Exhibit 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
XXXX, INC.
(the "Buyer")
and
INTERNATIONAL TEXTILE GROUP, INC.
(the "Seller")
Dated as of January 11, 2007
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions.............................................................1
1.2 Construction............................................................1
ARTICLE II
PURCHASE, TERMS OF PAYMENT AND CLOSING
2.1 Purchase and Sale of Assets.............................................2
2.2 Purchased Assets........................................................2
2.3 No Assumption of Liabilities............................................2
2.4 Purchase Price; Materials Credit........................................4
2.5 Manner of Payment; Closing Date Inventory...............................4
2.6 Closing.................................................................5
2.7 Closing Obligations.....................................................5
2.8 Certain Expenses........................................................6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.1 Organization; Good Standing.............................................6
3.2 Authority; Enforceability...............................................6
3.3 Consents and Approvals; No Violation....................................7
3.4 Books and Records.......................................................7
3.5 Absence of Certain Changes or Events....................................8
3.6 Litigation..............................................................8
3.7 Governmental Authorizations.............................................8
3.8 Compliance with Laws and Governmental Authorizations....................8
3.9 Assets..................................................................9
3.10 Inventory...............................................................9
3.11 Proprietary Rights......................................................9
3.12 Warranties and Products................................................11
3.13 Suppliers..............................................................11
3.14 Customers..............................................................11
3.15 Brokers................................................................11
3.16 Full Disclosure........................................................12
3.17 Securities Matters.....................................................12
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE BUYER
4.1 Organization...........................................................13
4.2 Authority; Enforceability..............................................13
4.3 Consents and Approvals; No Violation...................................13
4.4 Litigation.............................................................14
4.5 Brokers................................................................14
4.6 Buyer's Stock..........................................................14
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Access to Information..................................................14
5.2 Confidentiality........................................................14
5.3 Operation of the Business of the Seller................................15
5.4 Efforts to Satisfy Closing Conditions..................................15
5.5 Notification...........................................................16
5.6 Employees..............................................................16
5.7 Exclusivity............................................................16
5.8 Mattress Covers........................................................17
5.9 Securities Matters.....................................................17
5.10 Noncompetition.........................................................17
ARTICLE VI
CLOSING CONDITIONS
6.1 Mutual Conditions......................................................18
6.2 Buyer's Conditions.....................................................18
6.3 Seller's Conditions....................................................19
ARTICLE VII
INDEMNIFICATION
7.1 Survival; Knowledge....................................................19
7.2 Seller's Agreement to Indemnify........................................19
7.3 Buyer's Agreement to Indemnify.........................................20
7.4 Limitations on Seller's Indemnity......................................20
7.5 Limitations on Buyer's Indemnity.......................................21
7.6 Procedure for Indemnification - Third-Party Claims.....................21
7.7 Alleged Breaches.......................................................23
7.8 Indemnification Procedure - Direct Claims..............................23
7.9 Interest...............................................................24
7.10 Return of Buyer's Stock................................................24
7.11 Remedies Not Exclusive.................................................24
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ARTICLE VIII
TERMINATION
8.1 Termination............................................................24
8.2 Procedure and Effect of Termination....................................25
ARTICLE IX
GENERAL PROVISIONS
9.1 Expenses...............................................................25
9.2 Amendment and Modification.............................................26
9.3 Waiver of Compliance; Consents.........................................26
9.4 Notices................................................................26
9.5 Publicity..............................................................27
9.6 Assignment; No Third-Party Rights......................................27
9.7 Governing Law..........................................................27
9.8 Jurisdiction; Service of Process.......................................28
9.9 Further Assurances; Records............................................28
9.10 Severability...........................................................28
9.11 Construction...........................................................28
9.12 Disclosure Schedule....................................................28
9.13 Time of Essence........................................................29
9.14 Counterparts...........................................................29
9.15 Specific Performance...................................................29
9.16 Entire Agreement.......................................................29
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EXHIBITS
A Form of Registration Rights and Shareholder Agreement
B Form of Xxxx of Sale
C-1 Form of Patent and Trademark Assignment
C-2 Form of Copyright Assignment
D Form of Transition and Manufacturing Services Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of January 11, 2007, is between
Xxxx, Inc., a North Carolina corporation (the "Buyer"), and International
Textile Group, Inc., a Delaware corporation (the "Seller").
Background Statement
The Seller desires to sell, and the Buyer desires to purchase, certain of
the Seller's mattress ticking assets (consisting of inventory and related
proprietary rights), for the consideration and on the terms set forth herein.
Statement of Agreement
The parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. Capitalized terms used in this Agreement have the meanings
given to them in Appendix 1.
1.2 Construction.
(a) The article and section headings contained in this Agreement are solely
for the purpose of reference and convenience, are not part of the agreement of
the parties, and shall not in any way limit, modify or otherwise affect the
meaning or interpretation of this Agreement.
(b) References to "Sections" or "Articles" refer to corresponding Sections
or Articles of this Agreement unless otherwise specified.
(c) Unless the context requires otherwise, the words "include," "including"
and variations thereof mean without limitation, the words "hereof," "hereby,"
"herein," "hereunder" and similar terms refer to this Agreement as a whole and
not any particular section or article in which such words appear, and any
reference to a statute, regulation or law shall include any amendment thereof or
any successor thereto and any rules and regulations promulgated thereunder.
(d) Unless the context requires otherwise, words in the singular include
the plural, words in the plural include the singular, and words importing any
gender shall be applicable to all genders.
(e) If a term is defined as one part of speech (such as a noun), it shall
have a corresponding meaning when used as another part of speech (such as a
verb).
(f) Currency amounts referenced herein are in U.S. Dollars.
(g) References to a number of days refer to calendar days unless Business
Days are specified. Except as otherwise specified, whenever any action must be
taken on or by a day that is not a Business Day, then such action may be validly
taken on or by the next day that is a Business Day.
(h) All accounting terms used herein and not expressly defined herein shall
have the meanings given to them under GAAP.
ARTICLE II
PURCHASE, TERMS OF PAYMENT AND CLOSING
2.1 Purchase and Sale of Assets. On the terms and subject to the conditions
of this Agreement, on the Closing Date, the Seller shall sell, convey, assign,
transfer and deliver to the Buyer, and the Buyer shall purchase, acquire and
accept from the Seller, all of the Purchased Assets, free and clear of all
Liens, except for Permitted Liens, in exchange for payment of the Purchase
Price.
2.2 Purchased Assets. For purposes of this Agreement, the term "Purchased
Assets" means all of the following assets of the Seller and all of the Seller's
rights therein:
(a) all Finished Goods Inventories of the Seller related to the Product
Line, including all rights to all such Inventories that have been manufactured
by third parties and that are in transit to the Seller and to which Seller has
taken title as of the Effective Time (the "In-Transit Inventories" and, together
with all other such Finished Goods Inventories, the "Purchased Inventories");
(b) the Proprietary Rights of the Seller listed in Schedule 2.2(b) hereto
(the "Purchased Proprietary Rights"), which shall include, without limitation,
all artwork and patterns relating to the Purchased Inventories and all
copyrights and related copyright information with respect thereto;
(c) all electronic design files and specifications for each pattern
described above, and all client and customer lists and records, research and
development reports and records, service and warranty records, bills of
material, design and creative records and product accounting records, as and to
the extent related to the Product Line.
It is expressly understood that the Purchased Assets will not include any
accounts receivable or any furniture, fixtures or other property, plant or
equipment of the Seller, or any trademarks or trade names of Seller that are
used in any business of the Seller other than in connection with the Product
Line, including the "Burlington" name and the weave logo associated with that
name ("Excluded Assets").
2.3 No Assumption of Liabilities. It is understood that in connection with
the transactions contemplated hereby, the Buyer shall not assume any obligations
or liabilities of the Seller, except for payment obligations in respect to
purchase orders for finished goods that are open as of the Effective Time ("Open
Purchase Order Obligations"), which Open Purchase Order Obligations the Buyer
will assume on the Closing Date. It is further understood that, without limiting
the foregoing, the Buyer shall not assume any liabilities or obligations of the
Seller or any Affiliate of the Seller incurred, arising from or out of, in
connection with or relating to:
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(i) any claims made by or against the Seller or any Affiliate of the
Seller, whether before or after the Closing Date, that arise out of events
prior to the Effective Time, including any and all accounts payable,
accrued expenses, customer rebates or quality claims relating to goods sold
or shipped prior to Closing, and including any liabilities or obligations
relating to investigations by any Governmental Authority;
(ii) any Taxes, including any Taxes arising by reason of the
transactions contemplated herein;
(iii) products manufactured, sold or distributed prior to the
Effective Time, including liabilities or obligations related to product
warranties, recalls of such products or defects with respect to such
products;
(iv) any liabilities or obligations under any supply contracts to
which the Seller or any Affiliate of the Seller is party or otherwise
relating to the Product Line;
(v) any liability associated with Seller's employees or employee
benefit plans;
(vi) any employment, severance, retention or termination agreement
with any employee (except as provided in the Transition and Manufacturing
Services Agreement);
(vii) any employee grievance;
(viii) any obligation to indemnify, reimburse or advance amounts to
any officer, director, employee or agent;
(ix) any Proceeding pending as of the Effective Time or any Proceeding
commenced after the Effective Time that arises out of or relates to any
occurrence or event happening prior to the Effective Time;
(x) any compliance or noncompliance with any Legal Requirement of any
Governmental Authority;
(xi) any credit facility or any security interest related thereto;
(xii) any fees and expenses in connection with the transactions
contemplated hereby;
(xiii) any obligation relating to any assets of the Seller not being
conveyed to the Buyer; and
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(xiv) any obligation of the Seller under this Agreement or any other
document executed in connection with the transactions contemplated hereby.
2.4 Purchase Price; Materials Credit. In consideration of the sale of the
Purchased Assets and in exchange for the granting of the Materials Credit (as
defined below), at the Closing and subject to the conditions contained herein,
the Buyer shall pay to the Seller an aggregate amount equal to $8,300,000 (the
"Base Purchase Price"), adjusted as follows: (i) plus the amount, if any, by
which the amount of the Closing Date Inventory is greater than $9,200,000 or
(ii) minus the amount, if any, by which the amount of the Closing Date Inventory
is less than $9,200,000, as applicable (as so adjusted, the "Purchase Price").
The Seller and the Buyer acknowledge and agree that the Purchase Price is
based in part on the value of the Seller's Inventories not consisting of
Finished Goods Inventories and on hand as of the Effective Time. Accordingly, it
is understood that a portion of the Purchase Price is payable in exchange for a
credit to be established for the Buyer's account for the amount of Inventories
on hand as of the Effective Time, which Inventories do not consist of Finished
Goods Inventories (the "Materials Credit"). The Materials Credit, which
effective as of the Effective Time is hereby granted to the Buyer, will be
applied to the payment of certain amounts owing by the Buyer to the Seller
pursuant to Sections 3.1(c) and (d) of the Transition and Manufacturing Services
Agreement (as defined in Section 2.7(a)(iii)).
2.5 Manner of Payment; Closing Date Inventory.
(a) The Purchase Price shall be paid as follows:
(i) On the Closing Date, the Buyer shall pay to the Seller, by wire
transfer of immediately available funds to an account or accounts that the
Seller shall designate in writing to the Buyer at least two Business Days
prior to the Closing Date, an aggregate amount equal to $2,500,000 (the
"Cash Payment"); and
(ii) Following Closing, on the Business Day next succeeding the date
on which the Buyer and the Seller agree upon the Closing Date Inventory
pursuant to Section 2.5(b) below, the Buyer will issue and deliver to the
Seller the number of shares of the common stock of Buyer (the "Buyer's
Stock") valued in the aggregate at an amount equal to the Purchase Price
minus the amount of the Cash Payment, based on a price per share of the
Buyer's Stock of $6.60 per share (as adjusted for any stock dividends,
stock splits or other changes in the Buyer's capital stock since December
31, 2006 having a dilutive effect on the Buyer's Stock being issued to the
Seller), which issuance shall be made subject to the terms set forth in the
registration rights and shareholder agreement substantially in the form of
Exhibit A attached hereto executed by the Seller and the Buyer (the
"Registration Rights and Shareholder Agreement"). No fractional shares of
the Buyer's Stock shall be issued in connection with this Agreement. If the
Seller otherwise has the right to receive .5 or more of a share of the
Buyer's Stock, the Seller shall receive an additional share of the Buyer's
Stock; otherwise, the Seller shall receive no such shares or other
consideration for such a fractional interest. The Buyer's Stock shall be
evidenced by a stock certificate that shall bear legends reflecting any
restrictions on the resale of the underlying shares imposed by the
Securities Act and the regulations promulgated thereunder. A condition
precedent to the Buyer's obligation to issue such Buyer's Stock shall be
the delivery by the Seller of a certificate of an executive officer of the
Seller re-confirming the warranties set forth in Section 3.17 hereof.
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(b) Following the execution and delivery of this Agreement, the Buyer and
the Seller shall jointly conduct a physical count and calculation of the
Inventories on hand as of the Closing Date, which shall be based upon the
Seller's normal lower of cost or market valuation methodology, applied on a
basis consistent with prior practice. It is anticipated that the determination
of the Closing Date Inventory will be finalized following the Closing Date. If
the Buyer and the Seller are unable to agree on such Closing Date Inventory, the
parties shall engage a mutually agreeable independent certified public
accounting firm to resolve the issues in dispute. The accounting firm shall
apply accounting principles, in accordance with the provisions of this Section
2.5(b), to the issues at hand and shall not have the power to alter, modify,
amend, add to or subtract from any term or provision of this Agreement, and the
accounting firm's engagement shall be limited in scope to the disputed issues or
amounts identified in the notice of objection. The parties shall instruct the
accounting firm to render its decision within 10 days of the engagement, and
such decision shall be binding on the parties. The cost of the accounting firm
shall be borne by the party that does not prevail in the dispute.
2.6 Closing. The closing (the "Closing") of the purchase and sale of the
Purchased Assets shall take place at the offices of the Buyer in High Point,
North Carolina, beginning at 10:00 a.m., local time, on January 22, 2007 or on
such other date or at such other time or place as the parties shall agree. The
Closing shall be effective as of 12:01 a.m. on the Closing Date (the "Effective
Time") and all actions scheduled in this Agreement for the Closing Date shall be
deemed to occur simultaneously at the Effective Time. Subject to the provisions
of Article VIII, failure to consummate the purchase and sale provided for in
this Agreement on the date determined pursuant to this Section will not result
in the termination of this Agreement and will not relieve any party of any
obligation under this Agreement.
2.7 Closing Obligations. At the Closing:
(a) The Seller shall deliver to the Buyer:
(i) a xxxx of sale, assignment and assumption agreement substantially
in the form of Exhibit B attached hereto (the "Xxxx of Sale") executed by
the Seller and the Buyer, conveying the Purchased Assets to the Buyer and
providing for the assumption by the Buyer of the Open Purchase Order
Obligations;
(ii) an assignment of patents and trademarks substantially in the form
of Exhibit C-1 attached hereto, and an assignment of copyrights
substantially in the form of Exhibit C-2, each executed by the Seller (the
documents referenced in this clause (ii), collectively, the "Intellectual
Property Assignments") executed by the Seller;
(iii) a transition and manufacturing services agreement substantially
in the form of Exhibit D attached hereto executed by the Seller (the
"Transition and Manufacturing Services Agreement"); and
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(iv) the Registration Rights and Shareholder Agreement.
(b) The Buyer shall deliver to the Seller:
(i) the Cash Payment to be paid to the Seller pursuant to Section
2.5(a)(i);
(ii) the Transition and Manufacturing Services Agreement executed by
the Buyer;
(iii) the Registration Rights and Shareholder Agreement executed by
the Buyer; and
(iv) the Xxxx of Sale executed by the Buyer.
2.8 Certain Expenses. The Seller shall pay any sales or use Taxes arising
out of the transactions contemplated herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that:
3.1 Organization; Good Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Seller has full corporate power and authority to own or use the
Purchased Assets and to conduct its business as presently conducted. The Seller
is duly qualified to do business as a foreign corporation and is in good
standing in the states, provinces and jurisdictions in which either the nature
of the activities of the Seller or the ownership or use of the Purchased Assets
makes such qualification necessary. No other jurisdiction has given notice to
the Seller indicating that the Seller should be qualified in any other
jurisdiction.
3.2 Authority; Enforceability. The Seller has the absolute and unrestricted
right, authority, power and capacity to (i) execute and deliver this Agreement
and each certificate, document and agreement to be executed by the Seller in
connection herewith (the certificates, documents and agreements to be executed
by the Seller in connection with this Agreement, collectively, the "Seller
Documents") and (ii) perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Seller Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Seller, and no other proceedings on the part of
the Seller are necessary to authorize this Agreement or any Seller Document or
to consummate the transactions contemplated hereby or thereby. This Agreement
has been duly and validly executed and delivered by the Seller and constitutes a
legal, valid and binding obligation of the Seller, enforceable against it in
accordance with its terms. Upon execution and delivery by the Seller of each
Seller Document, such Seller Document shall constitute a legal, valid and
binding obligation of the Seller, in each case enforceable against it in
accordance with its terms.
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3.3 Consents and Approvals; No Violation.
(a) No Governmental Authorization is required in connection with (i) the
execution or delivery by the Seller of this Agreement or the Seller Documents,
(ii) the performance of the Seller's obligations under this Agreement or the
Seller Documents or (iii) the consummation of the transactions contemplated
hereby.
(b) Except as disclosed in Section 3.3 of the Disclosure Schedule, neither
the execution and delivery of this Agreement and the Seller Documents by the
Seller nor the performance of the Seller's obligations hereunder or thereunder
nor the consummation of the transactions contemplated hereby will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in any violation of any
provision of the certificate of incorporation or bylaws of the Seller, any
resolution adopted by the board of directors or shareholders of the Seller
or any agreement among shareholders of the Seller;
(ii) contravene, conflict with or result in a breach of any of the
terms or provisions of, or give any Person a right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify any Contract that is material to the
business of the Seller;
(iii) result in the creation of any Lien upon any of the Purchased
Assets;
(iv) contravene, conflict with, violate, or give any Governmental
Authority or other Person the right to challenge any of the transactions
contemplated hereby or exercise any remedy (including revocation,
withdrawal, suspension or modification of any Governmental Authorization)
or obtain any relief under, any Legal Requirement applicable to the Seller;
(v) cause the Buyer to become subject to, or to become liable for the
payment of, any Tax;
(vi) contravene, conflict with or violate the terms or requirements
of, or result in any loss, or right of revocation, withdrawal, suspension,
termination or modification of, any Governmental Authorization;
(vii) cause any of the Purchased Assets to be reassessed or revalued
by any taxing authority or other Governmental Authority; or
(viii) otherwise require the Seller or the Buyer to give any notice
to, or obtain any consent from, any Person.
3.4 Books and Records. The books and records, files and other materials
relating to the Purchased Assets and the Seller's operation and use thereof in
connection with its business (including without limitation sales records and
customer lists) and that have been furnished or made available by the Seller to
the Buyer in connection with the transactions contemplated hereby are true and
correct in all material respects.
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3.5 Absence of Certain Changes or Events. Since November 15, 2006, except
as set forth in Section 3.5 of the Disclosure Schedule, there has not been any:
(i) event or condition that has had, or could reasonably be expected
to have, a Material Adverse Effect;
(ii) loss or damage (whether or not covered by insurance) affecting
any of the Purchased Assets;
(iii) indication by any customer or supplier of the Seller in
connection with the Product Line of any intention to discontinue or change
the terms of its relationship with the Seller; or
(iv) the loss of any material Purchased Proprietary Right as a result
of the failure to make any filing with or pay any fee to any Governmental
Authority; or
(b) agreement, whether oral or written, by the Seller to do any of the
foregoing.
3.6 Litigation.
(a) There are no Proceedings that have been commenced by or against the
Seller in connection with any of the Purchased Assets or, to the Seller's
Knowledge, that have been threatened against or may affect the Seller (including
its officers, directors or employees in their capacity as such) in connection
with any of the Purchased Assets, or that challenge, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, the
transactions contemplated by this Agreement. No event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding.
(b) There are no Orders to which the Seller is subject in connection with
any of the Purchased Assets or the Seller's use or operation thereof or that
challenge, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, the transactions contemplated by this Agreement,
or that could affect the enforceability of this Agreement against the Seller or
impair the Seller's ability to consummate the transactions contemplated by this
Agreement. To the Seller's Knowledge, no officer, director, agent, or employee
of the Seller is subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct, activity, or
practice relating to the use or operation of the Purchased Assets.
3.7 Governmental Authorizations. No Governmental Authorization is necessary
in order for the Seller to own, operate or use any of the Purchased Assets in
connection with the Product Line.
3.8 Compliance with Laws and Governmental Authorizations(a) . The Seller
is, and at all times since August 2, 2004, has been, in compliance with (i) all
Legal Requirements applicable to the Seller in connection with the Product Line
and (ii) all Governmental Authorizations of the Seller in connection with such
business.
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3.9 Assets. Except as set forth in Section 3.9 of the Disclosure Schedule
(which exceptions shall be cleared as of the Effective Time), the Seller owns
good and valid title to all of the Purchased Assets, whether tangible or
intangible, free and clear of all Liens, except for Permitted Liens.
3.10 Inventory. All of the Purchased Inventories consist of a quality and
quantity usable and salable in the Ordinary Course, except for obsolete items
and items of below-standard quality that have been written off or written down
to net realizable value in the accounting records of the Seller as of the
Closing Date. All of the Purchased Inventories have been priced at the lower of
cost or market in accordance with GAAP on a first in, first out basis. The
quantities of each item included in the Purchased Inventories are not excessive
but are reasonable in the present circumstances of the Seller's business. The
Seller is not in possession of any Finished Goods Inventories in connection with
the Product Line not owned by the Seller, including goods already sold. No
customer of the Seller in connection with the Product Line has the right to
return for credit or refund items that, if returned, would be included in the
Purchased Inventories pursuant to any agreement, understanding or practice of
the Seller with respect to taking back any product (other than with respect to
defective products). Without limiting the generality of the foregoing, there is
no product of the Seller in connection with the Seller's mattress ticking
business in the possession of customers of the Seller on consignment or on a
similar basis.
3.11 Proprietary Rights.
(a) Ownership and Right to Use. The Seller owns, has been granted a license
to use or otherwise has the right to use all of the Purchased Proprietary
Rights. The Purchased Proprietary Rights constitute all of the Proprietary
Rights used by the Seller in connection with the Product Line. Except as set
forth in Section 3.11(a) of the Disclosure Schedule, the Seller does not have,
and the Buyer will not have upon the Closing, (i) any contractual limitation or
restriction on its right to use any Purchased Proprietary Right, (ii) any
obligation to pay any royalty or other fee to any Person relating to any
Purchased Proprietary Right or (iii) any obligation to any other Person to
register, protect or otherwise take any action with respect to any Purchased
Proprietary Right. There is no agreement or commitment on the part of the Seller
that grants any Person a license in any Purchased Proprietary Right.
(b) Acquired Proprietary Rights. Section 3.11(b) of the Disclosure Schedule
identifies each Purchased Proprietary Right that was created for the Seller by
any Person other than an employee acting within the scope of the employee's
duties for the Seller. Except as set forth in Section 3.11(b) of the Disclosure
Schedule, each such Person has entered into an agreement or contract with the
Seller pursuant to which it has assigned to the Seller all of such Person's
rights in such Purchased Proprietary Rights, free of any restrictions, and
agreed not to use or disclose any Trade Secrets included in such Purchased
Proprietary Rights. Section 3.11(b) of the Disclosure Schedule identifies each
Purchased Proprietary Right that is owned by any other Person and licensed to
the Seller and identifies each Purchased Agreement pursuant to which the Seller
has licensed such Purchased Proprietary Right, together with any additional
contracts that modify the Company's rights or obligations with respect to such
Purchased Proprietary Right.
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(c) Marks, Trade Names and Domain Names. Section 3.11(c) of the Disclosure
Schedule lists each Xxxx and Trade Name that has been used by the Seller during
the last year in connection with the Product Line (exclusive of any Excluded
Assets), and lists each application for registration that has been filed and
each registration that has been obtained by the Seller with respect to any such
Marks. Section 3.11(c) of the Disclosure Schedule lists each domain name used by
the Seller during the last year in connection with the Product Line. All such
Marks, Trade Names and domain names are included in the Purchased Proprietary
Rights. The Seller has the exclusive right to use each such Xxxx and Trade Name
within the scope, and in the geographic area, of its present use and has the
right to continue to use each such domain name. To the Seller's Knowledge: (i)
no other Person is using a similar Trade Name to describe a business that is
similar to the Product Line; (ii) no other Person is using a similar Xxxx to
describe products or services that are similar to the products and services
relating to the Product Line; and (iii) no other Person has registered or is
currently using any Xxxx or Trade Name in a manner that would preclude the
Seller from using the Marks and Trade Names included in the Purchased
Proprietary Rights throughout the United States.
(d) Patents. Section 3.11(d) of the Disclosure Schedule lists each Patent
included in the Purchased Proprietary Rights and lists each country in which
each such issued Patent is valid. Each claim of each such Patent is valid and
enforceable and each such Patent provides to the Seller a meaningful range of
exclusivity in the practice of the invention covered by such Patent.
(e) Copyrights. Section 3.11(e) of the Disclosure Schedule lists each
Copyright registration owned by the Seller and included in the Purchased
Proprietary Rights.
(f) Trade Secrets. The Seller has taken efforts that are reasonable under
the circumstances to prevent unauthorized disclosure to any other Person of such
portions of the Seller's Trade Secrets included in the Purchased Proprietary
Rights that would enable such Person to compete with the Seller within the scope
of or with respect to the Product Line as now conducted and as presently
proposed to be conducted.
(g) No Infringement. The Seller has not interfered with, infringed upon or
misappropriated any Proprietary Right of any other Person in connection with the
Seller's use or operation of the Purchased Assets, and the continued use or
operation of such assets by the Buyer, in the manner that such assets are
currently used or operated or proposed to be used or operated, will not
interfere with, infringe upon or misappropriate any Proprietary Right of any
other Person. To the Seller's Knowledge, no Person is interfering with,
infringing upon or misappropriating any Purchased Proprietary Right. No claim
has been asserted against the Seller by any Person: (i) that such Person has any
right, title or interest in or to any of the Copyrights, Patents, Trade Secrets
or Know-How included in the Purchased Proprietary Rights; (ii) that such Person
has the right to use any of the Marks, Trade Names or domain names included in
the Purchased Proprietary Rights; (iii) to the effect that any past, present or
projected act or omission by the Seller in connection with the Product Line
infringes any Proprietary Right of such Person; or (iv) that challenges the
Seller's right to use any of the Purchased Proprietary Rights. No facts or
circumstances exist that, with or without the passing of time or the giving of
notice or both, might reasonably serve as the basis for any such claim.
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3.12 Warranties and Products.
(a) There are no defects in the design or manufacturing of any of the
products distributed or sold by the Seller in connection with the Product Line
(collectively, the "Products") that would adversely affect the quality of any
such Product, other than defects arising in the Ordinary Course of the
manufacturing process thereof, the exclusive remedy for which is a return of the
defective product and for which adequate reserves are maintained on the Seller's
accounting records. The Products have been designed and manufactured in
compliance with all regulatory, engineering, industrial and other codes
generally recognized as being applicable thereto, and there are no statements,
citations or decisions by any Governmental Authority or any product-testing
laboratory that indicate that any Product is unsafe or fails to meet any
standards promulgated by such Governmental Authority or testing laboratory.
Except as set forth in Section 3.12 of the Disclosure Schedule, the Seller has
not recalled any Product or received notice of any defect in any Product, any
claim of personal injury, death, or property or economic damages in connection
with any Product, or any claim for injunctive relief in connection with any
Product. There are no facts that are reasonably likely to give rise to a recall
of any Product or to give rise to a successful future claim of personal injury,
death, or property or economic damages, or a claim for injunctive relief in
connection with any Product.
(b) Section 3.12 of the Disclosure Schedule sets forth (i) a description of
all warranties of the Seller to third Persons with respect to all Products since
August 2, 2004, except warranties imposed by law; and (ii) the warranty
experience of the Seller in connection with the Product Line since August 2,
2004 for an amount in excess of $10,000. The Seller has not given any Product
warranties prior to August 2, 2004 that have not expired.
3.13 Suppliers. To the Seller's Knowledge, the relationships of the Seller
with each of its suppliers in connection with the Product Line are good working
relationships, and no supplier of the Seller in connection with the Product Line
has cancelled or otherwise terminated, or threatened in writing to cancel or
otherwise terminate, its relationship with the Seller, or has since January 1,
2006 (at the volition of the supplier) decreased materially, or threatened to
decrease or limit materially, its services, supplies or materials to the Seller.
3.14 Customers. Section 3.14 of the Disclosure Schedule lists each customer
or account representing sales by the Seller in connection with the Product Line
in excess of $100,000 in the 12 months ended December 31, 2006. Except as set
forth in Section 3.14 of the Disclosure Schedule, to the Seller's Knowledge, (i)
no account or relationship with any such customer is being terminated or is
being considered for termination or nonrenewal; and (ii) no such customer is
considering any material reduction in its commercial relationship with the
Seller.
3.15 Brokers. No broker, finder or other Person is or shall be entitled to
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby from the Seller by reason of any action taken
by the Seller with respect to this Agreement.
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3.16 Full Disclosure.
(a) No statement that relates to the Seller or the Product Line contained
in this Agreement, the Disclosure Schedule or any Seller Document (including
each representation and warranty in this Article III) contains or shall contain
any untrue statement of a material fact or omits or shall omit to state any
material fact that was necessary to make such statements, in light of the
circumstances in which they were made, not misleading.
(b) To the Seller's Knowledge, there are no facts that have specific
application to the Seller or the Product Line (other than general economic or
industry conditions) that materially adversely affect or, as far as the Seller
can reasonably foresee, materially threaten, the Purchased Assets that has not
been set forth in this Agreement or the Disclosure Schedule.
3.17 Securities Matters.
(a) The Seller is a corporation (i) with total assets in excess of
$5,000,000 and (ii) not formed for the specific purpose of acquiring the Buyer's
Stock.
(b) The Seller has been furnished with all materials that he or she has
requested relating to the Buyer and the issuance of the Buyer's Stock, and the
Buyer has been afforded the opportunity to obtain any additional information
necessary to verify the accuracy of any such information. The Buyer has answered
all inquiries that the Seller has made of it concerning the Buyer and the
issuance of the Buyer's Stock.
(c) The Seller is acquiring the Buyer's Stock for its own account and not
for the account of any other Person. The Seller agrees that it will not resell,
distribute or otherwise dispose of all or any part of the Buyer's Stock except
as permitted by law, including without limitation the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended.
(d) The Seller acknowledges that the offer and sale of the Buyer's Stock is
being made pursuant to an exemption from the registration requirements of the
Securities Act, and that, consequently, neither this agreement nor any
disclosure made by the Buyer to the Seller in connection herewith has been filed
with or reviewed by the Securities and Exchange Commission (the "SEC"), any
securities exchange or any state securities regulatory agency, and neither the
SEC, any such exchange nor any state securities regulatory agency has approved
or disapproved of the Buyer's Stock or the issuance thereof.
(e) The Seller understands that the Buyer's Stock has not been registered
under the Securities Act and therefore may not be sold or otherwise transferred
unless registered under the Securities Act or there is an exemption from such
registration.
(f) The Seller has such knowledge and experience in financial and business
matters as to be able to evaluate the merits and risks of an investment in the
Buyer. The Seller understands the nature of an investment in the Buyer and the
risks associated with such an investment. The Seller understands that there is
no guarantee of any financial return on this investment in the Buyer and that
the seller risks the complete loss of this investment.
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(g) The Seller is able now, and was able at the time of receipt of any
offer regarding the Buyer, to bear the economic risks of this investment in the
Buyer, including the complete loss of its investment in the Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RELATING TO THE BUYER
The Buyer represents and warrants to the Seller as follows:
4.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of North Carolina.
4.2 Authority; Enforceability. The Buyer has the absolute and unrestricted
legal right, authority, power and capacity to (i) execute and deliver this
Agreement and each certificate, document and agreement to be executed by the
Buyer in connection herewith (collectively, the "Buyer Documents") and (ii)
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the Buyer Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Buyer, and no other proceedings on the part of the Buyer are necessary to
authorize this Agreement or any of the Buyer Documents or to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly and
validly executed and delivered by the Buyer and constitutes a legal, valid and
binding obligation of the Buyer, enforceable against it in accordance with its
terms. Upon execution and delivery by the Buyer of each Buyer Document, such
Buyer Document shall constitute a legal, valid and binding obligation of the
Buyer, in each case enforceable against it in accordance with its terms.
4.3 Consents and Approvals; No Violation.
(a) Except as disclosed in Section 4.3 of the Disclosure Schedule, no
Governmental Authorization is required in connection with (i) the execution or
delivery by the Buyer of this Agreement or the Buyer Documents, or (ii) the
performance of the Buyer's obligations under this Agreement or the Buyer
Documents.
(b) Neither the execution and delivery of this Agreement and the Buyer
Documents by the Buyer nor the performance of the Buyer's obligations hereunder
or thereunder shall (with or without notice or lapse of time): (i) contravene,
conflict with or result in any violation of any provision of the articles of
incorporation or bylaws of the Buyer or any resolution adopted by the board of
directors or shareholders of the Buyer, or (ii) contravene, conflict with,
result in any violation of, or give any Governmental Authority the right
challenge any of the transaction contemplated hereby or to exercise any remedy
(including revocation, withdrawal, suspension or modification) or obtain any
relief under, any Legal Requirement applicable to the Buyer.
(c) The execution and delivery of this Agreement by the Buyer will not
conflict with or require any waiver in respect of any agreement pursuant to
which the Buyer has incurred indebtedness for borrowed money, except for
consents or waiver previously obtained by the Buyer.
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4.4 Litigation. There are no Proceedings commenced against, or, to the
Buyer's knowledge, threatened against the Buyer that could affect its ability to
consummate the transactions contemplated by this Agreement. The Buyer is not
subject to any Order that could affect the enforceability of this Agreement
against the Buyer or impair its ability to consummate the transactions
contemplated by this Agreement.
4.5 Brokers. No broker, finder or other Person is or shall be entitled to
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby from the Seller by reason of any action taken
by the Buyer (except for the fee intended to be paid by the Buyer to Soles
Xxxxxx Xxxxx & Co.).
4.6 Buyer's Stock. The issuance of the Buyer's Stock has been duly and
validly authorized by all requisite corporate action on the part of the Buyer,
and upon the issuance thereof to the Seller as provided herein, all shares of
such Buyer's Stock shall have been fully paid and nonassessable.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Access to Information.
Between the date hereof and the Closing Date, the Seller shall (i) afford
the Buyer and its authorized representatives reasonable access, during normal
business hours and upon reasonable notice, to the books and records of the
Seller that relate to the Purchased Assets and the facilities owned or used by
the Seller that relate to the Purchased Assets; provided that any such
investigation by the Buyer shall be conducted in such a manner as not to
interfere unreasonably with the normal operations of the Seller, and (ii) cause
its officers, agents or other appropriate officials to furnish the Buyer with
all internally-prepared financial statements of the Seller's business with
respect to the Product Line promptly upon the preparation thereof and such other
financial and operating data (including accountants' work papers) and other
information with respect to the Purchased Assets as the Buyer may from time to
time reasonably request.
5.2 Confidentiality.
(a) Until the Closing Date, the Buyer shall protect, and shall use
Commercially Reasonable Efforts to cause its officers, directors, employees,
lenders, accountants, representatives, agents, consultants and advisors to
protect, the confidentiality of all proprietary and confidential information
furnished to the Buyer in connection with the transactions contemplated by this
Agreement, using the same care and procedures used to protect the Buyer's own
proprietary and confidential information, and the Buyer shall not disclose, and
shall use Commercially Reasonable Efforts to cause its officers, directors,
employees, lenders, accountants, representatives, agents, consultants and
advisors not to disclose, such proprietary and confidential information to any
other Persons except as may be reasonably necessary in connection with the
transactions contemplated hereby or except to the extent (i) such information is
or becomes publicly available or obtainable from independent sources and not in
breach of the Buyer's obligations hereunder, (ii) such information is required
to be disclosed by a Legal Requirement (including applicable securities laws and
the rules and regulations of any stock exchange or inter-dealer automated
quotation system on which the securities of the Buyer are traded), (iii) such
information was known by the Buyer prior to any disclosure to it by the Seller,
or (iv) disclosure is necessary for the Buyer to enforce any or all of its
rights under this Agreement. If the transactions contemplated by this Agreement
are not consummated, such information, including all analyses, compilations,
studies or other documents prepared by or on behalf of the Buyer based on such
information, shall be returned to the Seller or destroyed immediately upon the
Seller's request.
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(b) From and after the date hereof, the Seller shall not disclose or use,
and the Seller shall use Commercially Reasonable Efforts to cause its officers,
directors, employees, lenders, accountants, representatives, agents and advisors
not to disclose or use, any of the Seller's proprietary and confidential
information included in the Purchased Assets to any other Persons except to the
extent (i) permitted under Section 5.10, (ii) such information is or becomes
publicly available or obtainable from independent sources and not in breach of
the obligations of the Seller hereunder, (iii) such information is required to
be disclosed by law or by Governmental Authorities having jurisdiction over the
Seller (including applicable securities laws and the rules and regulations of
any stock exchange or inter-dealer automated quotation system on which the
securities of the Buyer are traded), or (iv) disclosure is necessary for the
Seller to enforce any or all of its rights under this Agreement.
5.3 Operation of the Business of the Seller. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Seller shall (a) use and operate the Purchased Assets only in the Ordinary
Course, (b) use Commercially Reasonable Efforts to preserve its relationships
with customers, suppliers and others with whom the Seller deals in connection
with the Product Line, to keep available the services of its officers and
employees related to such business and to maintain the Purchased Assets in
substantially the condition currently existing, (c) confer with the Buyer
concerning operational matters with respect to the Purchased Assets of a
material nature and (d) otherwise report periodically to the Buyer concerning
the business, operations and finances of the Seller related to the Purchased
Assets. Except as otherwise expressly permitted by this Agreement, between the
date hereof and the Closing Date, the Seller shall not take any affirmative
action or fail to take any reasonable action within its control, as a result of
which any of the changes or events listed in Section 3.5 is likely to occur.
5.4 Efforts to Satisfy Closing Conditions.
(a) Between the date hereof and the Closing Date, the Seller shall (i) use
its Commercially Reasonable Efforts to cause the conditions in Article VI to be
satisfied on or before the day of Closing provided in Section 2.6; and (ii) not
take any action or omit to take any action within its reasonable control to the
extent such action or omission might result in a breach of any term or condition
of this Agreement or in any representation or warranty contained in this
Agreement being inaccurate or incorrect as of the Closing Date.
(b) Between the date hereof and the Closing Date, the Buyer shall (i) use
its Commercially Reasonable Efforts to cause the conditions in Article VI to be
satisfied on or before the later of the day of Closing provided in Section 2.6;
and (ii) not take any action or omit to take any action within its reasonable
control to the extent such action or omission might result in a breach of any
term or condition of this Agreement or in any representation or warranty
contained in this Agreement being inaccurate or incorrect as of the Closing
Date.
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5.5 Notification.
(a) Seller. Prior to the Closing Date, the Seller shall promptly notify the
Buyer in writing if it becomes aware of any fact or condition that (i) causes or
constitutes a breach of any representation or warranty set forth in Article III
or (ii) would have caused or constituted a breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Schedule if the Disclosure
Schedule were dated the date of the occurrence or discovery of any such fact or
condition (including the addition of a new Section to the Disclosure Schedule),
the Seller shall promptly deliver to the Buyer a supplement to the Disclosure
Schedule specifying such change. During the same period, the Seller shall
promptly notify the Buyer of the occurrence of any breach of any covenant of the
Seller or of the occurrence of any event that may make the satisfaction of the
conditions set forth in Section 6.1 or 6.3 impossible or unlikely.
(b) Buyer. Prior to the Closing Date, the Buyer shall promptly notify the
Seller in writing if the Buyer becomes aware of any fact or condition that (i)
causes or constitutes a breach of any representation or warranty set forth in
Article IV or (ii) would have caused or constituted a breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. Should any such
fact or condition require any change in the Disclosure Schedule if the
Disclosure Schedule were dated the date of the occurrence or discovery of any
such fact or condition (including the addition of a new Section to the
Disclosure Schedule), the Buyer shall promptly deliver to the Seller a
supplement to the Disclosure Schedule specifying such change. During the same
period, the Buyer shall promptly notify the Seller of the occurrence of any
breach of any covenant of the Buyer or of the occurrence of any event that may
make the satisfaction of the conditions in Section 6.1 or 6.2 impossible or
unlikely.
5.6 Employees. The parties expressly agree that nothing in this Agreement
shall be construed as requiring the Buyer to assume any collective bargaining
agreement with respect to any employees of the Seller. In addition, nothing in
this Agreement, expressed or implied, shall (i) obligate the Buyer or any
Affiliate of the Buyer to employ any Person currently employed by the Seller, to
engage any independent contractor currently engaged by the Seller or to assume
any obligations relating to the employment of any Person as an employee,
independent contractor or otherwise; or (ii) confer upon any employee or
independent contractor of the Seller any right to employment or to continued
employment for any specified period, as an employee, independent contractor or
otherwise.
5.7 Exclusivity. In recognition of the time that shall be expended and the
expense that shall be incurred by the Buyer in connection with the transactions
contemplated hereby, until such time, if any, as this Agreement is terminated
pursuant to Article VIII, the Seller shall not, and shall cause its officers,
agents, employees and representatives not to, directly or indirectly, (a)
encourage, solicit, engage in negotiations or discussions with, or provide
information with respect to any inquiry or proposal (an "Acquisition Proposal")
relating to (i) the possible direct or indirect acquisition of all or any
portion of the Product Line, whether through the acquisition of the capital
stock or other equity interest of the Seller or all or substantially all of the
Purchased Assets, or (ii) any business combination with the Seller in connection
with the Product Line or (b) discuss or disclose either this Agreement (except
as may be required by law, or is necessary in connection with the transactions
contemplated hereby, and except to the extent that such information becomes
public other than as result of a violation hereof), with any Person other than
the Buyer without the prior written approval of the Buyer. Additionally, the
Seller agrees to promptly notify the Buyer upon receipt of any Acquisition
Proposal from any Person.
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5.8 Mattress Covers. To the extent that the Buyer sells to its customers
any mattress covers included in the Purchased Inventories for more than $5.00
per cover, then until all such mattress covers have been sold the Buyer will pay
fifty percent (50%) of such excess to the Seller on a monthly basis (each such
payment, if any, being due on the last day of each month, beginning February
2007).
5.9 Securities Matters. The Seller agrees not to transfer, assign or sell
any shares of Buyer's Stock received in connection with this Agreement in
violation of the federal and any applicable state securities laws, including
without limitation the limitations imposed by the Securities Act or the Exchange
Act or the regulations promulgated thereunder.
5.10 Noncompetition. The Seller hereby agrees that, in consideration of the
purchase by the Buyer of the Purchased Assets, for a period of four years from
the Closing Date (the "Noncompete Period"), the Seller will not produce and/or
source (such producing or sourcing being collectively referred to herein as
"Producing"; provided that Producing shall not include the commission dyeing and
finishing of mattress ticking by Jiaxing Burlington Textiles, an indirect
subsidiary of the Seller located in China, but would include the design, sale or
marketing of Ticking Products (as defined below)) mattress ticking products,
including but not limited to woven and knitted ticking and mattress covers
(collectively, "Ticking Products") anywhere in the world, except in China and
only for consumption in China. For purposes of this provision, "consumption in
China" means that the end use of a Ticking Product is in China, and that neither
the Ticking Product nor the mattress on which it is used will be sold or shipped
outside of China. Accordingly, the Seller agrees that, during the Noncompete
Period, the Seller shall not, directly or indirectly (either by itself or
through any Affiliates, officers, directors or employees) Produce (or
participate in the Producing of) any Ticking Products in any country in the
world other than in China, or own or otherwise hold any interest in any entity
or venture that Produces Ticking Products in any country in the world other than
in China, and furthermore during such period Seller shall not, directly or
indirectly, assist or cooperate or work with any other supplier or manufacturer
of Ticking Products (other than the Buyer), in any manner, with respect to
transitioning the Product Line to such other supplier or manufacturer, or with
respect to selling Ticking Products to any customers or former customers of the
Product Line.
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ARTICLE VI
CLOSING CONDITIONS
6.1 Mutual Conditions. The respective obligations of each party to
consummate the transactions required to be taken by it at the Closing shall be
subject to the fulfillment of the following conditions:
(a) No party to this Agreement shall be subject on the Closing Date to any
Order of a court of competent jurisdiction that enjoins or prohibits the
consummation of the transactions contemplated by this Agreement, nor shall there
be any Proceeding pending or threatened by any Person other than a party to this
Agreement that involves any challenge to, or seeks damages or other relief in
connection with, any of the transactions contemplated hereby, or that may have
the effect of preventing, delaying, making illegal, or otherwise interfering
with any of the transactions contemplated hereby.
(b) No Legal Requirement shall have been adopted or promulgated as of the
Closing Date having the effect of making the transactions contemplated herein
illegal or otherwise prohibiting consummation of, or making void or voidable,
the transactions contemplated herein.
6.2 Buyer's Conditions. The obligation of the Buyer to consummate the
transactions required to be taken by it at the Closing shall be further subject
to the fulfillment of the following conditions, any one or more of which may be
waived by the Buyer (in whole or in part):
(a) All representations and warranties (individually and collectively) of
the Seller in this Agreement and all other documents and certificates required
to be delivered hereby shall be, if specifically qualified by materiality, true
and correct in all respects and, if not so qualified, shall be true and correct
in all material respects, in each case on the date hereof and as of the Closing
Date as if made on the Closing Date, but without giving effect to any supplement
to the Disclosure Schedule. The Seller shall have performed and complied with
all covenants, agreements and conditions (individually and collectively)
contained in this Agreement required to be performed and complied with by it at
or prior to the Closing Date.
(b) The Seller shall have delivered each document required to be delivered
pursuant to Section 2.7(a).
(c) The Seller shall have delivered to the Buyer Uniform Commercial Code,
tax and judgment lien search results, prepared by a nationally recognized search
provider, from the Seller's jurisdiction of incorporation and each jurisdiction
in which any of the Purchased Assets are located, and dated as of a date not
more than 30 Business Days prior to the Closing Date.
(d) The Buyer shall have received evidence satisfactory to it that prior to
or substantially concurrent with the consummation of the transactions
contemplated by this Agreement all of the Liens (other than the Permitted Liens)
to which any of the Purchased Assets may be subject shall be released and any
related filings terminated of record.
(e) Since the date of this Agreement, there must not have been commenced or
threatened against the Buyer, or against any Person affiliated with the Buyer,
any Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated hereby or (b)
that may have the effect of preventing or making illegal any of the transactions
contemplated hereby.
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6.3 Seller's Conditions. The obligations of the Seller to consummate the
transactions required to be taken by them at the Closing shall be further
subject to the fulfillment of the following conditions, any one or more of which
may be waived by the Seller:
(a) All representations and warranties (individually and collectively) of
the Buyer in this Agreement and all other documents and certificates required to
be delivered hereby shall be, if specifically qualified by materiality, true and
correct in all respects and, if not so qualified, shall be true and correct in
all material respects, in each case on the date hereof and as of the Closing
Date as if made on the Closing Date, but without giving effect to any supplement
to the Disclosure Schedule. The Buyer shall have performed and complied in all
material respects with all covenants, agreements and conditions (individually
and collectively) contained in this Agreement required to be performed and
complied with by it at or prior to the Closing Date.
(b) The Buyer shall have delivered each document required to be delivered
and shall have made such payments required pursuant to Sections 2.7(b).
ARTICLE VII
INDEMNIFICATION
7.1 Survival; Knowledge. All representations, warranties, covenants and
agreements made by the Seller and the Buyer in this Agreement, the Disclosure
Schedule and the documents to be executed in connection with this Agreement,
shall survive the Closing. No representation or warranty shall be deemed to be
waived or otherwise diminished as a result of any due diligence investigation by
the party to whom the representation or warranty was made, as a result of any
actual or constructive knowledge by such party with respect to any facts,
circumstances or claims or that any representation or warranty is false, in each
case, whether before or after the execution and delivery of this Agreement or at
the time of Closing. A party's consummation of the transactions contemplated
hereby after waiving any of the conditions to its obligation to close (including
the condition that the other party's representations and warranties be true in
all material respects) shall not limit or otherwise affect its rights to recover
under this Article VII.
7.2 Seller's Agreement to Indemnify. Subject to the limitations set forth
in this Article VII, the Seller shall indemnify and hold harmless the Buyer and
its Affiliates (and the officers, directors, managers, equity holders, employees
and agents of each of them) for, and shall pay to such Persons and reimburse
such Persons for, any and all Damages arising, directly or indirectly, from or
in connection with:
(a) any breach or alleged breach of any representation or warranty of the
Seller contained in this Agreement, the Disclosure Schedule, any supplement to
the Disclosure Schedule or in any certificate or document delivered pursuant to
this Agreement; provided, that for these purposes, each qualification and
exception regarding materiality or Material Adverse Effect in Article III shall
be disregarded and given no effect, so that Damages are determined without
regard to such qualifications and exceptions;
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(b) any inaccuracy or alleged inaccuracy in any representation or warranty
of the Seller contained in this Agreement as of the Closing Date, without giving
any effect to any supplement to the Disclosure Schedules delivered pursuant to
Section 5.5(a), other than any disclosure in any such supplement that causes the
condition in Section 6.2(a) not to be satisfied; provided, that for these
purposes, each qualification and exception regarding materiality or Material
Adverse Effect in Article III shall be disregarded and given no effect, so that
Damages are determined without regard to such qualifications and exceptions;
(c) any breach or alleged breach of any covenant or agreement of the Seller
contained in this Agreement or in any agreement or instrument executed and
delivered pursuant to this Agreement;
(d) any liability or obligation of the Seller or any liability or
obligation associated with the Product Line and arising prior to the Effective
Time (including without limitation any of the liabilities described in Section
2.3 as not being assigned by the Buyer hereunder and also including any
liability that becomes, or is alleged to have become, a liability of the Buyer
under any applicable bulk sales law, under any doctrine of de facto merger or
successor liability, or otherwise by operation of law); and
(e) any product manufactured, sold or shipped by, or any services provided
by, the Seller prior to the Closing Date.
7.3 Buyer's Agreement to Indemnify. Subject to the limitations set forth in
this Article VII, the Buyer shall indemnify and hold harmless the Seller, and
the Affiliates of the Seller for, and shall pay to such Persons and reimburse
such Persons for, any and all Damages arising, directly or indirectly, from or
in connection with:
(a) any breach or alleged breach of any representation or warranty of the
Buyer contained in this Agreement or in any certificate or document delivered
pursuant to this Agreement;
(b) any inaccuracy or alleged inaccuracy in any representation or warranty
of the Buyer contained in this Agreement as of the Closing Date, without giving
any effect to any supplement to the Disclosure Schedules delivered pursuant to
Section 5.5(b), other than any disclosure in a supplement to the Disclosure
Schedules that causes the condition in Section 6.3(a) not to be satisfied; and
(c) any breach or alleged breach of any covenant or agreement of the Buyer
contained in this Agreement or in any agreement or instrument executed and
delivered pursuant to this Agreement.
7.4 Limitations on Seller's Indemnity. If the Closing occurs,
notwithstanding anything set forth in this Article VII to the contrary:
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(a) The Seller shall have no liability under Section 7.2(a) or 7.2(b)
unless and until the aggregate amount of the Damages under such subsections
exceeds $50,000, and then the Seller shall be liable only to the extent of the
amount of such excess; provided, that the foregoing limitation shall not apply
to any breach or alleged breach of any representation or warranty set forth in
Sections 3.2, 3.9, 3.10, , 3.15 or 3.17.
(b) The Seller shall have liability under Section 7.2(a) or (b) only up to
a maximum aggregate amount of the Damages under such subsections of $2,000,000;
provided, that the foregoing limitation shall not apply to any breach or alleged
breach of any representation or warranty set forth in Sections 3.2, 3.9, 3.10, ,
3.15 or 3.17.
(c) No indemnification shall be required by the Seller under Section 7.2(a)
or (b) unless the Seller shall have received notice of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by the
Buyer on or before the date two years after the Closing Date; provided, however,
that the foregoing limitation shall not apply to any breach or alleged breach of
any representation or warranty set forth in Sections 3.2, 3.9, 3.10, , 3.15 or
3.17.
7.5 Limitations on Buyer's Indemnity. If the Closing occurs,
notwithstanding anything set forth in this Article VII to the contrary:
(a) The Buyer shall have liability under Section 7.3(a) or (b) only up to a
maximum aggregate amount of Damages under such subsections of $2,000,000.
(b) No indemnification shall be required by the Buyer under Section 7.3(a)
or (b) unless the Buyer shall have received notice of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by the
Seller on or before the date two years after the Closing Date; provided that the
foregoing limitation shall not apply to any breach or alleged breach of any
representation or warranty set forth in Section 4.2 or 4.5.
7.6 Procedure for Indemnification - Third-Party Claims.
(a) If any Person shall claim indemnification hereunder arising from any
claim or demand of a third party, the party seeking indemnification (the
"Indemnified Party") shall notify the party from whom indemnification is sought
(the "Indemnifying Party") in writing of the basis for such claim or demand
setting forth the nature of the claim or demand in reasonable detail. The
failure of the Indemnified Party to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of any indemnification obligation hereunder
except to the extent the Indemnifying Party demonstrates that the defense of
such claim or demand is materially prejudiced by the failure to give such
notice.
(b) If any Proceeding is brought by a third party against an Indemnified
Party and the Indemnified Party gives notice to the Indemnifying Party pursuant
to Section 7.6(a), the Indemnifying Party shall, unless the claim involves
Taxes, be entitled to participate in such Proceeding and, to the extent that it
wishes, to assume the defense of such Proceeding, if (i) the Indemnifying Party
provides written notice to the Indemnified Party that the Indemnifying Party
intends to undertake such defense, and by such notice it shall be conclusively
established that the Indemnifying Party shall indemnify the Indemnified Party
against all claims for indemnification resulting from or relating to such
third-party claim as provided in this Article VII, (ii) the Indemnifying Party
provides to the Indemnified Party evidence acceptable to the Indemnified Party
that the Indemnifying Party shall have the financial resources to defend against
the third-party claim and to fulfill its indemnification obligations hereunder,
(iii) the Indemnifying Party conducts the defense of the third-party claim
actively and diligently with counsel reasonably satisfactory to the Indemnified
Party and (iv) if the Indemnifying Party is a party to the Proceeding, the
Indemnifying Party has not determined in good faith that joint representation
would be inappropriate. The Indemnified Party shall, in its sole discretion,
have the right to employ separate counsel (who may be selected by the
Indemnified Party in its sole discretion) in any such action and to participate
in the defense thereof, and the fees and expenses of such counsel shall be paid
by such Indemnified Party. The Indemnified Party shall fully cooperate with the
Indemnifying Party and its counsel in the defense or compromise of such claim or
demand, provided that all reasonable out-of-pocket expenses incurred by the
Indemnified Party shall be paid by the Indemnifying Party (except as set forth
in the preceding sentence). If the Indemnifying Party assumes the defense of a
Proceeding, (A) no compromise or settlement of the claims with respect thereto
may be effected by the Indemnifying Party without the Indemnified Party's
consent unless (I) there is no finding or admission of any violation of law or
any violation of the rights of any Person and no effect on any other claims that
may be made against the Indemnified Party and (II) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party and (B) the
Indemnified Party shall have no liability with respect to any compromise or
settlement of such claims effected without its consent.
21
(c) If (i) notice is given to the Indemnifying Party of the commencement of
any Proceeding and the Indemnifying Party does not, within ten days after the
Indemnified Party's notice is given, give notice to the Indemnified Party of its
election to assume the defense of such Proceeding, or (ii) an Indemnified Party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it other than as a result of monetary damages
for which it would be entitled to indemnification from the Indemnifying Party
under this Agreement, the Indemnified Party shall (upon notice to the
Indemnifying Party) have the right to undertake the defense, compromise or
settlement of such claim; provided that the Indemnifying Party shall reimburse
the Indemnified Party promptly and periodically for the costs of defending
against the third-party claim (including reasonable attorneys' fees and
expenses) and the Indemnifying Party shall remain responsible for any
indemnifiable amounts arising from or related to such third-party claim to the
fullest extent provided in this Article VII. The Indemnifying Party may elect to
participate in such Proceedings, negotiations or defense at any time at its own
expense.
(d) The Seller hereby consents to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Party for
purposes of any claim that an Indemnified Party may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on the Seller with respect to such a claim anywhere in the
world.
(e) With respect to any third-party claim subject to indemnification under
this Article VII, (i) both the Indemnified Party and the Indemnifying Party, as
the case may be, shall keep the other Person fully informed of the status of
such third-party claim and any related Proceedings at all stages thereof if such
Person is not represented by its own counsel, and (ii) the parties agree to
render (each at its own expense) to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with each other
in order to ensure the proper and adequate defense of any third-party claim.
22
(f) With respect to any third-party claim subject to indemnification under
this Article VII, the parties agree to cooperate in such a manner as to preserve
in full (to the extent possible) the confidentiality of all confidential
information and the attorney-client and work-product privileges. In connection
therewith, each party agrees that: (i) it will use Commercially Reasonable
Efforts, in respect of any third-party claim in which it has assumed or
participated in the defense, to avoid production of confidential information
(consistent with applicable Legal Requirements), and (ii) all communications
between any party hereto and counsel responsible for or participating in the
defense of any third-party claim shall, to the extent possible, be made so as to
preserve any applicable attorney-client or work-product privilege.
7.7 Alleged Breaches. For the purposes of this Article VII, an "alleged"
breach, inaccuracy or violation of a representation, warranty or covenant shall
exist only if there is a claim by a third-party against an Indemnified Party
alleging facts that, if true, would constitute a breach, violation or inaccuracy
of such representation or warranty or covenant.
7.8 Indemnification Procedure - Direct Claims.
(a) If an Indemnified Party shall claim indemnification hereunder for any
claim other than a third-party claim, the Indemnified Party shall notify the
Indemnifying Party in writing of the basis for such claim setting forth the
nature and amount of the damages resulting from such claim. The Indemnifying
Party shall give written notice of any disagreement with such claim within 15
days following receipt of the Indemnified Party's notice of the claim,
specifying in reasonable detail the nature and extent of such disagreement. If
the Indemnifying Party and the Indemnified Party are unable to resolve any
disagreement within 30 days following receipt by the Indemnified Party of the
notice referred to in the preceding sentence (or such later time as is agreed by
the Buyer and the Seller), the disagreement shall be submitted for resolution to
an independent Person (the "Arbitrator") mutually agreed by the Indemnifying
Party and the Indemnified Party. If the Indemnifying Party and the Indemnified
Party cannot agree on a single Arbitrator, then the disagreement shall be
submitted to a panel of three Arbitrators, one selected by the indemnifying
party, one by the indemnified party and one by the two Arbitrators so
selected/an Arbitrator selected in accordance with the Rules of the American
Arbitration Association.
(b) Any such arbitration shall be conducted in accordance with the Rules of
the American Arbitration Association and shall be held in Charlotte, North
Carolina or such other location to which the parties to such dispute mutually
agree. The determination by the Arbitrator(s) shall be made within 30 days of
the submission of the dispute, shall be in accordance with this Agreement, shall
be set forth in a written statement delivered to the Indemnifying Party and the
Indemnified Party and shall be final, binding and conclusive. Judgment upon the
decision rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof and may include the award of attorneys' fees and other
costs to the extent provided by this Article. The Person who is prevailed
against in the resolution of such disagreement shall pay the fees and expenses
of the Arbitrator(s); if one Person does not prevail on all issues, the fees and
expenses shall be apportioned in such manner as the Arbitrator(s) shall
determine. Any amount owing by any Person as a result of this Section 7.8 shall
be paid within 10 Business Days after final determination of such amount.
23
(c) The parties agree that (i) the provisions of this Section 7.8 shall not
apply to any preliminary or temporary equitable relief sought with respect to
breaches of the obligations set forth in Sections 5.2 and 9.5, and (ii) the
Arbitrator shall have no power to grant such preliminary or temporary relief
with respect to breaches of such obligations. In addition, the parties agree
that the provisions of this Section 7.8 shall not apply to the provisions of
Section 2.5(b).
7.9 Interest. Interest shall accrue on the unpaid amount of all
indemnification obligations hereunder at the Prime Rate, such interest to be
calculated based on the actual number of days elapsed from the date each
indemnification obligation becomes due and owing until paid in full and shall be
based on a 365-day year.
7.10 Return of Buyer's Stock. In the event that the Buyer or an Affiliate
(a "Buyer Indemnified Party") is entitled to indemnification under this Article
VII, Damages payable by the Seller as an Indemnifying Party with respect thereto
shall be satisfied by the Buyer Indemnified Party's call and acquisition (at no
additional cost to the Buyer Indemnified Party), and the Seller's transfer to
the Buyer Indemnified Party, of that number of shares of Buyer's Stock having a
value (based on an assumed value of $6.60 per share, as adjusted for any stock
dividends, stock splits or other changes in the Buyer's capital stock since
December 31, 2006 having a dilutive effect on the Buyer's Stock being issued to
the Seller) equal to the amount of Damages payable by the Seller hereunder, to
the extent hat the Seller owns any such shares of Buyer's Stock on the date that
the right to payment is established. The foregoing shall not be deemed to be
exclusive remedy of any Buyer Indemnified Party and furthermore will in no way
limit or impair the rights of any Buyer Indemnified Party (or in any way limit
the liability of the Seller as an Indemnifying Party) in connection with the
rights of any Buyer Indemnified Party, subject to the limitations on the
Seller's indemnification obligations as set forth in Section 7.4, to bring any
claim, demand, suit or cause of action otherwise available to the Buyer
Indemnified Party hereunder..
7.11 Remedies Not Exclusive. The remedies provided in this Article VII are
not exclusive of and do not limit any other remedies that may be available to
any party, but the limitations provided in Sections 7.4 and 7.5 shall apply to
any claims based on breaches of representations and warranties.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of the Seller and the Buyer;
24
(b) by the Seller, if all the conditions in Article VI shall not have been
fulfilled as of February 15, 2007 or shall have become incapable of fulfillment
(other than through the failure of the Seller to comply fully with any of its
obligations under this Agreement) and such conditions shall not have been waived
by the Seller;
(c) by the Buyer, if all of the conditions set forth in Article VI shall
not have been fulfilled as of February 15, 2007 or shall have become incapable
of fulfillment (other than through the failure of the Buyer to comply fully with
its obligations under this Agreement) and such conditions shall not have been
waived by the Buyer;
(d) by the Seller, if the Buyer materially breaches any provision of this
Agreement and such breach remains uncured for a period of 10 days after the
Buyer receives written notice of such breach; or
(e) by the Buyer, if the Seller materially breaches any provision of this
Agreement and such breach remains uncured for a period of 10 days after the
Seller receives notice of such breach.
8.2 Procedure and Effect of Termination. In the event of a termination of
this Agreement by any party pursuant to Section 8.1:
(a) The terminating party shall give prompt written notice thereof to the
other party, and the transactions contemplated hereby shall be abandoned,
without further action by either of the parties hereto.
(b) All further obligations of the parties shall terminate, except that the
obligations in Section 5.2, Article VII, Section 9.1 and Section 9.5 hereof
shall survive. Notwithstanding anything in this Agreement to the contrary, each
of the parties to this Agreement shall be entitled to any remedy to which such
party may be entitled at law or in equity for the violation or breach by any
other party of any agreement, covenant, representation or warranty contained in
this Agreement, including pursuing claims under Article VII, and if any party
shall bring an action to enforce this Agreement, the prevailing or successful
party shall be entitled to recover its reasonable attorneys' fees and other
costs incurred in such action.
(c) All filings, applications and other submissions relating to the
transactions contemplated herein shall, to the extent practicable, be withdrawn
from the agency or other Person to which made.
ARTICLE IX
GENERAL PROVISIONS
9.1 Expenses. Whether or not the transactions contemplated hereby are
consummated, except as otherwise provided herein, the Buyer shall pay all costs
and expenses incurred by the Buyer in connection with this Agreement and the
transactions contemplated hereby, and the Seller shall pay all costs and
expenses incurred by the Seller in connection with this Agreement and the
transactions contemplated hereby, including in each case all fees and expenses
of investment bankers, finders, brokers, agents, representatives, consultants,
counsel and accountants. If this Agreement is terminated, the obligation of each
party to pay its own expenses will be subject to any right arising from a breach
of the Agreement by another party.
25
9.2 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by an agreement in writing signed by the party against whom
such amendment, modification or supplement is sought to be enforced. Any such
writing must refer specifically to this Agreement.
9.3 Waiver of Compliance; Consents. The rights and remedies of the parties
are cumulative and not alternative and may be exercised concurrently or
separately. No failure or delay by any party in exercising any right, power, or
privilege under this Agreement shall operate as a waiver of such right, power,
or privilege, and no single or partial exercise of any such right, power, or
privilege shall preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (i) no claim or right arising out of
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (ii) no waiver that may be given by a party shall be applicable except in
the specific instance for which it is given; and (iii) no notice to or demand on
one party shall be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement. Any consent required or
permitted by this Agreement is binding only if in writing.
9.4 Notices. All notices, consents, waivers and other communications
hereunder shall be in writing and shall be (i) delivered by hand, (ii) sent by
facsimile transmission, or (iii) sent certified mail or by a nationally
recognized overnight delivery service, charges prepaid, to the address set forth
below (or such other address for a party as shall be specified by like notice):
(a) If to the Seller, to:
International Textile Group, Inc.
000 Xxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxx X. Xxxxx
Facsimile: (000) 000-0000
Copy to: Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Buyer, to:
Xxxx, Inc.
0000 Xxxxxxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
26
Copies to:
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
Each such notice or other communication shall be deemed to have been duly given
and to be effective (x) if delivered by hand, immediately upon delivery if
delivered on a Business Day during normal business hours and, if otherwise, on
the next Business Day; (y) if sent by facsimile transmission, immediately upon
confirmation that such transmission has been successfully transmitted on a
Business Day before or during normal business hours and, if otherwise, on the
Business Day following such confirmation, or (z) if sent by a nationally
recognized overnight delivery service, on the day of delivery by such service
or, if not a Business Day, on the first Business Day after delivery. Notices and
other communications sent via facsimile must be followed by notice delivered by
hand or by overnight delivery service as set forth herein within five Business
Days.
9.5 Publicity. No party hereto shall make any public announcement or
similar publicity of the transactions contemplated by this Agreement prior to
the Closing without first obtaining the prior written consent of the Seller and
the Buyer; provided that nothing contained herein shall prohibit any party from
making any public announcement if such party determines in good faith, on the
advice of legal counsel, that such public disclosure is required by a Legal
Requirement so long as such party consults with the Seller and the Buyer prior
to making such disclosure. For a period of 30 days following the Closing Date,
from and after the Closing, any public announcement or similar publicity with
respect to this Agreement or the transactions contemplated hereby will be issued
at such a time and in such a manner as the Buyer and the Seller agree.
Thereafter, any public announcement or similar publicity with respect to this
Agreement or the transactions contemplated hereby will be issued at such a time
and in such a manner as the Buyer determines. The Buyer and the Seller shall
consult with each other concerning the means by which the Seller's employees,
customers and suppliers in connection with the Product Line will be informed of
the transactions contemplated hereby and the Buyer shall have the right to be
present at any such communication.
9.6 Assignment; No Third-Party Rights. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
party. Except as set forth in Section 7.2, this Agreement and its provisions are
for the sole benefit of the parties to this Agreement and their successors and
permitted assigns and shall not give any other Person any legal or equitable
right, remedy or claim.
9.7 Governing Law. The execution, interpretation and performance of this
Agreement, and any disputes with respect to the transactions contemplated by
this Agreement, including any fraud claims, shall be governed by the internal
laws and judicial decisions of the State of North Carolina, without regard to
principles of conflicts of laws.
27
9.8 Jurisdiction; Service of Process. If any party commences a lawsuit or
other proceeding relating to or arising from this Agreement, the parties hereto
agree that the United States District Court for the Middle District of North
Carolina shall have sole and exclusive jurisdiction over any such proceeding. If
such court lacks federal subject matter jurisdiction, the parties agree that the
courts of the State of North Carolina in the County of Guilford shall have sole
and exclusive jurisdiction. Any of these courts shall be proper venue for any
such lawsuit or judicial proceeding and the parties hereto waive any objection
to such venue. The parties hereto consent to and agree to submit to the
jurisdiction of any of the courts specified herein and agree to accept service
of process to vest personal jurisdiction over them in any of these courts.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
9.9 Further Assurances; Records. Each Party shall cooperate and take such
actions, and execute all such further instruments and documents, at or
subsequent to the Closing, as another party or other parties may reasonably
request in order to convey title to the Purchased Assets to Buyer and otherwise
to effect the terms and purposes of this Agreement. Each party shall provide the
other party or parties with access to all relevant documents and other
information pertaining to the Purchased Assets that are needed by such other
party or parties for the purposes of preparing Tax Returns or responding to an
audit by any Governmental Authority or for any other reasonable purpose.
9.10 Severability. If any provision contained in this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein, unless the
invalidity of any such provision substantially deprives either party of the
practical benefits intended to be conferred by this Agreement. Notwithstanding
the foregoing, any provision of this Agreement held invalid, illegal or
unenforceable only in part or degree shall remain in full force and effect to
the extent not held invalid or unenforceable, and the determination that any
provision of this Agreement is invalid, illegal or unenforceable as applied to
particular circumstances shall not affect the application of such provision to
circumstances other than those as to which it is held invalid, illegal or
unenforceable.
9.11 Construction. Each party acknowledges that such party and its
attorneys have been given an equal opportunity to negotiate the terms and
conditions of this Agreement and that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party or any similar
rule operating against the drafter of an agreement shall not be applicable to
the construction or interpretation of this Agreement.
9.12 Disclosure Schedule. Each representation, warranty and covenant set
forth herein shall have independent significance. Any disclosures in any part of
the Disclosure Schedule apply only to the Section of this Agreement to which
they expressly relate and not to any other representation, warranty or covenant.
In the event of any inconsistency between the statements in the body of this
Agreement and those in of the Disclosure Schedule (other than an exception
expressly set forth as such in of the Disclosure Schedule with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
28
9.13 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
9.14 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may be executed on
signature pages exchanged by facsimile, in which event each party shall promptly
deliver to the others such number of original executed copies as the others may
reasonably request.
9.15 Specific Performance. The Buyer and the Seller acknowledge and agree
that the recovery of damages by any party hereto may not be an adequate means to
redress a breach of this agreement, and accordingly, the parties specifically
agree that each party shall have the right of injunctive relief or specific
performance hereof. Nothing contained in this paragraph, however, shall prohibit
any party hereto from pursuing any remedies in addition to injunctive relief or
specific performance, including recovery of damages.
9.16 Entire Agreement. This Agreement, including the Appendices, the
Exhibits and the Disclosure Schedule, constitutes the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof. The
Appendices, Exhibits and the Disclosure Schedule hereto are an integral part of
this Agreement and are incorporated by reference herein. This Agreement
supersedes all prior agreements, understandings, promises, representations and
statements between the parties and their representatives with respect to the
transactions contemplated by this Agreement, including the letter of intent
dated December 22, 2006.
[the remainder of this page left blank intentionally]
29
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
XXXX, INC.
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President
INTERNATIONAL TEXTILE GROUP, INC.
By: /s/ Xxxx X. Xxxxx
----------------------------------
Name: Xxxx X. Xxxxx
Title: EVP & CFO
30
APPENDIX 1
"Acquisition Proposal" has the meaning set forth in Section 5.7.
"Affiliate" means with respect to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, owns or controls, is
controlled by or is under common control with, such Person. For the purpose of
this Agreement, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this agreement, as it may hereafter be amended in
accordance with its terms.
"Arbitrator" has the meaning set forth in Section 7.8(a).
"Base Purchase Price" has the meaning set forth in Section 2.4.
"Xxxx of Sale" has the meaning set forth in Section 2.7(a).
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in Charlotte, North Carolina are generally closed for
business.
"Buyer" has the meaning set forth in the introductory paragraph of this
Agreement.
"Buyer Documents" has the meaning set forth in Section 4.2.
"Buyer Indemnified Party" has the meaning set forth in Section 7.10.
"Buyer's Stock" has the meaning set forth in Section 2.5(a)(ii).
"Cash Payment" has the meaning set forth in Section 2.5(a)(i).
"Closing" has the meaning set forth in Section 2.6.
"Closing Date" means the date and time as of which the Closing actually
takes place.
"Closing Date Inventory" means the value of the Seller's Inventories
relating to the Product Line on hand as of the Effective Time, as calculated
pursuant to Section 2.5(b).
"Commercially Reasonable Efforts" means the efforts that a prudent business
Person would use in similar circumstances to achieve a desired result in a
reasonably efficient and cost-effective manner and as expeditiously as possible;
provided that an obligation to use the Commercially Reasonable Efforts under
this Agreement does not require the Person subject to that obligation to take
actions that would result in a materially adverse change in the benefits to such
Person of this Agreement or the transactions contemplated hereby.
"Copyright" means the legal right provided by the Copyright Act of 1976, as
amended, to the expression contained in any work of authorship fixed in any
tangible medium of expression together with any similar rights arising in any
other country as a result of statute or treaty, and any right that may exist to
obtain a registration with respect thereto from any Governmental Authority and
any rights arising under any such application.
A-1
"Damages" means damages loss, liability, claim, damage, expense (including
cost of investigation and reasonable attorneys' fees) and diminution of value,
whether or not involving a third-party claim.
"Disclosure Schedule" means the Disclosure Schedule delivered to the Buyer
by the Seller concurrently with the execution of this Agreement.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Effective Time" has the meaning set forth in Section 2.6.
"Exchange Act" means the Securities Exchange act of 1934, as amended.
"Finished Goods Inventories" means all of the Seller's Inventories of
finished goods related to the Product Line.
"GAAP" means generally accepted accounting principles as recognized by the
American Institute of Certified Public Accountants, applied on a consistent
basis.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any municipal, local, city or county government,
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any corporation or
other entity owned or controlled, through capital stock or otherwise by any of
the foregoing.
"Governmental Authorization" means any approval, consent, license, permit,
waiver or other authorization issued, granted, given or otherwise made available
by or under the authority of any Governmental Authority or pursuant to any Legal
Requirement.
"Indemnified Party" has the meaning set forth in Section 7.6(a).
"Indemnifying Party" has the meaning set forth in Section 7.6(a).
"Intellectual Property Assignments" has the meaning set forth in Section
2.7(a).
"In-Transit Inventories" has the meaning set forth in Section 2.2(a).
"Inventories" means, collectively, the Seller's Finished Goods Inventories
and the Seller's raw materials and work-in-process for use in connection with
the Product Line.
"Know-How" means ideas, designs, inventions, discoveries, concepts,
compilations of information, methods, techniques, procedures and processes,
whether confidential or not, whether patentable or not and whether reduced to
practice or not.
"Legal Requirement" means any statute, law, treaty, rule, regulation,
Order, decree, writ, injunction or determination of any arbitrator or court or
Governmental Authority and, with respect to any Person, includes all such Legal
Requirements applicable or binding upon such Person, its business or the
ownership or use of any of its assets.
A-2
"Liens" means any mortgages, claims, liens, security interests, pledges,
escrows, charges, options or other restrictions or encumbrances of any kind or
character whatsoever.
"Xxxx" means any word, name, symbol or device used by a Person to identify
its goods or services, whether or not registered, all goodwill associated
therewith, and any right that may exist to obtain a registration with respect
thereto from any Governmental Authority and any rights arising under any such
application. As used in this Agreement, the term "Xxxx" includes trademarks and
service marks.
"Material Adverse Effect" means a material adverse change in the assets,
business, properties, or prospects of the Product Line, or a material adverse
effect on the ability of the Seller to consummate the transactions contemplated
by this Agreement.
"Materials Credit" has the meaning set forth in Section 2.4.
"Open Purchase Order Obligations" has the meaning set forth in Section 2.3.
"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency, other Governmental Authority or by any arbitrator.
"Ordinary Course" means an action taken by a Person only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority) or by its shareholders or other owners; and
(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors of such Person (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"Patent" means any patent granted by the U.S. Patent and Trademark Office
or by the comparable agency of any other country, and any renewal thereof, and
any rights arising under any patent application filed with the U.S. Patent and
Trademark Office or the comparable agency of any other country and any rights
that may exist to file any such application.
"Permitted Liens" means (i) the Liens for current Taxes not yet due and
payable and (ii) the Liens imposed by law, such as the Liens of carriers,
warehousemen, mechanics, materialmen and landlords, and other similar Liens
incurred in the Ordinary Course for sums not constituting borrowed money, that
are not overdue.
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"Person" means any corporation, association, joint venture, partnership,
limited liability company, organization, business, individual, trust, government
or agency or political subdivision thereof or other legal entity.
"Prime Rate" means the per annum rate of interest from time to time by
Wachovia Bank, N.A. (or, if such bank discontinues its practice of announcing
its prime rate, such other institution approved by the Buyer and the Seller) as
its prime rate of interest, in effect from time to time.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator.
"Product Line" means the mattress ticking product line of the Seller's
"Burlington House" division.
"Products" has the meaning set forth in Section 3.12(a).
"Proprietary Rights" means, with respect to a Person, all Copyrights,
Marks, Know-how, Trade Names, Trade Secrets, Patents, patterns, domain names and
other intellectual property rights owned, licensed, used or usable by such
Person.
"Purchase Price" has the meaning set forth in Section 2.4.
"Purchased Assets" has the meaning set forth in Section 2.2.
"Purchased Inventories" has the meaning set forth in Section 2.2(a).
"Purchased Proprietary Rights" has the meaning set forth in Section 2.2(b).
"Registration Rights and Shareholder Agreement" has the meaning set forth
in Section 2.5(a)(ii)2.5(a).
"SEC" has the meaning set forth in Section 3.17(b).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning set forth in the introductory paragraph of this
Agreement.
"Seller Documents" has the meaning set forth in Section 3.2.
"Seller's Knowledge" means the knowledge of the Seller and of any officer
or director of the Seller, which shall include the actual knowledge of any such
Person and the knowledge any such Person should have in the exercise of such
Person's duties with the Seller or would be expected to have or obtain after
reasonable inquiry and includes information available in the books, records and
files of the Seller.
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"Tax Return" means any report, return or other information required to be
supplied to a taxing authority in connection with the Taxes.
"Taxes" means (i) all taxes, charges, fees, levies or other assessments
(whether federal, state, local or foreign), including income, gross receipts,
excise, property, sales, use, transfer, license, payroll, franchise, ad valorem,
withholding, Social Security and unemployment taxes and (ii) any interest,
penalties and additions related to the foregoing.
"Trade Names" means any words, name or symbol used by a Person to identify
its business.
"Trade Secrets" means business or technical information of any Person
including, but not limited to, customer lists, marketing data and Know-How, that
is not generally known to other Persons who are not subject to an obligation of
nondisclosure and that derives actual or potential commercial value from not
being generally known to other Persons.
"Transition and Manufacturing Services Agreement" has the meaning set forth
in Section 2.7(a)(iii).
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