STOCK PURCHASE AGREEMENT
among
XXXX FURNITURE, INC.,
XXXXXXXX FURNITURE, INC.
and
XXXXXXXX ACQUISITION CO.
Dated as of January 5, 1996
TABLE OF CONTENTS
Page
ARTICLE 1: SALE AND PURCHASE OF SHARES................................................................ 1
1.1 Sale and Purchase of Shares.......................................................... 1
1.2 Closing.............................................................................. 2
1.3 Delivery of Shares................................................................... 2
1.4 Payment of Purchase Price............................................................ 2
ARTICLE 2: REPRESENTATIONS AND WARRANTIES............................................................. 4
2.1 Representations and Warranties as to the Company..................................... 4
2.1.1 Corporate Status............................................................ 4
2.1.2 Capitalization.............................................................. 5
2.1.3 Conflicts, Consents......................................................... 6
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities..................................................... 7
2.1.5 No Liens.................................................................... 8
2.1.6 Accounts Receivable......................................................... 8
2.1.7 Inventories................................................................. 8
2.1.8 Real Property............................................................... 9
2.1.9 Insurance................................................................... 10
2.1.10 Litigation................................................................... 10
2.1.11 Compliance with Laws, Permits................................................ 10
2.1.12 Tax Matters.................................................................. 11
2.1.13 Brokers, Finders............................................................. 12
2.1.14 Absence of Certain Changes................................................... 12
2.1.15 Material Agreements.......................................................... 14
2.1.16 Compliance with ERISA........................................................ 16
2.1.17 Intellectual Property........................................................ 19
2.1.18 Labor Matters................................................................ 20
2.1.19 No Material Liabilities...................................................... 20
2.1.20 No Judgments or Orders....................................................... 20
2.1.21 Bank Accounts; Powers of Attorney............................................ 20
2.1.22 Affiliate Transactions....................................................... 21
2.1.23 Environmental................................................................ 21
2.1.24 Disclosure................................................................... 24
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2.2 Representations and Warranties as to XXXX............................................ 24
2.2.1 Authorization, etc.......................................................... 25
2.2.2 Conflicts and Consents...................................................... 25
2.2.3 Title to Shares, etc........................................................ 26
2.2.4 Litigation.................................................................. 26
2.2.5 Brokers, Finders............................................................ 26
2.2.6 No Other Agreements......................................................... 26
2.3 Representations and Warranties of Purchaser.......................................... 26
2.3.1 Purchaser's Corporate Status................................................ 27
2.3.2 Authorization, etc.......................................................... 27
2.3.3 Conflicts, Consents......................................................... 27
2.3.4 Brokers, Finders............................................................ 28
2.3.5 Purchase for Investment..................................................... 28
2.3.6 Financing................................................................... 28
ARTICLE 3: CERTAIN COVENANTS PENDING THE CLOSING...................................................... 28
3.1 Access and Information............................................................... 28
3.2 Conduct of Business of the Company................................................... 29
3.3 Efforts to Consummate Transaction.................................................... 30
3.4 Employee Matters..................................................................... 30
3.5 Consents and Approvals; Releases..................................................... 32
3.6 [Intentionally Left Blank]........................................................... 33
3.7 Tax Matters.......................................................................... 33
3.8 Intercompany Debt.................................................................... 34
3.9 Noncompetition....................................................................... 34
3.10 Corporate Names...................................................................... 35
3.11 Nondisclosure........................................................................ 36
3.12 Mutual Cooperation. ................................................................ 36
3.13 Further Assurances. ................................................................ 36
3.14 No Solicitation...................................................................... 36
3.15 Caldor Pre-petition Receivable....................................................... 37
3.16 VOSH................................................................................. 37
3.17 Labor Matters........................................................................ 37
3.18 EASY-PLAN. ......................................................................... 37
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ARTICLE 4: CONDITIONS PRECEDENT....................................................................... 38
4.1 Conditions to Obligations of Purchaser............................................... 38
4.1.1 Representations, Performance, etc........................................... 38
4.1.2 Opinion of Counsel.......................................................... 38
4.1.3 Resignation of Directors and Officers....................................... 38
4.1.4 Certain Approvals, etc...................................................... 39
4.1.5 No Litigation or Injunction................................................. 39
4.1.6 No Liens.................................................................... 39
4.1.7 No Material Adverse Changes................................................. 39
4.1.8 Intercompany Debt........................................................... 40
4.1.9 Financing................................................................... 40
4.1.10 Employment Arrangements..................................................... 40
4.1.11 No Change in Law............................................................ 40
4.1.12 Repurchase of Equipment..................................................... 40
4.1.13 HSR Act..................................................................... 40
4.1.14 CEDA Guaranty............................................................... 40
4.2 Conditions to Obligations of Sellers................................................. 41
4.2.1 Representations, Performance, etc........................................... 41
4.2.2 Opinion of Counsel.......................................................... 41
4.2.3 Certain Approvals, etc...................................................... 41
4.2.4 No Litigation or Injunction................................................. 41
4.2.5 No Change in Law............................................................ 42
4.2.6 Purchase Price.............................................................. 42
4.2.7 Guaranties.................................................................. 42
4.2.8 Intercompany Debt........................................................... 42
4.2.9 Employment Arrangements..................................................... 42
4.2.10 HSR Act..................................................................... 43
4.2.11 Security for Note........................................................... 43
4.2.12 CEDA Guaranty............................................................... 43
4.2.13 Warrant..................................................................... 43
ARTICLE 5: TERMINATION
5.1 Grounds for Termination.............................................................. 43
5.1.1 Mutual Consent.............................................................. 43
5.1.2 Termination by Either Party................................................. 43
5.2 Effect of Termination................................................................ 44
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ARTICLE 6: INDEMNIFICATION............................................................................ 44
6.1 Indemnification by XXXX.............................................................. 44
6.2 Indemnification by Purchaser......................................................... 49
6.3 Notice of Claims..................................................................... 50
6.4 Third Party Claims................................................................... 50
6.5 Set Off.............................................................................. 52
ARTICLE 7: MISCELLANEOUS.............................................................................. 52
7.1 Survival............................................................................. 52
7.2 Expenses............................................................................. 53
7.3 Assignment; Successors; Parties in Interest.......................................... 53
7.4 Amendment and Modification........................................................... 53
7.5 Access After Closing................................................................. 53
7.6 Best Efforts......................................................................... 54
7.7 Knowledge............................................................................ 54
7.8 Notices.............................................................................. 54
7.9 Public Announcement.................................................................. 56
7.10 Captions............................................................................. 56
7.11 Entire Agreement..................................................................... 56
7.12 Counterparts......................................................................... 56
7.13 Severability......................................................................... 56
7.14 Arbitration.......................................................................... 57
7.15 Confidential Nature of Information................................................... 57
7.16 Schedules and Exhibits............................................................... 58
7.17 Definitions.......................................................................... 58
7.18 Governing Law........................................................................ 66
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SCHEDULES AND EXHIBITS
Schedule 2.1.1 Subsidiaries
Schedule 2.1.2 Capitalization
Schedule 2.1.3 Required Consents
Schedule 2.1.4 Financial Statements/Material Changes/Undisclosed Liabilities
Schedule 2.1.8 Real Property (Owned and Leased)
Schedule 2.1.9 Insurance
Schedule 2.1.10 Litigation
Schedule 2.1.11 Noncompliance with Laws
Schedule 2.1.14 Absence of Certain Changes
Schedule 2.1.15 Material Agreements
Schedule 2.1.16 Employee Benefit Plans
Schedule 2.1.17 Intellectual Property
Schedule 2.1.18 Labor Matters
Schedule 2.1.21 Bank Accounts
Schedule 2.1.22 Affiliate Transactions
Schedule 2.1.23 Environmental
Schedule 3.2 Conduct of Business
Schedule 3.5 Guaranties
Schedule 3.6 Cherry Grove Intellectual Property
Schedule 7.7 Knowledge
Schedule 7.17 Permitted Liens
Exhibit A Form of Opinion of Xxxxxx Xxxxxxxx, L.L.P.
Exhibit B Form of Opinion of Xxxxx Xxxxxxxxxx
Exhibit C Term Sheet for Subordinated Note
Exhibit D Form of Warrant
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of January 5, 1996 (the
"Agreement"), by and among XXXX Furniture, Inc., a North Carolina corporation
("XXXX"), Xxxxxxxx Furniture, Inc. ("Xxxxxxxx"), a North Carolina corporation
and a wholly owned subsidiary of XXXX (Xxxxxxxx, together with its subsidiary
(defined below) is sometimes referred to as, the "Company") (XXXX and the
Company are sometimes collectively referred to herein as the "Sellers"), and
Xxxxxxxx Acquisition Co., a Delaware corporation (the "Purchaser").
W I T N E S S E T H
WHEREAS, XXXX owns all of the issued and outstanding capital
stock of the Company, consisting of 100 shares of Common Stock, par value $1.00
per share (the "Shares");
WHEREAS, XXXX wishes to sell the Shares to the Purchaser, and
the Purchaser wishes to purchase the Shares from XXXX, on the terms and
conditions and for the consideration set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made
herein and of the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Subject to all of the terms
and conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing provided for in Section 1.2 in
consideration for the sale of the Shares by XXXX, representing all of the issued
and outstanding shares of capital stock of the Company, Purchaser will pay to
XXXX the Purchase Price (defined below). The Shares shall be delivered by XXXX
as provided in Section 1.3, and the Purchase Price shall be paid by the
Purchaser as provided in Section 1.4.
1.2 Closing. The closing of the purchase and sale of the
Shares contemplated hereby (the "Closing") will take place at the offices of
Xxxxx Xxxxxxxxxx, New York, New York at 10:00 a.m., on February 2, 1996 or at
such other place, time or date as the parties hereto may agree in writing (the
"Closing Date").
1.3 Delivery of Shares. At the Closing, XXXX will transfer to
the Purchaser, against payment of the Purchase Price therefor as provided in
Section 1.5, good and valid title to the Shares, free and clear of any liens,
charges, pledges, encumbrances, security interests, options or rights or claims
of any third party ("Encumbrances") with respect thereto, by delivering to the
Purchaser certificate(s) for such Shares, duly endorsed in blank or accompanied
by a duly executed stock power or other proper instrument of assignment duly
executed in blank, and having all requisite stock transfer stamps attached.
1.4 Payment of Purchase Price. (A) At the
Closing, the Purchaser shall pay to XXXX the purchase price (the
"Purchase Price") as follows:
(i) an amount in cash or other immediately available funds
(the "Cash Amount") equal to (x) $3,000,000 plus (y) the
remainder of (1) the total availability under Purchaser's
senior secured credit facility with the CIT Group/Credit
Finance, Inc. ("CIT") on the Closing Date, less (2) $4,000,000
(the minimum availability that CIT requires at Closing), less
(3) Purchaser's transaction expenses (not to exceed $900,000)
and (ii) a subordinated promissory note (the "Note") on terms
set forth on the term sheet attached hereto as Exhibit C in
the principal amount of $10,669,516 less the Cash Amount (the
"Original Principal Amount") (which Original Principal Amount
shall automatically be adjusted pursuant to Section
1.4(B)(c) below). On the Closing Date Purchaser shall
certify the Cash Amount in writing to XXXX.
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(B) Purchase Price Adjustment. (a) Delivery and Review of
Closing Balance Sheet. As promptly as practicable, but not later than 14 days
after the Closing Date, XXXX and the Company will cause to be prepared and
delivered to Purchaser (i) the Closing Balance Sheet in substantially the same
form as the Interim Balance Sheet and (ii) a certificate setting forth the
Closing Working Capital, together with supporting calculations in reasonable
detail (the "Adjustment Certificate"). Purchaser shall be given an opportunity
to discuss with XXXX and the Company matters relating to the determination of
Closing Working Capital. Purchaser shall have 30 days from the date on which the
Closing Balance Sheet and the Adjustment Certificate are delivered to it to
review such documents (the "Review Period"). Purchaser shall be provided with
full access to the work papers of the Company in connection with such review. If
Purchaser asserts that any item or amount shown or reflected in the Closing
Balance Sheet or the Adjustment Certificate are not materially correct or that
the calculation of Closing Working Capital was arrived at other than in
accordance with GAAP applied on a basis consistent with those used in the
preparation of the Interim Balance Sheet (including the application of the
deviations from GAAP set forth in Schedule 2.1.4), Purchaser may, on or prior to
the last day of the Review Period, deliver a notice to XXXX setting forth, in
reasonable detail, the basis for the disagreement therewith, together with
supporting calculations (the "Dispute Notice"). XXXX and Purchaser acknowledge
that disputes aggregating less than $25,000 shall not be deemed material and
thereby do not give rise to any adjustment in Closing Working Capital. If no
Dispute Notice is received by XXXX on or prior to the last day of the Review
Period, the Closing Balance Sheet and the Adjustment Certificate shall be deemed
accepted by both parties.
(b) Disputes. Within 30 days after delivery of the Dispute
Notice if Purchaser and XXXX shall be unable despite their reasonable efforts to
resolve the dispute set forth in the Dispute Notice, Purchaser and XXXX shall
jointly retain a nationally recognized firm of independent public accountants
mutually acceptable to them. Such independent firm shall review the Closing
Balance Sheet (and, if necessary or appropriate in their judgment, any related
Company work papers) the Adjustment Certificate and the Dispute Notice, and
shall, as promptly as practicable and in no event later than 45 days following
the date of their engagement, deliver to XXXX and Purchaser a report (the
"Adjustment Report") setting forth, in reasonable detail,
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their determination with respect to all of the disputed items or amounts
specified in the Dispute Notice, and the revisions, if any, to be made
to the Closing Balance Sheet, the Adjustment Certificate and the
calculation of Closing Working Capital to reflect such determination,
together with supporting calculations. The Adjustment Report shall be
final and binding upon Purchaser and XXXX. XXXX shall pay one-half, and
Purchaser shall pay one-half, of the fees and expenses of such
independent firm incurred in preparing and delivering such Adjustment
Report.
(c) Adjustment and Payment. To the extent Closing Working
Capital is less than $13,075,500, the Original Principal Amount of the Note
shall automatically be deemed to have been reduced by such deficit as of the
Closing Date. In the event such deficit is greater than the Original Principal
Amount such additional amount shall be promptly paid by XXXX to Purchaser in
cash. To the extent Closing Working Capital is greater than $13,100,500, the
Original Principal Amount of the Note shall automatically be deemed to have been
increased by such excess as of the Closing Date. Any such reduction or increase
in the Original Principal Amount is herein referred to as the "Principal Amount
Adjustment." Any portion of the Principal Amount Adjustment to be paid in cash,
shall be made by wire transfer of immediately available funds to an account
designated by Purchaser.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to the
Company. XXXX represents and warrants to the Purchaser as of the date
hereof as follows:
2.1.1 Corporate Status. (a) Corporate existence. Xxxxxxxx is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of North Carolina and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. Xxxxxxxx is duly qualified and in good standing as a
foreign corporation duly authorized to do business in all jurisdictions in which
the failure to be so qualified would have a Material Adverse Effect. The
subsidiary of Xxxxxxxx listed on
4
Schedule 2.1.1 (the "Subsidiary") is Xxxxxxxx'x sole subsidiary and is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization set forth on Schedule
2.1.1 with the corporate power and authority to own its properties and
conduct its business as now being conducted. The Subsidiary is duly
qualified and in good standing as a foreign corporation duly authorized
to do business in all jurisdictions in which the failure to be so
qualified would have a Material Adverse Effect on the Company.
(b) Corporate Records. The Company has delivered to the
Purchaser complete and correct copies, as in effect on the date hereof, of the
Articles of Incorporation and Bylaws of the Company and the Subsidiary and all
amendments to each thereof. The Purchaser has been given the opportunity to
inspect the corporate minute and stock transfer books of the Company.
(c) Authorization, etc. The Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against it in
accordance with its terms.
2.1.2 Capitalization. (a) Capital Stock. The authorized
capital stock of Xxxxxxxx consists of 10,000 shares of Common Stock, par value
$1.00 per share (the "Common Stock"), of which 100 shares are issued and
outstanding. The authorized capital stock of the Subsidiary, the number of
shares issued and outstanding, and the beneficial owner of such shares are
listed on Schedule 2.1.2 hereto. The Shares, constituting all of the issued and
outstanding capital stock of the Company, have been duly authorized and validly
issued, and are fully paid and nonassessable and have not been issued in
violation of any preemptive rights and, except as set forth in Schedule 2.1.3,
are owned beneficially and of record by XXXX free and clear of any Encumbrances
of any nature whatsoever.
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(b) Agreements with Respect to Common Stock. There are no
preemptive or similar rights on the part of any holder of any Shares. No
options, warrants, conversion or other rights, agreements, commitments,
arrangements or understandings of any kind obligating the Company, contingently
or otherwise, to issue or sell any shares of its Common Stock or any securities
convertible into or exchangeable for any such shares, are outstanding, and no
authorization therefor has been given. There are no agreements of any kind
relating to the voting or issuance of any of the Company's capital stock.
2.1.3 Conflicts, Consents. (a) Conflicts. Except as set forth
on Schedule 2.1.3, the execution and delivery of this Agreement by the Company,
and the consummation by the Company of the transactions contemplated hereby in
the manner contemplated hereby, will not conflict with or result in any
violation of or default under (or any event that, with notice or lapse of time
or both, would constitute a default under), require any consent under, or result
in the acceleration or required prepayment of any indebtedness pursuant to the
terms of, any provision of (i) the Articles of Incorporation or Bylaws of the
Company, (ii) any mortgage, indenture, loan agreement, note, bond, deed of
trust, other agreement, commitment or obligation for the borrowing of money or
the obtaining of credit, lease or other agreement, contract, license,
franchise, permit or instrument to which the Company is a party or by which the
Company may be bound, or (iii) any judgment, order, decree, law, statute, rule
or regulation applicable to the Company, which failure to receive such consent
for any of the items in section (ii) and (iii) would have a Material Adverse
Effect on the Company.
(b) Consents. Other than filings required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, amended (the "HSR Act"),
and except as set forth in Schedule 2.1.3, no consent, approval, authorization,
permit, order, filing, registration or qualification of or with any court,
governmental authority or third person is required to be obtained by the Company
or XXXX in connection with the execution and delivery of this Agreement or the
consummation by the Company and XXXX of the transactions contemplated hereby in
the manner contemplated hereby, which failure of XXXX or the Company to make or
obtain would have a Material Adverse Effect on the Company.
6
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities. (a) Financial Statements. XXXX has delivered to the
Purchaser true and complete copies of the unaudited statements of operations of
the Company for the fiscal years ended January 1, 1994 and December 31, 1994 and
unaudited balance sheets of the Company as of such dates (the "Annual
Financials") in each case prepared from and in accordance with the books and
records of the Company as of, and for the period ended on, such date. XXXX also
has delivered to the Purchaser an unaudited statement of operations for the ten
(10) month period ended October 28, 1995 and an unaudited balance sheet of the
Company as of October 28, 1995 (the "Interim Financials" and the balance sheet
contained in the Interim Financials, the "Interim Balance Sheet"), prepared from
and in accordance with the books and records of the Company as of, and for the
period ended on, such date. The Annual Financials and Interim Financials are set
forth in Schedule 2.1.4. The Annual Financials and the Interim Financials have
been prepared in accordance with generally accepted accounting principles
("GAAP") and accounting practices utilized by subsidiaries and divisions of
XXXX, except as described in the notes to the Interim Statements, consistently
applied throughout the periods indicated and present fairly the financial
condition of the Company at the respective dates indicated and (in the case of
the Annual Financials) the results of operations of the Company for the
respective periods indicated, except that the Interim Financials are
subject to year-end audit adjustments in accordance with GAAP.
(b) Material Adverse Change. Except as disclosed on Schedule
2.1.4, since October 28, 1995, there has been no change in the business,
financial condition or prospects of the Company that has had or could reasonably
be expected to have a Material Adverse Effect on the Company.
(c) Undisclosed Liabilities. Except (i) as and to the extent
reflected in the unaudited balance sheet of the Company as of December 31, 1994
included in the Annual Financials or in the notes to the Annual Financials for
the year then ended, and (ii) as disclosed in Schedule 2.1.4, as of December 31,
1994, there were no other liabilities or obligations, secured or unsecured
(whether absolute, accrued, known or unknown, contingent or otherwise, and
whether due or to become due) that has had or which can reasonably be expected
to have a
7
Material Adverse Effect on the Company. Since December 31, 1994, the
Company has not incurred any liabilities or obligations of any nature (whether
accrued, absolute, known or unknown, contingent or otherwise, and whether due or
to become due) that has had or which can reasonably be expected to have a
Material Adverse Effect on the Company, except (x) as and to the extent
reflected in the Interim Financials, or (y) as disclosed in Schedule 2.1.4.
2.1.5 No Liens. Except for Permitted Liens, the Company has
good and marketable title to the personal property and assets reflected in the
Annual Financials and the Interim Financials free and clear of all Encumbrances
of any nature whatsoever, and all personal property acquired by the Company
since October 28, 1995, except such personal property as has been disposed of
between such date and the date hereof in the ordinary course of business, it
being understood that a disposition of any asset, other than inventory or
marketable products, carried on the books of the Company at more than $25,000
shall not be deemed to be a disposition in the ordinary course of business.
2.1.6 Accounts Receivable. All reserves have been recorded
such that trade accounts receivable are valued in the aggregate at their
estimated net realizable value. The trade accounts receivable of the Company
reflected on the Annual Financials and the Interim Financials have arisen from
bona fide sales transactions in the ordinary course of business.
2.1.7 Inventories. The inventories of the Company are fit and
sufficient in all material respects for the purposes for which they were
purchased or manufactured, except for inventories for which adequate reserves
have been provided and reflected in the Annual Financials and the Interim
Financials. The values at which inventories are carried on the Annual Financials
and the Interim Financials reflect the normal inventory policy of the Company
(including the writing down or reserving of the value of slow-moving or obsolete
inventory or inventory of below-standard quality to estimated net realizable
market value in accordance with GAAP), at the lower of cost or market on a
last-in, first-out basis and are not in excess of the value of such inventories
computed in accordance with GAAP and accounting practices utilized by
subsidiaries
8
and divisions of XXXX, except as described in the notes to the Interim
Statements, applied on a consistent basis. The Company owns its
inventories free and clear of any Encumbrances.
2.1.8 Real Property; Condition of Property. (a) The Company
has good and marketable title in fee simple to the real property, including the
plants, buildings and other improvements thereon, set forth and described in
Schedule 2.1.8 hereto (the "Owned Real Property"), free and clear of any
Encumbrances of any nature whatsoever, except for Permitted Liens. The Owned
Real Property constitutes all of the real property reflected in the Annual
Financials and the Interim Financials and all real property acquired by the
Company since October 28, 1995. Schedule 2.1.8 sets forth all leasehold
interests in real property held by the Company, and the Company has in all
material respects performed all the obligations required to be performed by it
to the date hereof under said leases and possesses and quietly enjoys said
premises under said leases, and to the best of Sellers' knowledge, such premises
are not subject to any Encumbrances of any nature whatsoever, encroachments,
building or use restrictions, exceptions, reservations or limitations that in
any material respect interfere with or impair the present and continued
use thereof in the usual and normal conduct of the business of the
Company. The Company has not received notice of any violation of any
applicable zoning regulation, ordinance or other law, order, regulation
or requirement relating to the operations of owned or leased properties
of the Company, and the Sellers know of no such violation. The Company
has not received notice of any pending or threatened condemnation
proceedings relating to any of the owned or leased properties of the
Company and, so far as known to Sellers, there are no such pending or
threatened proceedings.
(b) Except as set forth on Schedule 2.1.8 hereto, the plants,
structures, material tangible properties and equipment owned, operated or leased
by the Company are in good operating condition and repair, ordinary wear and
tear excepted, subject to normal maintenance in the ordinary course of business,
and, to the Sellers' knowledge, are in conformity in all material respects with
all material applicable laws, ordinances, orders, regulations and other
requirements presently in effect or, known to Sellers, scheduled to take effect.
9
(c) XXXX has delivered to the Purchaser true and correct
copies of all title insurance policies and all deeds to Owned Real Property.
2.1.9 Insurance. The assets, properties and business of the
Company are insured under the various policies of general liability and other
forms of insurance, as set forth on Schedule 2.1.9 hereof. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policies has been received by the Company. To the Sellers' knowledge,
such insurance policies provide such coverage against risk of loss in such
amounts as are customary for corporations of established reputation engaged in
similar businesses as the Company and similarly situated.
2.1.10 Litigation. Except as set forth in Schedule 2.1.10,
there are no actions, suits or proceedings pending or, to the knowledge of the
Company and XXXX, threatened or any basis for any such actions, suits or
proceedings against or affecting the Company or its respective properties,
assets or business which would, individually or in the aggregate, if adversely
decided against the Company, have a Material Adverse Effect on the Company or
which would prevent or hinder the consummation of the transactions contemplated
hereby.
2.1.11 Compliance with Laws, Permits. (a) Compliance with
Laws. Except as set forth on Schedule 2.1.11, the Company is not, nor previously
has it been, in violation of any applicable laws or regulations or any
applicable orders, rules, writs, judgments, injunctions, decrees or ordinances
applicable to the business or operations of the Company, the violation of which
would have a Material Adverse Effect on the Company. Except as set forth on
Schedule 2.1.11, Sellers have not received any notice to the effect that, or
otherwise have been advised that, the Company is not in compliance with any of
such laws, regulations, orders, rules, writs, judgments, injunctions, decrees or
ordinances, and Sellers have no reason to anticipate that any presently existing
circumstances of which they have knowledge are likely to result in violations of
any such regulations which could, in any one case or in the aggregate, have a
Material Adverse Effect on the Company.
10
(b) Permits. All necessary licenses, permits or orders with
respect to the conduct of the business of the Company, the absence of which
would have a Material Adverse Effect on the Company, have been obtained by the
Company and are in effect as of the date hereof. All permits, licenses, orders,
registrations, or other approvals of all federal, state, local or foreign
governmental or regulatory bodies, the failure to obtain which would have
Material Adverse Effect on the Company, have been obtained, are set forth on
Schedule 2.1.11 hereto, are in full force and effect, and, there has been
neither any violation, suspension or cancellation thereof nor any basis for any
such claim.
2.1.12 Tax Matters. The Company and XXXX have correctly
prepared and timely filed all federal, foreign, state and local tax returns and
other tax reports required to be filed, or intends to amend such tax returns
where necessary, and has paid, or set up an adequate reserve in the Annual
Financials and Interim Financials for the payment of, all federal, foreign,
state and local income taxes and other taxes (including, without limitation, all
franchise, property, sales, use, excise, intangible, employment taxes, and all
such other taxes along with all federal, foreign, state and local income taxes
being defined collectively as "Taxes") required to be paid in respect of the
periods covered by such returns, has set up an adequate reserve in the Annual
Financials and Interim Financials for the payment of all Taxes anticipated to
be payable in respect of the period subsequent to the last of such periods. The
Company or XXXX is not delinquent in the payment of any Taxes, has not waived
any statute of limitations in respect of Taxes, and has not requested or agreed
to any extension of time within which to file any tax return or report or with
respect to a tax assessment or deficiency except as where allowed by law. No
deficiencies for Taxes have been assessed or asserted, and the Company and XXXX
know of no basis for the assertion of claims concerning the Tax liability of
the Company. The Company has delivered or made available for review to
Purchaser a true and correct copy of all federal, foreign, state and local Tax
returns (including amended returns) and tax audit reports (if any) for all
periods for which the applicable statute of limitations for the assessment of
tax is open). There is no pending or, to the knowledge of the Company and XXXX,
threatened examination or audit by the Internal Revenue Service or any state,
foreign or local taxing authorities of such returns.
11
All proper amounts of payroll taxes have been collected or withheld by the
Company and XXXX for all Taxes payable or anticipated to be payable.
2.1.13 Brokers, Finders. The Company and XXXX have not
retained any broker or finder in connection with the transactions contemplated
hereby so as to give rise to any claim against the Purchaser or the Company for
any brokerage or finder's commission, fee or similar compensation, except that
Xxxxx Financial Corporation and Xxxxx & Company have acted as financial advisors
to XXXX and their fees and expenses will be paid by XXXX.
2.1.14 Absence of Certain Changes. Except as set
forth in Schedule 2.1.14, since October 28, 1995, the Company has not:
(a) issued, sold or delivered or agreed to issue, sell or
deliver any additional shares of its capital stock or any options, warrants or
rights to acquire any such capital stock, or securities convertible into or
exchangeable for such capital stock;
(b) mortgaged, pledged or subjected to any
Encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business;
(c) acquired or disposed of any material assets or properties,
or entered into any agreement or other arrangements for any such acquisition or
disposition, except in the ordinary course of business;
(d) declared, made, paid or set apart any sum for any dividend
or other distribution to its shareholders or purchased or redeemed any shares of
its capital stock or any option, warrant or right to purchase any of its capital
stock, or reclassified its capital stock;
(e) (i) increased the wages, salaries, compensation, pension
or other benefits payable or to become payable to any of the Company's current
or former officers, directors, employees or agents (collectively, "Company
Personnel") other than in accordance with the
12
normal compensation and benefits policies of the Company or established by any
pension or other benefit plan, or granted any severance or termination pay,
(ii) or entered into any employment, severance or consulting agreement or
arrangement with any Company Personnel, (iii) granted, made or accrued,
contingently or otherwise, any bonus, incentive compensation, service award or
other like benefit, to or to the credit of any Company Personnel or (iv) made
any addition to or modification of any employee welfare, pension retirement,
profit sharing or similar arrangement except to comply with applicable law;
(f) forgiven or cancelled any material debts or claims or
waived any material rights of value other than intercompany debts, claims or
rights listed on Schedule 3.2 hereto and other than in the ordinary course of
business or cancelled or terminated any contract, agreement or other instrument
material to the Company;
(g) suffered any damage, destruction or loss (whether or not
covered by insurance) affecting its properties or assets that could reasonably
be expected to have a Material Adverse Effect on the Company;
(h) suffered any strike or other labor trouble affecting its
business or operations that could reasonably be expected to have a Material
Adverse Effect on the Company;
(i) suffered or experienced any loss of or, to the best of
Sellers' knowledge, suffered or experienced any change in relations with, any
Company Personnel or customers that could reasonably be expected to have a
Material Adverse Effect on the Company;
(j) incurred any indebtedness for borrowed money
(or guaranteed any indebtedness of others) other than trade indebtedness
incurred in the ordinary course of business;
(k) changed any method of accounting or
accounting practice or policy of the Company;
13
(l) conducted its business other than in the ordinary course
so as to preserve the business intact and to preserve for the Purchaser the
goodwill of the employees, suppliers, customers and others having material
business relations with the Company, except as required by this Agreement;
(m) settled or compromised any claim, suit or
cause of action involving more than $25,000;
(n) materially altered its collection practices with respect
to accounts receivable, including any practice which has had the effect of
accelerating the recording and billing of accounts receivable;
(o) materially altered its payment practices with respect to
accounts payable, including any practice which has had the effect of delaying
the payment of expenses and other reserves in connection with the business or
any material accounts of the Company; or
(p) made any capital expenditures or commitments
therefor involving payments in excess of $25,000;
(q) suffered or experienced any damage, destruction or
casualty loss, whether covered by insurance or not, adversely affecting the
business, operations or financial condition of the Company; or
(r) made any agreement by the Company or XXXX to
do any of the foregoing.
2.1.15 Material Agreements. Except for the contracts,
franchises, agreements, plans, leases and licenses described in Schedule 2.1.15
hereto, the Company is not a party to or subject to:
14
(a) any employment contract or any other
agreement relating to compensation or severance payments with any
officer, consultant, director or employee;
(b) any plan or contract or arrangement providing
for bonuses, pensions, options, deferred compensation, retirement
payments, profit sharing or other benefits for employees;
(c) any contract or agreement with any labor union;
(d) any lease (other than leases of real property
described in Schedule 2.1.8 hereto) involving payment of annual rentals
in excess of $25,000;
(e) any contract or agreement for the purchase of
any materials, services, or supplies involving annual payments in excess
of $25,000 and of more than one year in duration;
(f) any contract or agreement for the purchase of equipment or
any construction or other contract or agreement, not otherwise covered by this
Section 2.1.15, involving annual payments in excess of $25,000 and of more than
one year in duration;
(g) any contract or agreement for the sale of its
products, exceeding $25,000 on an annual basis and of more than one year
in duration;
(h) any contract or agreement with an agent,
sales representative, dealer or other distributor of products of the
Company;
(i) any instrument evidencing or related to
indebtedness for money loaned or borrowed by the Company or indebtedness
guaranteed by the Company, in any case in excess of $25,000;
15
(j) any contract or agreement, not otherwise covered
by this Section 2.1.15, containing covenants limiting the freedom of the
Company to compete in any line of business or with any person;
(k) any license or franchise agreement in which
the Company is the licensor, licensee or franchisor;
(l) any license or franchise agreement in which
the Company is the licensee or franchisee;
(m) any contract or agreement, not of the type covered
by any of the other items of this Section 2.1.15, which involves the
payment or receipt by the Company of $25,000 or more in any one year and
which by its terms is either (i) not to be performed by the Company
prior to one year from the date hereof, or (ii) does not terminate, or
is not terminable, by and without penalty to the Company prior to one
year from the date hereof.
All contracts, franchises, agreements, plans, leases and
licenses described in Schedules 2.1.8 and 2.1.15 (the "Material Agreements") are
valid and in full force and effect and the Company (or, to the knowledge of the
Company and XXXX, any other party to such Material Agreements) has not breached
any material provision of, and is not in default in any material respect under
the terms of, any such Material Agreement. Schedule 2.1.15 correctly identifies
each Material Agreement which is or might be terminable by any other party upon
the change of control of the Company.
2.1.16 Compliance with ERISA. (a) Schedule 2.1.16 sets forth a
complete list of each "employee benefit plan," as that term is defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") regardless of whether such plan is subject to ERISA, and each bonus,
deferred or incentive compensation, stock purchase, stock option, severance or
termination pay plan or program that is maintained or contributed to by the
Company or XXXX for the benefit of Company Personnel (the "Plans"). Schedule
2.1.16
16
identifies which plans are sponsored and maintained by XXXX and which plans are
sponsored and maintained by the Company or its Subsidiary. With respect to each
of the Plans, the Company has heretofore made available to the Purchaser (or
will deliver to the Purchaser prior to the Closing) correct and complete copies
of each of the following documents: (i) the Plans and related trust or other
funding documents (including all amendments thereto), (ii) the most recent Form
5500 annual report, including all attachments thereto, filed with the Internal
Revenue Service with respect to each such Plan, (iii) most recent trust report,
if any, prepared with respect to each such Plan, (iv) the most recent
determination letter received from the Internal Revenue Service with respect to
each such Plan that is intended to be qualified under section 401 of the
Internal Revenue Code of 1986, as amended (the "Code") and (v) the summary plan
description prepared for each such Plan.
(b) Each Plan has been administered and
operated in material compliance with its terms and the applicable
requirements of ERISA and the Code including the requirement to file an
annual report. No Plan is a "multi-employer plan" (within the meaning of
Section 3(37) of ERISA) or a "multiple employer" plan (within the
meaning of Section 4063 or 4064 of ERISA). Each Plan that is intended to
be qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service to that effect or
has an application pending for such a determination letter with the
Internal Revenue Service.
(c) Except as set forth on Schedule 2.1.10, there are no
pending or, to the knowledge of the Company and XXXX, threatened claims of any
Company Personnel against or otherwise involving any of the Plans (other than
routine claims for benefits).
(d) All contributions required to have been made by the
Company or XXXX to any Plan pursuant to the applicable provisions of the Code or
ERISA have been made within the time prescribed by such provisions of the Code
and ERISA and all other contributions which relates to all periods prior to
October 28, 1995 have been accrued on the Annual Financials and Interim
Financials including the obligation to provide matching contributions and there
has been
17
no event since October 28, 1995 which would require additional accruals (other
than accruals in the ordinary course).
(e) There are no Company Personnel who are entitled to (i) any
pension benefit that is unfunded or (ii) any benefit to be paid after
termination of employment other than required by Section 601 of ERISA or
pursuant to a Plan intending to be qualified under Section 401(a) of the Code or
identified as providing a benefit described in this Section 2.1.16(e) on
Schedule 2.1.16. Each Plan that is an employee welfare benefit plan as defined
in Section 3(1) of ERISA is either unfunded or funded through an insurance
company contract. There is no liability in the nature of a retroactive rate
adjustment or loss-sharing or similar arrangement with respect to any such Plan.
(f) None of the assets of the Plans is invested in any
property constituting employer real property or any employer security within the
meaning of Section 407(d) of ERISA. Neither the Company nor the Subsidiary nor
any other person, including any fiduciary, has engaged in any "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA),
which could subject the Company, any of its Subsidiaries or any person who the
Company or the Subsidiary has an obligation to indemnify, to any tax or penalty
imposed under Section 4975 of the Code in Section 502 of ERISA.
(g) Neither the Company nor the Subsidiary has at any time (x)
maintained, contributed to or been required to contribute to any plan subject to
Title IV of ERISA, (y) incurred or expects to incur any liability to the Pension
Benefit Guaranty Corporation or otherwise under Title IV of ERISA, or (z)
incurred or expects to incur liability in connection with an "accumulated
funding deficiency" within the meaning of Section 412 of the Code, whether or
not waived.
(h) Except as set forth on Schedule 2.1.16 or in Section
3.4(c), the events contemplated by this Agreement (either alone or together with
any other event) will not (w) entitle any Company Personnel to severance pay,
unemployment compensation, or other similar
18
payments under any Plan, law or agreement, (x) accelerate the time of payment
or vesting or increase the amount of benefits due under any Plan or agreement
or compensation to any Company Personnel, (y) result in any payments (including
parachute payments) under any Plan, law or agreement becoming due to any
Company Personnel, or (z) terminate or modify or give a third party a right to
terminate or modify the provisions or terms of any Plan or any employment
agreement.
2.1.17 Intellectual Property. (a) Schedule 2.1.17 contains a
list of all trademarks, patents and patent applications, trade names and
copyrights, whether registered or not, owned by or assigned to the Company or in
which it has an interest by license, agreement, shop right, common law, or
otherwise or which are used by the Company and are material to the conduct of
its business (collectively, the "Listed Intellectual Property"). To the
knowledge of the Company and XXXX, as appropriate, no third party is engaged in
any activity not duly authorized by the Company or XXXX, which would constitute
an infringement of any Listed Intellectual Property or any processes, designs,
formulas, inventions, trade secrets, know-how, ideas or concepts which are
presently used in and are material to the operation of the Company's business
(collectively, together with the Listed Intellectual Property, the
"Intellectual Property"). There are no claims or proceedings pending or, to the
knowledge of the Company and XXXX, threatened against the Company or Cherry
Grove, Inc. ("Cherry Grove") asserting that the Company or Cherry Grove has, is
or was infringing any patent, trademark, trade name or other intellectual
property rights of any third party. Except as set forth on Schedule 2.1.17, the
Company owns or by license or otherwise has, to the extent that neither the
Company nor XXXX is aware of any claim to the contrary by any third party, the
right to use all Intellectual Property. In the Sellers' reasonable judgment, no
intellectual property other than the Intellectual Property is necessary or
advisable for the conduct of the Company's business as currently conducted.
Except as set forth on Schedule 2.1.17, upon consummation of the transactions
contemplated hereby, the Purchaser will own all of the Intellectual Property
free and clear of any Encumbrance of any nature whatsoever.
19
2.1.18 Labor Matters. Except as set forth on Schedule 2.1.18,
there has been no work stoppage or slowdown or other labor difficulties relating
to the Company that has had or could reasonably be expected to have a Material
Adverse Effect on the Company. Except as set forth on Schedule 2.1.18, the
Company is not a party to any collective bargaining agreement with any labor
union or similar organization, nor does the Company know of any such
organization which represents or claims to represent any of the Company's
employees or is currently seeking to represent or organize the employees at any
of the principal facilities of the Company.
2.1.19 No Material Liabilities. There are no
material liabilities of the Company, other than:
(a) liabilities disclosed or provided for in the
Annual Financials or the Interim Financials, including the notes
thereto;
(b) liabilities incurred or recorded in the ordinary course of
business since October 28, 1995, none of which has been materially adverse to
the business, assets or operations of the Company
2.1.20 No Judgments or Orders. The Company is not a party to
or subject to any judgment, order or decree entered in any action or proceeding
brought by any governmental agency or any other party enjoining it in respect of
any business practice or the conduct of business in any area or the acquisition
of any property.
2.1.21 Bank Accounts; Powers of Attorney. Schedule 2.1.21 sets
forth a list of all bank accounts, xxxxx cash or imprest funds maintained by the
Company, with the persons authorized to sign thereon. Also included on Schedule
2.1.21 is a list of safe deposit boxes in the Company's name and the persons
authorized to enter such boxes and the names of all persons holding powers of
attorney from the Company or the Subsidiary.
20
2.1.22 Affiliate Transactions. Except as reflected in the
Annual Financials, the Interim Financials or otherwise set forth in Schedule
2.1.22, neither Sellers nor any Company Personnel (nor any member of any such
person's family) is presently a party to any material transaction with the
Company (other than for services as employees, officers and directors),
including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to any such
person (including, XXXX or any affiliate of XXXX).
2.1.23 Environmental. Except as disclosed on
Schedule 2.1.23.,
(a) The Company complies, and the Company at all
times has complied, in all material respects, with all Environmental,
Health or Safety Requirements of Law (as defined below) applicable to
the business thereof or the Properties (as defined below), including,
without limitation, the use, maintenance and operation of the
Properties, and all activities and conduct of business related thereto,
including, without limitation, the treatment, remediation, removal,
transport, storage and/or disposal of any Contaminant (as defined
below);
(b) The Company has obtained or has taken appropriate steps,
as required by Environmental, Health or Safety Requirements of Law, to obtain
all environmental, health and safety permits, consents, licenses and other
authorizations (collectively, "EHS Permits") necessary for the operation of its
business and the ownership and operation of the Properties, all such EHS Permits
are in good standing, and the Company is currently in compliance in all material
respects with all terms and conditions of such EHS Permits. No material change
in the facts or circumstances reported or assumed in the applications for or the
granting of such EHS Permits exists. To the best of the Company's knowledge,
there are not any proceedings threatened which would jeopardize the validity of
any such EHS Permits;
(c) The Company is not subject to any judicial or
administrative proceeding, notice, order, judgment, decree or settlement, or to
the best of the Company's knowledge, any investigation, alleging or addressing
in connection with its business or the Properties (i) any
21
violation of any Environmental, Health or Safety Requirements of Law, or (ii)
any Remedial Action (as defined below), or (iii) any claims or liabilities and
costs arising from the Release (as defined below) or threatened Release of any
Contaminant;
(d) No Environmental Lien (as defined below) has
attached to any of the Properties owned by the Company or, to the best
of the Company's or XXXX'x knowledge, any Properties leased by the
Company;
(e) The Company has not received and is otherwise not aware of
any notice, claim or other communication concerning (i) any alleged violation of
any Environmental, Health or Safety Requirements of Law at the Properties,
whether or not corrected to the satisfaction of the appropriate authority, (ii)
alleged liability of the Company for Environmental Damages (as defined below)
arising out of or related to its business or any of the Properties, or (iii)
any alleged liability of the Company arising out of or related to its business
or the Properties for the Release or threatened Release of a Contaminant at any
location, and, there exists no writ, injunction, decree, order or judgment
outstanding, nor any lawsuit, claim, proceeding, citation, directive, or
summons relating to the condition, ownership, use, maintenance or operation of
any of the Properties, or the suspected presence of Contaminants thereon or
therefrom, nor is the Company aware of any basis for such lawsuit, claim,
proceeding, citation, directive, summons or investigation being instituted or
filed;
(f) To the best of the Company's knowledge, there
has been no Release of any Contaminants in reportable quantities, nor is
there any threatened release of any Contaminants, at, to or from any of
the Properties;
(g) To the best of the Company's knowledge, none of the
Properties is listed or proposed for listing on the National Priorities List
("NPL") pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended ("CERCLA"), or listed on the Comprehensive
Environmental Response Compensation Liability Information System List
("CERCLIS") or any similar state list of sites, and the Company is unaware of
any conditions at
22
any of such Properties which, if known to a Governmental Authority (as defined
below), would qualify such Properties for inclusion on any such list;
(h) The Company has not disposed (as such term is defined in
the Federal Resource Conservation and Recovery Act ("RCRA")) of greater than de
minimis quantities of any hazardous waste (as such term is defined in RCRA) at
any of the Properties;
(i) The Company has not transported or arranged for the
transport of any Contaminant to any site, other than amounts and type of
Contaminants not subject to regulation under Environmental, Health and Safety
Requirements of Law;
(j) To the best of its knowledge, the Company has not
transported or arranged for the transport of any Contaminant to any facility or
site for the purpose of treatment or disposal which (i) is included on the NPL
or CERCLIS, (ii) is or was, at the time of disposal, subject to a Remedial
Action requirement (other than routine, anticipated, closure-related corrective
action obligations affecting closed solid waste management units at such
facility) issued under RCRA or any state or local solid or hazardous waste
regulatory law, or (iii) at the time of the disposal had received a notice of
violation with respect to alleged violations of any Environmental, Health and
Safety Requirements of Law;
(k) There is not constructed, placed, deposited,
stored, disposed nor located on any of the Properties any asbestos in
any form which has become or threatens to become friable;
(l) To the best of the Company's knowledge, no underground
improvements, including but not limited to treatment or storage tanks, sumps, or
water, gas or oil xxxxx, or associated piping, but excluding utility-owned
underground improvements, are or have ever been located on any of the
Properties;
(m) There is not constructed, placed, deposited, released,
stored, disposed, leaching nor located on any of the Properties any
polychlorinated biphenyls ("PCBs") or
23
transformers, capacitors, ballasts, or other equipment which contain dielectric
fluid containing PCBs; and
(n) To the best of its knowledge, the Company has no
liability, has not received and is otherwise unaware of any notice, claim or
other communication alleging liability on the part of the Company, for the
material violation of any Environmental, Health or Safety Requirements of Law,
for Environmental Damages, or for the Release or threatened Release of any
Contaminant in connection with any businesses or properties previously owned or
operated by the Company.
(o) XXXX has delivered to Purchaser a true and
complete copy of the environmental report prepared by ERM-Southeast,
Inc., with respect to the Company's St. Xxxx, Virginia facility. All
matters disclosed therein are incorporated into Schedule 2.1.23.
(p) Purchaser has had prepared its own
environmental report with respect to the Company's St. Xxxx, Virginia
facility, and delivered a true and complete copy to XXXX. All matters
disclosed therein are incorporated into Schedule 2.1.23
2.1.24 Disclosure. This Agreement, the Schedules hereto and
the certificates and other documents furnished by the Company or XXXX to the
Purchaser pursuant hereto, taken as a whole, do not, and as to any
representation or warranty made to the best of the knowledge of XXXX or the
Company, such representation and warranty, to XXXX'x and the Company's
knowledge, does not, as of their respective dates contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
2.2 Representations and Warranties as to XXXX.
XXXX represents and warrants to the Purchaser as follows:
24
2.2.1 Authorization, etc. XXXX is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of North Carolina. XXXX has all requisite corporate power and authority to
execute and deliver this Agreement sufficient to convey to Purchaser good and
marketable title to the Shares, free and clear of all Encumbrances of any nature
whatsoever and to perform fully its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of XXXX. This Agreement has been duly executed and delivered by XXXX and
constitutes the legal, valid and binding obligation of XXXX enforceable against
XXXX in accordance with its terms.
2.2.2 Conflicts and Consents. (a) Conflicts. Except as set
forth in Schedule 2.1.3, the execution and delivery by XXXX of this Agreement,
and the consummation by XXXX of the transactions contemplated hereby, in the
manner contemplated hereby, do not and will not conflict with or result in the
breach of any of the terms or provisions of, or constitute a default under (or
an event that, with notice or lapse of time or both, would constitute a default
under), require any consent under, or result in the acceleration or required
prepayment of any indebtedness pursuant to the terms of, any provision of (i)
the Articles of Incorporation or Bylaws of XXXX, (ii) any material mortgage,
indenture, loan agreement, note, other agreement for the borrowing of money or
the obtaining of credit, deed of trust, will, lease or other material agreement
or instrument to which XXXX is a party or by which XXXX or the Shares owned by
XXXX may be bound, or (iii) any judgment, order, decree, law, statute, rule or
regulation applicable to XXXX or to the Shares to be sold by XXXX.
(b) Consents. Except as set forth in Schedule 2.1.3, no
consent, approval, authorization, order, filing, registration or qualification
of or with any court, governmental authority or third person is required to be
obtained by XXXX in connection with the execution and delivery by XXXX of this
Agreement or consummation by XXXX of the transactions contemplated herein in the
manner contemplated hereby.
25
2.2.3 Title to Shares, etc. XXXX is the record and beneficial
owner of and has good and valid title to the Shares, free and clear of any
Encumbrance, preemptive subscription, title retention agreement, adverse claim
or option. Upon the delivery of and payment for the Shares at Closing, as
provided for in this Agreement, XXXX will transfer to the Purchaser good and
valid title to the Shares, free and clear of any Encumbrance, preemptive
subscription, title retention agreement, adverse claim, option or other
restriction whatsoever.
2.2.4 Litigation. There is no action, claim, suit or
proceeding pending or, to the knowledge of XXXX, threatened by or against or
affecting XXXX and, to the knowledge of XXXX, there is no investigation pending
or threatened against or affecting XXXX, in each case before any court or
governmental or regulatory authority or body, that could reasonably be
expected to have a material adverse effect on the consummation of the
transactions contemplated by this Agreement.
2.2.5 Brokers, Finders. XXXX has not retained any broker or
finder in connection with the transactions contemplated hereby so as to give
rise to any claim against the Purchaser or the Company for any brokerage or
finder's commission, fee or similar compensation, except that Xxxxx Financial
Corporation and Xxxxx & Company have acted as financial advisors to XXXX and
their fees and expenses will be paid by XXXX at the Closing.
2.2.6 No Other Agreements. Sellers have no legal
obligation, absolute or contingent, to any other person or firm to sell
the Shares or the Cherry Grove Intellectual Property or any significant
assets of the Company, to effect any merger, consolidation or other
reorganization of the Company or to enter into any agreement with
respect thereto.
2.3 Representations and Warranties of Purchaser.
The Purchaser represents and warrants to XXXX as of the date hereof as
follows:
26
2.3.1 Purchaser's Corporate Status. The Purchaser is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware. On the Closing Date Purchaser
shall have a minimum equity capitalization of $2,500,000.
2.3.2 Authorization, etc. The Purchaser has full
corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby and to perform its
obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of the
Purchaser. This Agreement has been duly executed and delivered by the
Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its
terms.
2.3.3 Conflicts, Consents. (a) Conflicts. The
execution and delivery of this Agreement by the Purchaser, and the
consummation by the Purchaser of the transactions contemplated hereby in
the manner contemplated hereby, do not and will not conflict with or
result in any violation of, or default under (or any event that, with
notice or lapse of time or both, would constitute a default under), any
provision of (i) the Articles of Incorporation or Bylaws of the
Purchaser, (ii) any mortgage, indenture, loan agreement, note, bond,
deed of trust, other agreement, commitment or obligation for the
borrowing of money or the obtaining of credit, material lease or other
material agreement, contract, license, franchise, permit or instrument
to which the Purchaser is a party or by which it may be bound, or (iii)
any judgment, order, decree, law, statute, rule or regulation applicable
to the Purchaser.
(b) Consents. Other than filings under the HSR Act, no
consent, approval, authorization, permit, order, filing, registration or
qualification of or with any court, governmental authority or third
person is required to be obtained by the Purchaser in connection with
the execution and delivery by the Purchaser of this Agreement or the
consummation by the Purchaser of the transactions contemplated hereby in
the manner contemplated hereby.
27
2.3.4 Brokers, Finders. The Purchaser has not retained
any broker or finder in connection with the transactions contemplated
hereby so as to give rise to any valid claim against XXXX or the Company
for any brokerage or finder's commission, fee or similar compensation.
2.3.5 Purchase for Investment. The Purchaser is
acquiring the Shares for its own account for investment and not with a
view to any distribution thereof. The Purchaser acknowledges receipt of
advice from the Company to the effect that the Shares have not been
registered under the Securities Act of 1933, as amended, or any state
securities laws.
2.3.6 Financing. Purchaser has furnished to XXXX true
and complete copies of all commitment letters received from Purchaser's
lending sources and equity sources setting forth the amount of funds
necessary for Purchaser to purchase the Shares as provided in this
Agreement. All fees required to be paid by Purchaser to such lending
sources as of the date hereof have been paid by Purchaser or an
affiliate thereof and such commitment letters are subject only to the
conditions set forth therein. Purchaser is not in default with respect
to any requirements or conditions contained in such commitment letters
and knows of no existing conditions, events or circumstances that would
cause such lending sources to not fund such commitments in connection
with the transactions contemplated hereby.
ARTICLE 3
CERTAIN COVENANTS PENDING THE CLOSING
3.1 Access and Information. Prior to the Closing Date,
XXXX shall cause the Company to (a) give to the Purchaser and its
representatives full and free access to the Company's properties,
Company Personnel, books, records, contracts and commitments upon
reasonable notice during normal business hours, (b) furnish all such
information and documents relating to its properties and business as the
Purchaser may reasonably request, (c) allow the Purchaser to discuss
matters relating to the Company with the Company's customers with the
prior consent of XXXX (such consent not to be unreasonably withheld or
delayed), the outside auditors, attorneys and such other representatives
(including the Company's lenders) for the
28
Company as are reasonably requested by the Purchaser, and (d) permit
such other reasonable investigations, valuations or testing (including
environmental investigations and testing) as may be deemed necessary by
Purchaser with the prior consent of XXXX (such consent not to be
unreasonably withheld or delayed).
3.2 Conduct of Business of the Company. Except as set
forth in Schedule 3.2, from the date hereof to the Closing, XXXX will
cause the Company (a) to conduct its business only in the ordinary
course in substantially the same manner as heretofore, (b) to maintain
and keep its properties and equipment in such repair, working order and
condition as is sufficient for the operation of its business in the
ordinary course, (c) to keep in full force and effect insurance
comparable in amount and scope of coverage to that now maintained by it
(to the extent available on commercially reasonable terms in the case of
any renewal or replacement policies), (d) to perform in all material
respects all of its obligations under all contracts and commitments
applicable to its business or properties, (e) to use its best efforts to
maintain and preserve the Company's business organization intact, and
maintain satisfactory relationships with employees, suppliers,
distributors and customers so that they will be preserved after the
Closing, (f) to maintain its books of account and records in the usual
and regular manner, (g) to comply in all material respects with all laws
and regulations applicable to it and to the conduct of its business, (h)
not to amend its Articles of Incorporation or Bylaws, (i) not to merge
or consolidate with, or agree to merge or consolidate with, or to
purchase substantially all of the assets of, or otherwise acquire, any
business or any business organization or division thereof, (j) not to
make any material commitments or expenditures, other than those
previously disclosed to Purchaser, (k) promptly to advise the Purchaser
in writing of any emergency or other change in the normal course of
business or in the operations of its properties and of any governmental
or any other third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated), (l)
promptly advise the Purchaser of any material adverse change in its
business, operations or financial condition, (m) to collect its accounts
receivable in the ordinary course of business consistent with past
practice, (n) to pay its accounts payable in the ordinary course of
business consistent with past practice, (o) to use its best efforts to
insure that the
29
representations and warranties contained in Section 2 hereof shall be
true and correct as of the Closing Date and (p) not to take any action
described in Section 2.1.14 hereof.
3.3 Efforts to Consummate Transaction. Subject to the
terms and conditions herein provided, each of the parties agrees hereto
to use its best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby in accordance with the terms of this
Agreement.
3.4 Employee Matters. (a) Purchaser shall, or shall
cause the Company to, maintain employee benefit plans, programs,
policies and arrangements for employees of the Company for a period of
12 months which provide medical, dental, life insurance and savings plan
benefits that are no less favorable in the aggregate than those provided
under the applicable employee benefit plans, programs, policies and
arrangements of the Company in effect on the Closing; provided, however,
that the 12 month period with respect to savings plan benefits shall
commence upon the establishment of a Transferee Savings Plan pursuant to
Section 3.4(c)(i) below. Notwithstanding the foregoing, for a period of
12 months from the Closing, Purchaser shall, or shall cause the Company
to, maintain severance plans which provide to each employee of the
Company severance pay and benefits which are no less favorable than
those under the severance plan, program or policy applicable to the
employee as in effect on the Closing and attached hereto as Schedule 3.4
(the "Severance Plans"). Employees of the Company shall be given credit
for all service with the Company and XXXX (and the affiliates hereof) to
the same extent as such service was credited for such purpose by the
Company or XXXX (or the affiliates thereof) under (i) each employee
benefit plan, program, policy or arrangement of the Company or XXXX in
which the employees are eligible to participate for all service with the
Company or any predecessor employer (to the extent such credit was given
by the Company or XXXX) for purposes of eligibility and vesting and (ii)
the Severance Plans, programs and policies for purposes of calculating
the amount of each employee's severance pay and benefits.
30
(b) If employees of the Company become eligible to
participate in 1996 in a medical and dental plan of Purchaser or its
affiliates, Purchaser shall or shall cause the Company to cause such
plan to (i) waive any preexisting condition limitations for conditions
covered under the applicable medical or dental plans of the Company (the
"Company Medical Plans") but only to the extent such conditions would
have been covered under the applicable Company Medical Plan based on
such plan's existing condition limitation and (ii) honor any deductible
and out of pocket expenses incurred by the employees and their
beneficiaries under the Company Medical Plans during the portion of 1996
preceding the Closing. If employees of the Company become eligible to
participate in 1996 in a group term life insurance plan maintained by
Purchaser or its affiliates, Purchaser shall cause such plan to waive
any medical certification for such employees up to the amount of
coverage the employees had under the life insurance plan of the Company
(but subject to any limits on the maximum amount of coverage under
Purchaser's life insurance plan).
(c) (i) Not later than 60 days after the Closing,
Purchaser shall establish or maintain one or more
defined contribution plans (the "Transferee Savings
Plans") for the benefit of current and former
employees of the Company (and their beneficiaries) who
were participants in the Savings Plan for Salaried
Employees of XXXX Furniture, Inc. or the Savings Plan
for Hourly Employees of the Divisions and Subsidiaries
of XXXX Furniture, Inc. (together referred to as the
"XXXX Savings Plans"). Such employees (and
beneficiaries) are referred to hereinafter as the
"Savings Plan Employees." The Transferee Savings Plans
shall, upon the transfer of assets referred to below,
fully vest all account balances of the Savings Plan
Employees transferred from the XXXX Savings Plans.
XXXX shall cause to be transferred from the
XXXX Savings Plans to the Transferee Savings Plans the
liability for the account balances of the Savings Plan
Employees, together with assets the fair market value
of which is equal to such liability. The transfer
shall take place within 120 days after the Closing;
provided, however, that in no event shall such
transfer take place until Purchaser furnishes
31
to XXXX a copy of the plan document and trust
agreement establishing the Transferee Savings Plans
(including amendments thereto) and, unless waived by
XXXX, a copy of the favorable determination letter
from the Internal Revenue Service with respect to the
qualification of the Transferee Savings Plans under
Section 401(a) of the Code. XXXX and Purchaser shall
cooperate in filing with all government agencies any
documents required in connection with the transfer.
(ii) Pending the completion of the transfers
described in this paragraph (c), XXXX shall make
arrangements for any required payments to the Savings
Plan Employees from the XXXX Savings Plans, in the
event of their termination of employment or
retirement. XXXX and Purchaser shall provide each
other with access to information reasonably necessary
in order to carry out the provisions of this
paragraph.
(d) Neither Purchaser nor the Company shall assume or
have any liability under any bonus, incentive or supplemental retirement
plans maintained by XXXX, including without limitation, the XXXX
Furniture, Inc. 1994 Incentive Stock Option Plan, Management Incentive
Plan and Long Term Incentive Plan. XXXX shall take such actions as are
necessary to ensure the preservation and delivery of all benefits
accrued through the Closing, whether payable presently or at some future
date, to employees of the Company in respect of the Management Incentive
Plan and Long Term Incentive Plan. If such benefits do not accrue
ratably, this provision shall apply to the pro rata portion of the
benefits, calculated as of the Closing Date that would have been earned
had such employees remained employed on the applicable accrual date.
3.5 Consents and Approvals; Releases. Sellers shall
use their best efforts (without the obligation to make any payment or
concession to any third party) promptly to obtain all consents, releases
and amendments from parties to the Material Agreements and from
governmental authorities, which are required by the terms thereof, this
Agreement or otherwise for the due and punctual consummation of the
transactions contemplated by this Agreement. Purchaser will cooperate
with Sellers in obtaining such consents, amendments and releases and
32
shall continue to use its best efforts after Closing to obtain such
consents, amendments and releases in the event they are not all obtained
prior to Closing. Purchaser and Seller shall use their best efforts
(without the obligation to make any payment or concession to any third
party) to cause Purchaser to be substituted in all respects for XXXX or
any of its affiliates or obtain the release of XXXX or any of its
affiliates, effective as of the Closing, in respect of all obligations
of XXXX under the guaranties and severance agreements set forth in
Schedule 3.5 (the "Guaranty" or "Guaranties"). If Purchaser and Sellers
are unable to effect such a substitution or release with respect to any
Guaranty after using their best efforts to do so, Purchaser shall fully
indemnify XXXX and its affiliates with respect to the obligations
covered by each of the Guaranties for which Purchaser does not effect
such substitution, and for so long as XXXX'x guaranty to the Virginia
Coalfield Economic Development Authority (the "CEDA Guaranty") remains
outstanding, Purchaser shall (x) pay to LADD a CEDA Guaranty fee on
commercially reasonable terms as shall be mutually acceptable to
Purchaser and XXXX; and (y) deliver to XXXX within 120 days of
Purchaser's fiscal year end, audited consolidated statements of
operations, balance sheets, shareholders equity and cash flows of the
Company and its subsidiaries, including the Company, for such year. The
Sellers shall also cooperate with and assist Purchaser and its
authorized representatives in order to provide an efficient transfer of
the control and management of the Company and to avoid any undue
interruption in the activities and operations of the Company following
the Closing Date.
3.6 [Intentionally Left Blank]
3.7 Tax Matters. (a) Purchaser agrees that following
the Closing Date it will permit and cooperate with XXXX, at XXXX'x
expense, to carry back any net operating losses, capital losses or tax
credits that have arisen in taxable periods ended on or prior to the
Closing Date to be applied to reduce XXXX'x federal or Virginia tax
liability or the Company's other state tax liabilities attributable to
earnings prior to Closing in all situations where such carrybacks are
allowed by law.
33
(b) Purchaser shall bear and remit, and shall file all
the returns with respect to any and all federal, state, local, and
foreign income severance, property, payroll, employment, sale, use or
other taxes levied or imposed upon or in connection with the Company and
the Subsidiary which is attributable to the taxable period beginning
after the Closing Date. Purchaser shall be entitled to control the
defense and resolution, including settlement, of any audit of or other
challenge to any return filed by it.
(c) After the Closing Date, each of XXXX and Purchaser
shall cooperate (and shall cause their respective affiliates to
cooperate) with each other and with each other's respective agents,
including accounting firms and legal counsel, in connection with the
preparation or audit of any Tax return, amended return or report, claim
for refund and any tax claim or litigation in respect of the Company or
its activities, which cooperation shall include, but not be limited to
making available to the other all information, records and documents in
their possession relating to the liabilities for Taxes associated with
the Company. XXXX and Purchaser shall also make available to the other,
as reasonably requested and available, personnel responsible for
preparing, maintaining and interpreting information, records and
documents in connection with Taxes as well as related litigation. Any
information provided or obtained under this Section 3.7 shall be kept
confidential, except as may be otherwise necessary in connection with
the filing of returns or reports, refund claims, audits, tax claims and
litigation.
3.8 Intercompany Debt. All forms of intercompany
obligations of or to the Company with respect to XXXX or any XXXX
affiliate shall be extinguished on or before the Closing Date following
the procedure for eliminating intercompany debt set out in Exhibit B to
Schedule 2.1.14. Such method of elimination will not result in a Tax to
the Company or Purchaser.
3.9 Noncompetition. For a period of two years
following the Closing (the "Noncompetition Period"), XXXX will not (i)
in any geographic area where the Company or any of its subsidiaries
conducts business during the Noncompetition Period, engage or
participate in directly or indirectly (whether as partner, consultant,
holder of an equity or debt investment,
34
lender or in any other manner or capacity), or lend its name (or any
part or variant thereof) to, any business which is, or as a result of
the XXXX'x engagement or participation, a business that derives greater
than $25,000,000 of its total sales volume from the ready-to-assemble
("RTA") segment of the furniture industry ("RTA Products"); (ii) deal,
directly or indirectly, in a competitive manner with respect to RTA
Products with any customers doing business with the Company or any of
its subsidiaries during the Noncompetition Period; (iii) solicit any
officer, director, employee, or agent of the Company or any of its
subsidiaries to become an officer, director, employee, or agent of XXXX,
its respective affiliates or anyone else; and (iv) engage in or
participate in, directly or indirectly, any business conducted under any
name that shall be the same as or similar to the name of the Company or
any of its subsidiaries or any trade name used by them; provided,
however, neither (a) ownership by XXXX for investment of less than five
percent of the outstanding shares of capital stock of any corporation
with one or more classes of its capital stock listed on a national
securities exchange or actively traded in the over-the-counter market
nor (b) the manufacture, marketing and sale of lines of RTA Products
currently manufactured, marketed and sold by XXXX or any of its
affiliates or lines of RTA Products reasonably similar to such current
lines of products, whether or not such lines of RTA Products compete
directly or indirectly with the Company or are sold to any of the
Company's current or future customers, shall not constitute a breach of
the foregoing covenant. During the Noncompetition Period, Purchaser and
the Company will not solicit any officer, director, employee or agent of
XXXX or any affiliate of XXXX to become an officer, director, employee
or agent of Purchaser or the Company or any of its subsidiaries. XXXX is
entering into the foregoing covenant to assure Purchaser of the transfer
of the goodwill of the Company and the Subsidiary, and in order to
induce Purchaser to consummate the purchase contemplated by this
Agreement.
3.10 Corporate Names. From and after the Closing,
Purchaser shall possess, to the exclusion of XXXX, all rights to the
names: "Xxxxxxxx Furniture, Inc." and any variants or derivatives
thereof, and XXXX shall have no rights whatsoever to the use of any such
names or any variant or derivative of any such names in the conduct of
any business.
35
3.11 Nondisclosure. XXXX will not at any time after
the date of this Agreement divulge, furnish to or make accessible to any
nonaffiliate of XXXX any knowledge or information with respect to
confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether
patentable or not, with respect to any confidential or secret aspects of
the business of the Company or its Subsidiary (including without
limitation, customer lists, supplier lists and pricing arrangements with
customers or suppliers); provided, however, that nothing herein shall
prohibit XXXX from complying with any order or decree of any court of
competent jurisdiction or governmental authority, but XXXX will give
Purchaser timely notice of the receipt of any such order or decree, and
the foregoing provision shall not apply to any information which is or
becomes generally available to the public through no breach of this
Agreement.
3.12 Mutual Cooperation. The parties hereto will
cooperate with each other, and will use all reasonable efforts to cause
the fulfillment of the conditions to the parties' obligations hereunder,
and to obtain as promptly as possible all consents, authorizations,
orders or approvals of any third party, whether private or governmental,
required in connection with the transactions contemplated by this
Agreement.
3.13 Further Assurances. XXXX will, and will cause the
Company, the Subsidiary and all Company Personnel to, cooperate fully
with Purchaser in connection with the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, from and
after the Closing Date, from time to time, at Purchaser's request and
without further consideration, XXXX will execute and deliver, or cause
to be executed and delivered, at Purchaser's sole cost and expense, such
other instruments and take such other action as Purchaser may reasonably
request in order to carry out the purposes of this Agreement.
3.14 No Solicitation. Until the Closing Date, except
as required by law in the written opinion of counsel to Sellers, the
Sellers shall, and shall use their best efforts to cause their
representatives, agents and employees to, refrain from, directly and
indirectly soliciting, discussing or negotiating, directly or
indirectly, with any third party any inquiries, proposals or
36
offers with respect to the sale of the Company or any portion of its
assets or securities. If the Sellers or their representatives, agents or
employees receive any unsolicited offer or proposal for any such
acquisition, or obtain information that such an offer or proposal is
likely to be made, XXXX will provide Purchaser with immediate written
notice thereof.
3.15 Caldor Pre-petition Receivable. Schedule
3.15 sets forth a true and complete description, including the invoices
constituting the $580,483.80 outstanding balance, of the receivable due
the Company from Caldor, Inc. for the period prior to the filing of
bankruptcy by Caldor, Inc. (the "Caldor Pre-petition Receivable"). On
or before the Closing Date the Caldor Pre-Petition Receivable will be
distributed by the Company to XXXX.
3.16 VOSH. With regard to the pending enforcement
action by the Virginia Department of Labor and Industry/Occupational
Safety and Health Enforcement ("VOSH"), inspection no. 123693178,
Citation Date: 4/4/95, if the final penalty imposed by VOSH is greater
than $10,000, XXXX will immediately pay to Purchaser in cash any final
penalty amount in excess of $10,000.
3.17 Labor Matters. With regard to the complaint
issued by the National Labor Relations Board (the "Board") with respect
to charges filed by the United Mine Workers of America and more fully
disclosed on Schedule 2.1.10 hereto, XXXX will promptly reimburse
Purchaser in cash upon notice for 50% of the reasonable fees and
expenses incurred by the Company or Purchaser after the Closing Date (in
excess of $125,000) of counsel to Purchaser in defending the Company
against such Board complaint or any other related complaint, action,
proceeding or matter. In addition, XXXX will fully cooperate with
Purchaser in the defense of such complaint, including, without
limitation, making XXXX personnel and documentation available as
Purchaser shall reasonably request.
3.18 EASY-PLAN. XXXX and the Company agree to
cooperate fully, at no out-of-pocket costs to XXXX and the Company to
any third party, in any and all efforts reasonably
37
required to be undertaken by the Purchaser or any of its affiliates due
to third party inquiry to continue the Purchaser's unqualified right to
use the xxxx EASY-PLAN in Canada.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser. The
obligations of the Purchaser under this Agreement are subject to the
fulfillment, at or prior to the Closing, of the following conditions,
any one or more of which may be waived by the Purchaser in its sole
discretion:
4.1.1 Representations, Performance, etc. The
representations and warranties of the Company and XXXX contained in
Sections 2.1 and 2.2 that are not conditioned as to materiality shall be
true and correct in all material respects at and as of the Closing Date
with the same effect as though made at and as of the Closing Date,
except as modified by transactions permitted by this Agreement, and all
representations and warranties of the Company and XXXX that are so
qualified as to materiality shall be true and correct at and as of the
Closing Date with the same effect as though made at and as of the
Closing Date. The Company and XXXX shall have duly performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or at the
Closing Date. XXXX shall have delivered to the Purchaser a certificate
of XXXX signed by a senior officer of each of XXXX and the Company
familiar with the transactions contemplated by this Agreement.
4.1.2 Opinion of Counsel. The Purchaser shall have
received an opinion, addressed to the Purchaser and dated the Closing
Date, of Xxxxxx Stockton, L.L.P., counsel to the Company and XXXX, in
substantially the form attached hereto as Exhibit A.
4.1.3 Resignation of Directors and Officers. Each
director and officer of the Company shall have submitted his resignation
effective as of the Closing.
38
4.1.4 Certain Approvals, etc. All consents and
approvals from governmental authorities and third parties required to be
obtained by the Company and XXXX to consummate the transactions
contemplated hereby shall have been obtained, other than (i) any
consents or approvals of third parties listed on Schedule 2.1.3 as to
which Purchaser has indicated it waives any requirement of XXXX or the
Company to obtain such consents and (ii) any consents and approvals of
third parties in respect of any contract or agreement of the Company and
XXXX (not involving the borrowing of money) in respect of which the
failure to obtain such consent or approval, either in any case or in the
aggregate, could not be expected, in Purchaser's reasonable judgment, to
have a Material Adverse Effect on the Company.
4.1.5 No Litigation or Injunction. As of the Closing
Date, there shall not be in effect any judgment, order, injunction or
decree of any court of competent jurisdiction, the effect of which is to
prohibit or restrain the consummation of the transactions contemplated
by this Agreement, and no claim, action, suit, investigation or other
proceeding shall be threatened or pending before any court or
administrative agency or by any governmental agency or other person,
challenging or otherwise relating to the transactions provided for
herein or which may have a Material Adverse Effect on the Company.
4.1.6 No Liens. The Shares shall be free and clear of
all liens, claims and Encumbrances. The Purchaser shall receive the
stock certificates representing the Shares duly endorsed for transfer in
blank or accompanied by a duly executed stock power or other proper
instrument of assignment duly executed in blank and having all requisite
stock transfer tax stamps attached thereto (at Purchaser's expense if
the Closing takes place at any location other than the State of North
Carolina) in form suitable for transfer of valid title thereto to
Purchaser free and clear of any Encumbrances of any nature whatsoever..
4.1.7 No Material Adverse Changes. From the date
hereof to the Closing Date, there shall have been no material adverse
change in the business, assets, operations, or financial condition of
the Company.
39
4.1.8 Intercompany Debt. All forms of intercompany
obligations of or to the Company with respect to XXXX or any affiliate
of XXXX shall have been extinguished as provided in Section 3.8 in a
manner that will not result in a Tax to the Company or Purchaser.
4.1.9 Financing. Purchaser shall have obtained the
financing described in the commitment letters furnished to XXXX pursuant
to Section 2.3.6.
4.1.10 Employment Arrangements. Purchaser shall
have entered into employment arrangements satisfactory to Purchaser for
the post Closing period with D. Xxxxxxx Xxxxx, Xxxxx Xxxxxxxxxx, Xxxx X.
Xxxx and J. Xxxxxxx Xxxxxxx.
4.1.11 No Change in Law. There shall have not been any
action, or statute enacted, by the United States, any state or any
foreign country which would render the parties unable to consummate the
transactions contemplated herein, illegal or prohibit or restrict or
substantially delay the consummation of the transactions contemplated
herein.
4.1.12 Repurchase of Equipment. XXXX shall have
repurchased all equipment of the Company subject to that certain
Equipment Lease Agreement dated December 15, 1994 between Unionbanc
Leasing Corporation and XXXX, and Unionbanc Leasing Corporation shall
have released any and all interests it has in such equipment.
4.1.13 HSR Act. All waiting periods under the HSR Act
applicable to the consummation of the transactions contemplated hereby
shall have expired or been terminated.
4.1.14 CEDA Guaranty. If applicable, XXXX and
Purchaser shall have agreed upon the CEDA Guaranty fee and shall have
entered into mutually acceptable written documentation with respect
thereto.
40
4.2 Conditions to Obligations of Sellers. The
obligations of the Sellers under this Agreement are subject to the
fulfillment, at or prior to the Closing, of the following conditions,
any one or more of which may be waived by Sellers in their sole
discretion:
4.2.1 Representations, Performance, etc. The
representations and warranties of the Purchaser contained in Section 2.3
that are not conditioned as to materiality shall be true and correct in
all material respects at and as of the Closing Date with the same effect
as though made at and as of the Closing Date, except as modified by
transactions permitted by this Agreement, and all representations and
warranties of the Purchaser that are so qualified as to materiality
shall be true and correct at and as of the Closing Date with the same
effect as though made at and as of the Closing Date. The Purchaser shall
have duly performed and complied with all agreements, covenants and
conditions required by this Agreement to be performed or complied with
by it prior to or at the Closing Date. The Purchaser shall have
delivered to XXXX a certificate of the Purchaser signed by a senior
officer of the Purchaser familiar with the transactions contemplated by
this Agreement, dated the Closing Date, to the effect set forth above in
this Section 4.2.1.
4.2.2 Opinion of Counsel. XXXX shall have received an
opinion, addressed to it and dated the Closing Date, of Xxxxx
Xxxxxxxxxx, counsel for the Purchaser, in substantially the form
attached hereto as Exhibit B.
4.2.3 Certain Approvals, etc. All consents and
approvals from governmental authorities and third parties required to be
obtained by the Purchaser to consummate the transactions contemplated
hereby shall have been obtained, other than any consents and approvals
of third parties in respect of any contract or agreement of the
Purchaser (not involving the borrowing of money) in respect of which the
failure to obtain such consent or approval, either in any case or in the
aggregate, could not reasonably be expected to have a material adverse
effect on the transactions contemplated hereby.
4.2.4 No Litigation or Injunction. As of the Closing
Date, there shall not be in effect any judgment, order, injunction or
decree of any court or competent jurisdiction, the effect
41
of which is to prohibit or restrain the consummation of the transactions
contemplated by this Agreement, and no claim, action, suit,
investigation or other proceeding shall be threatened or pending before
any court or administrative agency or by any governmental agency or
other person, challenging or otherwise relating to the transactions
provided for herein or which may have a Material Adverse Effect on the
Company.
4.2.5 No Change in Law. There shall have not been any
action, or statute enacted, by the United States, any state or any
foreign country which would render the parties unable to consummate the
transactions contemplated herein, illegal or prohibit or restrict or
substantially delay the consummation of the transactions contemplated
herein.
4.2.6 Purchase Price. XXXX shall have received from
Purchaser the Purchase Price and the Note in form and substance
consistent with the terms set forth on the term sheet attached hereto as
Exhibit C reasonably satisfactory to XXXX.
4.2.7 Guaranties. Purchaser shall have been
substituted in all respects for the Sellers and their respective
affiliates in respect of each of the Guaranties, or Purchaser shall have
entered into indemnification agreements satisfactory to XXXX with
respect to such Guaranties, all as more specifically provided in Section
3.5.
4.2.8 Intercompany Debt. All forms of intercompany
obligations of or to the Company with respect to XXXX or any affiliate
of XXXX shall have been extinguished as provided in Section 3.8 in a
manner that will not result in a Tax to the Company or Purchaser.
4.2.9 Employment Arrangements. Employment
agreements shall have been entered into between Purchaser and each of D.
Xxxxxxx Xxxxx, Xxxxx Xxxxxxxxxx, Xxxx X. Xxxx and J. Xxxxxxx Xxxxxxx
accompanied by a release of XXXX satisfactory to XXXX of each of their
respective severance agreements with XXXX as contemplated by Section
3.5.
42
4.2.10 HSR Act. All waiting periods under the HSR Act
applicable to the consummation of the transactions contemplated hereby
shall have expired or been terminated.
4.2.11 Security for Note. XXXX shall have received
from the Company all security documents reasonably necessary or required
to be filed, registered or recorded in order to create, in favor of
XXXX, a perfected security interest in all of the assets of the Company
in which CIT takes a security interest, such security interest to be
inferior to only CIT and the Industrial Development Authority of Xxxxxxx
County, all as provided in Exhibit C to this Agreement.
4.2.12 CEDA Guaranty. If applicable, XXXX and
Purchaser shall have agreed upon the CEDA Guaranty fee and shall have
entered into mutually acceptable written documentation with respect
thereto.
4.2.13 Warrant. XXXX and Purchaser shall have entered
into the Warrant in substantially the form attached hereto as Exhibit D.
ARTICLE 5
TERMINATION
5.1 Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing Date in the circumstances
set forth in this Section 5.1, by delivering written notice of such
termination.
5.1.1 Mutual Consent. This Agreement may be
terminated at any time by the mutual consent of XXXX and the Purchaser.
5.1.2 Termination by Either Party. This Agreement may
be terminated by either the Purchaser or XXXX if (i) the representations
and warranties of the other party shall prove not to have been true in
all material respects as of the date when made, (ii) events shall have
43
occurred subsequent to the date hereof as a result of which the
representations and warranties of the other party could not be true in
all material respects as of the Closing Date, unless the occurrence of
such events shall be due to the failure of the party seeking to
terminate this Agreement to perform or comply with any of the covenants,
agreements or conditions hereof to be performed or complied with by such
party prior to the Closing, or (iii) the Closing shall not have occurred
prior to February 29, 1996 (or such other date as may be mutually agreed
to by the parties).
5.2 Effect of Termination. If this Agreement is
terminated as permitted under Section 5.1, such termination shall be
without liability of or to any party to this Agreement or any
shareholder, partner, director, officer, employee or agent of such
party, except that a party that willfully breaches this Agreement
resulting in termination of this Agreement may be held liable for any
breach. The provisions of Sections 5.2, 7.2 and 7.15 shall survive any
such termination.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by XXXX. (a) XXXX agrees to
indemnify and hold harmless Purchaser and its affiliates, successors and
assigns from and against any and all (a) liabilities, losses, costs or
damages ("Loss") and (b) reasonable attorneys' and accountants' fees and
expenses, court costs and all other reasonable out-of-pocket expenses,
including expenses of investigation ("Expense") incurred by Purchaser,
its affiliates, successors and assigns in connection with or arising
from:
(i) any breach by XXXX of any warranty or the
inaccuracy of any representation of XXXX contained in
this Agreement or in any agreement or instrument
contemplated hereby (including any Schedule or Exhibit
hereto);
44
(ii) any breach by XXXX of any of its
covenants contained in this Agreement or in any
agreement or instrument contemplated hereby (including
any Schedule or Exhibit hereto);
(iii) any Taxes of the Company or XXXX for
(A) any taxable period ended on or before the Closing
Date or (B) in the case of a taxable period beginning
before the Closing Date and ending after the Closing
Date, the portion of such period ending on the Closing
Date determined as if such taxable period ended on the
Closing Date and the taxable income or other basis of
taxation for such taxable period was determined by
means of an actual closing of the books at the end of
the Closing Date;
(iv) Any liability of the Company or XXXX (or
any entity required to be aggregated with the Company
or XXXX under section 414(b), (c), (m), or (o) of the
Code) to the Pension Benefit Guaranty Corporation or
otherwise under Title IV of ERISA, or in connection
with an accumulated funding deficiency or lien arising
under ERISA or section 412 of the Code; and
(v) the Company's (A) use of the xxxx
EASY-PLAN in Canada before or after the date hereof,
to the extent such use violates any rights of any
third party or (B) inability to use the xxxx EASY-PLAN
in Canada after the date hereof limited to any Loss or
Expense suffered by Purchaser in connection with its
relinquishment of such xxxx and provided that
Purchaser uses all reasonable efforts to minimize any
costs associated with any such relinquishment.
provided, however, that XXXX shall be required to indemnify and hold
harmless under clause (i) this Section 6.1 (a) with respect to Loss and
Expense incurred by Purchaser or its affiliates, successors and assigns
only to the extent that the aggregate amount of such Loss and Expense
exceeds $150,000, at which time claims hereunder may be asserted for all
such claims in excess of the initial $150,000. The indemnification
provided for in this Section 6.1 shall terminate
45
eighteen (18) months after Closing Date (and no claims shall be made by
any party indemnified under this Section 6.1 thereafter), except that
the indemnification provided for in clause (v) of this Section 6.1(a)
shall not terminate until Purchaser's relinquishment of the xxxx EASY-
PLAN; provided, that, all representations and warranties made by XXXX in
(i) Section 2.1.12 (Tax Matters) and Section 2.1.16 (Compliance with
ERISA) and the indemnification contained in Sections 6.1(iii) and (iv)
shall survive until 30 days after the applicable period of limitation
(or any extension thereof) has expired and (ii) Section 2.1.11
(Compliance with Laws; Permits) and Section 2.1.23 (Environmental) shall
survive the Closing Date for a period of five years (as the case may be,
the "Survival Period"). Such indemnification obligation shall continue,
without regard to any investigation made at any time by Purchaser after
the Closing Date as to any Loss or Expense of which Purchaser or its
affiliates, successors or assigns has notified XXXX in accordance with
the requirements of Section 6.3 on or prior to the expiration of the
applicable survival period in accordance with this Section 6.1, as to
which the obligation of XXXX shall continue until the liability of XXXX
shall have been determined pursuant to this Article 6, and XXXX shall
have reimbursed Purchaser, its affiliates, successors or assigns for the
full amount of such Loss and Expense in accordance with this Article 6.
(b) In the event of any claim for
indemnification under Section 6.1 with respect an Environmental Claim:
(i) Purchaser shall provide reasonable access
to the premises of such of the Company's properties as
may be necessary or appropriate to enable XXXX and its
employees, agents, attorneys, consultants and
contractors to evaluate the claim and take remedial or
other appropriate action;
(ii) Purchaser shall make available to XXXX
or its representatives all information, records and
other materials in the possession or control of
Purchaser which are reasonably required by XXXX for
its use in connection with any claim, investigation or
remedial action (it being understood that any such
materials that constitute Confidential Information
will be subject to the provisions of
46
Section 7.15) and shall otherwise cooperate and assist
XXXX in connection with such claim, investigation or
remedial action (including, where appropriate,
providing testimony in connection with any litigation;
provided, that in the event of such provision, XXXX
shall reimburse Purchaser for any Expense incurred in
connection therewith);
(iii) XXXX shall have the right and
responsibility of defending, remedying, compromising
and settling any Environmental Claim and shall have
the right to employ and control its own counsel,
consultants and contractors in connection therewith.
XXXX shall have full control over any actions
(including, without limitation, any remedial action,
negotiation or litigation) in connection with any such
Environmental Claim; provided, that (i) if a remedial
or other action proposed to be taken by XXXX in
settlement of the Environmental Claim would materially
and adversely affect the Company's operations at a
facility, such action shall not be taken without the
prior written consent of Purchaser (which consent
shall not unreasonably be withheld); (ii) XXXX shall
not compromise or settle any Environmental Claim
without the consent of Purchaser (which consent shall
not unreasonably be withheld); and (iii) in the event
Purchaser shall refuse to consent to the taking of any
remedial or other action approved by applicable
regulatory agencies in respect of, or the compromise
or settlement of, any Environmental Claim which would
not have a material and adverse effect on the
Purchaser's or the Company's operations, XXXX may
elect to take over the defense of such Environmental
Claim, and in any case, the liability of XXXX shall
not exceed the amount for which the Environmental
Claim could have been settled plus the amount of
Expense incurred by Purchaser prior to the time of the
proposed settlement to which it is entitled to
indemnification;
(iv) The obligations of XXXX in respect of an
Environmental Claim shall be limited to the taking of
such reasonable actions as are necessary under the
circumstances giving rise to such Environmental Claim,
and XXXX (i) shall in no
47
event be required to take more extensive actions than
would have been required under Environmental Laws in
effect, applicable and enforceable as of the Closing
Date; (ii) shall not be liable for any effect upon the
business operations of any of the facilities included
in the properties (including, without limitation,
business interruption or loss of profits) caused by or
resulting from remedial or other action taken by XXXX
in furtherance of its obligations hereunder, unless
resulting from XXXX'x willful misconduct or gross
negligence; and (iii) shall not be liable for any Loss
or Expense resulting from actions taken or omitted by
Purchaser on or after the Closing Date. Any Loss and
Expense in respect of a violation of Environmental Law
occurring both before and after the Closing Date shall
be allocated between XXXX and Purchaser on a fair and
equitable basis;
(v) Effective upon being indemnified as
provided in Section 6.1, Purchaser hereunder (A)
transfers and assigns to XXXX all rights and claims
Purchaser has or may have against third parties for
reimbursement or contribution; (B) agrees to execute
such instruments and take such other actions as may be
necessary or appropriate to transfer and assign the
foregoing rights or claims to the latter; and (C)
agrees to take such reasonable actions when and as
necessary or appropriate to assist the latter to
obtain reimbursement or contribution from third
parties;
(vi) The parties to this Agreement shall use
reasonable efforts and shall cooperate with each other
to obtain any necessary consent, transfer or
reissuance of any governmentally issued environmental
permits, licenses and registrations necessary to
operate the Company as it was operated as of the
Closing Date. XXXX makes no representations or
warranties with respect to whether or when such
consent, transfer or reissuance will occur or whether
such consent, transfer or reissuance will be
conditioned upon new or additional requirements. XXXX
shall not be required to incur any liability or make
any payment or concession to any third party in order
to obtain such consent, transfer or reissuance; provided
48
this provision shall not in any way limit XXXX'x
indemnification obligations hereunder; and
(vii) XXXX and Purchaser agree that their
respective rights and obligations in respect of
liabilities in respect of Environmental Laws as
provided in this Agreement shall supersede any such
rights and obligations either may have under any
existing or future law.
6.2 Indemnification by Purchaser. Purchaser agrees to
indemnify and hold harmless XXXX and its affiliates, successors and
assigns from and against any and all Loss and Expense incurred by them
in connection with or arising from:
(i) any breach by Purchaser of any warranty
or the inaccuracy of any representation of Purchaser
contained in this Agreement or in any agreement or
instrument contemplated hereby (including any Schedule
or Exhibit hereto);
(ii) any breach by Purchaser of any of
its covenants or agreements in this Agreement or any
agreement or instrument contemplated hereby (including
any Schedule or Exhibit hereto); and
(iii) any Loss or Expense arising from the
Purchaser's or the Company's conduct of the business
and operations of the Company after Closing;
The foregoing indemnification shall terminate eighteen (18) months after
the Closing Date (and no claims shall be made by any party indemnified
under this Section 6.2 thereafter) except that (y) the foregoing
indemnification contained in Section 6.2(iii) shall survive for a period
of five years from the Closing Date, and (z) except that the
indemnification by Purchaser shall continue as to any Loss or Expense of
which a party indemnified pursuant to this Section 6.2 has notified
Purchaser in accordance with the requirements of Section 6.3 on or prior
to the date such indemnification would otherwise terminate in accordance
with this Section 6.2, as to which the
49
obligation of Purchaser shall continue until the liability of Purchaser
shall have been determined pursuant to this Article 6, and Purchaser
shall have reimbursed such party for the full amount of such Loss and
Expense in accordance with this Article 6; provided, however, that
Purchaser shall be required to indemnify and hold harmless under clause
(i) of this Section 6.2 with respect to any Loss and Expense incurred by
XXXX or its affiliates, successors and assigns only to the extent that
the aggregate amount of such Loss and Expense exceeds $150,000, at which
time claims hereunder may be asserted for all such claims in excess of
$150,000.
6.3 Notice of Claims. (a) If Purchaser or XXXX
believes that any of the persons indemnified under this Article 6 has
suffered or incurred any Loss or incurred any Expense, Purchaser or XXXX
shall so notify the other promptly in writing describing such Loss or
Expense, the amount thereof, if known, and the method of computation of
such Loss or Expense, all with reasonable particularity and containing a
reference to the provisions of this Agreement or other agreement,
instrument or certificate delivered pursuant hereto in respect of which
such Loss or Expense shall have occurred, except that the failure to so
notify shall not relieve a party of its obligations to indemnify, except
to the extent its rights hereunder are materially prejudiced. If any
action at law or suit in equity is instituted by or against a third
party with respect to which any of the indemnified persons intends to
claim any liability or expense as Loss or Expense under this Article 6,
any such indemnified person shall promptly notify the indemnifying party
of such action or suit.
(b) The amount to which an indemnified person shall be
entitled under this Article 6 shall be determined by the written
agreement between the indemnified person and the indemnifying party. If
the parties are unable to agree upon such amount, the indemnifying party
shall pay that amount agreed upon between the parties and the remainder
shall be determined as provided in Section 7.14 hereto.
6.4 Third Party Claims. (a) Subject to Section 6.1(b)
and 6.4(b), the persons indemnified under Sections 6.1 and 6.2 shall
have the right to conduct and control, through counsel of their
choosing, any third party claim, action or suit, and the persons
indemnified may
50
compromise or settle the same, provided that any of the indemnified
persons shall give the indemnifying party advance notice of any proposed
compromise or settlement provided that the indemnified party will not
settle any claim, action or suit without the prior consent of the
indemnifying party, such consent not to be unreasonably withheld or
delayed. The indemnified persons shall permit the indemnifying party to
participate in the defense of any such action or suit through counsel
chosen by it, provided that the fees and expenses of such counsel shall
be borne by the indemnifying party.
(b) If applicable, if the remedy sought in any action
or suit referred to in Section 6.4(a) is solely money damages and will
have no continuing effect on the business of any indemnified person in
the reasonable judgment of the indemnified person, the indemnifying
party shall have 30 days after receipt of the notice referred to in the
first sentence of Section 6.4(a) to notify the indemnified persons that
it elects to conduct and control such action or suit. If the
indemnifying party does not give the foregoing notice, the indemnified
persons shall have the right to defend, contest, settle or compromise
such action or suit in the exercise of their exclusive discretion, and
the indemnifying party shall, upon request from any of the indemnified
persons, promptly pay to such indemnified persons in accordance with the
other relevant terms of this Article 6 the amount of any Loss resulting
from its liability to the third party claimant and all related Expense.
If the indemnifying party gives the foregoing notice, the indemnifying
party shall have the right to undertake, conduct and control, through
counsel of its own choosing and at the sole expense of the indemnifying
party, the conduct and settlement of such action or suit, and the
indemnified persons shall cooperate with the indemnifying party in
connection therewith; provided that (w) the indemnifying party shall not
settle or compromise any such action or suit without the indemnified
party's prior written consent, unless the terms of such settlement or
compromise release the indemnified party from any and all liability with
respect to such action or suit, (x) the indemnifying party shall not
thereby permit to exist any lien, encumbrance or other adverse charge
upon any asset of any indemnified person; (y) the indemnifying party
shall permit the indemnified persons to participate in such conduct or
settlement through one counsel chosen by the indemnified persons, and
the fees and expenses of such counsel shall be borne by the indemnified
persons except as provided in clause (z) below; and (z) the indemnifying
party
51
shall agree promptly to reimburse to the extent required under this
Article 6 the indemnified persons for the full amount of any Loss
resulting from such action or suit and all related Expense incurred by
the indemnified persons, except fees and expenses of counsel for the
indemnified persons incurred after the assumption of the conduct and
control of such action or suit by the indemnifying party. So long as the
indemnifying party is contesting any such action or suit in good faith,
the indemnified persons shall not pay or settle any such action or suit.
Notwithstanding the foregoing, the indemnified persons shall have the
right to pay or settle any such action or suit, provided that in such
event the indemnified persons shall waive the right to indemnity
therefor by the indemnifying party, and no amount in respect thereof
shall be claimed as Loss or Expense under this Article 6 unless
otherwise agreed by the parties.
6.5 Set Off. Purchaser shall have the right to set off
against the Note due to any Losses or Expenses sustained or paid
resulting from any misrepresentation or breach of any representation,
warranty or agreement for which Purchaser is indemnified under this
Article VI, upon and in accordance with the judgment of a court of
competent jurisdiction, an arbitration award or as agreed by the parties
hereto with respect to the amount of such Loss or Expense.
ARTICLE 7
MISCELLANEOUS
7.1 Survival. Only those agreements and covenants of
Purchaser and Sellers which by their express terms apply in whole or in
part after the Closing, including but not limited to the rights of
indemnification contained in Article 6, shall survive the Closing. XXXX
and Purchaser agree that the indemnification provisions set forth in
Article 6 are the exclusive provisions of this Agreement with respect to
the liability of XXXX or the Purchaser for the breach or inaccuracy of a
representation or warranty or the breach of any covenant in this
Agreement or in any agreement or instrument contemplated hereby;
provided, that nothing herein shall preclude either party from seeking
an equitable remedy for any such breach.
52
7.2 Expenses. XXXX shall (i) pay the fees and expenses
of Xxxxx Financial Corporation and Xxxxx & Company at the Closing and
(ii) pay all federal, state, county and local and foreign income taxes
which may be payable by reason of the consummation of the purchase and
sale of the Shares. Subject to the foregoing, each of XXXX and the
Purchaser shall assume and bear their own expenses, costs and fees
incurred in the preparation and execution of this Agreement and
compliance herewith, including attorneys' and accountants' fees, whether
or not the purchase and sale provided for herein shall be consummated.
7.3 Assignment; Successors; Parties in Interest. This
Agreement shall not be assignable by any party hereto without the prior
written consent of all of the other parties and any attempt to assign
this Agreement without such consent shall be void and of no effect,
except that, this Agreement may be assigned by Purchaser to an affiliate
of Purchaser provided that such affiliate has a minimum equity
capitalization at the time of such assignment of $2,500,000 or, subject
to the consent of XXXX (which consent shall not be unreasonably
withheld), to a purchaser of all or substantially all of the capital
stock or assets of the Company; provided that no such assignment shall
relieve Purchaser of its obligations hereunder. This Agreement shall
inure to the benefit of, and be binding on and enforceable against, each
party hereto and such permitted successors and assigns of the respective
parties hereto, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any
nature whatsoever under this Agreement.
7.4 Amendment and Modification. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated
orally, but only with the written consent signed by the party against
which such change, waiver, discharge or termination is sought to be
enforced.
7.5 Access After Closing. Each party shall retain for
a period of six years following Closing all books and records within its
possession or control which relate to the operation and conduct of the
business of the Company prior to Closing. Each party shall provide to
the other party and its representatives, upon reasonable notice and at
the requesting party's
53
expense, reasonable access during normal business hours to copies of all
such books and records upon request by the other party hereto, including
providing such access to XXXX to prepare tax returns or statements or
documents relevant to a particular claim for indemnification that has
been made by Purchaser under Article 6; provided that, XXXX shall not be
entitled to any books, records, or other information deemed by Purchaser
to be confidential or competitively sensitive unless such books, records
or other information relates to Taxes or a matter subject to
indemnification under Article 6.
7.6 Best Efforts. Each party agrees to use its
reasonable best efforts to satisfy the conditions to the Closing set
forth in this Agreement and otherwise to consummate the transactions
contemplated by this Agreement.
7.7 Knowledge. For the purposes of the representations
and warranties of Sellers contained in this Agreement, the knowledge of
XXXX, the Company or the Sellers shall be deemed to consist solely of
the actual knowledge of those individuals listed on Schedule 7.7 and
only such persons after due investigation.
7.8 Notices. All notices, consents, requests,
instructions, approvals and other communications provided for herein and
all legal processes in regard hereto shall be validly given, made or
served, if in writing and delivered personally or sent by registered or
certified mail, postage prepaid, or by commercial courier or by telecopy
(promptly confirmed in writing) to the following addresses (or at such
other addresses for such party as shall be specified by like notice):
54
To XXXX:
XXXX Furniture, Inc.
Xxx Xxxxx Xxxxxx, Xxx XX-0
Xxxx Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
Executive Vice President and
Chief Financial Officer
Telephone: 910/000-0000
Telecopy: 910/888-6344
With a copy to:
(which copy shall not constitute notice)
Xxxxxx Xxxxxxxx, L.L.P.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: 910/000-0000
Telecopy: 910/607-7505
To the Purchaser:
Xxxxxxxx Acquisition Corp.
c/o Gefinor Acquisition Partners
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Principal
Telephone: 212/000-0000
Telecopy: 212/308-1182
55
With a copy to:
(which copy shall not constitute notice)
Xxxxx Xxxxxxxxxx
1301 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: 212/000-0000
Telecopy: 212/259-6333
7.9 Public Announcement. Neither Sellers nor Purchaser
will make, directly or indirectly, any public announcement with respect
to this transaction prior to the Closing without the prior written
approval of the other party, except as required by law; provided,
however, that XXXX shall make a public announcement with respect to the
execution of this Agreement in form and substance reasonably acceptable
to Purchaser whose consent shall not be unreasonably withheld.
7.10 Captions. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
7.11 Entire Agreement. This Agreement (including the
Schedules and Exhibits) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
7.12 Counterparts. This Agreement may be executed
in several counterparts, each of which shall constitute one and the same
instrument.
7.13 Severability. If any term or provision of this
Agreement is held by a court or other authority of competent
jurisdiction to be invalid, void or unenforceable, the remaining terms
and provisions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
56
7.14 Arbitration. The parties hereto agree to submit
to arbitration any and all matters in dispute or in controversy among
them concerning the terms and provisions of this Agreement. All such
disputes and controversies shall be determined and adjudged by the
arbitrators, and the hearing shall be held in Greensboro, North
Carolina. The selection of arbitrators and the procedure shall be in
accordance with the commercial arbitration rules then in effect of the
American Arbitration Association. Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered in the
highest court of the forum, state or federal, having jurisdiction. The
expenses of the arbitration shall be borne equally by the parties to the
arbitration, provided that, subject to the provisions of Article 6 which
are not superseded hereby and which provide for indemnification of
certain expenses, each party shall pay for and bear the costs of their
own experts, evidence and counsel's fees, except that in the discretion
of the arbitrator, any award may include the costs of a party's counsel
if the arbitrator expressly determines that the party against whom such
award is entered has caused the dispute, controversy or claim to be
submitted to arbitration as a dilatory tactic.
7.15 Confidential Nature of Information. Each party
agrees that it will treat in confidence all documents, materials and
other information which it shall have obtained regarding the other party
during the course of the negotiations leading to the consummation of the
transactions contemplated hereby (whether obtained before or after the
date of this Agreement), the investigation provided for herein and the
preparation of this Agreement and other related documents, and, in the
event the transactions contemplated hereby shall not be consummated,
each party will return to the other party all copies of nonpublic
documents and materials which have been furnished in connection
therewith. The obligation of each party to treat such documents,
materials and other information in confidence shall not apply to any
information which (i) such party can demonstrate was already lawfully in
its possession prior to the disclosure thereof by the other party, (ii)
is known to the public and did not become so known through any violation
of a legal obligation, (iii) became known to the public through no fault
of such party or (iv) is later lawfully acquired by such party from
other sources, and following the Closing, Purchaser shall have no
obligation to treat documents, materials and other information
concerning the Company in confidence.
57
7.16 Schedules and Exhibits. The Schedules and
Exhibits are a part of this Agreement as if fully set forth herein. All
references to Sections, subsections, Schedules and Exhibits shall be
deemed references to such parts of this Agreement, unless the context
shall otherwise require. Disclosure of any fact or items in any Schedule
hereto referenced by a particular section in this Agreement shall,
should the existence of the fact or item or its contents be relevant to
any other section, be deemed to be disclosed with respect to that other
section if an explicit cross-reference appears.
7.17 Definitions. Used in this Agreement, the
following terms have the meanings specified or referred to in this
Section 7.16:
(a) "Adjustment Certificate" shall have the
meaning set forth in Section 1.4(B).
(b) "Adjustment Report" shall have the meaning
set forth in Section 1.4(B).
(c) "Agreement" shall have the meaning set forth
on Page 1 of this Agreement.
(d) "Annual Financials" shall have the meaning
set forth in Section 2.1.4(a).
(e) "Caldor Pre-petition Receivable" shall have
the meaning set forth in Section 3.15.
(f) "Cash Amount" shall have the meaning set
forth in Section 1.4(A).
(g) "CEDA Guaranty" shall have the meaning set
forth in Section 3.5.
(h) "CERCLA" shall have the meaning set forth in
Section 2.1.23(g).
(i) "CERCLIS" shall have the meaning set forth in
Section 2.1.23g.
58
(j) "Closing" shall have the meaning set forth in
Section 1.2.
(k) "Closing Balance Sheet": the unaudited
consolidated balance sheet of the Company as of the Closing Date, which
shall be prepared in accordance with generally accepted accounting
principles applied on a basis consistent with those used in the
preparation of the Interim Balance Sheet (including the deviations from
GAAP set forth on Schedule 2.1.4).
(l) "Closing Date" shall have the meaning set
forth in Section 1.2.
(m) "Closing Working Capital": the excess of
consolidated current assets over consolidated current liabilities
(exclusive of the Caldor Pre-petition Receivable, the current portion of
long-term indebtedness, current deferred tax assets or liabilities, and
intercompany indebtedness or receivables and the accrued lease payment
under the Unionbanc Leasing Corporation equipment lease) of the Company
as shown on the Closing Balance Sheet which shall be prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the Interim
Balance Sheet (including the deviations from GAAP set forth on Schedule
2.1.4).
(n) "COBRA" shall have the meaning set forth in
Section 3.4(e).
(o) "Code" shall have the meaning set forth in
Section 2.1.16(a).
(p) "Common Stock" shall have the meaning set
forth in Section 2.1.2(a).
(q) "Company" shall have the meaning set forth on
Page 1 of this Agreement.
(r) "Company Medical Plans" shall have the
meaning set forth in Section 3.4(b).
(s) "Company Personnel" shall have the meaning
set forth in Section 2.1.14(e).
59
(t) "Dispute Notice" shall have the meaning set
forth in Section 1.4(B).
(u) "Contaminant" means any pollutant, hazardous
substance, radioactive substance, toxic substance, hazardous waste,
medical waste, radioactive waste, special waste, petroleum or
petroleum-derived substance or waste, asbestos, PCBs, or any hazardous
or toxic constituent thereof and includes, but is not limited to, any
substance defined in or regulated under Environmental, Health or Safety
Requirements of Law.
(v) "Encumbrances" shall have the meaning set
forth in Section 1.3.
(w) "Environmental Claim" shall mean any claim
with respect to indemnification relating to any environmental matters.
(x) "Environmental Damages" means all claims,
judgments, damages (including punitive damages), losses, penalties,
fines, interest, fees, liabilities (including strict liability),
encumbrances, liens, costs, and expenses of investigation and defense of
any claim, whether or not such claim is ultimately defeated, and of any
good faith settlement or judgment, of whatever kind or nature,
contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including, without limitation, reasonable attorneys' fees
and disbursements and consultants' fees, any of which are incurred at
any time as a result of the existence of Contaminants or noncompliance
with Environmental, Health or Safety Requirements of Law with respect to
the period prior to the Closing, including without limitation:
(i) Damages for personal injury or
threatened personal injury (including sickness, disease or death), or
injury or threatened injury to property or natural resources,
foreseeable or unforeseeable, including, without limitation, the cost of
demolition and rebuilding of any improvements on real property;
(ii) Reasonable fees incurred for the
services of attorneys, consultants, contractors, doctors, experts,
laboratories and all other reasonable costs incurred in connection
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with any damages as described in subparagraph (i) of this definition,
and the investigation or remediation of Contaminants or the suspected
presence of Contaminants or the violation or threatened violation of
Environmental, Health or Safety Requirements of Law including, but not
limited to, the preparation of any feasibility studies or reports or the
performance of any investigations, cleanup, treatment, remediation,
removal, response, abatement, containment, closure, storage, disposal,
transport, restoration or monitoring work required by any federal, state
or local governmental agency or political subdivision, or otherwise
expended in connection with such conditions, and including, without
limitation, any reasonable attorneys' fees, costs and expenses incurred
in enforcing this Agreement or collecting any sums due hereunder; and
(iii) Liability to any third person or
Governmental Authority to indemnify such person or Governmental
Authority for costs expended in connection with the items referenced in
subparagraphs (i) and (ii) of this definition.
(y) "Environmental, Health or Safety Requirements of
Law" means all federal, state and local laws, statutes, codes,
ordinances, rules, regulations, EHS Permits, or orders relating to or
addressing the environment, health or safety, including, but not limited
to, any law, statute, code, ordinance, rule, regulation, EHS Permit or
order relating to (x) the use, handling or disposal of any Contaminant
or (y) workplace or worker safety and health, as such requirements are
promulgated by the specifically authorized Governmental Authority
responsible for administering such requirements.
(z) "Environmental Lien" means a lien in favor of any
Governmental Authority for any (a) liability under any Environmental,
Health or Safety Requirement of Law, or (b) damages arising from, or
costs incurred by, such Governmental Authority in response to a Release
or threatened Release of a Contaminant into the environment.
(aa) "Environmental Permits" shall have the
meaning set forth in Section 2.1.23(i).
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(ab) "ERISA" shall have the meaning set forth in
Section 2.1.16(a).
(ac) "GAAP" shall have the meaning set forth in
Section 2.1.4(a).
(ad) "Governmental Authority" means any agency,
department, court or other administrative, legislative or regulatory
authority of any federal, state or local governmental body.
(ae) "Guaranties" shall have the meaning set
forth in Section 3.5.
(af) "Hazardous Materials" shall have the
meaning set forth in Section 2.1.23(iv).
(ag) "HSR Act" shall have the meaning set forth
in Section 2.1.3(b).
(ah) "Intellectual Property" shall have the
meaning set forth in Section 2.1.17.
(ai) "Interim Balance Sheet" shall have the
meaning set forth in Section 2.1.3.
(aj) "Interim Financials" shall have the meaning
set forth in Section 2.1.4(a).
(ak) "XXXX" shall have the meaning set forth on
Page 1 of this Agreement.
(al) "XXXX Savings Plans" shall have the meaning
set forth in Section 3.43.4(c)(i).
(am) "Liens" means, with respect to any assets or
properties (whether real, personal or mixed or tangible or intangible),
any mortgage, pledge, option, escrow, hypothecation, lien, security
interest, financing statement, lease, charge, encumbrance, easement,
conditional sale or other title retention or security agreement or any
other similar restriction, claim or right of
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others, on, in, or with respect to such assets or properties, whether arising
by contract, operation of law or otherwise.
(an) "Loss and Expense" shall have the meaning
set forth in Section 6.1.
(ao) "Material Adverse Effect" shall mean a material
adverse effect on the business, properties, assets (tangible and
intangible) or financial condition or results of operations of the
Company; provided that an event, change or effect that arises from
general U.S. or Canadian economic conditions or that otherwise affects
the U.S. manufacturing industry generally such as a result of the
suspension or limitation of trading in securities generally on the New
York Stock Exchange, American Stock Exchange or NASDAQ for a prolonged
period of time, a banking moratorium declared by U.S. authorities, any
outbreak of major hostilities in which the U.S. is involved, or any
declaration of war by the U.S. Congress or similar substantial national
calamity or emergency, shall not be considered material or to have a
material adverse effect on the Company.
(ap) "Material Agreements" shall have the
meaning set forth in Section 2.1.15.
(aq) "Note" shall have the meaning set forth in
Section 1.4(A).
(ar) "NPL" shall have the meaning set forth in
Section 2.1.23(g).
(as) "Original Principal Amount" shall have the
meaning set forth in Section 1.4(A).
(at) "PCBs" shall have the meaning set forth in
Section 2.1.23(m).
(au) "Permitted Liens" means (i) Liens for taxes not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on
the books of the Company in accordance with generally accepted
accounting
63
principles; (ii) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of the
business of the Company which are not overdue for a period of more than
30 days or which are being contested in good faith and by appropriate
proceedings, if adequate reserves with respect thereto are maintained on
the books of the Company in accordance with generally accepted
accounting principles; (iii) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social security
legislation; (iv) deposits to secure the performance of any or all of
the following: bids, trade contracts (other than for borrowed money),
leases (other than financing leases), statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of the business of the Company; (v)
easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of the business of the Company which, in
the aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject thereto
or interfere with the ordinary conduct of the business of the Company;
(vi) such imperfections or irregularities of title and encumbrances, if
any, as are not substantial in character, amount or extent so as to
materially detract from the value or interfere with the present use of
the properties affected thereby or otherwise impair present business
operations, and (vii) those liens or encumbrances described on Schedule
7.17 attached hereto.
(av) "Plans" shall have the meaning set forth in
Section 2.1.16(a).
(aw) "Principal Amount Adjustment" shall have
the meaning set forth in Section 1.4(B)(c).
(ax) "Properties" means all real or personal property
of any kind or description presently owned, leased, operated, or
otherwise under the control of the Company.
(ay) "Purchase Price" shall have the meaning set
forth in Section 1.4(A).
(az) "Purchaser" shall have the meaning set
forth on Page 1 of this Agreement.
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(ba) "RCRA" shall have the meaning set forth in
Section 2.1.23(h).
(bb) "Release" means the release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migrating into the indoor or outdoor environment of any
Contaminant through or in the air, soil, surface water, groundwater or
Properties.
(bc) "Remedial Action" means actions required to (i)
clean up, remove, treat or in any other way address Contaminants in the
indoor or outdoor environment; (ii) prevent the Release or threat of
Release or minimize the further Release of Contaminants; or (iii)
investigate and determine if a remedial response is needed, to design
such a response and post-remedial investigation, monitoring, operation,
maintenance and care.
(bd) "Review Period" shall have the meaning set
forth in Section 1.4(B).
(be) "RTA Products" shall have the meaning set
forth in Section 3.9.
(bf) "Savings Plan Employees" shall have the
meaning set forth in Section 3.4(c)(i).
(bg) "Sellers" shall have the meaning set forth
on Page 1 of this Agreement.
(bh) "Severance Plans" shall have the meaning
set forth in Section 3.4.
(bi) "Shares" shall have the meaning set forth
in the recitals to this Agreement.
(bj) "Subsidiary" shall have the meaning set
forth in Section 2.1.1(a).
(bk) "Taxes" shall have the meaning set forth in
Section 2.1.12.
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(bl) "Transferee Savings Plans" shall have the
meaning set forth in Section 3.4(c)(i).
7.18 Governing Law. This Agreement shall be governed in
all respects, including validity, interpretation and effect, by the laws
of the State of North Carolina, without giving effect to the conflict of
laws rules thereof.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
XXXX:
XXXX FURNITURE, INC.
By:
President and Chief Executive Officer
THE COMPANY:
XXXXXXXX FURNITURE, INC.
By:
Title: Vice President
PURCHASER:
XXXXXXXX ACQUISITION CO.
By:
Title:
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