ACQUISITION AGREEMENT,
DATED AS OF NOVEMBER 4, 1997,
AMONG
XXXXXXX & XXXXXX PRODUCTS CO.,
IMPERIAL WALLCOVERINGS, INC.,
AND
BDPI HOLDINGS CORPORATION
TABLE OF CONTENTS
(Not a part of the Agreement)
I. PURCHASE AND SALE OF SHARES......................................................................................2
1.1. Purchase and Sale of Shares...........................................................................2
1.2. Closing Payment.......................................................................................2
1.3. Purchase Price Adjustment.............................................................................3
1.4. Intercompany Obligations..............................................................................6
II. REPRESENTATIONS AND WARRANTIES..................................................................................7
2.1. Representations and Warranties of Seller..............................................................7
2.1.1. The Imperial Shares......................................................................7
2.1.2. Authorization and Effect of Agreement....................................................8
2.1.3. No Restrictions..........................................................................8
2.1.4. Financial Statements.....................................................................9
2.1.5. Brokers.................................................................................10
2.2. Representations and Warranties of Purchaser..........................................................11
2.2.1. Authorization and Effect of Agreement...................................................11
2.2.2. No Restrictions.........................................................................11
2.2.3. Financial Capacity......................................................................11
2.2.4. Disclosure..............................................................................12
2.3. Certain Limitations on Representations and Warranties.
...............................................................................................12
III. COVENANTS.....................................................................................................12
3.1. Investigation by Purchaser...........................................................................12
3.2. Press Releases.......................................................................................14
3.3. Regulatory Filings...................................................................................14
3.4. Injunctions..........................................................................................15
3.5. Operation of the Business............................................................................15
3.6. Satisfaction of Conditions...........................................................................17
3.7. Negotiations With Others.............................................................................18
3.8. Certain Additional Covenants.........................................................................18
3.9. Efforts to Consummate................................................................................18
3.10. Resignations........................................................................................18
3.11. Certain Conditions..................................................................................19
3.12. Certain Pre-Closing Transactions....................................................................19
IV. THE CLOSING....................................................................................................19
4.1. Conditions Precedent to Obligations of Purchaser and Seller
..........................................................................................................19
4.2. Additional Conditions Precedent to Obligations of
Purchaser.......................................................................................20
4.2.1. No Material Breach......................................................................20
4.2.2. Transfer Documents, Etc.................................................................20
4.2.3. Other Documents.........................................................................20
4.2.4. Xxxxxx Closing..........................................................................20
4.2.5. Material Adverse Change.................................................................20
4.2.6. No Litigation...........................................................................20
4.2.7. Certain Approvals.......................................................................20
4.2.8. Release of Liens........................................................................20
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4.3. Additional Conditions Precedent to Obligations of Seller
21
4.3.1. No Material Breach......................................................................21
4.3.2. Closing Payment.........................................................................21
4.3.3. Option..................................................................................21
4.3.4. Other Documents.........................................................................21
4.4. The Closing..........................................................................................21
4.5. Termination..........................................................................................22
V. SURVIVAL AND INDEMNIFICATION....................................................................................22
5.1. Survival of Representations, Warranties and Covenants
...............................................................................................22
5.2. Limitations on Liability.............................................................................23
5.3. Indemnification......................................................................................24
5.4. Defense of Claims....................................................................................25
VI. OTHER POST-CLOSING COVENANTS...................................................................................27
6.1. Personnel Matters....................................................................................27
6.1.1. Employees and Employee Benefit Plans....................................................27
6.1.2. Assumption of Obligations...............................................................28
6.1.3. Retirement Plans........................................................................29
6.1.4. Employment and Plan Amendments or Terminations
........................................................................................30
6.1.5. Transitional Matters....................................................................30
6.1.6. Employee Information....................................................................31
6.2. General Post-Closing Matters.........................................................................31
6.2.1. Post-Closing Notifications..............................................................31
6.2.2. Access..................................................................................31
6.2.3. Certain Tax Matters.....................................................................32
6.2.4. Insurance...............................................................................39
6.2.5. Receivables.............................................................................40
6.2.6. Surety Obligations......................................................................40
6.2.7. Assumed Push-Down Liabilities...........................................................41
6.2.8. 1994 Financial Statements...............................................................41
6.2.9. Certain Contracts.......................................................................42
VII. MISCELLANEOUS PROVISIONS......................................................................................43
7.1. Notices..............................................................................................43
7.2. Expenses.............................................................................................44
7.3. Successors and Assigns...............................................................................44
7.4. Waiver...............................................................................................44
7.5. Entire Agreement.....................................................................................45
7.6. Amendments, Supplements, Etc.........................................................................45
7.7. Rights of the Parties................................................................................45
7.8. Further Assurances...................................................................................45
7.9. Applicable Law; Jurisdiction.........................................................................46
7.10. Titles and Headings.................................................................................46
7.11. Certain Interpretive Matters and Definitions........................................................46
7.12. Bulk Transfer Laws..................................................................................46
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ACQUISITION AGREEMENT
This Acquisition Agreement (the "Agreement") is made and entered into
as of the 4th day of November, 1997, among Xxxxxxx & Xxxxxx Products Co., a
Delaware corporation ("Seller"), Imperial Wallcoverings, Inc., a Delaware
corporation ("Imperial"), and BDPI Holdings Corporation, a Delaware corporation
("Purchaser").
RECITALS:
A. Imperial, together with its wholly owned subsidiaries Imperial
Wallcoverings Limited, a company incorporated in England ("Imperial UK"),
Marketing Service, Inc., a Delaware corporation ("MSI"), and Imperial
Wallcoverings (Canada) Inc. ("Imperial Canada"), a Canadian corporation owned by
Imperial and Xxxxxxx & Xxxxxx Canada Inc., a Canadian corporation and indirect
wholly owned subsidiary of Seller ("C&A Canada") (Imperial UK, MSI and Imperial
Canada being referred to herein collectively as the "Subsidiaries" and, together
with Imperial, the "Company" and Imperial UK, MSI and Imperial being referred to
herein as the "Purchased Imperial Companies"), is presently engaged in the
business (the "Business") of the development, production, manufacture,
marketing, distribution and sale of paper and vinyl decorative surface products
and related products for residential, commercial and industrial applications
("Products") and performing certain related services;
B. Seller is the record and beneficial owner of all of the issued and
outstanding shares of Common Stock, par value $0.01 per share, of Imperial (the
"Imperial Shares") and C&A Canada is the record and beneficial owner of
3,100,000 issued and outstanding shares of common stock, without par value, of
Imperial Canada, which shares, together with the 1,000,000 shares of common
stock of Imperial Canada owned of record and beneficially by Imperial, represent
all of the issued and outstanding shares of capital stock of Imperial Canada;
C. Purchaser intends to effect the recapitalization (the "Xxxxxx
Recap") of Xxxxxx Decorative Products Holdings, Inc. ("BDPH") pursuant to, among
other transactions, the merger of Purchaser into BDPH (the "Merger"), whereupon
all rights and obligations of Purchaser hereunder will be, by virtue of the
Merger, vested in BDPH (which will be renamed "Royal Wall Fashions, Inc." in the
Merger);
D. Seller desires to sell, assign and deliver ("Transfer") to
Purchaser, and Purchaser desires to purchase and accept from Seller, the
Imperial Shares on the terms and subject to the conditions set forth in this
Agreement; and
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E. Seller desires to cause Imperial Canada to Transfer to Purchaser,
and Purchaser desires to purchase and accept from Imperial Canada, the C&A
Imperial Canada Assets and to assume the C&A Imperial Canada Assumed Liabilities
(together, the "Imperial Canada Business Acquisition").
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF SHARES
1.1. Purchase and Sale of Shares. On the terms and subject to the
conditions hereof, at the Closing, Seller will Transfer, or cause to be
Transferred, to Purchaser, and Purchaser will purchase and accept from Seller
and Imperial Canada, the Imperial Shares and the C&A Imperial Canada Assets,
free and clear of all Liens, for the amount determined pursuant to Section 1.3
and in consideration of the grant of the Option to be delivered at Closing
pursuant to Section 4.3.3 and the assumption of the C&A Imperial Canada Assumed
Liabilities (such amount, together with the Option and the C&A Imperial Canada
Assumed Liabilities, the "Purchase Price"). Notwithstanding any other provision
hereof, in no event will the total amount of the accounts payable and accrued
liabilities included in the C&A Imperial Assumed Liabilities (other than any
liabilities under the Canadian Pension Plan) exceed $5.0 million. For purposes
of this Agreement, (a) the "C&A Imperial Canada Assets" means all assets,
properties and rights, of whatever kind and nature, real or personal, tangible
or intangible, contractual or legal, wherever located, of Imperial Canada as of
the Closing and (b) "C&A Imperial Canada Assumed Liabilities" means all
obligations and liabilities, fixed or contingent, primary or secondary, direct
or indirect, absolute or contingent, known or unknown, whether or not accrued,
of Imperial Canada as of the Closing, except for (i) any Indebtedness of
Imperial Canada and (ii) such of the foregoing as are retained by Seller or any
of its Post-Closing Affiliates hereunder or as to which Seller has agreed to
indemnify the Purchaser or the Purchased Imperial Companies under any provision
of Article VI.
1.2. Closing Payment. (a) The cash portion of the Purchase Price will
be (i) $58 million, plus the amount of cash of Imperial UK as of immediately
prior to the Closing, less $500,000 (the "Base Amount"), (ii) plus the
Adjustment Amount, and (iii) minus the amount of any Indebtedness of any
Purchased Imperial Company outstanding immediately prior to the Closing
(calculated after giving effect to any payments of any such Indebtedness prior
to the Closing and in accordance with this Agreement (provided, however, that
nothing in this Section 1.2 will be deemed to constitute an authorization of the
incurrence or maintenance of any such Indebtedness by the Company)). For
purposes of this Agreement (A) "Adjustment Amount" means, if Net
2
Cash Flow is negative, a positive amount equal to such negative Net Cash Flow
and, if Net Cash Flow is positive, a negative amount equal to such positive Net
Cash Flow; (B) "Indebtedness" means any liability or obligation (whether primary
or secondary as a guarantor or other surety other than arising out of the
endorsement of checks for collection in the ordinary course of business), for
borrowed money, for deferred purchase price of any asset (other than obligations
to pay for inventory purchased in the ordinary course of business), under a
capitalized lease and any other liability or obligation which should be shown as
indebtedness on a consolidated balance sheet for the Company prepared in
accordance with GAAP, whether or not evidenced by a note, bond or similar
instrument, and any prepayment penalties, accrued interest or other amounts due
on or in respect of any of the foregoing; and (C) the term "Net Cash Flow" means
an amount, for the period from and including November 2, 1997 through the
opening of business on the Closing Date, calculated in accordance with Schedule
1.2, giving effect to an additional deemed positive cash flow amount (regardless
of the actual amount thereof) of $6.0 million.
(b) Not less than two business days prior to the Closing Date, Seller
and Purchaser will jointly prepare estimates of the Adjustment Amount and
Indebtedness (such estimated Adjustment Amount minus such estimated Indebtedness
being the "Estimated Purchase Price Adjustment Amount"), determined in
accordance with Section 1.2(a) and based upon their respective review of monthly
financial information then available to Seller and Purchaser and their
respective inquiries of personnel responsible for the preparation of financial
information relating to the Company in the ordinary course thereof. If the
parties are unable so to agree on the Estimated Purchase Price Adjustment
Amount, then the amount thereof as estimated by Deloitte & Touche LLP,
Purchaser's independent accountants ("D&T"), in good faith will be the Estimated
Purchase Price Adjustment Amount for all purposes of this Agreement and the
amount to be paid by Purchaser at the Closing will be the Base Amount, plus or
minus, as the case may be, the Estimated Purchase Price Adjustment Amount (such
amount, the "Closing Payment").
(c) On the Closing Date, Purchaser will cause to be paid by wire
transfer of immediately available funds to such account as Seller has
theretofore designated an amount equal to the Closing Payment.
1.3. Purchase Price Adjustment. (a) In order finally to determine the
Purchase Price, the Closing Payment will be increased or decreased, as the case
may be, by the amount, if any, by which the Adjustment Amount and Indebtedness,
each as finally determined in accordance with this Section 1.3, differ (on a
combined basis) from the amounts thereof reflected
3
Estimated Purchase Price Adjustment Amount. For purposes of this Agreement, (x)
the adjustment referred to in the immediately preceding sentence will be finally
calculated on a net basis and (y) all determinations of the actual amounts
thereof (the "Actual Purchase Price Adjustment Amount") will be determined by
reference to the amounts thereof required to be shown, with respect to
Indebtedness, on a consolidated balance sheet as of the opening of business on
the Closing Date and, with respect to Net Cash Flow, on a consolidated statement
of cash flows for the period from and including November 2, 1997 through the
opening of business on the Closing Date (collectively, the "Closing Statement"),
each on a basis consistent with, and using the same accounting principles,
policies, practices and procedures used in preparing, the Financial Statements
and in accordance with Schedule 1.2 and Section 1.2(a).
(b) Within 60 calendar days after the Closing Date, Purchaser will in
good faith prepare and deliver, or cause to be prepared and delivered, to Seller
a Closing Statement setting forth Purchaser's determination of the Actual
Purchase Price Adjustment Amount. The parties and their respective authorized
representatives will be entitled to review, during normal business hours, the
books, records and work papers of the Company to prepare or review, as the case
may be, the Closing Statement and to determine the Actual Purchase Price
Adjustment Amount. Without limiting the generality or effect of any other
provision hereof, (i) the parties will provide the other parties and their
authorized representatives access, during normal business hours, to the
facilities, personnel and accounting and other records of the Company and the
parties, as the case may be, to the extent reasonably determined by such other
parties to be necessary to permit Purchaser to prepare or have prepared the
Closing Statement and to compute the Actual Purchase Price Adjustment Amounts as
herein provided and to permit Seller to review such Closing Statement and
computation (including, if requested by Seller, such access as may be necessary
or appropriate to permit Xxxxxx Xxxxxxxx L.L.P. ("AA") to perform an audit of
Net Cash Flow); provided, however, that the parties will conduct any such review
in a manner that does not unreasonably interfere with the conduct of any other
party's business, and (ii) Seller will take such actions as may be reasonably
requested by Purchaser to close, or to assist Purchaser in closing, as of the
opening of business on the Closing Date, or as of the Closing, as the case may
be, the books and accounting records of the Company and otherwise reasonably to
cooperate with Purchaser and its representatives in the preparation of the
Closing Statement. Concurrently with the delivery of the Closing Statement,
Seller will use its reasonable efforts to cause AA to provide Purchaser access
to any of such firm's workpapers, trial balances and similar materials prepared
in connection with such firm's audits or reviews of any of the Financial
Statements (the "Workpapers").
4
(c) If, within 45 calendar days after the date of Purchaser's delivery
of its computation of the Actual Purchase Price Adjustment Amount, Seller
determines in good faith that such computations are inaccurate, Seller will give
written notice to Purchaser within such 45 calendar day period (i) setting forth
Seller's computation of Actual Purchase Price Adjustment Amount and (ii)
specifying in reasonable detail Seller's basis for its disagreement with
Purchaser's computations. The failure by Seller so to express its disagreement
or provide such specification within such 45 calendar day period will constitute
Seller's acceptance of Purchaser's computation of the Actual Purchase Price
Adjustment Amounts. If Purchaser and Seller are unable to resolve any
disagreement between them within ten calendar days after the giving of notice of
such disagreement, the items in dispute will be referred for determination to
KPMG Peat Marwick LLP (the "Accountants") as promptly as practicable. The
Accountants will make a determination as to each of the items in dispute, which
determination will be (A) in writing, (B) furnished to each of the parties
hereto as promptly as practicable after the items in dispute have been referred
to the Accountants, (C) made in accordance with this Agreement, and (D)
conclusive and binding upon each of the parties hereto. In connection with their
determination of the disputed items, the Accountants will be entitled to rely on
the Workpapers and the Company's books and records, and the fees and expenses of
the Accountants will be shared equally by Purchaser and Seller (except as
provided below). Purchaser and Seller will use reasonable efforts to cause the
Accountants to render their decision as soon as practicable, including without
limitation by promptly complying with all reasonable requests by the Accountants
for information, books, records and similar items. If the determination of the
Accountants represents an outcome more favorable to either Purchaser or Seller
than the midpoint of such parties' last written settlement offers related to all
items in dispute, in the aggregate, submitted to the other party at least two
calendar days before the referral of the matter to the Accountants (each a "Last
Offer"), then the party obtaining such favorable result will be deemed the
"Prevailing Party" and the other party will be deemed the "Non-Prevailing
Party". For purposes hereof, all of the fees and expenses of the Accountants,
will be borne by the Non-Prevailing Party. No party will disclose to the
Accountants, and the Accountants will not consider for any purpose, any
settlement offer (other than the Last Offer) made by any party.
(d) To the extent that the Actual Purchase Price Adjustment Amount,
determined as provided in this Section 1.3 is more or less than the Estimated
Purchase Price Adjustment Amount, Seller or Purchaser, as applicable, will,
within ten calendar days after the final determination of the Actual Purchase
Price Adjustment Amount, calculated on a net basis, pursuant to this Section
1.3,
5
make or, in the case of Purchaser, cause to be made payment by wire transfer of
immediately available funds of the amount of such difference, together with
interest thereon from the Closing Date to the date of payment (at a rate equal
to The Chase Manhattan Bank's prime rate, as publicly announced and in effect
from time to time during such period, plus 2.0%, calculated on the basis of the
actual number of days elapsed over 365), to such account as has been designated
by Purchaser or Seller, as applicable.
1.4. Intercompany Obligations. Notwithstanding any other provision
hereof, except for the receivables and payables described in Schedule 1.4
("Post-Closing AR/AP"), any amount owed by Seller or any of its Affiliates other
than the Purchased Imperial Companies (collectively, "Post-Closing Affiliates"),
or owed by any of the Purchased Imperial Companies to Seller or any Post-Closing
Affiliate, in respect of liabilities, obligations or assets of the Purchased
Imperial Companies of a type that would be shown on a consolidated balance sheet
of any of the Purchased Imperial Companies as "Investments and Advances From
(To) Xxxxxxx & Xxxxxx Products Co." will be settled at or prior to the Closing
and will not be reflected in the Closing Statement. Effective immediately after
the Closing, all intercompany liabilities and obligations owing from Seller or
any Post-Closing Affiliate to any of the Purchased Imperial Companies or owing
from any of the Purchased Imperial Companies to Seller or any Post-Closing
Affiliate (except for any Post-Closing AR/AP) that is not settled as
contemplated by the immediately preceding sentence will be netted against each
other and the net balance thereof will be discharged and deemed forgiven without
further action or payment, will be deemed contributed to or deducted from
capital of the appropriate Purchased Imperial Company and all such amounts will
be excluded from the determination of Net Cash Flow or Indebtedness under
Sections 1.2 and 1.3. As a result, immediately following the Closing, there will
be no further liability or obligation in respect of any such matters between
Seller or any Post-Closing Affiliate, on the one hand, and the Purchased
Imperial Companies, on the other hand, except as expressly provided herein. Any
holder of a note or other evidence of indebtedness deemed settled pursuant to
this Section 1.4 will surrender such note or other evidence of indebtedness to
the obligor thereon. In addition, and without limiting the generality or effect
of the foregoing, effective as of immediately prior to the Closing, all
contracts and other obligations, other than the Transaction Documents and other
than as set forth on Schedule 1.4, between or among the Purchased Imperial
Companies or any of the Subsidiaries, on the one hand, and Seller or any
Post-Closing Affiliate, on the other hand, will be terminated without further
action to the extent that they would otherwise apply to any period or act
occurring after the Closing. Notwithstanding anything to the contrary in this
6
Agreement, Purchaser will not assume any liability or obligation (other than
those listed on Schedule 1.4) owed by Imperial Canada to Seller or any
Post-Closing Affiliate of a type that would be shown on a balance sheet of
Imperial Canada and any such liability or obligation will not be included in the
C&A Imperial Canada Assumed Liabilities.
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of Seller. Subject to Section 2.3,
Seller represents and warrants to Purchaser as follows:
2.1.1. The Imperial Shares. (a) Except as set forth on
Schedule 2.1.1, (i) Seller owns free and clear of any mortgages, liens, security
interests or other encumbrances (collectively, "Liens") the number of Imperial
Shares listed in Schedule 2.1.1, which Shares represent all of the issued and
outstanding shares of capital stock of Imperial, and (ii) C&A Canada owns the
shares of common stock of Imperial Canada listed in Schedule 2.1.1 as owned by
C&A Canada (the "C&A Canada-Owned Imperial Canada Shares"), which shares,
together with the shares of common stock of Imperial Canada listed in Schedule
2.1.1 as owned by Imperial (the "Imperial-Owned Imperial Canada Shares"),
represent all of the issued and outstanding shares of capital stock of Imperial
Canada.
(b) The Imperial Shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable. The Imperial Shares have not been
issued in violation of, and are not subject to, any preemptive rights, and there
are no outstanding convertible or exchangeable securities, calls, options or
similar Contracts relating to the Imperial Shares or that may require the
Company to issue to any person or entity any shares of any of its capital stock.
Except as listed or described on Schedule 2.1.1, there are no voting trust or
other Contracts restricting the voting, dividend rights or disposition of the
Imperial Shares.
(c) Except as set forth in Schedule 2.1.1, Seller owns the Imperial
Shares beneficially and of record free and clear of all Liens and at the Closing
will Transfer its entire right, title and interest in and to the Imperial Shares
to Purchaser.
(d) The Company does not own, beneficially or of record, any stock or
other ownership interests in, or control, any other entity other than the
Subsidiaries, all of the issued and outstanding share capital of which is owned
by Imperial free and clear of all Liens (except for the C&A Canada-Owned
Imperial Canada Shares and as set forth on Schedule 2.1.1); and, except as set
forth on Schedule 2.1.1, there are no outstanding convertible
7
or exchangeable securities or agreements giving any person or entity any right
to acquire shares of capital stock of either of the Subsidiaries and no voting
trusts or other Contracts restricting the voting, dividend rights or disposition
of shares of either of the Subsidiaries.
2.1.2. Authorization and Effect of Agreement. Seller has the
requisite corporate power to execute and deliver this Agreement and the other
agreements or instruments referred to herein other than the Recapitalization
Agreement, dated as of the date hereof, between Xxxxxx, Inc., BDPH and Purchaser
(the "Xxxxxx Agreement") (collectively, the "Transaction Documents") to which
Seller is a party and to perform the transactions contemplated hereby to be
performed by it. All necessary corporate action required to be taken under the
Delaware General Corporation Law for the due authorization of the execution and
delivery by Seller of the Transaction Documents to which Seller is a party and
the performance by Seller of the transactions contemplated thereby to be
performed by it has been duly taken by Seller. Each Transaction Document to
which Seller is a party has been, or will be, as the case may be, duly executed
and delivered by Seller, and, assuming the due execution and delivery of such
Transaction Document by Purchaser, constitutes, or will constitute, as the case
may be, valid and binding obligations of Seller enforceable in accordance with
its terms. Imperial and each of the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation.
2.1.3. No Restrictions. The execution and delivery of the
Transaction Documents by Seller, Imperial Canada and Imperial to which they are
parties does not, and the performance by Seller, Imperial Canada and Imperial of
the transactions contemplated thereby to be performed by them will not, conflict
with, or result in any violation of, or constitute a default (with or without
notice or lapse of time or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a benefit under,
(i) any provision of the Certificate of Incorporation or By-laws or comparable
governing documents of Seller, Imperial or any of the Subsidiaries, (ii) any
material lease, agreement, or other contract or legally binding contractual
right or obligation (a "Contract") of the Company, (iii) any permit or approval
("Permit") issued under any domestic, foreign or other statute, law, ordinance,
rule, regulation, judgment, order, injunction, decree or ruling or common law
obligation ("Law") of any domestic, foreign or other court, government,
governmental agency, authority, entity or instrumentality ("Governmental
Entity"), or (iv) any Law (other than a Law requiring a Permit), other than, as
to clauses (ii), (iii) and (iv), any such conflicts, violations or defaults as
are listed or described on
8
Schedule 2.1.3 or which, individually or in the aggregate, could not reasonably
be expected to result in a material undisclosed liability of the Company. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Seller or the Company in connection with the execution and
delivery by Seller and Imperial Canada of the Transaction Documents to which
they are a party or the performance by Seller and Imperial Canada of the
transactions contemplated thereby to be performed by them, except (i) for the
filing of a premerger notification report by an Affiliate of Seller under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if applicable in the circumstances, (ii) for such of the foregoing as are
listed or described on Schedule 2.1.3, and (iii) for such consents, approvals,
orders, authorizations of, or registrations, declarations or filings with, any
Governmental Entity, which, individually or in the aggregate, if not obtained or
made, could not reasonably be expected to result in a material undisclosed
liability of the Company.
2.1.4. Financial Statements. (a) Attached as Schedule 2.1.4(a)
are the audited consolidated balance sheets of the Company as of January 27,
1996 and December 28, 1996, the related audited consolidated statements of
stockholders' equity, operations and cash flows for the fiscal years then ended,
accompanied by the accountant's reports thereon, the unaudited combined balance
sheet of the Company as of September 26, 1997 (the "Balance Sheet") and the
unaudited combined statements of operations for the combined first two fiscal
quarters of 1996 and 1997 (collectively, with the related notes, the "Financial
Statements"). The audited Financial Statements present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods specified in conformity with United States generally accepted accounting
principles, consistently applied ("GAAP"), except as set forth in Schedule
2.1.4(a).
(b) Seller will deliver audited consolidated balance sheets of
the Company as of September 26, 1997 and the related audited consolidated
statements of stockholders' equity, operations and cash flows for the nine month
periods ended September 26, 1997 (collectively, with the related notes, the
"Offering Financial Statements") as promptly as practicable and in any event by
November 30, 1997. The Offering Financial Statements will present fairly, in all
material respects, the consolidated financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
specified in conformity with GAAP.
9
(c) The Company does not have, and as of immediately prior to
the Closing will not have, any liabilities or obligations, whether known or
unknown, absolute, accrued, contingent or otherwise, whether due or to become
due, including any uninsured liabilities, and whether arising by virtue of a
breach of or under any Law, any lawsuit or claim or otherwise, that would be
required by GAAP to be shown as a liability on a consolidated balance sheet of
the Company except (i) as and to the extent set forth in the Balance Sheet or
specifically disclosed in the notes thereto, (ii) liabilities incurred in the
ordinary course of business consistent with past practice and not prohibited by
this Agreement, which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, (iii) as set forth in Schedule
2.1.4(c), and (iv) other liabilities for which Seller is responsible pursuant to
this Agreement.
(d) Except as listed or described on Schedule 2.1.4(d), (i)
from September 26, 1997 to the date of this Agreement, the Company has conducted
the Business only in the ordinary course, consistent with past practice, (ii)
since September 26, 1997, the Company has not taken any action which would have
constituted a violation of Section 3.5 if Section 3.5 had applied since
September 26, 1997, and (iii) during the period from September 26, 1997 to the
Closing Date, there has not been any Material Adverse Effect, including any
damage, destruction, loss or abandonment (whether or not covered by insurance)
which, individually or in the aggregate, has or, to the Knowledge of Seller,
could reasonably be expected to have, a Material Adverse Effect, other than, as
applied to the accuracy of this representation in respect of the period between
the date hereof and the Closing Date, changes or effects after the date hereof
that result from general economic conditions or competitive circumstances in the
markets in which the Business is conducted.
(e) For purposes of this Agreement, the term "Material Adverse
Effect" means an event, circumstance or occurrence that has a material adverse
effect on the Business or the consolidated financial condition or results of
operations of the Company relative, in the case of financial condition or
results of operations, to the management projections for the Business set forth
in Schedule 2.1.4(e).
2.1.5. Brokers. No broker, investment banker, financial
advisor or other person (other than BancBoston Securities, Inc. and Xxxxxxxxxxx
Xxxxxxx & Co., Inc., the fees and expenses of which will be paid by Seller) is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement.
10
2.2. Representations and Warranties of Purchaser. Subject to Section
2.3, Purchaser represents and warrants to Seller as follows:
2.2.1. Authorization and Effect of Agreement. Purchaser has
the requisite corporate power to execute and deliver this Agreement and to
perform the transactions contemplated hereby to be performed by it. All
necessary corporate action required to be taken under the Delaware General
Corporation Law for the due authorization of the execution and delivery by
Purchaser of this Agreement and the performance by Purchaser of the transactions
contemplated hereby to be performed has been duly taken by Purchaser. This
Agreement has been duly executed and delivered by Purchaser and, assuming the
due execution and delivery of this Agreement by Seller constitutes a valid and
binding obligation of Purchaser, enforceable in accordance with its terms.
2.2.2. No Restrictions. The execution and delivery of this
Agreement by Purchaser does not, and the performance by Purchaser of the
transactions contemplated hereby to be performed by it will not, conflict with,
or result in any material violation of, or constitute a material default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, any provision of the charter or bylaws or comparable
governing documents of Purchaser, or any material Contract or Permit applicable
to Purchaser other than any such conflicts, violations or defaults which,
individually or in the aggregate, could not reasonably be expected to result in
a material undisclosed liability of Purchaser. No material consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained or made by or with respect to
Purchaser in connection with the execution and delivery of this Agreement by
Purchaser or the performance by Purchaser of the transactions contemplated
hereby to be performed by either of them, except (i) for such of the foregoing
as are listed or described on Schedule 2.2.2 and (ii) for such consents,
approvals, orders, authorizations of, or registrations, declarations or filings
with, any Governmental Entity, which, individually or in the aggregate if not
obtained or made, could not reasonably be expected to result in a material
undisclosed liability of Purchaser.
2.2.3. Financial Capacity. Purchaser has in hand a commitment
letter (the "Commitment Letter"), which is currently in effect and a true and
correct copy of which has been previously provided to Seller, from the financial
institutions indicated therein, as well as the equity commitment letter of
Blackstone Capital Partners III Merchant Banking Fund, L.P.
11
("Blackstone"), to provide the secured debt and equity financing contemplated by
Purchaser for the transactions described in this Agreement and has obtained a
highly confident letter, a true and correct copy of which has been previously
provided to Seller, with respect to the subordinated debt financing so
contemplated. Blackstone has undertaken to provide the equity capital
contemplated by the Commitment Letter, and a true and correct copy of such
undertaking has been previously provided to Seller.
2.2.4. Disclosure. As of the date hereof, to the Knowledge of
Purchaser, (a) Seller is not in breach of any of its representations and
warranties set forth in Section 2.1.4 and (b) Purchaser has furnished to
Seller's financial advisors all material information pertaining to the Company
and the Xxxxxx Recap that such financial advisors have requested prior to the
date hereof.
2.3. Certain Limitations on Representations and Warranties.
(a) Each of the parties is a sophisticated legal entity that
was advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Accordingly, each of the parties
hereby acknowledges that (i) there are no representations or warranties by or on
behalf of any party hereto or any of its respective Affiliates or
representatives other than those expressly set forth in this Agreement and (ii)
the parties' respective rights, obligations and remedies with respect to this
Agreement and the events giving rise thereto will be solely and exclusively as
set forth in the Transaction Documents.
(b) Any representation and warranty made in this Agreement by
Seller will be deemed for all purposes to be qualified by the disclosures made
in any Schedule specifically referred to in such representation or warranty and
by the information disclosed in any other Schedule if the relevance of such
information to such representation and warranty is reasonably apparent on its
face. References in this Article to matters "primarily" relating to the Business
are to matters which predominantly relate to the Business rather than
predominantly to one of either Seller's or any Post-Closing Affiliate's other
businesses or to the businesses or operations of Seller or any Post-Closing
Affiliate generally.
III. COVENANTS
3.1. Investigation by Purchaser. (a) Prior to the Closing, upon
reasonable notice from Purchaser to Seller given in accordance with this
Agreement, Seller will, and will cause the Company to, afford to the officers,
attorneys, accountants or other authorized representatives of Purchaser
reasonable access during normal business hours to the facilities and the books
and
12
records of the Company so as to afford Purchaser a reasonable opportunity to
make, at its sole cost and expense, such review, examination and investigation
of the Company as Purchaser may reasonably desire to make, including without
limitation a so-called "Phase I" (i.e., documentary review and walk-through site
inspection) preliminary environmental evaluation; provided, however, that no
borings or other so-called "Phase II" environmental examinations will be
performed without Seller's prior written consent, which consent may be given or
withheld in Seller's sole discretion. Purchaser will be permitted to make
extracts from or to make copies of such books and records as may be reasonably
necessary. Prior to the Closing, Seller will furnish to Purchaser, or cause to
be furnished to Purchaser, such financial and operating data and other
information pertaining to the Company as Purchaser may reasonably request;
provided, however, that nothing in this Agreement will obligate Seller to take
actions that would unreasonably disrupt the normal course of business of itself,
any Post-Closing Affiliate or the Company, violate the terms of any applicable
Law or rules of any national stock exchange applicable to it or its Affiliates
or any Contract to which any of them is a party or to which any of them or any
of their assets are subject (to the extent described in reasonable detail in
response to any request for information specified above) or grant access to any
of their proprietary or confidential information not related to the Business.
(b) Subject to Section 3.2, whether or not the Closing occurs,
Purchaser will, and will cause its Affiliates other than Seller to, treat in
confidence all documents, materials and other information (including without
limitation information relating to supply and sales agreements and relationships
with third persons or entities) disclosed by any other party that is not its
Affiliate, whether before, during or after the course of the negotiations
leading to the execution of this Agreement or thereafter, including without
limitation in its investigation of the other parties and in the preparation of
agreements, schedules and other documents relating to the consummation of the
transactions contemplated hereby. Prior to the Closing, and in the event that
this Agreement is terminated, neither Purchaser nor any of its Affiliates will,
and if the Closing occurs, Seller will not and will cause its Affiliates not to,
disclose to any third party any confidential information, except as required by
Law or rules of any national stock exchange or any Governmental Authority
applicable to it or its Affiliates or Purchaser determines is required to be
disclosed in connection with the financing described in Section 2.2.3, subject
to Seller's right to review and reasonably object to such disclosure. If this
Agreement is terminated, Purchaser and each of its Affiliates will return to
Seller all originals and copies of all non-public documents and materials of the
type provided for in this Section 3.1 which have been furnished or made
available in connection
13
with this Agreement, and Purchaser will destroy all notes, analyses,
compilations, studies or other documents which contain or otherwise reflect such
information.
3.2. Press Releases. Prior to the Closing, no party will issue or cause
the publication of any press release or other public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other parties, which consent will not be unreasonably withheld or
delayed; provided, however, that nothing herein will prohibit any party from
issuing or causing publication of any such press release or public announcement
to the extent that such party determines such action to be required by Law or
the rules of any national stock exchange applicable to it or its Affiliates or
prohibit Purchaser from making any disclosure it determines may be reasonably
necessary in furtherance of obtaining the financing contemplated by Section
2.2.3, in which event the party making such determination will, if practicable
in the circumstances, use reasonable efforts to allow the other parties
reasonable time to comment on such release or announcement in advance of its
issuance.
3.3. Regulatory Filings. (a) Not later than two business days after the
date hereof, Purchaser will, and Seller will cause the ultimate parent entity of
Seller to, make such filings, if any, as may be required by the HSR Act with
respect to the consummation of the transactions contemplated by this Agreement.
Thereafter, Purchaser will, and Seller will cause the ultimate parent entity of
Seller to, file or cause to be filed as promptly as practicable with the United
States Federal Trade Commission (the "FTC") and the United States Department of
Justice (the "DOJ") supplemental information, if any, which may be required or
requested by the FTC or the DOJ pursuant to the HSR Act. To the extent required
by Law, Seller will make, or cause any of its Affiliates to make, such filings
and use its reasonable efforts to obtain the governmental approvals and the
other third party consents (if any) referred to in Section 2.1.3, and Purchaser
will each make such filings and use its reasonable efforts to obtain the
governmental approvals and the other third party consents (if any) referred to
in Section 2.2.2. All filings referred to in this Section 3.3(a) will comply in
all material respects with the requirements of the respective Laws pursuant to
which they are made.
(b) Without limiting the generality or effect of Section 3.3(a), each
of the parties will (i) use their respective reasonable efforts to comply as
expeditiously as possible with all lawful requests of Governmental Entities for
additional information and documents pursuant to the HSR Act, if applicable,
(ii) not (A) extend any waiting period under the HSR Act or (B) enter into any
agreement with any Governmental Entity not to
14
consummate the transactions contemplated by this Agreement, except with the
prior consent of each of the other parties hereto, and (iii) cooperate with each
other and use reasonable efforts to prevent the entry of, and to cause the
lifting or removal of, any temporary restraining order, preliminary injunction
or other judicial or administrative order which may be entered into in
connection with the transactions contemplated by this Agreement, including
without limitation the execution, delivery and performance by the appropriate
entity of such divestiture agreements or other actions, as the case may be, as
may be necessary to secure the expiration or termination of the applicable
waiting periods under the HSR Act or the removal, dissolution, stay or dismissal
of any temporary restraining order, preliminary injunction or other judicial or
administrative order which prevents the consummation of the transactions
contemplated hereby or requires as a condition thereto that all or any part of
the Business be held separate and, prior to or after the Closing, pursue the
underlying litigation or administrative proceeding diligently and in good faith.
3.4. Injunctions. Without limiting the generality or effect of any
provision of Section 3.3, Section 3.6 or Section 3.9 or Article IV, if any
Governmental Entity having jurisdiction over any party issues or otherwise
promulgates any injunction, decree or similar order prior to the Closing which
prohibits the consummation of the transactions contemplated hereby, the parties
will use their respective reasonable efforts to have such injunction dissolved
or otherwise eliminated as promptly as possible and, prior to or after the
Closing, to pursue the underlying litigation diligently and in good faith.
3.5. Operation of the Business. Except in connection with or as a
result of any matter listed or described on Schedule 3.5, as expressly
contemplated herein or as otherwise consented to by Purchaser or requested by
Purchaser or any of its Affiliates, from the date hereof to the Closing Date,
Seller will cause the Company to:
(a) Use reasonable efforts to keep the Business intact
(including without limitation relationships with customers, employees,
suppliers and others) and not take or permit to be taken or do or
suffer to be done anything other than in the ordinary course of
business of the Business as presently conducted, and use reasonable
efforts to maintain the goodwill associated with the Business; without
limiting the generality or effect of the foregoing, (i) in all events
Seller will take all actions so that, as of immediately prior to the
Closing, the total accounts payable and accrued liabilities (other than
any liabilities under the Canadian Pension Plan) included in the C&A
Imperial Canada Assumed Liabilities total not more than $5.0 million
and (ii) not
15
effect any transaction between Imperial Canada, on the one hand, and
any of the Purchased Imperial Companies, on the other hand, except in
the ordinary course of business;
(b) Continue existing practices relating to maintenance of the
assets owned, leased or otherwise held by the Company for use in the
Business ("Assets") in good repair, ordinary wear and tear excepted,
and continue to make capital expenditures substantially in accordance
with budgets previously delivered to Purchaser (and Imperial hereby
agrees to continue to make capital expenditures only substantially in
accordance with budgets previously delivered to Purchaser unless each
other party otherwise consents);
(c) Not purchase, sell, lease or dispose of, or enter into any
Contract for the purchase, sale, lease or disposition of, or subject to
Lien, any of the Assets other than (i) Products or (ii) in the ordinary
course of business of the Business;
(d) Not adopt or make any amendment to any Employee Plan or
increase the general rates of compensation of Employees, except (i) as
required by Law or (ii) pursuant to any Contract in effect on the date
of this Agreement (Seller representing that, to the Knowledge of
Seller, no Contract providing for such adoption, amendment or increase
is in effect other than collective bargaining agreements the terms of
which have been previously disclosed to Purchaser);
(e) Not enter into, amend, modify or cancel any material
Contract except in the ordinary course of business consistent with past
practice;
(f) Not incur indebtedness for borrowed money, or assume,
guarantee, endorse or otherwise become responsible for the obligations
of any other person or entity, or make loans or advances to any person
or entity (other than advances to Employees in the ordinary course of
business consistent with past practice reflected on the Company's books
and records);
(g) Not enter into any joint venture, partnership or similar
arrangement;
(h) Not amend its Certificate of Incorporation or ByLaws;
(i) Not dispose of, permit to lapse or otherwise fail to
preserve any of its Intellectual Property or other similar rights,
dispose of or permit to lapse any material
16
Permit, or dispose of or disclose to any person or entity other than an
authorized representative of Purchaser, any trade secret (except for
such of the foregoing as may occur by operation of Law or the terms of
any of the foregoing);
(j) Not make any change in the accounting methods, principles
or practices of the Business, except as required by GAAP;
(k) Not sell or factor any account receivable of the Business
or otherwise participate in any accounts receivable facility other than
to accept payments made by account debtors to the Company at an
existing lock-box of the Company (which lock-box arrangement will be
terminated as promptly as practicable);
(l) With respect to the Pension Plan for Salaried Employees of
Imperial Wallcoverings (Canada), Inc.(the "Canadian Pension Plan"), (1)
not withdraw any assets from the Canadian Pension Plan other than to
pay benefits in accordance with its existing terms, (2) not make any
amendment to the Canadian Pension Plan and (3) other than as may be
required by Law, make any change to the actuarial assumptions used in
determining the actuarial present value of the liabilities of the
Canadian Pension Plan;
(m) Not fail to pay when due any amount owed to a third party,
including without limitation, any Taxes, in accordance with the
applicable payment terms;
(n) Not prepay any obligation of the Company other than (i) in
the ordinary course of business consistent with past practice or (ii)
Indebtedness; and
(o) Not enter into a Contract to do any of the foregoing
(other than as may be required by Section 3.5(a) or 3.5(b).
For purposes of this Agreement, "Intellectual Property" means all patents and
trademarks and all material trade names, service marks and registered
copyrights, and registrations and applications therefor, used or held for use in
the conduct of the Business.
3.6. Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Section 3.3, 3.4 or 3.9 or Article IV, prior to the
Closing, each of the parties hereto will use its respective reasonable efforts
with due diligence and in good faith to satisfy promptly all conditions required
hereby to be satisfied by such party in order to expedite the consummation of
the transactions contemplated hereby.
17
3.7. Negotiations With Others. From the date hereof until the
termination of this Agreement in accordance with its terms or the Closing,
Seller and its Affiliates will not, and will cause its and their respective
officers, directors, investment bankers, attorneys, accountants and other agents
not to: (i) initiate, solicit (including by way of furnishing information) or
accept, any offer or proposal which constitutes, an Alternative Proposal or (ii)
in the event of an unsolicited Alternative Proposal, engage in substantive
discussions or negotiations, or enter into any Contract, with, or furnish
information to, any Person relating to any Alternative Proposal. All such
negotiations prior to the date hereof have been terminated. For purposes of this
Agreement, "Alternative Proposal" means any proposal or offer from any Person
relating to any acquisition or purchase of all or substantially all of the
assets or common stock of the Company or any merger, consolidation, business
combination or similar transaction involving the Company, other than the
transactions contemplated by this Agreement.
3.8. Certain Additional Covenants. Seller will use its reasonable best
efforts to cause the independent accountants that issued the reports relating to
the Offering Financial Statements to consent to Purchaser's use of the Offering
Financial Statements as may be required by applicable Law in the disclosure
documents relating to the financing contemplated by this Agreement or any
subsequent financing involving a public offering.
3.9. Efforts to Consummate. Subject to the terms and conditions herein
provided, Seller and Purchaser will use their reasonable efforts to take or
cause to be taken, all actions and to do, or cause to be done, all things
necessary to consummate and make effective the transactions contemplated by this
Agreement and to cooperate with the other in connection with the foregoing.
Seller will, at its sole expense, cause to be included in the assets and
properties of the Company prior to the Closing all assets, properties, permits,
authorizations, rights and related obligations which are being used or held for
use primarily or exclusively by the Company (whether or not such assets,
properties, permits, authorizations, rights and related obligations are
presently owned or held by the Company), all on terms and conditions, and
pursuant to documentation, reasonably acceptable to Purchaser.
3.10. Resignations. Prior to the Closing, upon Purchaser's specific
request, Seller will cause to resign or to be removed from office such officers
and directors of Imperial and each of the Subsidiaries whose full-time
employment is not in the Business.
18
3.11. Certain Conditions. Notwithstanding any other provision hereof,
in the event that the condition to the Closing set forth in Section 4.2.4 is not
satisfied, Purchaser will have no liability or obligation to Seller or any other
Person under any provision of, or actual or alleged breach of, this Article III
(other than Section 3.1(b) or 3.2), the parties hereby expressly acknowledging
and agreeing that Purchaser will have no liability or obligation hereunder if
the Xxxxxx Recap shall not have been consummated.
3.12. Certain Pre-Closing Transactions. Immediately prior to the
Closing, Seller will cause Imperial to Transfer to C&A Canada the Imperial-Owned
Imperial Canada Shares for $1.00; such Transfer will be deemed not to constitute
a breach of any representation, warranty or covenant herein. If, between the
date of this Agreement and the Closing, any party reasonably determines that
additional agreements with any other party are necessary and appropriate to
effect the Transfer of the C&A Imperial Canada Assets and the assumption of the
C&A Imperial Canada Assumed Liabilities on economic terms as close as
practicable to a transaction in which Purchaser acquired all the stock of
Imperial Canada, then the parties will negotiate in good faith with respect to
such additional agreements (including, without limitation, any such agreements
relating to the transfer of the assets and liabilities of the Canadian Pension
Plan). The parties agree that Seller may cause C&A Canada to amalgamate with
Imperial Canada prior to the Closing. If such amalgamation were to take place,
the parties agree to amend the Agreement as necessary so that C&A Canada will be
the seller of the same Imperial Canada assets and Purchaser will assume the same
liabilities as described in the present Agreement.
IV. THE CLOSING
4.1. Conditions Precedent to Obligations of Purchaser and Seller. The
obligations of Purchaser and Seller under this Agreement to consummate the
transactions contemplated hereby will be subject to the satisfaction, at or
prior to the Closing, of the conditions that there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency or
body of competent jurisdiction that is in effect that prohibits the Closing and
the waiting period (and any extension thereof) applicable to the Imperial Canada
Business Acquisition and the purchase and sale of the Imperial Shares
contemplated hereby under the HSR Act shall have lapsed or been terminated. The
foregoing conditions may be waived (i) insofar as it is a condition to the
obligations of Purchaser, by Purchaser at its option and (ii) insofar as it is a
condition to the obligations of Seller, by Seller at its option.
19
4.2. Additional Conditions Precedent to Obligations of Purchaser. The
obligations of Purchaser under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to the
Closing, of all of the following conditions, any one or more of which may be
waived at the option of Purchaser:
4.2.1. No Material Breach. There shall have been no material breach by
Seller in the performance of any of the covenants herein to be performed by it
in whole or in part prior to the Closing.
4.2.2. Transfer Documents, Etc. Seller shall have delivered or caused
to be delivered to Purchaser the certificates representing the Imperial Shares,
and certificates representing all shares of capital stock of the Subsidiaries
other than Imperial Canada, which certificates shall have been duly endorsed for
transfer or accompanied by duly executed stock powers, with (if applicable) any
required tax stamps affixed thereto.
4.2.3. Other Documents. Seller shall have duly executed and delivered
to Purchaser a Management Services Agreement in substantially the form of
Schedule 4.2.3(a) (the "MSA") and a Noncompetition Agreement in substantially
the form of Schedule 4.2.3(b) (the "NCA"), and Seller shall have delivered to
Purchaser an opinion of Cravath, Swaine & Xxxxx, counsel to Seller,
substantially to the effect set forth in Schedule 4.2.3(c).
4.2.4. Xxxxxx Closing. The conditions to the obligations of Purchaser
to consummate the Xxxxxx Recap shall have been satisfied or duly waived in
accordance with the requirements thereof.
4.2.5. Material Adverse Change. Since September 26, 1997, there shall
not have occurred (a) a Material Adverse Effect or (b) any event which could
reasonably be expected to have a Material Adverse Effect.
4.2.6. No Litigation. There shall not be pending or threatened any
litigation seeking to enjoin this Agreement or the transactions contemplated
hereby or the Xxxxxx Recap or seeking substantial damages as a result thereof.
4.2.7. Certain Approvals. All filings and approvals specified in
Schedule 2.1.3 shall have been made or obtained and shall be in full force and
effect.
4.2.8. Release of Liens. Seller shall have delivered to
Purchaser evidence reasonably satisfactory to Purchaser of the
release and termination of all Liens in respect of Indebtedness
20
and any guarantees of indebtedness of Seller or any Post-Closing
Affiliate.
4.3. Additional Conditions Precedent to Obligations of Seller. The
obligations of Seller under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to the
Closing, of all the following conditions, any one or more of which may be waived
at the option of Seller:
4.3.1. No Material Breach. There shall have been no material breach by
Purchaser in the performance of any of the covenants herein to be performed by
it in whole or in part prior to the Closing.
4.3.2. Closing Payment. Purchaser shall have delivered the
Closing Payment to Seller in the manner specified in Section 1.2.
4.3.3. Option. Purchaser shall have executed and delivered to Seller an
Option Agreement in substantially the form of Exhibit A (the "Option Agreement")
under which Seller will have the right (the "Option") to purchase 6.7% of the
common stock of BDPH issuable in the Merger calculated as specified in Footnote
1 of Exhibit A at an initial option exercise price (the "Initial Exercise
Price") calculated in accordance with Note 2 of Exhibit A and otherwise on the
terms set forth in Exhibit A. The Initial Exercise Price will be proportionately
increased to the extent that stockholders of Purchaser make any additional
contributions to the capital of BDPH to fund any adjustments required by Section
1.3 and the comparable provisions of the Xxxxxx Agreement.
4.3.4. Other Documents. Purchaser shall have caused the Company to have
duly executed and delivered to Seller the MSA and the NCA, and Purchaser shall
have delivered to Seller an opinion of Xxxxx, Day, Xxxxxx & Xxxxx, counsel to
Purchaser, substantially to the effect set forth in Schedule 4.3.4.
4.4. The Closing. Subject to the fulfillment or waiver of the
conditions precedent specified in Sections 4.1, 4.2 and 4.3, the consummation of
the purchase and sale of the Shares contemplated hereby (the "Closing") will
take place on December 31, 1997 (or as soon as practicable thereafter as all of
the conditions to the Closing set forth in Section 4.3 are satisfied or waived)
(the actual date of the Closing, the "Closing Date"). The Closing will take
place at 10:00 A.M., Eastern Time, at the offices of Xxxxx, Day, Xxxxxx & Xxxxx,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other time or place or
on such date as shall be agreed upon the parties. At the Closing, the parties
will execute and deliver such transfer and assumption documentation as may be
customary to evidence the Transfer of the
21
C&A Imperial Canada Assets and the assumption of the C&A Imperial Canada Assumed
Liabilities, as contemplated herein.
4.5. Termination. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated
at any time prior to the Closing:
(a) By the mutual written consent of Purchaser and
Seller;
(b) By Purchaser or Seller if the Closing shall not have
occurred on or before May 31, 1998 (the "Drop Dead Date");
(c) By either Purchaser or Seller if there shall have been
entered a final, nonappealable order or injunction of any Governmental
Entity restraining or prohibiting the consummation of the transactions
contemplated hereby or any material part thereof;
(d) By Purchaser, in its sole discretion, on December 5, 1997
or, if later, the fifth day following Seller's delivery of the Offering
Financial Statements, but neither before nor after such date, if the
Offering Financial Statements reflect an adverse difference from the
financial information for the first three quarters of fiscal year 1997
previously provided to Purchaser by Imperial in any material respect as
determined by Purchaser, which determination will be conclusive for all
purposes; or
(e) By Purchaser, in its sole discretion, by notice given to
Seller prior to 5:00 p.m., New York time, on November 5, 1997.
In the event of the termination of this Agreement under this Section 4.5, each
party hereto will pay all of its own fees and expenses. There will be no further
liability hereunder on the part of any party hereto if this Agreement is so
terminated, except under Sections 3.1(b), 3.2 and 7.2 or by reason of a breach
of any covenant or representation or warranty contained in this Agreement,
including without limitation the covenants contained in Sections 3.3, 3.4 and
3.7.
V. SURVIVAL AND INDEMNIFICATION
5.1. Survival of Representations, Warranties and Covenants. (a) Each of
the representations and warranties contained in Article II and in the last
sentence of Section 6.1.3(b) will survive the Closing and remain in full force
and effect until the later of (i) the expiration of the applicable statute of
22
limitations and (ii) the fifth anniversary of the Closing Date, except that the
representations and warranties contained in clauses (ii) and (iii) of the first
sentence of Section 2.1.3 and Sections 2.1.4, 2.2.2 and 2.2.4 will not survive
the Closing. Any claim for indemnification with respect to such matters which is
not asserted by a notice given as herein provided specifically identifying the
particular breach underlying such claim (whether or not the Indemnifiable Loss
has been actually incurred as of the date of such notice) and the facts and
Indemnifiable Loss relating thereto (to the extent reasonably determinable as of
the date of such notice), within such specified periods of survival may not be
pursued and is hereby irrevocably waived.
(b) The covenants contained in Sections 3.1(b), 3.3(b), 3.4,
3.5(a)(i)-(iii), 3.5(l), 3.5(m), 3.5(n), 3.8 and 3.9 (second sentence only), in
this Article V and in Articles I, VI and VII (the "Post-Closing Covenants") will
survive the Closing and remain in effect indefinitely unless a specified period
is otherwise set forth in this Agreement (in which event such specified period
will control). All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of the Closing, with the result that
any claim for an alleged breach of any such covenant may not be pursued and is
hereby irrevocably waived.
5.2. Limitations on Liability. (a) For purposes of this Agreement, (i)
"Indemnity Payment" means any amount of Indemnifiable Losses required to be paid
pursuant to this Agreement, (ii) "Indemnitee" means any person or entity
entitled to indemnification under this Agreement, (iii) "Indemnifying Party"
means any person or entity required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all claims, demands,
actions, suits or proceedings (by any person or entity, including without
limitation any Governmental Entity), settlements and compromises relating
thereto and reasonable attorneys' fees and expenses in connection therewith or
in enforcing the Indemnifying Party's obligations hereunder, losses,
liabilities, costs and expenses, reduced by the amount of insurance proceeds
actually received from any person or entity that is not an Affiliate of the
Indemnitee, and (v) "Third Party Claim" means any claim, demand, action, suit or
proceeding made or brought by any person or entity who or which is not a party
to this Agreement or an Affiliate of a party to this Agreement.
(b) After the Closing, as between Seller and any Post- Closing
Affiliate, on the one hand, and Purchaser, the Purchased Imperial Companies and
any Affiliate of either of them, on the other hand, the rights and obligations
set forth in this Article V will be the sole and exclusive remedies for breach
of this Agreement.
23
5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4, Seller
will indemnify, defend and hold harmless Purchaser and its Affiliates and their
respective directors, officers, partners, shareholders, employees, agents and
representatives (including, without limitation, any predecessor or successor to
any of the foregoing) (such persons and entities, "Purchaser Indemnitees") from
and against any and all Indemnifiable Losses relating to, resulting from or
arising out of:
(i) Any breach by Seller of any of the representations
or warranties of Seller contained in this Agreement;
(ii) Any breach by Seller of any Post-Closing Covenant
of Seller contained in this Agreement;
(iii) Any controlled group liability under (A) Title IV of
ERISA, (B) Section 302 of ERISA, (C) Sections 412 and 4971 of the
Internal Revenue Code of 1986, as amended (the "Code"), (D)
continuation coverage requirements of Sections 601, et seq. of ERISA
and Section 4980B of the Code, and (E) corresponding or similar
provisions of foreign Laws, other than such liabilities that arise
solely out of, or relate solely to, Employees or Former Employees;
(iv) All Indemnifiable Losses incurred by any Purchaser
Indemnitee by reason of any liability or obligation of Seller or any of
its Post-Closing Affiliates that does not solely arise out of the
Business or the Company; and
(v) The assertion against Purchaser or any of its Affiliates
of any liability or obligation of Imperial Canada that is not a C&A
Imperial Canada Assumed Liability.
(b) Subject to Sections 5.1, 5.2 and 5.4, Purchaser will, and, if the
Closing occurs, Imperial, jointly and severally with Purchaser will, indemnify,
defend and hold harmless Seller and each Post-Closing Affiliate and their
respective directors, officers, partners, shareholders, employees, agents and
representatives (including, without limitation, any predecessor or successor to
any of the foregoing) (such persons and entities, "Seller Indemnitees") from and
against any and all Indemnifiable Losses relating to, resulting from or arising
out of:
(i) Any breach by Purchaser of any of the
representations or warranties of Purchaser contained in this
Agreement;
(ii) Any breach by Purchaser of any Post-Closing
Covenant of Purchaser contained in this Agreement;
(iii) The Assumed Push-Down Liabilities;
24
(iv) All Indemnifiable Losses incurred by any Seller
Indemnitee by reason of any liability or obligation of the Company that
solely arises out of the Business or the operations of the Company,
provided, however, that this Section 5.3(b)(iv) will not apply to any
matter for which Purchaser is entitled to indemnification under Section
5.3(a); and
(v) The assertion against Seller or any of its Post-
Closing Affiliates of any C&A Imperial Canada Assumed
Liability.
5.4. Defense of Claims. (a) If any Indemnitee receives notice of the
assertion or commencement of any Third Party Claim against such Indemnitee with
respect to which an Indemnifying Party is obligated to provide indemnification
under this Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 30
calendar days after receipt of such written notice of such Third Party Claim.
Such notice by the Indemnitee will describe the Third Party Claim in reasonable
detail, will include copies of all material written evidence thereof and will
indicate the estimated amount, if reasonably practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party
will have the right to participate in, or, by giving written notice to the
Indemnitee, to assume, the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel (reasonably
satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith
in such defense.
(b) If, within ten calendar days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 5.4(a), an Indemnitee
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 5.4(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within ten calendar days after receiving written notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps or
if the Indemnifying Party has not undertaken fully to indemnify the Indemnitee
in respect of all Indemnifiable Losses relating to the matter, the Indemnitee
may assume its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith. Without
the prior written consent of the Indemnitee, the Indemnifying Party will not
enter into any settlement of any Third Party Claim which would lead to liability
25
or create any financial or other obligation on the part of the Indemnitee for
which the Indemnitee is not entitled to indemnification hereunder, or which
provides for injunctive or other non-monetary relief applicable to the
Indemnitee or does not include an unconditional release of all Indemnified
Parties. If a firm offer is made to settle a Third Party Claim without leading
to liability or the creation of a financial or other obligation on the part of
the Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder and the Indemnifying Party desires to accept and agree to such offer,
the Indemnifying Party will give written notice to the Indemnitee to that
effect. If the Indemnitee fails to consent to such firm offer within ten
calendar days after its receipt of such notice, the Indemnitee may continue to
contest or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will not exceed
the amount of such settlement offer.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 calendar days after the Indemnitee
becomes aware of such Direct Claim. Such notice by the Indemnitee will describe
the Direct Claim in reasonable detail, will include copies of all material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have a period of 30 calendar days within
which to respond in writing to such Direct Claim. If the Indemnifying Party does
not so respond within such 30 calendar day period, the Indemnifying Party will
be deemed to have rejected such claim, in which event the Indemnitee will be
free to pursue such remedies as may be available to the Indemnitee on the terms
and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 5.4(a), 5.4(b) or 5.4(c) will
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise prejudiced as a result of such
failure.
(e) If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an Indemnity Payment to the Indemnitee, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement, rebate or other payment by or against any
26
other person or entity, the amount of such reduction, less any costs, expenses,
premiums or taxes incurred in connection therewith, will promptly be repaid by
the Indemnitee to the Indemnifying Party. Upon making any Indemnity Payment the
Indemnifying Party will, to the extent of such Indemnity Payment, be subrogated
to all rights of the Indemnitee against any third person or entity that is not
an Affiliate of the Indemnitee in respect of the Indemnifiable Loss to which the
Indemnity Payment relates; provided, however, that (i) the Indemnifying Party
shall then be in compliance with its obligations under this Agreement in respect
of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment
of its Indemnifiable Loss, any and all claims of the Indemnifying Party against
any such third person or entity on account of said Indemnity Payment will be
subrogated and subordinated in right of payment to the Indemnitee's rights
against such third person or entity. Without limiting the generality or effect
of any other provision hereof, each such Indemnitee and Indemnifying Party will
duly execute upon request all instruments reasonably necessary to evidence and
perfect the above-described subrogation and subordination rights.
VI. OTHER POST-CLOSING COVENANTS
6.1. Personnel Matters.
6.1.1. Employees and Employee Benefit Plans. (a) Purchaser and
Imperial, jointly and severally, will indemnify Seller and each of its
Affiliates for any Indemnifiable Loss relating to, resulting from or arising out
of any change by Purchaser or the Company in employee plan benefits or levels of
compensation following the Closing Date from those existing on the Closing Date
or any liability or obligation to any Employee in the event that Purchaser or
the Company terminates the employment of any person who is an Employee as of the
Closing Date. Subject to Section 6.1.4, effective as of the Closing Date,
Purchaser will, or will cause one of its Affiliates to, offer employment to each
Employee employed as of the Closing Date by Imperial Canada.
(b) Purchaser agrees that, under any employee benefit plan made
available or established after the Closing, Employees will receive credit for
their years of service with Seller, any Post- Closing Affiliate or the Company
prior to the Closing in determining eligibility and vesting thereunder, and in
determining the amount of benefits under any applicable sick leave, vacation or
severance plan. Purchaser will, or will cause one of its Affiliates to, cover
Employees and Former Employees as of the Closing under a group health plan and
waive any preexisting condition limitations applicable to Employees under any
group health plan made available to Employees to the extent that an Employee's
condition would not have operated as a preexisting condition limitation under
any applicable group
27
health plan prior to the Closing, and Purchaser will, or will cause one of its
Affiliates to, take all action necessary to ensure that Employees and Former
Employees are given full credit for all co-payments and deductibles incurred
under any group health plan for the plan year that includes the Closing Date.
(c) For purposes of this Agreement, the term "Employee Plan" means each
employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and each other material plan,
program, agreement or arrangement, whether or not subject to ERISA, that (i)
provides benefits for Employees or Former Employees and (ii) is maintained by
Seller, any Post-Closing Affiliate or the Company or to which Seller, any
Post-Closing Affiliate or the Company contributes or is obligated to contribute,
or under which Seller, any Post-Closing Affiliate or the Company is liable in
respect of Employees or Former Employees. As used in this Agreement, (A) the
term "Employee" means each person (if any) listed or described as such on
Schedule 6.1.1 and each person who is employed by the Company as of the Closing
(Seller hereby covenanting that no such person will be so employed who also
works for Seller or any Post-Closing Affiliate) and (B) the term "Former
Employee" means any person formerly so employed by the Company in the conduct of
the Business but does not include person who became an employee of Seller (or
any entity that is or was an Affiliate of Seller) following the termination of
their employment with the Company. The terms "Employee" and "Former Employee"
will include, where an Employee Plan provides benefits for beneficiaries or
dependents, the beneficiaries and dependents of an Employee or Former Employee.
6.1.2. Assumption of Obligations. (a) Effective as of the Closing,
Purchaser will cause the Company to assume and be solely responsible for all
liabilities and obligations of any of Seller and each Post-Closing Affiliate
arising at any time and relating to the employment or termination of employment
of any Employee or Former Employee, except to the extent that any of such
liabilities or obligations are expressly retained by any Seller or any
Post-Closing Affiliate pursuant to this Section 6.1.
(b) Except as provided in Section 6.1.3, effective as of the Closing,
Purchaser will cause the Company to, assume and be solely responsible for all
liabilities and obligations of Seller or any Post-Closing Affiliate with respect
to Employees and Former Employees under any Employee Plan and Seller and each
Post-Closing Affiliate will be relieved of all liabilities and obligations with
respect to such Employee Plans. The liabilities and obligations assumed by
Purchaser and all of its Affiliates pursuant to this Section 6.1.2(b) include
without limitation (i) any liability or obligation relating to (x) short-term
and long-term disability benefits, (y) group medical benefits, and
28
(z) retiree health and life insurance benefits; including in each case any
claims for disability, medical, health and life insurance benefits incurred
prior to the Closing; and (ii) any liability or obligation to provide such
Employees and Former Employees and their qualified beneficiaries with
continuation coverage (within the meaning of Section 4980B(f)(2) of the Code)
under each Employee Plan that is a group health plan, and any liability or
obligation relating to such coverage, including without limitation any liability
or obligation to provide such Employees and Former Employees with the notice
required under Section 4980B(f)(6) of the Code with respect to qualifying events
that occur as a result of the Transfer of the Assets. Notwithstanding the
foregoing, neither Purchaser nor any of its Affiliates will assume any
liabilities or obligations with respect to Seller's cafeteria plan arrangement
arising out of any failure of Seller to set forth the terms of such plan in a
written plan document.
(c) Seller will, and will cause Imperial Canada to, take all steps (i)
as are necessary (including obtaining all required governmental or third party
consents) to effect the assumption by Purchaser or one of Purchaser's Affiliates
of the Employee Benefit Plans maintained or sponsored by Imperial Canada and the
collective bargaining agreements covering Employees employed by Imperial Canada
and (ii) as are reasonably calculated to ensure that Purchaser or its Affiliate
assuming such Employee Benefit Plans and collective bargaining agreements do not
incur any obligations or liabilities with respect to such plans and agreements
that are greater than, or in addition to, Imperial Canada's obligations or
liabilities under the terms of such plans and agreements as of the Closing Date.
6.1.3. Retirement Plans. (a) As of the Closing, Seller will cause
Employees to fully vest in their accrued benefits under the Xxxxxxx & Xxxxxx
Corporation Employees' Profit Sharing and Personal Savings Plan and the Xxxxxxx
& Xxxxxx Corporation Employees' Pension Account Plan (collectively, the
"Retirement Plans"). Neither Purchaser nor any of its Affiliates will assume any
liabilities or obligations with respect to the Retirement Plans, which will be
retained by Seller. As soon as practicable after the Closing, to the extent
permitted by Law and the terms of the Retirement Plans, Seller will permit
distributions to Employees of their vested benefits under the Retirement Plans.
With respect to Retirement Plans from which distributions are to be made,
Purchaser will, or will cause one of its Affiliates to, take all action
necessary to cause one or more qualified retirement plans maintained by
Purchaser or any one of its Affiliates to accept an eligible rollover
distribution (within the meaning of Section 402(f)(2) of the Code) of the
amounts distributed from the Retirement Plans to each Employee who shall become
an employee of Purchaser's affiliated group and a rollover
29
contribution (within the meaning of Section 408(d)(3) of the Code) with respect
to such amounts. To the extent distributions are not permitted under Law,
Purchaser and Seller will take such mutually agreed upon action with respect to
Employees' plan accounts, whether that be a spin-off, trustee-to-trustee
transfer to a plan maintained by Purchaser or any of its Affiliates, or
retention in the Retirement Plans for eventual distribution pursuant to the
terms of such plan. All distributions under any Retirement Plan which is a
defined benefit plan will satisfy all requirements for funding as are required
by Law giving effect to the transactions contemplated by this Agreement. Seller
represents and warrants that distributions to Employees as contemplated by this
Section 6.1.3 are permitted by the terms of the Xxxxxxx & Xxxxxx Corporation
Employees' Pension Account Plan.
(b) Seller will, and will cause Imperial Canada to, take all steps as
are necessary or reasonably requested by Purchaser, to transfer to Purchaser, or
one of Purchaser's Affiliates, the Canadian Pension Plan and the Canadian
Pension Plan assets and liabilities (including obtaining all required
governmental and third party consents). To the extent such a transfer is not
permitted by the terms of the Canadian Pension Plan or applicable Law, Seller
and Purchaser will permit distributions or make other arrangements as are
contemplated with respect to Retirement Plans by the third and fourth sentences
of Section 6.1.3(a).
6.1.4. Employment and Plan Amendments or Terminations. Except as
provided in Section 6.1.1, no provision of this Section 6.1 will limit
Purchaser's or any of its Affiliates' right and authority to discontinue,
suspend or modify the employment of any Employee or benefits provided to any or
all Employees or Former Employees after the Closing; provided, however, that in
the event of any such discontinuance, suspension or modification Purchaser will,
or will cause one of its Affiliates to, remain liable for all Employee Plan and
other employee benefit liabilities or obligations assumed pursuant to this
Agreement and will indemnify, defend and hold harmless Seller, each Post-Closing
Affiliate and their respective directors, officers, partners, employees, agents
and representatives (including without limitation any predecessor or successor
to any of the foregoing) from and against any and all Indemnifiable Losses they
may suffer or incur as a result thereof. Neither Seller nor any Post- Closing
Affiliate will be liable for any liability or obligation that may arise from the
amendment or termination by Purchaser or any of its Affiliates of any employee
benefit plan assumed, established or continued by Purchaser or any of its
Affiliates under this Section 6.1.
6.1.5. Transitional Matters. Each of Seller and Purchaser
will use its respective reasonable efforts to cooperate to
(a) transfer to Purchaser or any of its Affiliates any insurance
30
and administrative services contracts that Purchaser wishes to continue with
respect to any Employee Plan that Purchaser or any of its Affiliates is assuming
or continuing pursuant to this Agreement and (b) cause any insurance carrier
administering workers' compensation and other employee benefit liabilities or
obligations assumed by Purchaser or any of its Affiliates to deal directly with
Purchaser or such Affiliate.
6.1.6. Employee Information. Each of Seller and Purchaser will provide
the other, in a timely manner, any information with respect to any Employee's or
Former Employee's employment with and compensation from Seller, any Post-Closing
Affiliate or Purchaser or any of its Affiliates, as the case may be, or rights
or benefits under any employee benefit plan which the other party hereto may
reasonably request.
6.2. General Post-Closing Matters.
6.2.1. Post-Closing Notifications. Purchaser and Seller will, and each
will cause its respective Affiliates to, comply with any post-Closing
notification or other requirements, to the extent then applicable to such party,
of any antitrust, trade competition, investment, control or other Law of any
Governmental Entity having jurisdiction over the Business.
6.2.2. Access. (a) On the Closing Date, or as soon thereafter as
practicable, and in no event later than 30 calendar days after the Closing Date,
Seller will deliver or cause to be delivered to Purchaser all original
agreements, documents, books, records, including without limitation Employee
records and records relating to obligations of the Company to Employees under
Employee Plans retained or assumed by Purchaser or the Company hereunder, and
files primarily relating to the Business or the Company (collectively,
"Records") in the possession of Seller or any Post-Closing Affiliate to the
extent not in the possession of the Company or Purchaser, subject to the
following exceptions:
(i) Purchaser recognizes that certain Records may contain only
incidental information relating to the Company or may primarily relate
to Seller or any Post-Closing Affiliate, or the businesses of Seller or
any Post-Closing Affiliate other than the Business, and Seller and its
Post- Closing Affiliates may retain such Records and Seller may deliver
appropriately excised copies of such Records; and
(ii) Seller and each Post-Closing Affiliate may retain any Tax
Returns so long as true and complete copies of the portions thereof
relating to the Business are delivered to Purchaser at or before the
Closing or made available to Purchaser following the Closing.
31
After the Closing, each party will, and will cause its Affiliates to, retain all
Records (except those Records referred to in Section 6.2.2(a)(i) and (ii))
required to be retained pursuant to obligations imposed by any applicable Law.
Except as provided in the immediately preceding sentence, each party will, and
will cause its Affiliates to, retain all Records for a period of seven years
after the Closing Date. After the end of such seven-year period, before
disposing, or permitting its Affiliates to dispose, of any such Records, each
party will, and will cause its Affiliates to, give notice to such effect to the
other party and give the other party at its cost and expense an opportunity to
remove and retain all or any part of such Records as the other party may elect.
(b) After the Closing, upon reasonable notice, each party hereto will
give, or cause to be given, to the representatives, employees, counsel and
accountants of the other parties hereto access, during normal business hours, to
Records relating to periods prior to or including the Closing, and will permit
such persons to examine and copy such Records to the extent reasonably requested
by the other party in connection with tax and financial reporting matters
(including, without limitation, any Tax Return relating to state or local real
property transfer or gains taxes), audits, legal proceedings, governmental
investigations and other business purposes and to make inquiries relating
thereto of the relevant personnel; provided, however, that nothing herein will
obligate any party to take actions that would unreasonably disrupt the normal
course of its business, violate the terms of any contract to which it is a party
or to which it or any of its assets is subject or grant access to any of its
proprietary, confidential or classified information (except to the extent
required for purposes of defending or prosecuting any third party lawsuits or
administrative or other adjudicative proceedings ("Legal Proceedings")). Each
party will, and will cause its respective Affiliates controlled by it to,
provide or make available to the other and the other's respective Affiliates
access to employees of Purchaser and the Company for the purposes of, and with
the limitations described in, the preceding sentence (including without
limitation for the purpose of providing, and preparing to provide, testimony in
connection with third party Legal Proceedings).
6.2.3. Certain Tax Matters. (a) Seller will prepare and file or cause
to be prepared and filed all Income Tax Returns for the Purchased Imperial
Companies required to be filed with the appropriate foreign, United States,
state and local taxing authorities for any taxable period that ends on or before
the Closing Date (each a "Pre-Closing Tax Period"). Seller will prepare and, if
required to do so by applicable Law, deliver to Purchaser for signing and filing
any Income Tax Returns of the Purchased Imperial Companies with respect to any
Pre-Closing Tax
32
Period (including any short period) that have not been filed prior to the
Closing Date. Seller will pay all Taxes required to be paid with respect to such
Tax Returns. Seller will prepare and file or cause to be prepared and filed all
Income Tax Returns for Imperial Canada and will pay all Income Taxes required to
be paid with respect to such Tax Returns.
(b) Except as otherwise provided in Section 6.2.3(a) or Section
6.2.3(c), Purchaser will prepare and file or cause to be prepared and filed all
Tax Returns for the Purchased Imperial Companies that are required to be filed
with the appropriate United States, state, local and foreign taxing authorities
for all periods as to which such Tax Returns are due after the Closing Date
(taking into account all extensions of due dates). Subject to Section 6.2.3(r)
and Section 6.2.3(v), Purchaser will pay or cause to be paid all Taxes required
to be paid with respect to such Tax Returns.
(c) With respect to any taxable period that would otherwise include but
not end on the Closing Date, to the extent permissible pursuant to applicable
Law, Seller will, and Purchaser will cause the Purchased Imperial Companies and
Imperial Canada to, insofar as possible, (i) take all steps as are or may be
reasonably necessary, including without limitation the filing of elections or
returns with applicable taxing authorities, to cause such period to end on the
Closing Date or (ii) if clause (i) is inapplicable, report (insofar as possible)
the operations of the Purchased Imperial Companies only for the portion of such
period ending on the Closing Date in a combined, consolidated or unitary Tax
Return filed by Seller or a Post- Closing Affiliate, and report the operations
of Imperial Canada only for the portion of such period ending at the close of
business on the Closing Date, notwithstanding that such taxable period does not
end on the Closing Date. If clause (ii) applies to a taxable period of the
Purchased Imperial Companies, the portion of such taxable period included in
such return filed by Seller will be treated as a Pre-Closing Tax Period
described in Section 6.2.3(a) and Purchaser will not be responsible for filing
such return for such portion of such year pursuant to Section 6.2.3(b), provided
that the foregoing will not relieve Purchaser of its obligation under Section
6.2.3(b) to file a Tax Return reporting the operations of the Purchased Imperial
Companies for the portion of such taxable period beginning after the Closing
Date. If it is not possible for a Tax Return to be filed for Non-Income Taxes
that reports the operations of Imperial Canada only for the period ending at the
close of business on the Closing Date, the parties shall cooperate in preparing
a return for the whole taxable period.
(d) Purchaser will prepare and deliver, or will cause to be prepared
and delivered, within 60 calendar days of receipt of
33
Seller's request therefor, to Seller, Seller's standard international, federal
and state Income Tax Return data gathering packages relating to the Purchased
Imperial Companies, and Seller's standard Tax Return data gathering packages
relating to the Non-Income Taxes of Imperial Canada (if appropriate pursuant to
Section 6.2.3(c)). Such packages will be prepared on a basis consistent with the
prior year's Income Tax or Non-Income Tax (if appropriate) Returns. In addition
to providing such packages to Seller, Purchaser will promptly provide or cause
to be provided to Seller such other information as Seller may reasonably request
in order for the operations of the Company to be properly reported in such
Income Tax or Non-Income Tax(if appropriate) Returns.
(e) Seller will indemnify, defend and hold harmless Purchaser and each
of its Affiliates from and against any and all liability for any taxable period
as a result of Treasury Regulation Section 1.1502-6 (or any comparable provision
of state, local or foreign law) for Income Taxes of any corporation, other than
the Purchased Imperial Companies which is or has been affiliated with Seller or
Xxxxxxx & Xxxxxx Corporation, a Delaware corporation ("C&A Corp.").
(f) Purchaser is eligible to and will make a timely and effective
election under Section 338(g) of the Code (and any comparable provision of state
or local law) with respect to the purchase of the Imperial Shares hereunder.
Both Seller and Purchaser are eligible to, and Purchaser will make and Seller
will cause C&A Corp. to make, a timely and effective election under Section
338(h)(10) of the Code (and any comparable provision of state or local law) with
respect to such purchase (the "Section 338(h)(10) Election").
(g) At the Closing, Purchaser will deliver to Seller a completed
Internal Revenue Service Form 8023A, and the required schedules thereto ("Form
8023A"), providing for the Section 338(h)(10) Election. Provided that the
information on such Form 8023A is, in the reasonable determination of Seller,
correct and complete in all material respects, Seller will, at the Closing,
execute and deliver such Form 8023A to Purchaser. If any changes or supplements
are required to the Form 8023A as a result of any information that is first
available after the Closing, Seller and Purchaser will promptly agree upon and
make such changes. Purchaser and Seller (or C&A Corp.) will timely file the Form
8023A, and any required supplements thereto, and will provide written evidence
to the other that it has done so.
(h) Purchaser and Seller agree that neither of them will take, or
permit their Affiliates to take, any action to modify or revoke the elections
contained in or the content of any Form 8023A without the express written
consent of the other party.
34
(i) Seller will pay and indemnify and hold Purchaser and Imperial
harmless from (i) any and all Taxes arising from the Section 338(h)(10) Election
and (ii) any Tax liability, cost or expense arising out of the failure to pay
such Tax. Seller will also pay any state or local Tax (and indemnify and hold
Purchaser and the Purchased Imperial Companies harmless against any Tax
liability, cost or expense arising out of any failure to pay such Tax)
attributable to any election under state or local law comparable to the election
available under Section 338(g) of the Code (or which results from the making of
an election under Section 338(g) of the Code) with respect to Purchaser's
acquisition of the Purchased Imperial Companies.
(j) Purchaser and Seller agree to report transactions under this
Agreement consistent with the Section 338(h)(10) Election and will take no
position contrary thereto unless required to do so pursuant to a final
determination by any Taxing authority or judicial proceeding.
(k) Seller will cause any tax sharing agreements between the Company
and Seller or any other Post-Closing Affiliate to be terminated, effective as of
the Closing Date, to the extent that any such agreement relates to the Company.
(l) Purchaser and Seller agree that for purposes of all Tax Returns and
other appropriate documents, (i) $10 million of the Purchase Price will be
allocated to the Imperial Canada Business Acquisition, (ii) the balance of the
Purchase Price and the liabilities of the Purchased Imperial Companies (plus
other relevant items) will be allocated to the assets of the Purchased Imperial
Companies (with the Option deemed for this purpose to be valued at $6 million)
in a manner consistent with the purchase price allocation to be determined by
the parties in accordance with Treasury Regulation Section 1.338(h)(10)-1, and
(iii) the sum of $10 million and the C&A Imperial Assumed Liabilities will be
allocated among the C&A Imperial Canada Assets as follows: (A) Purchaser will
propose such an allocation and (B) if Seller disagrees in good faith, after
consultation with its Canadian tax advisors, with Purchaser's proposed
allocation, Purchaser, Seller and their respective Canadian tax advisors will
negotiate to determine such an allocation based on the principle that
Purchaser's proposed allocation will be used to the maximum extent permitted by
Canadian tax law. Such allocation as finally determined will be evidenced by a
writing signed by Seller and Purchaser. The parties agree that, if requested by
Seller, the parties will make any election under Canadian tax law necessary to
permit C&A Canada or Imperial Canada to treat any loss on inventory as an
ordinary loss unless Purchaser determines in its sole discretion that such
election could have a negative impact on Purchaser or any of its Affiliates.
35
(m) On or before the Closing Date, Seller agrees to provide Purchaser
and the Company with all required clearance certificates or similar documents
that may be required by any state, local or other Taxing authority in order, to
the extent allowed, to relieve Purchaser of any obligation to withhold any
portion of the Purchase Price. If necessary to avoid sales or use Taxes, Seller
will, to the extent allowed, provide Purchaser with all appropriate state and
local resale certificates.
(n) Seller will furnish to Purchaser on or before the Closing Date a
certification of Seller's non-foreign status as set forth in Treasury Regulation
Section 1.1445-2(b).
(o) Seller, Purchaser and the Company will reasonably cooperate with
each other in connection with the preparation and filing of all Tax Returns or
any audit examinations for any period, including without limitation the timely
furnishing or making available of records, books of account and any other
information necessary for the preparation of the Tax Returns.
(p) (i) With respect to any Income Tax Return of the Purchased Imperial
Companies for a Pre-Closing Tax Period and any Income Tax Return of Imperial
Canada for any tax period, Seller and its duly appointed representatives will
have the sole right, at its or their expense, to supervise or otherwise
coordinate any examination process and to negotiate, resolve, settle or contest
any asserted Tax deficiencies or assert and prosecute any claims for refund;
notwithstanding the foregoing, without the express written consent of Purchaser
or Imperial, which consent will not be unreasonably withheld or delayed, Seller
will not file any amended Tax Return, settle any Tax claim or assessment, or
surrender any right to claim a refund of Tax, if such action could have the
effect of increasing the Tax liabilities of the Purchased Imperial Companies or
Purchaser.
(ii) With respect to any other Tax Return of C&A Imperial
Canada or the Purchased Imperial Companies, Purchaser, the Purchased Imperial
Companies and their duly appointed representatives will have the sole right, at
the expense of Purchaser or the Purchased Imperial Companies, to supervise or
otherwise coordinate any examination process and to negotiate, resolve, settle
or contest any asserted Tax deficiencies or assert and prosecute any claims for
refund; notwithstanding the foregoing, without the express written consent of
Seller, which consent will not be unreasonably withheld or delayed, neither
Purchaser nor the Purchased Imperial Companies will file any amended Tax Return,
settle any Tax claim or assessment, or surrender any right to claim a refund of
Tax, if such action could have the effect of increasing the Tax liabilities of
Seller or any Post-Closing Affiliate.
36
(iii) Each party hereto will notify the other within 30
calendar days (unless action is required sooner, then as soon as practicable) of
the assertion of any claim or the commencement of any suit, action, proceeding,
investigation or audit with respect to the operations of the Company that is the
subject of this Section 6.2.3(p), and will provide the other copies (subject to
deletion of nonrelevant information) of all correspondence relating to such
contest.
(q) (i) "Income Tax" or "Income Taxes" means all Taxes imposed on,
measured by or which require reference to, net or taxable income (including any
income, franchise, estimated, alternative, minimum, add-on minimum or other Tax
imposed on, measured by or which require reference to, net or taxable income),
together with interest and penalties thereon and estimated payments thereof,
(ii) "Taxes" means all federal, state, local, foreign and other taxes (including
without limitation income, profits, premium, estimated, excise, sales, use,
occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, withholding, social security, employment, unemployment
compensation, payroll-related and property taxes, alternative minimum, estimated
stamp, value added, windfall profits, import duties and other governmental
charges and assessments), whether or not measured in whole or in part by net
income, and including deficiencies, interest, additions to tax or additional
amounts, interest and penalties with respect thereto (such term shall also
include any "Taxes" as to which the Company is liable as a successor or
transferee or pursuant to a contractual obligation), (iii) "Non-Income Taxes"
means all Taxes that are not Income Taxes, and (iv) "Tax Returns" means all
returns, reports or information returns or statements relating to Taxes as are
required to be filed with any United States, state, local and foreign taxing
authorities.
(r) Seller will defend, indemnify and hold harmless Purchaser and the
Purchased Imperial Companies and their respective directors, officers,
employees, agents and representatives (including, without limitation, any
predecessor or successor to any of the foregoing) from and against any breach of
a covenant contained in this Section 6.2.3 and against the following Taxes and,
except as otherwise provided in Section 6.2.3(s), against any loss, damage,
liability, or expense, including reasonable fees for attorneys and consultants,
incurred in contesting or otherwise in connection with any such Taxes and in
enforcing their rights under this Section 6.2.3: (i) all Income Taxes imposed on
the Purchased Imperial Companies with respect to taxable periods ending before
or on the Closing Date, (ii) all Income Taxes of Imperial Canada with respect to
any Tax period, (iii) with respect to taxable periods beginning before the
Closing Date and ending after the Closing Date, Income Taxes imposed on the
Purchased Imperial Companies that are allocable,
37
pursuant to Section 6.2.3(s), to the portion of such period ending on the
Closing Date, (iv) all Non-Income Taxes of Imperial Canada that arise or accrue
after the close of business on the Closing Date, and (v) all Canadian Non-Income
Taxes arising out of or related to the pre-Closing transfer pricing practices of
Seller and its Affiliates.
(s) Purchaser will, and, if the Closing occurs, Imperial jointly and
severally with Purchaser will, indemnify, defend and hold harmless Seller, each
Post-Closing Affiliate and their respective directors, officers, partners,
employees, agents and representatives (including, without limitation, any
predecessor to any of the foregoing) from and against (i) all Income Taxes
imposed on the Purchased Imperial Companies with respect to taxable periods
beginning after the Closing Date and, with respect to taxable periods beginning
before the Closing Date and ending after the Closing Date, Income Taxes imposed
on the Purchased Imperial Companies that are allocable, pursuant to Section
6.2.3(t), to the portion of such period beginning after the Closing Date, (ii)
all Income Taxes relating to or arising out of the operation by Purchaser or any
of its Affiliates of the business of Imperial Canada after the Closing Date,
(iii) all Non-Income Taxes of the Purchased Imperial Companies with respect to
any Tax period and Non-Income Taxes of Imperial Canada that arise or accrue
through the close of business on the Closing Date, in each case other than sales
and transfer Taxes which are Seller's responsibility pursuant to Section
6.2.3(v) and Taxes which are Seller's responsibility pursuant to Section
6.2.3(r)(v), and (iv) any loss, damage, liability, or expense, including
reasonable fees for attorneys and consultants, incurred in contesting or
otherwise in connection with any such Taxes and in enforcing their rights under
this Section 6.2.3.
(t) In the case of Income Taxes of the Purchased Imperial Companies and
Non-Income Taxes of Imperial Canada that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax that is allocable to the portion of the period ending on
the Closing Date or, in the case of Non-Income Taxes of Imperial Canada, at the
close of business on the Closing Date, will be deemed equal to the amount that
would be payable if the taxable year ended immediately prior to the Closing Date
(including the taxable years of organizations in which the Company owns a
partnership interest or equity interest) (except that, solely for purposes of
determining the marginal tax rate applicable to income or receipts during such
period in a jurisdiction in which such tax rate depends upon the level of income
or receipts, annualized income or receipts may be taken into account if
appropriate for an equitable sharing of such Taxes). The portion of Tax
allocable to the portion of the period ending on the Closing Date shall be
computed on a per diem basis in the case of
38
Taxes that are neither (x) Income Taxes nor (y) imposed in connection with any
sale or other transfer or assignment of property, real or personal, tangible or
intangible.
(u) Any Tax refund (or comparable benefit resulting from a reduction in
Tax liability) for a period ending on or before the Closing Date arising out of
the carryback of a loss or credit incurred by the Purchased Imperial Companies
in a taxable period (or allocable portion thereof) ending after the Closing Date
will be the property of Purchaser and, if received by Seller or any Post-Closing
Affiliate will be paid over promptly to Purchaser (including any interest
received from or credited thereon by the applicable taxing authority). Any other
Income Tax refund for a period ending on or before the Closing Date or for the
allocable portion of a period including the Closing Date will be the property of
Seller. Purchaser will pay or cause the Company to pay to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon by
the applicable taxing authority) received by Purchaser or any of its Affiliates
after the Closing Date and attributable to Income Taxes paid by the Purchased
Imperial Companies or any other Post-Closing Affiliate with respect to a
Pre-Closing Tax Period or by Seller. Such payment will be made to Seller
promptly after receipt of any such refund from, or allowance of such credit by,
the relevant taxing authority. In all other events, any Tax refund will be the
property of the Purchased Imperial Companies and paid to the Purchased Imperial
Companies.
(v) Seller and Purchaser will each pay one-half of all sales and
transfer Taxes, if any, which may be payable with respect to the consummation of
the transactions contemplated by this Agreement, including any and all sales,
transfer, recording and other Taxes arising from the Imperial Canada Business
Acquisition being effected in the form of a purchase and sale of assets rather
than a stock acquisition, and to the extent any exemptions from such Taxes are
available Seller and Purchaser will cooperate to prepare any certificates or
other documents necessary to claim such exemptions.
6.2.4. Insurance. With respect to any loss, liability or damage
suffered by Purchased Imperial Companies after the Closing Date relating to,
resulting from or arising out of the conduct of the Business prior to the
Closing Date or included in the C&A Imperial Canada Assumed Liabilities, for
which Seller or any Post-Closing Affiliate would be entitled to assert, or cause
any other Person to assert, a claim for recovery under any policy of insurance
maintained by Seller or a Post-Closing Affiliate or for the benefit of Seller or
the Company, in respect of the Business, products, employees or the Company
("Insurance"), at the request of Purchaser, Seller will use its reasonable
efforts to assert, or to assist Purchaser or the Purchased Imperial Companies to
39
assert, one or more claims under such Insurance covering such loss, liability or
damage if Purchaser or any of the Purchased Imperial Companies is not itself
entitled to assert such claim, provided that all of Seller's and any
Post-Closing Affiliate's out-of-pocket costs and expenses incurred in connection
with the foregoing, including without limitation any liability, obligation or
expense referred to in the last sentence of this Section 6.2.4, are promptly
reimbursed by Purchaser. Seller will be deemed, solely for the purpose of
asserting claims for Insurance pursuant to the immediately preceding sentence,
to have assumed or retained liability for such loss, liability or damage to the
extent of the policy limits of the applicable policy of Insurance; provided,
however, that (a) Purchaser's obligations under Section 5.3(b) will not be
affected by the provisions of this Section 6.2.4 and (b) with respect to any
claim made at the request of Purchaser or the Purchased Imperial Companies by
Seller or any Seller Affiliate under any Insurance pursuant to this Section
6.2.4, Purchaser will indemnify, defend and hold harmless Seller and each
Post-Closing Affiliate and their respective directors, officers, partners,
employees, agents and representatives (including without limitation any
predecessor or successor of any of the foregoing) from and against any
Indemnifiable Loss relating to, resulting from or arising out of any deductible,
policy limit, obligation, indemnity, reinsurance due to the liquidation or
insolvency of the reinsurer, self-insurance retention, premium adjustments
resulting from claims made at the request of Purchaser or the Purchased Imperial
Companies under this Section 6.2.4 or other like arrangement by which any such
entity retains any liability or obligation under any such policy of Insurance or
otherwise.
6.2.5. Receivables. As of the Closing, Seller will terminate any
agreements to which Imperial or any of the Subsidiaries is a party that is
related to the accounts receivables facility operated by a finance subsidiary of
Seller for its affiliates and Seller will indemnify, defend and hold harmless
the Company or Purchaser for any Indemnifiable Loss arising out of the Company's
prior participation in this facility or performance under such agreements,
provided, however, that the foregoing indemnity obligation will not apply to any
loss on the sale of receivables prior to the Closing Date or the collection (or
failure to collect) the receivables. Seller hereby agrees that all monies
(regardless of any prior discount or loss on sale) collected after the Closing
by Seller or any Post-Closing Affiliate with respect to receivables attributable
to the Company will be paid to the Company within three business days of
Seller's or Post-Closing Affiliate's receipt thereof.
6.2.6. Surety Obligations. (a) From and after the
Closing, Purchaser will, and will cause the Company to, use
reasonable efforts to obtain and have issued replacements for any
40
guarantee, performance bond, letter of credit or other agreement guaranteeing or
securing liabilities and obligations (including without limitation in respect of
operating or other leases and the surety bonds listed on Schedule 6.2.6)
(collectively, "Surety Obligations") relating to the Business or the Company
under which Seller or any Post-Closing Affiliate has any liability to a third
party and to obtain any amendments, novations, releases, waivers, consents or
approvals necessary to release Seller and each Post- Closing Affiliate to such
Surety Obligations from all liability thereunder relating to the Business or the
Company, in each case as promptly as practicable. In the event and for the
period that Purchaser and the Company fail to obtain any such replacement,
amendment, novation, release, waiver, consent or approval, without limiting the
generality of Section 5.3(b), Purchaser will indemnify, defend, and hold
harmless Seller and each Post-Closing Affiliate and their respective directors,
officers, partners, employees, agents and representatives (including without
limitation the predecessors or successors of any of the foregoing) from and
against any Indemnifiable Loss relating to, resulting from or arising out of any
such failure by Purchaser or the Company.
(b) From and after the Closing, Seller will use reasonable
efforts to obtain and have issued replacements for any Surety Obligations
relating to any business other than the Business or any Post-Closing Affiliate
or under which the Company has any liability to a third party and to obtain any
amendments, novations, releases, waivers, consents or approvals necessary to
release the Company from all liability thereunder relating to any business other
than the Business or any Post-Closing Affiliate, in each case as promptly as
practicable. In the event and for the period that Seller fails to obtain any
such replacement, amendment, novation, release, waiver, consent or approval,
without limiting the generality of Section 5.3(a), Seller will indemnify,
defend, and hold harmless the Company and its respective Affiliates, directors,
officers, partners, employees, agents and representatives (including without
limitation the predecessors or successors of any of the foregoing) from and
against any Indemnifiable Loss relating to, resulting from or arising out of any
such failure by Seller.
6.2.7. Assumed Push-Down Liabilities. Without further action, effective
as of the Closing, the Company will assume the liabilities of Seller listed on
Schedule 6.2.7 (the "Assumed Push-Down Liabilities") but only to the extent
related exclusively to the Business.
6.2.8. 1994 Financial Statements. Seller will deliver as promptly as
practicable after Purchaser's written request, audited consolidated balance
sheets of the Company as of January 28, 1995 and the related audited
consolidated statements of
41
stockholders' equity, operations and cash flows for the fiscal year then ended,
accompanied by the accountant's report thereon.
6.2.9. Certain Contracts. (a) Notwithstanding anything to the contrary
in this Agreement, to the extent that (i) any Contract that is a C&A Imperial
Canada Asset (an "Assumed Contract") is not capable of being assigned to
Purchaser in connection with the Closing without the consent or waiver of a
third Person (including without limitation a Governmental Entity) which has not
been obtained on or before the Closing Date, or (ii) any of the transactions
contemplated by this Agreement constituted or would constitute a breach of any
Assumed Contract, or a violation of any Law or Order or other governmental
edict, Seller will be deemed not to have Transferred, and will not be obligated
to Transfer, to Purchaser any direct or indirect right, title or interest in or
to any such Contract without first having obtained all necessary consents and
waivers. Seller will use reasonable efforts to obtain such consents and waivers
as may be necessary to cure such potential breach or violation; provided,
however, but without affecting Seller's obligations under Section 5.3, Seller
will not be obligated to pay any consideration therefor to the party from whom
the consent or waiver is requested. Purchaser agrees that neither Seller nor any
of its Affiliates will have any liability whatsoever arising out of or relating
to the failure to obtain any consents or waivers that may have been or may be
required in connection with the transactions contemplated by this Agreement or
because of a breach of, default under or termination of any Assumed Contract as
a result thereof.
(b) To the extent that the consents and waivers referred to in
the immediately preceding paragraph are not obtained, or until the breaches or
violations referred to in the immediately preceding paragraph are resolved,
Seller will use reasonable efforts, (i) with reasonable costs of Purchaser and
its Affiliates related thereto to be promptly reimbursed by Seller, to provide
to Purchaser, at its request, the benefits of any such Contract and cooperate in
any reasonable and lawful arrangement designed to provide such benefits to
Purchaser, without incurring any financial obligation to Seller or any of its
Affiliates, and (ii) with reasonable costs of Seller and its Affiliates related
thereto to be promptly reimbursed by Purchaser, to enforce, at the request and
for the account of Purchaser, any rights of Seller arising from any such
Contract against the other party or parties to such Contract (including the
right to elect to terminate in accordance with the terms thereof upon the advice
of Purchaser). Notwithstanding any provision to the contrary contained herein,
Purchaser will perform or pay for the benefit of the other party or parties
thereto the obligations of Seller under or in connection with any such Contract
and will indemnify and hold Seller and its
42
Affiliates harmless from any Indemnifiable Losses relating to, resulting from or
arising out of any failure by Purchaser so to perform or pay. Purchaser will
comply with all reasonable requests of Seller for cooperation in connection with
the performance of Seller's obligations under this Section 6.2.9.
VII. MISCELLANEOUS PROVISIONS
7.1. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or by
a nationally recognized overnight courier service or when dispatched during
normal business hours by electronic facsimile transfer (confirmed in writing by
mail simultaneously dispatched) to the appropriate party at the address
specified below:
(a) If to Purchaser, to:
BDPI Holdings Corporation
c/o The Blackstone Group
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxxxx
Senior Managing Director
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
(b) If to Seller, to:
Xxxxxxx & Xxxxxx Products Co.
000 XxXxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Corporate Counsel
with a copy to:
Xxxxxxx & Xxxxxx Products Co.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
43
Attention: Xxxxxxxxx X. Xxxxxxx, Esq.
Executive Vice President - Law
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
7.2. Expenses. Except as otherwise expressly provided herein, (a)
Seller will pay or cause to be paid all expenses incurred by Seller incident to
this Agreement and in preparing to consummate and consummating the transactions
provided for herein and (b) Purchaser will pay any expenses incurred by it
incident to this Agreement and in preparing to consummate and consummating the
transactions provided for herein, including without limitation the fees and
expenses of any broker, finder, financial advisor or similar person engaged by
such party.
7.3. Successors and Assigns. (a) Subject to Section 7.3(b), this
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but will not be
assignable or delegatable by any party without the prior written consent of the
other parties hereto. Notwithstanding the foregoing sentence, Purchaser may
assign any of its rights or obligations under this Agreement to any lender to
Purchaser or any subsidiary of Purchaser as security for obligations to such
lender in respect of the financing arrangements entered into in connection with
the transactions contemplated hereby and any refinancings, extensions,
refundings or renewals thereof, or to any subsidiary of Purchaser or BDPH or any
entity of which Purchaser is a subsidiary, provided however, that no assignment
hereunder shall in any way affect Purchaser's or the Company's obligations or
liabilities under this Agreement.
(b) Nothing in this Agreement is intended to limit Purchaser's ability
to sell or to Transfer the Shares following the Closing Date provided that such
sale or Transfer will not result in a termination of any of Purchaser's
covenants, duties, responsibilities, obligations or liabilities hereunder,
including without limitation under Sections 3.1(b) and Articles V and VI, unless
the person or entity acquiring the Shares pursuant to such sale or Transfer
assumes all of such covenants, duties, responsibilities, obligations and
liabilities in a written instrument reasonably satisfactory to Seller.
7.4. Waiver. Either Purchaser or Seller by written notice to the other
may (a) extend the time for performance of any of the obligations or other
actions of the other under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement, (c)
waive compliance with any of the conditions or covenants of the other
44
contained in this Agreement, or (d) waive or modify performance of any of the
obligations of the other under this Agreement; provided, however, that neither
Purchaser nor Seller may, without the prior written consent of the other, make
or grant such extension of time, waiver of inaccuracies or compliance or waiver
or modification of performance with respect to its (or any of its Affiliates')
representations, warranties, conditions or covenants hereunder. Except as
provided in the immediately preceding sentence, no action taken pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
7.5. Entire Agreement. This Agreement (including the Schedules hereto)
supersedes any other agreement, whether written or oral, that may have been made
or entered into by any party or any of their respective Affiliates (or by any
director, officer or representative thereof) prior to the date hereof relating
to the matters contemplated hereby. This Agreement (together with the Schedules
hereto) constitutes the entire agreement by and among the parties hereto and
there are no agreements or commitments by or among such parties or their
Affiliates except as expressly set forth herein.
7.6. Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written agreements as may mutually be
determined by Purchaser and Seller to be necessary, desirable or expedient to
further the purposes of this Agreement, or to clarify the intention of the
parties hereto.
7.7. Rights of the Parties. Except as provided in Article V or in
Sections 6.2.3 and 7.3, nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give any person or entity other
than the parties hereto and their respective Affiliates any rights or remedies
under or by reason of this Agreement or any transaction contemplated hereby.
7.8. Further Assurances. From time to time, whether at or after the
Closing as and when requested by either Purchaser or Seller, the other will
execute and deliver, or cause to be executed and delivered, all such documents
and instruments as may be reasonably necessary or otherwise reasonably requested
by Purchaser or Seller to consummate the transactions contemplated by this
Agreement or otherwise to carry out the intent and purpose of this Agreement and
to assure that the Company holds all of the assets, properties, permits,
authorizations, rights and related obligations used or held for use primarily or
exclusively in the Business, including without limitation the proper filing,
registration or recordation of such documents and instruments.
45
7.9. Applicable Law; Jurisdiction. This Agreement and the legal
relations among the parties hereto will be governed by and construed in
accordance with the substantive Laws of the State of New York, without giving
effect to the principles of conflict of laws thereof.
7.10. Titles and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
7.11. Certain Interpretive Matters and Definitions. (a) Unless the
context otherwise requires, (i) all references to Sections or Schedules are to
Sections or Schedules of or to this Agreement, (ii) each term defined in this
Agreement has the meaning assigned to it, (iii) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP, (iv) "or" is disjunctive but not necessarily exclusive, (v) words in
the singular include the plural and vice versa, (vi) the terms "subsidiary" and
"Affiliate" have the meanings given to those terms in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934, as amended, provided, however,
that, except with respect to Section 1.3, none of Purchaser, its parent or any
entity controlled by either of them will be deemed to be Affiliates of Seller
and none Seller, C&A Corp. or any entity controlled by either of them will be
deemed to be Affiliates of Purchaser, (vii) all references to "$" or dollar
amounts will be to lawful currency of the United States of America, and (viii)
"Knowledge of Seller" means solely to the actual knowledge of the persons listed
on Schedule 7.11(a), and (ix) "Knowledge of Purchaser" means solely to the
actual knowledge of the persons listed on Schedule 7.11(b).
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
7.12. Bulk Transfer Laws. Purchaser hereby waives compliance by Seller
with the provisions of any so-called "bulk transfer" Law of any jurisdiction in
connection with the sale of the C&A Imperial Canada Assets to Purchaser.
46
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
XXXXXXX & XXXXXX PRODUCTS CO.
By: /s/ J. Xxxxxxx Xxxxx
Name:
Title:
IMPERIAL WALLCOVERINGS, INC.
By: /s/ J. Xxxxxxx Xxxxx
Name:
Title:
BDPI HOLDINGS CORPORATION
By: /s/ Xxxxxxx Xxxxxx
Name:
Title:
Exhibit A
AGREEMENT
This Agreement, dated as of __________, 199_, is made and entered into
by and among Royal Wall Fashions, Inc., a Delaware corporation (the "Company"),
Xxxxxxx & Xxxxxx Products Co., a Delaware corporation ("C&A" and, together with
its Permitted Transferees of Option Shares, collectively "Holder"), and BDPI
Holdings LLC, a Delaware limited liability company and a stockholder of the
Company ("BDPI").
RECITALS
A. BDPI Holdings Corporation, a Delaware corporation ("Purchaser"),
agreed to acquire the entire issued and outstanding share capital of Imperial
Wallcoverings, Inc., a Delaware corporation ("Imperial"), pursuant to an
Acquisition Agreement, dated as of November 3, 1997, among C&A, Imperial and
Purchaser (the "Acquisition Agreement");
B. Purchaser effected the recapitalization of the Company pursuant to,
among other transactions, the merger (the "Merger") of Purchaser into the
Company, whereupon by virtue of the Merger the Company assumed Purchaser's
obligations under the Acquisition Agreement; and
C. The Acquisition Agreement provides for this Agreement to be entered
into by the parties hereto.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the parties hereto hereby agree as follows:
1. Grant of Option. The Company hereby grants to C&A an option (the
"Option") to purchase ______ shares (the "Option Shares")1 of Common Stock at a
purchase price per Option Share2 payable upon the exercise of the Option (the
"Option Price") of $_____ per Option Share, payable in cash in immediately
available funds upon exercise of the Option as provided in Section 2. The Option
Price and the number and kind of Option Shares purchasable upon exercise of the
Option are subject to adjustment pursuant to Section 3.
--------
1 6.7% of the total number of shares of the Common Stock issuable in the
Merger, calculated without giving effect to any shares or potentially
dilutive options, warrants or other rights issued or granted to
management or in connection with the financing of the Xxxxxx Recap and
the transactions contemplated by the Agreement.
2 130% of the amount per share of capital contributed by BDPI to the
Company as of the close of business on the Closing Date, giving effect
to the Merger and subject to adjustment as provided in the Acquisition
Agreement.
1
2. Exercise of Option. (a) The Option may be exercised by C&A, in whole
or in part, at any time and, subject to the last sentence of this Section 2,
from time to time after the date hereof and prior to 5:00 p.m., New York, New
York time on ___________,3 (the "Expiration Date") by delivering to the Company,
at its principal office designated for such purpose, the following:
(i) a written notice of exercise of the Option duly
executed by Holder (a "Notice of Exercise"); and
(ii) cash, a certified or bank cashier's check payable to
the order of the Company or a wire transfer to an account designated by
the Company, in each case in an amount in immediately available funds
equal to the product of (A) the number of Option Shares and (B) the
Option Price.
If Holder delivers a Notice of Exercise as to less than all of the Option
Shares, the Option will expire without further action to the extent then
unexercised unless such Notice of Exercise is given in respect of a transaction
referred to in Section 7.3 or 7.4, in which event the Option may be exercised in
part (to the extent that Option Shares are included in any such transaction) and
will remain in effect in accordance with its terms with respect to the
unexercised portion thereof.
(b) As promptly as practicable after the exercise of the
Option in accordance with Section 2(a), and in any event within 10 Business Days
after such exercise, the Company will (i) requisition from any transfer agent
for the Common Stock certificates representing the Option Shares, (ii) after
receipt of such certificates, cause them to be delivered to C&A, registered in
C&A's name, and (iii) if applicable, deliver to or upon the order of C&A the
amount of cash to be paid in lieu of the issuance of fractional Option Shares in
accordance with the provisions of Section 4.
(c) The Company will take all such action as may be necessary
to ensure that all Option Shares delivered upon exercise of the Option, at the
time of delivery of the certificates for such Option Shares, will (subject to
payment of the Option Price) be (i) duly and validly authorized and issued,
fully paid and nonassessable and (ii) if shares of Common Stock are then listed
on any national securities exchange (as defined in the Securities Exchange Act
of 1934, as amended) or qualified for quotation on the National Association of
Securities Dealers, Inc. Automated Quotation System, duly listed or qualified
for quotation thereon, as the case may be.
(d) The Company will pay all expenses of the preparation,
issuance and delivery of certificates representing Option Shares in connection
with any exercise of the Option in accordance with Section 2(a), including any
documentary or stamp taxes payable as a result of the issuance of Option Shares
to C&A. In connection with any exercise of the Option
--------
3 Insert the fifth anniversary of the Closing Date.
2
in accordance with Section 2(a), the Option will be deemed to have been
exercised, any certificate representing Option Shares issued on account thereof
will be deemed to have been issued and the Person in whose name any such
certificate is issued will be deemed for all purposes to have become a holder of
record of the Option Shares represented thereby as of the date of such exercise.
3. Adjustments of Option Price and Option Shares. The Option Price and
the number and kind of Option Shares purchasable upon exercise of the Option
will be subject to adjustment from time to time upon the occurrence of certain
events as provided in this Section 3.
3.1. Mechanical Adjustments. The Option Price and the number and kind
of Option Shares purchasable upon exercise of the Option will be subject to
adjustment as follows:
(a) Subject to Section 3.1(c), if the Company (i) pays a
dividend or otherwise distributes to holders of its Common Stock, as
such, shares of its capital stock (whether Common Stock or capital
stock of any other class), (ii) subdivides its outstanding shares of
Common Stock into a greater number of shares of Common Stock, (iii)
combines its outstanding shares of Common Stock into a smaller number
of shares of Common Stock, or (iv) issues any shares of its capital
stock in a reclassification of its outstanding shares of Common Stock
(excluding any such reclassification in connection with a
consolidation, merger or other business combination transaction), then
the number and kind of Option Shares purchasable upon exercise of the
Option immediately prior thereto will be adjusted so that C&A will be
entitled to receive (A) in the case of a dividend or distribution, the
sum of (1) the number of Option Shares that, if the Option had been
exercised immediately prior to such adjustment, C&A would have received
upon such exercise and (2) the number and kind of additional shares of
capital stock that C&A would have been entitled to receive as a result
of such dividend or distribution by virtue of its ownership of the
Option Shares, (B) in the case of a subdivision or combination, the
number of Option Shares that, if the Option had been exercised
immediately prior to such adjustment, C&A would have received upon such
exercise, adjusted to give effect to such subdivision or combination as
if the Option Shares had been subject thereto, or (C) in the case of an
issuance in a reclassification, the sum of (1) the number of Option
Shares that, if the Option had been exercised immediately prior to such
adjustment, C&A would have received upon such exercise and retained
after giving effect to such reclassification as if the Option Shares
had been subject thereto and (2) the number and kind of additional
shares of capital stock that C&A would have been entitled to receive as
a result of such reclassification as if the Option Shares had been
subject thereto. An adjustment made pursuant to this Section 3.1(a)
will become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution in the case of a dividend or distribution and will become
effective immediately after the effective date of such subdivision,
combination or reclassification in the case of a subdivision,
combination or reclassification.
3
(b) (i) In the event of a distribution by the Company
to holders of its outstanding common stock of stock of a subsidiary or
securities convertible into or exercisable for such stock, then in lieu
of an adjustment in the number of Option Shares purchasable upon the
exercise of the Option, C&A will be entitled to (A) receive from such
subsidiary, an option (a "Subsidiary Option") having terms (including
adjustments of number of option shares and exercise price)
substantially similar to the terms of the Option and (B) an adjustment
to the Option Price, such that the Exercise Price plus the exercise
price of the Subsidiary Option shall equal the Option Price immediately
prior to such distribution.
(ii) If the Company distributes to holders
of its Common Stock evidences of indebtedness of the Company or assets
or securities other than Common Stock (including any contractual or
other right to purchase Common Stock but excluding ordinary cash
dividends payable out of consolidated retained earnings and dividends
or distributions referred to in Section 3.1(a)) (any such evidences of
indebtedness, assets or securities, the "assets or securities"), then,
in each case, the Option Price shall be adjusted by subtracting from
the Option Price then in effect the fair market value of the assets or
securities that C&A would have been entitled to receive as a result of
such distribution had the Option been exercised and the relevant Option
Shares issued in the name of C&A immediately prior to the record date
for such distribution; provided, however, that if such adjustment would
result in an Option Price of less than $0.01 per share (or such other
amount equal to the then par value of the Common Stock), then the
Company shall distribute such assets or securities to C&A as if C&A had
exercised the Option and the Option Shares had been issued in the name
of C&A immediately prior to the record date for such distribution.
(c) No adjustment in the number of Option Shares purchasable
upon the exercise of the Option will be required unless such adjustment
would require an increase or decrease in the number of Option Shares
purchasable upon the hypothetical exercise of the Option of at least
1%. All calculations with respect to the number of Option Shares will
be made to the nearest one-thousandth of a share and all calculations
with respect to the Option Price will be to the nearest whole cent.
(d) Whenever the number of Option Shares purchasable upon the
exercise of the Option is adjusted as herein provided, the Option Price
will be correspondingly adjusted by multiplying the Option Price in
effect immediately prior to such adjustment by a fraction, the
numerator of which will be the number of Option Shares purchasable upon
the exercise of the Option immediately prior to such adjustment, and
the denominator of which will be the number of Option Shares so
purchasable immediately thereafter.
(e) For the purpose of this Section 3, the term "Common Stock"
means (i) the class of shares designated as the Common Stock of the
Company as of the date of this Agreement, (ii) all shares of any class
or classes (however designated) of the Company, now or hereafter
authorized, the holders of which have the right, without limitation as
4
to amount, either to all or to a part of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of
which are ordinarily entitled to vote generally in the election of
directors of the Company, or (iii) any other class of shares resulting
from successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or
from no par value to par value.
3.2. Notice of Adjustment. Whenever the Option Price or the number or
kind of Option Shares purchasable upon exercise of the Option is adjusted
pursuant to any of the provisions of this Agreement, the Company will promptly
give notice to C&A of such adjustment or adjustments, together with a
certificate of a firm of independent public accountants selected by the Company
(who may be the regular accountants employed by the Company) setting forth the
adjustments in the Option Price and the number or kind of Option Shares
purchasable upon exercise of the Option, and also setting forth a brief
statement of the facts requiring such adjustments and the computations upon
which such adjustments are based. Such certificate will be conclusive evidence
of the correctness of such adjustments.
3.3. Preservation of Purchase Rights Upon Merger, Consolidation, Etc.
In case of any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale or transfer to another entity in any
one transaction or series of related transactions effected pursuant to a common
plan of all or substantially all the assets of the Company (any such
transaction, a "Company Sale"), the Company or such successor, as the case may
be, will execute an agreement providing that C&A will have the right thereafter,
upon payment of an amount equal to the amount payable upon the exercise of the
Option immediately prior thereto, to purchase upon exercise of the Option in
accordance with Section 2 the kind and amount of securities or property that it
would have owned or have been entitled to receive after giving effect to the
Company Sale on account of the Option Shares that would have been purchasable
upon the exercise of the Option had the Option been exercised immediately prior
thereto, provided that (a) to the extent that C&A would have been so entitled to
receive cash on account of such Option Shares, C&A may elect in connection with
the exercise of the Option in accordance with Section 2.1 to reduce the amount
of cash that it would be entitled to receive upon such exercise in exchange for
a corresponding reduction in the amount payable upon such exercise), (b) no
adjustment in respect of dividends, interest or other income on or from such
shares or other securities or property will be made during the term of the
Option or upon the exercise of the Option, and (c) nothing herein will diminish
or otherwise affect the provisions of Sections 7.3 and 7.4. Such agreement will
provide for adjustments that will be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 3. The provisions of this
Section 3.3 will similarly apply to successive consolidations, mergers, sales or
transfers.
4. Fractional Interests. The Company may, but will not be required to,
issue fractional Option Shares or fractional interests in any other securities
on the exercise of the Option. If any fraction of an Option Share or other
security would, except for the provisions of this Section 4, be issuable upon
the exercise of the Option, the Company will pay or issue, as the case may be,
such fractional interest or, at the Company's option, an amount in cash (a) in
lieu
5
of a fractional Option Share, equal to the Current Market Price for one share of
Common Stock on the Trading Day immediately preceding the date on which the
Option is presented for exercise, multiplied by such fraction of an Option
Share, or (b) in lieu of a fractional interest in any other security, equal to
the fair value of such fractional interest, determined in a manner as similar as
possible, taking into account the difference in the fractional interest being
valued, to the calculation described in clause (a) of this Section 4.
5. Notices to C&A. Nothing contained in this Agreement will be
construed as conferring upon Holder the right to vote, or to receive dividends,
or to consent or to receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter or
any rights whatsoever as a stockholder of the Company; provided, however, that
if, at any time prior to the Expiration Date and prior to the exercise of the
Option, any of the following events occurs:
(a) The Company declares any dividend payable in any
securities upon its shares of Common Stock or makes any distribution
(other than a regular cash dividend payable out of consolidated
retained earnings) to the holders of its shares of Common Stock;
(b) The Company offers to the holders of its Common Stock any
shares of capital stock of the Company or any Subsidiary or securities
convertible into or exchangeable for shares of capital stock of the
Company or any Subsidiary or any option, right or warrant to subscribe
for or purchase any thereof;
(c) The Company distributes to the holders of its Common Stock
evidences of indebtedness or assets (including any cash dividend which
would result in an adjustment under Section 3.1) of the Company or any
Subsidiary;
(d) Any reclassification of the Common Stock, any
consolidation of the Company with or merger of the Company into another
entity, any sale, transfer or lease to another entity of all or
substantially all the property of the Company; or
(e) Any proposal by the Company to effect a dissolution,
liquidation or winding up of the Company that has been publicly
announced by the Company;
then in any one or more of such events the Company will give notice of such
event to Holder, as provided in Section 10 hereof, such giving of notice to be
completed at least ten Business Days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the stockholders
entitled to such dividend, distribution or subscription rights, or for the
determination of stockholders entitled to vote on such proposed
reclassification, consolidation, merger, sale, transfer or lease, dissolution,
liquidation or winding up. Such notice will specify such record date or the date
of closing the transfer books, as the case may be, for such event. Failure to
mail or receive such notice or any defect therein or in the mailing thereof will
not affect the validity of any action taken in connection with such event.
6
6. Reports to C&A. (a) To the extent such documents are required to be
sent by the Company to the holders of outstanding Common Stock, the Company will
provide to C&A, within 15 calendar days after it files them with the SEC, copies
of its annual report and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which the Company is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act.
(b) The Company will provide to C&A copies of its annual
financial statements and quarterly financial statements in the forms provided to
its senior bank lenders, within 15 calendar days after they are provided to such
lenders.
7. Agreements of Holder and the Company with Respect to Option Shares.
The provisions of this Section 7 will apply to all Option Shares acquired upon
exercise of the Option and any other shares of Common Stock which Holder
hereafter acquires by means of a stock split, stick dividend, distribution,
exercise of options or warrants or otherwise (other than pursuant to a Public
Offering) (all such Option Shares or other shares, "Shares").
7.1. Limitations on Transfer. (a) No Holder may Transfer any Shares (i)
other than in accordance with Sections 7.2, 7.3, 7.4 or 7.5 or (ii) to a
Transferee engaged in the business of the development, production, marketing,
distribution or sale of vinyl and/or paper decorative surface products (a
"Competitor"). C&A may not, directly or indirectly, Transfer the Option in part
or to a Competitor and may Transfer its entire rights in and under the Option
only in the circumstances, and subject to the same conditions, permitted and
specified in Sections 7.3 and 7.5 as applicable to Transfers of Shares.
(b) In the event of any purported Transfer of the Option or
any Shares in violation of the provisions of this Agreement, such purported
transfer will be void and the Company will not give effect to such Transfer.
(c) Each certificate representing Shares issued to Holder will
bear the following legend on the face thereof:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN AGREEMENT AMONG THE COMPANY, BDPI HOLDINGS LLC AND THE HOLDER
HEREOF, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH OPTION AGREEMENT.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE,
AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH OPTION AGREEMENT.
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
7
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY
HAVE BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE."
The aforesaid legend will be removed by the Company by the delivery of
substitute certificates without such legend in the event of (i) a Transfer
permitted by this Agreement and in which the Transferee is not required to enter
into an Assumption Agreement or (ii) the termination of Sections 7.1, 7.2 and
7.5 pursuant to the terms hereof, provided however, that the second paragraph of
such legend will only be removed if at such time it is no longer required for
purposes of the Securities Act.
7.2. Transfers to Affiliates. Subject to Section 7.1, Holder may
Transfer the Option as an entirety or any or all of the Shares held by it to any
of its Affiliates who duly executes and delivers an Assumption Agreement,
provided that in connection therewith the Company has been furnished with an
opinion in form and substance reasonably satisfactory to the Company of counsel
reasonably satisfactory to the Company that such Transfer is exempt from or not
subject to the provisions of Section 5 of the Securities Act and any other
applicable securities laws.
7.3. Tag-Along Rights. (a) So long as this Agreement remains in effect,
with respect to any proposed Transfer by BDPI or any Person to whom BDPI assigns
its rights in accordance with Section 7.4(c) of shares of Common Stock to any
Person not an Affiliate of BDPI, other than in a Public Offering, whether
pursuant to a stock sale, a tender or exchange offer or a similar transaction
(any such transaction, a "BDPI Sale"), BDPI will have the obligation, and Holder
will have the right, to require the proposed Transferee or acquiring Person to
purchase from a Holder who exercises its rights under Section 7.3(b) (a "Tagging
Stockholder") a number of Shares up to the product (rounded up to the nearest
whole number) of (i) the quotient determined by dividing (A) the aggregate
number of Shares owned by such Tagging Stockholder by (B) the aggregate number
of shares of Common Stock owned by BDPI, the Tagging Stockholder and any other
Stockholder entitled to participate in such transaction, and (ii) the total
number of shares of Common Stock proposed to be directly or indirectly
Transferred to the Transferee or acquiring Person in the contemplated BDPI Sale,
at the same price per share of Common Stock and upon the same terms and
conditions (including, without limitation, time of payment and form of
consideration) as to be paid and given to BDPI; provided, that in order to be
entitled to exercise its right to sell Shares to the proposed Transferee or
acquiring Person pursuant to this Section 7.3, each Tagging Stockholder must
agree to make to the Transferee or acquiring Person substantially the same
representations, warranties, covenants, indemnities and agreements as BDPI
agrees to make in connection with the proposed BDPI Sale. Each Tagging
Stockholder will be responsible for its proportionate share of the costs of the
BDPI to the extent not paid or reimbursed by the Company or the Transferee.
(b) BDPI will give notice to each Tagging Stockholder of each
proposed BDPI Sale at least 15 Business Days prior to the proposed consummation
of such BDPI Sale, setting forth the number of shares of Common Stock proposed
to be so Transferred, the name and address of the proposed Transferee or
acquiring Person, the proposed amount and form of consideration (and if such
consideration consists in part or in whole of property other than cash, BDPI
will provide such information, to the extent reasonably available to BDPI,
relating to such
8
consideration as the Tagging Stockholder may reasonably request in order to
evaluate such non-cash consideration) and other terms and conditions of payment
offered by the proposed Transferee or acquiring Person, and a representation
that the proposed Transferee or acquiring Person has been informed of the
tag-along rights provided for in this Section 7.3. BDPI will deliver or cause to
be delivered to each Tagging Stockholder copies of all transaction documents
relating to the proposed BDPI Sale (including draft and final versions of such
documents) as the same become available. The tag-along rights provided by this
Section 7.3 must be exercised by each Tagging Stockholder within 12 Business
Days following receipt of the notice required by the preceding sentence by
delivery of a written notice to BDPI indicating the desire of such Tagging
Stockholder to exercise its or his rights and specifying the number of Shares it
desires to sell. The Tagging Stockholder will be entitled under this Section 7.3
to Transfer to the proposed Transferee or acquiring Person the number of Shares
calculated in accordance with Section 7.3(a).
(c) If any Tagging Stockholder exercises its rights under
Section 7.3(a), the closing of the purchase of the Shares with respect to which
such rights have been exercised will take place concurrently with the closing of
the sale of BDPI's Common Stock to the proposed Transferee or acquiring Person.
7.4. Drag-Along Rights. (a) So long as this Agreement remains in
effect, if BDPI receives a bona fide offer from a Person other than an Affiliate
of BDPI (a "Third Party") to purchase in an arms'-length transaction of a type
referred to in the first sentence of Section 7.3(a) at least a majority of the
shares of Common Stock then outstanding and such offer is accepted by BDPI, then
Holder hereby agrees that it will Transfer to such Third Party on the terms of
the offer so accepted by BDPI, including the same time of payment and per Share
consideration, the number of Shares equal to the number of Shares owned by
Holder multiplied by the percentage of the then-outstanding shares of Common
Stock to which the Third Party offer is applicable.
(b) BDPI will give notice (the "Drag-Along Notice") to Holder
of any proposed Transfer giving rise to the rights of BDPI set forth in Section
7.4(a) as soon as practicable following BDPI's acceptance of the offer referred
to in Section 7.4(a). The Drag-Along Notice will set forth the number of shares
of Common Stock proposed to be so Transferred, the name of the proposed
Transferee or acquiring Person, the proposed amount and form of consideration
(and if such consideration consists in part or in whole of property other than
cash, BDPI will provide such information, to the extent reasonably available to
BDPI, relating to such consideration as Holder may reasonably request in order
to evaluate such non-cash consideration), the number of shares of Common Stock
sought and the other terms and conditions of the offer. BDPI will notify Holder
at least ten Business Days in advance of entering into a definitive agreement in
connection with such offer. In any such agreement, Holder will be required (i)
to make the same representations, warranties and indemnities as BDPI makes, so
long as they are made severally and not jointly, and (ii) to pay its
proportionate share of the costs of such Transfer to the extent not paid or
reimbursed by the Company or the Transferee or acquiring Person. If the Transfer
referred to in the Drag-Along Notice is not consummated within 180 days from the
date of the Drag-Along Notice, BDPI must deliver another Drag-Along Notice in
order to exercise its rights under this Section 7.4 with respect to such
Transfer or any other Transfer.
9
(c) Notwithstanding Section 12, BDPI may assign its rights
under this Section 7.4 to a single Transferee of at least a majority of the
shares of Common Stock then owned by BDPI, provided, however, that upon such an
assignment BDPI's rights under this Section 7.4 will terminate.
(d) If more than one Person is included in Holder when the
Company exercises drag-along rights under this Section 7.4, each such Person
will participate pro rata by reference to the number of Shares owned by each
such Person.
(e) If the Company has drag-along rights similar to this
Section 7.4 with respect to any holder of Common Stock other than Holder, then
the Company may not exercise its drag-along rights under this Section 7.4 unless
it simultaneously exercises (to the maximum proportional extent permitted) its
drag-along rights against such other holder.
7.5. Right of First Offer. (a) Except as otherwise expressly permitted
by Sections 7.2, 7.3 or 7.4, during the period from the date hereof until the
earlier to occur of the completion of an IPO and the fifth anniversary of the
date on which a Notice of Exercise is given (the "ROFO Period"), prior to any
Holder proposing to effect a Transfer of Common Stock to any Person not an
Affiliate of the Transferor (a "Third-Party Sale"), such Holder (the "Offering
Stockholder") will deliver to BDPI a written Notice (an "Offer Notice")
specifying (i) the aggregate amount of cash consideration (the "Offer Price")
for which the Offering Stockholder proposes to sell the Common Stock to be
offered in such Third-Party Sale (the "Offered Stock"), (ii) the identity of the
purchaser in such Third-Party Sale (if then known), and (iii) all other material
terms of the proposed Third-Party Sale.
(b) Prior to negotiating (or committing to negotiate) with any
third party in respect of a possible sale Third-Party Sale of any Common Stock,
the Offering Stockholder will negotiate with BDPI in good faith concerning the
possible sale to BDPI of the Common Stock proposed or otherwise intended to be
sold in a Third Party Sale for a period of 30 calendar days following the date
on which BDPI receives the Offer Notice. If BDPI delivers to the Offering
Stockholder a written Notice (an "Acceptance Notice") within such 30 calendar
day period (such period being referred to herein as the "ROFO Acceptance
Period") stating that BDPI is willing to purchase all of the Offered Stock for
the Offer Price and on the other terms set forth in the Offer Notice, the
Offering Stockholder will sell all of the Offered Stock to BDPI, and BDPI will
purchase such Offered Stock from the Offering Stockholder, on the proposed terms
and subject to the conditions set forth below.
(c) The consummation of any purchase of the Offered Stock by
BDPI pursuant to this Section 7.5 (the "ROFO Closing") will occur no more than
90 calendar days following the delivery of the Acceptance Notice (such 90
calendar day period being referred to herein as the "ROFO Closing Period") at
10:00 a.m. (Eastern Time) at the offices of Xxxxx, Day, Xxxxxx & Xxxxx at 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other time of day and
place as may be mutually agreed upon by the Offering Stockholder and BDPI. At
the ROFO Closing, (i) BDPI will deliver to the Offering Stockholder by certified
or official bank check or
10
wire transfer to an account designated by the Offering Stockholder an amount in
immediately available funds equal to the Offer Price, (ii) the Offering
Stockholder will deliver one or more certificates evidencing the Common Stock,
together with such other duly executed instruments or documents (executed by the
Offering Stockholder) as may be reasonably requested by BDPI to acquire the
Offered Stock free and clear of any and all claims, liens, pledges, charges,
encumbrances, security interests, options, trusts, commitments and other
restrictions of any kind whatsoever (collectively, "Encumbrances"), except for
Encumbrances created by this Agreement, federal or state securities laws or BDPI
or as specified in the Offer Notice ("Permitted Encumbrances"), and (iii) the
Offering Stockholder will be deemed to represent and warrant to BDPI that, upon
the ROFO Closing, the Offering Stockholder will convey and Blackstone will
acquire the entire record and beneficial ownership of, and good and valid title
to, the Offered Stock, free and clear of any and all Encumbrances, except for
Permitted Encumbrances.
(d) If no Acceptance Notice relating to the proposed
Third-Party Sale is delivered to the Offering Stockholder prior to the
expiration of the ROFO Acceptance Period, or an Acceptance Notice is so
delivered to the Offering Stockholder but the ROFO Closing fails to occur prior
to the expiration of the ROFO Closing Period (unless BDPI was ready, willing and
able prior to the expiration of the ROFO Closing Period to consummate the
transactions to be consummated by BDPI at the ROFO Closing), the Offering
Stockholder may (without affecting its rights, if any, arising out of such
failure) consummate the Third-Party Sale, but only (i) during the 90 calendar
day period immediately following the expiration of the ROFO Acceptance Period
(in the event that no Acceptance Notice was timely delivered to the Offering
Stockholder) or the 90 calendar day period immediately following the expiration
of the ROFO Closing Period (in the event that an Acceptance Notice was timely
delivered to the Offering Stockholder but the ROFO Closing failed timely to
occur), (ii) at a price at least equal to the Offer Price, (iii) upon other
terms not materially less favorable to the Offering Stockholder than those set
forth in the Offer Notice, (iv) if the transferee in the Third-Party Sale enters
into an Assumption Agreement, and (v) if the Third-Party Sale is not to or with
a Competitor or for consideration other than cash.
(e) This Section 7.5 will not apply to any transaction in
which the consideration payable in the Third-Party Sale is other than cash.
7.6 Registration Rights. Holder will be entitled to cause the Company
to register Option Shares in accordance with the terms and conditions of
Appendix A hereto, which is incorporated herein by reference.
7.7 Conflicting Provisions. (a) The Company will not enter into any
agreement that prevents it from complying with its obligations under this
Agreement (including Sections 7.3, 7.4 and 7.6).
(b) If the Company grants to Xxxxxx, Inc. (or any of its
Affiliates or transferees) transfer rights, tag-along rights, preemptive rights,
or registration rights, with respect to the Common Stock, more favorable to such
Person than the comparable rights granted to Holder hereunder, the Company will
offer to amend this Agreement to include such favorable rights.
11
8. Reservation of Common Stock. The Company will, for so long as the
Option remains outstanding, reserve and keep available, solely for issuance and
delivery upon the exercise of, a number of shares of Common Stock (or, if
applicable, other securities) sufficient to provide for the exercise of the
Option. The transfer agent for the Common Stock (or, if applicable, other
securities) will be irrevocably authorized and directed at all times until the
exercise or expiration of the Option to reserve such number of authorized shares
of Common Stock (or, if applicable, other securities) as necessary for such
purpose. The Company will keep copies of this Agreement on file with the
transfer agent and will supply the transfer agent with duly executed stock
certificates for such purpose.
9. Representations and Warranties of the Company. The Company hereby
represents and warrants to Holder that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to execute, deliver
and perform its obligations hereunder and to consummate the
transactions contemplated hereby;
(b) The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company;
(c) The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof will not
conflict with, violate or constitute a breach of the Certificate of
Incorporation or By-Laws of the Company, or any material contract,
agreement or instrument by which the Company is bound or any judgment,
order, decree, law, statute, rule, regulation or other judicial or
governmental restriction to which the Company is subject;
(d) This Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except as the enforceability hereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally; and
(e) The Option, when issued and delivered to C&A as provided
in this Agreement, and the Option Shares issued upon exercise of the
Option, when issued, paid for and delivered as provided in this
Agreement, will be duly and validly issued and outstanding, fully paid
and nonassessable.
10. Notices. All notices, requests, waivers, releases, consents and
other communications required or permitted by this Agreement (collectively,
"Notices") must be in writing. Except as expressly otherwise provided herein
with respect to manner of delivery, notices will be deemed sufficiently given
for all purposes when delivered in person, when
12
dispatched by telegram or electronic facsimile transmission, when sent by
first-class mail, postage prepaid, or upon confirmation of receipt when
dispatched by a nationally recognized overnight courier service to the
appropriate party as follows: (a) if to Holder, at 000 XxXxxxxxxx Xxxxx,
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000, Attention: Controller, Telecopy: (000) 000-0000
and (b) if to the Company or BDPI, c/o The Blackstone Group, 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxxxxxx, Telecopy No. (212)
754-8720, or at such other address as either such party may from time to time
designate in writing.
11. Amendment and Waiver. No failure or delay of the Holder in
exercising any power or right hereunder (other than a failure to exercise the
Option in accordance with the provisions hereof) will operate as a waiver
thereof, nor will any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No notice or demand on the Company in any case will entitle the
Company to any other or future notice or demand in similar or other
circumstances. The terms of this Agreement cannot be changed, waived, released
or discharged otherwise than by a writing signed by each party thereto. Any such
amendment, modification, or waiver effected pursuant to and in accordance with
the provisions of this Section 11 will be binding upon Holder and the Company.
12. Successors and Assigns. This Agreement will be binding upon and
inure to the benefit of the parties hereto, their respective successors and
permitted assigns, but will not be assignable or delegable by any party in whole
or in part without the prior written consent of the other parties, except as
otherwise provided in Section 7.4. In the absence of such prior written consent,
any purported assignment or delegation of any right or obligation hereunder will
be null and void.
13. Rights of the Parties. Except as provided in Section 12, nothing
expressed or implied in this Agreement is intended or will be construed to
confer upon or give any Person other than the Company and Holder any rights or
remedies under or by reason of this Agreement or any transaction contemplated
hereby. All rights of action in respect of this Agreement are vested in Holder,
and Holder may enforce its rights hereunder, including the right to exercise or
exchange the Option Certificate in accordance with the provisions hereof.
14. Titles and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
15. Termination. This Agreement will terminate and be of no further
force and effect (other than with respect to prior breaches) (i) with respect to
Sections 1 and 2 on the Expiration Date, (ii) with respect to Sections 3, 4, 5
and 8, six months after the Expiration Date, (iii) with respect to Sections 6
and 9, at such time as the Option is no longer exercisable and none of C&A or
any of its Affiliates owns any Option Shares, (iv) with respect to Sections 7.1
through 7.4, upon the consummation of an IPO, (v) with respect to Section 7.5,
upon the earlier to occur of (A) the fifth anniversary of the date on which a
Notice of Exercise is given and (B) the
13
consummation of an IPO, (vi) with respect to Section 7.6 and Appendix A (except
for Section 5 of Appendix A), at such time as no Holder holds any Registrable
Securities (as defined in Appendix A), (vii) with respect to Section 5 of
Appendix A, upon expiration of the applicable statutes of limitations, and
(viii) with respect to all other Sections of this Agreement, at such time as all
Sections other than such Sections have terminated.
16. Certain Interpretive Matters and Definitions. (a) As used in this
Agreement, the following capitalized terms have the meanings set forth below:
"AFFILIATE" means, with respect to any Person, (i) any Person
that directly or indirectly controls, is controlled by or is under
common control with, such Person, (ii) any director, officer, partner
or employee of such Person or of any Person specified in clause (i)
above; provided, however, that no Person controlling or controlled by
BDPI will be deemed to be an Affiliate of C&A.
"AGREEMENT" means this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"ASSUMPTION AGREEMENT" means a writing reasonably satisfactory
in form and substance to the Company whereby a transferee of Option
Shares becomes a party to, and agrees to be bound to the same extent as
its transferor by the terms of, this Agreement.
"BUSINESS DAY" means a day other than a Saturday, Sunday,
federal or New York State holiday or other day on which commercial
banks in New York City are authorized or required by law to close.
"COMMON STOCK" means the shares of common stock, par value
$.01 per share, of the Company.
"CURRENT MARKET PRICE" per share of Common Stock on any date
means the average of the daily closing prices for three Trading Days
before the date of such computation. The closing price for each day
will be the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in each case on the
principal national securities exchange on which the shares of the
Common Stock are listed or admitted to trading or, if not so listed or
admitted to trading, the Board of Directors of the Company will
determine the Current Market Price in good faith on the basis of such
quotations or other relevant information as it considers appropriate.
"IPO" means the initial Public Offering of Common Stock by the
Company.
"PERMITTED TRANSFEREES" means any Person to whom Option Shares
are Transferred in a Transfer pursuant to Section 7.2 or Section 7.5 or
otherwise not in violation of this Agreement and who is required to,
and does, enter into an Assumption Agreement, and includes any Person
to whom a Permitted Transferee (or a Permitted
14
Transferee of a Permitted Transferee) so further transfers shares and
who is required to, and does, become bound by the terms of this
Agreement.
"PERSON" means any individual, corporation, limited liability
company, partnership, trust, joint stock company, business trust,
unincorporated association, joint venture, governmental authority or
other entity of any nature whatsoever.
"PUBLIC OFFERING" means the sale of shares of any class of the
Common Stock to the public pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8 or
any similar or successor form) filed under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"STOCKHOLDERS" means each of the holders of common stock of
the Company, and "Stockholder" means any one of the Stockholders.
"TRADING DAY" means any day on which shares of Common Stock
are traded on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if shares
of Common Stock are not so listed or admitted to trading, in the
over-the-counter market.
"TRANSFER" means a transfer, sale, assignment, pledge,
hypothecation or other disposition.
(b) Unless the context otherwise requires, (i) all references
to Sections or Exhibits are to Sections or Exhibits of or to this Agreement,
(ii) each term defined in this Agreement has the meaning assigned to it, (iii)
"or" is disjunctive but not necessarily exclusive and (iv) words in the singular
include the plural and vice versa. All references to "$" or dollar amounts are
to lawful currency of the United States of America.
(c) No provision of this Agreement will be interpreted in
favor of, or against, any party hereto by reason of the extent to which such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
17. Injunctive Relief. The parties acknowledge and agree that a
violation of any of the terms of this Agreement will cause the non-breaching
party irreparable injury for which adequate remedy at law is not available.
Accordingly, it is agreed that each party will be entitled to an injunction,
restraining order or other equitable relief to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any
15
court of competent jurisdiction, in addition to any other remedy to which it may
be entitled at law or equity.
18. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and there are
no agreements among the parties hereto with respect thereto except as expressly
set forth herein.
19. Severability. In case any provision contained in this Agreement is
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions will not in any way be affected or impaired thereby and
the invalid, illegal or unenforceable term will be deemed replaced by 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.
20. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed will be deemed to be an original; such
counterparts will together constitute but one agreement.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
ROYAL WALL FASHIONS, INC.
By: _________________________________
Name:
Title:
XXXXXXX & XXXXXX PRODUCTS CO.
By: _________________________________
Name:
Title:
BDPI HOLDINGS LLC
16
By: _________________________________
Name:
Title:
17
APPENDIX A
REGISTRATION RIGHTS
1. Certain Definitions. For purposes of this Appendix A, the
following terms will have the following meanings:
"BDPI" means BDPI Holdings LLC, a Delaware limited liability
company, and its transferees and their transferees.
"REGISTRABLE SECURITIES" means (i) any Option Shares, (ii) any
Common Stock issued as (or issuable upon the conversion or exercise of
any warrant, right, option or other convertible security which is
issued as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of, such Option Shares, and (iii) any
Common Stock issued by way of a stock split of the Common Stock
referred to in clauses (i) or (ii) above. For purposes of this
Agreement, any Registrable Securities will cease to be Registrable
Securities when (w) a registration statement covering such Registrable
Securities has been declared effective and such Registrable Securities
have been disposed of pursuant to such effective registration
statement, (x) such Registrable Securities have been distributed
pursuant to Rule 144 (or any similar provision then in effect) under
the Securities Act or may be sold in a single transaction without
registration pursuant to Rule 144, (y) such Registrable Securities are
sold by a Person in a transaction in which rights under the provisions
of this Agreement are not assigned, or (z) such Registrable Securities
cease to be outstanding.
"REGISTRATION EXPENSES" means any and all expenses incident to
the performance by the Company of or compliance by the Company with
Section 2 or 3 hereof, including, without limitation, (i) all SEC,
stock exchange, National Association of Securities Dealers, Inc. and
other comparable regulatory agencies, registration and filing fees,
(ii) all fees and expenses of complying with securities or blue sky
laws (including fees and disbursements of counsel for the underwriters
in connection with blue sky qualifications), (iii) all printing,
messenger and delivery expenses, (iv) the fees and disbursements of
counsel for the Company and of its independent public accountants, (v)
the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (vi) fees and disbursements of underwriters
(but not discounts or similar compensation) customarily paid by issuers
or sellers of securities, (vii) liability insurance if the Company so
desires or if the underwriters so require and (viii) the reasonable
fees and expenses of any special experts retained by the Company in
connection with the requested registration.
1
2. Piggyback Rights. (a) Each time the Company is planning to file a
registration statement under the Securities Act in connection with the sale of
shares of securities of the Company that are of the type that are Registrable
Securities by (i) the Company (other than in connection with an IPO comprised
solely of the primary offer and sale of Common Stock by the Company or a
registration statement on Form S-4 or S-8 or any similar or successor form) or
(ii) any Stockholder (the Company or such Stockholder in such case, the
"Initiating Party"), the Company will give prompt written notice thereof to
Holder and to BDPI, at least 15 Business Days prior to the anticipated filing
date of such registration statement. Upon the written request of Holder made
within 12 Business Days after the receipt of any such notice from the Company,
which request will specify the Registrable Securities (the "Piggy-Back Shares")
intended to be disposed of by Holder in such offering, the Company will use its
reasonable best efforts to effect the registration under the Securities Act of
all Piggy-Back Shares which the Company has been so requested to register by
Holder to the extent required to permit the disposition of the PiggyBack Shares
to be registered; provided, that (i) if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, any
Initiating Party determines for any reason not to proceed with the proposed
registration, the Company may at its election give written notice of such
determination to each holder of Piggy-Back Shares and thereupon will be relieved
of its obligation to register any Piggy-Back Shares in connection with such
registration, and (ii) if such registration involves an underwritten offering,
Holder must sell the Piggy-Back Shares to the underwriters on the same terms and
conditions as apply to the Initiating Parties.
(b) If a registration pursuant to this Section 2 involves an
underwritten offering and the managing underwriter or underwriters in good faith
advise the Company in writing that, in their opinion, (i) the number of
Registrable Securities which the Initiating Party intends to include in such
registration, together with the Piggy-Back Shares, exceeds the largest number of
such securities which can be sold in such offering without having an adverse
effect on such offering (including, but not limited to, the price at which the
Registrable Securities can be sold) or (ii) the inclusion of Registrable
Securities owned by Holder in such registration would have an adverse effect on
such offering, then the Company will include in such registration (A) first,
100% of the securities, if any, that the Company proposes to sell for its own
account, and (B) second, to the extent that the number of securities which the
Company proposes to sell is less than the number of securities which the Company
has been advised can be sold in such offering without having the adverse effect
referred to above, the number of Registrable Securities of Holder determined on
the basis of the relative percentage relationships of (x) the number of
Registrable Securities to be included by Holder and (y) the number of
Registrable Securities to be included by all other Stockholders.
3. Demand Registrations. (a) From and after 180 days following an IPO,
Holder may request in a written notice (the "Request") that the Company effect
the registration under the Securities Act of all or any part of the Registrable
Securities owned by Holder. Following the receipt of the Request, the Company
will (i) within ten days notify all other Stockholders having registration
rights of such Request in writing and (ii) thereupon, will as expeditiously as
practicable, use its reasonable best efforts to effect the registration under
the Securities Act of any or all Registrable Securities of Holder as are
specified in the Request and any Registrable Securities of any other Stockholder
having registration rights as are specified in a subsequent
2
Request received by the Company, within ten days after the Company has given
such notice, and will cause such registration statement to remain effective for
a period of not less than 180 days; provided, however, that the Company will not
be required to effect more than one registration pursuant to this Section 3,
unless the Holder is unable to sell all of the Registrable Securities requested
be included in such offering solely because of the participation by BDPI and any
other Stockholders (other than Holder) in such offering, in which case Holder
will be entitled to make one additional Request.
(b) The Company and Holder will reasonably mutually agree on
the managing underwriter of any underwritten offering effected under this
Section 3.
(c) If a registration pursuant to this Section 3 involves an
underwritten offering and the managing underwriter or underwriters in good faith
advise the Company in writing that, in their opinion, the number of Registrable
Securities which Holder and any other Stockholders intend to include in such
registration exceeds the largest number of securities which can be sold in such
offering without having an adverse effect on such offering (including, but not
limited to, the price at which the securities can be sold), then the number of
Registrable Securities of each Stockholder to be included in such offering will
be determined on the basis of the relative percentage relationships of (x) the
number of Registrable Securities to be included by such Stockholder and (y) the
number of Registrable Securities to be included by all other Stockholders.
4. Other Registration-Related Matters. (a) (i) If (A) during the term
of this Agreement, the Company files or proposes to file a registration
statement (other than in connection with the registration of securities issuable
pursuant to a continuous "at the market offering" pursuant to Rule 415(a)(4)
under the Securities Act or an employee stock option, stock purchase, dividend
reinvestment plan or similar plan) with respect to any securities of the
Company, and (B) with reasonable prior notice, (1) the Company (in the case of a
non-underwritten offering pursuant to such registration statement) advises
Holder in writing that a sale or distribution of securities owned by Holder
would adversely affect such offering or (2) the managing underwriter or
underwriters (in the case of an underwritten offering) advise the Company in
writing (in which case the Company will notify Holder), that a sale or
distribution of securities owned by Holder would adversely affect such offering,
then Company will not be obligated to effect the initial filing of a
registration statement pursuant to Section 3 (A) in the case of an IPO, during
the period commencing on the date that is 30 calendar days prior to the date the
Company in good faith estimates (as certified in writing by an officer of the
Company to the Holder following a request for registration pursuant to Section
3) will be the date of the filing of, and ending on the date which is 150
calendar days following the effective date of, such registration statement but
in no event for more than 180 consecutive days, or (B) in the case of any
offering subsequent to an IPO, during the period commencing on the date that is
30 calendar days prior to the date the Company in good faith estimates (as
certified in writing by an officer of the Company to Holder following a request
for registration pursuant to Section 3) will be the date of filing of, and
ending on the date which is 60 calendar days following the effective date of,
such registration statement but in no event for more than 90 consecutive days.
3
(ii) If the Board of Directors of the Company
determines in good faith that the registration and distribution of Registrable
Securities (A) would materially impede, delay or interfere with any pending
financing, acquisition, corporate reorganization or other significant
transaction involving the Company or (B) would require disclosure of non-public
material information, the disclosure of which would materially and adversely
affect the Company, the Company will promptly give Holder written notice of such
determination and will be entitled to postpone the filing or effectiveness of a
registration statement for a reasonable period of time not to exceed 180
calendar days (a "Section 4(a)(ii) Period"); provided, however, that in
connection therewith the Company will be required to deliver to Holder (as
identified at such time to the Company) a general statement, signed by an
officer of the Company, describing in reasonable detail the reasons for such
postponement or restriction on use and an estimate of the anticipated delay. The
Company will promptly notify Holder of the expiration or earlier termination of
a Section 4(a)(ii) Period.
(b) The Company may require any Person that is selling shares
of Common Stock in a Public Offering pursuant to Section 2 or 3 to furnish to
the Company in writing such information regarding such Person and the
distribution of the shares of Common Stock which are included in a Public
Offering as may from time to time reasonably be requested in writing in order to
comply with the Securities Act.
(c) The Company will pay all Registration Expenses in
connection with each registration or proposed registration of Registrable
Securities pursuant to Section 2 or 3. Notwithstanding the foregoing, (y) the
fees or expenses of counsel to any Stockholder or of any other expert hired
directly by any Stockholder will be the sole responsibility of such Stockholder
and (z) each Stockholder will be responsible for its pro rata share (determined
by reference to the number of shares included in the applicable registration) of
all underwriting discounts and commissions and transfer taxes.
(d) Before filing a registration statement or prospectus, or
any amendments or supplements thereto, in connection with any registration or
proposed registration of Registrable Securities pursuant to Section 2 or 3, the
Company will furnish to Holder's counsel copies of all documents proposed to be
filed.
(e) The Company will furnish to each seller of Registrable
Securities such number of copies of the applicable registration statement and of
each amendment or supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of
Registrable Securities by such seller.
(f) The Company will use its reasonable best efforts to
register or qualify Registrable Securities covered by a registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller reasonably requests, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller, except that
4
the Company will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction where, but for the
requirements of this paragraph (f), it would not be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction, or to consent
to general service of process in any such jurisdiction.
(g) The Company will use its reasonable best efforts to cause
the Registrable Securities covered by a registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller thereof to consummate the disposition thereof.
(h) The Company will notify each seller of Registrable
Securities covered by a registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act within the
appropriate period of the Company's becoming aware that the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of an amended
or supplemental prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such Registrable Securities, such prospectus will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances than existing.
(i) The Company will enter into such customary agreements
(including an underwriting agreement in customary form) and take such other
actions as sellers of a majority of holders of securities covered by a
registration statement or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities.
(j) The Company will make available for inspection by any
seller of Registrable Securities covered by a registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(k) The Company will obtain a "cold comfort" letter or letters
from the Company's independent public accountants in customary form and covering
matters of the type customarily covered by "cold comfort" letters as the sellers
of a majority of the outstanding shares of Registrable Securities covered by the
registration statement reasonably requests.
(l) Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in paragraph (h)
Holder will forthwith discontinue disposition of pursuant to the registration
statement covering such Registrable Securities until Holder's receipt of the
copies of the amended or supplemented prospectus contemplated by
5
paragraph (h) and, if so directed by the Company, Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in Holder's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company gives any such notice, the period for which the Company will be required
to keep the registration statement effective will be extended by the number of
days during the period from and including the date of the giving of such notice
pursuant to paragraph (h) to and including the date when each seller of
Registrable Securities covered by such registration statement has received the
copies of the supplemented or amended prospectus contemplated by paragraph (h).
(m) Holder will, in connection with an offering of the
Company's securities, upon the request of the Company of the underwriters
managing any underwritten offering of the Company's securities, agree in writing
not to effect any sale, disposition or distribution of Registrable Securities
(other than those included in the registration) without the prior written
consent of the managing underwriter for such period of time (not to exceed (i)
180 days, in the case of an IPO, or (ii) 90 days, in the case of any other
offering of Company securities) from the effective date of such registration as
the Company or the underwriters may specify.
5. Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act pursuant
to Section 2 or 3, the Company hereby indemnifies and agrees to hold harmless,
to the extent permitted by law, each party hereto who is a holder ("Selling
Holder") of Registrable Securities covered by such registration statement, each
Affiliate of such Selling Holder and their respective directors and officers or
general and limited partners (and the directors, officers, affiliates and
controlling Persons thereof), each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such Selling Holder or any such underwriter within the meaning
of the Securities Act (collectively, the "Indemnified Parties"), against any and
all losses, claims, damages or liabilities, joint or several, and expenses to
which such Indemnified Party may become subject under the Securities Act, common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof, whether or not such Indemnified Party
is a party thereto) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities Act,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and the Company will reimburse such Indemnified Party for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided, that
the Company will not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action proceeding in
respect thereof) or expense arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, in any such preliminary, final or summary prospectus, or
any amendment or supplement thereto in reliance upon and in conformity with
written information with respect to such Indemnified Party
6
furnished to the Company by such Indemnified Party for use in the preparation
thereof; and provided, further, that the Company will not be liable to any
Person who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section 5
with respect to any preliminary prospectus or the final prospectus or the final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, claim, damage or liability of such underwriter or controlling
Person results from the fact that such underwriter sold Registrable Securities
to a Person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final prospectus or of the final
prospectus as then amended or supplemented, whichever is most recent, if the
Company has previously furnished copies thereof to such underwriter. Such
indemnity will remain in full force and effect regardless of any investigation
made by or on behalf of such Selling Holder or any Indemnified Party and will
survive the transfer of such securities by such Selling Holder.
(b) Indemnification by the Selling Holders and Underwriters.
The Company may require, as a condition to including any Registrable Securities
in any registration statement filed in accordance with this Appendix A, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Selling Holder of such Registrable Securities or any prospective underwriter
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 5(a)) the Company, all other Selling Holders or any prospective
underwriter, as the case may be, and any of their respective Affiliates,
directors, officers and controlling Persons, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with written
information with respect to such Selling Holder or underwriter furnished to the
Company by such Selling Holder or underwriter expressly for use in the
preparation of such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated by reference
into any of the foregoing. Such indemnity will remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any of
the Selling Holders, or any of their respective affiliates, directors, officers
or controlling Persons and will survive the transfer of such securities by such
Selling Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 5, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the failure of the
indemnified party to give notice as provided herein will not relieve the
indemnifying party of its obligations under Sections 5(a) or 5(b), except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to
7
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. If, in such
indemnified party's reasonable judgment, having common counsel would result in a
conflict of interest between the interests of such indemnified and indemnifying
parties, then such indemnified party may employ separate counsel reasonably
acceptable to the indemnifying party to represent or defend such indemnified
party in such action, it being understood, however, that the indemnifying party
will not be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties (and not
more than one separate firm of local counsel at any time for all such
indemnified parties) in such action. No indemnifying party will consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that
specified in this Section 3.10 (with appropriate modifications) will be given by
the Company and each Selling Holder of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation or governmental authority other than the Securities
Act.
(e) Contribution. If recovery is not available under the
foregoing indemnification provisions of this Section 5 for any reason other than
as expressly specified therein, the parties entitled to indemnification by the
terms thereof will be entitled to contribution to liabilities and expenses
except to the extent that contribution is not permitted under Section 11(f) of
the Securities Act. In determining the amount of contribution to which the
respective parties are entitled, consideration will be given to the relative
benefits received by each party from the offering of the Registrable Securities
(taking into account the portion of the proceeds realized by each), the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
misstatement or omission and any other equitable considerations appropriate
under the circumstances.
(f) Non-Exclusivity. The obligations of the parties under this
Section 5 will be in addition to any liability which any party may otherwise
have to any other party.
8
Schedules
Set forth below is a list of schedules to the foregoing Exhibit that have been
omitted as permitted by Item 601(b)(2) of Regulation S-K. The registrant hereby
agrees to furnish supplementally a copy of any omitted schedule to the
Commission upon request.
Schedule 1.2. Net Cash Flow
Schedule 1.4. Post-Closing AR/AP
Schedule 2.1.1. Imperial Shares/Liens
Schedule 2.1.3. Conflicts; Consents
Schedule 2.1.4. Financial Statements
Schedule 2.2.2. Conflicts; Consents
Schedule 3.5. Operation of the Business
Schedule 4.2.3.(a) Management Services Agreement
Schedule 4.2.3.(b) Noncompetition Agreement
Schedule 4.2.3.(c) Opinion of Cravath, Swaine & Xxxxx
Schedule 4.3.4. Opinion of Xxxxx, Day, Xxxxxx & Xxxxx
Schedule 6.1.1. Certain Employees
Schedule 6.2.6. Surety Obligations
Schedule 6.2.7. Assumed Push-Down Liabilities
Schedule 7.11.(a) Knowledge of Seller
Schedule 7.11.(b) Knowledge of Purchaser
