1
EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
by and among
XXXXXXX & XXXXXX CORPORATION,
XXXXXXX & XXXXXX PRODUCTS CO.,
JAII ACQUISITION CO.,
XXXXX XxXXXXXX,
XXXX FABRICS CORPORATION
and
XXXX AUTOMOTIVE INDUSTRIES, INC.
Dated as of August 17, 2001
2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.1 Definitions.............................................................1
ARTICLE II
THE MERGER
2.1 The Merger.............................................................10
2.2 The Closing............................................................10
2.3 Effective Time.........................................................10
2.4 Certificate of Incorporation and Bylaws................................10
2.5 Directors and Officers of the Surviving Corporation....................11
ARTICLE III
CONVERSION AND EXCHANGE OF SHARES
3.1 Conversion of Shares...................................................11
3.2 Surrender and Payment..................................................11
3.3 Repayment of Debt Repayment Amount.....................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE COMPANY
4.1 Due Incorporation......................................................12
4.2 Due Authorization......................................................12
4.3 Consents and Approvals; Authority Relative to This Agreement...........13
4.4 Capitalization of the Company..........................................13
4.5 Financial Statements; Undisclosed Liabilities; Other Documents.........14
4.6 No Material Adverse Effects; No Material Adverse Change................14
4.7 Title to Properties; Restructuring.....................................16
4.8 Condition and Sufficiency of Assets....................................17
4.9 Real Property..........................................................17
4.10 Personal Property......................................................18
4.11 Inventory..............................................................18
4.12 Accounts Receivable; Engineering and Development.......................18
-i-
3
Page
----
4.13 Intellectual Property...................................................18
4.14 Contracts; No Default or Violation......................................19
4.15 Permits.................................................................21
4.16 Insurance...............................................................21
4.17 Employee Benefit Plans; ERISA...........................................22
4.18 Employment and Labor Matters............................................24
4.19 Capital Improvements....................................................25
4.20 Taxes...................................................................25
4.21 Product Claims..........................................................26
4.22 Environmental Matters...................................................26
4.23 Litigation..............................................................27
4.24 No Conflict of Interest.................................................28
4.25 Bank Accounts...........................................................28
4.26 Additional Representations and Warranties by Seller.....................28
4.27 Brokers.................................................................29
4.28 Imposition of Certain Liability.........................................29
4.29 Customers and Suppliers.................................................29
4.30 Company Disclosure Schedule.............................................29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT, PRODUCTS AND MERGER SUB
5.1 Existence and Power.....................................................30
5.2 Due Authorization.......................................................30
5.3 Consents and Approvals; Authority Relative to This Agreement............30
5.4 No Violation of Other Instruments or Laws...............................30
5.5 Merger Consideration....................................................30
5.6 Parent Disclosure Documents.............................................31
5.7 Brokers.................................................................31
ARTICLE VI
COVENANTS
6.1 Implementing Agreement..................................................31
6.2 Access to Information and Facilities....................................31
6.3 Consents and Approvals..................................................32
6.4 Retention of Certain Employees..........................................32
6.5 Supplemental Information................................................33
6.6 Use of Name.............................................................33
6.7 Termination of Certain Agreements.......................................33
6.8 Confidentiality.........................................................33
6.9 Publicity...............................................................34
6.10 Preservation of Business................................................34
-ii-
4
Page
----
6.11 Tax Matters............................................................36
6.12 Maintenance of Insurance...............................................40
6.13 Non-Compete............................................................40
6.14 Non-Disparagement......................................................41
6.15 Personnel Matters......................................................41
6.16 Company Financial Statements...........................................44
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY
7.1 Non-Compete Agreements.................................................45
7.2 Actions or Proceedings.................................................45
7.3 New York Stock Exchange................................................45
7.4 Refinancing of Seller's Loan...........................................45
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT, PRODUCTS AND MERGER SUB
8.1 Warranties True as of Both Present Date and Closing Date...............46
8.2 Compliance with Agreements and Covenants...............................46
8.3 Consents and Approvals.................................................46
8.4 Stockholders Agreement.................................................46
8.5 Financial Statements...................................................46
8.6 Documents..............................................................46
8.7 No Indebtedness; Working Capital.......................................47
8.8 Additional Agreements..................................................47
8.9 Consummation of WAD Asset Purchase.....................................47
8.10 No Material Adverse Change.............................................47
8.11 Consummation of Restructuring..........................................48
8.12 Consents and Estoppels.................................................48
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXXXX,
SELLER AND THE COMPANY
9.1 Warranties True as of Both Present Date and Closing Date...............48
9.2 Compliance with Agreements and Covenants...............................48
9.3 Documents..............................................................48
9.4 Registration Rights Agreement; Stockholders Agreement..................49
9.5 Consents and Approvals.................................................49
9.6 Consummation of WAD Asset Purchase.....................................49
9.7 Additional Agreements..................................................49
-iii-
5
Page
----
ARTICLE X
CLOSING
10.1 Deliveries by Seller and the Company...................................49
10.2 Deliveries by Parent, Products and Merger Sub..........................50
ARTICLE XI
TERMINATION
11.1 Termination............................................................51
11.2 Effect of Termination..................................................51
ARTICLE XII
INDEMNIFICATION
12.1 Survival...............................................................52
12.2 Indemnification by Seller..............................................52
12.3 Indemnification by Products............................................52
12.4 Claims.................................................................53
12.5 Notice of Third Party Claims; Assumption of Defense....................54
12.6 Settlement or Compromise...............................................54
12.7 Failure of Indemnifying Person to Act..................................55
12.8 Limitations on Indemnification.........................................55
12.9 Assignment of Claims...................................................55
12.10 Exclusive Remedies.....................................................55
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses...............................................................56
13.2 Amendment..............................................................56
13.3 Notices................................................................56
13.4 Waivers................................................................57
13.5 Counterparts...........................................................57
13.6 Headings...............................................................58
13.7 Interpretation.........................................................58
13.8 Applicable Law.........................................................58
13.9 Jurisdiction; Waiver of Jury Trial.....................................58
13.10 Assignment.............................................................58
13.11 No Third Party Beneficiaries...........................................58
13.12 Further Assurances.....................................................59
-iv-
6
Page
----
13.13 Severability...........................................................59
13.14 Remedies Cumulative....................................................59
13.15 Entire Understanding...................................................59
13.16 Company Disclosure Schedule............................................59
EXHIBITS
Exhibit A Form of Non-Compete Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Stockholders Agreement
-v-
7
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is made as of August 17, 2001, by and
among Xxxxxxx & Xxxxxx Corporation, a Delaware corporation ("PARENT"); Xxxxxxx &
Xxxxxx Products Co., a Delaware corporation ("PRODUCTS"); JAII Acquisition Co.,
a Delaware corporation, and a wholly-owned Subsidiary of Parent ("MERGER SUB");
Xxxxx XxXxxxxx ("XXXXXXXX"); Xxxx Fabrics Corporation, a Delaware corporation
("SELLER"); and Xxxx Automotive Industries, Inc., a Delaware corporation (the
"COMPANY").
WHEREAS, Seller owns beneficially and of record all of the issued and
outstanding capital stock of the Company (the capital stock of the Company is
hereinafter referred to as the "SHARES");
WHEREAS, on the terms and subject to the conditions contained herein, the
board of directors of Seller has approved the merger (the "MERGER") of Merger
Sub with and into the Company with the Company being the Surviving Corporation
(as defined);
WHEREAS, on the terms and subject to the conditions contained herein, the
board of directors of the Company has approved the Merger of Merger Sub with and
into the Company with the Company being the Surviving Corporation;
WHEREAS, on the terms and subject to the conditions contained herein, the
board of directors of each of Parent, Products and Merger Sub has approved the
Merger of Merger Sub with and into the Company with the Company being the
Surviving Corporation;
WHEREAS, XxXxxxxx is a substantial indirect beneficial owner of the Company
and each of Parent, Products and Merger Sub wish to gain assurances that
XxXxxxxx will not compete with the Automotive Business (as defined below in
connection with Section 6.13) or make any statements that disparage any of
Parent, Products, Merger Sub or the Company or any of their present or future
Subsidiaries or Affiliates; and
WHEREAS, it is intended that, for federal income Tax purposes, the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code and that this Agreement shall be, and hereby is, adopted as a plan of
reorganization for purposes of Section 368 of the Code;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
agreements and warranties herein contained, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Unless otherwise defined in this Agreement, the following
terms shall have the meanings herein ascribed to such terms:
8
-2-
"ACCREDITED INVESTOR" shall have the meaning provided in Rule 501(a)
under Regulation D.
"ACQUISITION" shall have the meaning set forth in Section 6.17.
"AFFILIATE" shall mean, with respect to any specified Person: (1)
any other Person which, directly or indirectly, owns or controls, is under
common ownership or control with, or is owned or controlled by, such specified
Person; and (2) any immediate family member of the specified Person or any of
the foregoing Persons referred to in clause (1) who is an individual.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
all exhibits and schedules hereto, as amended from time to time.
"AUTOMOTIVE BUSINESS" shall mean (i) except with respect to Section
6.13, the business of manufacturing, finishing and selling automotive fabrics as
conducted by Seller and the Company as of the date hereof and as of the Closing
Date and (ii) with respect to Section 6.13, the business of manufacturing,
finishing and selling automotive fabrics as conducted by Seller and the Company
as of the date hereof and as of the Closing Date and as conducted by Parent and
its Subsidiaries at any time while XxXxxxxx is a member of the board of
directors of Parent or any Subsidiary of Parent.
"AUTOMOTIVE BUSINESS EMPLOYEES" shall have the meaning set forth in
Section 6.15(a).
"BENEFITS TRANSITION PERIOD" shall have the meaning set forth in
Section 6.15(g).
"B INVESTORS" shall mean Xxxxxxx X. Xxxxxx, Xxxxxxx X. XxXxxxxxx and
Jens Hohnel.
"BUSINESS DAY" shall mean a day other than Saturday, Sunday or any
other day on which commercial banks in New York, New York are authorized or
required by Law to be closed for business.
"CERCLA" shall have the meaning set forth in Section 4.22(d).
"CERTIFICATE OF MERGER" shall have the meaning set forth in
Section 2.3.
"CLOSING" shall have the meaning set forth in Section 2.2.
"CLOSING DATE" shall have the meaning set forth in Section 2.2.
"COBRA" shall have the meaning set forth in Section 4.17(m).
"COBRA COVERAGE" shall have the meaning set forth in Section
6.15(b)(iii).
"CODE" shall mean the United States Internal Revenue Code of 1986,
as amended.
0
-0-
"XXXXXX XXXXX" shall mean the shares of common stock of Parent, par
value $0.01 per share.
"COMPANY" shall have the meaning set forth in the recitals to this
Agreement.
"COMPANY DISCLOSURE SCHEDULE" shall have the meaning set forth in
Article IV.
"COMPANY FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 6.16.
"COMPANY INTELLECTUAL PROPERTY" shall mean any and all Intellectual
Property owned by the Company.
"CONFIDENTIAL INFORMATION" shall mean, with respect to any Person,
all nonpublic technical, proprietary, commercial, financial and other
information (irrespective of the form of such information) owned by or
concerning such Person and its Subsidiaries and their respective businesses and
operations.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set forth in
Section 6.8.
"CONTINUING BENEFITS" shall have the meaning set forth in
Section 6.15(g).
"CONTINUING EMPLOYEES" shall have the meaning set forth in
Section 6.15(a).
"CONTRACT" shall mean any contract, lease, license (other than a
license which is a Permit or Environmental Permit), commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument or plan, whether written or oral.
"DEBT REPAYMENT AMOUNT" shall have the meaning set forth in
Section 3.3.
"DGCL" shall have the meaning set forth in Section 2.1.
"DOLLARS" or numbers preceded by the symbol "$" shall mean amounts
in United States Dollars.
"EFFECTIVE TIME" shall have the meaning set forth in Section 2.3.
"EL PASO BUSINESS" shall mean the business currently engaged in by
each of SW Foam, L.P., a Delaware limited partnership, and Shawmut Southwest
L.P., a Delaware limited partnership.
"EMPLOYEE BENEFIT PLANS" shall have the meaning set forth in
Section 4.17(a).
"END DATE" shall have the meaning set forth in Section 11.1(b)(i).
"ENVIRONMENTAL CLAIM" shall mean any written notice, claim, demand,
action, suit, complaint, proceeding or final communication by any Governmental
Authority or Person alleging li-
10
-4-
ability or potential liability arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Material at any location, whether or not owned, leased
or operated by the Company, or (ii) circumstances forming the basis of any
violation or alleged violation of any Environmental Law or Environmental Permit.
Environmental Claim shall not include claims that were made in the past and
which have been resolved leaving the Company without further liability,
contingent or otherwise.
"ENVIRONMENTAL LAWS" shall mean the common law and all applicable,
federal, state, local and foreign statutes, rules, regulations, ordinances, and
orders and decrees of any Governmental Authority, relating in any manner to
contamination, pollution or protection of human health or the environment, or
occupational safety and health.
"ENVIRONMENTAL PERMITS" shall mean all permits, licenses,
registrations and other governmental authorizations and approvals required for
the Company, and the operations of the Company's facilities, to conduct its
business under Environmental Laws.
"ENVIRONMENTAL REPORTS" shall mean all applications, notifications,
reports, studies, assessments and audits that address any issue of site
assessment or noncompliance with, or liability under, any Environmental Law that
may affect the Company in any material respect.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall have the meaning set forth in Section
4.17(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED ASSETS" shall mean the assets that are or were used by
Seller or the Company in the Automotive Business, as conducted by Seller and the
Company prior to and as of the Closing Date, that are not, as of the date
hereof, assets of the Company, as set forth on Schedule 4.7(b) of the Company
Disclosure Schedule under the heading "Assets Not Transferred" and that the
parties have agreed are not part of the Automotive Business being transferred
under this Agreement.
"GAAP" shall mean U.S. generally accepted accounting principles at
the time in effect.
"GOVERNMENTAL AUTHORITY" shall mean the government of the United
States or any foreign country or any state or political subdivision thereof, and
any entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, including
the PBGC and other quasi-governmental entities established to perform such
functions.
"HAZARDOUS MATERIAL" shall mean any chemical, material or substance
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "hazardous constituents", "restricted hazardous
materials", "extremely hazardous substances", "toxic
11
-5-
substances", "contaminants", "pollutants", "toxic pollutants", or words of
similar meaning and regulatory effect under any applicable Environmental Law,
including, without limitation, petroleum (including, without limitation, crude
oil or any fraction thereof) and asbestos.
"HEARTLAND" shall mean Heartland Industrial Partners, L.P.
"IDENTIFIED TERMS" shall have the meaning set forth in Section 6.6.
"INDEBTEDNESS" of any Person shall mean (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all capital lease obligations
of such Person, (d) all obligations of such Person in respect of bankers'
acceptances issued or created for the account of such Person, (e) all
indebtedness of others secured by (or for which the holder of such indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
any property owned or acquired by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof, and (f) all
guarantees by such Person of indebtedness of others.
"INDEMNIFIED PERSON" shall mean the Person or Persons entitled to,
or claiming a right to, indemnification under Article XII.
"INDEMNIFYING PERSON" shall mean the Person or Persons claimed by
the Indemnified Person to be obligated to provide indemnification under Article
XII.
"INTELLECTUAL PROPERTY" shall mean any and all of the following that
were used in the Automotive Business as of the date of the Letter of Intent or
thereafter: trademarks, trade names, service marks, patents, copyrights
(including any registrations, applications, licenses or rights relating to any
of the foregoing), technology, trade secrets, inventions, know-how, designs,
computer programs, processes, and all other intangible assets, properties and
rights.
"IRS" shall mean the Internal Revenue Service.
"KNOWLEDGE" and similar phrases such as "aware" and "known" shall
mean, whenever used to qualify a representation or warranty herein or in any
Related Agreement, the actual knowledge of Xxxxx XxXxxxxx, Chief Executive
Officer of Seller, Xxxxxx Xxxxx, Chief Financial Officer of Seller, Xxxx Xxxxxx,
General Counsel to Seller, Xxxxx Xxxxxxxxx, Executive Vice President and Chief
Operating Officer of the Company, Xxxx Xxxxxx, Vice President of Operations of
Seller, Xxxxxxx Xxxxx, Executive Vice President of Automotive Design of Seller,
Xxxxxxx Xxxxxxxx, Corporate Controller of Seller, or Xxxxx XxXxxxxx, in each
case, after reasonable inquiry of the individuals whom such Persons would
ordinarily consult with when investigating the type of matter to which the
representation or warranty relates in the ordinary course of performing their
duties and obligations to Seller.
"LATEST BALANCE SHEET" shall mean the audited consolidated balance
sheet of Seller, on a consolidated basis, dated as of June 30, 2000.
12
-6-
"LATEST BALANCE SHEET DATE" shall mean the date of the Latest
Balance Sheet.
"LAW" shall mean any law, statute, regulation, ordinance, rule,
order, decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed to or imposed by any
Governmental Authority.
"LETTER OF INTENT" shall mean the letter agreement among XxXxxxxx,
the Company, Seller, Parent and Products dated April 17, 2001.
"LENDERS" shall mean have the meaning set forth in Section 7.4.
"LIABILITIES" shall have the meaning set forth in Section 12.2(e).
"LIEN" shall mean any mortgage, lien (except for any lien for Taxes
not yet due and payable), charge, restriction, pledge, assessment, security
interest, option, lease or sublease, claim, right of any third party, easement,
encroachment or encumbrance.
"LOSS" or "LOSSES" shall mean any and all liabilities, losses,
costs, claims, damages (including out-of-pocket consequential damages),
penalties and expenses (including reasonable attorneys' fees and expenses and
costs of investigation and litigation). In the event any of the foregoing are
indemnifiable hereunder, the terms "Loss" and "Losses" shall include any and all
reasonable attorneys' fees and expenses and costs of investigation and
litigation incurred by the Indemnified Person in enforcing such indemnity.
"MAIN STREET" shall mean Main Street Textiles, L.P., a Delaware
limited partnership, and its successors and assigns.
"MATERIAL ADVERSE CHANGE" shall mean a change (or circumstance or
event involving a prospective change) in the business, operations, assets,
liabilities, results of operations, cash flows or condition (financial or
otherwise) of the Company or the Automotive Business that has a Material Adverse
Effect.
"MATERIAL ADVERSE EFFECT" shall mean with respect to a Person an
effect or circumstance that is or is reasonably likely to be materially adverse
on either (i) the business, operations, assets, liabilities, results of
operations, cash flows or condition (financial or otherwise) of such Person or,
with respect to the Company, the Automotive Business, or (ii) the ability of
Seller, Parent or such Person to consummate the Transactions. Notwithstanding
the foregoing, each of the parties hereto agrees that any such effect or
circumstance that relates to the matters contemplated by any Section of this
Agreement that does not have an effect upon the Company or Products that would
reasonably be expected to result in a claim, Loss or obligation of an amount
greater than $100,000 shall not constitute a Material Adverse Effect; provided,
however, that in no event shall an effect or circumstance that affects the
national economy or the automotive industry generally in substantially the
manner and to substantially the extent that it affects the Automotive Business
be deemed to be a Material Adverse Effect even if the same would otherwise
qualify as such.
13
-7-
"MATERIAL CONTRACT" shall mean a Contract that provides for or that
would reasonably be expected to result in the relevant party thereto making
payments in excess of $25,000 per year, for at least one year, or that would
otherwise be reasonably expected to have a Material Adverse Effect if not
performed by either party to such Contract.
"XXXXXXXX" shall have the meaning set forth in the recitals to this
Agreement.
"MERGER" shall have the meaning set forth in the recitals to this
Agreement.
"MERGER CONSIDERATION" shall have the meaning set forth in
Section 3.1(b).
"MERGER SUB" shall have the meaning set forth in the recitals to
this Agreement.
"NON-COMPETE AGREEMENT" shall mean each of the non-compete
agreements by and between Products and each of Xxxxx XxXxxxxx and Xxxxx Xxxxxxxx
substantially in the form attached hereto as EXHIBIT A.
"NON-COMPETE PERIOD" shall have the meaning set forth in
Section 6.13.
"PARENT" shall have the meaning set forth in the recitals to this
Agreement.
"PARENT DISCLOSURE DOCUMENTS" shall have the meaning set forth in
Section 5.6.
"PBGC" shall have the meaning set forth in Section 4.17(f).
"PENSION PLANS" shall have the meaning set forth in Section 4.17(a).
"PERMITTED LIENS" shall mean any easements, covenants, restrictions,
encroachments and similar encumbrances that do not materially interfere with,
and do not materially adversely affect, the value or the use of the Real
Property as used and improved as of the date of the Letter of Intent and as
currently used and improved. "Permitted Liens" shall also include the right of
the lessor in or to (i) any lease of assets or Real Property; (ii) any assets
that are subject to a lease where the existence of the lease or the fact that
the assets are leased is reflected in Schedule 1.2(P) of the Company Disclosure
Schedule; and (iii) other Liens that are reflected on Schedule 1.2(P) of the
Company Disclosure Schedule.
"PERMITS" shall have the meaning set forth in Section 4.15.
"PERSON" shall mean any individual, corporation, proprietorship,
firm, partnership, limited partnership, trust, association or other entity.
"PRODUCT" shall have the meaning set forth in Section 4.21.
"PRODUCT DAMAGE CLAIMS" shall have the meaning set forth in
Section 12.2(d).
"PRODUCT WARRANTY CLAIMS" shall have the meaning set forth in
Section 12.2(c).
14
-8-
"PRODUCTS" shall have the meaning set forth in the recitals to this
Agreement.
"PRODUCTS 401(K) PLAN" shall have the meaning set forth in
Section 6.15(c)(ii).
"PRODUCTS INDEMNIFIED PARTIES" shall mean Products, Parent, Merger
Sub and each of their Affiliates (including, after the Closing, the Company and
its Subsidiaries), and their respective officers, directors, employees, members,
managers, agents and representatives; provided that in no event shall Seller be
deemed a Products Indemnified Party.
"REAL PROPERTY" shall have the meaning set forth in Section 4.9.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights
agreement in the form attached hereto as EXHIBIT B to be entered into by and
among Parent, Heartland, Seller and the B Investors, if any, named therein.
"REGULATION D" shall have the meaning set forth in Section 4.26(a).
"RELATED AGREEMENT" shall mean any Contract that is or is to be
entered into at the Closing or otherwise pursuant to, or in connection with,
this Agreement, including the Non-Compete Agreements, the Registration Rights
Agreement, the Stockholders Agreement, the Supply Agreement and the Transition
Services Agreement.
"RESTRUCTURING" shall have the meaning set forth in Section 4.7(b).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLER" shall have the meaning set forth in the recitals to this
Agreement.
"SELLER FINANCIAL STATEMENTS" shall mean all of the following: (i)
the audited consolidated financial statements of Seller as of June 30, 1999 and
June 30, 2000, consisting of the consolidated balance sheets at such date and
the related consolidated statements of earnings and retained earnings and cash
flows for the year then ended and (ii) the unaudited consolidated financial
statements of Seller as of March 31, 2000 and March 31, 2001, consisting of the
consolidated balance sheets at each such date and the related consolidated
statements of earnings and retained earnings and cash flows for the nine-month
period then ended.
"SELLER INDEMNIFIED PARTIES" shall mean Seller and each of its
Affiliates (including, prior to the Closing, the Company), and their respective
officers, directors, employees, members, managers, agents and representatives.
"SELLER'S DEFINED BENEFIT PLAN" shall have the meaning set forth in
Section 6.15(c)(i).
"SELLER'S 401(K) PLAN" shall have the meaning set forth in
Section 6.15(c)(i).
"SELLER'S LOAN" shall mean the debt of Seller, as guaranteed by its
Affiliates to the lenders pursuant to that certain Credit Agreement dated as of
July 15, 1997, as amended.
15
-9-
"SELLER'S RETIREMENT PLANS" shall have the meaning set forth in
Section 6.15(c)(i).
"SHARES" shall have the meaning set forth in the recitals to this
Agreement.
"STOCKHOLDERS AGREEMENT" shall mean the stockholders agreement in
the form attached hereto as EXHIBIT C by and among Parent, Heartland, Seller and
the B Investors, if any, named therein.
"STRADDLE PERIOD" shall mean any taxable period beginning on or
before, and ending after, the Closing Date.
"SUBSIDIARY" shall mean, with respect to a specified Person, any
corporation, partnership or other entity in which the specified Person owns or
controls, directly or indirectly, through one or more intermediaries, more than
50% of the stock or other interests having general voting power in the election
of directors or Persons performing similar functions.
"SUPPLY AGREEMENT" shall mean the Supply and Looms Agreement by and
among Seller, Main Street and Products in form and substance mutually
satisfactory to the parties.
"SURVIVING CORPORATION" shall have the meaning set forth in
Section 2.1.
"TAX BENEFITS" shall mean the amount of any refund, credit or
reduction in otherwise required Tax payments, including any interest payable
thereon, actually received.
"TAX INDEMNITEE" shall have the meaning set forth in Section
6.11(k)(i).
"TAX INDEMNITOR" shall have the meaning set forth in Section
6.11(k)(i).
"TAX RETURN" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with any
Taxes.
"TAXES" shall mean all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Authority, and such
term shall include any interest, penalties or additions to tax attributable
thereto.
"TRANSACTIONS" shall mean the Merger and the other transactions
contemplated by the Related Agreements.
"TRANSITION SERVICES AGREEMENT" shall mean the Transition Services
Agreement by and between Seller and Products in form and substance mutually
satisfactory to the parties.
"WAD" shall mean Western Avenue Dyers, L.P., a Delaware limited
partnership.
16
-10-
"WAD PURCHASE AGREEMENT" shall mean the Asset Purchase Agreement
dated as of the date hereof by and among Products, WAD, Xxxxx XxXxxxxx, Xxxxx
XxXxxxxx, Xxxxx Xxxxxxxx and Xxxx Textiles LLC.
"WELFARE PLANS" shall have the meaning set forth in Section 4.17(a).
"WORKING CAPITAL" shall mean at any time, (i) the consolidated trade
accounts receivable (less reserve for doubtful accounts) and product inventory
(less reserve for obsolescence) of the Company, as adjusted to reflect the
Restructuring, less (ii) the consolidated accounts payable and accrued current
liabilities not related to Indebtedness, automotive fabric quality claims
reserve and premium freight reserve of the Company, in each case calculated on a
basis consistent with the historical consolidated financial statements of Seller
previously delivered to Parent and Products.
ARTICLE II
THE MERGER
2.1 THE MERGER. On the terms and subject to the conditions of this
Agreement, at the Effective Time, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall thereupon cease,
and the Company shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "SURVIVING CORPORATION"). The Merger shall have
the effects specified in the Delaware General Corporation Law (the "DGCL").
2.2 THE CLOSING. On the terms and subject to the conditions of
this Agreement, the closing of the Merger (the "CLOSING") shall take place at
the offices of Xxxxxx Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx as
promptly as practicable, but no later than two (2) Business Days following the
satisfaction or waiver of the conditions set forth in Articles VII, VIII and IX
(other than conditions which by their nature are to be satisfied at Closing, but
subject to those conditions) or at such other time, date or place as Products
and Seller may agree. The date on which the Closing occurs is hereinafter
referred to as the "CLOSING DATE."
2.3 EFFECTIVE TIME. If all the conditions set forth in Articles
VII, VIII and IX shall have been fulfilled or waived in accordance herewith and
this Agreement shall not have been terminated as provided in Article XI, the
parties hereto shall cause a Certificate of Merger meeting the requirements of
Section 252 of the DGCL (a "CERTIFICATE OF MERGER") with respect to the Merger
to be properly executed and filed in accordance with such Section on the Closing
Date. The Merger shall become effective at the time of filing of the Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with the DGCL or at such later time which the parties hereto shall have agreed
upon in writing and designated in such filings as the effective time of the
Merger (the "EFFECTIVE TIME").
2.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of the Company as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
17
-11-
2.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors and officers of Merger Sub immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable Law.
ARTICLE III
CONVERSION AND EXCHANGE OF SHARES
3.1 CONVERSION OF SHARES. (a) At the Effective Time by virtue of
the Merger and without any action on the part of the holder thereof:
(i) each Share held by the Company as treasury stock or owned by
Parent or any Subsidiary of Parent immediately prior to the Effective Time
shall be canceled, and no payment shall be made with respect thereto;
(ii) each share of common stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation; and
(iii) the Shares outstanding immediately prior to the Effective Time
shall, except as otherwise provided in Section 3.1(a)(i) and subject to
Section 3.1(b), be converted into an aggregate of 12,760,000 shares of
Common Stock.
(b) All Common Stock issued as provided in Section 3.1(a)(iii)
shall be of the same class and shall have the same terms as the currently
outstanding Common Stock. The shares of Common Stock to be received as
consideration pursuant to the Merger with respect to Shares are referred to
herein as the "MERGER CONSIDERATION." The number of shares of Common Stock
received as the Merger Consideration shall be adjusted to reflect fully the
effect of any stock split, reverse stock split, stock dividend, reorganization,
recapitalization or any like change with respect to the Common Stock occurring
after the date hereof and prior to the Effective Time.
(c) From and after the Effective Time, all Shares converted in
accordance with Section 3.1(a)(iii) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration. From
and after the Effective Time, all certificates representing the common stock of
Merger Sub shall be deemed for all purposes to represent the number of shares of
common stock of the Surviving Corporation into which they were converted in
accordance with Section 3.1(a)(ii).
3.2 SURRENDER AND PAYMENT. At the Effective Time, Seller shall
receive the Merger Consideration against surrender by Seller of the
certificate(s) representing the Shares.
18
-12-
3.3 REPAYMENT OF DEBT REPAYMENT AMOUNT. On the Closing Date,
Parent will cause to be repaid the Debt Repayment Amount if required by the
lenders of the Seller's Loan. The "DEBT REPAYMENT AMOUNT" shall mean the
$90,000,000 (which amount shall include all principal, premium, interest, fees,
charges, costs, expenses and other obligations, contingent or otherwise,
relating thereto) for which the Company has indemnified Seller pursuant to the
Restructuring.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SEllER AND THE COMPANY
Seller, the Company and XxXxxxxx (but as to XxXxxxxx only with
respect to those representations and warranties relating to XxXxxxxx) jointly
and severally represent and warrant to each of Parent, Products and Merger Sub
that, except as set forth in the corresponding section or subsection of the
document entitled the "Company Disclosure Schedule" (the "COMPANY DISCLOSURE
SCHEDULE"):
4.1 DUE INCORPORATION. The Company is duly incorporated, validly
existing and in good standing under the Laws of the State of Delaware, with all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses and operations as they are now being owned, leased,
operated and conducted. As of the date of this Agreement, the Company is
licensed or qualified to do business and is in good standing as a foreign
corporation in each of Massachusetts, Michigan and Texas and, as of the Closing
Date, will be licensed or qualified to do business and be in good standing as a
foreign corporation in each jurisdiction where the nature of the properties
owned, leased or operated by it and the businesses and operations transacted by
it require such licensing or qualification, except where the failure to be so
licensed or qualified would not have, individually or in the aggregate, a
Material Adverse Effect. The States set forth on the Company Disclosure Schedule
are the only jurisdictions in which the Company is, or will be as of the Closing
Date, organized, or licensed or qualified to do business. The Company has no
Subsidiaries and has no investment in and does not hold any other direct or
indirect economic, voting or management interest in any Person or directly or
beneficially own any security issued by any other Person. Accurate and complete
copies of (i) the Certificate of Incorporation and Bylaws of the Company as
currently in effect and (ii) the corporate books and records of the Company have
been delivered to Products.
4.2 DUE AUTHORIZATION. Each of the Company and Seller has full
corporate power and authority to enter into this Agreement and the Related
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Company and Seller of this Agreement and the Related Agreements to which it is a
party have been duly and validly approved by the board of directors and
stockholders of each of the Company and Seller, and no other actions or
proceedings on the part of the Company or Seller are necessary to authorize this
Agreement, the Related Agreements to which it is a party or the transactions
contemplated hereby and thereby. Each of the Company and Seller has duly and
validly executed and delivered this Agreement and the Related Agreements to
which it is a party. This Agreement constitutes, and the Related Agreements of
the Company and Seller shall constitute (assuming, in each case, due execution
and delivery by the other parties thereto), legal, valid and binding obligations
of each of
19
-13-
the Company, Seller and XxXxxxxx, as the case may be, in each case enforceable
in accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar Laws in effect which affect the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific remedies.
4.3 CONSENTS AND APPROVALS; AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Schedule 4.3(a) of the Company Disclosure Schedule sets forth all the
consents, authorizations and approvals of, or filings and registrations with,
any Governmental Authority or any other Person not a party to this Agreement
that are necessary in connection with the execution, delivery and performance by
the Company or Seller of this Agreement or the Related Agreements to which it is
a party or the consummation of the transactions contemplated hereby or thereby
and identifies which of such consents, authorizations, approvals, filings and
registrations will be conditions to the obligations of Parent, Products and
Merger Sub under Section 8.3 hereof under the heading "Condition Consents" and
which are not conditions to the obligations of Parent, Products and Merger Sub
under the heading "Non-Condition Consents." The failure to obtain any such
consent, authorization, approval, filing and registration listed under the
heading "Non-Condition Consents" would not have, individually or in the
aggregate, a Material Adverse Effect.
(b) The execution, delivery and performance by the Company or
Seller of this Agreement and the Related Agreements to which it is a party do
not and will not: (i) violate any Law; (ii) violate or conflict with, result in
a breach or termination of, constitute a default or give any third party any
additional right (including a termination right) under, permit cancellation of,
result in the creation of any Lien upon any of the assets or properties of
Seller or the Company under, or result in or constitute a circumstance which,
with or without notice or lapse of time or both, would constitute any of the
foregoing under, any Material Contract to which Seller or the Company is a party
or by which Seller or the Company or any of their assets or properties are
bound; (iii) permit the acceleration of the maturity of any Indebtedness of the
Company or Indebtedness secured by its assets or properties; or (iv) violate or
conflict with any provision of any of, or cause the dissolution of Seller or the
Company pursuant to, the Certificate of Incorporation or Bylaws of Seller or the
Company.
4.4 CAPITALIZATION OF THE COMPANY. (a) The authorized capital
stock of the Company consists of 20 shares of Class A Common Stock, $1 par
value, and 2,980 shares of Class B Common Stock, $1 par value, of which 10
shares of Class A Common Stock and 90 shares of Class B Common Stock have been
duly authorized and validly issued in compliance with the terms and conditions
of the Certificate of Incorporation and Bylaws of the Company and in compliance
with all registration or qualification requirements (or applicable exemptions
therefrom) of all applicable federal and state securities laws. The legal and
beneficial and record ownership of the Shares is accurately set forth on the
Company Disclosure Schedule. The Shares are fully paid and nonassessable and are
not subject to preemptive rights. There are no shares of capital stock of the
Company currently reserved for issuance for any purpose or upon the occurrence
of any event or condition.
(b) Except as set forth in clause (a) there is no stock or other
securities (whether or not such securities have voting rights) of the Company
issued or outstanding or any subscriptions, options, warrants, puts, calls,
rights, convertible securities or other agreements or commitments of any
character obligating Seller, the Company or any of their respective Affiliates
to issue, transfer or sell,
20
-14-
or cause the issuance, transfer or sale of, any stock or other securities
(whether or not such securities have voting rights) of the Company. There are no
outstanding contractual rights or obligations of any Person that relate to the
purchase, sale, issuance, repurchase, redemption, acquisition, transfer,
disposition, holding or voting of any stock or other securities of the Company,
or the management or operation of the Company, including rights of first
refusal, rights of first offer, "drag along" rights or "tag along" rights.
Accurate and complete copies of any agreement relating to any such arrangement
have previously been provided to Products. Except for Seller's rights as the
record and beneficial owner of the Shares, no Person has any right to
participate in, or receive any payment based (including payments pursuant to
this Agreement or any Related Agreement) on any amount relating to, or arising
in connection with, the revenue, income, value or net worth of the Company or
any component or portion thereof, or any current or former ownership of Shares,
or any current or former ownership of the Company or Seller, or any increase or
decrease in any of the foregoing.
(c) The Shares owned by Seller are owned free and clear of any and
all Liens.
4.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES; OTHER
DOCUMENTS. (a) Accurate and complete copies of the Seller Financial Statements
have previously been provided to Products. The Seller Financial Statements
consistently and fairly present the consolidated financial position, assets and
liabilities of Seller as of the dates thereof and the consolidated revenues,
expenses and results of operations of Seller for the periods covered thereby, in
each case in accordance with GAAP. The Seller Financial Statements have been
prepared in accordance with the books and records of Seller. The Seller
Financial Statements do not reflect any transactions which are not bona fide
transactions other than sales between Seller and Seller's Affiliates and between
Seller's Affiliates. The Seller Financial Statements do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained therein, in light of the circumstances in which
they were made, not misleading.
(b) Except as reflected in the Latest Balance Sheet, the Company
has no liabilities, Indebtedness or obligations, whether accrued, absolute,
contingent or otherwise, whether due or to become due, other than accrued
expenses incurred in the ordinary course of business since the Latest Balance
Sheet Date. At the Effective Time, the Company will have no Indebtedness
whatsoever and no liability, Indebtedness or obligations, whether accrued,
absolute, contingent or otherwise, whether due or to become due, except for the
Debt Repayment Amount. As of the Effective Time, the Debt Repayment Amount will
not exceed $90,000,000.
4.6 NO MATERIAL ADVERSE EFFECTS; NO MATERIAL ADVERSE CHANGE. Since
the Latest Balance Sheet Date, the Company and Seller have conducted the
Automotive Business in the ordinary course consistent with past practices of the
Automotive Business and the Company and Seller (with respect to the Automotive
Business) have not:
(a) suffered any Material Adverse Change (provided that for the
purpose of this Section 4.6(a), $250,000 in the aggregate shall be
substituted for $100,000 individually in the definition of "Material
Adverse Effect");
21
-15-
(b) suffered any damage, destruction or Loss to any of their
assets or properties (whether or not covered by insurance) that has had or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect (provided that for the purpose of this Section
4.6(b), $250,000 in the aggregate shall be substituted for $100,000
individually in the definition of "Material Adverse Effect");
(c) taken any action or failed to take any action, or made any
expenditure or failed to make any expenditure, or entered into or
authorized any Material Contract or transaction, other than in the
ordinary course of business and consistent with past practice and other
than pursuant to the Restructuring;
(d) except for the Restructuring, sold, transferred, conveyed,
assigned or otherwise disposed of any material assets or properties
related to the Automotive Business (other than the Excluded Assets),
except sales of inventory in the ordinary course of business and
consistent with past practice;
(e) waived, released or canceled any claims against third parties
or debts owing to them, or any rights which have any value and which
relate to the Automotive Business, other than in the ordinary course of
business and consistent with past practice pursuant to Contracts which are
not Material Contracts with Persons that are not Affiliates of Seller;
(f) made any changes in their accounting systems, policies,
principles or practices related to the Automotive Business;
(g) except for the transfer from Seller to the Company of the
property and other assets comprising the Automotive Business in connection
with the Restructuring, entered into, authorized or permitted any
transaction with Seller or any Affiliate of Seller from the Latest Balance
Sheet Date through to the Closing Date;
(h) authorized for issuance, issued, sold, delivered or agreed or
committed to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any Shares or
any other securities of the Company, or amended any of the terms of any
Shares or such other securities;
(i) split, combined or reclassified any Shares (or any other
securities of the Company), declared, set aside or paid any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) in respect of any Shares (or any other securities of the
Company), or redeemed or otherwise acquired any Shares (or any other
securities of the Company);
(j) other than pursuant to the Restructuring, with respect to the
Company, made any borrowings, incurred any Indebtedness, or assumed,
guaranteed, endorsed (except for the negotiation or collection of
negotiable instruments in transactions in the ordinary course of business
and consistent with past practice) or otherwise become liable (whether
directly, indi-
22
-16-
rectly or contingently) for the obligations or Indebtedness of any other
Person, or made any payment or repayment in respect of any obligations or
Indebtedness (other than accrued expenses in the ordinary course of
business and consistent with past practice);
(k) with respect to the Company, made any loans, advances or
capital contributions to, or investments in, any other Person;
(l) entered into, adopted, amended or terminated any bonus, profit
sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of
the Continuing Employees, or increased in any manner the compensation or
fringe benefits of any Continuing Employee or paid any benefit not
required by any existing plan and arrangement or entered into any
contract, agreement, commitment or arrangement to do any of the foregoing;
(m) except in connection with the Restructuring, acquired or
leased any assets outside the ordinary course of business or any assets
which are material to the Company or made any property subject to any Lien
other than a Permitted Lien;
(n) except in connection with the Restructuring, authorized or
made any capital expenditures which individually or in the aggregate are
in excess of $100,000;
(o) made any Tax election or settled or compromised any federal,
state, local or foreign Tax liability, or waived or extended the statute
of limitations in respect of any such Taxes;
(p) paid any amount, performed any obligation or agreed to pay any
amount or perform any obligation, in settlement or compromise of any suits
or claims of liability against the Company or any of its officers,
members, managers, employees or agents; or
(q) except in connection with the Restructuring, terminated,
modified, amended or otherwise altered or changed any of the terms or
provisions of any Material Contract.
4.7 TITLE TO PROPERTIES; RESTRUCTURING. (a) Other than those
assets, properties and rights which are Excluded Assets or which have been
acquired or disposed of in the ordinary course of business and consistent with
past practice, the Company has, or at and as of the Closing Date will have, good
and marketable title to, and is or will be, as the case may be, the lawful owner
of, all of the tangible and intangible assets, properties and rights used in the
Automotive Business during the year ended December 31, 2000, and thereafter, in
all cases free and clear of all Liens other than Permitted Liens.
(b) Prior to the Closing Date, Seller will, and will cause each of
its Affiliates (other than Main Street and WAD) to, transfer and assign to the
Company all of the respective properties and assets owned by it (other than
those assets and properties that are the Excluded Assets or
23
-17-
that have been disposed of in the ordinary course of business and consistent
with past practices) that are used in the Automotive Business as conducted by it
during the year ended December 31, 2000, and thereafter, and those liabilities
associated with such assets as set forth on the Company Disclosure Schedule (the
"RESTRUCTURING"). The Company Disclosure Schedule sets forth a complete and
accurate description of each such transfer undertaken or to be undertaken prior
to the Closing Date in connection with the Restructuring. Included in the
transfers which constitute the Restructuring are all operating and capital
leases of equipment (other than those operating and capital leases of equipment
which are Excluded Assets) used in the Automotive Business but only to the
extent that at least twelve months of the related operating or capital lease, as
the case may be, expense have been reflected in Seller's consolidated statement
of earnings for the year ended December 31, 2000.
4.8 CONDITION AND SUFFICIENCY OF ASSETS. The Company owns or
leases, or at and as of the Effective Time will own or lease, all assets and
rights (other than those assets and rights which are Excluded Assets) used for
the continued conduct of the Company's business and operations as conducted
during the year ended December 31, 2000, and thereafter (including, without
limitation, those assets used for the continued conduct of the Automotive
Business). All of the tangible assets, properties and rights of the Company or
which are used in the Automotive Business, whether real or personal, owned or
leased (with respect to leased property, during the term of lease therefor),
have been well maintained and are in good operating condition and repair (with
the exception of normal wear and tear), and are free from defects other than
such minor defects as do not interfere with the intended use thereof in the
conduct of normal operations or adversely affect the resale value thereof.
4.9 REAL PROPERTY. The Company Disclosure Schedule sets forth an
accurate and complete list of all real property owned or leased (as lessor or
lessee) by the Company or used in the Automotive Business (other than the real
property located at 00-00 Xxxxxxx Xxxxxx in Lowell, Massachusetts and in
Hickory, North Carolina, which were used by Seller in the Automotive Business
conducted by Seller for itself and for the Company but which are Excluded
Assets) and sets forth in the case of owned real property, the address and owner
of each parcel and in the case of leased real property, the landlord and tenant
for such lease. Accurate and complete copies of each deed and lease related to
such real property have previously been provided to Products. With respect to
the real property used in the business and operations of the Automotive Business
(the "REAL PROPERTY"):
(a) the activities carried on by Seller or any of its Subsidiaries
in all buildings, plants, facilities, installations, fixtures and other
structures or improvements included as part of, or located on or at, the
Real Property, and the buildings, plants, facilities, installations,
fixtures and other structures or improvements themselves, are not in
violation of, or in conflict with, any applicable zoning, building,
environmental or health regulations or ordinance or any other similar Law;
or
(b) neither Seller nor any of its Subsidiaries has used,
deposited, stored or located at, on, under or beneath any Real Property or
portion thereof any Hazardous Material, including, without limitation any
asbestos, asbestos-containing materials, PCB compounds or other pollutants
or contaminants, except as would not reasonably be expected to give rise
to a material liability of the Company.
24
-18-
4.10 PERSONAL PROPERTY. The Company Disclosure Schedule sets forth
an accurate and complete list of all of the tangible personal property owned by
the Company or used in the Automotive Business (other than the Excluded Assets)
having an original acquisition cost of $10,000 or more for each such item or
group of related or similar items. The Company Disclosure Schedule also sets
forth all Contracts that are leases of personal property binding upon the
Company or any of its assets or properties, and all items of personal property
covered thereby. All of such tangible personal property is presently utilized by
the Company or in the Automotive Business in the ordinary course of business.
4.11 INVENTORY. Section 4.11 of the Company Disclosure Schedule
sets forth an itemized list of all inventories of the Company pro forma for the
Restructuring as of June 30, 2001 and all reserves in connection therewith as of
such date; and all such inventories of the Company are of good, usable and
merchantable quality subject to such reserves. The net value of such inventories
does not include the value of any obsolete, irregular or discontinued items.
Since June 30, 2001, no inventory items have been sold or disposed of except
through sales in the ordinary course of business and at gross margins consistent
with past practice.
4.12 ACCOUNTS RECEIVABLE; ENGINEERING AND DEVELOPMENT. (a) All
accounts, notes receivable and other receivables (other than receivables
collected since the Latest Balance Sheet Date) reflected on the Latest Balance
Sheet were, and all accounts and notes receivable arising from or otherwise
relating to the business of the Company as of the Closing Date will be, valid,
genuine and fully collectible in the aggregate amount thereof, subject to normal
and customary trade discounts, less any reserves for doubtful accounts and other
allowances recorded on the Latest Balance Sheet or established in the ordinary
course thereafter. All accounts, notes receivable and other receivables arising
out of or relating to the business and operations of the Company as of the
Latest Balance Sheet Date were included in the Latest Balance Sheet in
accordance with GAAP.
(b) The Company has no capitalized engineering and development
expenses.
4.13 INTELLECTUAL PROPERTY. The Company Disclosure Schedule sets
forth an accurate and complete list of all the Company Intellectual Property and
all Intellectual Property used by the Company in the conduct of its business and
operations as of the date hereof and all Intellectual Property used in
connection with the Automotive Business (including the identity of the licensee
thereof). With respect to such Intellectual Property and such Company
Intellectual Property:
(a) all of the Company Intellectual Property is owned by the
Company free and clear of all Liens, and is not subject to any license,
royalty or other agreement, and the Company has not granted any license or
agreed to pay or receive any royalty in respect of any Company
Intellectual Property and all applicable fees relating thereto have been
paid timely;
(b) except for the Company Intellectual Property, all of the
Intellectual Property used by the Company or in the Automotive Business is
the subject of a valid license, and all royalties and other fees to be
paid by the Company with respect to such licenses are set forth on the
Company Disclosure Schedule;
25
-19-
(c) no Intellectual Property has been or is the subject of any
pending or, to the Knowledge of Seller, threatened litigation or claim of
infringement or misappropriation in the United States or any foreign
country, and the Company owns or possesses adequate rights for the
remainder of the normal term of protection under Law of such Company
Intellectual Property to preclude any infringement;
(d) to the Knowledge of Seller, no Person is misappropriating or
infringing the rights of the Company with respect to the Intellectual
Property;
(e) to the Knowledge of Seller, no party to any license or royalty
agreement to which the Company is a party is in breach or default, and no
written notice of termination has been given or is threatened;
(f) to the Knowledge of Seller, the Automotive Business as now
conducted by Seller and the Company does not infringe on or misappropriate
any intellectual property or confidential or proprietary rights of any
other Person in the United States or in any foreign country in which the
Company has operated prior to the Closing Date, and the Company has not
received any notice contesting its right to use any Intellectual Property;
and
(g) the Company owns or possesses adequate rights in and to all
Intellectual Property necessary to conduct its business and operations
(including, without limitation, the Automotive Business) as presently
conducted.
4.14 CONTRACTS; NO DEFAULT OR VIOLATIONS. (a) The Company
Disclosure Schedule sets forth an accurate and complete list of all the
Contracts of the following types to which the Company is a party or by which it
is bound, or to which any of the Company's assets or properties or the
Automotive Business is subject:
(i) any collective bargaining agreement, as well as any document
modifying, terminating or extending such agreement and any letters of
understanding or side agreements with respect to such agreement, in each
case whether oral or written;
(ii) any Material Contract with any Continuing Employee or any of
its Affiliates, or any Contract or other arrangement of any kind with
Seller or any Affiliate of Seller;
(iii) any Material Contract with a sales representative,
manufacturer's representative, promoter, producer, sponsor, distributor,
dealer, broker, sales agency, advertising agency or other Person engaged
in sales, distributing or promotional activities, or any Material Contract
to act as one of the foregoing on behalf of any Person; any Contract of
any nature which involves the payment or series of payments or receipt of
cash or other property, an unperformed commitment, or goods or services,
or any combination thereof having a value in excess of $25,000; any
Contract pursuant to which the Company has made or will make loans or
advances, or has or will have incurred debts or become a guarantor or
surety or pledged its credit on or otherwise become responsible with
respect to any undertaking of another (except
26
-20-
for the negotiation or collection of negotiable instruments in
transactions in the ordinary course of business);
(iv) any indenture, credit agreement, loan agreement, note,
mortgage, security agreement, lease of Real Property or personal property,
loan commitment or other Contract or financing statements relating to
Indebtedness, the borrowing of funds, an extension of credit or financing;
(v) any Contract involving a partnership, joint venture or other
cooperative undertaking in which the Company is a partner, joint venturer
or the like;
(vi) any Contract involving any restrictions with respect to the
geographical area of operations or scope or type of business of the
Company or any Continuing Employee;
(vii) any power of attorney or agency agreement or arrangement with
any Person pursuant to which such Person is granted the authority to act
for, or on behalf of, the Company, or the Company is granted the authority
to act for, or on behalf of, any Person;
(viii) any Material Contract for which the full performance thereof
may extend beyond sixty (60) days from the Closing Date;
(ix) any Material Contract (other than this Agreement and the
Related Agreements) not made in the ordinary course of business which is
to be performed in whole or in part at or after the Closing Date;
(x) any Contract (other than this Agreement and the Related
Agreements), whether or not fully performed, relating to any acquisition
or disposition of the Company or any predecessor in interest to the
Company, or any acquisition or disposition of all or substantially all of
the assets of the Company, or any acquisition or disposition of any
Subsidiary, division or line of business or any other acquisition or
disposition of property or assets comprising the Automotive Business;
(xi) any Material Contract containing an option to purchase or sell
any property, real or personal, tangible or intangible, or containing any
right of first refusal to acquire or sell any such property;
(xii) any Material Contract involving the licensing of any
Intellectual Property from any third party and any Contract involving the
licensing of Company Intellectual Property by the Company to any third
party; and
(xiii) any Contract not specified above that is a Material Contract.
(b) Seller or the Company has delivered or made available to
Products accurate and complete copies of each Contract listed on the Company
Disclosure Schedule, and the Company Disclosure Schedule contains a written
description of each oral arrangement of the kind listed. (i) All such Contracts
and arrangements between the Company, on the one hand, and the Company's
Affili-
27
-21-
ates or Seller or any Affiliate of Seller, on the other hand, are on terms that
are no less favorable to the Company than the terms that could have been
obtained as of the date of such Contract from an unrelated third party; (ii) all
such Contracts are valid and enforceable obligations of the Company and, to the
Knowledge of Seller, each other party thereto and are not subject to termination
as a result of the Transactions provided that required consents to or approvals
of the Merger listed on Schedule 4.3(b) of the Company Disclosure Schedule are
received; and (iii) neither Seller nor the Company has received any notice of
default or termination (or threatened termination) with respect to any such
Contract.
(c) The Company has not breached any provision of, nor is in
default under the terms of, its Certificate of Incorporation or Bylaws (or other
applicable organizational documents) or any Contract to which it is a party or
under which it has any rights or by which it or any of its assets or properties
is bound, and, to the Knowledge of Seller, no other party to any such Contract
has breached such Contract or is in default (with or without notice or the
passage of time, or both) thereunder.
(d) The Company is, and Seller and its other Subsidiaries in the
conduct of the Automotive Business are, in compliance with, and no violation
exists under, any and all applicable Laws except as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(e) No written notice from any Governmental Authority has been
received by the Company or Seller or any of its other Subsidiaries in the
context of the Automotive Business, claiming any violation, of any Law
(including any building, zoning or other ordinance), which claimed violation,
and any related liability (contingent or otherwise) has not been corrected prior
to the date of this Agreement, or requiring any work, construction or
expenditure, or asserting any Tax, assessment or penalty.
4.15 PERMITS. The Company Disclosure Schedule sets forth an
accurate and complete list of all licenses, certificates, permits, franchises,
rights, code approvals and private product approvals (together, the "PERMITS"),
other than Permits that are Excluded Assets, that are held by the Company or
that relate to the Automotive Business and are held by Seller or any of its
other Subsidiaries. At and as of the Effective Time, the Company will hold all
Permits, whether federal, state, local or foreign, that are necessary for the
lawful operation of the businesses of the Company as presently conducted
(including, without limitation, in connection with the Automotive Business),
except where the failure to hold or maintain any such Permit would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
4.16 INSURANCE. (a) The Company Disclosure Schedule sets forth an
accurate and complete list of all policies of fire, liability, workers'
compensation, title and other forms of insurance owned, held by or applicable to
the Company (or its assets or business), and Seller or the Company has
previously delivered to Products an accurate and complete copy of all such
policies, including all occurrence-based policies applicable to the Company (or
its assets or business) for all periods prior to the Closing Date. All such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been paid, and no
notice of cancellation or
28
-22-
termination has been received with respect to any such policy, except with
respect to any such cancellation or termination that would not reasonably be
expected to have a Material Adverse Effect. Such policies are sufficient for
compliance with all requirements of Law and compliance with all Material
Contracts to which Seller or the Company is a party and which relate to the
property or assets of the Company or the Automotive Business, and are valid,
outstanding and enforceable policies. Such insurance policies provide types and
amounts of insurance customarily obtained by businesses similar to the business
of the Company (including, without limitation, with the Automotive Business).
Neither Seller nor the Company has been refused any insurance with respect to
the assets or operations of the Company or the Automotive Business, and their
coverage has not been limited by any insurance carrier to which any of them has
applied for any such insurance or with which any of them has carried insurance
during the last three (3) years.
(b) The Company Disclosure Schedule sets forth an accurate and
complete list of all claims which have been made by Seller or the Company in the
last three (3) years under any workers' compensation, general liability,
property or other insurance policy applicable to the Company or any of its
properties or the Automotive Business. There are no pending or, to the Knowledge
of Seller, threatened claims under any insurance policy. Such claim information
includes all available information with respect to each accident, loss, or other
event, including (i) the identity of the claimant; (ii) the date of the
occurrence; (iii) the status as of the report date; and (iv) the amounts paid or
expected to be paid or recovered.
4.17 EMPLOYEE BENEFIT PLANS; ERISA. (a) The Company Disclosure
Schedule sets forth an accurate and complete list of all "employee pension
benefit plans" as defined in Section 3(2) of ERISA ("PENSION PLANS"), "welfare
benefit plans" as defined in Section 3(1) of ERISA ("WELFARE PLANS") and stock
bonus, stock option, restricted stock, stock appreciation right, stock purchase,
bonus, incentive, deferred compensation, severance and vacation plans,
employment or consulting agreements, and all other employee benefit plans,
programs, policies or arrangements, covering Automotive Business Employees (or
former employees), maintained or contributed to by the Company or any of its
ERISA Affiliates (as hereinafter defined) on behalf of Automotive Business
Employees, or to which the Company contributes or is obligated to make payments
thereunder (collectively, the "EMPLOYEE BENEFIT PLANS"). For purposes of this
Agreement, "ERISA AFFILIATE" shall mean any person (as defined in Section 3(9)
of ERISA) that is or has been a member of any group of persons described in
Section 414(b), (c), (m), (o) or (t) of the Code including the Company.
(b) The Company and each of the Pension Plans and Welfare Plans
are in compliance in all material respects with the applicable provisions of
ERISA, the Code and other applicable Laws in connection with the Employee
Benefit Plans.
(c) All contributions to, and payments from, the Pension Plans
that are required to have been made in accordance with the Pension Plans have
been timely made.
(d) Any Pension Plans intended to qualify under Section 401 of the
Code have been determined by the IRS to be so qualified and no event has
occurred and no condition exists with respect to the form or operation of such
Pension Plans that would cause the loss of such qualification or exemption or
the imposition of any material liability, penalty or Tax under ERISA or the
Code.
29
-23-
(e) Each Pension Plan that is not qualified under Code Section
401(a) or 403(a) is exempt from Part 2, 3 and 4 of Title I of ERISA as an
unfunded plan that is maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. No assets of the
Company is allocated to or held in a "rabbi trust" or similar funding vehicle.
(f) There are (i) no investigations pending by any governmental
entity (including the Pension Benefit Guaranty Corporation (the "PBGC"))
involving the Pension Plans or Welfare Plans, and (ii) no pending or, to the
Knowledge of Seller, threatened claims (other than routine claims for benefits),
suits or proceedings against any Pension Plan or Welfare Plan, against the
assets of any of the trusts under any Pension Plan or Welfare Plan or against
any fiduciary of any Pension Plan or Welfare Plan with respect to the operation
of such plan or asserting any rights or claims to benefits under any Pension
Plan or against the assets of any trust under such plan, nor, to the Knowledge
of Seller, are there any facts that would give rise to any material liability.
(g) None of the Company or any Automotive Business Employee, nor
any trustee, administrator, other fiduciary or any other "party in interest" or
"disqualified person" with respect to the Pension Plans or Welfare Plans, has
engaged in a "prohibited transaction" (as such term is defined in Section 4975
of the Code or Section 406 of ERISA) that could result in a material tax or
penalty on the Company under Section 4975 of the Code or Section 502(i) of
ERISA.
(h) With respect to any employee benefit pension plan subject to
Section 412 of the Code or Section 302 of ERISA maintained by the Company or an
ERISA Affiliate with respect to the Automotive Business Employees: (i) all
contributions required to be made by the Company or any ERISA Affiliate under
Section 302 of ERISA and Section 412 of the Code have been timely made, (ii)
there has been no application for or waiver of the minimum funding standards
imposed by Section 412 of the Code, and (iii) no such plan has incurred an
"accumulated funding deficiency" within the meaning of Section 412(a) of the
Code as of the end of the most recently completed plan year.
(i) No employee benefit pension plan subject to Title IV of ERISA
maintained by the Company or an ERISA Affiliate has been terminated or has been
the subject of a "reportable event" (as defined in Section 4043 of ERISA and the
regulations thereunder) for which the thirty (30) day notice requirement has not
been waived by the PBGC.
(j) Neither the Company nor any ERISA Affiliate has incurred, or
would reasonably be expected to incur, liability under Title IV of ERISA with
respect to the Employee Benefit Plans.
(k) No Pension Plan is a "multiemployer plan" as defined in
Section 3(37) of ERISA.
(l) With respect to each of the Employee Benefit Plans, true,
correct and complete copies of the following documents have been made available
to Products: (i) the plan document and any related trust agreement, including
amendments thereto, (ii) any current summary plan descriptions and other
material communications to participants relating to the Employee Benefit Plans,
30
-24-
(iii) the most recent Forms 5500, if applicable, (iv) the most recent IRS
determination letter, if applicable, and (v) the most recent actuarial report or
valuation with respect to each Pension Plan subject to Title IV of ERISA.
(m) None of the Welfare Plans maintained by the Company with
respect to the Automotive Business Employees provide for continuing benefits or
coverage for any participant or any beneficiary of a participant following
termination of employment, except as may be required under Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA ("COBRA"), or except at the
expense of the participant or the participant's beneficiary. The Company and any
ERISA Affiliates which maintain a "group health plan" within the meaning of
Section 5000(b)(1) of the Code have complied in all material respects with the
COBRA notice and continuation requirements.
(n) No liability under any Pension Plan or Welfare Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which the Company has received notice
that such insurance company is in rehabilitation or a comparable proceeding.
(o) As of the Closing, the Company and any entity with which the
Company could be considered a single employer under 29 U.S.C. Section 2101(a)(1)
or under any relevant case law, has not incurred any liability or obligation
under the Worker Adjustment and Retraining Notification Act, as it may be
amended from time to time.
(p) Except pursuant to Section 6.15(c) hereof, the consummation of
the transactions contemplated by this Agreement will not result in an increase
in the amount of compensation or benefits or accelerate the vesting or timing of
payment of any benefits or compensation payable to or in respect of any employee
of the Company.
(q) The consummation of the transactions contemplated by this
Agreement will not result in or satisfy a condition to the payment of
compensation that would, in combination with any other payment, result in an
"excess parachute payment" within the meaning of Section 280G(b) of the Code.
(r) The Company does not maintain or contribute to any plan,
program, policy, arrangement or agreement with respect to employees (or former
employees) employed outside the United States.
4.18 EMPLOYMENT AND LABOR MATTERS. (a) The Company has no
employment contract or consulting agreement currently in effect that is not
terminable at will (other than agreements with the sole purpose of providing for
the confidentiality of proprietary information or assignment of inventions). The
Company Disclosure Schedule sets forth an accurate and complete list of all
Automotive Business Employees and their respective positions.
(b) Neither Seller nor any of its Subsidiaries (i) has ever been
or is now subject to a union organizing effort with respect to Automotive
Business Employees, (ii) is subject to any collective bargaining agreement with
respect to any of the Automotive Business Employees, (iii) is
31
-25-
currently negotiating any collective bargaining agreement, mid-term bargaining
agreement, effects bargaining agreement or plant closure agreement with respect
to any of the Automotive Business Employees, (iv) is subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization with respect to Automotive Business Employees, or (v)
has current labor disputes relating to the Automotive Business Employees. Seller
and its Subsidiaries have good labor relations and, to the Knowledge of Seller,
there are no facts indicating that the consummation of the transactions
contemplated hereby will have a Material Adverse Effect on such labor relations,
and, to the Knowledge of Seller, no Continuing Employee intends to leave its
employ as of the date of this Agreement.
(c) Seller and each of its Subsidiaries is in compliance with all
Contracts relating to employment, employment practices, wages, hours and terms
and conditions of employment of the Automotive Business Employees. Seller and
each of its Subsidiaries is in compliance with all applicable Laws with respect
to employment and employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health.
4.19 CAPITAL IMPROVEMENTS. The Company Disclosure Schedule sets
forth an accurate and complete list of all capital improvements or purchases or
other capital expenditures of the Company that have not been completed prior to
the date hereof, and also sets forth the cost and expense reasonably estimated
to complete such work and purchases.
4.20 TAXES. (a) All federal, state, local and foreign income,
corporation and other Tax Returns have been timely filed by or for Seller or the
Company or are subject to a valid extension of the filing date for all periods
through and including the Closing Date as required by applicable Law. All Taxes
shown as due on all such Tax Returns and other filings, and all other Taxes of
such entities, have been timely paid. Each such Tax Return and filing is
accurate and complete in all material respects. The Company Disclosure Schedule
sets forth an accurate and complete list of such Tax Returns filed by the
Company at any time after January 1, 1998; a copy of each such Tax Return has
previously been provided to Products. Neither Seller nor the Company currently
has or will have any additional liability for Taxes with respect to any Tax
Return or other filing heretofore filed or which was required by Law to be
filed, other than (i) as reflected as liabilities on the Seller Financial
Statements as of the Latest Balance Sheet; or (ii) since the Latest Balance
Sheet Date, as have arisen in the ordinary course of business consistent with
past practice.
(b) No material Tax Return of Seller or the Company is under audit
or examination by any taxing authority, and no written notice of such an audit
or examination has been received by Seller or the Company. The Company
Disclosure Schedule sets forth an accurate and complete list of all Tax audits
of Seller or the Company completed at any time after January 1, 1998 and an
accurate and complete description in reasonable detail of any Tax audit or Tax
claim with respect to Seller or the Company that was initiated but not completed
in that time. Each material deficiency resulting from any audit or examination
relating to Taxes by any taxing authority has been paid, except for deficiencies
being contested in good faith and described on the Company Disclosure Schedule.
(c) All Taxes that Seller or the Company is required by Law to
withhold or collect, including sales and use taxes, and amounts required to be
withheld for Taxes of Automotive
32
-26-
Business Employees and other withholding taxes, have been duly withheld or
collected and, to the extent required, have been paid over to the proper
Governmental Authorities or are held in separate bank accounts for such purpose.
All information returns required to be filed by Seller or the Company prior to
the date hereof have been filed (and prior to the Closing Date will have been
filed), and all statements required to be furnished to payees by Seller or the
Company prior to the date hereof have been furnished (and prior to the Closing
Date will have been furnished) to such payees, and the information set forth on
such information returns and statements is accurate and complete in all material
respects. The Company Disclosure Schedule sets forth an accurate and complete
description in reasonable detail of any Tax consulting services provided to or
for the benefit of the Company at any time since January 1, 1998. The Company
has engaged no independent contractors.
(d) Seller is not a "foreign person" as defined in Section
1445(f)(3) of the Code.
4.21 PRODUCT CLAIMS. The Company Disclosure Schedule sets forth an
accurate and complete list of all notices, demands, claims, actions, notices of
violation or investigation or classes of claims or lawsuits involving any
product manufactured, produced, distributed or sold by or on behalf of the
Automotive Business (a "PRODUCT") that are pending or, to the Knowledge of
Seller, threatened by or on behalf of any Governmental Authority or any direct
or indirect purchaser of any Product resulting from an alleged defect in design,
manufacture, materials or workmanship of any Product, or any alleged failure to
warn or from any breach of express or implied specifications or warranties or
representations. There has not been, nor is there under consideration or
investigation by Seller or the Company, any recall, rework, retrofit or
post-sale warning concerning any Product or, to the Knowledge of Seller, any
recall conducted by or on behalf of any entity involving any Product.
4.22 ENVIRONMENTAL MATTERS. (a) (i) Seller and the Company are in
compliance in all material respects with all Environmental Laws applicable to
the properties, assets and businesses of the Company and the Automotive Business
and possess and comply in all material respects with all Environmental Permits
required under such Environmental Laws, and (ii) there are no present or past
events, conditions or circumstances, practices or plans that have been asserted
in writing to have violated any Environmental Law and have not been corrected,
and any related liability (contingent or otherwise) resolved, prior to the date
of this Agreement or that would reasonably be expected to materially increase
the burden on the Company of complying with Environmental Laws or of obtaining,
renewing or complying with all Environmental Permits required under
Environmental Laws in order to conduct the business of the Company and the
Automotive Business as currently conducted;
(b) (i) Neither Seller nor the Company has received any
Environmental Claim and (ii) there is no pending or, to the Knowledge of Seller,
threatened Environmental Claim against Seller or the Company or any
Environmental Claim pending or, to the Knowledge of Seller, threatened against
any entity for which the Company may be liable;
(c) There are no Hazardous Materials or other conditions at, under
or emanating from any property or facility owned, leased or operated by Seller
in connection with the Automotive Business or by the Company now or in the past
that would reasonably be expected to give rise to a material Environmental Claim
against or material liability of the Company;
33
-27-
(d) (i) No property owned, leased or operated by Seller in
connection with the Automotive Business or by the Company is (A) listed or
proposed for listing on the National Priorities List promulgated under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA") or (B) listed on the Comprehensive Environmental Response,
Compensation, and Liability Information System promulgated under CERCLA or (C)
listed on any comparable list promulgated or published by any Governmental
Authority (including, without limitation, any such list relating to gasoline or
petroleum or oil), and (ii) no Lien has been recorded under any Environmental
Law with respect to any property, facility or asset owned, leased or operated by
Seller in connection with the Automotive Business or by the Company;
(e) The Company has not assumed, contractually or by operation of
Law, any liabilities or obligations of any third party under any Environmental
Law;
(f) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and the exercise by Parent
and Products of rights to own and operate the business of the Company as
currently conducted (i) will not affect the validity or require the transfer of
any Environmental Permits held by the Company under any Environmental Law and
(ii) will not require any notification, disclosure, registration, reporting,
filing or investigatory, remedial, removal or other response action under any
Environmental Law; and
(g) The Company Disclosure Schedule sets forth an accurate and
complete list of all Environmental Reports in the possession or control of
Seller or the Company which relate to the Company or the Automotive Business. A
copy of each such Environmental Report has previously been provided or made
available to Products.
4.23 LITIGATION. (a) There are no actions, suits, claims, notices
of potential claims, requests for accommodation, arbitrations, regulatory
proceedings or other litigation, proceedings or governmental investigations
pending or, to the Knowledge of Seller, threatened against or affecting the
Automotive Business or the Company, or any of its officers, directors,
employees, managers, or agents in their capacity as such, or any of its
properties, rights, assets or businesses, and there are no facts or
circumstances which would reasonably be expected to give rise to any of the
foregoing. Any proceeding pending or, to the Knowledge of Seller, threatened
against the Automotive Business or the Company is fully covered by insurance
policies (or other indemnification agreements with third parties) and is being
defended by the insurers (or such third parties), subject to such deductibles as
are set forth in the Company Disclosure Schedule. The Company is not subject to
any order, judgment, decree, injunction, stipulation or consent order of or with
any court or other Governmental Authority. The Company has not entered into any
agreement to settle or compromise any proceeding pending or threatened against
it which has involved any obligation other than the payment of money or for
which it has any continuing obligation.
(b) There are no claims, actions, suits, proceedings or
investigations pending or, to the Knowledge of Seller, threatened by or against
the Automotive Business or the Company, any of its officers, directors,
employees, managers or agents or Seller with respect to this Agreement or the
Related Agreements, or in connection with the transactions contemplated hereby
or thereby, and
34
-28-
Seller has no reason to believe there is a valid basis for any such claim,
action, suit, proceeding or investigation.
4.24 NO CONFLICT OF INTEREST. Neither Seller nor any of its
Affiliates has or claims to have any direct or indirect interest in any tangible
or intangible property, rights or assets (other than the Excluded Assets) used
in the business of the Company (including, without limitation, the Automotive
Business), except in the case of Seller as record and beneficial owner of the
Shares.
4.25 BANK ACCOUNTS. The Company Disclosure Schedule sets forth a
complete and accurate list of the names and locations of each bank or other
financial institution at which the Company has an account (giving the account
numbers) or safe deposit box and the names of all Persons authorized to draw
thereon or have access thereto, and the names of all Persons, if any, now
holding powers of attorney or comparable delegation of authority from the
Company and a summary statement thereof.
4.26 ADDITIONAL REPRESENTATIONS AND WARRANTIES BY SELLER. (a)
Seller hereby acknowledges that Parent and Products each intend the offer and
issuance of the Common Stock representing the Merger Consideration to Seller to
be exempt from registration under the Securities Act and applicable state
securities laws by virtue of: (i) the status of Seller as an Accredited
Investor; and (ii) Regulation D promulgated under Section 4(2) of the Securities
Act ("REGULATION D").
(b) Seller hereby represents and warrants that:
(i) it is an Accredited Investor;
(ii) it shall acquire the Common Stock for its own account and not
with a view to or for sale in connection with any "sale," "offer for
sale," "offer to sell," "offer" or "distribution" thereof within the
meaning of the Securities Act;
(iii) it has sufficient knowledge and experience in financial, tax
and business matters to enable it to evaluate the merits and risks of
investment in the Common Stock; and it has the ability to bear the
economic risk of acquiring the Common Stock; and
(iv) it has been supplied with, or had access to, information to
which a reasonable investor would attach significance in making an
investment decision to acquire the Common Stock; and it has had an
opportunity to ask questions of, and receive information and answers from,
Parent and Products concerning Parent, Products and the Common Stock, and
to assess and evaluate any information supplied to Seller. All questions
concerning Parent, Products and the Common Stock have been answered and
all such information has been provided to the full satisfaction of Seller.
(c) Seller hereby acknowledges that:
(i) this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby involve complex tax and legal consequences
for Seller, and Seller is relying solely on the advice of its own tax and
legal advisors to evaluate such consequences;
35
-29-
(ii) none of Parent, Products or Merger Sub has made (or shall be
deemed to have made) any representations or warranties concerning the tax
or legal consequences of such transaction to Seller;
(iii) the Common Stock is not, and, subject to the Registration
Rights Agreement, will not be, registered under the Securities Act or any
state securities laws and cannot be resold without registration thereunder
or exemption therefrom; and
(iv) the certificates representing the unregistered Common Stock to
be delivered at the Closing shall bear substantially the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred, or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the Company to the effect that such registration is
not required."
4.27 BROKERS. Neither Seller nor the Company has used any broker or
finder in connection with the transactions contemplated hereby, and none of
Parent, Products or Merger Sub or any Affiliate of Parent, Products or Merger
Sub has or shall have any liability or otherwise suffer or incur any Loss as a
result of, or in connection with, any brokerage or finder's fee or other
commission of any Person retained by Seller or the Company in connection with
this Agreement, the Related Agreements or any of the transactions contemplated
hereby or thereby.
4.28 IMPOSITION OF CERTAIN LIABILITY. Neither Seller nor the
Company has at any time taken any action or failed to take any action as a
result of which the Company has lost or will lose limited liability associated
with the status of the Company as a corporation.
4.29 CUSTOMERS AND SUPPLIERS. Since January 1, 2000, none of the
top five customers of or top ten suppliers (including subcontractors thereof) to
the Automotive Business or the Company, in each case measured by dollar volume
for the twelve months ended as of December 31, 2000, has (i) notified Seller or
any Subsidiary of Seller that it intends to discontinue its relationship with
the Company or the Automotive Business, (ii) notified Seller or any Subsidiary
of Seller that it intends to reduce its trading with or provision of supplies to
the Company or the Automotive Business, or (iii) materially changed the terms on
which it is prepared to purchase from, trade with or supply the Company or the
Automotive Business. The Company Disclosure Schedule sets forth an accurate and
complete list of each Material Contract with the customers and suppliers of the
Automotive Business or the Company. Copies of each such Material Contract and of
each standard business agreement (i.e., purchase orders, invoices and the like)
used in the Automotive Business or by the Company have previously been provided
or made available to Products.
4.30 COMPANY DISCLOSURE SCHEDULE. Seller has previously provided or
made available, or caused the Company to provide or make available, to Products
accurate and complete copies of each document listed or referred to on the
Company Disclosure Schedule.
36
-30-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT, PRODUCTS AND MERGER SUB
Each of Parent, Products and Merger Sub jointly and severally
represents and warrants to Seller that:
5.1 EXISTENCE AND POWER. Each of Parent, Products and Merger Sub
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of Delaware, with all requisite power and authority to
own, lease and operate its properties and to conduct its business and operations
as they are now being owned, leased, operated and conducted.
5.2 DUE AUTHORIZATION. Each of Parent, Products and Merger Sub has
full power and authority to enter into this Agreement and the Related Agreements
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by each of Parent, Products
and Merger Sub of this Agreement and the Related Agreements to which it is a
party have been duly and validly approved by the board of directors of each of
Parent, Products and Merger Sub and by the stockholders of Merger Sub, and no
other actions or proceedings on the part of Parent, Products or Merger Sub are
necessary to authorize this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby. Each of Parent, Products and
Merger Sub has duly and validly executed and delivered this Agreement and the
Related Agreements to which it is a party. This Agreement and each such Related
Agreement constitute (assuming, in each case, due execution and delivery by the
other parties thereto) legal, valid and binding obligations of Parent, Products
or Merger Sub, as the case may be, in each case enforceable in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws in
effect which affect the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies.
5.3 CONSENTS AND APPROVALS; AUTHORITY RELATIVE TO THIS AGREEMENT.
Except for the approval of the listing on the New York Stock Exchange of the
Common Stock representing the Merger Consideration, no consent, authorization or
approval of, filing or registration with, or cooperation from, any Governmental
Authority or any other Person not a party to this Agreement is necessary in
connection with the execution, delivery and performance by Parent, Products or
Merger Sub of this Agreement or the Related Agreements to which it is a party or
the consummation of the transactions contemplated hereby or thereby.
5.4 NO VIOLATION OF OTHER INSTRUMENTS OR LAWS. The execution,
delivery and performance by each of Parent, Products and Merger Sub of this
Agreement and the Related Agreements to which it is a party do not and will not
(a) violate, breach or constitute any material event of default, or result in
the acceleration of any material obligation, under any Material Contract, order,
writ, injunction, arbitration award, judgment or decree to which Parent,
Products or Merger Sub is a party or by which it is bound; or (b) violate any
Law.
5.5 MERGER CONSIDERATION. The shares of Common Stock that
constitute the Merger Consideration, when issued and delivered to Seller in
accordance with the terms and condi-
37
-31-
tions of this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable, free and clear of all Liens (other than Liens arising out of
Seller's ownership of such shares of Common Stock).
5.6 PARENT DISCLOSURE DOCUMENTS. Parent has made available to
Seller true, correct and complete copies of its annual report on Form 10-K for
the year ended December 31, 2000, each quarterly report on Form 10-Q since that
date and each report on Form 8-K since that date, if any (collectively, the
"PARENT DISCLOSURE DOCUMENTS"). Except as reflected in any subsequent amendment
or supplement to a Parent Disclosure Document, no Parent Disclosure Document at
the date on which such document was filed contained any misstatements of a
material fact or omitted to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
5.7 BROKERS. None of Parent, Products or Merger Sub has used any
broker or finder in connection with the transactions contemplated hereby, and
neither Seller nor any Affiliate of Seller has or shall have any liability or
otherwise suffer or incur any Loss as a result of, or in connection with, any
brokerage or finder's fee or other commission of any Person retained by Parent,
Products or Merger Sub in connection with this Agreement, the Related
Agreements, or any of the transactions contemplated hereby or thereby.
ARTICLE VI
COVENANTS
Each party hereto covenants and agrees, to the extent applicable to
such party, that, except as set forth in the corresponding section or subsection
of the Company Disclosure Schedule:
6.1 IMPLEMENTING AGREEMENT. On the terms and subject to the
conditions hereof, from and after the date hereof, (a) each party hereto shall
use its commercially reasonable efforts (i) to take all action required of it to
fulfill its obligations under the terms of this Agreement and the Related
Agreements to which it is a party, and (ii) to facilitate the consummation of
the transactions contemplated hereby and thereby, and (b) no party hereto shall
take or fail to take any actions which would be reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code. Seller hereby agrees that Seller shall not sell, transfer or
otherwise dispose of any Shares or xxxxx x Xxxx upon any Shares (and shall not
agree to do the foregoing). Each party hereto agrees that it shall not, directly
or indirectly, take any other action (or refrain from taking any other action)
that would have the effect of preventing or disabling such party's performance
of its obligations under this Agreement or the Related Agreements to which it is
a party.
6.2 ACCESS TO INFORMATION AND FACILITIES. From and after the date
hereof, Seller shall give Products and Products' representatives reasonable
access during Seller's normal business hours to all of the facilities,
properties, books, Contracts, commitments and records of the Company and Seller
that relate to the Company or the Automotive Business, and shall be available to
Products and its representatives and shall give reasonable access to Products
and its representatives Seller's and Company's officers, managers and employees,
as Products and its representatives, in each case, shall
38
-32-
from time to time reasonably request. From and after the date hereof, Parent
shall give Seller and Seller's representatives access during normal business
hours to all of the facilities, properties, books, material Contracts,
commitments and records of Parent and its Subsidiaries for the purpose of
confirming the accuracy in all material respects of the Parent Disclosure
Documents and shall be available to Seller and its representatives and shall
make the Parent's and its Subsidiaries' officers, directors, managers and
employees available to Seller and its representatives as Seller and its
representatives, in each case, shall from time to time request for the purpose
of confirming the accuracy in all material respects of the Parent Disclosure
Documents.
6.3 CONSENTS AND APPROVALS. (a) Each party hereto shall use its
commercially reasonable efforts to obtain all consents, approvals, certificates
and other documents required in connection with the performance by it of this
Agreement and the Related Agreements to which it is a party and the consummation
of the transactions contemplated hereby and thereby, including all consents and
approvals referred to in the Company Disclosure Schedule, other than as set
forth below in Section 6.3 (b) and (c) hereof. Each of the Company, Seller,
Parent, Products and Merger Sub shall make all filings, applications, statements
and reports to all Governmental Authorities and other Persons that are required
to be made by it prior to the Closing Date by, or on behalf of, any such party
pursuant to any applicable Law or Contract in connection with this Agreement and
the Related Agreements, and the transactions contemplated hereby and thereby.
Parent shall use its commercially reasonable efforts to obtain the consent of
the New York Stock Exchange to list the Common Stock constituting the Merger
Consideration on such Exchange.
(b) If Seller, despite its reasonable best efforts, is unable to
obtain any consent, authorization or approval listed on Schedule 4.3(a) of the
Company Disclosure Schedule under the heading "Non-Condition Consents" with
respect to any Contract or Permit, Seller shall cause Products to receive the
benefits of such Contract or Permit, provided that Products shall, at Seller's
option, either reimburse Seller for reasonable out-of-pocket costs incurred by
Seller or its Affiliates providing Products the benefits of such Contract or
Permit or pay such costs directly promptly after, or when, as the case may be,
such costs are incurred or owing, as the case may be. Products' obligations to
Seller with respect to such Contracts shall be equivalent in all applicable
respects to Seller's obligations to the other party or parties to such
Contracts.
(c) Notwithstanding anything herein to the contrary, and without
limiting the foregoing, the parties acknowledge that consent is being sought
under the Master Lease Agreement (the "CIT LEASE"), dated December 21, 1999,
between the CIT Group/Equipment Financing, Inc., as lessor, and Seller, as
lessee, to divide the CIT Lease into two leases, one of which would cover assets
of the Automotive Business and one of which would cover assets not of the
Automotive Business. The parties agree to use reasonable best efforts to obtain
prior to Closing CIT's consent to the transactions contemplated by this
Agreement and the Related Agreements. If CIT's consent is not obtained prior to
Closing and Products is unable to obtain the benefits of the leases, Seller
shall indemnify Products for the loss of such benefits.
6.4 RETENTION OF CERTAIN EMPLOYEES. Prior to the Closing Date,
Seller shall use its commercially reasonable efforts in cooperation with
Products to bring about each Continuing Employee's agreement to be or remain, as
the case may be, employed by the Company following the
39
-33-
Closing Date. Seller shall promptly notify Products whenever Seller becomes
aware or reasonably believes that any Continuing Employee intends to leave its
employ.
6.5 SUPPLEMENTAL INFORMATION. From time to time after the date
hereof, each party hereto shall promptly disclose in writing to the other
parties hereto any matter hereafter arising which, if existing, occurring or
known as of the date hereof or the Closing Date, would have been required to be
disclosed to such other party or which would render inaccurate any of the
representations, warranties or statements of such party set forth in Article IV
or V, as the case may be. No information provided to a party pursuant to this
Section 6.5 shall be deemed to cure any breach of any representation, warranty
or covenant made in this Agreement.
6.6 USE OF NAME. From and after the Closing Date, Products shall
not use and shall not cause or permit any of its Affiliates to use in any manner
any of Seller's trade names, trademarks or service marks which contain the term
"Xxxx," "Xxxx Automotive" or "Xxxx Fabrics" (the "IDENTIFIED TERMS").
Notwithstanding the foregoing, Products (1) may continue to use, until
exhausted, the supplies of stationery, invoices, order forms, packaging material
and the like which are on hand as of the Closing Date which bear the Identified
Terms, provided that Products shall use and shall cause the Company to use
commercially reasonable efforts to cover or otherwise obscure or delete any of
such names or marks containing the Identified Terms and (2) may use and operate
the properties and assets of the Company (including, without limitation, Real
Property and all buildings, facilities, fixtures and other improvements thereon,
machinery, equipment, trucks, cars and rolling stock) bearing signs or other
forms of identification which bear the Identified Terms for a period not to
exceed one hundred eighty (180) days from the Closing Date, during which time
Products shall use and shall cause the Company to use commercially reasonable
efforts to remove or replace any such signs or other forms of identification.
6.7 TERMINATION OF CERTAIN AGREEMENTS. Seller shall, and shall
cause its Affiliates and the Company to, effective as of the Closing, without
any cost to the Company, terminate, rescind, cancel and render void and of no
effect any and all Contracts between the Company, on the one hand, and Seller or
any of its Affiliates (other than the Company), on the other hand, other than
the Related Agreements. Seller agrees that, effective as of the payment of the
Debt Repayment Amount under Section 3.3, all rights of Seller to indemnification
by the Company (whether by Contract, Bylaw, Law or otherwise) are hereby
terminated, void, of no effect and unenforceable by Seller.
6.8 CONFIDENTIALITY. In addition to the obligation of the parties
under that certain Confidential Disclosure Agreement between Seller and Products
dated August 10 and 11, 1999 ("CONFIDENTIALITY AGREEMENT"), each party hereby
agrees that it shall hold in confidence, shall not disclose to any third party,
and shall not use for its own benefit or for the benefit of any other Person,
any Confidential Information, knowledge or data which has been or will be
disclosed pursuant to this Agreement or in connection with the Transactions by
the other party in any manner, including but not limited to, orally or in
writing concerning the business or affairs of (i) the Company, Parent or
Products in the case of Seller and its Affiliates and (ii) Seller, in the case
of Parent, Products or Merger Sub, in each case, except as required or permitted
by this Agreement or the Related Agreements to fulfill its obligations or
exercise its rights hereunder or thereunder. Access to any such Confidential
Information, knowledge or data of the disclosing party shall be limited to those
officers, employees,
40
-34-
advisors and agents of the recipient who need to know it in connection with the
purposes specified above and who agree to be bound by provisions similar to this
Section 6.8.
The obligations of confidentiality, nondisclosure and nonuse in this
Section 6.8 or the Confidentiality Agreement shall not apply to Confidential
Information, knowledge or data which is or becomes generally available to the
public through no act in contravention of this Agreement; or to Confidential
Information, knowledge or data which is received by the recipient on a
non-confidential basis from a third party entitled to make disclosure thereof;
or, in the case of Parent, Products, Merger Sub and their Affiliates,
Confidential Information, knowledge or data relating to the business or affairs
of the Company or the Automotive Business whether disclosed pursuant to this
Agreement or the Confidentiality Agreement.
If a party either reasonably determines that it is required to
disclose any Confidential Information, knowledge or data of the other party
pursuant to applicable law or receives any demand under lawful process from a
court of competent jurisdiction to disclose or provide Confidential Information,
knowledge or data of the other party that is subject to the confidentiality
provisions hereof, such party shall provide reasonable prior written notice of
the same to the other party and shall cooperate at the expense of the requesting
party in seeking any reasonable protective arrangements requested by such other
party. Subject to the foregoing, the party that receives such request may
thereafter disclose or provide Confidential Information, knowledge or data to
the extent required by such law or by lawful process.
The parties hereto agree that, upon the request of the disclosing
party, they shall immediately deliver to such disclosing party all papers,
books, manuals, lists, correspondence and documents (in electronic format or
otherwise) containing or relating to the Confidential Information, together with
all copies thereof unless ownership thereto has transferred pursuant to this
Agreement. All Confidential Information disclosed pursuant to this Agreement by
any party shall be and remain the property of the disclosing party unless
ownership thereto has transferred pursuant to this Agreement.
6.9 PUBLICITY. Each of Seller, the Company, XxXxxxxx, Parent,
Products and Merger Sub agrees that no public release or announcement concerning
this Agreement and the transactions contemplated hereby shall be issued without
the prior consent of the other parties, except as such release or announcement
may be required by Law or the rules or regulations of any securities exchange;
provided that, prior to issuing any such release, the issuing party shall
provide each other party in interest with a reasonable opportunity to review
such release.
6.10 PRESERVATION OF BUSINESS. From and after the date hereof until
the Closing Date, except as required by this Agreement or any Related Agreement,
Seller shall operate the Automotive Business and shall cause the Company to
operate only in the ordinary and usual course of business and consistent with
past practice, and shall use its commercially reasonable efforts to (a) preserve
intact the present business organization and personnel of the Company and of the
Automotive Business; (b) preserve the goodwill and advantageous relationships of
the Company and the Automotive Business with customers, suppliers, independent
contractors, managers, employees and other Persons material to the operation of
such businesses; (c) preserve in full force and effect its
41
-35-
Permits that are held by the Company or are used in the Automotive Business; and
(d) not permit any action or omission that would cause any of the
representations or warranties of Seller or the Company contained herein to
become inaccurate or any of the covenants of Seller or the Company to be
breached. Without limiting the generality of the foregoing, from the date hereof
until the Closing Date, neither Seller (with respect to the Company or the
Automotive Business) nor the Company shall, without the prior written consent of
Products, except as required by this Agreement or any Related Agreement:
(i) waive, release or cancel any claims against third parties or
debts owing to it, or any rights which have any value and which relate to
the Company or the Automotive Business, other than in the ordinary course
of business and consistent with past practice pursuant to Contracts which
are not Material Contracts with Persons that are not Affiliates of Seller;
(ii) make any changes in its accounting systems, policies,
principles or practices relating to the Company or the Automotive
Business;
(iii) enter into, authorize or permit any transaction with Seller or
any Affiliate of Seller, other than in the ordinary course of business and
consistent with past practices;
(iv) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting
of options, warrants, convertible or exchangeable securities, commitments,
subscriptions, rights to purchase or otherwise) any Shares or any other
securities of the Company, or amend any of the terms of any Shares or such
other securities;
(v) split, combine or reclassify any Shares (or any other
securities of the Company), declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) in respect of any Shares (or any other securities of the
Company), or redeem or otherwise acquire any Shares (or any other
securities of the Company);
(vi) make any borrowings, incur any Indebtedness or assume,
guarantee, endorse, other than in the ordinary course of business and
consistent with past practice, or otherwise become liable (whether
directly, indirectly or contingently) for the obligations or Indebtedness
of any other Person, or make any payment or repayment in respect of any
obligations or Indebtedness, other than in the ordinary course of business
and consistent with past practice;
(vii) make any loans, advances or capital contributions to, or
investments in, any other Person;
(viii) enter into, adopt, amend or terminate any bonus, profit
sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of
any director of the Company or any Continuing Employee or increase in any
manner the compensa-
42
-36-
tion or fringe benefits of any director of the Company or any Continuing
Employee or pay any benefit not required by any existing plan and
arrangement or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(ix) sell, transfer or assign any of its properties or assets other
than the sale of inventory in the ordinary course of business and
consistent with past practice or acquire or lease any assets outside of
the ordinary course of business or any assets that are material to the
Company or the Automotive Business or make any property subject to any
Lien whatsoever;
(x) authorize or make any capital expenditures of the Company or
which relate to the Automotive Business which individually or in the
aggregate are in excess of $100,000;
(xi) make any Tax election or settle or compromise any federal,
state, local or foreign Tax liability, or waive or extend the statute of
limitations in respect of any such Taxes;
(xii) pay any amount, perform any obligation or agree to pay any
amount or perform any obligation, in settlement or compromise of any suits
or claims of liability against the Company or any of its directors,
officers, employees or agents;
(xiii) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) or repay or discharge any Indebtedness other than (a) as
required by the instruments evidencing the claims, liabilities,
obligations or Indebtedness and (b) the payments, discharges or
satisfactions, in the ordinary course of business and consistent with past
practice, of liabilities reflected or reserved against in the Latest
Balance Sheet or subsequently incurred in the ordinary course of business
and consistent with past practice or collect, or accelerate the collection
of, any amounts owed (including accounts receivable) other than collection
in the ordinary course, in each case, which relate to or affect the
Company or the Automotive Business;
(xiv) terminate, modify, amend or otherwise alter or change any of
the terms or provisions of any Material Contract, or pay any amount not
required by Law or by any Material Contract;
(xv) agree to any repricing, giveback or discount pursuant to or in
connection with any Material Contract; or
(xvi) take any action, or refrain from taking any action, that would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
6.11 TAX MATTERS. (a) Any Tax Return required to be filed by Parent
or Products relating to any Straddle Period shall be submitted (with copies of
any relevant schedules, work papers and other documentation then available) to
Seller for its approval not less than 45 days prior to the due date for the
filing of such Tax Return, which approval shall not be unreasonably withheld or
delayed. Seller shall have the option of providing to Parent or Products at any
time at least 30 days prior to the due date, written instructions as to how
Seller desires any item for which it may be liable re-
43
-37-
flected on such Tax Return. Parent shall cause the items for which Seller is
liable hereunder to be reflected in accordance with Seller's instructions
(unless, in the opinion of tax advisors to Parent, complying with Seller's
instructions would possibly subject Parent to any criminal penalty or to civil
penalties under Sections 6662 through 6664 of the Code or similar provisions of
applicable state, local or foreign Law).
(b) Upon the written request of Parent setting forth in reasonable
detail the computation of the amounts owed, Seller shall pay to Parent, no later
than five (5) Business Days prior to the due date for the applicable Tax Return,
the Taxes for which Seller is liable pursuant to Section 6.11(d) and which are
payable with any Tax Return to be filed by Parent with respect to any Straddle
Period.
(c) Within 90 days after the Closing Date, Seller shall prepare
and provide to Parent a package of Tax information materials, including
schedules and work papers, as needed, by Parent to enable Parent to prepare and
file all Tax Returns required to be prepared and filed by it pursuant to Section
6.11(d)(i). Seller shall prepare such package in good faith in a manner
consistent with past practice.
(d) (i) To the extent permitted or required by Law or
administrative practice, (A) the taxable year of the Company which includes the
Closing Date shall be treated as closing on and including the Closing Date and,
notwithstanding the foregoing, (B) all transactions not in the ordinary course
of business occurring after the Closing Date shall be reported on Parent's
consolidated United States federal income Tax Return to the extent permitted by
Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) and shall be similarly
reported on other Tax Returns of Parent or its Affiliates.
(ii) In determining Seller's liability for Taxes pursuant to this
Agreement, Seller shall be credited with the amount of estimated Taxes paid by
or on behalf of the Company prior to the Closing. To the extent that Seller's
liability for Taxes for a taxable year or period is less than the amount of
estimated Taxes previously paid by Seller on behalf of the Company with respect
to all or a portion of such taxable year or period, Parent shall pay Seller the
difference within five (5) Business Days of the receipt of the Tax refund or in
the case of amounts credited against Tax, the filing of the Tax Return relating
to such Taxes, whichever is later.
(e) (i) Any Tax refund (including any interest in respect thereof)
received by Parent, and any amounts credited against Tax to which Parent or the
Company becomes entitled (including by way of any amended Tax Return other than
any carryback filing), that relate to any taxable period, or portion thereof,
ending on or before the Closing Date, shall be for the account of Seller and
Parent shall pay over to Seller any such refund or the amount of any such credit
within five days of receipt of such refund or credit. Parent shall pay Seller
interest at the rate prescribed under Section 6621(a)(1) of the Code, compounded
daily, on any amount not paid when due under this Section 6.11(e). For purposes
of this Section 6.11(e), where it is necessary to apportion a refund or credit
between Parent and Seller for a Straddle Period, such refund or credit shall be
apportioned between the period deemed to end at the close of the Closing Date
and the period deemed to begin at the beginning of the day following the Closing
Date on the basis of an interim closing of the books of Parent, except that
refunds or credits of Taxes imposed on a period basis shall be allocated on a
daily basis.
44
-38-
(ii) Parent shall cooperate in obtaining any material Tax refund
that Seller reasonably believes should be available, including through filing
appropriate forms with the applicable Governmental Authority.
(f) (i) If the examination of any federal, state, local or other
Tax Return of the Company for any taxable period ending on or before the Closing
Date shall result (by settlement or otherwise) in any adjustment which permits
Parent to increase deductions, losses or tax credits or decrease the income,
gains or recapture of tax credits which would otherwise (but for such
adjustments) have been reported or taken into account (including by way of any
increase in basis) by Parent for one or more periods ending after the Closing
Date, Seller shall notify Parent and provide it with adequate information so
that Parent can reflect on its Tax Returns such increases in deductions, losses
or tax credits or decreases in income, gains or recapture of tax credits. Parent
shall pay to Seller, within 30 days of the receipt of such Tax Benefits, the
amount of any resulting Tax Benefits.
(ii) If the examination of any federal, state, local or other Tax
Return of Parent for any taxable period ending after the Closing Date shall
result (by settlement or otherwise) in any adjustment which permits Seller to
increase deductions, losses or tax credits or decrease the income, gains or
recapture of tax credits which would otherwise (but for such adjustments) have
been reported or taken into account (including by way of any increase in basis)
by Seller for one or more periods ending on or before the Closing Date, Parent
shall notify Seller and provide it with adequate information so that Seller can
reflect on its Tax Returns such increases in deductions, losses or tax credits
or decreases in income, gains or recapture of tax credits. Seller shall pay to
Parent, within 30 days of the receipt of such information, the amount of any
resulting Tax Benefits.
(g)(i) Parent shall not take any action which Parent knows would
(A) increase Seller's liability for Taxes (including any liability of Seller to
indemnify Parent for Taxes pursuant to this Agreement) or (B) result in, or
change the character of, any income or gain that Seller must report on any Tax
Return.
(ii) Parent shall not amend, refile or otherwise modify any Tax
Return relating in whole or in part to the Company with respect to any taxable
year or period ending on or before the Closing Date (or with respect to any
Straddle Period) without the prior written consent of Seller, which consent
shall not be unreasonably withheld or delayed.
(h) After the Closing Date, each of Parent and Seller shall (and
shall cause their respective Affiliates to) (i) assist the other party in
preparing any Tax Returns which such other party is responsible for preparing
and filing, and (ii) cooperate fully in preparing for any audits of, or disputes
with any tax authority regarding any Tax to the extent such audit or dispute (y)
relates to or arises from the Transactions or the conduct of the business of the
Company or the Automotive Business or (z) would reasonably be expected to have
an impact on Seller or any of its Affiliates, in the case of an audit or dispute
involving Parent or any of its Affiliates, or Parent or any of its Affiliates,
in the case of an audit or dispute involving Seller or any of its Affiliates.
Seller shall not dispose of any Tax work papers, books or records relating to
the Company during the six (6) year period following the Closing Date, and
thereafter, if Parent provides notice of this requirement within six (6) months
45
-39-
prior to the end of the six (6) year period, shall give Parent reasonable
written notice before disposing of such items.
(i) Notwithstanding any other provision of this Agreement, Seller
shall indemnify each Products Indemnified Party from and against and in respect
of any and all Losses incurred by such Products Indemnified Party, which may be
imposed on, sustained, incurred or suffered by or assessed against such Products
Indemnified Party, directly or indirectly, to the extent relating to or arising
out of any liability for (a) Taxes imposed on Seller or the Company for any
taxable year or period that ends on or before the Closing Date and, with respect
to any Straddle Period, the portion of such Straddle Period deemed to end on and
include the Closing Date, but only to the extent such Taxes exceed the accrual
or reserve for Taxes (excluding any reserve for deferred Taxes established to
reflect timing differences between book and tax income) set forth on the Latest
Balance Sheet and (b) Taxes otherwise resulting from the Merger.
(j) Notwithstanding any other provision of this Agreement, Parent
shall indemnify each Seller Indemnified Party from and against and in respect of
any and all Losses incurred by such Seller Indemnified Party, directly or
indirectly, to the extent relating to or arising out of
(i) any liability for Taxes imposed on any of Parent or its
Subsidiaries for any taxable year or period that begins after the Closing
Date and, with respect to any Straddle Period, the portion of such
Straddle Period beginning the day after the Closing Date; and
(ii) any liability, or increase in a liability, for Taxes imposed
on such Seller Indemnified Party as a result of any failure by Parent or
its Subsidiaries to perform or comply with its obligations under this
Agreement.
(k)(i) NOTICE. After the Closing Date, Parent and Seller each
shall notify the other party in writing within 20 days of the notice of
the commencement of any Tax audit or administrative or judicial proceeding
affecting the Taxes of the Company, which, if determined adversely to the
taxpayer (the "TAX INDEMNITEE") or after the lapse of time, would be
grounds for indemnification under this Section 6.11 by the other party
(the "TAX INDEMNITOR"). Such notice shall contain factual information
describing any asserted Tax liability in reasonable detail and shall
include copies of any notice or other document received from any Tax
authority in respect of any such asserted Tax liability. If Parent or
Seller fails to give the other party prompt notice of an asserted Tax
liability as required under this Agreement, then if such failure to give
prompt notice results in a detriment to the Tax Indemnitor, then any
amount which the Tax Indemnitor is otherwise required to pay pursuant to
this Section 6.11 with respect to such liability shall be reduced by the
amount of such detriment.
(ii) CONTROL OF CONTESTS INVOLVING PRE-CLOSING PERIODS OR STRADDLE
PERIODS. In the case of an audit or administrative or judicial proceeding
involving any asserted liability for Taxes relating to any taxable years or
periods ending on or before the Closing Date or relating to any Straddle Period,
Seller shall have the right, at its expense, to control the conduct of such
audit or proceeding. Parent may participate in the conduct of such audit or
proceeding at its own expense and, if such audit or proceeding would be
reasonably expected to result in an increase in Tax liability of the Company
46
-40-
for which Parent or one of its Affiliates would be liable, Seller shall not
settle any such audit or proceeding without the consent of Parent, which consent
shall not be unreasonably withheld or delayed.
(iii) CONTROL OF CONTESTS INVOLVING POST-CLOSING PERIODS. In the
case of an audit or administrative or judicial proceeding involving any asserted
liability for Taxes relating to any taxable years or periods beginning after the
Closing Date, Parent shall have the right, at its expense, to control the
conduct of such audit or proceeding.
6.12 MAINTENANCE OF INSURANCE. Seller shall and shall cause the
Company to continue to carry its existing insurance relating to the Company or
the Automotive Business through the Closing Date, and shall not allow any
breach, default, termination or cancellation of such insurance policies or
agreements to occur or exist.
6.13 NON-COMPETE. None of Seller or any of its present or future
Subsidiaries or Affiliates or XxXxxxxx or any of his present or future
Affiliates shall during the period beginning from the Closing Date and ending on
the later of the (i) fifth anniversary of the Closing Date and (ii) third
anniversary of the termination of the Supply Agreement (the "NON-COMPETE
PERIOD"), directly or indirectly, on its or his own behalf, or on behalf of any
other Person:
(a) acquire or own in any manner any interest in any Person (other
than Parent or its Affiliates) that is engaged in the business of
manufacturing, finishing and selling automotive fabrics;
(b) engage, through or in connection with any Person (other than
Parent or its Affiliates) in the business of manufacturing, finishing and
selling automotive fabrics or compete in any way with the Automotive
Business;
(c) be employed in any capacity by, serve as an employee, agent or
officer or director of, serve as a consultant or advisor to, or otherwise
participate in the management or operation of, any Person (other than
Parent or its Affiliates) which engages in, or competes in any way with,
the business of manufacturing, finishing and selling automotive fabrics;
(d) solicit, entice or induce any employee, agent, officer or
director of Parent, Products or the Company or any of their respective
present or future Subsidiaries or Affiliates to terminate his or her
employment or other relationship with Parent, Products or the Company or
any of their respective present or future Subsidiaries or Affiliates, as
the case may be; provided, however, that, with respect to any third party
which is not an Affiliate of XxXxxxxx and which is the successor to all or
substantially all of the assets of Seller, the application of this clause
(d) shall be limited to the individuals who are Continuing Employees;
(e) knowingly solicit, entice or induce any vendor or solicit,
entice or induce any customer, in each case, of Parent, Products or the
Company or any of their respective present or future Subsidiaries or
Affiliates to terminate or diminish its relationship with Parent, Products
or the Company or any of their respective present or future Subsidiaries
or Affiliates, as the case may be; or
47
-41-
(f) assist others engaging in the conduct described in the
foregoing clauses (a) through (e).
Notwithstanding the foregoing, during the Non-Compete Period, (i)
Main Street may comply with its obligations under and enjoy the benefits of the
Supply Agreement and with the prior written consent of Products (which consent
shall not be unreasonably withheld or delayed) weave automotive fabric products
for customers identified to Products in reasonable detail, (ii) Seller and/or
XxXxxxxx and/or any of their respective Subsidiaries or Affiliates may continue
to own and operate the El Paso Business substantially in the manner that such
business is currently being conducted, (iii) Seller and XxXxxxxx and each of
their respective Subsidiaries and Affiliates may (A) own capital stock of
Parent, (B) own in the aggregate for all such Persons not in excess of five
percent (5%) of the outstanding equity interests of any other publicly traded
company that is engaged in the Automotive Business (provided that each shall
nonetheless remain subject to the restrictions described in clauses (b) through
(f), inclusive, above with respect to such investments in this clause (B)) and
(C) participate as investors in Heartland, (iv) Seller and its Affiliates may
make an investment in a Mexican fabrics weaving business provided that such
business shall not weave automotive fabric products for any Person other than
Parent and its Subsidiaries without the prior written consent of Products (which
consent shall not be unreasonably withheld), (v) XxXxxxxx may serve as a
director of or consultant to Parent, Products or the Company or any of their
respective Subsidiaries or Affiliates from time to time and (vi) The Xxxxxx Yarn
Company, L.P. and the Xxxxxxx Yarn Division of Mastercraft Fabrics LLC may
continue to produce, manufacture, market and sell yarn even if such yarn is sold
to or used by a competitor of Parent or any Affiliate of Parent and even if such
yarn is used in the automotive industry. For the avoidance of doubt, nothing in
this Section 6.13 shall prohibit any form of dyeing, other than package dyeing
yarn, and dyeing fabric, for use in the automotive industry.
6.14 NON-DISPARAGEMENT. None of Seller or any of its Subsidiaries
or Affiliates or XxXxxxxx or any of his Affiliates shall at any time following
the date of this Agreement make any statements in writing or otherwise that
disparage the reputation or character of Parent, Products, the Company or any of
their respective present or future Subsidiaries, Affiliates or divisions or any
of their respective directors, officers, employees or stockholders at any time
for any reason whatsoever, except that nothing in this Section 6.14 shall
prohibit XxXxxxxx or Seller or any of its directors, officers, employees or
stockholders from giving truthful testimony on any litigation or administrative
proceedings either between XxXxxxxx or Seller on the one hand and either Parent
or Products on the other hand, or in connection with which XxXxxxxx or Seller or
such director, officer, employee or stockholder is required by law to give
testimony.
6.15 PERSONNEL MATTERS.
(a) EMPLOYEES AND EMPLOYEE BENEFIT PLANS. (i) Subject to Section
6.15(d), effective as of the Closing, Products will, or will cause one of its
Subsidiaries or Affiliates to, offer employment to each active employee of the
Automotive Business (including, without limitation, employees taking advantage
of the Family and Medical Leave Act of 1993 but excluding inactive employees of
the Automotive Business who are not actively employed on the Closing Date due to
a short-term disability or other illness or injury and who within six months
after the Closing Date become eligible under the Seller's applicable long-term
disability plans without an intervening return to active em-
48
-42-
ployment, and excluding former employees of the Automotive Business who, as of
the Closing Date are on a long-term disability leave) ("AUTOMOTIVE BUSINESS
EMPLOYEES") of Seller identified on the Company Disclosure Schedule as potential
Continuing Employees (such identified Employees of Seller who accept employment
with Products of any of its Subsidiaries as of the Closing Date, the "CONTINUING
EMPLOYEES").
(ii) Products agrees that, under any employee benefit plan made
available or established after the Closing Date, Continuing Employees will
receive credit for their years of service with Seller or any of its Affiliates
prior to the Closing Date in determining eligibility and vesting thereunder, and
in determining the amount of benefits under any applicable sick leave, vacation
or severance plan. Products will, or will cause one of its Subsidiaries or
Affiliates to, cover Continuing Employees as of the end of the Benefits
Transition Period under a group health plan and waive any preexisting condition
limitations applicable to Continuing Employees under any group health plan made
available to Continuing Employees to the extent that a Continuing Employee's
condition would not have operated as a preexisting condition limitation under
any applicable group health plan of or sponsored by Seller or any of its
Affiliates prior to the Closing Date, and Products will, or will cause one of
its Subsidiaries or Affiliates to, take all action necessary to ensure that
Continuing Employees are given full credit for all co-payments and deductibles
incurred under any group health plan for the plan year that includes the end of
the Benefits Transition Period.
(b) ASSUMPTION OF OBLIGATIONS. (i) Except as set forth in Section
6.15(g), effective as of the Closing, Products will, or will cause one of its
Subsidiaries or Affiliates to, assume and be solely responsible for all
liabilities and obligations relating to termination (actual or constructive) of
employment by Products or any of its Subsidiaries or Affiliates of any
Continuing Employee after the Closing Date. Seller will retain and be solely
responsible for all liabilities and obligations relating to termination (actual
or constructive) of employment of any Automotive Business Employee (or other
employee of the Seller, Subsidiary or Affiliate) occurring on or prior to the
Closing Date (including those employees deemed terminated because they are not
required to be rehired by Products or its Subsidiary or Affiliate under Section
6.15(a)), and Products will have no liability with respect thereto.
(ii) Effective as of the Closing, Products will, or will cause one
of its Subsidiaries or Affiliates to, assume and be solely responsible for all
liabilities and obligations of Seller with respect to Continuing Employees for
accrued wages, vacation or sick pay, but only to the extent taken into account
in the determination of Working Capital at the Closing Date (including any
claims for such benefits incurred but not reported).
(iii) Products shall have sole responsibility, liability and
obligation to provide Continuing Employees and their qualified beneficiaries
with continuation coverage (within the meaning of Section 4980B(f)(2) of the
Code) under each Employee Benefit Plan that is a group health plan ("COBRA
Coverage"), and any liability or obligation relating to such coverage, with
respect to qualifying events (within the meaning of Section 4980(f)(3) of the
Code) that occur after the Closing Date.
49
-43-
(c) RETIREMENT PLANS. (i) As of the Closing, Seller will cause
Continuing Employees to be fully vested in their accrued benefits under the Xxxx
Fabrics Profit Sharing Retirement and Personal Savings Plan ("SELLER'S 401(k)
PLAN") and the Xxxx Fabrics Factory Hourly and Office Employee's Pension Plan
and Trust ("SELLER'S DEFINED BENEFIT PLAN," and collectively, "SELLER'S
RETIREMENT PLANS"). Neither Products nor any of its Subsidiaries or Affiliates
will assume any liabilities or obligations with respect to the Seller's
Retirement Plans (except as provided in clause (ii)(B) below), which will be
retained by Seller, or with respect to any claims made with respect to benefits
allegedly payable thereunder.
(ii) As soon as practicable after the Closing and following (A)
delivery by Products to Seller of a favorable IRS determination letter regarding
a defined contribution plan of Products ("PRODUCTS' 401(K) Plan") or an opinion,
reasonably satisfactory to Seller, of Products' counsel to the effect that the
terms of the Products' 401(k) Plan and its related trust qualify, as to form,
under Section 401(a) and Section 501(a) of the Code, and (B) delivery by Seller
to Products of a favorable IRS determination letter regarding Seller's 401(k)
Plan or an opinion, reasonably satisfactory to Products, of Seller's counsel to
the effect that the terms of Seller's 401(k) Plan and its related trust qualify,
as to form, under Section 401(a) and Section 501(a) of the Code, Seller shall
cause the trustee of Seller's 401(k) Plan to transfer all of the assets and
liabilities thereof attributable to Continuing Employees. Unless otherwise
agreed by Seller and Products, the assets to be transferred shall be cash and
promissory notes for loans made to Continuing Employees.
(d) EMPLOYMENT TERMINATION AND PLAN AMENDMENTS. Subject to
Products' obligations under Contracts by which the Company or the Automotive
Business is bound, no provision of this Section 6.15 will limit Products' or any
of its Subsidiaries' or Affiliates' right and authority to discontinue, suspend
or modify the employment of any Continuing Employee or benefits provided to any
or all Continuing Employees after the Closing.
(e) CEASE PARTICIPATION IN SELLER'S PLANS. Effective as of the end
of the Benefits Transition Period, Continuing Employees shall cease active
participation in all Continuing Benefits. Effective as of the Closing Date,
Continuing Employees shall cease active participation in all Employee Benefit
Plans.
(f) WELFARE PLANS. Effective as of the end of the Benefits
Transition Period, Products or the Company shall maintain group welfare plans as
defined in Section 3(1) of ERISA for the benefit of Continuing Employees and
their dependents and beneficiaries. Subject to Section 6.15(g) below, Seller
shall retain responsibility for all medical or dental services incurred on or
prior to the end of the Benefits Transition Period and Products and the Company
shall retain responsibility for claims incurred after the end of the Benefits
Transition Period. For purposes of the preceding sentence, a claim shall be
deemed to have been incurred on the date on which medical or other treatment or
service was rendered and not the date of inception of the related illness or
injury or the date of submission of a claim related thereto; provided that in
the case of a claim involving hospitalization, all expenses incurred during a
continuous hospital stay shall be deemed to be one claim and shall be deemed to
have been incurred on the first day of such hospital stay.
50
-44-
(g) BENEFITS TRANSITION PERIOD. Seller shall continue to make
available during the Benefits Transition Period (as defined below) to Continuing
Employees the medical, dental, life insurance, disability, cafeteria and
flexible spending account plans (but not Seller's 401(k) Plan) provided by
Seller or its Affiliates and available to Continuing Employees immediately prior
to the Closing Date (the "CONTINUING BENEFITS"). The Benefits Transition Period
shall commence on the Closing Date and end on the earlier of a date specified by
Products or December 31, 2001. Products shall pay to Seller, or any
administrative representative of Seller, all premium rates, plan contributions
and other costs payable for the Continuing Benefits with respect to Continuing
Employees during the Benefits Transition Period, plus any third party
administrative service fees directly related to such premiums, costs or
contributions incurred by Seller in connection with the Continuing Benefits for
Continuing Employees during the Benefits Transition Period.
(h) INACTIVE OR FORMER EMPLOYEES. Seller shall continue to be
responsible in accordance with its applicable plans for all disability income
benefits, and other applicable benefits, payable to inactive employees or former
employees of the Company who are not Continuing Employees.
(i) EMPLOYEE INFORMATION. Each of Seller and Products will provide
the other, in a timely manner, any information with respect to any Automotive
Business Employee's or former employee's employment with and compensation from
Seller, any of its Affiliates or Products or any of its Subsidiaries or
Affiliates, as the case may be, or rights of benefits under any employee benefit
plan or arrangement which the other party hereto may reasonably request.
(j) W-2 MATTERS. Pursuant to the alternate procedure described by
Revenue Procedure 96-60, the Company will assume Seller's entire obligation to
furnish Forms W-2 for the year ending December 31, 2001 to Continuing Employees.
Seller will provide the Company the information not available to the Company and
relating to periods ending on the Closing Date necessary for the Company to
prepare and distribute Forms W-2 to Continuing Employees for the year ending
December 31, 2001, which Forms W-2 will include all remuneration earned by
Continuing Employees from Seller, the Company and Products during the year
ending December 31, 2001, and the Company will prepare and distribute such
Forms. Seller will indemnify, defend and hold harmless Products and the Company
against any fines or penalties to the extent resulting from Seller's provision
of incorrect information pursuant to this Section 6.15(j).
(k) VEBA. Neither Products nor any of its Subsidiaries or
Affiliates will assume any liabilities or obligations with respect to the Xxxx
Fabrics voluntary employees' beneficiary association ("VEBA").
(l) EMPLOYEE CONFIDENTIALITY AGREEMENTS. Seller covenants that it
will not at any time waive any provision of any confidentiality or similar
agreement between Seller and any employee of Seller insofar as such provision
relates to the Automotive Business.
6.16 COMPANY FINANCIAL STATEMENTS. Seller shall prepare, in
cooperation with Parent and deliver to Products, (i) by August 31, 2001 audited
consolidated financial statements of the Company, the Automotive Business and
WAD for each of the three fiscal years of the Company and
51
-45-
WAD ended June 30, 2001, 2000 and 1999; (ii) if determined subsequent to August
31, 2001 to be necessary or advisable then as soon as practical after such
determination, an unaudited statement of financial position for the interim
period ended September 30, 2001 and unaudited statements of income and cash
flows for the interim period ended September 30, 2001 and the corresponding
period in 2000, in each case prepared in accordance with GAAP consistently
applied for the periods presented and with the accounting requirements and the
published rules and regulations of the SEC applicable to a registration
statement relating to an offering of debt securities; and to comply with the
requirements of Form 8-K under the Exchange Act (as reasonably determined by
Parent) (the "COMPANY FINANCIAL STATEMENTS"); and (iii) shall in connection
therewith cause its independent accountants to deliver an unqualified audit
report with respect to the audited consolidated financial statements included in
the Company Financial Statements prepared in accordance with the accounting
requirements and the published rules and regulations of the SEC applicable to a
registration statement relating to an offering of debt securities.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY
The obligations of Parent, Products, Merger Sub, Seller, the Company
and XxXxxxxx to consummate the Transactions are subject to the satisfaction of
the following conditions:
7.1 NON-COMPETE AGREEMENTS. Each of Xxxxx XxXxxxxx and Xxxxx
Xxxxxxxx shall have entered into a Non-Compete Agreement with Products, and each
such agreement shall be in full force and effect.
7.2 ACTIONS OR PROCEEDINGS. No action or proceeding by any
Governmental Authority or other Person shall have been instituted or threatened,
and no event or circumstance shall have occurred, (a) that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
(provided that for the purpose of this Section 7.2, $250,000 as an aggregate
shall be substituted for $100,000 individually in the definition of "MATERIAL
ADVERSE EFFECT") on the business, operations, assets, liabilities, results of
operations, cash flows, condition (financial or otherwise) of the Company or
Parent of Products (together with their consolidated Subsidiaries); or (b) that
would reasonably be expected to result in the enjoining, restraining or
prohibition of, or result in substantial damages in respect of, any provision of
this Agreement or the Related Agreements or the consummation of the Transactions
or the effective operation of any material portion of the business of the
Company or Parent or Products or any integration of any operations of the
Company with those of Products and its Affiliates.
7.3 NEW YORK STOCK EXCHANGE. The Common Stock representing the
Merger Consideration shall have been approved for listing on the New York Stock
Exchange, subject only to official notice of issuance.
7.4 REFINANCING OF SELLER'S LOAN. Seller shall have entered into
an amendment of Seller's Loan, in form and substance satisfactory to Seller and
Products, with the lenders thereunder (the "LENDERS"), pursuant to which the
Lenders shall have agreed that, upon repayment of a stated
52
-46-
amount of the Indebtedness owed the Lenders, the Lenders will release any and
all Liens held by the Lenders against (i) the Shares and (ii) the assets of the
Automotive Business other than the Excluded Assets, and will release the Company
from its obligations as a guarantor of the Indebtedness.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT, PRODUCTS AND MERGER SUB
The obligations of Parent, Products and Merger Sub to consummate the
Transactions are subject to the waiver or satisfaction of the following
conditions:
8.1 WARRANTIES TRUE AS OF BOTH PRESENT DATE AND CLOSING DATE. The
representations and warranties of Seller, the Company and XxXxxxxx contained
herein shall have been accurate and complete on and as of the date hereof, and
shall also be accurate and complete on and as of the Closing Date (as updated
pursuant to Section 6.5), except for representations and warranties that are
made as of a specific date, which shall be accurate and complete as of such
date, and provided that each of the representations and warranties contained in
Article IV that are qualified or limited by the term "Material Adverse Effect"
or "material" or phrases of like import shall be read without giving effect to
such qualification or limitation, but provided, further, that, this Section 8.1
will be deemed to be satisfied unless any breaches of the representations and
warranties contained in Article IV would reasonably be expected, individually or
in the aggregate, to result in a (i) Material Adverse Effect (provided that, for
the purpose of this Section 8.1, $250,000 in the aggregate shall be substituted
for $100,000 individually in the definition of "Material Adverse Effect") or
(ii) default or event of default under any material debt instrument of Parent or
its Subsidiaries as a result thereof.
8.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS. Seller, the Company
and XxXxxxxx shall have performed and complied in all material respects with all
of their respective covenants, obligations and agreements contained in this
Agreement and the Related Agreements to be performed and complied with by them
on or prior to the Closing Date.
8.3 CONSENTS AND APPROVALS. The Company shall have furnished
written evidence satisfactory to Products that all consents, approvals and
filings (a) required for the consummation of the Transactions or the ownership
and operation by Products of the Company and the Automotive Business (taking
into account that the Excluded Assets are not part of the Automotive Business)
and (b) that are set forth on Schedule 4.3(a) under the heading "Condition
Consents" have been obtained, or have been made, as the case may be.
8.4 STOCKHOLDERS AGREEMENT. Seller shall have entered into the
Stockholders Agreement, and such agreement shall be in full force and effect.
8.5 FINANCIAL STATEMENTS. The Company shall have furnished to
Products the Company Financial Statements no later than August 31, 2001.
8.6 DOCUMENTS. Products shall have received each agreement,
document and item specified in Section 10.1.
53
-47-
8.7 NO INDEBTEDNESS; WORKING CAPITAL. The Company shall have no
liabilities, Indebtedness or obligations, whether accrued, absolute, contingent
or otherwise, except for (i) Indebtedness in respect of the Debt Repayment
Amount, (ii) trade payables and other ordinary course current liabilities of the
Company relating to the Automotive Business, (iii) leases of assets transferred
to the Company in connection with the Restructuring and as disclosed in the
Company Disclosure Schedules, (iv) the lease of the Company's Auburn Hills,
Michigan offices, (v) the lease of the Company's facilities at 000 Xxxxxxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx (which lease should be in form and substance
acceptable to Products) and (vi) those liabilities, Indebtedness and obligations
that are set forth in the Company Disclosure Schedule. The Company shall have
Working Capital at Closing which, taking into consideration current sales
levels, is substantially consistent with the amount of Working Capital that
would have been maintained for such sales levels under the historic methods of
computation of appropriate Working Capital of the Automotive Business. At the
time of Closing, the Company shall be released from all obligations under
Seller's Loan, whether contingent or otherwise, in excess of the Debt Repayment
Amount. At the time of Closing, the Debt Repayment Amount shall not exceed
$90,000,000 (inclusive of all principal, premium, interest, fees, charges, cost,
expenses and other obligations, contingent or otherwise, relating thereto).
All notices and other conditions under Seller's Loan or otherwise
applicable to Seller which must be met in order to permit Products to repay the
Debt Repayment Amount and extinguish all liabilities and commitments in respect
of such Indebtedness and secure all necessary releases from the creditors in
respect thereof reasonably satisfactory to Seller and Products shall have been
made or obtained. All commitments for any other Indebtedness of the Company
(including letters of credit) shall have been terminated. No default or event of
default shall have occurred and be continuing under any material debt instrument
of Products and its Subsidiaries (it being understood that should any such
failure result in a default or event of default under any material debt
instrument of Parent or its Subsidiaries in connection with the consummation of
the Transactions, Parent, Product and Seller will be required to collectively
use reasonable best efforts to resolve the problem in a manner which permits
financing of the Transactions as contemplated).
8.8 ADDITIONAL AGREEMENTS. Seller shall have delivered to Products
each of:
(a) the Supply Agreement; and
(b) the Transition Services Agreement;
duly executed by Seller and/or each Affiliate of Seller to the extent a party
thereto and each such agreement shall be in full force and effect.
8.9 CONSUMMATION OF WAD ASSET PURCHASE. The consummation of the
purchase by Products of all of the assets of WAD as contemplated by the WAD
Purchase Agreement shall have occurred or shall occur contemporaneously with the
Closing.
8.10 NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall
have occurred since the Latest Balance Sheet Date, and no event shall have
occurred which, in the reasonable judgment of Products, would reasonably be
expected to have, individually or in the aggregate, a Mate-
54
-48-
rial Adverse Effect (provided, that for the purpose of this Section 8.10,
$250,000 in the aggregate shall be substituted for $100,000 individually in the
definition of "Material Adverse Effect").
8.11 CONSUMMATION OF RESTRUCTURING. The Restructuring shall have
been fully consummated on the terms and in the manner contemplated by this
Agreement.
8.12 CONSENTS AND ESTOPPELS. Products shall have received consents
from the lessor of each lease of Real Property which would otherwise be
terminable as a result of the Transactions. Products shall also have received
estoppel certificates addressed to Products from the lessor of each such lease,
dated within 30 days of the Closing Date, identifying the lease documents and
any amendments thereto, stating that the lease is in full force and effect and,
to the best knowledge of the lessor, that the tenant is not in default under the
lease and no event has occurred that, with notice or lapse of time or both,
would constitute a default by the tenant under the lease and containing any
other information reasonably requested by Products.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF XXXXXXXX,
SEllER AND THE COMPANY
The obligations of XxXxxxxx, Seller and the Company to consummate
the Transactions are subject to the waiver or satisfaction of the following
conditions:
9.1 WARRANTIES TRUE AS OF BOTH PRESENT DATE AND CLOSING DATE. The
representations and warranties of Parent, Products and Merger Sub contained
herein shall have been accurate and complete on and as of the date hereof, and
shall also be accurate and complete on and as of the Closing Date, except for
representations and warranties that are made as of a specific date, which shall
be accurate and complete as of such date, and provided that each of the
representations and warranties contained in Article V that are qualified or
limited by the term "Material Adverse Effect" or "material" or phrases of like
import shall be read without giving effect to such qualification or limitation,
but provided, further, that, this Section 9.1 will be deemed to be satisfied
unless any breaches of the representations and warranties contained in Article V
would reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect (provided that, for purposes of this Section 9.1,
$250,000 shall be substituted for $100,000 in the definition of "Material
Adverse Effect").
9.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS. Each of Parent,
Products and Merger Sub shall have performed and complied in all material
respects with all of its covenants, obligations and agreements contained in this
Agreement and the Related Agreements to be performed and complied with by it on
or prior to the Closing Date.
9.3 DOCUMENTS. Seller shall have received all of the agreements,
documents and items specified in Section 10.2.
55
-49-
9.4 REGISTRATION RIGHTS AGREEMENT; STOCKHOLDERS AGREEMENT. Parent
and Heartland shall have entered into the Registration Rights Agreement and the
Stockholders Agreement, and each such agreement shall be in full force and
effect.
9.5 CONSENTS AND APPROVALS. Products shall have furnished written
evidence satisfactory to Seller that all consents and approvals of its
stockholders, board of directors and third parties required for the consummation
of the transactions contemplated hereby have been obtained, and all required
filings with the New York Stock Exchange have been made.
9.6 CONSUMMATION OF WAD ASSET PURCHASE. The consummation of the
sale by WAD of all of the assets of WAD as contemplated by the WAD Purchase
Agreement shall have occurred or shall occur contemporaneously with the Closing.
9.7 ADDITIONAL AGREEMENTS. Products shall have delivered to Seller
each of:
(a) the Supply Agreement; and
(b) the Transition Services Agreement;
duly executed by Products and/or each Affiliate of Products to the extent a
party thereto and each such agreement shall be in full force and effect.
ARTICLE X
CLOSING
10.1 DELIVERIES BY SELLER AND THE COMPANY. At the Closing, in
addition to any other documents or agreements required under this Agreement,
Seller shall deliver to Parent, Products and Merger Sub, as appropriate, the
following:
(a) A receipt for the Merger Consideration;
(b) A written statement from each Person holding a Lien, other
than a Permitted Lien, upon any of the assets of the Company or upon any
Shares, and each creditor of the Company with respect to any Indebtedness,
other than the obligation to indemnify Seller for the amount equal to the
Debt Repayment Amount, confirming the repayment of such Indebtedness and
the release of the Company as of the Closing Date of (i) any such Lien;
and (ii) all obligations under any and all Contracts relating thereto;
(c) A certificate dated the Closing Date of Seller certifying as
to the matters set forth in Section 8.1 and Section 8.2, and attached to
such certificate shall be a written statement of all matters that shall
have been disclosed pursuant to Section 6.5;
(d) A certificate of the Secretary of the Company certifying board
of directors and stockholder resolutions of the Company approving and
authorizing the execution, deliv-
56
-50-
ery and performance of this Agreement and the Related Agreements to which
it is a party and the consummation of the transactions contemplated hereby
and thereby (together with an incumbency and signature certificate
regarding the officer(s) signing on behalf of the Company);
(e) A certified copy of the Stock Register of the Company as of
the Closing Date, reflecting that Seller is the registered owner of all of
the issued and outstanding Shares, certified by the Secretary of the
Company or equivalent Person;
(f) The Certificate of Incorporation of the Company certified by
the Secretary of State of the State of Delaware (dated as of a recent
date), and Bylaws of the Company, certified by the Secretary of the
Company (dated as of the Closing Date);
(g) A Certificate of Good Standing for the Company from the State
of Delaware (dated as of a recent date); and
(h) the Certificate of Merger, duly executed by the Company.
10.2 DELIVERIES BY PARENT, PRODUCTS AND MERGER SUB. At the Closing,
in addition to any other documents, consideration and agreements required under
this Agreement:
(a) Merger Sub shall deliver to Seller the Merger Consideration;
(b) Parent, Products and Merger Sub shall deliver to Seller one or
more certificates, dated the Closing Date, of an executive officer of each
of Parent, Products and Merger Sub certifying as to the matters set forth
in Section 9.1 and Section 9.2, and attached to such certificate shall be
a written statement of all matters that shall have been disclosed pursuant
to Section 6.5;
(c) Certificates of the Secretary of Parent, of Products and of
Merger Sub certifying board of directors and, as required by Law,
stockholder resolutions of such Person approving and authorizing the
execution, delivery and performance of this Agreement and the Related
Agreements to which it is a party and the consummation of the transactions
contemplated hereby or thereby (together with an incumbency and signature
certificate regarding the officer(s) signing on behalf of the each such
Person);
(d) The Certificate of Incorporation of Merger Sub certified by
the Secretary of State of the State of Delaware (dated as of a recent
date), and Bylaws of Merger Sub, certified by the Secretary of the Company
(dated as of the Closing Date);
(e) A Certificate of Good Standing for Merger Sub from the State
of Delaware (dated as of a recent date); and
(f) The Certificate of Merger, duly executed by Merger Sub.
57
-51-
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time, on
or prior to the Closing Date:
(a) by mutual written consent of Seller, on the one hand, and
Parent, on the other hand;
(b) by either Seller or Parent, Products and Merger Sub, if:
(i) the Closing has not occurred on or before September 30,
2001 (the "END DATE"), provided that the right to terminate this
Agreement pursuant to this Section 11.1(b)(i) shall not be available
to any party whose breach of any provision of this Agreement results
in the failure of the Closing to occur by that time;
(ii) there shall be any Law that makes consummation of the
Closing illegal or otherwise prohibited or any judgment, injunction,
order or decree of any Governmental Authority having competent
jurisdiction enjoining Seller or the Company or Products from
consummating the Closing is entered and such judgment, injunction,
order or decree shall have become final and nonappealable; or
(iii) the WAD Purchase Agreement shall have been terminated in
accordance with its terms;
(c) by Products, Parent and Merger Sub, if there shall have been a
material breach of any covenant, representation or warranty of Seller, the
Company or XxXxxxxx hereunder, and such breach is incapable of being
remedied by the End Date or shall not have been remedied within ten (10)
Business Days after receipt by Seller of a written notice from Parent or
Products specifying the breach and requesting such be remedied (but in any
event prior to the End Date); or
(d) by Seller, if there shall have been a material breach of any
covenant, representation or warranty of Parent, Products or Merger Sub
hereunder, and such breach is incapable of being remedied by the End Date
or shall not have been remedied within ten (10) Business Days after
receipt by Parent, Products or Merger Sub of written notice from Seller
specifying the breach and requesting such be remedied (but in any event
prior to the End Date).
11.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 11.1, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Sections 6.8, 6.9, 11.1 and
this Section 11.2 and Articles I, XII and XIII (other than Section 13.12), which
shall survive the termination of this Agreement, and except that no such
termination shall relieve any party from liability for any prior knowing or
willful breach of this Agreement.
58
-52-
ARTICLE XII
INDEMNIFICATION
12.1 SURVIVAL. The representations and warranties of the parties
hereto contained herein shall not survive the Closing.
12.2 INDEMNIFICATION BY SELLER. Seller agrees to indemnify each of
the Products Indemnified Parties against, and agrees to hold each of them
harmless from, any and all Losses incurred or suffered by it relating to,
arising out of, or in connection with, any of the following:
(a) any fraud or willful breach on the part of Seller or the
Company with respect to any provision of this Agreement or any Related
Agreement or any other document delivered at the Closing;
(b) any knowing or willful breach of, or failure by Seller or
XxXxxxxx to perform, any covenant or obligation of Seller or XxXxxxxx (x)
set out or contemplated in this Agreement or any document delivered at the
Closing to the extent it is to be performed following the Closing, or (y)
described in Section 6.1, 6.5, 6.6, 6.8, 6.9, 6.10, 6.13 or 6.14;
(c) alleged defects in design, manufacture, materials or
workmanship, or any alleged breach of express or implied specifications,
warranties or representations (other than the "in the field" defects or
breaches covered by the Transition Services Agreement) of any Product
("PRODUCT WARRANTY CLAIMS") sold prior to the Closing;
(d) alleged injury to individuals or alleged damage to property
resulting from any Product ("PRODUCT DAMAGE CLAIMS") sold prior to the
Closing; and
(e) all liabilities or obligations, whether accrued, absolute,
contingent or otherwise, whether due or to become due ("LIABILITIES"), of
Seller, except for (i) trade accounts payable, and other accounts payable,
incurred in the ordinary course of the Automotive Business and consistent
with past practice, (ii) Liabilities to Continuing Employees, (iii)
Liabilities under leases for leased assets of the Company at Closing ,
(iv) other Contracts (including the membership of the Detroit golf club)
of the Company listed in the Company Disclosure Schedule as being
Contracts of the Company at Closing, (v) the Debt Repayment Amount; and
(vi) Product Warranty Claims and Product Damage Claims for any Product
sold prior to the Closing.
12.3 INDEMNIFICATION BY PRODUCTS. Products agrees to indemnify each
of the Seller Indemnified Parties against, and agrees to hold each of them
harmless from, any and all Losses incurred or suffered by it relating to, or
arising out of, or in connection with, any of the following:
59
-53-
(a) any fraud or willful breach on the part of Parent, Products or
Merger Sub with respect to any provision of this Agreement or of any other
document delivered at Closing;
(b) any knowing or willful breach of, or failure by Parent,
Products or Merger Sub to perform, any covenant or obligation of Parent,
Products or Merger Sub (x) set out or contemplated in this Agreement or
any document delivered at the Closing to the extent it is to be performed
following the Closing, or (y) described in Section 6.1, 6.8 or 6.9;
(c) any liability, obligation, cost or expense reasonably incurred
after the Closing by Seller or an Affiliate of Seller, as a result of
Seller or an Affiliate of Seller (i) continuing to guarantee after the
Closing any Contract listed in Schedule 4.3(a) of the Company Disclosure
Schedule under the heading "Non-Condition Consents" or (ii) continuing to
be a party to a Contract by operation of Section 6.3(b) or 6.3(c) hereof;
(d) (i) Product Warranty Claims and Product Damage Claims for any
Product sold after the Closing (ii) Product Warranty Claims for any
Product sold prior to the Closing and brought after the earlier of the
third anniversary of the shipment of the Product or the second anniversary
of the Closing, and (iii) Product Damage Claims for any Product sold prior
to the Closing and brought after the seventh anniversary of the Closing;
and
(e) (i) Liabilities of Products and its Subsidiaries, (ii) trade
accounts payable, and other accounts payable relating to the assets of the
Company, incurred in the ordinary course of the Automotive Business and
consistent with past practice, (iii) Liabilities to Continuing Employees,
(iv) Liabilities under leases for leased assets of the Company at the
Closing, (v) Liabilities under other Contracts (including the membership
of the Detroit golf club) of the Company listed in the Company Disclosure
Schedule as being Contracts of the Company at Closing, and (vi) the Debt
Repayment Amount.
12.4 CLAIMS. (a) The provisions of this Section shall be subject to
Section 12.5. As soon as is reasonably practicable after becoming aware of a
claim for indemnification under this Agreement, the Indemnified Person shall
promptly give notice to the Indemnifying Person of such claim and the maximum
amount (if ascertainable) the Indemnified Person will be entitled to receive
hereunder from the Indemnifying Person; provided that the failure of the
Indemnified Person to give notice shall not relieve the Indemnifying Person of
its obligations under this Article XII except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. If the Indemnifying
Person does not object in writing to such indemnification claim within 30
calendar days of receiving notice thereof, the Indemnified Person shall be
entitled to recover promptly from the Indemnifying Person the amount of such
claim (but such recovery shall not limit the amount of any additional
indemnification to which the Indemnified Person may be entitled pursuant to
Section 12.2 or Section 12.3), and no later objection by the Indemnifying Person
shall be permitted. If the Indemnifying Person agrees that it has an
indemnification obligation but objects that it is obligated to pay only a lesser
amount, the Indemnified Person shall nevertheless be entitled to recover
promptly from the Indemnifying Person the lesser amount, without prejudice to
the Indemnified Person's claim for the difference.
60
-54-
(b) The liability of the Indemnifying Person under this Article
XII shall be subject to reduction in an amount equal to the value of any: (i)
net Tax benefit realized by the Indemnified Person (by reason of a Tax
deduction, basis adjustment, shifting of income, credits and/or deductions, or
otherwise from one or more fiscal periods to another resulting, in each case,
from any Loss suffered by the Indemnified Person that forms the basis of the
Indemnifying Person's obligation hereunder), giving effect to any Tax
liabilities of the Indemnified Person arising as a result of any payments made
by an Indemnifying Person with respect to such claim for indemnification; and
(ii) insurance benefit realized by the Indemnified Person in connection with any
Loss suffered by such Person that forms the basis of the Indemnifying Person's
obligation hereunder.
12.5 NOTICE OF THIRD PARTY CLAIMS; ASSUMPTION OF DEFENSE. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person of the assertion of any claim, or the commencement of
any suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this Agreement; provided that the failure of
the Indemnified Person to give notice shall not relieve the Indemnifying Person
of its obligations under this Article XII except to the extent (if any) that the
Indemnifying Person shall have been prejudiced thereby. The Indemnifying Person
may, at its own expense: (a) participate in the defense of any claim, suit,
action or proceeding; and (b) subject to Section 12.6, upon notice to the
Indemnified Person and the Indemnifying Person's delivering to the Indemnified
Person a written agreement that the Indemnified Person is entitled to
indemnification pursuant to Section 12.2 or Section 12.3 for all Losses arising
out of such claim, suit, action or proceeding and that the Indemnifying Person
shall be liable for the entire amount of any Loss, at any time during the course
of any such claim, suit, action or proceeding, assume the defense thereof;
provided, however, that: (i) the Indemnifying Person's counsel is reasonably
satisfactory to the Indemnified Person, and (ii) the Indemnifying Person shall
thereafter consult with the Indemnified Person upon the Indemnified Person's
reasonable request for such consultation from time to time with respect to such
claim, suit, action or proceeding. If the Indemnifying Person assumes such
defense, the Indemnified Person shall have the right (but not the duty) to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person. If, however, the
Indemnified Person reasonably determines in its judgment that representation by
the Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest or if
the Indemnifying Person's counsel is otherwise not reasonably satisfactory to
the Indemnified Person, then such Indemnified Person may employ separate counsel
to represent or defend it in any such claim, action, suit or proceeding and the
Indemnifying Person shall pay the reasonable fees and disbursements of such
separate counsel. Whether or not the Indemnifying Person chooses to defend or
prosecute any such claim, suit, action or proceeding, all of the parties hereto
shall cooperate in the defense or prosecution thereof at the Indemnifying
Person's expense (except as set forth in Section 12.5).
12.6 SETTLEMENT OR COMPROMISE. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any claim, suit, action or proceeding of the kind referred to in
Section 12.5 shall also be binding upon the Indemnifying Person or the
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided, however, that no obligation,
restriction or Loss shall be imposed on the In-
61
-55-
demnified Person as a result of such settlement without its prior written
consent. The Indemnified Person will give the Indemnifying Person at least 30
days' notice of any proposed settlement or compromise of any claim, suit, action
or proceeding it is defending, during which time the Indemnifying Person may
reject such proposed settlement or compromise; provided, however, that from and
after such rejection, the Indemnifying Person shall be obligated to assume the
defense of and full and complete liability and responsibility for such claim,
suit, action or proceeding and any and all Losses in connection therewith in
excess of the amount of unindemnifiable Losses which the Indemnified Person
would have been obligated to pay under the proposed settlement or compromise.
12.7 FAILURE OF INDEMNIFYING PERSON TO ACT. In the event that the
Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
12.8 LIMITATIONS ON INDEMNIFICATION. (a) No Indemnifying Person
shall have any obligation to indemnify any Indemnified Person from and against
any Losses until the aggregate Losses suffered by all Indemnified Persons exceed
$100,000, at which time the Indemnifying Person shall be liable to the
Indemnified Persons for the entire amount of all aggregate Losses suffered by
all Indemnified Persons. The foregoing limitation shall not apply to any Losses
suffered by the Indemnified Parties with respect to Taxes pursuant to Section
6.11 or the indemnification pursuant to Sections 12.2(e), 12.3(c), 12.3(d) and
12.3(e).
(b) No claim for indemnification pursuant to Sections 12.2(a) or
(b) (other than with respect to Sections 6.8, 6.13 or 6.14) or Sections 12.3(a)
or (b) (other than with respect to Section 6.8) shall be brought after the
second anniversary of the Closing. No claim for indemnification pursuant to
Section 12.2(c) shall be brought after the earlier of the third anniversary of
the shipping of the Product or the second anniversary of the Closing. No claim
for indemnification pursuant to Section 12.2(d) shall be brought after the
seventh anniversary of the Closing. Any claim for indemnification with respect
to Taxes pursuant to Section 6.11 may only be made prior to thirty (30) Business
Days following the expiration of the related statute of limitations.
(c) In no event shall the aggregate liability of the Indemnifying
Person to the Indemnified Persons arising under this Article XII exceed
$25,000,000 (taking into account the liability of the Indemnifying Person under
the WAD Purchase Agreement).
12.9 ASSIGNMENT OF CLAIMS. The parties agree that, upon assumption
by the Indemnifying Person of the obligation to indemnify, the Indemnified
Person will assign to the Indemnifying Person any and all claims, causes of
action and demands of whatever kind and nature which the Indemnified Person may
have against any person, firm or other entity giving rise to the indemnified
Loss, and will reasonably cooperate in any efforts to recover from such person
or entity.
12.10 EXCLUSIVE REMEDIES. This Article XII provides the exclusive
remedy for any misrepresentation, breach of warranty or covenant or other claim
arising out of this Agreement or the transaction contemplated by it. Each party
shall use reasonable efforts to mitigate any Losses.
62
-56-
ARTICLE XIII
MISCELLANEOUS
13.1 EXPENSES. Each party hereto shall bear its own costs and
expenses (including the fees and disbursements of legal counsel, investment
bankers and accountants) with respect to the transactions contemplated hereby;
provided, however, that no later than the Closing, Products shall pay, or
reimburse Xxxx, an aggregate of $250,000 for the filing fee and related legal
expenses in connection with the pre-merger notification form previously filed
and for its other expenses in connection with the Transactions. Seller shall pay
all sales, use, stamp, transfer, service, recording, real estate and like taxes
or fees, if any, imposed by any Governmental Authority in connection with the
conversion of the Shares in the Merger.
13.2 AMENDMENT. This Agreement may be amended, modified or
supplemented only by a written instrument signed by Parent, Products, Merger
Sub, the Company, Seller and XxXxxxxx.
13.3 NOTICES. Any notice, request, instruction or other document to
be given hereunder by a party hereto shall be in writing and shall be deemed to
have been given: (a) when received if given in person or by courier or a courier
service; (b) on the date of transmission if sent by telex, facsimile or other
wire transmission; or (c) three (3) Business Days after being deposited in the
U.S. mail, certified or registered mail, postage prepaid:
If to Seller, the Company (prior to the Closing) or XxXxxxxx,
addressed as follows:
c/o Xxxx Fabrics Corporation
100 Vesper Executive Park
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx XxXxxxxx, CEO
Facsimile No.: (000) 000-0000
with a copy to:
Goulston & Storrs, A Professional Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
63
-57-
If to Parent, Products or Merger Sub, addressed as follows:
c/x Xxxxxxx & Xxxxxx Corporation
0000 Xxx Xxxx Xxxxx
Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, CEO
Facsimile No.: (000) 000-0000
and for notices pursuant to Section 6.4 hereof:
Xxxxxxx & Xxxxxx Corporation
0000 Xxx Xxxx Xxxxx
Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: (000) 000-0000
and in each case
Attention: Xxxxxx X. Xxxxxxx, General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. Xxxxxx Xxxxx
Xxxxxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
13.4 WAIVERS. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
13.5 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
64
-58-
13.6 HEADINGS. The headings preceding the text of articles and
sections included in this Agreement and the headings to schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement.
13.7 INTERPRETATION. Unless otherwise indicated, words describing
the singular number shall include the plural and vice versa, and words denoting
each gender shall include the other gender and words denoting natural persons
shall include corporations and partnerships and vice versa. The use of the terms
"including" or "includes" shall in all cases herein mean "including, without
limitation" or "includes, without limitation," respectively. Unless otherwise
indicated, references to articles, sections, subsections or schedules shall
refer to those portions of this Agreement. Consummation of the transactions
contemplated herein shall not be deemed a waiver of a breach of or inaccuracy in
any representation, warranty or covenant or of any party's rights and remedies
with regard thereto. No specific representation, warranty or covenant contained
herein shall limit the generality or applicability of a more general
representation, warranty or covenant contained herein. A breach of or inaccuracy
in any representation, warranty or covenant shall not be affected by the fact
that any more general or less general representation, warranty or covenant was
not also breached or inaccurate.
13.8 APPLICABLE LAW. The validity, construction and effect of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Delaware, without giving effect to the principles of
conflicts of law of such State.
13.9 JURISDICTION; WAIVER OF JURY TRIAL. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Agreement or the Related Agreements shall be
brought in any United States federal or state court sitting in the State of
Delaware, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
Law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 13.3 shall be deemed
effective service of process on such party. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE RELATED AGREEMENTS.
13.10 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, however, that no assignment of any rights or obligations shall be made
by Seller or XxXxxxxx without the written consent of Products, Parent and Merger
Sub or by Products, Parent or Merger Sub without the written consent of Seller,
except that each of Products, Parent, Merger Sub and Seller may assign its
rights hereunder without such consent to any of its Affiliates.
13.11 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and, to the extent provided herein, their
respective Affiliates, directors, officers, em-
65
-59-
ployees, stockholders, managers, agents and representatives, and no provision of
this Agreement shall be deemed to confer upon other third parties any remedy,
claim, liability, reimbursement, cause of action or other right.
13.12 FURTHER ASSURANCES. Upon the reasonable request of Products,
Seller, the Company and XxXxxxxx shall on and after the Closing Date execute and
deliver to Products such other documents, releases, assignments and other
instruments as may be required to effectuate completely the Merger, and to
otherwise carry out the purposes of this Agreement. Upon the reasonable request
of Seller, Products, Parent and Merger Sub shall on and after the Closing Date
execute and deliver to Seller such other documents, releases, assignments and
other instruments as may be required to effectuate completely the Merger, and to
otherwise carry out the purposes of this Agreement.
13.13 SEVERABILITY. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions shall not be affected thereby, and there shall be deemed
substituted for the provision at issue a valid, legal and enforceable provision
as similar as possible to the provision at issue.
13.14 REMEDIES CUMULATIVE. The remedies provided in this Agreement
shall be cumulative and shall not preclude the assertion or exercise of any
other rights or remedies available by Law, in equity or otherwise.
13.15 ENTIRE UNDERSTANDING. This Agreement, together with the
exhibits and schedules hereto, the Related Agreements and the Confidentiality
Agreement, set forth the entire agreement and understanding of the parties
hereto and supersede any and all prior agreements, arrangements and
understandings among the parties hereto.
13.16 COMPANY DISCLOSURE SCHEDULE. Seller, XxXxxxxx and Products
agree that it shall be a condition of Closing for them to agree on a mutually
acceptable Company Disclosure Schedule prior to August 24, 2001.
* * * * *
66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
XXXXXXX & XXXXXX CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name:
Title:
XXXXXXX & XXXXXX PRODUCTS CO.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name:
Title:
JAII ACQUISITION CO.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name:
Title:
XXXX FABRICS CORPORATION
By: /s/ Xxxxx XxXxxxxx
-------------------------------------
Name: Xxxxx XxXxxxxx
Title: Chief Executive Officer
XXXX AUTOMOTIVE INDUSTRIES, INC.
By: /s/ Xxxxx XxXxxxxx
-------------------------------------
Name: Xxxxx XxXxxxxx
Title: President
XXXXX XxXXXXXX
/s/ Xxxxx XxXxxxxx
-----------------------------------------
