Exhibit 2.1
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Execution Copy
PURCHASE AGREEMENT
by and among
CAG ACQUISITION CORP.,
CONSOLIDATED APPAREL GROUP, LLC
and
XXXXX XXXXXXX
dated as of August 10, 2001
TABLE OF CONTENTS
Page
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ARTICLE I
PURCHASE AND SALE OF ASSETS................................................................1
Section 1.1 Purchase and Sale of Assets.....................................1
Section 1.2 Assumption of Liabilities.......................................4
Section 1.3 Excluded Liabilities............................................4
Section 1.4 Purchase Price; Allocation;
Deferred Payments...............................................5
Section 1.5 Purchase Price Adjustment.......................................6
Section 1.6 Closing.........................................................8
Section 1.7 Deliveries by Seller............................................8
Section 1.8 Deliveries by Buyer.............................................9
Section 1.9 Earnout Payment.................................................9
Section 1.10 Covenants During Earnout Payment Periods.......................16
Section 1.11 Further Assurances.............................................17
Section 1.12 Third-Party Consents...........................................17
Section 1.13 Change of Name.................................................18
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND WOLFMAN.................................................................18
Section 2.1 Corporate Organization.........................................18
Section 2.2 Authorization..................................................18
Section 2.3 Consents and Approvals; No Violation...........................19
Section 2.4 Financial Statements...........................................19
Section 2.5 No Undisclosed Liabilities.....................................20
Section 2.6 Absence of Certain Changes.....................................20
Section 2.7 Real Property..................................................22
Section 2.8 Intellectual Property..........................................23
Section 2.9 Certain Contracts..............................................23
Section 2.10 Permits and Other Authorizations...............................24
Section 2.11 Assets.........................................................24
Section 2.12 Insurance......................................................25
Section 2.13 Labor Relations................................................25
Section 2.14 Benefit Plans; ERISA...........................................26
Section 2.15 Taxes..........................................................29
Section 2.16 Environmental Matters..........................................30
Section 2.17 Litigation.....................................................30
Section 2.18 Compliance with Law............................................30
Section 2.19 Personnel......................................................30
Section 2.20 Related Party Transactions.....................................31
Section 2.21 Inventory......................................................31
Section 2.22 Accounts Receivable............................................31
Section 2.23 Customers and Suppliers........................................31
Section 2.24 Orders and Commitments.........................................32
Section 2.25 Product Warranties.............................................32
Section 2.26 Brokers and Finders............................................32
Section 2.27 Disclosure.....................................................32
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER...................................................32
Section 3.1 Corporate Organization.........................................33
Section 3.2 Authorization..................................................33
Section 3.3 No Violation; Consents.........................................33
Section 3.4 Brokers and Finders............................................33
ARTICLE IV
TAX MATTERS...............................................................................34
Section 4.1 Taxes..........................................................34
Section 4.2 Access to Information..........................................34
Section 4.3 Tax Cooperation................................................35
Section 4.4 Bulk Sales Waiver..............................................35
ARTICLE V
SURVIVAL AND INDEMNIFICATION..............................................................35
Section 5.1 Survival of Representations, Warranties
and Covenants..................................................35
Section 5.2 Indemnification................................................36
Section 5.3 Claims for Indemnification.....................................36
Section 5.4 Limitations on Indemnification.................................37
Section 5.5 Insurance Proceeds.............................................38
Section 5.6 Exclusive Remedy...............................................38
ARTICLE VI
MISCELLANEOUS.............................................................................38
Section 6.1 Confidentiality................................................38
Section 6.2 Non-Competition................................................39
Section 6.3 Employee Benefits and Compensation.............................40
Section 6.4 Employee Bonus.................................................42
Section 6.5 Expenses.......................................................42
Section 6.6 Entire Agreement; No Third-Party
Beneficiaries..................................................42
Section 6.7 Amendment, Extension and Waiver................................42
Section 6.8 Headings.......................................................42
Section 6.9 Notices........................................................43
Section 6.10 Assignment.....................................................44
Section 6.11 Severability...................................................44
Section 6.12 Applicable Law.................................................44
Section 6.13 Jurisdiction...................................................44
Section 6.14 Service of Process.............................................45
Section 6.15 Interpretation.................................................45
Section 6.16 WAIVER OF JURY TRIAL...........................................45
Section 6.17 Specific Performance...........................................46
Section 6.18 Counterparts...................................................46
ARTICLE VII
CERTAIN DEFINITIONS.......................................................................47
PURCHASE AGREEMENT
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PURCHASE AGREEMENT, dated as of August 10, 2001 (this
"Agreement"), by and among CAG Acquisition Corp., a Delaware corporation
("Buyer") and wholly-owned subsidiary of Hartmarx Corporation, a Delaware
corporation ("Hartmarx"), Consolidated Apparel Group, LLC, a New York
limited liability company ("Seller"), and Xxxxx Xxxxxxx ("Wolfman").
WHEREAS, Seller is engaged in the business of the designing,
sourcing, marketing and selling, at wholesale, men's sportswear apparel
products (the "Business");
WHEREAS, Wolfman is the principal member of Seller; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires
to sell, assign, transfer, convey and deliver to Buyer, all the assets and
properties of Seller, together with certain obligations and liabilities
relating thereto, all in the manner and subject to the terms and conditions
set forth herein;
NOW THEREFORE, in consideration of the premises and the covenants,
agreements, representations and warranties contained herein, intending to
be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
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Section 1.1 Purchase and Sale of Assets.
(a) Acquired Assets. Subject to the terms of this Agreement,
effective as June 30, 2001, Seller agrees to sell, assign, transfer, convey
and deliver to Buyer or its designee(s) (which shall be an affiliate of
Buyer, reasonably satisfactory to Seller), and Buyer agrees to purchase and
acquire (or cause any such designee(s) to purchase and acquire) from
Seller, as of the Closing, Seller's right, title and interest in and to all
of its rights, properties and assets of every kind, nature, character and
description (whether real, personal or mixed, whether tangible or
intangible, and wherever located) and whether or not required to be
reflected on a balance sheet prepared in accordance with GAAP
(collectively, the "Assets"), including, without limitation, the following:
(i) all goodwill as a going concern;
(ii) all of Seller's contracts, agreements, leases,
instruments, obligations, arrangements or other understandings
(whether written or oral) (including amendments and supplements,
modifications, and side letters or agreements), including, without
limitation, those identified in Section 1.1(a)(ii) of the written
statement delivered to Buyer by Seller herewith and dated as of the
date hereof (the "Seller Disclosure Schedule");
(iii) Intentionally omitted;
(iv) all marketing, sales and promotional literature,
books, records, files, documents, financial records, bills,
accounting, internal and audit records, operating manuals, personnel
records, customer and supplier lists and files, preprinted materials,
and other similar items in the possession or under the control of
Seller or in the possession or under the control of its Affiliates or
their representatives;
(v) all rights, title and interests of Seller in and to all
real property leases, including improvements, fixtures, fittings
thereon and appurtenances thereto, including, without limitation,
those listed in Section 1.1(a)(v) of the Seller Disclosure Schedule;
(vi) all rights to all telephone numbers related to the
Business and rights to the name "Consolidated Apparel Group";
(vii) all intangible assets, including Intellectual
Property and other intangible assets of an intellectual property
nature, including, without limitation, the Intellectual Property
listed on Section 1.1(a)(vii) of the Seller Disclosure Schedule;
(viii) all payments, deposits (including security deposits)
and prepaid expenses of Seller and all rights to insurance proceeds;
(ix) all raw materials, components, work-in-process,
finished products, inventory, office and other supplies, spare parts,
packaging materials, samples and other accessories related thereto,
wherever located, including any of the foregoing purchased subject to
any conditional sales or title retention agreement in favor of any
other Person, together with all rights of Seller against suppliers of
such inventories;
(x) all furnishings, furniture, fixtures, equipment, tools,
machinery, vehicles, art work and other tangible personal property,
including, without limitation, the tangible personal property listed
on Section 1.1(a)(x) of the Seller Disclosure Schedule;
(xi) all rights under warranties, representations and
guarantees made by suppliers, manufacturers or contractors;
(xii) all Permits, including, without limitation, the
Permits listed on Section 1.1(a)(xii) of the Seller Disclosure
Schedule;
(xiii) all cash and cash equivalents such as bank deposits,
certificates of deposit and marketable securities; and
(xiv) all claims and causes of action against other Persons
(regardless of whether or not such claims and causes of action have
been asserted by Seller), and all rights of indemnity, warranty
rights, rights of contribution, rights to refunds, rights of
reimbursement and other rights of recovery possessed by Seller
(regardless of whether such rights are currently exercisable).
(b) Excluded Assets. Notwithstanding anything contained herein to
the contrary, Seller shall not sell, assign, transfer, convey or deliver to
Buyer, and Buyer shall not purchase from Seller the following assets,
properties, interests and rights of Seller (the "Excluded Assets"):
(i) the organizational documents, seals, minute books, and
other documents relating exclusively to the organization, maintenance
and existence of Seller as a limited liability company, including,
without limitation, taxpayer and other identification numbers, Tax
Returns, Tax information and Tax records, and books and records
related exclusively to the Excluded Assets or the Excluded
Liabilities;
(ii) the rights of Seller under this Agreement;
(iii) any refunds (or rights thereto) relating to Taxes
attributable to or imposed upon Seller's conduct of the Business for
all periods ending on or prior to the date hereof; and
(iv) Any right, property or asset which is listed in
Section 1.1(b)(iv) of the Seller Disclosure Schedule.
Section 1.2 Assumption of Liabilities. Subject to the terms of this
Agreement and excluding the Excluded Liabilities, Buyer hereby agrees to
assume, perform and discharge when due only the following Liabilities
(collectively, the "Assumed Liabilities"):
(a) the Liabilities of Seller under the Business Contracts but
only to the extent such obligations (A) arise after the date hereof, (B) do
not arise from or relate to any breach by Seller of any such Business
Contracts, (C) do not arise from or relate to any event, circumstance or
condition occurring or existing on or prior to the date hereof that, with
notice or lapse of time, would constitute or result in a breach of any of
such Business Contracts, and (D) are ascertainable (in nature and amount)
solely by reference to the express terms of such Business Contracts;
(b) accounts payable to the extent reflected on the Balance Sheet
or (i) incurred in the ordinary course of business consistent with past
practice since December 31, 2000 and (ii) set forth on Section 1.2(b) of
the Seller Disclosure Schedule;
(c) the obligations of Seller with respect to the accrued expenses
listed in Section 1.2(c) of the Seller Disclosure Schedule;
(d) Intentionally omitted; and
(e) the Liabilities listed on Section 1.2(e) of the Seller
Disclosure Schedule.
Section 1.3 Excluded Liabilities. Except as expressly provided in
Section 1.2, Buyer shall not assume or be liable for any other Liabilities
of Seller or any other Person, whether or not relating to the Business (the
"Excluded Liabilities"), including, without limitation, the following:
(a) all Liabilities relating to Taxes attributable to or imposed
upon Seller, Wolfman or any of their respective Affiliates for the conduct
of the Business or the transactions contemplated by this Agreement (or for
which the Seller, Wolfman or any of their respective Affiliates may
otherwise be liable) for any period (or portion thereof) ending on or prior
to the date hereof (but excluding 50% of all Liabilities for sales, use,
documentary, transfer and other similar Taxes related to the transactions
contemplated by this Agreement as referred to in Section 4.1(a));
(b) any Liability of Seller arising out of or relating to the
execution, delivery or performance of this Agreement;
(c) any Liability of Seller for any fees, costs or expenses of the
type referred to in Section 6.5;
(d) any Liability relating to any Excluded Asset;
(e) any Liability that relates to, or arises out of, directly or
indirectly, the operation of the Business or Seller's ownership or use of
the Assets prior to the date hereof;
(f) Any liability under or otherwise attributable to the Benefit
Plans (as defined in Section 2.14(a)), including without limitation any
Liability for benefits payable thereunder;
(g) Any Liability in any way attributable to the performance of
services for Seller prior to the date hereof by either any employee of
Seller or any other individuals rendering services to Seller (including,
without limitation, individuals providing services in accordance with the
Xxxxxx Agreement); and
(h) Any other Liability otherwise attributable to the arrangement
contemplated by the Xxxxxx Agreement.
Section 1.4 Purchase Price; Allocation; Deferred Payments
(a) Upon the terms and subject to the conditions set forth herein,
in consideration for the aforesaid sale, assignment, transfer and
conveyance of the Assets, Buyer or its designee(s) shall (i) deliver or
cause to be delivered to Seller at the Closing $ 8,348,336 (the "Closing
Payment") by wire transfer of immediately available funds to an account or
accounts designated by Seller, (ii) deliver or cause to be delivered to
Seller, the Deferred Payment (as defined below) and (iii) deliver, or cause
to be delivered, to Seller the payments, if any, required by Section 1.9 at
such time as any such payments are required. For purposes of this
Agreement, "Purchase Price" means the sum of the Closing Payment, the
Deferred Payment and the net amount of any payments made pursuant to
Sections 1.5 and 1.9 hereof. Buyer shall allocate the Purchase Price (and
the Assumed Liabilities) paid by Buyer for the Assets in accordance with
Exhibit A, and Seller shall take no position that is inconsistent with such
allocation in any Tax Return, audit, litigation or other proceeding.
(b) The Buyer shall pay Seller $9,808,366 (the "Deferred Amount")
in accordance with this Section 1.4(b) (such payment, the "Deferred
Payment"). From the Closing until October 31, 2001, Seller shall provide
Buyer with monthly statements of all amounts collected by Seller (including
amounts paid by the CIT Group/Commercial Services, Inc ("CIT") under the
Notification and Factoring Agreement, dated August 11, 1995, between CIT
and Seller, as amended (the "Factoring Agreement," such payments
the"Section 7.2 Payments"), with respect to Accounts Receivable outstanding
as of the date of this Agreement (the "Pre-Closing Accounts Receivable").
On October 31, 2001, Buyer shall pay Seller (i) an amount equal to the
Deferred Amount less the total amount collected by Seller with respect to
the Pre-Closing Accounts Receivable prior to such date (including the
Section 7.2 Payments) plus interest on such amount from August 11, 2001 to
October 31, 2001 at the rate of interest publicly announced by the Chase
Manhattan Bank from time to time as its prime rate plus 1% (the "Interest
Rate") per annum and (ii) interest at the Interest Rate per annum on the
amount of any amounts collected by Seller (including the Section 7.2
Payments) prior to October 31, 2001 in respect of the Pre-Closing Accounts
Receivable from August 11, 2001 until the date of such collection. On
October 31, 2001, Seller shall sell, assign, transfer, convey and deliver
to Buyer or its designee(s) (which shall be an affiliate of Buyer,
reasonably satisfactory to Seller), Seller's right, title and interest in
and to all outstanding Pre-Closing Accounts Receivable and any proceeds
thereof. On October 31, 2001, Seller shall instruct CIT to remit to Buyer
any amounts they receive thereafter or pay pursuant to Section 7.2 of the
Factoring Agreement in respect of the Pre-Closing Accounts Receivable.
Section 1.5 Purchase Price Adjustment.
(a) As soon as practicable, but in no event later than October 31,
2001, Seller shall prepare and deliver to Buyer a statement (the "Closing
Statement"), setting forth (i) the cumulative profits of Seller for the
period beginning January 1, 2001 and ending as of June 30, 2001 (the
"Cumulative Profits") which shall be calculated in a manner consistent with
the preparation of the Financial Statements and shall take into account the
reduction of certain reserves of Seller as disclosed in Section 2.6 of the
Seller Disclosure Schedule and shall take into account the difference in
standard costs and actual costs for the inventory of Seller sold prior to
June 30, 2001, namely the purchase price variance relating to such
inventory (it being understood that the determination of the actual costs
for such period may not be finalized until October 31, 2001 after all costs
for such inventory have been identified) and (ii) the amount of all
distributions of cash and other property to Seller's members in respect of
such period (but specifically excluding any distributions relating to
earnings in the calendar years prior to January 1, 2001) ("Distributions").
Buyer hereby acknowledges and agrees that Seller may entrust members of the
management of Seller who become members of management of Buyer on and after
the date hereof, including, without limitation, Xxxxxx Xxxxxxx, to prepare
the Closing Statement, and that Seller (or its representatives) shall have
reasonable access to the accounting systems and books and records of Buyer
relating to the Business to prepare the Closing Statement.
(b) After receipt of the Closing Statement, Buyer shall have 30
days to review it. Buyer and its authorized representatives shall have
reasonable access to all relevant books and records and employees of Seller
and Seller's accountants to the extent required to complete their review of
the Closing Statement, including, without limitation, the accountants' work
papers used in preparation thereof. Unless Buyer delivers written notice to
Seller on or prior to the 30th day after receipt of the Closing Statement
specifying in reasonable detail its objections to the Closing Statement,
Seller and Buyer shall be deemed to have accepted and agreed to the Closing
Statement. If Buyer so notifies Seller of such an objection to the Closing
Statement, Seller and Buyer shall within 30 days following the date of such
notice (the "Adjustment Resolution Period") attempt to resolve their
differences. Any resolution by them as to any disputed amount shall be
final, binding, conclusive and nonappealable.
(c) If, at the conclusion of the Adjustment Resolution Period,
Seller and Buyer have not resolved all disputes, then all amounts remaining
in dispute shall, at the election of either party, be submitted to a "big
5" accounting firm (other than PricewaterhouseCoopers LLP) mutually agreed
upon by Buyer and Seller (the "Neutral Auditor"). Each of Seller and Buyer
agrees to execute, if requested by the Neutral Auditor, an engagement
letter in usual and customary form and reasonably satisfactory to Seller
and Buyer. All fees and expenses of the Neutral Auditor shall be borne
equally by Buyer and Seller. The Neutral Auditor shall act as an arbitrator
to determine, based solely on the presentations by Buyer and Seller, and
not by independent review, only those amounts remaining in dispute. The
Neutral Auditor's determination shall be made within 30 days of its
engagement, shall be set forth in a written statement delivered to Buyer
and Seller, and shall be final, binding, conclusive and nonappealable. The
term "Final Closing Statement" shall mean the definitive Closing Statement
agreed to by Seller and Buyer in accordance with Section 1.5(b) or the
definitive Closing Statement resulting from the determination made by the
Neutral Auditor in accordance with this Section 1.5(c) (in addition to
those items theretofore agreed to by Seller and Buyer).
(d) To the extent that Distributions reflected on the Final
Closing Statement are less than the Cumulative Profits, Buyer shall make a
cash payment to Seller to the extent of such difference, and to the extent
that Distributions reflected on the Final Closing Statement are greater
than the Cumulative Profits, Seller shall make a cash payment to Buyer to
the extent of such difference. The amount, if any, paid to either Buyer or
Seller pursuant to this Section 1.5(d) shall be paid by either Buyer or
Seller, as the case may be, within five Business Days after the Final
Closing Statement is agreed to by Seller and Buyer or is determined by the
Neutral Auditor, by wire transfer of immediately available funds to the
account designated by Buyer or Seller, as the case may be. Any payment
required to be made hereunder shall be treated as an adjustment of the
Purchase Price.
Section 1.6 Closing. Concurrently with the execution and delivery
of this Agreement, the purchase and sale of the Assets (the "Closing")
shall take place at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx
(Illinois), 000 Xxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx.
Section 1.7 Deliveries by Seller. At the Closing, Seller shall
deliver, or cause to be delivered, to Buyer the following:
(a) the xxxx of sale for the Assets;
(b) the consents (or in lieu thereof waivers) listed in Section
1.7(b) of the Seller Disclosure Schedule;
(c) Wolfman's employment agreement (the "Employment Agreement");
(d) the Assignment, Assumption and Amendment of Lease for the
Rouses Point, New York facility;
(e) an instrument or instruments of assignment with respect to the
Intellectual Property included in the Assets;
(f) the opinion of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx,
special counsel to Seller, dated the date hereof; and
(g) all other previously undelivered documents, instruments or
writings required to be delivered by Seller to Buyer at or prior to the
Closing, pursuant to this Agreement or otherwise required in connection
herewith.
Section 1.8 Deliveries by Buyer. At the Closing, Buyer shall deliver,
or cause to be delivered, to Seller the following:
(a) the Closing Payment; and
(b) all other previously undelivered documents, instruments or
writings required to be delivered by Buyer to Seller at or prior to the
Closing, pursuant to this Agreement or otherwise required in connection
herewith.
Section 1.9 Earnout Payment. (a) Subject to Section 1.9(f), as soon as
practicable, but in no event later than 120 days following the end of each
Earnout Payment Period (or in the case of the final Earnout Payment
referred to in Section 1.9(e)(ii)(C), 120 days following the November 30 of
the December 1 to November 30 year that includes such seven-month final
Earnout Payment Period), Buyer shall deliver to Seller, a written
computation statement prepared by Buyer setting forth, in reasonable
detail, (i) the EBIT, and (ii) the Earnout Payment, if any, for such
Earnout Payment Period (the "Earnout Payment Statement").
(b) After receipt of the Earnout Payment Statement, Seller shall
have 30 days to review it. Seller and its authorized representatives shall
have reasonable access to all relevant books and records and employees of
Buyer and Buyer's accountants to the extent required to complete their
review of the Earnout Payment Statement, including, without limitation, the
accountants' work papers used in preparation thereof. Unless Seller
delivers written notice to Buyer on or prior to the 30th day after receipt
of the Earnout Payment Statement of its disagreement as to any item
included on or omitted from the Earnout Payment Statement (an "Earnout
Payment Statement Objection"), Seller shall be deemed to have accepted and
agreed to the Earnout Payment Statement. If Seller so notifies Buyer of an
Earnout Payment Statement Objection, Seller and Buyer shall, within 30 days
following the date of such notice (the "Resolution Period"), attempt to
resolve their differences. Any resolution by them as to any disputed amount
shall be final, binding, conclusive and nonappealable. The term "Final
Earnout Payment Statement" shall mean the definitive Earnout Payment
Statement, including the calculation of the Earnout Payment and EBIT agreed
to by Seller and Buyer in accordance with this Section 1.9(b), or in the
absence of such agreement, the definitive Earnout Statement, including the
Earnout Payment and EBIT resulting from the determination made by the
Neutral Auditor in accordance with Section 1.9(c) hereof (in addition to
those items to which Seller and Buyer have theretofore agreed).
(c) If, at the conclusion of the Resolution Period, Seller and
Buyer have not resolved all disputes, then all amounts remaining in dispute
shall, at the election of either party, be submitted to the Neutral
Auditor. Buyer and Seller agree to execute, if requested by the Neutral
Auditor, an engagement letter in usual and customary form and reasonably
satisfactory to Seller and Buyer. All fees and expenses of the Neutral
Auditor shall be borne equally by Buyer and Seller. The Neutral Auditor
shall act as an arbitrator to determine, based solely on the presentations
by Seller and Buyer, and not by independent review, only those amounts
remaining in dispute. The Neutral Auditor's determination shall be made
within 30 days of its engagement, shall be set forth in a written statement
delivered to Seller and Buyer and shall be final, binding, conclusive and
nonappealable.
(d) Subject to Section 1.9(f), the Earnout Payments, if any, as
reflected in the Final Earnout Payment Statement, shall be paid within five
Business Days after the date that the applicable Final Earnout Payment
Statement is agreed to by Seller and Buyer or is determined by the Neutral
Auditor, in immediately available funds by wire transfer to the account
designated by Seller.
(e) For purposes of this Section 1.9:
(i) "Earnout Payment" for each Earnout Payment Period, the
Earnout Payment shall be calculated as follows:
(A) if EBIT is less than $5 million, the Earnout
Payment shall be $1 million; provided that earnings of the Business are
greater than $1 million after deducting (i) all interest expense and
other financing costs of Buyer or any Affiliate of Buyer related to the
financing of the Closing Payment, any Earnout Payments and the assets
employed in the Business ("Financing Costs") and (ii) any amortization
of goodwill related to the Business or Assets computed on a 10-year
basis from the date hereof;
(B) if EBIT is between $5 million and (including)
$7.5 million, the Earnout Payment shall be an amount equal to 25% of
such EBIT; and
(C) if EBIT is greater than $7.5 million, the
Earnout Payment shall be an amount equal to 33% of such EBIT;
provided, however, that the Earnout Payment shall be an amount equal to
33% of EBIT for the Earnout Payment Period referred to in Section
1.9(e)(ii)(A).
(ii) "Earnout Payment Period" means the following periods:
(A) the five-month period commencing July 1,
2001 and ending November 30, 2001;
(B) for the four-year period beginning December
1, 2001 and ending November 30, 2005, each of the 12-month periods
beginning December 1 and ending November 30; provided, that in the
event that an Earnout Payment is not required to be paid pursuant to
this Section 1.9 in respect of one or more Earnout Payment Periods
referred to in this clause (B), one additional 12-month Earnout Payment
Period shall be added for each such Earnout Payment Period in respect
of which an Earnout Payment is not made (up to a maximum of two
additional Earnout Payment Periods). Any such additional Earnout
Payment Periods shall commence on December 1, 2005 and, if necessary,
December 1, 2006, respectively; and
(C) the seven-month period from December 1 in
the year in which the final Earnout Payment Period in clause (B) is
completed and ending June 30 of the following year; provided, that in
the event that an Earnout Payment is not required to be paid pursuant
to this Section 1.9 in respect of such period and the Earnout Payment
Periods in clause (B) have been extended by no more than one additional
period, one additional seven-month Earnout Payment Period (commencing
December 1 and ending June 30) shall be added for each Earnout Payment
Period referred to in this clause (C) (including any such additional
period) in respect of which an Earnout Payment has not been made;
provided further, that in no event shall more than two additional
Earnout Payment Periods be added in the aggregate pursuant to clause
(B) above and this clause (C).
(iii) "EBIT" means for each Earnout Payment Period, the
earnings of the Business as conducted by Buyer and/or its Affiliates
19before interest and income taxes, Financing Costs and amortization
of goodwill related to the Business or Assets calculated in accordance
with GAAP consistently applied during such period; provided, that in
determining the Earnout Payment, if any, in respect of the seven-month
period referred to in Section 1.9(e)(ii)(C), the percentage to be
applied to the EBIT for such seven-month period shall be determined
based on EBIT for the 12-month period from December 1 to November 30
that includes such seven-month period.
(f) Buyer's obligations under this Section 1.9 shall immediately
terminate upon the earlier of (i) the payment to Seller of six Earnout
Payments in accordance with this Section 1.9, (ii) the completion of eight
Earnout Payment Periods (regardless of the number of Earnout Payments
actually made), or (iii) payment of the Lump Sum Earnout Payment pursuant
to Section 1.9(g).
(g) In the event that at any time before the end of the last
Earnout Payment Period, there shall occur a Change in Control (as defined
below) of Hartmarx, upon written notice from Seller delivered to Buyer not
later than 90 days following the date of such Change in Control, Seller
shall have the right to elect to be paid the Earnout Payment either (i) in
accordance with the provisions of Sections 1.9(a) - (e), or (ii) in a lump
sum (the "Lump Sum Earnout Payment"). The Lump Sum Earnout Payment shall be
an amount equal to the sum of (A) the "Average Earnout Payment" (as defined
below) multiplied by the number of complete 12-month Earnout Payment
Periods remaining pursuant to Section 1.9(e)(ii), plus (B) the Average
Earnout Payment multiplied by .583 (reflecting the seven-month period
Earnout Payment Period under Section 1.9(e)(ii)(C)). "Average Earnout
Payment" means the sum of all Earnout Payments paid or required to be paid
pursuant to this Section 1.9 for all Earnout Payment Periods completed up
to the date of the Change in Control (including $0 for each Earnout Payment
Period in excess of 2 in respect of which no Earnout Payment was required).
For purposes of computing the Average Earnout Payment (A) the Earnout
Payment for the five-month Earnout Payment Period ending November 30, 2001
shall be included on an annualized basis, and (B) the Earnout Payment for
any Earnout Payment Period completed prior to the date of a Change in
Control but in respect of which an Earnout Payment Statement has not been
delivered shall be included promptly upon the determination of such Earnout
Payment. If elected by Seller in accordance with this Section 1.9(g), the
Lump Sum Earnout Payment shall be paid to Seller within 90 days after
Buyer's receipt of Seller's election pursuant to this Section 1.9(g).
(h) For purposes of this Section 1.9, a "Change in Control" shall
mean the occurrence of any of the following:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Hartmarx representing 25% or more of the
combined voting power of Hartmarx' then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in connection
with a merger or consolidation which would result in the record holders
of the voting securities of Hartmarx outstanding immediately prior to
such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) in substantially the same
proportions as their ownership immediately prior to such merger or
consolidation at least 75% of the combined voting power of the voting
securities of Hartmarx or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation; provided
that this exclusion shall only apply to the percentage obtained by
merger or consolidation and shall cease to apply in the event
additional securities are purchased in another transaction;
(ii) during any period of two consecutive years (not including
any period prior to the date of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of Hartmarx
("Hartmarx Board") (together with any new directors whose election by
the Hartmarx Board or whose nomination for election by the shareholders
of Hartmarx was approved by a vote of at least 66 2/3 % of the
directors of Hartmarx then still in office who were either directors at
the beginning of such period or whose election or nomination for
election was previously so approved unless the initial assumption of
office of such subsequently-elected or appointed director was in
connection with (A) an actual or threatened election contest, including
a consent solicitation, relating to the election or removal of one or
more members of the Hartmarx Board, (B) a "tender offer" (as such term
is used in Section 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), (C) a proposed merger or consolidation
of Hartmarx, or (D) a request, nomination or suggestion of any one or
more Beneficial Owner of voting securities of Hartmarx representing 20%
or more of the aggregate voting power of the voting securities of
Hartmarx or the surviving corporation, as applicable)) cease for any
reason to constitute 66 2/3 % of the Hartmarx Board then in office;
(iii) there is consummated a merger or consolidation of
Hartmarx (or any direct or indirect subsidiary of Hartmarx) with any
other corporation, other than a merger or consolidation which would
result in the record holders of the voting securities of Hartmarx
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) in substantially the same proportions as their ownership
immediately prior to such merger or consolidation at least 75% of the
combined voting power of the voting securities of Hartmarx or such
surviving entity or any parent thereof outstanding immediately after
such merger or consolidation;
(iv) the stockholders of Hartmarx approve a plan of complete
liquidation or dissolution of Hartmarx or there is consummated an
agreement for the sale or disposition by Hartmarx of all or
substantially all of Hartmarx' assets, other than a sale or disposition
by Hartmarx of all or substantially all of Hartmarx' assets to an
entity at least 75% of the combined voting power of the voting
securities of which are owned by Persons in substantially the same
proportions as their ownership of Hartmarx immediately prior to such
sale; or
(v) all or substantially all of the assets or outstanding
stock of Buyer is sold to any Person, or the consummation of a
transaction having a similar effect; or Hartmarx, directly or
indirectly, ceases to beneficially own at least 51% of the issued and
outstanding voting securities of Buyer.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur in the event of a Management Change in Control. A Management
Change in Control shall mean a Change in Control pursuant to which Wolfman
(alone or with others) acquires or retains, directly or indirectly, the
power to direct or cause the direction of the management and policies of
Hartmarx (whether through the ownership of voting securities, by contract,
or otherwise) and which is directly or indirectly attributable to a public
announcement by Wolfman (or others acting in concert with Wolfman) of an
intention to take actions which, if consummated, would constitute such
Management Change in Control. In addition, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series
of integrated transactions immediately following which the record holders
of the combined voting power of Hartmarx' outstanding securities
immediately prior to such transaction or series of transactions continue to
have substantially the same proportionate ownership in an entity which owns
all or substantially all of the assets of Hartmarx immediately following
such transaction or series of transactions.
(i) For purposes of Section 1.9(h) only, the following terms shall
be defined as follows:
(i) "Person" shall mean any person (as defined in Section
3(a)(9) of the Exchange Act), as such term is modified in Sections
13(d) and 14(d) of the Exchange Act) other than (1) any employee plan
established by Hartmarx, (2) Hartmarx or any of its affiliates (as
defined in Rule 12b-2 promulgated under the Exchange Act) prior to the
transaction resulting in the Change in Control, (3) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (4) a corporation owned, directly or indirectly, by
stockholders of Hartmarx in substantially the same proportions as their
ownership of Hartmarx.
(ii) "Beneficial Owner" shall mean beneficial owner as defined
in Rule 13d-3 under the Exchange Act.
Section 1.10 Covenants During Earnout Payment Periods. From the Closing
and continuing until November 30 of the last year of the final Earnout
Payment Period:
(a) For operational purposes, the Business shall be operated on a
stand-alone basis in a manner consistent with past practices.
(b) Wolfman shall serve as President of Buyer pursuant to, and
subject to the terms and conditions of, the Employment Agreement.
(c) If Wolfman is unable, for whatever reason, to serve as
President of Buyer, he shall be replaced by a person selected by Wolfman
from three candidates (one of which shall not be a current employee of
Buyer or any of its Affiliates) designated by Hartmarx.
(d) No general corporate overhead expenses of Hartmarx shall be
allocated to the Business in determining EBIT for any Earnout Payment
Period; provided that, the Business shall be charged for all services and
employee and other costs associated with the Business or employees of the
Business by Hartmarx or any of its Affiliates (including, without
limitation, audit, legal, insurance and treasury) at the same rate
generally charged to Hartmarx' other businesses for similar services
consistent with Hartmarx' applicable accounting practices.
(e) At Closing, Buyer shall adopt the various operating practices
followed by Seller including, but not limited to, sales practices, price
increases or decreases, inventory procurement, customer relations, employee
base salary and bonus opportunities (other than for Wolfman) and the
accounting thereof, and the day-to-day operational decisions and
decision-making authority with respect to the operations of the Business
shall be made by Wolfman (for so long as Wolfman serves as President of
Buyer), consistent with the provisions of this Section 1.10(e) and the
authority of other Hartmarx operating unit presidents. Seller, Wolfman,
Buyer and Hartmarx acknowledge that changes in the general economic
conditions of the retail and apparel industries or to other factors could
result in changes to Buyer's business practices in the future. Annual
budgets, capital expenditure plans and long-term plans shall be prepared by
Buyer, and reviewed and approved by Hartmarx in a manner substantially
consistent with other Hartmarx operating units. If the Business is not
operated in accordance with such approved annual budgets, capital
expenditure plans and long-term plans, or if general economic conditions or
other factors make it necessary, appropriate or advisable for Buyer to
change its operating practices, Hartmarx may require such changes and may
make such operational decisions regarding the Business as it deems
appropriate in its sole discretion.
(f) Neither Hartmarx nor Buyer shall, without the consent of
Wolfman, cause the warehousing operations of the Business to be moved to a
location other than its present location at Rouses Point, New York;
however, notwithstanding the foregoing, Buyer may move (and Hartmarx may
direct Buyer to move its warehousing operations to the location of
Hartmarx' choice), in accordance with the notice requirements set forth in
that certain Assignment, Assumption and Amendment of Lease of even date
herewith by and among Seller, Wolfman and Buyer, provided that (i) said
warehouse relocation shall be performed in an orderly manner so as to
prevent or minimize, to the extent practicable, any material adverse effect
on, or disruption to, the operation of the Business, and (ii) in addition
to the cost allocations associated with the Rouses Point, New York
warehouse, the Business shall be allocated costs on a per-unit basis to the
extent that such operations are moved to a new location, such costs not to
exceed the most recent annual historical per unit costs associated with the
warehousing operations of the Business in Rouses Point, New York.
Section 1.11 Further Assurances. After the Closing, Seller shall, from
time to time, at the request of Buyer, and without further expense to
Buyer, execute and deliver such other instruments of conveyance and
transfer (including powers of attorney) as Buyer may reasonably request, in
order to more effectively consummate the transactions contemplated hereby
and to vest in Buyer good and marketable title to the Assets (or in the
case of real property leases, valid leasehold interests), including,
without limitation, assistance in the collection or reduction to possession
of any such Assets.
Section 1.12 Third-Party Consents. To the extent that any Asset is not
assigned or not assignable to Buyer or if any necessary consent to such
assignment shall not have been obtained by Seller, this Agreement shall not
constitute an assignment or attempted assignment of such Asset. With
respect to any such Asset, Seller shall use its commercially reasonable
efforts to obtain any necessary consents from and after the date hereof. If
such consents are not obtained, Seller shall (i) cooperate in any
reasonable arrangement designed to provide Buyer with the benefits of such
Asset and (ii) enforce at the request of Buyer any rights of Seller arising
from such Asset (including, without limitation, a right of termination).
Buyer agrees to use reasonable efforts to perform any obligations relating
to an Asset for which benefits are being provided to Buyer in accordance
with the preceding sentence to the same extent required of Seller (in the
same (or as near as practicable) manner and time, and with the same
quality, required of Seller).
Section 1.13 Change of Name. On the date hereof, Seller will amend its
organizational documents so as to delete therefrom the words "Consolidated
Apparel Group" and will file, as promptly as practicable, such documents as
are necessary to reflect such name change in its state of formation or
organization and the other jurisdictions where it is qualified to do
business as a foreign Person. Seller further agrees that, from and after
the date hereof, Seller will not adopt any name that is confusingly similar
to, or a derivation of, "Consolidated Apparel Group".
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND WOLFMAN
Seller and Wolfman jointly and severally represent and warrant as
of the date hereof to Buyer that:
Section 2.1 Corporate Organization. Seller (a) is duly formed, validly
existing and in good standing under the laws of its jurisdiction of
formation or organization; (b) has full limited liability company power and
authority to carry on its businesses as they are now being conducted by it
and to own the properties and assets it now owns; and (c) is duly qualified
or licensed to do business as a foreign Person in good standing in all the
jurisdictions in which such qualification or licensing is required, except
jurisdictions in which the failure to be so qualified or licensed or in
good standing would not have a Material Adverse Effect.
Section 2.2 Authorization. Each of Wolfman and Seller has the full
power (in the case of Seller, full limited liability company power), and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
by Seller of this Agreement and the consummation of the transactions
contemplated hereby, have been duly authorized and no other limited
liability company or member actions on the part of Seller are necessary to
authorize the execution and delivery by Seller of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Wolfman and Seller, and (assuming due
and valid authorization, execution and delivery hereof by Buyer) is a valid
and binding obligation of Wolfman and Seller enforceable against Wolfman
and Seller in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by the availability of equitable
remedies.
Section 2.3 Consents and Approvals; No Violation. Except as disclosed
in Section 2.3 of the Seller Disclosure Schedule, neither the execution,
delivery or performance of this Agreement by Wolfman or Seller nor the
consummation by Wolfman or Seller of the transactions contemplated hereby
will (i) conflict with or violate any provision of the organizational
documents of Seller; (ii) conflict with or result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of notice, modification, payment,
termination, cancellation or acceleration) under, or result in the creation
of any Lien upon any of the assets or properties of Wolfman or Seller
under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, permit, contract, agreement or other
instrument, obligation, arrangement or understanding to which Wolfman or
Seller is a party or by which any of them or any of their properties or
assets may be bound; (iii) violate any order, writ, judgment, injunction,
decree, law, statute, rule or regulation or other similar authoritative
matter ("Law") applicable to Wolfman or Seller or any of their properties
or assets or (iv) require on the part of Wolfman or Seller any filing or
registration with, notification to, or authorization, consent or approval
of, any court, legislative, executive or regulatory authority or agency (a
"Governmental Authority") or any other Person, except in the case of clause
(ii) or (iv) for such violations, breaches or defaults which, or filings,
registrations, notifications, authorizations, consents or approvals the
failure of which to obtain, could not reasonably be expected to have a
Material Adverse Effect.
Section 2.4 Financial Statements. Seller has heretofore delivered to
Buyer (i) the unaudited balance sheet of Seller as of May 26, 2001 and the
related statements of income, cash flows, and members' equity for the
five-month period then ended and (ii) the audited balance sheet of Seller
as of December 31, 1998, 1999 and 2000 and the related statements of
income, cash flows and members' equity for the periods then ended ((i) and
(ii) collectively, the "Financial Statements"). The Financial Statements
are true, complete and accurate and present fairly in all material respects
the financial position of Seller as of the respective dates thereof, and
the results of operations and cash flows of Seller for the periods then
ended. The Financial Statements have been derived from the books and
records of Seller and are consistent with the books and records of Seller.
The Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved (subject, in the case
of the Financial Statements referred to in clause (i), to the absence of
notes and to normal year end adjustments). As used herein, the term
"Balance Sheet" shall refer to the audited balance sheet of Seller as of
December 31, 2000.
Section 2.5 No Undisclosed Liabilities. Seller has no Liabilities of
any kind whatsoever, and neither Seller nor Wolfman knows of any valid
basis for the assertion of any such Liabilities, and no existing condition,
situation or set of circumstances exists which could reasonably be expected
to result in a Liability, other than:
(a) Liabilities which are adequately reflected and reserved for in
the Balance Sheet or described in the notes to the Financial Statements;
(b) Liabilities incurred in the ordinary and usual course of
business consistent with past practice since December 31, 2000, which,
individually or in the aggregate, are not material; and
(c) Liabilities and obligations that are set forth in Section
2.5(c) of the Seller Disclosure Schedule.
Section 2.6 Absence of Certain Changes. Except as and to the extent set
forth in Section 2.6 of the Seller Disclosure Schedule, since December 31,
2000, (a) the Business has been conducted, only in the ordinary and usual
course of business consistent with past practice and (b) Seller has not:
(i) suffered any adverse change in its business, prospects,
operations, working capital, condition (financial or otherwise),
assets, properties or Liabilities which resulted in or could reasonably
be expected to result in a Material Adverse Effect, and there has not
been any damage, destruction, loss or other event which resulted in or
could reasonably be expected to result in a Material Adverse Effect;
(ii) incurred any Liabilities except current Liabilities
for trade or business obligations in connection with the purchase of
goods or services in the ordinary and usual course of business
consistent with past practice, none of which, individually or in the
aggregate, are material to the Business;
(iii) paid, discharged or satisfied any Liabilities other
than the payment, discharge or satisfaction in the ordinary and usual
course of business and consistent with past practice of Liabilities
reflected or reserved against in the Balance Sheet or current
Liabilities incurred since December 31, 2000 in the ordinary and usual
course of business consistent with past practice none of which,
individually or in the aggregate, are material to the Business;
(iv) permitted or allowed any of its properties or assets
(real, personal or mixed, tangible or intangible) to be subjected to
any Liens, except for Permitted Liens and the liens of CIT under the
CIT Financing;
(v) materially written down the value of any inventories or
written off as uncollectible any accounts receivable;
(vi) cancelled any material debts or waived any claims or
rights of substantial value;
(vii) sold, transferred, or otherwise disposed of any of
its properties or assets (real, personal or mixed, tangible or
intangible), except in the ordinary and usual course of business
consistent with past practice;
(viii) disposed of or permitted to lapse any Intellectual
Property rights, or disposed of or disclosed to any Person, other than
representatives of Buyer, any Intellectual Property rights not
theretofore a matter of public knowledge;
(ix) made, or permitted any other Person to make, any
change in the rate of compensation, commission, bonus or other direct
or indirect remuneration payable, or paid or agreed or orally promised
to pay, conditionally or otherwise, any bonus, incentive, retention or
other compensation, or made any addition to or other change in any
retirement, welfare, fringe or severance benefit or vacation plan, to
or in respect of any member, director, manager, officer, employee,
leased employee, broker, salesman, distributor or agent of Seller;
(x) made any change in its selling, purchasing, pricing,
advertising or personnel practices inconsistent with its prior practice
and prudent business practices prevailing in the industry;
(xi) instituted, settled or agreed to settle any
litigation, action or proceeding before any Governmental Authority or
arbitral body other than in the ordinary and usual course of business
consistent with past practice, but not in any case involving (A)
amounts in excess of $5,000, individually, or $10,000 in the aggregate,
or (B) any form of non-monetary recovery, including consents,
restraining orders or injunctions;
(xii) made any single capital expenditure or commitment in
excess of $10,000 for additions to property, plant, equipment or
intangible capital assets or made aggregate capital expenditures and
commitments in excess of $50,000 for additions to property, plant,
equipment or intangible capital assets;
(xiii) made any change in any method of financial or Tax
accounting or reporting or financial or Tax accounting or reporting
practice, except as required by GAAP; or
(xiv) agreed, whether in writing or otherwise, to take any
action described in this Section 2.6.
Section 2.7 Real Property.
(a) The Seller does not own any real property.
(b) Section 1.1(a)(v) of the Seller Disclosure Schedule contains a
complete list of all real property leased by Seller, together with all
leases related to such properties (the "Real Property Leases"). Seller has
heretofore made available to Buyer true and complete copies of the Real
Property Leases (including any amendments, modifications or supplements
thereto). Each Real Property Lease is legal, valid, binding, enforceable,
and in full force and effect, except as enforcement may be limited by
bankruptcy, insolvency, reorganization and similar laws affecting creditors
generally and by the availability of equitable remedies. Neither Seller
nor, to the knowledge of Seller, any other party is in default, violation
or breach in any respect under any Real Property Lease, and no event has
occurred and is continuing that constitutes or, with notice or the passage
of time or both, would constitute a default, violation or breach in any
respect under any Real Property Lease. The Seller has good and valid title
to the leasehold estate under each Real Property Lease to which it is a
party, free and clear of all Liens, other than Permitted Liens.
Section 2.8 Intellectual Property. Section 1.1(a)(vii) of the Seller
Disclosure Schedule sets forth a true and complete list of all material
Intellectual Property used or held for use by Seller, together with all
licenses related to the foregoing, whether Seller is the licensee or
licensor thereunder. Either Seller owns, or is licensed to use all such
listed Intellectual Property (the "Business Intellectual Property"), and
the consummation of the transactions contemplated by this Agreement will
not alter or impair such ability in any respect. There are no oppositions,
cancellations, invalidity proceedings, re-examination or other proceedings
presently pending with respect to the Business Intellectual Property. The
conduct of the Business and the Business Intellectual Property has not
infringed and does not infringe on any Intellectual Property or other
proprietary rights of any Person, and neither Seller nor Wolfman has
received any notice from any other Person pertaining to or challenging the
right of Seller to use any Business Intellectual Property. The Seller has
not made any claim of a violation or infringement by others of its rights
to or in connection with Business Intellectual Property.
Section 2.9 Certain Contracts.
(a) Section 2.9(a) of the Seller Disclosure Schedule lists, by
reference to the applicable subsection of this Section 2.9(a), all material
contracts, agreements, leases, instruments, obligations, arrangements or
other understandings (whether written or oral), to which Seller is a party
or by which it or any of the Assets may be bound or affected (the "Business
Contracts"), including, without limitation, (i) all employment or other
contracts (including, without limitation, non-competition, confidentiality,
loans to employees, directors, managers or officers, severance or
indemnification agreements) with or in respect of any employee or current
or former officer or director, manager or member of Seller; (ii) all
consulting contracts; (iii) instruments for borrowed money (including,
without limitation, any indentures, guarantees, loan agreements, sale and
leaseback agreements, mortgages, pledges, hypothecations, deeds of trust,
conditional sale or title retention agreements, security agreements or
equipment financing obligations); (iv) agreements for acquisitions or
dispositions (by merger, purchase or sale of assets or stock or otherwise)
of material assets, as to which Seller has continuing obligations or
rights; (v) joint venture or partnership agreements, licensing
arrangements, contracts for sharing of profits or proprietary information;
(vi) purchase contracts or agreements giving rise to Liabilities of Seller;
(vii) guarantees, suretyships, indemnification, contribution agreements or
other sources of contingent liability in respect of any indebtedness or
obligations of any other Person; (viii) all leases of personal property;
(ix) all contracts providing for payments by or to Seller in excess of
$10,000 per year; (x) all contracts obligating Seller to provide or obtain
products or services for a period of one year or more; (xi) all contracts
containing covenants purporting to limit Seller's freedom to compete with
any Person or in any geographic area; (xii) all contracts for construction
or the purchase of real estate, improvements, equipment, machinery and
other items which under GAAP constitute capital expenditures or which
involve or are reasonably expected to involve capital expenditures; (xiii)
all contracts relating to Business Intellectual Property (not otherwise
identified in Section 1.1(a)(vii) of the Seller Disclosure Schedule); (xiv)
any agreement or contract not terminable or cancellable by Seller upon
notice of not longer than 60 days and without liability, penalty or
premium; and (xv) any agreement or contract which was not made in the
ordinary course of business consistent with past practice.
(b) Seller has heretofore provided to Buyer a true and complete
copy of each Business Contract (together with all amendments thereto). Each
Business Contract is a legal, valid and binding obligation of the parties
thereto enforceable against such parties in accordance with its terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws affecting creditors generally and by the
availability of equitable remedies. Neither Seller nor, to the knowledge of
Seller, any other party is in default, violation or breach in any material
respect under any Business Contract, and no event has occurred and is
continuing that constitutes or with notice or the passage of time would
constitute, a default, violation or breach in any material respect under
any Business Contract.
Section 2.10 Permits and Other Authorizations. Section 2.10 of the
Seller Disclosure Schedule lists all material licenses, permits, franchises
and other authorizations of any Governmental Authority (the "Permits")
necessary for, or otherwise material to, the conduct of the Business as
currently conducted. Except as set forth in Section 2.10 of the Seller
Disclosure Schedule, all such Permits are in full force and effect, and no
proceeding is pending or, to the knowledge of each of Seller and Wolfman,
threatened seeking the revocation or limitation of any such Permit.
Section 2.11 Assets. Except as set forth on Section 2.11 of the Seller
Disclosure Schedule, Seller owns all of the Assets, and shall transfer to
Buyer at the Closing, good, valid and marketable title (in the case of the
Real Property Leases, valid leasehold interests therein) to the Assets,
free and clear of all Liens, except Permitted Liens. The Assets include all
rights, properties and other assets used by Seller to conduct the Business
or necessary to permit Buyer to conduct the Business after the Closing in
the same manner as the Business has been conducted by Seller prior to the
date hereof. The plants, structures and equipment included in the Assets
are structurally sound with no known defects and are in good operating
condition and repair, normal wear and tear excepted, and are adequate for
the uses to which they are being put. None of such plants, structures or
equipment are in need of maintenance or repairs except for ordinary,
routine maintenance and repairs which are not material in nature or cost.
Neither the whole nor any portion of any Asset is subject to any
governmental decree or order to be sold or is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefor, nor has any such condemnation, expropriation or
taking been proposed.
Section 2.12 Insurance. Section 2.12 of the Seller Disclosure Schedule
contains an accurate and complete list of all material policies of
property, fire, liability, and other forms of insurance owned or held by
Seller. The Seller has heretofore delivered copies of such insurance
policies to Buyer. All such policies are in full force and effect, and all
premiums with respect thereto covering all periods up to the date hereof
have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Such policies: (a) are sufficient
for compliance with all requirements of Law and of all contracts to which
Seller is a party; (b) are valid, outstanding and enforceable; and (c)
provide adequate insurance coverage for the assets and operations of the
Business.
Section 2.13 Labor Relations. Except to the extent set forth in Section
2.13 of the Seller Disclosure Schedule: (a) Seller is not a party to any
collective bargaining agreements, other contracts, agreements, arrangements
or understandings, written work rules or practices agreed to with any labor
organization, employee association or works council; (b) Seller is and at
all times has been in compliance in all material respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, occupational safety and health and wages and
hours, and are not engaged in any unfair labor practice as defined in the
National Labor Relations Act or other applicable Law; (c) there is no labor
strike, dispute, slowdown, lockout or stoppage pending or, to the knowledge
of Seller or Wolfman, threatened against or affecting the Seller and during
the past five years there has not been any such action; (d) none of the
employees employed by Seller is represented by a labor organization,
employee association or works council and there are no current union
organizing activities among such employees, nor does any question
concerning representation exist concerning such employees; and (e) there
are no written personnel policies, rules or procedures applicable to
employees employed by Seller, other than those set forth in Section 2.13 of
the Seller Disclosure Schedule, true and correct copies of which have
heretofore been delivered to Buyer.
Section 2.14 Benefit Plans; ERISA.
(a) Section 2.14(a) of the Seller Disclosure Schedule contains a
true and complete list of each deferred compensation and each incentive
compensation or equity compensation plan, "welfare" plan, fund or program
(within the meaning of section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or
program (within the meaning of section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan,
fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by Seller or
by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with Seller would be deemed a "single employer"
within the meaning of section 414(b), (c), (m) or (o) of the Internal
Revenue Code of 1986, as amended (the "Code"), or to which Seller or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of Seller or any subsidiary of Seller (the
"Benefit Plans"). Benefit Plans sponsored or maintained or directly
contributed to by Seller or an ERISA Affiliate are referred to herein and
listed on Section 2.14(a) of the Seller Disclosure Schedule as "CAG
Benefit Plans," and Benefit Plans maintained by Xxxxxx Staff Leasing, Inc.,
d/b/a "The Xxxxxx Group" ("Xxxxxx") pursuant to the Xxxxxx Agreement, to
which Seller indirectly contributes through payments made under the Xxxxxx
Agreement but which are not sponsored or maintained or directly contributed
to by Seller or an ERISA Affiliate, are referred to herein and listed on
Section 2.14(a) of the Seller Disclosure Schedule as "Xxxxxx Benefit
Plans."
(b) With respect to each Benefit Plan, Seller has heretofore
delivered to Buyer true and complete copies of the Benefit Plans and any
amendments thereto (or if the Benefit Plan is not a written Benefit Plan, a
description thereof), any related trust or other funding vehicle, any
reports or summaries required under ERISA or the Code and the most recent
determination letter received from the Internal Revenue Service with
respect to each Benefit Plan intended to qualify under section 401 of the
Code.
(c) No liability under Title IV or section 302 of ERISA has been
incurred by Seller or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to any Seller
or any ERISA Affiliate of incurring any such liability.
(d) There are no Benefit Plans subject to Title IV of ERISA, and
neither Seller nor any ERISA Affiliate has any liability with respect to
any plans subject to Title IV of ERISA.
(e) Each CAG Benefit Plan, and to Seller's and Wolfman's
knowledge, each Xxxxxx Benefit Plan has been operated and administered in
all material respects in accordance with its terms and applicable law,
including but not limited to ERISA and the Code.
(f) Each CAG Benefit Plan, and to Seller's and Wolfman's
knowledge, each Xxxxxx Benefit Plan intended to be "qualified" within the
meaning of section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under section 501(a) of the
Code.
(g) No CAG Benefit Plan, and to Seller's and Wolfman's knowledge,
no Xxxxxx Benefit Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former
employees of Seller or any subsidiary of any Seller for periods extending
beyond their retirement or other termination of service, other than (i)
coverage mandated by applicable law, (ii) death benefits under any "pension
plan," or (iii) benefits the full cost of which is borne by the current or
former employee (or his beneficiary).
(h) No amounts payable under the Benefit Plans will fail to be
deductible for federal income tax purposes by virtue of section 280G of the
Code.
(i) Except as set forth in Section 2.14(i) of the Seller
Disclosure Schedule, the consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with another event,
(i) entitle any current or former employee or officer of Seller or any
ERISA Affiliate (or any other Person in respect of whom Seller or any ERISA
Affiliate could have any Liability) to severance pay, unemployment
compensation or any other payment or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee,
officer or other person.
(j) There are no pending, or, to the knowledge of Seller or
Wolfman, threatened or anticipated claims by or on behalf of any CAG
Benefit Plan, by any employee or beneficiary covered under any such CAG
Benefit Plan, or otherwise involving any such CAG Benefit Plan (other than
routine claims for benefits). To the knowledge of Seller and Wolfman, there
are no pending, threatened or anticipated claims by or on behalf of any
Xxxxxx Benefit Plan, by any employee or beneficiary covered under any such
Xxxxxx Benefit Plan, or otherwise involving any such Xxxxxx Benefit Plan
(other than routine claims for benefits).
(k) All contributions and premiums required to be paid by Seller
or any ERISA Affiliate under the terms of each of the Benefit Plans and
Section 302 of ERISA and Section 412 of the Code, have, to the extent due,
been paid in full or properly recorded on the financial statements or
records of the Seller.
(l) No representations or communications, oral or written, with
respect to the participation, eligibility for benefits, vesting, benefit
accrual or coverage under any CAG Benefit Plan have been made to employees,
directors, agents or leased employees (or any of their representatives or
beneficiaries) of Seller which are not in accordance with the terms and
conditions of the CAG Benefit Plans.
(m) Except as described in Section 2.14(m) of the Seller
Disclosure Schedule, neither Seller nor any ERISA Affiliate has used the
services or workers provided by third party contract labor suppliers,
temporary employees, leased employees, or individuals who have provided
services as independent contractors (including without limitation
individuals covered by the Xxxxxx Agreement) who may be eligible to
participate in the CAG Benefit Plans or used the services of individuals to
an extent that could result in the disqualification of any of the CAG
Benefit Plans or the imposition of penalties or excise taxes with respect
to the CAG Benefit Plans by the Internal Revenue Service, the Department of
Labor or any other Governmental Authority.
(n) To Seller's and Wolfman's knowledge, all contributions and
premiums required to be paid under the terms of the Xxxxxx Benefit Plans
and Section 302 of ERISA and Section 412 of the Code have, to the extent
due, been paid in full, and, to Seller's and Wolfman's knowledge, Xxxxxx
has paid in full all other compensation due to the individuals listed on
Attachment 1 to the Xxxxxx Agreement.
(o) To Seller's and Wolfman's knowledge, Xxxxxx has complied in
all material respects with its obligations under Section 4.A and 4.C of the
Xxxxxx Agreement.
Section 2.15 Taxes.
(a) Seller has duly and timely filed, or will so file when due,
with the appropriate Governmental Authorities (or there have been or will
be duly and timely filed on its behalf) all income Tax Returns and all
other material Tax Returns required to be filed by or with respect to it
(including, without limitation, Tax Returns relating to the payment of the
Purchase Price), and all such Tax Returns were or will be true, correct and
complete when filed, (ii) all material Taxes of Seller, which have become,
will become or are due, and any assessments received by Seller, regarding
any period through or ended prior to the date hereof (including, without
limitation, any Taxes due as a result of its receipt of the Purchase Price)
have been timely paid (or will be duly and timely paid and adequate
reserves have been made therefor), except for Taxes that are being
contested by Seller in good faith by appropriate proceedings and for which
adequate reserves have been made, and (iii) no notice of a claim, audit or
pending investigation has been received by Seller, or to the knowledge of
Seller or Wolfman, has been threatened, by any federal, state, local,
foreign or other jurisdiction with respect to Taxes.
(b) No waivers or comparable consents regarding the application of
the statute of limitations with respect to any Taxes or Tax Return have
been executed by Seller.
(c) Section 2.15(c) of the Seller Disclosure Schedule sets forth a
list of each jurisdiction with respect to which Seller has filed a Tax
Return relating to the Business during the last four years, the type of Tax
or Taxes to which such Tax Return relates (e.g., sales Tax, income Tax,
etc.), the latest year for which such Tax Return was filed and a
description of the transaction(s) to which such Tax Return relates.
(d) No claim has ever been made by an authority in a jurisdiction
where the Seller has not filed Tax Returns that Seller is or may be subject
to taxation by that jurisdiction with respect to the Business.
(e) Seller is not a "Foreign Person" within the meaning of Section
1445(a) of the Code.
(f) There are no liens for taxes upon any of the Assets, other
than liens for Taxes not yet due and payable.
(g) Seller has duly and timely withheld, and paid to the proper
Governmental Authority when due, all Taxes required to be withheld and
paid.
Section 2.16 Environmental Matters. The Seller (a) is and has been in
compliance in all material respects with all Laws relating to pollution or
protection of human health or the environment ("Environmental Laws"), and
(b) has not received any communication, notice or claim alleging that it is
not in such compliance or otherwise has any liability or potential
liability under Environmental Laws. There are no facts or circumstances,
including, without limitation, the release of any hazardous substance at
any property currently or formerly owned or operated by Seller, that are
reasonably likely to result in any material liability under Environmental
Laws.
Section 2.17 Litigation. Except as set forth in Section 2.17 of the
Seller Disclosure Schedule, there is no action, claim, suit, inquiry,
judicial or administrative proceeding or investigation by or before any
Governmental Authority or arbitral body pending or, to the knowledge of
Seller and Wolfman, threatened against or involving Seller, the Business or
the Assets. Seller is not a subject to any judgment, order, injunction,
rule or decree of any Governmental Authority or arbitral body affecting the
Business or the Assets.
Section 2.18 Compliance with Law. The operations of the Business have
been conducted in compliance in all material respects with all applicable
Laws and other requirements of all Governmental Authorities (other than
with respect to Environmental Laws, which shall be governed by Section
2.16, and employee benefit related matters, which shall be governed by
Section 2.13). Seller has not received any notification of any asserted
present or past failure by Seller to comply with such Laws or other
requirements.
Section 2.19 Personnel. Section 2.19 of the Seller Disclosure Schedule
sets forth a list of all employees of the Business and each person
providing services covered by the Xxxxxx Agreement as of the date hereof.
Such list indicates as to each such individual: (a) date of commencement of
service; (b) job title or brief job description and place of work; (c)
salary and bonus, if applicable, or other rate of pay for the fiscal year
ended December 31, 2000 and for the fiscal year commencing January 1, 2001;
(d) with respect to salaried individuals, the date of the last salary
increase; and (e) any material commitments or arrangements with such
individuals as to salary or bonus, if applicable, or other rate of pay. To
the knowledge of Seller and Wolfman, no such individual has any plans to
terminate his or her employment with or service to the Business as a result
of the transactions contemplated by this Agreement or otherwise. Section
2.19 of the Seller Disclosure Schedule separately identifies those
individuals who are common-law employees of Seller.
Section 2.20 Related Party Transactions. Except as disclosed in Section
2.20 of the Seller Disclosure Schedule, no officer, director, manager,
interest holder, member or Affiliate of Seller or any Affiliate of the
foregoing (collectively "Related Parties") provides or causes to be
provided any assets, services or facilities to Seller or has any other
business relationship with Seller. No Related Party conducts a business
similar to the Business.
Section 2.21 Inventory. All of the inventories of Seller consist of a
quality and quantity usable and salable in the ordinary and usual course of
business, except for items of obsolete materials and materials of
below-standard quality, all of which items have been written off or written
down to fair market value on the Balance Sheet or for which adequate
reserves have been provided therein. All inventories not written off have
been priced at the lower of cost or market. The quantities of each type of
inventory are not excessive, but are reasonable and warranted in the
present circumstances of the Business. All inventory held by the Business
is free of any defect or other deficiency, meets Seller's specifications
and does not infringe on any third-party Intellectual Property.
Section 2.22 Accounts Receivable. Except as set forth in Section 2.22
of the Seller Disclosure Schedule, all trade accounts receivable and all
notes, bonds and other evidences of indebtedness and rights to receive
payments arising out of sales of goods ("Accounts Receivable"), whether
reflected on the Financial Statements or arising thereafter in the ordinary
course of business, (i) arose in the ordinary course of business from bona
fide arm's-length transactions for the sale of goods or performance of
services by the Business; (ii) are valid; and (iii) are collectible in the
ordinary course of the business in accordance with their terms (subject to
reserves reflected on the Balance Sheet) and are not subject to
counterclaims or setoffs. Neither Seller nor Wolfman has knowledge of any
facts or circumstances which would result in a material increase in the
uncollectibility of the Accounts Receivable.
Section 2.23 Customers and Suppliers. Section 2.23 of the Seller
Disclosure Schedule sets forth the name of any customer of the Business who
accounted for more than 5% of the Business's sales during the period from
January 1, 2001 through May 26, 2001, and the name of any supplier of the
Business (but excluding any subcontractors of any supplier of the Business)
from whom the Business purchased more than 5% of the goods or services
which it purchased during the same period. Since January 1, 2001, no
customer or supplier listed in Section 2.23 of the Seller Disclosure
Schedule has cancelled or otherwise adversely modified its relationship
with the Business and, to the knowledge of Seller and Wolfman (a) no such
customer or supplier has any intention to do so and (b) the consummation of
the transactions contemplated by this Agreement will not adversely affect
any of such relationships.
Section 2.24 Orders and Commitments. The aggregate of all accepted and
unfulfilled orders for the sale of products entered into by Seller does not
exceed amounts which would be outstanding in the ordinary course of the
Business, and the aggregate of all commitments for the purchase of
inventory by Seller does not exceed amounts which would be outstanding in
the ordinary course of the Business. All such commitments and orders were
made in the ordinary course of business.
Section 2.25 Product Warranties. All products sold or delivered by
Seller, have been in conformity in all material respects with all
applicable contractual commitments and all express and implied warranties,
and Seller has no material liability, and there is no basis for any present
or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand giving rise to any such liability or replacement
or repair thereof or other damages in connection therewith. No products
sold or delivered by Seller are subject to any guarantee, warranty or other
indemnity other than the representation that the product is a reproduction
of a sample theretofore shown to the customer.
Section 2.26 Brokers and Finders. Except for KSA Capital Advisors,
whose fees and expenses will be paid by Seller in accordance with Seller's
agreement with such firm, none of Seller or Wolfman or any of their
respective officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this
Agreement.
Section 2.27 Disclosure. There is no fact or circumstance known to
Seller or Wolfman and related to Seller, Wolfman or the Business which has
not been disclosed in writing to Buyer that could be reasonably expected to
have a Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Wolfman and Seller that:
Section 3.1 Corporate Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware.
Section 3.2 Authorization. Buyer has the full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions
contemplated hereby, have been duly authorized and no other corporate or
shareholder actions on the part of Buyer are necessary to authorize the
execution and delivery by Buyer of this Agreement and the consummation of
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Buyer and (assuming due and valid authorization, execution
and delivery hereof by Wolfman and Seller) is a valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally
and by the availability of equitable remedies
Section 3.3 No Violation; Consents. Neither the execution, delivery or
performance of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby will (i) conflict with or violate any
provision of the certificate of incorporation or by-laws of Buyer; (ii)
conflict with or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of notice, modification, payment, termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, permit, contract,
agreement or other instrument, obligation, arrangement or understanding to
which Buyer is a party or by which it or any of its properties or assets
may be bound; (iii) violate any Law applicable to Buyer or any of its
properties or assets or (iv) require on the part of Buyer any filing or
registration with, notification to, or authorization, consent or approval
of, any Governmental Authority or any other Person, except in the case of
clause (ii) or (iv) for such violations, breaches or defaults which, or
filings, registrations, notifications, authorizations, consents or
approvals the failure of which to obtain, would be reasonably likely to
impair the ability of Buyer to consummate the transactions contemplated by
this Agreement.
Section 3.4 Brokers and Finders. Neither Buyer nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
TAX MATTERS; ACCESS
Section 4.1 Taxes. (a) All sales, use, documentary and/or transfer
Taxes, and other similar Taxes, if any, imposed in connection with the
transactions contemplated by this Agreement shall be borne equally by Buyer
and Seller.
(b) All personal property Taxes and similar ad valorem
obligations levied with respect to the Assets for a taxable period that
includes (but does not end on) on the date hereof shall be apportioned
between Seller, on the one hand, and Buyer, on the other hand, as of the
date hereof based on the number of days of such taxable period included in
the period ending with and including the date hereof (with respect to any
such taxable period, the "Pre-Closing Tax Period"), and the number of days
of such taxable period beginning after the date hereof (with respect to any
such taxable period, the "Post-Closing Tax Period"). Seller shall be liable
for the proportionate amount of such Taxes that is attributable to the Pre-
Closing Tax Period, and Buyer shall be liable for the proportionate amount
of such Taxes that is attributable to the Post-Closing Period.
Section 4.2 Access to Information.
(a) After the Closing, upon reasonable notice, Buyer, on the one
hand, and Seller, on the other hand, agree to furnish or cause to be
furnished to each other and their representatives, employees, counsel and
accountants access, during normal business hours, to such information and
assistance relating to the Assets as are reasonably necessary for financial
reporting and accounting matters relating to the Assets, the preparation
and filing of any Tax Returns, reports or forms relating to the Assets, the
defense of any Tax or other claim or assessment relating to the Assets or,
in the case of Seller, for any lawful purpose relating to the conduct of
the Business prior to the Closing, provided, however, that such access and
assistance do not unreasonably disrupt the normal operations of Buyer, in
the case of access and assistance given to Seller, or Seller, in the case
of access and assistance given to Buyer.
(b) Buyer shall not dispose of work papers, books and records
relating to the conduct of the Business prior to the Closing which are in
the possession of Buyer as of the Closing and which remain in the
possession of Buyer during the five-year period beginning with the Closing
without Seller's consent, which consent shall not be unreasonably withheld.
Following the expiration of such five-year period, Buyer may dispose of
such work papers, books and records at any time, unless prior to the
expiration of such five-year period, Seller requests such work papers,
books and records in writing and takes possession of such documents within
30 days after the end of such five-year period.
Section 4.3 Tax Cooperation. Without duplication of Section 4.2, Buyer,
on the one hand, and Seller, on the other hand, agree to furnish or cause
to be furnished to each other, upon request, as promptly as practicable,
such information and assistance relating to any of the Assets (including
access to books and records) as is reasonably necessary for the filing of
all Tax Returns, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax.
Section 4.4 Bulk Sales Waiver. Each party hereto hereby waives
compliance by Seller and Buyer with the provisions of the "bulk sales,"
"bulk transfer" or similar laws of any state or political subdivision.
Seller and Wolfman agree to indemnify and hold Buyer harmless against any
and all claims, losses, damages, liabilities (including Tax liabilities),
costs and expenses incurred by Buyer or any of its Affiliates as a result
of any failure to comply with any such "bulk sales," "bulk transfer" or
similar laws in connection with this Agreement or the transactions
contemplated thereby.
ARTICLE V
SURVIVAL AND INDEMNIFICATION
Section 5.1 Survival of Representations, Warranties and Covenants. All
representations and warranties of each party contained in this Agreement
shall survive the Closing, for a period ending two (2) years from the date
hereof, except that: (a) the representations and warranties set forth in
Sections 2.1, 2.2, 2.11, 3.1 and 3.2 shall survive without limitation; (b)
the representations and warranties set forth in Sections 2.14 and 2.15
shall survive until the applicable statute of limitations has run plus
ninety (90) days; (c) the representations and warranties set forth in
Section 2.16 shall survive for five (5) years from the date hereof; and (d)
all representations or warranties shall survive beyond such period with
respect to any inaccuracy therein or breach thereof, notice of which shall
have been duly given within such applicable period in accordance with
Section 5.3(a) hereof. The covenants and agreements contained herein shall
survive the Closing without limitation as to time unless the covenant or
agreement specifies a term, in which case such covenant or agreement shall
survive for such specified term. The right to indemnification or any other
remedy based on representations, warranties, covenants and obligations in
this Agreement shall not be affected by any investigation conducted with
respect to, or any knowledge acquired (or capable of being acquired) at any
time, whether before or after the execution and delivery of this Agreement,
with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation.
Section 5.2 Indemnification.
(a) Subject to the limits set forth in this Article V, Wolfman and
Seller agree to jointly and severally indemnify, defend and hold Buyer, its
officers, directors, employees, agents, representatives and Affiliates,
harmless from and in respect of any and all losses, damages, costs and
expenses (including, without limitation, demands, suits, claims, actions,
assessments, liabilities, judgments, expenses of investigation and fees and
disbursements of counsel and other professionals) (collectively, "Losses"),
that they may incur arising out of or due to (i) the inaccuracy or breach
of any representation or warranty of Wolfman or Seller contained in this
Agreement (without giving effect to any "materiality" or "Material Adverse
Effect" or other similar qualifier contained therein), (ii) the breach by
Wolfman or Seller of any covenant, undertaking or other agreement of
Wolfman or Seller contained in this Agreement, (iii) the Excluded
Liabilities, and (iv) enforcing the indemnification rights of Buyer
pursuant to this Article V.
(b) Subject to the limits set forth in this Article V, Buyer
agrees to indemnify, defend and hold Wolfman and Seller and its officers,
directors, employees, agents, representatives and Affiliates, harmless from
and in respect of any and all Losses that they may incur arising out of or
due to (i) the inaccuracy or breach of any representation or warranty of
Buyer contained in this Agreement (without giving effect to any
"materiality" or other similar qualifier contained therein), (ii) the
breach by Buyer of any covenant, undertaking or other agreement of Buyer
contained in this Agreement, (iii) the Assumed Liabilities, and (iv)
enforcing the indemnification rights of Wolfman and Seller pursuant to this
Article V.
Section 5.3 Claims for Indemnification.
(a) The parties intend that all indemnification claims be made as
promptly as practicable by the party seeking indemnification (the
"Indemnified Party"). Whenever any claim shall arise for indemnification,
the Indemnified Party shall promptly notify the party from whom
indemnification is sought ("Indemnifying Party") of the claim, and the
facts constituting the basis for such claim. The failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party, except to the extent
the Indemnifying Party demonstrates that the defense of such action is
materially prejudiced thereby.
(b) With respect to claims made by third parties, the Indemnifying
Party, upon acknowledgment of its obligations under the terms of the
indemnity hereunder in connection with such third-party claim shall be
entitled to assume the defense of such action or claim with counsel
reasonably satisfactory to the Indemnified Party; provided, that the
Indemnifying Party shall not be entitled to assume the defense thereof and
shall promptly pay the fees and expenses of counsel retained by the
Indemnified Party if (i) the claim for indemnification is with respect to a
criminal proceeding, action, indictment, allegation or investigation
against the Indemnified Party, (ii) the Indemnified Party has been advised
by counsel that a reasonable likelihood exists of a conflict of interest
between the Indemnifying Party and the Indemnified Party, (iii) the
Indemnifying Party has failed or is failing to vigorously prosecute or
defend such claim or (iv) the claim seeks an injunction or other equitable
relief against the Indemnified Party. The Indemnified Party agrees to
cooperate with the Indemnifying Party and its counsel in the defense
against any such asserted liability. The Indemnified Party shall have the
right to participate at its own expense in the defense of such asserted
liability. No Indemnifying Party shall consent to the entry of any judgment
or enter into any settlement without the consent of the Indemnified Party
(A) if such judgment or settlement does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each Indemnified
Party of a release from all liability in respect to such claim, (B) if such
judgment or settlement would result in the finding or admission of any
violation of Law, or (C) if as a result of such consent or settlement
injunctive or other equitable relief would be imposed against the
Indemnified Party or such judgment or settlement would interfere with or
adversely affect the business, operations or assets of the Indemnified
Party.
Section 5.4 Limitations on Indemnification. Notwithstanding anything to
the contrary contained herein, neither Seller or Wolfman on the one hand,
nor Buyer on the other hand (or, in each case, such party's officers,
directors, employees, agents, representatives and Affiliates), shall be
entitled to recover from the other unless and until the total of all such
party's Losses (including the Losses such party's officers, directors,
employees, agents, representatives and Affiliates) under Section 5.2(a)(i)
or 5.2(b)(i), as applicable, exceeds $50,000, in which case, such party
(and such party's officers, directors, employees, agents, representatives
and Affiliates) shall be entitled to recover Losses in excess of $50,000.
In addition, the aggregate liability of either Seller or Wolfman on the one
hand, or Buyer on the other hand, for any Losses under this Article V shall
not exceed $12,000,000. Notwithstanding the foregoing, no claim for
indemnification by Buyer hereunder with respect to Losses resulting from a
breach of Sections 2.1, 2.2 and 2.11 hereof or resulting from fraud or
intentional misrepresentation shall be subject to the limitations contained
in this Section 5.4. Any claim by Buyer for any Losses in connection with
the representation set forth Section 2.21. in respect of inventory not in
the possession of Seller shall be subject to the further limitations that
(a) Buyer shall have first used all reasonable efforts to recover any such
Losses from the supplier of such inventory and (b) Buyer may only recover
from Seller 50% of any such Losses.
Section 5.5 Insurance Proceeds. In computing the amount of any Losses
for purposes of determining the liability of any Indemnifying Party under
Section 5.3, the amount of any insurance proceeds actually received by the
Indemnified Party, less any deductibles or retentions and any resulting
premium increases, shall be deducted from such Losses.
Section 5.6 Exclusive Remedy. Except for any claim based on fraud or
willful misconduct or as otherwise provided in Section 4.1 or 4.4, (a) each
of the parties acknowledges that its sole and exclusive remedy with respect
to any and all claims relating to this Agreement and the transactions
contemplated hereby shall be pursuant to the indemnification provisions set
forth in Section 4.1 and 4.4 and this Article V and (b) each of the parties
expressly waives, to the fullest extent permitted by Law, all rights to
otherwise pursue such claims either at common law or in equity.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Confidentiality.
(a) Wolfman and Seller represent and warrant that they have
delivered to Buyer all Confidential Information, including all copies
thereof, which are in their possession, or under their control without
making or retaining any copies or extracts thereof, other than in the case
of financial and accounting books and records that relate to the operation
of the Business prior to the Closing; it being understood that Wolfman and
Seller are permitted to retain copies or extracts thereof. Wolfman and
Seller agree that, from and after the date hereof, except as otherwise
consented to in writing by Buyer, (i) they will not directly or indirectly
disclose or use in a manner adverse to Buyer or the Business, any
Confidential Information, and (ii) if either Wolfman or Seller receives a
request to disclose all or any part of the Confidential Information in
connection with a legal proceeding, such party will (A) immediately notify
Buyer of the existence, terms and circumstances surrounding such request,
(B) seek a protective order or other appropriate remedy, and (C) in the
event no such protective order or other remedy is obtained and disclosure
of such information is required, exercise their reasonable efforts to
obtain an order or other reliable assurance that confidential treatment
will be accorded to the Confidential Information required to be disclosed.
(b) "Confidential Information" means any and all information
relating to the management, operations, finances, products, trade secrets,
technology or services related to the Business, including but not limited
to any and all financial data, employee information, computer programs and
systems, computer based information, plans, projections, existing and
proposed and contemplated projects or investments, formulae, processes,
methods, products, manuals, drawings, supplier lists, customer lists,
purchase and sales records, marketing information, commitments,
correspondence and other information relating to the Business, whether
written, oral or computer generated, other than such information as may at
any time be or become lawfully available to the general public through no
fault of the disclosing party or its representatives. No information
contained in any of the Excluded Assets shall constitute "Confidential
Information."
Section 6.2 Non-Competition.
(a) Except as set forth in this Section 6.2, Seller agrees that,
to assure that Buyer will retain the value of the Business as a "going
concern," for a period of five years beginning on the date hereof, Seller
shall not, directly or indirectly, through one or more Affiliates, engage
or have an interest, anywhere in the United States or Canada, alone or in
association with others, as partner or stockholder or through the
investment of capital, lending of money or property, or otherwise, in any
business that competes with the products and services provided by the
Business as of the date hereof. During the three years beginning on the
date hereof, Seller shall not, directly or indirectly, through one or more
Affiliates, on behalf of itself or any other Person, (i) recruit or
otherwise solicit or induce any person who is an employee of, or otherwise
engaged by, Buyer or the Business or any successor to Buyer or the Business
to terminate his or her employment or other relationship with Buyer or the
Business or (ii) offer employment to or employ a person who is at that time
an employee (other than secretarial or clerical employees) of Buyer or the
Business or who was such an employee within one year of the time of such
offer or employment. The foregoing shall not, however, prohibit Seller or
any of its Affiliates from publishing any general public solicitation of
employment opportunities.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Section 6.2(a) shall not apply to Wolfman, whose obligations
related to matters contained in Section 6.2(a) shall be governed
exclusively by the terms of the Employment Agreement.
Section 6.3 Employee Benefits and Compensation
(a) Seller shall take all steps necessary (i) to enable Buyer,
effective as of the Closing, to assume, subject to Section 1.2(a), Seller's
rights and obligations under the Xxxxxx Agreement and (ii) to ensure that
Xxxxxx shall not terminate the Xxxxxx Agreement in accordance with Section
10A of the Xxxxxx Agreement before December 31, 2001. Effective as of the
Closing Buyer shall assume Seller's rights and obligations under the Xxxxxx
Agreement except to the extent otherwise provided in this Section 6.3. For
purposes of this Section 6.3, the individuals listed on Attachment 1 to the
Xxxxxx Agreement, exclusive of those employees listed on Section 6.3(a)(i)
of the Seller Disclosure Schedule whose co-employment with Seller has been
terminated prior to the Closing, shall be referred to as the "Xxxxxx
Transferred Employees." Buyer shall offer employment to the two Seller
employees identified on Section 6.3(a)(ii) of the Seller Disclosure
Schedule (the "Canadian Employees"), effective as of the Closing. For the
period beginning with the Closing and ending not earlier than December 31,
2001, Buyer shall cause the Xxxxxx Transferred Employees and the Canadian
Employees to be provided with compensation and benefits no less favorable
in the aggregate than the compensation and benefits received by them
immediately prior to the Closing. On and after January 1, 2002, Buyer shall
cause the Xxxxxx Transferred Employees and the Canadian Employees to be
provided with compensation and benefits no less favorable in the aggregate
than those generally provided to other similarly situated employees of
Hartmarx and its subsidiaries as determined by Hartmarx. Nothing in this
Section 6.3(a) shall require that Buyer continue to employ any Canadian
Employee after the Closing, or that Buyer continue to accept the provision
of services by any Xxxxxx Agreement Employee under the terms of the Xxxxxx
Agreement, or that Buyer continue the employment of any Xxxxxx Transferred
Employee for any period of time under circumstances not covered under the
terms of the Xxxxxx Agreement.
(b) Seller shall continue to be the employer (or co-employer with
Xxxxxx) of the individuals listed on Section 6.3(b) of the Seller
Disclosure Schedule (the "Continuing Seller Employees") for a period of not
less than one year after the Closing or for such shorter period as may be
mutually agreed by Seller and Buyer (the "Continuing Seller Employee
Transition Period"). Seller shall cause the services of the Continuing
Seller Employees to be available to Buyer during the Continuing Seller
Employee Transition Period. Seller shall cause compensation and benefits to
be provided to the Continuing Seller Employees during the Continuing Seller
Employee Transition Period that is no more favorable in the aggregate than
the compensation and benefits received by them immediately prior to the
Closing (other than increases in compensation and benefits in the normal
course consistent with past practice, or mutually agreed by Seller and
Buyer), and Buyer shall reimburse Seller for the costs of such compensation
and benefits promptly after being billed therefor on a periodic basis by
Seller. No later than one year after the Closing, Buyer shall offer
employment to each Continuing Seller Employee on terms and conditions no
less favorable in the aggregate than those provided to other similarly
situated Buyer employees, provided that the Continuing Seller Employee
continues to be employed by Seller (or co-employed with Xxxxxx). Nothing in
this Section 6.3(b) shall require that Seller continue to employ (or
co-employ with Xxxxxx) any Continuing Seller Employee for any period of
time following the Closing, or that Buyer continue to accept the provision
of services by any Continuing Seller Employee before Buyer offers the
Continuing Seller Employee employment in accordance with this Section
6.3(b), or that Buyer continue the employment of any Continuing Seller
Employee for any period of time following the commencement of his or her
employment with Buyer.
(c) For all purposes (other than for purposes of benefit accrual)
under Buyer's welfare, retirement and all other employee benefit plans,
each Xxxxxx Transferred Employee, Canadian Employee, and Continuing Seller
Employee (collectively, "Transferred Employees") shall be credited with his
or her service with Seller (including periods of co-employment by Seller
and Xxxxxx) prior to commencing otherwise eligible service with Buyer, to
the extent such Transferred Employee was entitled to credit for such
service under any analogous Benefit Plan, except to the extent such credit
would result in a duplication of benefits. To the extent applicable, Buyer
shall use its reasonable efforts to cause (i) all pre-existing condition
exclusions under Buyer's medical and dental plans to be waived for each
Transferred Employee and his or her covered dependents to the extent that
such exclusion did not operate to prohibit coverage of such Transferred
Employee and his or her covered dependents under the analogous Benefit Plan
immediately prior to the commencement of coverage under Buyer's medical and
dental plans and (ii) any eligible expenses incurred by any Transferred
Employee and his or her covered dependents during the portion of the year
that ends on the commencement of coverage under Buyer's welfare and other
employee benefit plans to be taken into account under Buyer's medical and
dental plans for purposes of satisfying all deductible, co-insurance and
maximum out-of-pocket requirements applicable to such Transferred Employee
and his or her covered dependents for such plan year as if such amounts had
been paid in accordance with Buyer's medical and dental plans.
(d) Seller shall be responsible for causing to be provided such
"continuation coverage" (within the meaning of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA")) as is required
pursuant to COBRA with respect to (i) any individual employed by or
providing services to Seller who incurs a "qualifying event" (as such term
is defined in COBRA) on or before the Closing (without regard to whether
notice of such qualifying event is provided before or after the Closing).
(e) Buyer shall not be obligated to provide any severance or
separation pay benefits to any individual on account of any termination of
the individual's employment with the Seller, or the termination of such
individual's services to the Seller, on or before the Closing, and such
benefits (if any) shall be payable by Seller.
Section 6.4 Employee Bonus. Buyer agrees to pay a partial year bonus
for January 1, 2001 through November 30, 2001, and a full year bonus for
the fiscal year ending November 30, 2002, in respect of each Transferred
Employee who is continuing to provide services to Buyer as of November 30,
2001 and November 30, 2002, respectively. Such bonuses shall be an amount
determined at Wolfman's discretion (provided that he continues to be
employed at the time of such determination), consistent with Seller's prior
practice in the ordinary course. From December 1, 2002 until the
termination of Buyer's obligations under Section 1.9 in accordance with
Section 1.9(f), Buyer agrees that each Transferred Employee who is
continuing to provide services to Buyer on December 1, 2002 will have a
bonus opportunity equal to the bonus opportunity for such employee
applicable for the fiscal year 2001.
Section 6.5 Expenses. Each party shall pay its own legal, accounting
and other miscellaneous expenses incident to the negotiation, preparation
and execution of this Agreement.
Section 6.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Seller Disclosure Schedule (a) constitute the entire
agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof and thereof and (b) are not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder other than any
Person entitled to indemnification under Article V.
Section 6.7 Amendment, Extension and Waiver. Any provision of this
Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each
party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege.
Section 6.8 Headings. The Article and Section headings contained herein
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 6.9 Notices. All notices, requests, demands and other
communications made under or by reason of the provisions of this Agreement
shall be in writing and shall be given by hand delivery, telecopier, or air
courier to the parties at the addresses set forth below.
If to Wolfman or Seller:
c/o 0000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx
Fax: (000) 000-0000
With a copy (which shall not constitute notice) given in
the manner prescribed above, to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 Xxxxxx xx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx X.X. Xxxx
Fax: (000) 000-0000
If to Buyer:
Hartmarx Corporation
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Chief Financial Officer
Fax: (000) 000-0000
With a copy (which shall not constitute notice) given in
the manner prescribed above, to:
Hartmarx Corporation
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
With a copy (which shall not constitute notice) given in
the manner prescribed above), to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx (Illinois)
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
Any such notice, request, demand or other communication shall be deemed to
have been received (i) when delivered, if delivered by hand or sent by
telecopier, or (ii) on the second Business Day after dispatch, if sent by
overnight air courier.
Section 6.10 Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, legal
representatives and assigns, but this Agreement may not be assigned by any
party without the written consent of the other parties; provided, that
Buyer may assign all or any portion of its respective rights hereunder
without the prior written consent of either Seller or Wolfman to an
Affiliate of Buyer.
Section 6.11 Severability. Any term or provision of this Agreement that
is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term
or provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction or other authority
declares that any term or provision hereof is invalid, void or
unenforceable, the parties agree that the court making such determination
shall have the power to reduce the scope, duration, area or applicability
of the term or provision, to delete specific words or phrases, or to
replace any invalid, void or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
Section 6.12 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Illinois, without giving effect to the conflict of laws provisions thereof.
Section 6.13 Jurisdiction. Each of the parties hereto hereby expressly
and irrevocably submits to the non-exclusive personal jurisdiction of the
United States District Court for the Northern District of Illinois, and to
the jurisdiction of any other competent court of the State of Illinois
located in the County of Xxxx (collectively, the "Illinois Courts") and of
the United States District Court for the Southern District of New York, and
to the jurisdiction of any other competent court of the State of New York
located in New York County (the "New York Courts"), preserving, however, in
each case, all rights of removal to such federal court under 28 U.S.C.
Section 1441, in connection with all disputes arising out of or in
connection with this Agreement or the transactions contemplated hereby and
agrees not to commence any litigation relating thereto except (a) in the
case of litigation commenced by Seller or Wolfman, in the Illinois Courts
or (b) in the case of litigation commenced by Buyer, in the New York
Courts. If the aforementioned courts do not have subject matter
jurisdiction, then the proceeding shall be brought in any other state or
federal court located in the State of Illinois or New York, as applicable,
preserving, however, in each case, all rights of removal to such federal
court under 28 U.S.C. Section 1441. Each party hereby waives the right to
any other jurisdiction or venue for any litigation arising out of or in
connection with this Agreement or the transactions contemplated hereby to
which any of them may be entitled by reason of its present or future
domicile. Each party hereby waives, to the fullest extent it may legally
and effectively do so (i) any objection which it may now or hereafter have
to the laying of venue of any action or proceeding arising out of or
relating to this Agreement or any related matter in any Illinois Court or
New York Court, as applicable, and (ii) the defense of an inconvenient
forum to the maintenance of such action or proceeding in any Illinois Court
or New York Court, as applicable. Notwithstanding the foregoing, each of
the parties hereto agrees that each of the other parties shall have the
right to bring any action or proceeding for enforcement of a judgment
entered by the Illinois Courts or the New York Courts, as applicable, in
any other court or jurisdiction.
Section 6.14 Service of Process. Each party irrevocably consents to the
service of process outside the territorial jurisdiction of the courts
referred to in Section 6.13 hereof in any such action or proceeding by
mailing copies thereof by registered United States mail, postage prepaid,
return receipt requested, to its address as specified in or pursuant to
Section 6.9 hereof. However, the foregoing shall not limit the right of a
party to effect service of process on the other party by any other legally
available method.
Section 6.15 Interpretation. Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or
plural, whichever shall be applicable. Unless otherwise specified, all
references herein to "Section" shall refer to corresponding provisions of
this Agreement or the Seller Disclosure Schedule, as the case may be.
Section 6.16 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING
TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON
LAW AND STATUTORY CLAIMS. THE PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT
EACH PARTY WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE
DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS IT HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
Section 6.17 Specific Performance. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
parties agrees that the other party shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state
thereof having jurisdiction over the parties and the matter, in addition to
any other remedy to which it may be entitled, at law or in equity.
Section 6.18 Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
ARTICLE VII
CERTAIN DEFINITIONS
"Affiliate" of any Person means a Person that controls, is
controlled by, or is under common control with, such Person. For the
purposes of this definition, "control" means 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 agreement or otherwise, and the terms "controls" and
"controlled" shall have corresponding meanings. In addition, an "Affiliate"
of a natural person shall include (i) such person's spouse or domestic
partner, (ii) the parents and lineal descendants of such person or of such
person's spouse or domestic partner, and (iii) any trust established by
such person for the benefit of such person's spouse or domestic partner or
the parents or lineal descendants of such person or of such person's spouse
or domestic partner and as to which such person serves as the trustee or in
a similar fiduciary capacity.
"Xxxxxx Agreement" means the Client Services Agreement between
Xxxxxx and Seller, dated as of June 2, 1999.
"Business Day" means any day (other than a Saturday or Sunday) on
which banks are permitted to be open and transact business in The City of
Chicago and the City of New York.
"CIT Financing" means the facility provided under the Notification
Factoring Agreement, dated August, 11, 1995, between CIT and Seller, as
amended and the other documents executed in connection therewith.
"GAAP" means generally accepted accounting principles, as in
effect in the United States.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions, copyrights and copyright rights, processes, formulae,
trade dress, business and product names, logos, slogans, trade secrets,
industrial models, processes, patterns, designs, methodologies, computer
programs (including all source codes) and related documentation, technical
information, manufacturing, engineering and technical drawings, know-how
and all pending applications for and registrations of patents, trademarks,
service marks and copyrights.
"Liabilities" means any and all debts, losses, expenses,
liabilities, damages, fines, costs, royalties, proceedings, deficiencies or
obligations of any nature (whether known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, due or to become due, and whether or not resulting from
third-party claims) and any out-of-pocket costs and expenses (including
attorneys, accountants or other fees) including any liability for Taxes.
"Liens" means all mortgages, pledges, security interests, deeds of
trust, liens, charges, options, conditional sales contracts, claims,
restrictions, covenants, easements, rights of way, title defects or other
encumbrances or restrictions of any nature whatsoever.
"Material Adverse Effect" means an (i) individual or cumulative
material adverse change in, or effect on, the business, prospects,
operations, working capital, condition (financial or otherwise), assets,
properties or Liabilities of the Business, or (ii) individual or cumulative
change that would be reasonably likely to impair the ability of Seller or
Wolfman to consummate the transactions contemplated by this Agreement.
"Permitted Liens" means (a) liens for Taxes, assessments and
governmental charges or levies not yet due and payable; (b) materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar
liens arising in the ordinary course of business that are not, individually
or in the aggregate, material to the Business; and (c) with respect to real
property, minor survey exceptions or imperfections of title that do not,
individually or in the aggregate, materially adversely affect the value of
such real property or the use of such real property.
"Person" means any corporation, individual, joint stock company,
joint venture, partnership, limited liability company, unincorporated
association, Governmental Authority, country, state or political
subdivision thereof, trust or other entity.
"Tax" or "Taxes" means all taxes, assessments, charges, duties,
fees, levies, imposts or other governmental charges, including, without
limitation, all federal, state, local foreign and other income,
environmental, add-on, minimum, franchise, profits, capital gains, capital
stock, capital structure, transfer, sales, gross receipt, use, ad valorem,
service, service use, lease, recording, customs, occupation, property,
excise, gift, severance, windfall profits, premium, stamp, license,
payroll, social security, employment, unemployment, disability,
value-added, withholding, and other taxes, assessments, charges, duties,
fees, levies, imposts or other governmental charges of any kind whatsoever
(whether payable directly or by withholding and whether or not requiring
the filing of a return) and all estimated taxes, deficiency assessments,
additions to tax, additional amounts imposed by an governmental authority
(domestic or foreign), penalties, fines and interest, and shall include any
liability for such amounts as a result either of being a member of a
combined, consolidated, unitary or affiliated group or of a contractual
obligation to indemnify any person, regardless of whether disputed.
"Tax Return" means any return, report, declaration, information
return, filing or other document (including, without limitation, any
amendments thereto or related or supporting information) filed or required
to be filed with respect to Taxes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by the duly authorized officer of Seller
and Buyer and by Wolfman as of the day and year first above written.
CAG ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxx
------------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman
CONSOLIDATED APPAREL GROUP, LLC
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxx
------------------------------------
Agreed to and accepted solely with
respect to Section 1.10:
HARTMARX CORPORATION
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: President & Chief Operating Officer
Index of Exhibits and Schedules*
Exhibit A-Purchase Price Allocation
Section 1.1(a)(ii) Assumed Contracts
Section 1.1(a)(v) Real Property Leases
Section 1.1(a)(vii) Intellectual Property
Section 1.1(a)(x) Tangible Personal Property
Section 1.1(a)(xii)Permits
Section 1.1(b)(iv) Excluded Assets
Section 1.2(b) Assumed Liabilities: Accounts Payable
Section 1.2(c) Assumed Liabilities: Accrued Expenses
Section 1.2(e) Assumed Liabilities: Other Liabilities
Section 1.7(b) Seller Consents for Delivery at Closing
Section 2.3 Consents and Approvals; No Violation
Section 2.5(c) Liabilities and Obligations
Section 2.6 Absence of Certain Changes
Section 2.9(a) Business Contracts
Section 2.10 Permits and Other Authorizations
Section 2.11 Assets
Section 2.12 Insurance
Section 2.13 Labor Relations
Section 2.14(a) Benefit Plans
Section 2.14(i) Payments Related to Transaction
Section 2.14(m)Eligibility for CAG Benefit Plans
Section 2.15(c) Taxes
Section 2.17 Litigation
Section 2.19 Personnel
Section 2.20 Related Party Transactions
Section 2.22 Accounts Receivable
Section 2.23 Customers and Suppliers
Section 6.3(a)(i) Employees Excluded from "Xxxxxx Transferred Employees"
Section 6.3(a)(ii) Canadian Employees
Section 6.3(b) Continuing Seller Employees
*Exhibits and Schedules to the Purchase Agreement are not being filed
herewith. The Registrant undertakes to furnish supplementally a copy of any
omitted exhibit or schedule to the Commission upon request, pursuant to
Item 601(b)(2) of Regulation S-K.
