EXHIBIT 2.1
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
among
DELTA APPAREL, INC.,
FUN-TEES, INC.
AND
CERTAIN SHAREHOLDERS OF FUN-TEES, INC
DATED AS OF AUGUST 17, 2006
---------------------------
Schedules
Schedule 1.1(c) Tangible Assets
Schedule 1.2(c) Specified Excluded Assets
Schedule 1.5(a) Assets and Liabilities Excluded from Net Working Capital
Schedule 1.5(b) Examples of Net Working Capital Computation
Schedule 1.5(d) Additional Finished Goods Inventory
Schedule 1.5(e) Distressed Inventory
Schedule 1.7(a)(i) Assumed Material Agreements
Schedule 1.7(a)(ii) Accrued Liabilities
Schedule 2.1.2(a) Conflicts -- Company
Schedule 2.1.2(b) Conflicts -- Owners
Schedule 2.1.2(c) Consents
Schedule 2.1.3(a) Financial Statements
Schedule 2.1.3(b) Material Adverse Change
Schedule 2.1.3(c) Liabilities
Schedule 2.1.5 Accounts Receivable
Schedule 2.1.7 Personal Property
Schedule 2.1.8 Real Property
Schedule 2.1.9 Intellectual Property
Schedule 2.1.10 Insurance
Schedule 2.1.11 Material Agreements
Schedule 2.1.12 Litigation
Schedule 2.1.14(b) Permits
Schedule 2.1.16 ERISA
Schedule 2.1.18 Environmental
Schedule 2.1.19 Certain Changes
Schedule 2.1.21 Standard Terms and Conditions of Sale
Schedule 2.1.24 Subsidiaries
Schedule 2.2.2(a) Conflicts -- Delta
Schedule 2.2.2(b) Consents - Delta
Schedule 5.6(a) Employment Agreements
Schedule 5.6(b) Key Employees
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of
August 17, 2006 by and among Delta Apparel, Inc., a Georgia corporation
("Delta"), Fun-Tees, Inc., a North Carolina corporation (the "Company"), Xxxxx
X. Xxxx, Xxxxx X. Xxxx, Xx., Xxxxxxx X. Xxxx, Xxxxx X. Xxxx, Xx., Xxxx X.
Xxxxxx, Xxxxx X. Xxxxxx, Xx., Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxxx, all of whom
are residents of the state of North Carolina and are sometimes referred to
herein as the "Owners."
W I T N E S S E T H
WHEREAS, the Company is in the business of designing, manufacturing,
marketing, and selling private labeled knitted custom t-shirts (the "Business");
and
WHEREAS, Delta desires to acquire, and the Company desires to sell,
assign, and transfer to Delta, substantially all of the assets and properties of
the Business, all upon the terms and subject to the conditions set forth herein
(the "Acquisition");
NOW, THEREFORE, in consideration of the mutual promises made herein and
of the mutual benefits to be derived herefrom, the parties hereto agree as
follows (certain capitalized terms used in this Agreement are defined in Section
9.14 hereof):
ARTICLE 1.
SALE AND PURCHASE OF ASSETS
1.1 Sale and Purchase of Assets. Subject to all of the terms and
conditions of this Agreement and in reliance upon the representations and
warranties contained herein, on the Closing Date, the Company shall sell,
transfer, assign, convey, and deliver to Delta, and Delta shall purchase, free
and clear of all Liens (other than Permitted Liens), all right, title, and
interest of the Company in and to all of the assets and properties of every
nature, kind, and description, tangible and intangible, whether real, personal,
or mixed, whether contingent or otherwise, whether now existing or hereinafter
acquired, whether or not reflected on the Company's books, of or relating to the
Business, excluding only the Excluded Assets, as the same may exist on the
Closing Date (collectively, the "Assets"), including, without limitation, all
right, title, and interest of the Company in, to, and under:
(a) By assignment of the Assumed Leases, all of the Company's leasehold
interest under the Assumed Leases to buildings, fixtures, and improvements
located on the real property subject to such Assumed Leases, and any and all
assignable warranties of third parties with respect thereto;
(b) All tangible assets of the Company, including all fixed assets,
equipment, tools, computers, terminals, computer equipment, telephones,
telephone systems, furniture, office equipment, and furnishings, including,
without limitation, the personal property listed on Schedule 1.1(b), other than
any such tangible assets that comprise Excluded Assets;
(c) All inventories of raw materials, supplies, work-in-process,
finished products, goods, spare parts, replacement and component parts, office
supplies, packaging material, and similar items other than to the extent any
such items comprise or relate exclusively to Excluded Assets or Excluded
Liabilities;
(d) All designs, artwork, and similar items;
(e) All accounts receivable;
(f) All Intellectual Property, all goodwill associated therewith,
including, without limitation, the Company's custom-developed, proprietary
software and associated source code, and all telephone numbers, telecopy
numbers, websites, and e-mail addresses;
(g) all equity and other interests in Textiles La Paz, LLC (the "El
Salvador Subsidiary") and Campeche Sportswear, S. de C.V. (the "Mexican
Subsidiary");
(h) All hardware and software owned, used, or held for use in the
conduct of the Business and any and all files and data contained on such
software other than to the extent any such files and data relate exclusively to
the Excluded Assets or Excluded Liabilities;
(i) All customer lists, customer data, e-mail directories, and other
customer information relating to the Business;
(j) Except as provided in Section 1.2(a), all Contracts relating to the
Business, including, without limitation, any right to receive payment pursuant
to such Contracts other than Contracts that relate exclusively to the Excluded
Assets or Excluded Liabilities;
(k) To the extent transfer is permitted by Applicable Law, all
licenses, permits, and orders issued by any Governmental Authority with respect
to the conduct of the Business, including, without limitation, those listed on
Schedule 2.1.14(b);
(l) All credits, prepaid rentals, and other prepaid expenses, deferred
charges, advance payments, security deposits, and prepaid items other than to
the extent any such items relate solely to any of the Excluded Assets or
Excluded Liabilities;
(m) All contracts of insurance and all interests in any insurance,
insurance claims, refunds, escrows, reserves, or rights to indemnity with
respect to any of the Assets or any of the Assumed Liabilities, provided that
Delta shall pay any deductibles and self insured retentions with respect
thereto;
(n) All real and personal property tax refunds relating to the Assets
to the extent reflected in the Net Working Capital;
(o) All choses in action, claims, and demands of any nature against
third parties, whether by way of counterclaim or otherwise, with respect to the
ownership, use, function, or value of any of the Assets or the Assumed
Liabilities, regardless of when such choses in action, claims, and demands
arise;
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(p) All books, records, files, invoices, data bases, computer programs,
manuals, and other materials (in any form or medium), including, without
limitation, sales and promotional materials, personnel records, accounting
records, sales order files, and supplier lists, in each case other than to the
extent any of such items relate exclusively to Excluded Assets, Excluded
Liabilities or personnel who will continue to be employed with the Company
following the Closing;
(q) The Company's rights pursuant to Section 10 (Noncompetition and
Nonsolicitation) under the Employment Agreement dated as of July 18, 2005,
between the Company and Xxxxxx X. Xxxxx (the "Xxxxx Employment Agreement");
(r) All cash and cash equivalents of the Business; and
(s) All goodwill attributable to the operation of the Business.
1.2 Excluded Assets. Notwithstanding the foregoing or any other
provision of this Agreement to the contrary, the Company will retain and not
transfer, and Delta will not purchase or acquire, the following (collectively,
the "Excluded Assets"):
(a) Any and all Material Agreements that are not listed on Schedule
1.7(a)(i) (including, without limitation, all Leases other than Assumed Leases);
any Contracts relating exclusively to any of the Excluded Assets or Excluded
Liabilities; and any employment contract or other agreement relating to
compensation or severance payments with any director, officer, or employee;
(b) The Plans, the assets related thereto, and any records related
thereto;
(c) The knitting, dyeing and finishing equipment and other assets of
the Company described on Schedule 1.2(c);
(d) Certain items of Distressed Inventory, to the extent set forth in
Section 1.5(f);
(e) The minute books and corporate records of the Company;
(f) The accounts receivable and prepaid items listed on Schedule
1.5(a);
(g) The insurance claims listed on Schedule 1.5(a);
(h) All books, records, files, manuals, and other materials (in any
form or medium) relating to the employees of the Company listed on Schedule
1.2(h) who will continue as employees of the Company after the Closing;
(i) All checks and drafts of the Company and all of the Company's
records and files, banking records, Tax returns, accounting records and such
other similar books and records relating to the Business;
(j) The items of yarn and and greige fabric set forth on Schedule
1.2(j);
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(k) All bank accounts, safe deposit boxes, checking accounts or other
accounts of any nature maintained by or on behalf of the Company;
(l) The Company's rights under this Agreement;
(m) All indemnity and contribution rights granted to or owed by third
parties to the Company with respect to any Excluded Assets or Excluded
Liabilities, and any and all rights or assets arising from and directly related
to the defense, release, compromise, discharge or satisfaction by the Company of
any liabilities and obligations relating thereto; and
(n) All of the real estate owned by the Company and all of the real
properties leased by the Company other than the Leased Properties.
1.3 Closing. The purchase and sale of the Assets and the assumption of
the Assumed Liabilities contemplated hereby (the "Closing") shall be consummated
at the offices of Wyche, Burgess, Xxxxxxx & Xxxxxx, P.A. in Greenville, South
Carolina on October 2, 2006 or at such other place, time, or date as the parties
hereto may agree in writing (the "Closing Date"), to be effective as of 12:00
a.m. on the Closing Date.
1.4 Purchase Price. In addition to the assumption of the Assumed
Liabilities, the purchase price to be paid to the Company for the sale,
transfer, and conveyance of the Assets shall be $20,000,000 (the "Initial
Purchase Price") which shall be subject to adjustment in accordance with
Sections 1.5 and 1.6 below (as adjusted, the "Purchase Price") and paid to the
Company as provided in Sections 1.9, 1.5 (c), 1.5(d), 1.5(e), 1.6(a) and 1.6(b).
1.5 Closing Net Working Capital Adjustment.
(a) No later than sixty days following the Closing, the Company shall
prepare or cause to be prepared and deliver to Delta the Net Working Capital (as
defined below) as of the Closing Date, determined in accordance with GAAP and
without giving effect to the Acquisition (the "Closing Net Working Capital").
"Net Working Capital" shall mean the sum of the Company's accounts receivable
(net of reserves), inventory (net of reserves), prepaid expenses and deposits
(up to $200,000 for such expenses and deposits), less accounts payable and
accrued liabilities, calculated in accordance with GAAP; provided that there
shall be excluded from the computation of Net Working Capital (i) accrued income
taxes, (iv) the current portion of long-term debt, (v) the current portion of
capital leases of equipment not included in the Assets and (vi) the assets and
liabilities set forth in Schedule 1.5(a). In computing Net Working Capital,
there shall be included in current liabilities the outstanding principal balance
of the Company's capital lease with Dell Financial Services, dated as of May 2,
2006, and its equipment loan with Orix Financial Services, Inc., dated as of
November 25, 2003. In is anticipated that these obligations will be assumed by
Delta and, if assumable, will be included in Delta's Assumed Liabilities. If the
obligations are not assumable, the principal balances shall be excluded from the
computation of Net Working Capital and the obligations shall be retained by the
Company and treated as Excluded Liabilities. For purposes of clarity in
computing the Closing Net Working Capital, the parties agree that the attached
Schedule 1.5(b) accurately reflects examples of the computation of Net Working
Capital assuming possible changes that could occur in its various components.
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(b) Disputes with respect to the Closing Net Working Capital shall be
resolved as follows:
(i) Delta shall have thirty (30) days after receipt of the Closing Net
Working Capital (the "Review Period") to assert that any of the
elements of or amounts reflected in the Closing Net Working Capital are
not correct or that the Closing Net Working Capital was arrived at
other than in accordance with the provisions of this Section 1.5 (a
"Working Capital Dispute"). If Delta desires to assert a Working
Capital Dispute, then it shall give the Company written notice of such
dispute (a "Working Capital Dispute Notice") within the Review Period,
setting forth in reasonable detail the items with which Delta
disagrees, together with supporting calculations.
(ii) Within thirty (30) days after delivery of the Working Capital
Dispute Notice (if any), if Delta and the Company shall be unable
despite their reasonable efforts to resolve the dispute set forth in
the Review Notice, Delta and the Company shall jointly retain Xxxxx
Xxxxxx PLLC or another nationally recognized firm of independent public
accountants mutually acceptable to them, the cost of which shall be
borne equally by Delta and the Company. Such independent firm shall
review the Closing Net Working Capital calculation (and, if necessary
or appropriate in its judgment, any related work papers of the Company)
and the Working Capital Dispute Notice, and shall, as promptly as
practicable and in no event later than forty-five (45) days following
the date of their engagement, deliver to Delta and the Company a report
(the "Working Capital Adjustment Report") setting forth, in reasonable
detail, its determination with respect to all of the disputed items or
amounts specified in the Working Capital Dispute Notice, and the
revisions, if any, to be made to the calculation of the Closing Net
Working Capital to reflect such determination, together with supporting
calculations. The Working Capital Adjustment Report shall be final and
binding upon Delta, the Company and the Owners.
(iii) If Delta does not deliver a Working Capital Dispute Notice to the
Company within the Working Capital Dispute Period, the Closing Net
Working Capital delivered by the Company shall be deemed to have been
accepted by Delta in the form in which it was delivered by the Company
and shall be final and binding upon Delta, the Company and the Owners.
(c) Upon final determination of the Closing Net Working Capital
pursuant to Sections 1.5 (a) and (b), the Purchase Price shall be adjusted as
follows:
(i) In the event that the Closing Net Working Capital is greater than
$16,100,000, then the Purchase Price shall be increased by an amount
equal to the Closing Net Working Capital less $16,100,000 (the "Excess
Amount"), subject to the following:
(A) In selecting $16,100,000 (the "Base NWC") as the figure
for determining whether the Purchase Price is adjusted
pursuant to this Section 1.5, the parties have assumed that
the Base NWC includes at least $17,000,000 of inventory. If
the inventory included in the Closing Net Working Capital
exceeds $17,000,000, this excess shall be included on a
dollar-for-dollar basis in the computation of the Excess
Amount, if any, up to $400,000. For clarity, the Excess Amount
will not
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include (and thus the Purchase Price will not be increased by)
more than $400,000 for inventory included in the Closing Net
Working Capital, even if inventory exceeds $17,400,000 at
Closing.
(B) If the Closing Net Working Capital exceeds the Base NWC by
up to $2,000,000 for any reason, including an inventory level
of up to $17,400,000, the purchase price shall be increased by
the amount of the excess up to a maximum of $2,000,000;
provided that if net accounts receivable included in Closing
Net Working Capital exceed $7,000,000, this excess shall be
included on a dollar-for-dollar basis in the computation of
the Excess Amount, if any, without limit to the extent that
net accounts receivable cause Closing Net Working Capital to
exceed $18,100,000.
The Excess Amount, if any, shall be paid by Delta to the Company by
wire transfer of immediately available funds within ten (10) business
days after the final determination of the Closing Net Working Capital,
with interest at the rate of 6% per annum from the Closing Date.
(ii) In the event that the Closing Net Working Capital is less than
$16,100,000, then the Purchase Price shall be decreased by (y) if the
Closing Net Working Capital is a positive amount, an amount equal to
$16,100,000 less the Closing Net Working Capital or, (z) if the Closing
Net Working Capital is a negative amount, an amount equal to 16,100,000
plus the positive difference between $0 and the Closing Net Working
Capital (the amount calculated pursuant to clause (y) or (z), the
"Deficit Amount"). The Deficit Amount, if any, shall be paid by the
Company to Delta by wire transfer of immediately available funds within
ten (10) business days after the final determination of the Closing Net
Working Capital, with interest at the rate of 6% per annum from the
Closing Date.
(d) This transaction is contemplated to be completed in the third
calendar quarter of 2006, a period in which the Company is building up finished
goods (blanks and printed goods) for anticipated increases in fourth quarter
sales. If the Company demonstrates to Delta that a build up of finished goods in
the third quarter of 2006 is supported by historical experience and meetings
with customers, Delta agrees that the Company can increase the Company's
finished goods inventory in the third quarter of 2006 by up to $2,500,000 from
the level of finished goods inventory at the end of the Company's second quarter
end of approximately $10,500,000 (excluding the inventory referred to in Section
1.5(f) below). If inventory on the Closing Date exceeds $17,400,000 by up to
$2,500,000 in additional inventory (all in finished goods) and Delta has
previously agreed that it was appropriate to produce such excess, such
additional inventory shall be set forth in Schedule 1.5(d) acceptable to Delta
and the Company and prepared on or before the final determination of Closing Net
Working Capital. After the preparation of Schedule 1.5(d), Delta will promptly
pay for the additional inventory reflected in Schedule 1.5(d) by delivery to the
Company of a non-interest bearing note. The note shall be paid as inventory is
reduced to less than the maximum amount of $17,400,000 that may be included in
the calculation of Closing Net Working Capital, but in any event no later than
March 31, 2007.
(e) Close-out and irregular inventory ("Distressed Inventory") of each
apparel category will be identified in Schedule 1.5(e), which shall be
acceptable to Delta and the
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Company and prepared on or before the final determination of Closing Net Working
Capital. Schedule 1.5(e) shall identify the portion of the Distressed Inventory
that would ordinarily be sold to the Company's regular first quality private
label customers. This portion of the Distressed Inventory will be sold to Delta
at the lower of the Company's marked down price or standard cost ("Book Value").
Delta will pay for this inventory by prompt delivery of a non-interest bearing
promissory note to the Company in the principal amount of the Book Value or such
lesser amount as Delta realizes from the sale of such inventory. The note will
be payable from the proceeds of the sale of the inventory as the proceeds are
received by Delta. All other items of Distressed Inventory included in the
schedule referred to above will be Excluded Assets and will be retained by the
Company. The Company will be responsible for selling these items subsequent to
Closing. As soon as practicable, but not less than 60 days after Closing, the
Company will remove all remaining unsold items from Delta's facilities formerly
occupied by the Company or its subsidiaries and stored in facilities that are
maintained and paid for by the Company. Any such items remaining in the
Company's Lumberton facility will also be removed and stored in facilities
maintained and paid for by the Company.
1.6 Additional Adjustments.
(a) The Purchase Price has been calculated based on the amount of the
equity of the Company's El Salvador Subsidiary and Mexican Subsidiary on the
books of the Company, net of any intangible assets, plus payables from these
subsidiaries to the Company and less receivables from these subsidiaries to the
Company (collectively, "Net Sub Equity") that existed as of May 31, 2006 on the
financial statements of the Mexican Subsidiary and as of June 2, 2006 on the
financial statements of the El Salvador Subsidiary. For purposes of calculating
Net Sub Equity, Delta and the Company agree that these subsidiaries act as
subcontractors for the Company and, as such, have inventory on hand that belongs
to the Company in which the subsidiaries have invested value, but have not yet
invoiced the Company. The Company's standard practice is for invoicing to occur
at the time product is exported to the United States by the relevant subsidiary.
The parties agree that the value of the El Salvador Subsidiary's and the Mexican
Subsidiary's inventory that has not yet been exported into the United States is
a component of Net Sub Equity and shall not be included in determination of Net
Working Capital. Delta and the Company agree that the Net Sub Equity was
approximately $700,000 as of May 31, 2006, and that from May 31, 2006 until the
to the Closing Date, the Net Sub Equity of the subsidiaries will change. If, as
of the Closing Date, the Net Sub Equity exceeds $700,000, Delta shall pay to the
Company the excess amount (up to a maximum of $100,000) in cash. If, as of the
Closing Date, the Net Sub Equity is less than $700,000, the Company shall pay
the amount of the deficiency to Delta. The final amount of Net Sub Equity will
be determined using the same procedure and payment terms as set forth in clauses
(a) and (b) of Section 1.5 for the determination of Closing Net Working Capital.
(b) Prior to the Closing, the Company expects to purchase additional
printing and related equipment, all of which will form part of the fixed assets
included in the Assets. As long as these purchases are reasonably acceptable to
Delta, Delta will increase the Purchase Price by the documented cost of such
equipment (up to a maximum of $300,000) and pay such cost upon the final
determination of Closing Net Working Capital.
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1.7 Assumption of Liabilities
(a) On the Closing Date, Delta shall assume and agree to discharge all
of the following obligations with respect to the Business in accordance with
their respective terms, but only to the extent that such obligations do not
expressly constitute Excluded Liabilities (the "Assumed Liabilities"):
(i) Any and all liabilities, obligations, and commitments arising out
of (A) the Material Agreements that are listed on Schedule 1.7(a)(i) or
(B) any lease of tangible personal property relating to the Business
that provides for annual payments by the Company of less than $5,000
and that may not be terminated upon 90 days (or less) notice without
any liability, penalty or premium and that has an unexpired term of
more than one year in duration, excluding in all cases, any obligation
or liability for any pre-Closing breach of such Material Agreement or
Contract by the Company; and
(ii) The accrued liabilities set forth on Schedule 1.7(a)(ii) or
otherwise included in Closing Net Working Capital or the computation of
Net Sub Equity and all worker severance and termination obligations of
the Mexican Subsidiary and the El Salvador Subsidiary payable after the
Closing Date and attributable to the termination of employees of such
subsidiaries after the Closing Date;
(b) Notwithstanding any provision of this Agreement to the contrary,
Delta shall not assume any liabilities, obligations, or commitments of the
Company other than the Assumed Liabilities, and all such other liabilities,
obligations, and commitments shall be retained by the Company (the "Excluded
Liabilities"). Without limiting the generality of the foregoing, none of the
following shall be Assumed Liabilities for purposes of this Agreement:
(i) Except as provided in Section 1.7(a)(ii), all trade accounts
payable, accrued payroll, accrued employee benefits, including accrued
vacation and sick leave and accrued post retirement and post employment
benefits, accrued taxes, and all other accrued expenses relating to the
Business;
(ii) Any liabilities or obligations for borrowed money or evidenced by
bonds, debentures, notes, drafts, or similar instruments;
(iii) Any and all liabilities, obligations, or commitments arising out
of any and all Material Agreements that are not listed on Schedule
1.7(a)(i), including liabilities, obligations, and commitments arising
out of the automobile leases of the Company;
(iv) Subject to Section 4.1, any and all Taxes (whether pursuant to
existing laws and regulations or laws and regulations subsequently
enacted by any Governmental Authority) which arise from (A) the
operation of the Business on or prior to the Closing Date; (B) the
ownership of the Assets on or prior to the Closing Date; or (C) the
consummation of the Acquisition;
(v) Except as otherwise expressly provided in this Agreement, any
liabilities or obligations relating to employees of the Business while
employed by the Company, including all liabilities or obligations
relating to any claims by employees of the
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Business, whether pending as of the Closing Date or arising after the
Closing Date, due to acts, alleged acts, or omissions of the Company
under any federal labor or employment laws or state laws relating to
labor relations, equal employment, fair employment practices,
entitlements, prohibited discrimination, or other employment practices
or otherwise relating to or arising out of the employment relationship
with the Company or the termination thereof, including, without
limitation, any liabilities and obligations associated with the Xxxxx
Employment Agreement;
(vi) Except as provided in Section 1.7(a), all liabilities or
obligations under any employment, severance, retention, or termination
agreement between the Company and any of its employees;
(vii) Any liabilities or obligations relating to any of the Plans or
relating to payroll, vacation, sick leave, workers' compensation,
unemployment benefits, pension benefits, or any other employee benefits
of any kind for employees of the Company;
(viii) Any liabilities or obligations with respect to any actions,
suits, proceedings, or possible claims, whether such actions, suits,
proceedings, or possible claims are currently pending, threatened,
contingent, subsequently arise, or otherwise, to the extent relating to
the conduct of the Business on or prior to the Closing Date, including
any such matters disclosed on Schedule 2.1.12 and without regard to
whether any such actions, suits, proceedings, or possible claims are
described on Schedule 2.1.12;
(ix) Any and all liabilities or obligations arising from or in
connection with warranty claims or product liability claims relating to
products manufactured or sold by the Company prior to the Closing Date
and any liabilities relating to the return of any products sold by the
Company prior to the Closing Date;
(x) Any liabilities for Environmental Damages, whether or not disclosed
in the schedules to this Agreement or otherwise known to the Company,
the Owners or Delta;
(xi) All costs, expenses, liabilities, or obligations incurred by the
Company incident to the negotiation and preparation of this Agreement
and its performance and compliance with the agreements and conditions
contained herein; and
(xii) Any liabilities or obligations relating to the Excluded Assets.
1.8 Closing Date Deliveries by the Company. On the Closing Date, the
Company shall deliver or cause to be delivered to Delta:
(a) a Xxxx of Sale, Assignment and Assumption Agreement, covering all
of the Assets and the Assumed Liabilities, which shall include, without
limitation, an assignment of the Company's rights under Section 10
(Noncompetition and Nonsolicitation) of the Xxxxx Employment Agreement and Xx.
Xxxxx'x consent to such assignment;
(b) a real property lease agreement in a form to be agreed upon between
the parties hereto prior to Closing (the "Concord Lease") whereby the Company
(as landlord) shall lease to Delta (as tenant) the real property owned by the
Company in Concord, North Carolina;
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(c) an Assignment and Assumption of Lease Agreements with respect to
the Assumed Leases;
(d) a Trademark and Service Xxxx Assignment with respect to each of the
Trademarks;
(e) an opinion of Xxxxx & Xxx Xxxxx, PLLC, counsel to the Company and
the Owners, reasonably acceptable to Delta;
(f) a certificate of the Secretary of the Company certifying, as
complete and accurate as of the Closing, attached copies of the articles of
incorporation and bylaws of the Company, certifying and attaching the
resolutions adopted by the Company's board of directors and shareholders
approving the Acquisition;
(g) certificates as of a recent date as to the valid existence of the
Company in North Carolina and good standing as a foreign corporation in Alabama;
(h) a certificate executed by the Company as to the accuracy of its
representations and warranties as of the date of this Agreement and as of the
Closing in accordance with Section 5.1 and as to its compliance with and
performance of its covenants and obligations to be performed or complied with at
or before the Closing in accordance with Section 5.2; and
(i) such other documents, all in form and substance reasonably
satisfactory to Delta, as Delta may reasonably request for the purpose of (x)
evidencing the accuracy of any of the representations and warranties of the
Company, (y) evidencing the performance by the Company and the Owners of, or the
compliance by the Company and the Owners with, any covenant or obligation
required to be performed or complied with by the Company and the Owners, or (z)
otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement.
1.9 Closing Date Deliveries by Delta. On the Closing Date, Delta shall
deliver or cause to be delivered to the Company the Initial Purchase Price in
cash by wire transfer to an account designated by the Company within five days
prior to the Closing Date and the following items:
(a) a Xxxx of Sale, Assignment and Assumption Agreement, covering all
of the Assets and the Assumed Liabilities;
(b) the Concord Lease;
(c) an Assignment and Assumption of Lease Agreements with respect to
the Assumed Leases;
(d) a Trademark and Service Xxxx Assignment with respect to each of the
Trademarks;
(e) certified copies of the resolutions adopted by their respective
boards of directors approving the Acquisition;
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(f) a certificate as of a recent date as to the good standing of Delta
in its jurisdiction of incorporation;
(g) employment agreements with those employees of the Company
identified in Schedule 5.6(a);
(h) to the extent applicable, promissory notes referred to in Sections
1.5(d) and 1.5(e) in forms reasonably acceptable to the parties hereto; and
(i) such other documents, all in form and substance reasonably
satisfactory to the Company, as the Company may reasonably request for the
purpose of (x) evidencing the accuracy of any of the representations and
warranties of Delta, (y) evidencing the performance by Delta of, or the
compliance by Delta with, any covenant or obligation required to be performed or
complied with by Delta, or (z) otherwise facilitating the consummation or
performance of any of the transactions contemplated by this Agreement.
1.10 Further Assurances. From and after the Closing Date, the Company
shall deliver to Delta such other bills of sale, endorsements, assignments, and
other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to Delta, as Delta may reasonably request or as may be
otherwise reasonably necessary to vest in Delta all right, title, and interest
of the Company in, to, or under all of the Assets. If at any time following the
Closing, any party receives any payment, correspondence, or other property that
is intended for or belongs to another party or to which another party is legally
entitled, then the party receiving such payment, correspondence, or other
property shall promptly pay over such payment or deliver such correspondence or
other property to the other party. From and after the Closing Date, the Company
shall take all steps as may be reasonably necessary to put Delta in actual
possession and control of all the Assets. From time to time following the
Closing, the parties shall execute and deliver to each other such other
instruments and documents as may be reasonably requested or as may be otherwise
reasonably necessary to consummate the transactions contemplated hereunder.
1.11 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in accordance with GAAP. The parties agree that such
allocation is a fair and reasonable allocation of the Purchase Price, and the
parties shall file all applicable tax returns and reports (including IRS Form
8594 issued pursuant to Section 1060 of the Code) in accordance with and based
upon such allocation and shall not take any position in any tax return or
report, or any tax proceeding or audit, that is inconsistent with such
allocation.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company and the Owners.
Except as otherwise set forth in this Article II, the Company represents and
warrants to Delta as of the date hereof and, with respect to the
respresentations and warranties in Sections 2.1.2(b) and (c), each Owner
represents and warrants to Delta as of the date hereof:
2.1.1 Corporate Status; Authorization.
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(a) Corporate Existence. The Company is a corporation duly
incorporated, validly existing, and in good standing under the laws of the State
of North Carolina and has all requisite corporate power and authority to own,
lease, and operate its properties and to carry on its business as presently
conducted. The Company is duly qualified and in good standing as a foreign
corporation duly authorized to do business in all jurisdictions in which the
failure to be so qualified would have a Material Adverse Effect. The Company is
qualified as a foreign corporation to do business in Alabama. Other than the
Mexican Subsidiary and the El Salvador Subsidiary, the Company does not have any
subsidiaries, does not own any shares, membership interests, or other equity
interests of any Person, and is not a party to any joint venture or other
similar agreement or arrangement.
(b) Authorization. The Company has full corporate power and authority
to execute, deliver, and perform this Agreement and the other agreements and
instruments executed and delivered by it at Closing, to consummate the
transactions contemplated hereby and thereby, and to perform its obligations
hereunder and thereunder. Each Owner has full power and authority to execute,
deliver, and perform this Agreement and the other agreements and instruments
executed and delivered by him or her at Closing, to consummate the transactions
contemplated hereby and thereby, and to perform his or her obligations hereunder
and thereunder. The execution and delivery of this Agreement and the other
agreements and instruments executed and delivered by the Company at Closing and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all requisite corporate action on the part of the Company.
This Agreement and the other agreements and instruments executed and delivered
by the Company at Closing have been duly executed and delivered by the Company,
and this Agreement and the other agreements and instruments executed and
delivered by the Company at Closing constitute the legal, valid, and binding
obligation of the Company, enforceable against it in accordance with their
respective terms, except as such enforceability may be limited by laws affecting
the rights and remedies of creditors and applicable principles of equity (the
"Enforceability Exceptions").
2.1.2 Conflicts and Consents.
(a) Conflicts of the Company. Except as set forth on Schedule 2.1.2(a),
the execution and delivery of this Agreement and the other agreements and
instruments executed and delivered by the Company at Closing and the
consummation by the Company of the transactions contemplated hereby and thereby
in the manner contemplated hereby and thereby will not (y) result in the
creation of any Lien (other than Permitted Liens) on any of the Assets, or (z)
conflict with or result in any violation of or default under (or any event that,
with notice or lapse of time or both, would constitute a default under), require
any consent under, or result in the acceleration or required prepayment of any
indebtedness pursuant to the terms of, any provision of (i) the Articles of
Incorporation or Bylaws of the Company, (ii) any mortgage, indenture, loan
agreement, note, bond, deed of trust, other agreement, commitment, or obligation
for the borrowing of money or the obtaining of credit, lease, or other
agreement, Contract, Material Agreement, license, franchise, permit, or
instrument to which the Company is a party or by which the Company may be bound,
or (iii) any judgment, order, decree, law, statute, rule, or regulation
applicable to the Company.
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(b) Conflicts of Owners. Except as set forth on Schedule 2.1.2(b), the
execution and delivery of this Agreement and the other agreements and
instruments executed and delivered by each Owner at Closing and the consummation
by each Owner of the transactions contemplated hereby and thereby in the manner
contemplated hereby and thereby will not (y) result in the creation of any Lien
upon on any of the Assets, or (z) conflict with or result in any violation of or
default under (or any event that, with notice or lapse of time or both, would
constitute a default under), require any consent under, or result in the
acceleration or required prepayment of any indebtedness pursuant to the terms
of, any provision of (i) any mortgage, indenture, loan agreement, note, bond,
deed of trust, other agreement, commitment, or obligation for the borrowing of
money or the obtaining of credit, lease, or other agreement, Contract, license,
franchise, permit, or instrument to which the Company is a party, by which the
Company may be bound, or that affects any of the Assets, or (iii) any judgment
order, decree, law, statute, rule, or regulation applicable to the Company or
any of the Assets.
(c) Consents. Except as set forth on Schedule 2.1.2(c), no consent,
approval, authorization, permit, order, filing, registration, or qualification
of or with any Governmental Authority or third Person is required to be obtained
by the Company or any Owner in connection with the execution, delivery, and
performance of this Agreement or the consummation by the Company or the Owners
of the transactions contemplated hereby in the manner contemplated hereby.
2.1.3 Financial Information; Material Adverse Change; Undisclosed
Liabilities.
(a) Financial Statements. The Company has delivered to Delta true and
complete copies of the the consolidated audited statement of operations of the
Company and its subsidiaries for the fiscal year ended December 31, 2005 and an
the consolidated audited balance sheet of the Company as of such date (the
"Annual Financials"), in each case prepared from and in accordance with the
books and records of the Company as of, and for the period ended on, such date.
The Company also has delivered to Delta an unaudited statement of operations of
the Company for the six (6) month period ended July 1, 2006 and an unaudited
balance sheet of the Company as of July 1, 2006 (the "Interim Financials")
prepared from and in accordance with the books and records of the Company as of,
and for the period ended on, such date. The Annual Financials and Interim
Financials are set forth on Schedule 2.1.3(a). Except as set forth on Schedule
2.1.3(a) with respect to the Interim Financials, the Annual Financials and the
Interim Financials have been prepared in accordance with GAAP consistently
applied throughout the periods indicated and present fairly in all material
respects the financial condition of the Company at the respective dates
indicated and the results of operations of the Company for the respective
periods indicated, except that the Interim Financials are subject to year-end
audit adjustments in accordance with GAAP (none of which will be material) and
do not contain footnotes otherwise required by GAAP. The accounting books and
records of the Company as of the date hereof are true, accurate, and complete in
all material respects.
(b) No Material Adverse Change. Except as disclosed on Schedule
2.1.3(b), since July 1, 2006, there has been no change in the properties,
business, financial condition, or prospects of the Company that has had or could
reasonably be expected to have a Material Adverse Effect.
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(c) No Liabilities. Except (i) as and to the extent reflected in the
Interim Financials, (ii) for nonmaterial liabilities incurred since July 1, 2006
in the ordinary course of business consistent with past practice, (iii) for
obligations arising under purchase orders and agreements to sell inventory in
the ordinary course of business consistent with past practice, (iv) for
liabilities incurred in connection with the preparation, execution and delivery
of this Agreement and the transactions contemplated hereby (including legal,
accounting and environmental Phase I fees and expenses), (v) as and to the
extent reflected in the Closing Net Working Capital, (vi) for obligations
arising under leases or agreements that constitute Assets, and (vii) as
disclosed on Schedule 2.1.3(c), the Company does not have any liabilities or
obligations, secured or unsecured (whether absolute, accrued, known or unknown,
contingent or otherwise, and whether due or to become due) of the type that
would be required to be set forth on a balance sheet prepared in accordance with
GAAP.
2.1.4 No Liens. The Company has good, exclusive, and marketable title
to the Assets, free and clear of all Liens of any nature whatsoever, except for
Permitted Liens. At Closing, the Company will have good, exclusive, and
marketable title to the Assets, free and clear of all Liens of any nature
whatsoever, except for Permitted Liens, other than inventory that is sold by the
Company between the date hereof and the Closing in the ordinary course of
business.
2.1.5 Accounts Receivable. Schedule 2.1.5 contains a true and complete
list of the Company's receivables in excess of $2,000 and an aging of such
accounts receivable as of the close of business on July 1, 2006. Except as
disclosed on Schedule 2.1.5, all accounts receivable of the Company (i) arose
from bona fide sales of goods or services in the ordinary course of business
consistent with past practice and are valid claims enforceable against the
account debtor, (ii) are owned free and clear of any Liens other than Permitted
Liens, and (iii) are accurately and fairly reflected on the Annual Financials
and the Interim Financials. All reserves of the Company have been recorded such
that accounts receivable are valued in the aggregate at their estimated net
realizable value.
2.1.6 Inventories. The inventories of the Company included in the
Assets are usable and sufficient for the purposes for which they were purchased
or manufactured, except for inventories for which adequate reserves have been
provided and reflected in the Annual Financials and the Interim Financials. The
values at which inventories are carried on the Annual Financials and the Interim
Financials reflect the normal inventory policy of the Company (including the
writing down or reserving of the value of slow-moving or obsolete inventory or
inventory of below-standard quality to estimated net realizable market value in
accordance with GAAP), at the lower of cost or market on a first-in, first-out
basis and are not in excess of the value of such inventories computed in
accordance with GAAP on a consistent basis.
2.1.7 Personal Property. The tangible personal property (other than
inventories) and equipment owned, operated, or leased by the Company and
included in the Assets are in good operating condition and repair, ordinary wear
and tear excepted, are used by the Company and, to the Company's Knowledge, are
in conformity in all material respects with all Applicable Law, and to the
Company's Knowledge, there are no facts or conditions affecting such tangible
personal property that could, individually or in the aggregate, interfere in any
material respect with the continued use thereof in the usual and normal conduct
of the operations of the Business consistent with past practice. The tangible
personal property listed on Schedule 1.1(c) comprises
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all assets of the Company, other than inventories and the Intellectual Property,
required for the continued conduct of the Business by Delta as presently
conducted. Except as set forth on Schedule 2.1.7, the Company has good and
marketable title to, and owns free and clear of any Liens (other than Permitted
Liens), the tangible personal property listed on Schedule 1,1(c) (except for
tangible personal property that is leased pursuant to leases set forth on
Schedule 2.1.11).
2.1.8 Real Property. Schedule 2.1.8 sets forth all leasehold interests
in real property currently held by the Company which will be transferred to
Delta in connection with the Acquisition (the "Assumed Leases"). The Company has
previously delivered to Delta true and complete copies of each lease with
respect to such real property interests (the "Leases," and the real property
subject to such Leases, the "Leased Properties"). The Leased Properties and the
real property owned by the Company on Manor Avenue in Concord, North Carolina
are the "Properties." The Leases are valid and in full force and effect. Neither
the Company nor, to the Knowledge of the Company, any other party to any such
Lease has breached any material provision of any such Lease or is in default in
any material respect under the terms of any such Lease. The Company possesses
and quietly enjoys the premises under such Leases, and such premises are not
subject to any Liens of any nature whatsoever (other than Permitted Liens),
encroachments, building or use restrictions, exceptions, reservations, or
limitations that interfere with or impair the present and continued use thereof
in the usual and normal conduct of the Business. All buildings, structures,
fixtures, and improvements located on the Leased Properties are in good repair
and in good condition, ordinary wear and tear excepted. The Company has not
received notice of any violation of any applicable zoning regulation, ordinance,
or other Applicable Law relating to the Leased Properties or the operations of
the Leased Properties, and to the Knowledge of the Company, no such notice has
been given or violation has occurred. The Company has not received written
notice of any pending or threatened condemnation proceeding relating to any of
the Leased Properties and, to the Knowledge of the Company, there are no such
pending or threatened proceedings. The structures, material tangible properties,
and equipment owned, operated, or leased by the Company at the Leased Properties
are in conformity in all material respects with all Applicable Law. To the
Knowledge of the Company, there are no (y) subleases, licenses, concessions, or
other agreements, written or oral, granting to any other Person the right to
acquire, use, or occupy any portion of, any of the Leased Properties, or (z)
Persons (other than the Company) in possession of any of the Leased Properties.
2.1.9 Intellectual Property.
(a) Schedule 2.1.9 contains a list of all registered trademarks and
trademark registration applications, issued patents and patent applications,
trade names, websites, web pages, and domain names, whether registered or not,
owned by or assigned to the Company or in which the Company has an interest by
license, agreement, shop right, common law, or otherwise or that are used by the
Company. Schedule 2.1.9 designates whether each such trademark, patent, patent
application, trade name, website, web page, and domain name is owned or licensed
by the Company.
(b) All trade names, trademarks and service marks listed on Schedule
2.1.9 that have been registered with the United States Patent and Trademark
Office or with similar foreign authorities (the "Trademarks") are currently in
compliance with all Applicable Law (including
15
the timely post-registration filings of affidavits of use and incontestability
and renewal applications), are valid and enforceable, and are not subject to any
maintenance fees or Taxes or actions due within ninety (90) days after the
Closing Date. No Trademark has been or is now involved in any opposition,
invalidation, or cancellation proceeding. To the Knowledge of the Company: (i)
no such action has been threatened, (ii) no Person has infringed,
misappropriated or otherwise conflicted with any of the Trademarks, and (iii)
none of the Trademarks infringes any trade name, trademark, or service xxxx of
any Person.
(c) All issued patents listed on Schedule 2.1.9 (the "Patents") are
currently in compliance with all Applicable Law (including payment of filing,
examination, and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or Taxes or actions due
within ninety (90) days after the Closing Date. No Patent has been or is now
involved in any interference, reissue, reexamination, or opposition proceedings
and to the Knowledge of the Company no such action is threatened. To the
Knowledge of the Company: (i) no Person has infringed, misappropriated or
otherwise conflicted with any of the Patents, and (ii) none of the products
manufactured to sold, nor any process or know-how used, by the Company infringes
or is alleged to infringe any patent or other proprietary right of any Person.
(d) To the Knowledge of the Company and except as set forth on Schedule
2.1.9, no third Person is engaged in any activity that would constitute an
infringement of any Intellectual Property. There are no claims or proceedings
pending or, to the Knowledge of the Company, threatened against the Company
asserting that the Company has, is, or was infringing any patent, trademark,
trade name, or other intellectual property right of any third Person. The
Company owns or by license or otherwise has the right to use all Intellectual
Property, and no intellectual property other than the Intellectual Property is
necessary or advisable for the conduct of the Business as currently conducted.
No Intellectual Property has been refused registration by any Governmental
Authority or is pending registration with any Governmental Authority.
2.1.10 Insurance. The assets, properties, and business of the Company
are insured under the various policies of general liability and other forms of
insurance set forth on Schedule 2.1.10. No notice of cancellation or non-renewal
with respect to, or disallowance of any claim under, any of such policies has
been received by the Company.
2.1.11 Material Agreements. Except for the Contracts, franchises,
agreements, plans, leases, and licenses described on Schedule 2.1.11, the
Company is not a party to or subject to:
(a) any employment contract or any other agreement relating to
compensation or severance payments with any director, officer, employee,
consultant, or agent;
(b) any Contract with an agent, sales representative, dealer, or
distributor;
(c) any plan, Contract, or arrangement providing for bonuses, pensions,
options, deferred compensation, retirement payments, profit sharing, or other
benefits for employees;
(d) any Contract with any labor union;
16
(e) any lease involving payment of annual rentals in excess of $12,000
that may not be terminated by the Company upon 90 days (or less) notice without
any liability, penalty or premium and that has an unexpired term of more than
one year in duration;
(f) any Contract for the purchase of materials, services, or supplies
involving annual payments in excess of $12,000 that may not be terminated by the
Company upon 90 days (or less) notice without any liability, penalty or premium
and that has an unexpired term of more than one year in duration;
(g) any Contract for the purchase of equipment or any construction
involving annual payments in excess of $12,000 that may not be terminated by the
Company upon 90 days (or less) notice without any liability, penalty or premium
and that has an unexpired term of more than one year in duration;
(h) any Contract for the sale of products involving annual payments to
the Company in excess of $12,000 that may not be terminated by the Company upon
90 days (or less) notice without any liability, penalty or premium and that has
an unexpired term of more than one year in duration;
(i) any Contract pursuant to which the Company has any obligation to
indemnify any Person;
(j) any instrument evidencing or related to indebtedness for money
loaned or borrowed by the Company or indebtedness guaranteed by the Company;
(k) any Contract containing covenants limiting the freedom of the
Company to compete in any line of business or with any Person;
(l) any license or franchise agreement in which the Company is the
licensor or franchisor;
(m) any license or franchise agreement in which the Company is the
licensee or franchisee; or
(n) any Contract, not otherwise covered by any of the other items of
this Section 2.1.11, which (i) involves the annual payment or receipt by the
Company of $12,000 or more; and (ii) does not terminate, or is not terminable,
by and without penalty to the Company prior to one year from the date hereof.
All Contracts, franchises, plans, and licenses described on Schedule 2.1.11 (the
"Material Agreements") are valid and in full force and effect. Neither the
Company nor, to the Knowledge of the Company, any other party to any such
Material Agreement has breached any material provision of any such Material
Agreement or is in default in any material respect under the terms of any such
Material Agreement. Schedule 2.1.11 identifies each Material Agreement that is
or might be breached by, or terminable by any other party upon, the sale of
substantially all of the Assets or occurrence of any of the other transactions
contemplated by this Agreement.
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2.1.12 Litigation. Except as set forth on Schedule 2.1.12, there are no
actions, suits, or proceedings pending or, to the Knowledge of the Company,
threatened against or affecting the Company or its properties, assets, or
business or which would prevent the consummation of the transactions
contemplated hereby. None of the actions, suits, or proceedings set forth on
Schedule 2.1.12 will, individually or in the aggregate, if adversely decided
against the Company, have a Material Adverse Effect or will prevent or hinder
the consummation of the transactions contemplated hereby. To the Knowledge of
the Company, there is no investigation pending or threatened by any Governmental
Authority with respect to the Business.
2.1.13 No Judgments or Orders. The Company is not a party to or subject
to any judgment, order, or decree entered in any action or proceeding brought by
any Governmental Authority or any other Person enjoining it in respect of any
business practice, the conduct of business in any area, the acquisition of any
property, or in any other respect.
2.1.14 Compliance with Laws; Permits.
(a) Compliance with Laws. The Company is not in violation of any
Applicable Law in any material respect. The Company has not received any written
notice to the effect that, or otherwise been advised in writing that, the
Company is not in compliance with any Applicable Law.
(b) Permits. All material licenses, permits, registrations, orders, and
other approvals of all Governmental Authorities and third Persons with respect
to the conduct of the Business by the Company have been obtained by the Company,
are set forth on Schedule 2.1.14(b), and are in full force and effect, and there
has been neither any violation, suspension, or cancellation thereof.
2.1.15 Tax Matters. The Company is an S corporation as defined in
Section 1361 of the Code. The Company has correctly prepared and timely filed
all foreign, federal, state, and local tax returns and other tax reports
required to be filed, and has paid, or set up an adequate reserve in the Annual
Financials and the Interim Financials for the payment of, Taxes required to be
paid in respect of the periods covered by such returns, and have set up an
adequate reserve in the Annual Financials and the Interim Financials for the
payment of all Taxes anticipated to be payable by the Company in respect of the
period subsequent to the last of such periods. The Company is not delinquent in
the payment of any Taxes, has not waived any statute of limitations in respect
of Taxes, and has not requested or agreed to any extension of time within which
to file any tax return or report. No deficiencies for Taxes payable by the
Company have been assessed or asserted. There is no pending or, to the Knowledge
of the Company, threatened examination or audit by the Internal Revenue Service
or any foreign, state, or local taxing authority of such returns. No claim has
ever been made by any Governmental Authority in any jurisdiction where the
Company does not file tax returns that the Company is or may be subject to
taxation by that jurisdiction. All proper amounts have been collected or
withheld and paid by the Company to the relevant taxing Governmental Authority
for all Taxes payable with respect to the Business. No Liens exist, or will
exist immediately following Closing, on the Assets that relate to or are
attributable to any Taxes.
2.1.16 Compliance with ERISA.
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(a) Schedule 2.1.16 sets forth a complete list of each "employee
benefit plan," as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") regardless of
whether such plan is subject to ERISA, and each bonus, deferred or incentive
compensation, stock purchase, stock option, severance, or termination pay plan
or program that is maintained or contributed to by the Company for the benefit
of any Company Personnel (the "Plans"). With respect to each of the Plans, the
Company has made available to Delta correct and complete copies of each of the
following documents: (i) the Plans and related trust or other funding documents
(including all amendments thereto), (ii) the most recent Form 5500 annual
report, including all attachments thereto, filed with the Internal Revenue
Service, (iii) the most recent trust report, if any, (iv) the most recent
determination letter received from the Internal Revenue Service with respect to
each such Plan that is intended to be qualified under Section 401 of the Code,
and (v) the summary plan description.
(b) Each Plan has been administered and operated in material compliance
with its terms and the applicable requirements of ERISA and the Code, including
the requirement to file an annual report. No Plan is a "multi-employer plan"
(within the meaning of Section 3(37) of ERISA) or a "multiple employer" plan
(within the meaning of Section 4063 or 4064 of ERISA). Each Plan that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service to that effect
or has an application pending for such a determination letter with the Internal
Revenue Service.
(c) Neither the Company nor any other Person, including any fiduciary,
has engaged in any "prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA) that could subject the Company or any Person whom
the Company has an obligation to indemnify to any tax or penalty imposed under
Section 4975 of the Code or Section 502 of ERISA.
(d) The Company has not at any time maintained, contributed to, or been
required to contribute to, any plan subject to Title IV of ERISA.
2.1.17 Labor Matters. There has been no work stoppage or slowdown or
other labor difficulties relating to the Company that has had or could
reasonably be expected to have a Material Adverse Effect. The Company is not a
party to any collective bargaining agreement with any labor union or similar
organization, nor does the Company know of any such organization that represents
or claims to represent the Company's employees or is currently seeking to
represent or organize the employees at any of the Properties. There are no labor
disputes currently subject to any pending grievance procedure, arbitration, or
litigation, and there is no representation petition pending or, to the Knowledge
of the Company, threatened with respect to any employee of the Company. The
Company has complied in all material respects with all Applicable Law pertaining
to the employment of its employees, including, without limitation, all laws
relating to labor relations, equal employment, fair employment practices,
entitlements, prohibited discrimination, and other similar employment practices
and acts.
2.1.18 Environmental. Except as disclosed on Schedule 2.1.18,
(a) The Company complies, and the Company at all times has complied
with, all Environmental, Health or Safety Requirements of Law applicable to the
business thereof or the
19
Properties, including, without limitation, the use, maintenance, and operation
of the Properties and all activities and conduct of business related thereto,
including, without limitation, the treatment, remediation, removal, transport,
storage, and/or disposal of any Contaminant, except where the failure to comply
would not have a Material Adverse Effect;
(b) The Company has obtained or has taken appropriate steps, as
required by Environmental, Health or Safety Requirements of Law, to obtain all
environmental, health, and safety permits, consents, licenses, and other
authorizations (collectively, "EHS Permits") necessary for the operation of its
business and the operation of the Properties, copies of all such EHS Permits are
set forth on Schedule 2.1.18, all such EHS Permits are in good standing, and the
Company is currently in compliance in all material respects with all terms and
conditions of such EHS Permits. No material change in the facts or circumstances
reported or assumed in the applications for or the granting of such EHS Permits
exists. There are no proceedings pending or, to the Knowledge of the Company,
threatened that would jeopardize the validity of any such EHS Permit;
(c) The Company is not subject to any judicial or administrative
proceeding, notice, order, judgment, decree, or settlement, or to the Knowledge
of the Company, any investigation, alleging or addressing in connection with the
business of the Company or the Properties (i) any violation of any
Environmental, Health or Safety Requirements of Law; (ii) any Remedial Action;
or (iii) any claims, liabilities, or costs arising from the Release or
threatened Release of any Contaminant;
(d) No Environmental Lien has attached to any of the personal property
owned by the Company or, to the Knowledge of the Company, any of the Properties;
(e) The Company has not received, and is not otherwise aware of, any
notice, claim, or other communication concerning (i) any investigation or
alleged violation of any Environmental, Health or Safety Requirements of Law at
the Properties, whether or not corrected to the satisfaction of the appropriate
authority, (ii) any investigation or alleged liability of the Company for
Environmental Damages arising out of or related to the business of the Company
or any of the Properties, or (iii) any investigation or alleged liability of the
Company arising out of or related to the business of the Company or any of the
Properties for the Release or threatened Release of a Contaminant at any
location, and there exists no writ, injunction, decree, order, judgment,
lawsuit, claim, proceeding, citation, directive, or summons relating to the
actual or suspected presence or removal of Contaminants on any of the Properties
or from any of the Properties, nor is the Company aware of any basis for any
such writ, injunction, decree, order, judgment, lawsuit, claim, proceeding,
citation, directive, summons, or investigation being instituted or filed;
(f) Neither the Company nor, to the Knowledge of the Company, any other
Person has caused any Release or threatened Release of any Contaminants at, to,
or from any of the Properties;
(g) None of the Properties is listed or, to the Knowledge of the
Company, proposed for listing on the National Priorities List ("NPL") pursuant
to the Comprehensive Environmental Response, Compensation, and Liability Act, as
amended ("CERCLA"), or listed on the
20
Comprehensive Environmental Response Compensation Liability Information System
List ("CERCLIS") or any similar state list of sites, and the Company is not
aware of any conditions at any of the Properties which, if known to a
Governmental Authority, would qualify any of the Properties for inclusion on any
such list;
(h) The Company has not disposed (as such term is defined in the
Federal Resource Conservation and Recovery Act ("RCRA")) of any hazardous waste
(as such term is defined in RCRA) at any of the Properties;
(i) Except in material compliance with the requirements of applicable
Environmental, Health and Safety Requirements of Law, the Company has not
transported or arranged for the transport of any Contaminant to any site, other
than amounts and types of Contaminants not subject to regulation under
Environmental, Health and Safety Requirements of Law;
(j) The Company has not transported or arranged for the transport of
any Contaminant to any facility or site for the purpose of treatment or disposal
that (i) is included on the NPL or CERCLIS, (ii) is or was, at the time of
disposal, subject to a Remedial Action requirement issued under RCRA or any
state or local solid or hazardous waste regulatory law, or (iii) to the
Knowledge of the Company, at the time of the disposal had received a notice of
violation with respect to alleged violations of any Environmental, Health and
Safety Requirements of Law;
(k) There is not constructed, placed, deposited, stored, disposed, or
located on any of the Properties any asbestos in any form that is friable;
(l) The Company has not used any, and to the Knowledge of the Company,
there are no, underground storage tanks at any of the Properties. There are no
above ground storage tanks or other active or inactive waste treatment, storage,
and/or disposal facilities including, but not limited to, incinerators or
surface impoundments at, on, under, or within any of the Properties, and the
Company has not used any of the foregoing and none of the foregoing has been
closed or removed by the Company, and the Company has not used any, and to the
Knowledge of the Company, there are no, underground improvements, including, but
not limited to, treatment or storage tanks, sumps, or water, gas, or oil xxxxx,
or associated piping, but excluding utility-owned underground improvements, are
or have ever been located on any of the Properties;
(m) There is not constructed, placed, deposited, released, stored,
disposed, leaching, or located on any of the Properties any polychlorinated
biphenyls ("PCBs") or transformers, capacitors, ballasts, or other equipment
that contain dielectric fluid containing PCBs;
(n) The Company has no liability, and has not received and is otherwise
unaware of any notice, claim, or other communication alleging liability on the
part of the Company, for the violation of any Environmental, Health or Safety
Requirements of Law, for Environmental Damages, or for the Release or threatened
Release of any Contaminant in connection with the business of the Company or any
of the Properties;
21
(o) The Company has not been required by any Governmental Authority to
perform any investigation, Remedial Action, or other response action in
connection with any actual or alleged Contaminant; and
(p) The Company has made available to Delta (or will make available to
Delta a reasonable time prior to Closing) all environmental studies, reports,
and other documents in their possession, custody, or control relating to any of
the Properties, the Assets, or the Business.
(q) The representations and warranties in this Section 2.1.18 are the
sole representations and warranties made by the Company with respect to
Contaminants and Environmental, Health and Safety Requirements of Law.
2.1.19 Absence of Certain Changes. Except as set forth on Schedule
2.1.19, since July 1, 2006, the Company has not:
(a) mortgaged, pledged, or subjected to any Lien any of its assets,
tangible or intangible;
(b) entered into, amended, or terminated any Lease or Material
Agreement;
(c) acquired or disposed of any assets or properties, or entered into
any agreement or other arrangement for any such acquisition or disposition,
except acquisitions and sales of inventory in the ordinary course of business;
(d) (i) increased the wages, salaries, compensation, pension, or other
benefits payable or to become payable to any Company Personnel other than in
accordance with the normal compensation and benefit policies of the Company or
in accordance with pre-existing pension or other benefit plans, (ii) granted any
severance or termination pay, (iii) entered into any employment, severance, or
consulting agreement or arrangement with any Company Personnel, (iv) granted,
made, or accrued, contingently or otherwise, any bonus, incentive compensation,
service award, or other like benefit to the credit of any Company Personnel; or
(v) made any addition to or modification of any Plan;
(e) forgiven or canceled any material debts or claims or waived any
material rights of value;
(f) suffered any damage, destruction, or loss (whether or not covered
by insurance) adversely affecting its properties, business, operations, or
financial condition;
(g) suffered any labor trouble affecting its business or operations
that could reasonably be expected to have a Material Adverse Effect;
(h) suffered or experienced any loss of or, to the Knowledge of the
Company, suffered or experienced any change in relations with, any Company
Personnel, suppliers, or customers that could reasonably be expected to have a
Material Adverse Effect;
(i) incurred any indebtedness for borrowed money (or guaranteed any
indebtedness of others) other than trade indebtedness incurred in the ordinary
course of business;
22
(j) changed any method of accounting or accounting practice or policy;
(k) conducted its business other than in the ordinary course so as to
preserve the business intact and to preserve for Delta the goodwill of the
employees, suppliers, customers, and other Persons having business relations
with the Company, except as required by this Agreement;
(l) settled or compromised any claim, suit, or cause of action
involving more than $5,000;
(m) altered its terms and conditions of sale or its collection
practices with respect to accounts receivable, including any practice which has
had the effect of accelerating the recording and billing of accounts receivable;
(n) altered its payment practices with respect to accounts payable,
including any practice which has had the effect of delaying the payment of
expenses and other reserves;
(o) except as set forth on Schedule 1.6(b), made any capital
expenditures or commitments therefor involving payments in excess of $12,000 in
the aggregate; or
(p) made any agreement to do any of the foregoing.
2.1.20 Customers and Suppliers. The Company has not received notice
from any Significant Customer or Significant Supplier that (i) it intends to
terminate any existing contractual relationship with the Company, other than
commitments or relationships that expire or terminate by their terms; (ii) in
the case of a Significant Customer, that the Significant Customer will not
purchase goods or services from the Company or that the Company will in the
future be disqualified from submitting bids in response to requests for
proposals from such Significant Customer; or (iii) in the case of a Significant
Supplier, that such Significant Supplier will no longer provide products or
services to the Company.
2.1.21 Product Warranty. Each product manufactured, sold, or delivered
by the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company has no
liability for replacement or repair thereof or other damages in connection
therewith. No product manufactured, sold, or delivered by the Company is subject
to any guaranty, warranty, or indemnity beyond the applicable standard terms and
conditions of sale, which standard terms and conditions of sale are set forth on
Schedule 2.1.21.
2.1.22 Product Liability. The Company has no liability arising out of
any injury to individuals or property as a result of the ownership, possession,
or use of any product manufactured, sold, or delivered by the Company.
2.1.23 Brokers, Finders. Neither the Company nor any Owner has retained
any broker or finder in connection with the transactions contemplated hereby so
as to give rise to any claim against Delta for any brokerage or finder's
commission, fee, or similar compensation.
23
2.1.24 Subsidiaries. Other than with respect to the El Salvador
Subsidiary and the Mexican Subsidiary, the Company does not directly or
indirectly own any securities or beneficial ownership interests in any other
Person (including through joint ventures or partnership arrangements) or have
any investment in any other Person. Schedule 2.1.24 sets forth the
capitalization of each of the El Salvador Subsidiary and Mexican Subsidiary. All
of the outstanding shares of capital stock or other equity interests of each of
the El Salvador Subsidiary and Mexican Subsidiary are duly authorized, validly
issued and fully paid and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of Applicable Laws for such
subsidiary in such subsidiary's state or other jurisdiction of incorporation,
such subsidiary's articles of incorporation or bylaws (or the equivalent
thereof) or any contract or commitment to which such subsidiary is a party or
otherwise bound, and (ii) issued in compliance with all Applicable Laws,
including federal and state securities laws (and securities laws of any other
jurisdiction, including the jurisdiction of the subsidiary's organization), and
are owned by the Company, free and clear of any and all Liens.
2.1.25 Disclosure. This Agreement, the Schedules hereto, and the
certificates and other documents furnished by the Company and the Owners to
Delta pursuant hereto, taken as a whole, do not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
2.1.26 No Other Representations. Except for the representations and
warranties expressly contained in this Agreement, neither the Company nor any
other Person acting on behalf of the Company makes any representation or
warranty, express or implied, of any nature whatsoever, including with respect
to the Company, the Business, the Assets, the Excluded Assets, the Assumed
Liabilities and the Excluded Liabilities. Without limiting the foregoing
sentence, except as expressly set forth in this Section 2.1, the condition of
the Assets shall be "AS IS" and "WHERE IS."
2.2 Representations and Warranties of Delta. Delta represents and
warrants to the Company as of the date hereof as follows:
2.2.1 Corporate Status; Authorization.
(a) Corporate Existence. Delta is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State of Georgia
and has all requisite corporate power and authority to own, lease, and operate
its respective properties and to carry on its respective business as presently
conducted.
(b) Authorization. Delta has full corporate power and authority to
execute, deliver, and perform this Agreement and the other agreements and
instruments executed and delivered to the Company and the Owners by it at
Closing, to consummate the transactions contemplated hereby and thereby, and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the other agreements and instruments executed and delivered
to the Company and the Owners by Delta at Closing and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of Delta. This Agreement and the other
agreements and instruments executed and
24
delivered to the Company and the Owners by Delta at Closing have been duly
executed and delivered by Delta, and this Agreement and the other agreements and
instruments executed and delivered to the Company and the Owners by Delta at
Closing constitute the legal, valid, and binding obligation of Delta,
enforceable against it in accordance with their respective terms, subject to the
Enforceability Exceptions.
2.2.2 Conflicts and Consents.
(a) Conflicts. Except as set forth on Schedule 2.2.2(a), the execution
and delivery of this Agreement and the other agreements and instruments executed
and delivered to the Company and the Owners by Delta at Closing and the
consummation by Delta of the transactions contemplated hereby and thereby in the
manner contemplated hereby and thereby will not conflict with or result in any
violation of or default under (or any event that, with notice or lapse of time
or both, would constitute a default under), require any consent under, or result
in the acceleration or required prepayment of any indebtedness pursuant to the
terms of, any provision of (i) the Articles of Incorporation or Bylaws of Delta,
(ii) any mortgage, indenture, loan agreement, note, bond, deed of trust, other
agreement, commitment, or obligation for the borrowing of money or the obtaining
of credit, lease, or other agreement, contract, license, franchise, permit, or
instrument to which Delta is a party or by which Delta may be bound, or (iii)
any judgment, order, decree, law, statute, rule, or regulation applicable to
Delta.
(b) Consents. Except as set forth on Schedule 2.2.2(b), no consent,
approval, authorization, permit, order, filing, registration, or qualification
of or with any Governmental Authority or third Person is required to be obtained
by Delta in connection with the execution, delivery, and performance of this
Agreement or the consummation by Delta of the transactions contemplated hereby
in the manner contemplated hereby.
2.2.3 Brokers, Finders. Delta has not retained any broker or finder in
connection with the transactions contemplated hereby so as to give rise to any
claim against the Company or any Owner for any brokerage or finder's commission,
fee, or similar compensation.
2.2.4 SEC Reports.
(a) Delta has filed with the Securities and Exchange Commission (the
"Commission") all reports, schedules, forms, statements and other documents
(including all exhibits thereto) required by the Securities Exchange Act of
1934, as amended, to be filed with the Commission since December 31, 2002 (the
"Delta SEC Documents"). The Delta SEC Documents (i) were prepared, as of their
respective dates, in all material respects in accordance with the applicable
requirements of the Securities Exchange Act of 1934, as amended, and (ii) did
not at the time they were filed (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which and at the time they were made, not
misleading.
(b) The consolidated financial statements of Delta (including, in each
case, any related notes thereto) contained in the Delta SEC Documents complied
as to form, as of their
25
respective dates of filing with the Commision, in all material respects with
applicable accounting requirements, were prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and fairly presented, in all material respects,
the financial position of Delta and its consolidated subsidiaries at the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated, except that the unaudited financial statements
were or are subject to year-end adjustments which were not or are not expected
to be material in amount.
2.2.5 Litigation. There are no actions, suits, or proceedings pending
or, to the Knowledge of Delta, threatened against or affecting Delta which could
reasonably be expected to prevent the consummation of the transactions
contemplated hereby.
2.2.6 No Other Representations. Except for the representations and
warranties expressly contained in this Agreement, neither Delta nor any other
Person acting on behalf of Delta makes any representation or warranty, express
or implied, of any nature whatsoever.
ARTICLE 3. COVENANTS OF THE COMPANY AND THE OWNERS PRIOR TO CLOSING
3.1 Access and Investigation. Between the date of this Agreement and
the Closing Date, and upon reasonable advance notice received from Delta, the
Company shall (a) afford Delta and its representatives and current or
prospective lenders and their representatives (collectively, "Purchaser Group")
full and free access, during regular business hours, to the Company's personnel,
properties, Contracts, Governmental authorizations, books and records and other
documents and data, such rights of access to be exercised in a manner that does
not unreasonably interfere with the operations of the Company; (b) furnish
Purchaser Group with copies of all such Contracts, Governmental authorizations,
books and records and other existing documents and data as Delta may reasonably
request; (c) furnish Purchaser Group with such additional financial, operating
and other relevant data and information in the Company's possession as Delta may
reasonably request; and (d) otherwise cooperate and assist, to the extent
reasonably requested by Delta, with such party's investigation of the
properties, assets and financial condition of the Company. In addition, Delta
shall have the right to have the Properties and the Company's tangible personal
property inspected by Purchaser Group, at Delta's sole cost and expense, for
purposes of determining the physical condition and legal characteristics of such
Properties or tangible personal property. Notwithstanding the foregoing, any
such access or inspection (i) shall be during normal business hours on
reasonable notice, (ii) shall not include sampling or testing of soil, sediment,
surface or ground water and/or building material, (iii) shall not be required
where such access would be prohibited or otherwise limited by any Applicable Law
or agreement and (iv) shall not otherwise unreasonably interfere with the
conduct of the Business of the Company, the El Salvador Subsidiary or the
Mexican Subsidiary.
3.2 Operation of the Business of the Company. Between the date of this
Agreement and the Closing, the Company shall:
(a) conduct its business only in the ordinary course of business
consistent with past practice;
26
(b) except as otherwise directed by Delta in writing, and without
making any commitment on Delta's behalf, use its best efforts to preserve intact
its current business organization, keep available the services of its officers,
employees and agents and maintain its relations and goodwill with suppliers,
customers, landlords, creditors, employees, agents and others having business
relationships with it;
(c) confer with Delta prior to implementing operational decisions of a
material nature;
(d) otherwise report periodically to Delta concerning the status of its
business, operations and finances;
(e) make no material changes in management personnel without prior
consultation with Delta;
(f) maintain the Assets in a state of repair and condition that
complies with applicable legal requirements and is consistent with the
requirements and normal conduct of the Company's business;
(g) keep in full force and effect, without amendment, all material
rights relating to the Company's business unless such rights terminate or expire
in accordance with any agreement or Contract giving rise to such rights;
(h) comply with all applicable legal requirements and contractual
obligations applicable to the operations of the Company's business;
(i) other than the Company's credit insurance, continue in full force
and effect the insurance coverage under the policies set forth in Section 2.1.10
or substantially equivalent policies;
(j) except as required to comply with ERISA or to maintain
qualification under Section 401(a) of the Code, not amend, modify or terminate
any Employee Plan without the express written consent of Delta, and except as
required under the provisions of any Employee Plan, not make any contributions
to or with respect to any Employee Plan without the express written consent of
Delta;
(k) cooperate with Delta and assist it in identifying the Governmental
authorizations required by it to operate the business from and after the Closing
Date and either transferring existing Governmental authorizations of the Company
to Delta, where permissible, or obtaining new Governmental authorizations for
Delta (provided the Company shall not be required to expend any money to provide
such assistance);
(l) upon request from time to time, execute and deliver all documents,
and do all other acts that may be reasonably necessary or desirable in the
opinion of Delta to consummate the transactions contemplated by this Agreement,
all without further consideration; and
(m) maintain all books and records of the Company relating to the
Company's business in the ordinary course of business consistent with past
practice.
27
3.3 Negative Covenant. Except as otherwise expressly permitted herein,
between the date of this Agreement and the Closing Date, the Company shall not,
without the prior written consent of Delta, (a) take any affirmative action, or
fail to take any reasonable action within its control, as a result of which any
of the changes or events listed in Sections 2.1.3(b) or 2.1.19 would be likely
to occur; (b) make any material modification to any Material Agreement or
Governmental authorization; (c) allow the levels of raw materials, supplies or
other materials included in the Company's inventory to vary materially from the
levels customarily maintained; or (d) enter into any compromise or settlement of
any litigation, proceeding or governmental investigation relating to the Assets,
the business of the Company or the Assumed Liabilities.
3.4 Required Approvals. As promptly as practicable after the date of
this Agreement, the Company shall make all filings required to be made by it in
order to consummate the transactions contemplated by this Agreement. The Company
shall cooperate with Delta and its representatives with respect to all filings
that Delta elects to make or is required to make in connection with the
transactions contemplated by this Agreement. The Company also shall cooperate
with Delta and its Representatives in obtaining all governmental or third-party
consents. Nothing contained in this Agreement shall require the Company to pay
any consideration to any other Person from whom any such approvals,
authorizations, consents, orders, licenses, permits, qualifications, exemptions
or waiver is requested or to institute any legal proceedings against such
Person.
3.5 Notification. Between the date of this Agreement and the Closing,
the Company shall promptly notify Delta in writing if it becomes aware of (a)
any fact or condition that causes or constitutes a breach of any representations
and warranties made by the Company as of the date of this Agreement or (b) the
occurrence after the date of this Agreement of any fact or condition that would
or be reasonably likely to (except as expressly contemplated by this Agreement)
cause or constitute a breach of any such representation or warranty had that
representation or warranty been made as of the time of the occurrence of, or the
Company's discovery of, such fact or condition. Should any such fact or
condition require any change to any Schedule to this Agreement, the Company
shall promptly deliver to Delta a supplement to such Schedule specifying such
change. Delta shall have 5 Business Days following delivery of such supplement
to terminate this Agreement in the event the items disclosed in such supplement
resulted in, or in Delta's sole judgment may result in, a Company Material
Adverse Effect. If Delta does not send a notice of termination to the Company
and the Owners within such 5 Business Day period then the Schedules shall be
deemed updated and neither Delta nor any other Person shall be entitled to
indemnification with respect to the matters disclosed on such update and Delta
shall not be entitled to assert any such matters as a reason for not Closing the
transactions contemplated by this Agreement. During the same period, the Company
also shall promptly notify Delta of the occurrence of any breach of any covenant
of the Company in this Article 3 or of the occurrence of any event that may make
the satisfaction of the conditions in Article 5 impossible or unlikely.
3.6 No Negotiation. Until such time as this Agreement shall be
terminated pursuant to Article 9, neither the Company nor any Owner shall
directly or indirectly solicit, initiate, encourage or entertain any inquiries
or proposals from, discuss or negotiate with, provide any nonpublic information
to any Person (other than Delta and its affiliates) relating to any business
combination transaction involving the Company, including the sale by Owners of
the Company's
28
stock, the merger or consolidation of the Company or the sale of the Company's
business or any of the Assets (other than in the ordinary course of business
consistent with past practice). The Company and any Owner shall notify Delta of
any such inquiry or proposal within twenty-four (24) hours of receipt or
awareness of the same by the Company or any such Owner.
3.7 Best Efforts. The Company and the Owners shall use their reasonable
best efforts to cause the conditions in Article 5 to be satisfied.
3.8 Interim Financial Statements. Until the Closing Date, the Company
shall deliver to Delta within twenty-five (25) days after the end of each month
a copy of the unaudited statement of operations of the Company for the
year-to-date period ended with that month and an unaudited balance sheet of the
Company as of the end of that month prepared in a manner and containing
information consistent with the Company's current practices and certified by the
Company's chief financial officer as to compliance with Section 2.1.3(a).
3.9 Payment of Liabilities. The Company shall pay or otherwise satisfy
in the ordinary course of business all of its liabilities and obligations that
are due prior to the Closing. Each of Delta and the Company and each Owner
hereby waives compliance with the bulk-transfer provisions of the Uniform
Commercial Code (or any similar law) ("Bulk Sales Laws") in connection with the
Acquisition.
ARTICLE 4.
OTHER COVENANTS
4.1 Tax Matters.
(a) The Company and Delta shall (i) provide each other with such
assistance as may be reasonably requested in connection with the preparation of
any tax return, audit, or other examination by any taxing Governmental Authority
or judicial or administrative proceedings relating to liability for Taxes
relating to the Business, (ii) retain and provide each other with any records or
other information that may be relevant to such tax return, audit, examination,
or proceeding, and (iii) provide Delta with any final determination of any such
audit, examination, or proceeding that affects any amount required to be shown
on any tax return of the Business for any period. Without limiting the
generality of the foregoing, the Company shall retain, until the applicable
statutes of limitations (including any extensions) have expired, copies of all
tax returns, supporting work schedules, and other records and information that
are relevant to such returns for all tax periods or portions thereof ending on
or before the Closing Date.
(b) Notwithstanding any provision of Applicable Law or this Agreement
to the contrary, the Company will pay any sales, use, transfer, stamp,
documentary, and similar Taxes and recording and filing fees (and file any tax
returns relating to such Taxes) applicable to the transactions contemplated by
this Agreement, it being agreed that none of such payments shall be borne
directly or indirectly by Delta.
(c) Personal property taxes and real property taxes and assessments
with respect to the Assets shall be prorated as of the Closing Date on the basis
of the calendar year in which the Closing occurs, regardless of when such taxes
become a lien or are payable. If the rate of any
29
such taxes is not fixed prior to the Closing Date, the proration thereof at the
Closing shall be upon the basis of the rate for the preceding calendar year
applied to the latest assessed valuation.
(d) The parties hereto shall cooperate to make any necessary filings
and to furnish any required supplemental information to any taxing Governmental
Authority resulting from the consummation of the transactions contemplated by
this Agreement.
4.2 Utilities. All charges for utilities at the Leased Properties under
Assumed Leases (including, without limitation, electricity, fuel, water,
sanitation, and garbage disposal) and for other services and goods furnished to,
or in connection with, the operation of the Business shall be prorated as of the
Closing Date. The Company shall be responsible for and shall pay that portion of
the charges for such utilities arising on or prior to the Closing Date to the
extent not reflected in the final calculation of the Net Working Capital, and
Delta shall be responsible for and shall pay for that portion of the charges for
utilities arising after the Closing Date.
4.3 Confidentiality.
(a) Each of the parties agrees to treat in confidence all documents,
materials, and other information obtained from any other party in connection
with the Acquisition or in connection with any investigation or examination
relating thereto, regardless of whether such materials and information were
obtained before the signing of this Agreement (collectively, "Acquisition
Information"). All Acquisition Information will be kept confidential by the
receiving party and its respective officers, directors, employees,
representatives, agents, and advisors; provided, that (i) Delta shall have no
obligation to keep Acquisition Information received by it from the Company
confidential so long as its disclosure of such Acquisition Information is
related to the operation of the Business after the Closing; and (ii) Acquisition
Information may be disclosed if so required by law (including securities laws).
In the event any party, or any of their Affiliates, are required by applicable
law to disclose any Acquisition Information, such disclosing party shall
promptly notify the other party in writing, which notification shall include the
nature of the legal requirement and the extent of the required disclosure, and
such disclosing party shall cooperate with the other party to preserve the
confidentiality of such information consistent with applicable law.
(b) Any public announcement relating to the execution of this Agreement
shall be reasonably acceptable to Delta and the Company and may be made only if
agreed to by Delta and the Company, except that any party may make a public
announcement to the extent required by law (including securities laws) other
than a public announcement made without prior coordination between Delta and the
Company respecting the timing of notice to the Company's major customers of the
transactions contemplated by this Agreement.
(c) Notwithstanding anything herein to the contrary, none of the
parties shall have any obligation to preserve the confidentiality of any
Acquisition Information that (a) prior to disclosure to the receiving party was
already rightfully in such receiving party's possession, (b) is or becomes
publicly available, other than by unauthorized disclosure, or (c) is received
from a third party who is rightfully in possession of such Information and has
the authority to disclose it and who does not require the receiving party, in
connection with disclosing such Information to the receiving party, to refrain
from disclosing such Information to others.
30
(d) The Company and each Owner hereby agrees that it, he, or she shall
keep confidential and shall not (except as reasonably necessary to perform his
or her duties as an employee of Delta) disclose to any Person, appropriate, or
make use of for himself or herself or any other Person any Business Information.
For purposes of this Agreement, "Business Information" means all information
regarding the Business or its customers (i) that is not generally known to
persons not employed by the Business, (ii) that is not generally disclosed by
the Business to persons not employed by it, and (iii) as to which, prior to
Closing, the Company made reasonable efforts to keep confidential or after
Closing, Delta makes reasonable efforts to keep confidential. Business
Information includes, but is not limited to, information regarding the products
or services of the Business, product or service cost, product or service
pricing, research and development, inventions, discoveries, improvements,
marketing, business strategy and plans, and non-public information concerning
the legal or financial affairs of the Business.
4.4 Noncompetition and Nonsolicitation.
(a) The Company and each Owner agrees that during the period beginning
on the Closing Date and ending on the second anniversary of the Closing Date
(the "Restricted Period"), it, he, or she will not (other than pursuant to his
or her employment with Delta), directly or indirectly (on behalf of itself,
himself, or herself or as principal, agent, joint venture partner, employee,
consultant, director, or officer of any Person), engage in a Competitive
Business in the Territory or own any stock or equity or other securities of any
Person that engages in a Competitive Business in the Territory. "Competitive
Business" means the business of designing, manufacturing, marketing, or selling
privately labeled knitted custom t-shirts for retailers and branded sportswear
companies. "Territory" means the United States of America.
Notwithstanding the foregoing, the Company and any Owner may own stock
or other securities of any publicly-traded Person if such ownership interest is
not greater than five percent (5%) of the outstanding stock or securities of
such entity and the Owners may continue to own and engage in the operation of
Xxxxxx Screen Printing & Embroidery, Inc. any where in the Territory.
(b) The Company and each Owner agrees that during the Restricted
Period, it, he, or she will not, directly or indirectly, interfere with, or seek
to interfere with: (i) the relationship between Delta and any customer of Delta,
or (ii) the relationship between Delta and any supplier of Delta. The Company
and each Owner further agrees that during the Restricted Period, it, he, or she
will not, directly or indirectly, induce or attempt to induce any of Delta's
customers to limit, reduce, or discontinue purchasing branded or licensed
apparel from Delta.
(c) The Company and each Owner agrees that during the Restricted
Period, it, he, or she will not, directly or indirectly, solicit, recommend for
employment, induce, or attempt to induce any Person who is an employee, agent,
or representative of Delta to terminate his, her, or its employment or
relationship with Delta.
(d) The parties agree that, in the event of breach or threatened breach
of covenants of the Company and/or any Owner under this Section 4.4, the damage
or imminent damage to Delta and to the value and goodwill of the Business will
be irreparable and extremely difficult to
31
estimate, making any remedy at law or in damages inadequate. Accordingly, the
Company and each Owner agrees that in the event of a breach by it, him, or her
of the covenants contained in this Section 4.4, Delta shall be entitled, if it
so elects, to institute and prosecute proceedings in any court of competent
jurisdiction to specifically enforce the performance of such covenants during
the Restricted Period, provided that such remedy will not be deemed to be
exclusive of any other remedies available to Delta, by judicial proceedings or
otherwise, to enforce the performance of such covenants, and the Company and
each Owner hereby waives any requirement that Delta post bond or any similar
security in connection with any such proceedings.
(e) The Company and the Owners agree that the geographical, time, and
subject matter limitations of the covenants contained in this Section 4.4 are
necessary for the adequate protection of Delta and the goodwill of the Business
and are fair and reasonable in light of Delta's acquisition of the Business,
including the goodwill thereof, and Delta's legitimate interest in its
relationship with customers and suppliers of the Business. The parties hereto
agree that the time period, geographical area, and scope set forth in this
Section 4.4 specify the fair, appropriate, minimum and reasonable time,
geographic area, and scope necessary to protect Delta and its Affiliates, in the
full use of the assets and goodwill of the Business. If any provision of this
Section 4.4 or the application of any such provision shall be held by a court of
competent jurisdiction to be prohibited or unenforceable in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability. The remaining provisions of this Section
4.4 shall otherwise remain in full force and effect and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without limiting the
generality of the foregoing, the parties intend that the covenants contained in
this Section 4.4 be enforced to the greatest extent in time, area, and
activities covered as is permitted by Applicable Law. The parties intend that
the unenforceability or invalidity of any term or provision of this Section 4.4
shall not render any other term or provision contained in this Section 4.4 or
this Agreement unenforceable or invalid. If the business activities, period of
time, or geographical area covered by this Section 4.4 should be deemed too
extensive, then the parties intend that this Section 4.4 be construed to cover
the maximum scope of business activities, period of time, and geographical area
(not exceeding those specifically set forth herein), if any, as may be
permissible under Applicable Law.
(f) Notwithstanding any provision in this Section 4.4 to the contrary,
Xxxxxx X. Xxxxx, one of the Owners, shall not be bound by the covenants in
Section 4.4(a) or any provision of Sections 4.4(d) or 4.4(e) relating to the
covenants in Section 4.4(a).
4.5 Accounts Receivable. In the event that the Company or any Owner
receives any payment relating to an account receivable of the Business acquired
by Delta pursuant to this Agreement, such payment shall be the property of, and
shall be immediately forwarded to, Delta. The Company and each Owner will
promptly endorse and deliver to Delta any cash, checks, or other documents
received by it, him or her after the Closing Date relating to any account
receivable of such Business.
4.6 Use of Assumed Name. From and after the Closing Date, the Company
will cease to do business as "Fun-Tees" or any derivative thereof, will refrain
from using the name
32
"Fun-Tees" or any derivative thereof (including, without limitation, using any
letterhead, business cards, stationary, or other items that contain the name
"Fun-Tees" or any derivative thereof), and will terminate any non-transferable
assumed name filings made by it with Governmental Authorities with respect to
the use of the name "Fun-Tees" or any derivative thereof.
4.7 Employee Matters.
(a) On or prior to the Closing Date, Delta shall make offers of
employment to all employees of the Company except those employees listed on
Schedule 4.7(a) hereto. The terms thereof shall be comparable in the aggregate
to the compensation and benefit levels provided to such employees by the Company
immediately prior to the Closing; provided, however, that nothing herein shall
limit Delta's ability to amend or terminate its employee welfare benefit plans
after the Closing Date. Effective as of the Closing Date or as otherwise agreed
by the Company and Delta, all employees of the Company hired by Delta (the
"Hired Employees") shall cease to be active participants in the Plans, in
accordance with the terms of the Plans and Applicable Law, including ERISA and
the Code. The Company shall retain liability for all claims incurred by its
employees (and their enrolled dependents) under the Plans on or prior to the
Closing Date. Delta shall be liable for all claims incurred by Hired Employees
(and their enrolled dependents) under the employee welfare benefit plans of
Delta or its Affiliates after the Closing Date. Delta shall solely be
responsible for any and all liability under the Workers Adjustment and
Retraining Notification Act, 29 U.S. Stat. Section 2101 et seq. (the "WARN Act")
(or liabilities under any similar state or local Applicable Law) that arise
after the Closing Date as to Hired Employees and will defend, indemnify, and
hold the Company harmless from any and all claims, demands,or liabilities
asserted against Company for Delta's failure to comply with the provisions of
the WARN Act (or under any simiilar state or local Applicable Law) as to the
Hired Employees after the Closing Date.
(b) The Company shall be liable for any violation of the WARN Act, or
under any simliar state or local Applicable Law, attendant to the Company's (or
any of its affiliates') failure to notify its employees of a "mass layoff" or
"plant closing" (as such terms are defined in the WARN Act). The Company shall
be exclusively liable and responsible for any notification required under the
WARN Act (or under any similar state or local Applicable Law) to its employees
after the Closing, and the Company shall indemnify and hold Delta and its
affiliates harmless from and against any liability asserted against any of them
under the WARN Act as a result of any failure to comply with the provision of
the WARN Act before or after the Closing Date or the Company's failure to comply
with the provisions of this Section.
(c) Effective as of the Closing Date, with respect to all of its plans
and arrangements other than its 401(k), vision, life insurance and disability,
and to the extent permissible under its 401(k), vision, life insurance and
disability plans, Delta shall, or shall cause Delta to: (i) recognize prior
service with the Company under its compensation and employee benefit plans and
arrangements for Hired Employees' employment service with the Company prior to
the Closing Date; (ii) provide coverage for the Hired Employees under its
medical, dental, and health plans or under such other comparable plans or
arrangements as are mutually agreed upon by the parties; (iii) secure the waiver
of any preexisting condition limitations, waiting periods, or actively-at-work
requirements imposed by such plans; and (iv) cause such plans to honor any
33
expenses incurred by the Hired Employees and their beneficiaries under the Plans
during the portion of the calendar year prior to the Closing Date for the
purposes of satisfying applicable deductible, co-payment, and maximum
out-of-pocket expenses under such plans; provided, however, that, with respect
to its 401(k), vision, life insurance and disability plans, Delta shall use its
best efforts to (x) cause any and all pre-existing condition (or
actively-at-work or similar) limitations, eligibility waiting periods and
evidence of insurability requirements to be waived and (y) provide such Hired
Employees with credit for any co-payments, deductibles and any offsets (or
similar payments) prior to the Closing Date for purposes of satisfying any
applicable deductible, out-of-pocket or similar requirement. With respect to all
"M&A Qualified Beneficiaries" (as defined in Section 54.4980B-9 Q&A-4(a) of the
Treasury regulations), Delta shall provide the notice required by Section
4980B(f)(6) of the Code and shall make available to such individuals
continuation coverage under a group health plan maintained by Delta, as provided
by Section 54.4980B-9 Q&A-7 of the Treasury regulations.
(d) As to any Hired Employee, the Company agrees to cause the release
of such Hired Employee from any contractual provision with the Company that
would impair the utility of such Hired Employee's services to Delta or that
would impose upon such Hired Employee any monetary or other obligation to the
Company that otherwise would be occasioned by the transfer of such Hired
Employee's employment to Delta including, without limitation, any agreements of
noncompetition or confidentiality owed to the Company.
4.8 Contract Knitting, Dyeing and Finishing. For a period of up to six
months following the Closing (the "Finishing Period"), the Company shall perform
for Delta such contract knitting, dyeing and finishing work as Delta reasonably
requests to provide Delta with an orderly supply of finished fabric to fulfill
orders until knitting, dyeing and finishing operations are relocated to Delta's
facilities. Delta shall pay the Company an amount equal to the Company's
estimated out-of-pocket cash costs for this finishing work, based on bi-weekly
invoices at the Company's standard costs in effect as of July 1, 2006. By the
15th working day of each month, the Company shall submit to Delta a report of
all out-of-pocket costs for the previous month, together with an additional
final billing, or credit adjustment, as applicable, and provide an itemization
of such costs in reasonable detail. For so long as the Company needs, in order
to perform this finishing work, the portion of the Assets that constitutes
equipment at its Lumberton facility, the Company may retain possession of and
use (with due care) such equipment. No later than 30 days following the end of
the Finishing Period, Delta shall remove such retained equipment from the
Company's Lumberton facility. Delta shall give the Company not less than 75 days
written notice of the date that no further contract knitting, dyeing and
finishing work by the Company shall be required by Delta.
4.9 Purchase of Raw Materials. Inventory included in the Assets and in
the computation of Closing Net Working Capital will include up to $1,700,000 of
raw materials (consisting of yarn and greige fabric) valued at the Company's
standard cost. Additional raw materials will not be included in the Assets but
may be purchased by Delta from the Company at Delta's option during the period
ending 30 days after Delta has absorbed the Company's fabric-making operations
and the closing of the Company's knitting, dyeing and finishing operations.
These purchases will be made as needed in Delta's judgment for Delta's business
operations. The selling price to Delta for raw yarn will be the Company's
original cost as documented by the Company's yarn contracts in effect as of the
date of Closing, plus $0.02 per pound for freight
34
allowance. The selling price to Delta for greige fabric will be the Company's
standard cost of greige fabric as of the Closing Date.
4.10 Reasonable Best Efforts. Delta shall use its reasonable best
efforts to cause the conditions in Article 6 to be satisfied.
4.11 Access to Hardware and Software. The Company shall be entitled
to use the accounting software included in the Assets for purposes of
maintaining its historical records and recording the conduct of its operations
following the Closing and Delta shall provide the Company access to and the use
of such software as requested by the Company.
ARTICLE 5. CONDITIONS PRECEDENT TO PURCHASER'S
AND DELTA'S OBLIGATION TO CLOSE
Delta's obligation to purchase the Assets, and Delta's obligations to
take the other actions required to be taken by it at the Closing, is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Delta in whole or in part):
5.1 Accuracy of Representations.
(a) All of the Company's and each Owner's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement, and shall be
accurate in all material respects as of the time of the Closing as if then made,
without giving effect to any supplement to the Schedules to this Agreement.
(b) Each of the representations and warranties in Sections 2.1(a) and
2.1.3, and each of the representations and warranties in this Agreement that
contains an express materiality qualification, shall have been accurate in all
respects as of the date of this Agreement, and shall be accurate in all respects
as of the time of the Closing as if then made, after giving effect to any
supplement to the Schedules to this Agreement.
5.2 Performance by the Company and the Owners. All of the covenants and
obligations that the Company and the Owners are required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), shall have been duly performed and complied with in all material
respects.
5.3 Consents. Each of the consents identified in Schedule 2.2.2(b) (the
"Material Consents") shall have been obtained and shall be in full force and
effect.
5.4 Additional Documents. The Company shall have caused the documents
and instruments required by Section 1.8(a) to be delivered (or tendered subject
only to Closing) to Delta:
5.5 No Proceedings. Since the date of this Agreement, there shall not
have been commenced or threatened against Delta, or against any of Delta's
affiliates, any legal proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, the
35
Acquisition or (b) that may have the effect of preventing, delaying, making
illegal, imposing limitations or conditions on or otherwise interfering with the
Acquisition. No statute, rule or regulation shall have been enacted or
promulgated by any Governmental Authority which prohibits the consummation of
the Closing.
5.6 No Conflict. Neither the consummation nor the performance of the
Acquisition will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of or cause Delta or
any of its affiliates to suffer any adverse consequence under any applicable
legal requirement or order, excluding Bulk Sales Laws.
5.7 Employees.
(a) Delta shall have entered into employment agreements (through
assumption of existing employment agreements or otherwise) with those employees
of the Company identified in Schedule 5.7(a).
(b) Those key employees of the Company identified on Schedule 5.7(b),
or substitutes therefor who shall be acceptable to Delta, in its sole
discretion, shall have accepted employment with Delta with such employment to
commence on and as of the Closing Date.
(c) Substantially all other employees of the Company shall be available
for hiring by Delta, in its sole discretion, on and as of the Closing Date.
5.8 Completion of Due Diligence. Delta shall have completed, to its
satisfaction and its counsel's satisfaction, due diligence with respect to the
Company and its Business by no later than September 15, 2006.
ARTICLE 6.
CONDITIONS PRECEDENT TO COMPANY'S AND EACH OWNER'S
OBLIGATION TO CLOSE
The Company's and each Owner's obligations to sell the Assets and to
take the other actions required to be taken by them at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Company or the applicable Owner in
whole or in part):
6.1 Accuracy of Representations. All of Delta's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the time of the Closing as if then made.
6.2 Performance by Delta. All of the covenants and obligations that
Delta is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), shall have been performed and complied
with in all material respects.
36
6.3 Closing Documents. Delta shall have caused the payments, documents
and instruments required by Section 1.9 to be delivered (or tendered subject
only to Closing) to the Company and Owners.
6.4 No Injunction. There shall not be in effect any legal requirement
or any injunction or other order that prohibits the consummation of the
Acquisition. No statute, rule or regulation shall have been enacted or
promulgated by any Governmental Authority which prohibits the consummation of
the Closing.
ARTICLE 7. TERMINATION
7.1 Termination Events.
By notice given prior to or at the Closing, subject to Section 7.2,
this Agreement may be terminated as follows:
(a) by Delta if a material breach of any provision of this Agreement
has been committed by the Company or any Owner such breach has not been either
waived by Delta or cured within 15 days following delivery by Delta to the
Company of written notice specifying the details of the breach;
(b) by the Company if a material breach of any provision of this
Agreement has been committed by Delta and such breach has not been either waived
by the Company or cured within 15 days following delivery by the Company to
Delta of written notice specifying the details of the breach;
(c) by Delta if any condition in Article 5 has not been satisfied as of
October 2, 2006 or if satisfaction of such a condition by such date is or
becomes impossible (other than through the failure of Delta to comply with its
obligations under this Agreement), and Delta has not waived such condition on or
before such date;
(d) by the Company if any condition in Article 6 has not been satisfied
as of October 2, 2006 or if satisfaction of such a condition by such date is or
becomes impossible (other than through the failure of the Company or any Owner
to comply with its, his or her obligations under this Agreement), and the
Company has not waived such condition on or before such date;
(e) by mutual consent of Delta and the Company;
(f) by Delta if the Closing has not occurred on or before October 31,
2006, or such later date as the parties may agree upon, unless Delta is in
material breach of this Agreement; or
(g) by the Company if the Closing has not occurred on or before October
31, 2006, or such later date as the parties may agree upon, unless the Company
or any Owner is in material breach of this Agreement.
(h) by Delta on or prior to September 25, 2006, if it has not obtained
on terms and conditions satisfactory to it all of the financing it needs in
order to consummate the Acquisition and to fund the working capital requirements
of Delta after the Closing;
37
(i) by Delta pursuant to the terms and conditions of Section 3.5
hereof; or
(j) by Delta on or prior to September 15, 2006 if they are not
satisfied, in their satisfaction and their counsel's satisfaction, with the
results of their due diligence review of the Company and its Business.
7.2 Effect of Termination. Each party's right of termination under
Section 7.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of such right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Section 7.1,
all obligations of the parties under this Agreement will terminate, except that
the obligations of the parties in Section 4.3, this Section 7.2 and Article 8
will survive, provided, however, that, if this Agreement is terminated because
of a breach of this Agreement by the nonterminating party or because one or more
of the conditions to the terminating party's obligations under this Agreement is
not satisfied as a result of the non-terminating party's failure to comply with
its obligations under this Agreement, the terminating party's right to pursue
all legal remedies will survive such termination unimpaired.
ARTICLE 8.
INDEMNIFICATION
8.1 Indemnification by the Company and the Owners. Subject to the
limitations contained herein, the Company and the Owners agree to jointly and
severally indemnify and hold harmless Delta and its officers, directors,
shareholders, agents, employees, Affiliates, and its representatives,
successors, and assigns from and against any and all liabilities, losses,
claims, costs, and damages ("Loss") and reasonable attorneys' and accountants'
fees and expenses, court costs, and all other reasonable expenses, including
reasonable expenses of investigation ("Expense") suffered or incurred by any of
them in connection with or arising from:
(i) any breach by the Company or any Owner of any warranty or the
inaccuracy of any representation of the Company or such Owner contained
in this Agreement or in any agreement or instrument contemplated by
this Agreement (including any Schedule hereto);
(ii) any breach by the Company or any Owner of any of its, his, or her
obligations or covenants contained in this Agreement or in any
agreement or instrument contemplated by this Agreement (including any
Schedule hereto);
(iii) any noncompliance by the Company with respect to any applicable
bulk sales law; and
(iv) the Excluded Liabilities;
provided, however, that:
(1) the Company and the Owners shall have no liability
with respect to the indemnification described in
Section 8.1(i) until the total of all Loss and
Expense with respect to such indemnification exceeds
$150,000 (the
38
"Threshold Limitation"), at which time the Company
and the Owners shall be liable for all Loss and
Expense that comprises the Threshold Limitation in
addition to Loss and Expense in excess of the
Threshold Limitation;
(2) the aggregate liability of the Company and the Owners
for Loss and Expense with respect to the
indemnification described in Section 8.1(i) shall not
exceed, on an aggregate basis, $10,000,000 (the
"Amount Limitation").
(3) the total liability of each Owner to indemnify for
Loss and Expense shall be subject to the following
limitations: (A) with respect to any indemnification
claim brought under this Section 8.1 such liability
shall not exceed the percentage of each Owner's
ownership of the Company relative to the ownership of
all of the Owners and (B) such liability with respect
to all indemnification claims brought under this
Section 8.1 shall not exceed the after-tax proceeds
of the Purchase Price received by such Owner;
(4) before any claim for indemnification against an Owner
may be made by Delta pursuant to this Section 8.1
during a period of one year following the Closing
Date, Delta shall first make the claim against the
Company and allow the Company a period of 60 days to
investigate and resolve the claim on terms mutually
satisfactory to Delta and the Company;
(5) to the extent that any Owner individually breaches
any of his or her covenants contained in Section 4.3
or 4.4, then only such Owner shall be obligated to
indemnify Delta and the other indemnified parties
with respect to such breach and the Company and
non-breaching Owners shall have no liability with
respect to such breach;
(5) Notwithstanding the foregoing, neither the Threshold
Limitation nor the Amount Limitation shall apply to
the indemnification described in Section 8.1(i) with
respect to the representations and warranties under
Sections 2.1.3(c) (No Liabilities), 2.1.15 (Tax
Matters), 2.1.16 (Compliance with ERISA), and 2.1.18
(Environmental) or to those representation and
warranties in Article 2 regarding title to and Liens
against the Assets.
8.2 Indemnification by Delta. Delta agrees to indemnify and hold
harmless the Company and the Owners and their respective officers, directors,
shareholders, agents, employees, Affiliates, and their representatives,
successors, and assigns from and against any and all Loss and Expense incurred
by any of them in connection with or arising from:
(i) any breach by Delta of any warranty or the inaccuracy of any
representation of Delta contained in this Agreement or in any agreement
or instrument contemplated by this Agreement (including any Schedule
hereto);
39
(ii) any breach by Delta of any of its obligations or covenants
contained in this Agreement or in any agreement or instrument
contemplated by this Agreement (including any Schedule hereto);
(iii) the Assumed Liabilities; and
(iv) the operation of the Business after Closing;
provided, however, that (1) Delta shall not have any liability with respect to
the indemnification described in Section 4.2(i) until the total of all Loss and
Expense with respect to such indemnification exceeds the Threshold Limitation,
at which time Delta shall be liable for all Loss and Expense that comprises the
Threshold Limitation in addition to Loss and Expense in excess of the Threshold
Limitation; and (2) the aggregate liability of Delta for Loss and Expense with
respect to the indemnification described in Section 4.2(i) shall not exceed, on
an aggregate basis, the Amount Limitation.
8.3 Survival Period. The indemnification provided for in Sections
8.1(i) and 8.2(i) shall terminate 24 months after the Closing Date, provided
that the representations and warranties under Sections 2.1.3(c) (No
Liabilities), 2.1.15 (Tax Matters), 2.1.16 (Compliance with ERISA), and 2.1.18
(Environmental) and those representation and warranties in Article 2 regarding
title to and Liens against the Assets and the indemnification contained in
Section 8.1(i) with respect thereto shall terminate forty-eight (48) months
after the Closing Date and otherwise in Sections 8.1 and 8.2 (other than 8.1(i)
and 8.2(ii)) shall terminate forty-eight (48) months after the Closing Date (as
the case may be, such periods are referred to as the "Survival Period"). Such
indemnification obligation shall continue after the Closing Date, without regard
to any investigation made at any time by the indemnified persons, as to any Loss
or Expense of which the indemnified persons has notified the indemnifying party
in accordance with the requirements of Section 8.4 on or prior to the expiration
of the applicable Survival Period, as to which the obligation of the
indemnifying party shall then continue until the liability of the indemnifying
party shall have been determined pursuant to this Article 8, and the
indemnifying party shall have reimbursed the indemnified persons for the full
amount of such Loss and Expense in accordance with this Article 8.
8.4 Notice of Claims. If Delta, the Company or any Owner believes that
any of the Persons indemnified under this Article 8 has suffered or incurred any
Loss or Expense, Delta, the Company or such Owner shall so notify the other
parties promptly in writing describing such Loss or Expense, the amount thereof,
if known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or other agreement, instrument, or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred, except that
the failure to so notify shall not relieve a party of its obligations to
indemnify except to the extent that its, his, or her rights hereunder are
materially prejudiced. If any action at law or suit in equity is instituted by a
third party with respect to which any of the indemnified persons intends to
claim any liability or expense as Loss or Expense under this Article 8, such
indemnified person shall promptly notify the indemnifying party of such action
or suit.
40
8.5 Third Party Claims. In the event of a third party claim giving rise
to indemnification hereunder, the indemnifying party shall have thirty (30) days
after receipt of the notice referred to in Section 8.4 to notify the indemnified
persons that it elects to conduct and control such action or suit with counsel
reasonably satisfactory to the indemnified persons. If the indemnifying party
does not give the foregoing notice, the indemnified persons shall have the right
to defend and contest such action or suit in any manner the indemnified persons
reasonably deem appropriate; provided, however, that the indemnified persons
shall not consent to the entry of any judgment or to any settlement of such
claim without the prior written consent of the indemnifying party, not to be
unreasonably withheld or delayed. If the indemnifying party gives the foregoing
notice, the indemnifying party shall have the right to undertake, conduct, and
control, through counsel of its own choosing and at the sole expense of the
indemnifying party, the conduct and settlement of such action or suit, and the
indemnified persons shall cooperate with the indemnifying party in connection
therewith; provided that (w) the indemnifying party shall not settle or
compromise any such action or suit without the indemnified persons' prior
written consent (not to be unreasonably withheld or delayed), unless the terms
of such settlement or compromise release the indemnified persons from any and
all liability with respect to such action or suit at no cost to the indemnified
persons, (x) the indemnifying party shall not thereby consent to the imposition
of any Lien upon any asset of any indemnified person or consent to the issuance
of an injunction or other equitable relief against the indemnified persons, (y)
the indemnifying party shall permit the indemnified persons to participate in
such conduct or settlement through one counsel chosen by the indemnified
persons, and the fees and expenses of such counsel shall be borne by the
indemnified persons (unless the named parties to any such action or suit include
one or more indemnified persons who have been advised by counsel that there may
be a conflict of interest between the indemnifying party and such indemnified
person or persons; in which case the reasonable fees and expenses of one counsel
for the indemnified person or persons will be borne by the indemnifying party).
So long as the indemnifying party is contesting any such action or suit in good
faith, the indemnified persons shall not pay or settle any such action or suit.
Notwithstanding the foregoing, the indemnified persons shall have the right to
pay or settle any such action or suit, provided that in such event the
indemnified persons shall waive the right to indemnity therefor by the
indemnifying party, and no amount in respect thereof shall be claimed as Loss or
Expense under this Article 8.
8.6 Tax Benefit; Insurance. The amount of any Loss or Expense subject
to indemnification hereunder or of any claim therefor shall be calculated net of
(i) any Tax benefit inuring to Delta or any of the other indemnified parties
under Section 8.1 on account of such Loss or Expense and (ii) any insurance
proceeds (net of direct collection expenses) received or receivable by Delta or
any of the other indemnified parties under Section 8.1 on account of such Loss
or Expense. Delta and any of the other indemnified parties under Section 8.1
which may seek indemnification shall seek full recovery under all insurance
policies covering any Loss or Expense to the same extent as they would if such
Loss were not subject to indemnification hereunder. The indemnifying parties
shall be subrogated to all rights of the indemnified parties in respect of any
Loss or Expense indemnified by the indemnifying parties.
8.7 Mitigation. Each Person entitled to indemnification hereunder shall
take all reasonable steps to mitigate all losses, costs, expenses and damages
after becoming aware of any event which would reasonably be expected to give
rise to any losses, costs, expenses and damages that are indemnifiable or
recoverable hereunder or in connection herewith.
41
8.8 Treatment of Indemnity Payments. All indemnification payments made
hereunder shall be treated by all parties as adjustments to the Purchase Price,
except as otherwise required by GAAP or, for Delta, except to the extent such
treatment is inconsistent with its part practice.
8.9 No Double Counting; Net Working Capital. Notwithstanding anything
to the contrary contained in this Article 8, there shall be no recovery for any
Loss or Expense by Delta or any of the other indemnified parties under Section
8.1 and the Loss and Expense shall not be included in meeting the stated
thresholds hereunder, to the extent such item has been included in the
calculation of the Closing Net Working Capital as determined pursuant to Section
1.5 hereof.
8.10 Exclusive Remedies. The Parties agree that indemnification under
this Article 8 shall be the sole and exclusive remedies for any party hereto
with respect to any claim relating to this Agreement or the transactions
contemplated hereby and the facts and circumstances relating and pertaining
hereto (whether any such claim shall be made in contract, breach of warranty,
tort or otherwise, but excluding any claim relating to fraud or willful
misconduct); provided, however, that, in the event of a breach of the Agreement
that does not result in termination of the Agreement by the non-breaching party,
the foregoing shall not limit the availability to any party hereto of injunctive
and other equitable relief, including specific performance; and provided
further, that this limitation on remedies shall not apply to any covenants that
require performance (other than the payment of money) by any party following the
Closing.
ARTICLE 9.
MISCELLANEOUS
9.1 Survival. Subject to Section 8.3, notwithstanding any otherwise
applicable statute of limitations or presumption, all agreements, covenants,
representations, and warranties of Delta, the Company and the Owners in this
Agreement and in any other agreement, instrument, or document delivered in
connection herewith shall survive Closing in accordance with their terms.
9.2 Expenses. Each party shall be solely responsible for and bear all
of its, his, or her own expenses incurred at any time in connection with
pursuing or consummating this Agreement and the transactions contemplated
herein.
9.3 Assignment; Successors; Parties in Interest. This Agreement shall
not be assignable by any party hereto without the prior written consent of the
other parties (which consent shall not be unreasonably withheld) and any attempt
to assign this Agreement without such consent shall be void and of no effect,
except that (i) Delta may assign this Agreement to any of its lenders; and (ii)
Delta may assign its rights under this Agreement to any of its wholly-owned
subsidiaries. This Agreement shall inure to the benefit of, and be binding on
and enforceable against, each party hereto and the successors and permitted
assigns of the respective parties hereto, and nothing in this Agreement, express
or implied, is intended to confer upon any other Person any rights or remedies
of any nature whatsoever under this Agreement.
9.4 Amendment and Modification. Neither this Agreement nor any term
hereof may be changed, waived, discharged, or terminated orally, but only with
the written consent signed by
42
the party against which such change, waiver, discharge, or termination is sought
to be enforced. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
or other breach, whether similar or not. No amendment to this Agreement shall be
effective unless it is agreed to in writing by the Company, Delta and any two of
Xxxxx X. Xxxx, Xxxxx X. Xxxx, Xx. and Xxxxxx X. Xxxxxx.
9.5 Access After Closing. The parties shall retain for a period of two
(2) years (other than Tax records which shall be retained for six (6) years)
following Closing all books and records within their possession or control that
they are permitted hereby to retain and that relate to the operation and conduct
of the Business prior to Closing. The parties shall provide to the other parties
and their representatives reasonable access during normal business hours to
copies of all such books and records upon request.
9.6 Notices. All notices, consents, requests, instructions, approvals,
and other communications provided for herein and all legal processes in regard
hereto shall be validly given, made, or served, if in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
commercial courier or by telecopy (promptly confirmed in writing) to the
following addresses (or at such other addresses for such parties as shall be
specified by like notice):
To Delta:
Delta Apparel, Inc.
0000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, President and CEO
Telecopy: 000-000-0000
Telephone: 000-000-0000
With a copy to:
(which copy shall not constitute notice)
Wyche, Burgess, Xxxxxxx & Xxxxxx, P.A.
00 Xxxx Xxxxxxxxxx Xxx
Xxxxxxxxxx, XX 00000
Xxxx Xxxxxx Xxx 000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxx Lux, Esq.
Telecopy: 000-000-0000
Telephone: 000-000-0000
43
To the Company:
Fun-Tees, Inc.
000 Xxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Xx.
Telecopy: 000-000-0000
Telephone: 000-000-0000
With a copy to:
(which copy shall not constitute notice)
Xxxxx & Xxx Xxxxx PLLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx III
Telecopy: 000-000-0000
Telephone: 000-000-0000
To Owners:
X.X. Xxxxx
000 Xxxxxxx Xxxx Xxxx
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Telephone: 000-000-0000
Xxxxx Xxxxxx Xxxx
000 Xxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
Xxxxx X. Xxxxxx, Xx.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
Xxxxx Xxxxxxxx Xxxx Jr. and Xxxxxxx Xxxx Xxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
Xxxx X. Xxxxxx
00000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
44
Xxxxx X. Xxxx, Xx.
0000 Xxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
Xxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
9.7 Captions. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.8 Entire Agreement. This Agreement (including the Schedules)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral (including, without limitation, that
certain letter of intent dated as of July 28, 2006), among the parties with
respect to the subject matter hereof.
9.9 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute one and the same instrument.
9.10 Severability. If any term or provision of this Agreement is held
by a court or other authority of competent jurisdiction to be invalid, void, or
unenforceable, the remaining terms and provisions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired, or
invalidated.
9.11 Arbitration. Except for (i) matters relating to specific
performance, injunctive relief, or other equitable remedies, and (ii)
indemnifiable third party claims pursuant to Article 8, the parties hereto agree
to submit to arbitration any and all matters in dispute or in controversy among
them concerning the terms and provisions of this Agreement. All such disputes
and controversies shall be determined and adjudged by a panel of three
arbitrators, and the hearing shall be held in Charlotte, North Carolina. The
selection of the arbitrators and the procedure shall be in accordance with the
commercial arbitration rules then in effect of the American Arbitration
Association. Any award rendered shall be final and conclusive upon the parties
and a judgment thereon may be entered in the highest court of the forum, state
or federal, having jurisdiction. The expenses of the arbitration shall be borne
equally by the parties to the arbitration, provided that each party shall pay
for and bear the costs of its own experts, evidence, and counsel's fees, and
provided further that in the discretion of the arbitrators, any award may
include the costs of a party's counsel if the arbitrators expressly determine
that the party against whom such award is entered has caused the dispute,
controversy, or claim to be submitted to arbitration in bad faith.
9.12 Schedules. The Schedules are a part of this Agreement as if fully
set forth herein. All references to Sections, subsections, Schedules shall be
deemed references to such parts of this Agreement, unless the context shall
otherwise require. For purposes of the representations and warranties of the
Company contained herein, disclosure in any of the Schedules attached
45
hereto of any facts or circumstances shall be deemed to be an adequate response
and disclosure of such facts or circumstances with respect to all
representations or warranties by the Company calling for disclosure of such
information, whether or not such disclosure is specifically associated with or
purports to respond to one or more or all of such representations or warranties,
if it is clearly apparent on the face of the Schedule that such disclosure is
applicable. The inclusion of any information in any Schedule or other document
delivered by the Company pursuant to this Agreement shall not be deemed to be an
admission or evidence of the materiality of such item, nor shall it establish a
standard of materiality for any purpose whatsoever.
9.13 Definitions. Used in this Agreement, the following terms have the
meanings specified or referred to in this Section 9.13:
(a) "Acquisition" shall have the meaning set forth in the recitals to
this Agreement
(b) "Acquisition Information" shall have the meaning set forth in
Section 4.3(a).
(c) "Affiliate" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by, or under common control with such
Person. For purposes of this definition, the term "controls," "is controlled
by," or "is under common control with" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
(d) "Agreement" shall have the meaning set forth in the first paragraph
of this Agreement.
(e) "Annual Financials" shall have the meaning set forth in Section
2.1.3(a).
(f) "Amount Limitation" shall have the meaning set forth in Section
8.1.
(g) "Applicable Law" means all applicable provisions of (i)
constitutions, treaties, statutes, laws (including common law), rules,
regulations, ordinances, codes, and orders of any Governmental Authority, (ii)
consents of, with, or to any Governmental Authority, and (iii) orders,
decisions, injunctions, writs, judgments, awards, decrees of, and agreements
with any Governmental Authority.
(h) "Assets" shall have the meaning set forth in Section 1.1.
(i) "Assumed Leases" shall have the meaning set forth in Section 2.1.8.
(j) "Assumed Liabilities" shall have the meaning set forth in Section
1.7(a).
(k) "Base NWC" shall have the meaning set forth in Section
1.5(c)(i)(A).
(l) "Book Value" shall have the meaning set forth in Section 1.5(e).
(m) "Business" shall have the meaning set forth in the recitals to this
Agreement.
46
(n) "Bulk Sales Laws" shall have the meaning set forth in Section 3.9.
(o) "Business Information" shall have the meaning set forth in Section
4.3(d).
(p) "CERCLA" shall have the meaning set forth in Section 2.1.18(g).
(q) "CERCLIS" shall have the meaning set forth in Section 2.1.18(g).
(r) "Xxxxx Employment Agreement" shall have the meaning set forth in
Section 1.1(q).
(s) "Closing" shall have the meaning set forth in Section 1.3.
(t) "Closing Date" shall have the meaning set forth in Section 1.3.
(u) "Closing Net Working Capital" shall have the meaning set forth in
Section 1.5(a).
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(w) "Commission" shall have the meaning set forth in Section 2.2.4(a).
(x) "Company" shall have the meaning set forth in the first paragraph
of this Agreement.
(y) "Company Personnel" means the current and former officers,
directors, employees, and agents of the Company.
(z) "Competitive Business" shall have the meaning set forth in Section
4.4(a).
(aa) "Concord Lease" shall have the meaning set forth in Section
1.8(b).
(bb) "Contaminant" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, PCBs, or any hazardous or toxic constituent thereof and
includes, but is not limited to, any substance defined in or regulated under
Environmental, Health or Safety Requirements of Law.
(cc) "Contract" means, for any Person, any agreement, contract, lease,
consensual obligation, promise or undertaking (whether written or oral and
whether express or implied) of such Person.
(dd) "Deficit Amount" shall have the meaning set forth in Section
1.5(c)(ii).
(ee) "Delta" shall have the meaning set forth in the first paragraph of
this Agreement.
(ff) "Delta SEC Documents" shall have the meaning set forth in Section
2.2.4(a).
(gg) "Distressed Inventory" shall have the meaning set forth in Section
1.5(e).
47
(hh) "El Salvador Subsidiary" shall have the meaning set forth in
Section 1.1(g).
(ii) "Enforceability Exceptions" shall have the meaning set forth in
Section 2.1.1(b).
(jj) "Excess Amount" shall have the meaning set forth in Section
1.5(c)(i).
(kk) "EHS Permits" shall have the meaning set forth in Section
2.1.18(b).
(ll) "Environmental Damages" means all claims, judgments, damages
(including punitive damages), losses, penalties, fines, interest, fees,
liabilities (including strict liability), encumbrances, liens, costs, response
costs, and other expenses of investigation and Remedial Action and defense of
any claim, whether or not such claim is ultimately defeated, and of any good
faith settlement or judgment, of whatever kind or nature, contingent or
otherwise, matured or unmatured, foreseeable or unforeseeable, including,
without limitation, reasonable attorneys' fees and disbursements and
consultants' fees, any of which are incurred at any time as a result of the
existence of Contaminants or noncompliance with Environmental, Health or Safety
Requirements of Law with respect to the period prior to the Closing, including
without limitation:
(i) Damages for personal injury or threatened personal injury
(including sickness, disease, or death), or injury or threatened injury
to property or natural resources, foreseeable or unforeseeable,
including, without limitation, the cost of demolition and rebuilding of
any improvements on real property;
(ii) Reasonable fees incurred for the services of attorneys,
consultants, contractors, doctors, experts, laboratories, and all other
reasonable costs incurred in connection with any damages described in
subparagraph (i) of this definition, and the investigation or
remediation of Contaminants or the suspected presence of Contaminants
or the violation or threatened violation of Environmental, Health or
Safety Requirements of Law including, but not limited to, the
preparation of any feasibility studies or reports or the performance of
any investigations, cleanup, treatment, remediation, removal, response,
abatement, containment, closure, storage, disposal, transport,
restoration, or monitoring work required by any foreign, federal,
state, or local governmental agency or political subdivision, or
otherwise expended in connection with such conditions; and
(iii) Liability to any third Person or Governmental Authority to
indemnify such Person or Governmental Authority for costs expended in
connection with the items referenced in subparagraphs (i) and (ii) of
this definition.
(mm) "Environmental, Health or Safety Requirements of Law" means all
foreign, federal, state, and local laws, statutes, codes, ordinances, rules,
regulations, EHS Permits, and orders relating to or addressing the environment,
health, or safety, including, but not limited to, any law, statute, code,
ordinance, rule, regulation, EHS Permit, or order relating to (x) the use,
handling, or disposal of any Contaminant, or (y) workplace or worker safety and
health, as such requirements are promulgated by the specifically authorized
Governmental Authority responsible for administering such requirements.
48
(nn) "Environmental Lien" means a lien in favor of any Governmental
Authority for any (a) liability under any Environmental, Health or Safety
Requirement of Law, or (b) damages arising from, or costs incurred by, such
Governmental Authority in response to a Release or threatened Release of a
Contaminant into the environment.
(oo) "ERISA" shall have the meaning set forth in Section 2.1.16(a).
(pp) "Excluded Assets" shall have the meaning set forth in Section 1.2.
(qq) "Excluded Liabilities" shall have the meaning set forth in Section
1.7(b).
(rr) "Expense" shall have the meaning set forth in Section 8.1.
(ss) "Finishing Period" shall have the meaning set forth in Section
4.8.
(tt) "GAAP" shall mean generally accepted accounting principles.
(uu) "Governmental Authority" means any agency, department, court, or
other administrative, legislative, or regulatory authority of any foreign,
federal, state, or local governmental body.
(vv) "Hired Employees" shall have the meaning set forth in Section
4.7(a).
(ww) "Initial Purchase Price" shall have the meaning set forth in
Section 1.4.
(xx) "Intellectual Property" means (i) all logos, trade styles, trade
names, trademarks, service marks (and applications therefor) owned by or
assigned to the Company or in which the Company has an interest by license,
agreement, shop right, common law, or otherwise relating to the Business, (ii)
all patents, patent applications, and inventions and discoveries that may be
patentable owned by or assigned to the Company or in which the Company has an
interest by license, agreement, shop right, common law, or otherwise relating to
the Business; (iii) all copyrights (and applications therefor), whether
registered or not, owned by or assigned to the Company or in which the Company
has an interest by license, agreement, shop right, common law, or otherwise
relating to the Business, (iv) all websites, web pages and applications, and
domain names owned by or assigned to the Company or in which the Company has an
interest by license, agreement, shop right, common law, or otherwise relating to
the Business, and (v) all processes, inventions, trade secrets, know-how, ideas
and concepts relating to the Business.
(yy) "Interim Financials" shall have the meaning set forth in Section
2.1.3(a).
(zz) "Knowledge of the Company" or "the Company's Knowledge" means the
actual knowledge, after due investigation, of any of the following individuals:
Xxxxx X. Xxxx, Xxxxx X. Xxxx, Xx., Xxxxx X. Xxxx, Xx., Xxxx X. Xxxxxx, Xxxxx
X.Xxxxxx, Xx., Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxxx.
(aaa) "Leases" shall have the meaning set forth in Section 2.1.8.
(bbb) "Leased Properties" shall have the meaning set forth in Section
2.1.8.
49
(ccc) "Liens" means, with respect to any assets or properties (whether
real, personal, or mixed, or tangible or intangible), any mortgage, pledge,
option, escrow, hypothecation, lien, pledge, security interest, financing
statement, lease, charge, preemptive subscription, encumbrance, easement,
option, conditional sale, or other title retention or security agreement or any
other similar restriction, claim, or right of others, on, in, or with respect to
such assets or properties, whether arising by contract, operation of law, or
otherwise.
(ddd) "Loss" shall have the meaning set forth in Section 8.1.
(eee) "Material Adverse Effect" or "Material Adverse Change" means a
material adverse effect on the properties, assets (tangible and intangible),
prospects, liabilities, financial condition, or results of operations of the
Business, including, but not limited to, any material casualty, loss, theft, or
damage to the Assets; provided that, for purposes of this Agreement, Material
Adverse Effect shall not include the effect of (a) changes to the industry or
markets in which the business of the Company and its Subsidiaries operate that
are not unique to such business, (b) general economic, regulatory or political
conditions that do not disproportionately effect the Business; (c) military act
or any act of terrorism; (d) changes in law or GAAP after the date hereof; or
(e) any matter or event which of which Delta has been notified in writing as of
the date hereof. To the extent that "Material Adverse Effect" or "Material
Adverse Change" shall be deemed to have a monetary value, it shall be deemed an
amount in excess of $150,000 in the aggregate.
(fff) "Material Agreements" shall have the meaning set forth in Section
2.1.11.
(ggg) "Mexican Subsidiary" shall have the meaning set forth in Section
1.1(g).
(hhh) "Net Working Capital" shall have the meaning set forth in Section
1.5.
(iii) "Net Sub Equity" shall have the meaning set forth in Section
1.6(a).
(jjj) "NPL" shall have the meaning set forth in Section 2.1.18(g).
(kkk) "Owners" shall have the meaning set forth in the first paragraph
of this Agreement.
(lll) "Patents" shall have the meaning set forth in Section 2.1.9(c).
(mmm) "PCBs" shall have the meaning set forth in Section 2.1.18(m).
(nnn) "Permitted Liens" means Liens for taxes not yet due.
(ooo) "Person" means any individual, partnership, limited liability
company, corporation, trust, unincorporated organization, or any other form of
legal entity.
(ppp) "Plans" shall have the meaning set forth in Section 2.1.16(a).
(qqq) "Properties" shall have the meaning set forth in Section 2.1.8.
00
(xxx) "Xxxxxxxx Price" shall have the meaning set forth in Section 1.4.
(sss) "RCRA" shall have the meaning set forth in Section 2.1.18(h).
(ttt) "Release" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migrating into
the indoor or outdoor environment of any Contaminant through or in the air,
soil, surface water, groundwater, or any of the Leased Properties.
(uuu) "Remedial Action" means actions required to (i) clean up, remove,
treat, or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed, design such a response, and perform post-remedial
investigation, monitoring, operation, maintenance, and care.
(vvv) "Restricted Period" shall have the meaning set forth in Section
4.4(a).
(www) "Review Period" shall have the meaning set forth in Section
1.5(b)(i).
(xxx) "Significant Customer" means any of the ten largest customers of
the Company measured in terms of dollar sales volume for the one year period
ended July 31, 2006.
(yyy) "Significant Supplier" means any of the ten largest suppliers of
the Company (measured by dollar value of goods purchased) for the one year
period ended July 31, 2006.
(zzz) "Survival Period" shall have the meaning set forth in Section
8.3.
(aaaa) "Taxes" means all foreign, federal, state, and local income
taxes and other taxes, including, without limitation, all franchise, property,
sales, use, excise, intangible, and employment taxes.
(bbbb) "Territory" shall have the meaning set forth in Section 4.4(a).
(cccc) "Threshold Limitation" shall have the meaning set forth in
Section 8.1.
(dddd) "Trademarks" shall have the meaning set forth in Section
2.1.9(b).
(eeee) "WARN Act" shall have the meaning set forth in Section 4.7(a).
(ffff) "Working Capital Adjustment Report" shall have the meaning set
forth in Section 1.5(b)(ii).
(gggg) "Working Capital Dispute" shall have the meaning set forth in
Section 1.5(b)(i).
(hhhh) "Working Capital Dispute Notice" shall have the meaning set
forth in Section 1.5(b)(i).
9.14 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation, and effect, by the laws of the State of
North Carolina, without giving
51
effect to the conflict of laws rules thereof. Subject to the provisions of
Section 9.11, Delta, the Company and the Owners hereby consent to the
jurisdiction of any state or federal court located within Mecklenburg County,
North Carolina and each irrevocably agrees that all actions or proceedings
relating to this Agreement may be litigated in such courts and hereby waive any
objection that each may have based on improper venue or forum non conveniens to
the conduct of any proceeding in any such court.
[SIGNATURE PAGES FOLLOW]
52
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
DELTA APPAREL, INC.
By:
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: CEO and President
FUN-TEES, INC.
By:
---------------------------------
Name:
Title:
OWNERS
------------------------------------
Xxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx, Xx.
------------------------------------
Xxxxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx, Xx.
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
------------------------------------
Xxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx, Xx.
------------------------------------
Xxxxxx X. Xxxxx
------------------------------------
Xxxxxx X. Xxxxxx
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
