Exhibit 2
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STOCK PURCHASE AGREEMENT
by and between
PTB ACQUISITION COMPANY, LLC
and
PARAGON TRADE BRANDS, INC.
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NOVEMBER 16, 1999
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TABLE OF CONTENTS
Page
1. Sale and Purchase of Purchased Shares..................1
1.1. Sale and Purchase of Purchased Shares...........1
1.2. Payment of Purchase Price.......................2
1.3. Delivery of Shares..............................2
2. Closing; Closing Date..................................2
3. Representations and Warranties of the Seller...........2
3.1. Due Incorporation and Authority.................2
3.2. Subsidiaries and Other Affiliates...............2
3.3. Qualification...................................3
3.4. Outstanding Capital Stock.......................3
3.5. Options or Other Rights.........................3
3.6. Authority Relative to This Agreement............4
3.7. SEC Documents...................................4
3.8. Financial Statements............................4
3.9. No Material Adverse Change......................5
3.10. Taxes...........................................5
3.11. Compliance with Laws............................7
3.12. Permits.........................................8
3.13. No Breach.......................................8
3.14. Environmental Matters...........................9
3.15. Claims and Proceedings.........................10
3.16. Contracts......................................11
3.17. Tangible Property..............................11
3.18. Intellectual Property..........................12
3.19. Title to Properties............................13
3.20. Employee Benefit Plans.........................14
3.21. Employee Relations.............................15
3.22. Insurance......................................16
3.23. Company Products...............................16
3.24. Operations of the Company......................16
3.25. Projections....................................17
3.26. Inventories....................................17
3.27. Receivables....................................17
4. Representations and Warranties of the Buyer...........18
4.1. Due Organization and Authority.................18
4.2. Authority to Execute and Perform Agreement.....18
4.3. Purchase for Investment........................18
4.4. Plan Acknowledgment............................18
4.5. Financing......................................19
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5. Covenants and Agreements..............................19
5.1. Conduct of Business............................19
5.2. Corporate Examinations and Investigations......19
5.3. Publicity......................................20
5.4. Expenses.......................................20
5.5. Brokerage......................................20
5.6. Required Consents..............................21
5.7. Permit Transfers...............................21
5.8. Further Assurances.............................21
5.9. Bankruptcy Covenants...........................21
5.10. Calculation of Cash Deficit and Cash Excess;
Net Working Capital............................22
6. Conditions Precedent to the Obligation of the Buyer
to Close..............................................23
6.1. Representations and Covenants..................23
6.2. Consents and Approvals.........................23
6.3. Opinion of Counsel to the Seller...............23
6.4. HSR Act Filing; Canada Acts....................23
6.5. No Claims......................................23
6.6. Confirmation Order.............................24
6.7. Plan Confirmation..............................24
6.8. Management.....................................24
6.9. No Material Adverse Change.....................24
6.10. Overbid Order..................................24
6.11. Ordinary Course................................24
6.12. Exit Financing.................................25
6.13. Settlement Orders..............................25
6.14. Settlements....................................25
6.15. Exclusive Period...............................25
6.16. PTB Canada.....................................25
6.17. Other Documents................................25
7. Conditions Precedent to the Obligation of the Seller
to Close..............................................26
7.1. Representations and Covenants..................26
7.2. Certain Consents and Approvals.................26
7.3. HSR Act Filing; Canadian Acts..................26
7.4. Confirmation Order.............................26
7.5. New Securities Issued..........................26
8. Designation of Executory Contracts; Employment
Agreements; Confirmation of Overbid Order and
Auction...............................................26
9. Monetization..........................................27
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10. Survival of Representations and Warranties of the
Seller................................................27
11. Termination of Agreement..............................28
11.1. Termination....................................28
11.2. Survival After Termination; Expense Reimbursement
and Termination Fee............................29
12. Mabesa; Dilution......................................30
13. Miscellaneous.........................................31
13.1. Certain Definitions............................31
13.2. Consent to Jurisdiction and Service of Process.41
13.3. Notices........................................41
13.4. Entire Agreement...............................42
13.5. Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies.......................42
13.6. Governing Law..................................43
13.7. Binding Effect; Assignment.....................43
13.8. Usage..........................................43
13.9. Counterparts...................................43
13.10. Exhibits and Schedules; Cross References.......43
13.11. Headings.......................................44
13.12. Interpretation.................................44
13.13. Severability of Provisions.....................44
13.14. Assignment by Buyer............................44
13.15. Seller's Knowledge.............................45
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EXHIBITS
A: Form of Opinion of Counsel to the Seller
B: Financing Commitment Letter
C: Plan
D. Form of Closing Balance Sheet
E. Form of Cash Deficit/Cash Excess Calculation
Appendix 1:Summary of Principal Terms of Notes
Appendix 2:Summary of Management Incentive Plan
Appendix 3:Summary of Principal Terms of Warrants
Appendix 4:Summary of Principal Terms of Rights
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STOCK PURCHASE AGREEMENT
AGREEMENT, dated November 16, 1999, by and among PTB ACQUISITION
COMPANY, LLC, a Delaware limited liability company (the "Buyer"), and as of the
date of the execution of this Agreement, Paragon Trade Brands, Inc. (the
"Seller"), a Delaware corporation, as debtor and debtor in possession under
Chapter 11 of the Bankruptcy Code.
WHEREAS, the Seller is the debtor and debtor in possession in Chapter
11 case number 98-60390 (the "Case") pending before the United States Bankruptcy
Court for the Northern District of Georgia, Atlanta Division (the "Bankruptcy
Court"); and
WHEREAS, subject to the terms and conditions set forth herein, and
pursuant to the Plan, Buyer desires to purchase from the Seller, and the Seller
desires to sell to Buyer, 11,712,635 shares of capital stock (the "New Common
Stock") of the Seller, as reorganized under the Plan on the Effective Date
thereof (the Seller as so reorganized, "Reorganized Paragon"), representing
98.5% of the shares of the 11,891,000 shares of New Common Stock to be issued
and outstanding immediately following the Closing, subject to reduction of the
number of shares of New Common Stock to be purchased by and sold to Buyer as a
result of the Rights Offering and the TEEP Plan.
Certain terms used in this Agreement are defined in Section 13.1.
Accordingly, the parties agree as follows:
1. Sale and Purchase of Purchased Shares.
1.1. Sale and Purchase of Purchased Shares. At the closing
provided for in Article 2 (the "Closing"), upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements of the Seller contained herein, Reorganized Paragon
shall issue and sell to Buyer and/or its designees and assignees, and Buyer
and/or its designees and assignees shall purchase or acquire from Reorganized
Paragon, an aggregate of 11,712,635 shares of New Common Stock, at a purchase
price equal to $10.00 per share; provided, however, that the number of shares to
be issued and sold to, and purchased by Buyer and/or its designees and assignees
shall be reduced by the number of shares (x) issued and sold by Reorganized
Paragon pursuant to the Rights Offering and (y) issued and distributed under the
TEEP Plan pursuant to the Plan. As used herein, the "Purchased Shares" means
that number of shares of New Common Stock actually issued and sold to Buyer
and/or its designees and assignees pursuant hereto.
1.2. Payment of Purchase Price. At the Closing, Buyer shall pay
or cause to be paid by wire transfer of immediately available funds to an
account designated in writing by the Seller at least two Business Days prior to
the Closing
Date an amount (the "Purchase Price") equal to the product of $10.00 and the
number of Purchased Shares.
1.3. Delivery of Shares. At the Closing, Seller shall deliver to
Buyer or its designee stock certificates representing the number of shares to be
purchased by Buyer and/or its designees, calculated in accordance with Section
1.1.
2. Closing; Closing Date. The Closing of the sale and purchase of the
Purchased Shares contemplated hereby shall take place at the offices of Xxxxxxx
Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx (or such other place as
the Buyer and Seller may agree), on the Effective Date, provided that all of the
conditions to the Closing set forth in Articles 6 and 7 have been satisfied or
waived by the party entitled to waive the same. The time and date upon which the
Closing occurs is herein called the "Closing Date."
3. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to Buyer as follows:
3.1. Due Incorporation and Authority. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and lawful
authority and government approvals to own, lease and operate its properties and
to carry on its business as now being conducted, except where the failure to
have such authority or approvals could not, (i) individually or in the
aggregate, have a material adverse effect on the properties, businesses,
prospects, results of operations or financial condition of Reorganized Paragon
and the Subsidiaries (as defined below), considered as a whole, or (ii) prevent
or materially interfere with the Seller's or Reorganized Paragon's ability to
consummate the transactions contemplated hereby (the "Contemplated
Transactions") (any event, effect or result described in clause (i) or (ii)
above being a "Material Adverse Effect on the Seller").
3.2. Subsidiaries and Other Affiliates. Section 3.2(i) of
Seller's Disclosure Memorandum sets forth the name and jurisdiction of
organization of each corporation or other entity (collectively, "Subsidiaries")
in which the Seller directly or indirectly owns or has the power to vote shares
of any capital stock or other ownership interests having voting power to elect a
majority of the directors of such corporation, or other persons performing
similar functions for such entity, as the case may be. Section 3.2(ii) of
Seller's Disclosure Memorandum identifies each entity (each, an "Investment
Entity") in which the Seller or one of its Subsidiaries owns a direct or
indirect equity interest which is not a Subsidiary, and with respect to each
such entity identifies the type of entity, the jurisdiction in which such entity
is organized, the nature of such entity's business, and the owners of the
remaining equity of such entity (to the extent known to the Seller). Each of the
Subsidiaries is, and to the knowledge of the Seller, each of the Investment
Entities is, an entity duly
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organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite power and lawful authority
and government approvals to own, lease and operate its properties and to carry
on its business as now being conducted, except where the failure to have such
authority or approvals could not have a Material Adverse Effect on the Seller.
3.3. Qualification. The Seller and each of its Subsidiaries is,
and to the knowledge of the Seller, each of the Investment Entities is, duly
qualified or otherwise authorized as a foreign entity to transact business and
is in good standing in each jurisdiction in which such qualification or
authorization is required by Law, except where the failure so to qualify or be
authorized could not have a Material Adverse Effect on the Seller.
3.4. Outstanding Capital Stock. The authorized and issued shares
of capital stock or other ownership interests of each Subsidiary are set forth
in Section 3.4 of Seller's Disclosure Memorandum. Except as set forth in Section
3.4 of Seller's Disclosure Memorandum, as of the Effective Date all issued and
outstanding capital stock or other ownership interests of each Subsidiary, and
Reorganized Paragon's or any of its Subsidiaries' equity interest in any
Investment Entity, will be owned by Reorganized Paragon or a Subsidiary free and
clear of any Lien other than Permitted Liens. At the Closing, all of the
outstanding shares of capital stock of Reorganized Paragon and the Subsidiaries
will be (in the case of Reorganized Paragon as of the Effective Date and after
giving effect to the Plan), and Reorganized Paragon's or any of its
Subsidiaries' equity interest in any Investment Entity will be, duly authorized
and validly issued, fully paid and nonassessable (subject, in the case of the
Mabesa Investment Entity, to Seller's obligation to make annual earn-out
payments pursuant to the Irrevocable Call Option Agreement, dated January 26,
1996, among International Disposable Products Investments Ltd., PTB
International, Inc. and the Seller). Except as set forth in Section 3.4 of
Seller's Disclosure Memorandum, at the Closing, no other class of capital stock
or other ownership interests of the Subsidiaries will be authorized or
outstanding. Upon delivery of and payment for the Purchased Shares at the
Closing as herein provided, Reorganized Paragon will convey to the Buyer and/or
its designees and assignees good and valid title thereto, free and clear of any
Lien.
3.5. Options or Other Rights. Except for the Warrants to be
issued under the Plan and as otherwise set forth in Section 3.5 of Seller's
Disclosure Memorandum, as of the Effective Date, there will be no outstanding
right, sub scription, warrant, call, unsatisfied preemptive right, option or
other agreement of any kind to purchase or otherwise to receive from Reorganized
Paragon or any Subsidiary any of the outstanding, authorized but unissued,
unauthorized or treasury shares of the capital stock or any other security of
Reorganized Paragon or any Subsidiary or, to the knowledge of the Seller, any
Investment Entity, and there will be no outstanding
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security of any kind of Reorganized Paragon or any Subsidiaries convertible into
any such capital stock.
3.6. Authority Relative to This Agreement. Except for any
required approvals of the Bankruptcy Court, the Seller has all necessary
corporate power and authority to execute and deliver this Agreement and,
assuming the satisfaction of the conditions set forth in Section 7, to perform
its obligations hereunder. The execution and delivery of this Agreement by the
Seller, the performance by the Seller of its obligations hereunder and the
consummation by the Seller of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of the Seller.
This Agreement has been duly and validly executed and delivered by the Seller
and (assuming due authorization, execution and delivery hereof by the Buyer and
upon receipt of any required approval of the Bankruptcy Court) will constitute
the legal, valid and binding obligation of the Seller (including Reorganized
Paragon) enforceable against the Seller (including Reorganized Paragon) in
accordance with its terms, subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally and subject, as to enforceability, to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.7. SEC Documents. Since December 27, 1998, Seller has filed
with the Securities and Exchange Commission (the "SEC") all reports, schedules,
forms, statements and other documents (including exhibits and all other
information incorporated therein) required to be filed with the SEC pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the SEC thereunder (the "SEC Documents;" the SEC
Documents filed since December 27, 1998 and prior to the date of this Agreement
are referred to as the "Identified SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents when
filed contained, and, when considered as an entirety currently contain, any
untrue statement of a material fact or omitted or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.8. Financial Statements. The consolidated balance sheets of
the Seller and the Subsidiaries as of December 27, 1998 and the related
consolidated statements of income, shareholders' equity and changes in financial
position for the year then ended, including the notes thereto, certified by
Xxxxxx Xxxxxxxx LLP, independent certified public accountants, which have been
delivered to Buyer, set forth the consolidated financial position of the Seller
and the Subsidiaries as at such date and the consolidated results of operations
of the Seller and the Subsidiaries for
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such period, in each case in accordance with generally accepted accounting
principles consistently applied. (The foregoing consolidated financial
statements of the Seller and the Subsidiaries as of December 27, 1998 and for
the year then ended are sometimes herein called the "Audited Financials.") The
unaudited consolidated balance sheet of the Seller and the Subsidiaries as of
September 26, 1999, and the related consolidated statement of income, including
the notes thereto, which have been delivered to Buyer, set forth the
consolidated financial position of the Seller and the Subsidiaries as at such
date and the results of operations of the Seller and the Subsidiaries for the
thirty-nine weeks then ended, in each case in conformity with generally accepted
accounting principles applied on a basis consistent with that of the Audited
Financials (subject to the normal year-end adjustments). The foregoing unaudited
consolidated financial statements of the Seller and the Subsidiaries as of
September 26, 1999 and for the thirty-nine weeks then ended are sometimes herein
called the "Interim Financials," the consolidated balance sheet included in the
Interim Financials is sometimes herein called the "Balance Sheet" and September
26, 1999 is sometimes herein called the "Balance Sheet Date". To the knowledge
of the Seller, except as fully reflected in the Interim Financial Statements,
the Seller and the Subsidiaries do not have any direct or indirect indebtedness,
liability, Claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, contingent or otherwise, of any kind
("Liabilities") except for (a) liabilities that will be fully discharged in the
Case at the Effective Date, (b) liabilities arising after the Petition Date
reflected on the Balance Sheet or described in Seller's Disclosure Memorandum or
in the notes to the Audited Financials or Interim Financials, and (c)
liabilities that have arisen since the Balance Sheet Date in the ordinary course
of business of the Seller and the Subsidiaries and that are similar in nature
and amount to the liabilities that arose during the comparable period of time in
the immediately preceding fiscal period.
3.9. No Material Adverse Change. Except as set forth in Section
3.9 of Seller's Disclosure Memorandum, since September 26, 1999 there has been
no change, event or occurrence which has had a Material Adverse Effect on the
Seller, and to the knowledge of the Seller no such change, event or occurrence
is threatened, nor has there been any damage, destruction or loss which could
have or has had a Material Adverse Effect on the Seller, whether or not covered
by insurance.
3.10. Taxes.
(a) Except as set forth in Section 3.10(a) of Seller's
Disclosure Memorandum, the Seller and each Subsidiary have timely filed (after
giving effect to any extensions of the time to file which were obtained) prior
to the date of this Agreement, and will file prior to the Closing Date, all
material returns required to be filed prior to the date of this Agreement or the
Closing Date, as the case may be, with respect to all federal, state, local,
foreign and other taxes, together
5
with interest and penalties thereon ("Taxes") for periods ending on or after
February 3, 1993, and such returns are true, correct and complete; and the
Seller and each Subsidiary has paid or will pay (or the Seller has paid or will
pay on its behalf), or has or will set up (or the Seller will set up on its
behalf) an adequate reserve for the payment of, all material Taxes required to
be paid by the Seller or any of the Subsidiaries on or before the Closing Date.
(b) Except as set forth in Section 3.10(b) of Seller's
Disclosure Memorandum, none of the Seller or any Subsidiary has filed or entered
into any election, consent or extension agreement that extends any applicable
statute of limitations, which statute of limitations has not expired.
(c) Except as set forth in Section 3.10(c) of Seller's
Disclosure Memorandum, and except as could not reasonably be expected to have a
Material Adverse Effect on the Seller, (i) none of the Seller, any Subsidiary
or, to the Seller's knowledge, any group of which the Seller or any Subsidiary
is a member, is a party to any action or proceeding pending or, to the Seller's
knowledge, threatened by any Governmental Authority for assessment or collection
of Taxes, and (ii) no audit or investigation of the Seller or any Subsidiary by
any Governmental Authority is pending or, to the Seller's knowledge threatened.
(d) None of the Seller nor any of the Subsidiaries
(i) is a party to, is bound by, or is under any obligation under any Tax sharing
or similar agreement that includes any other person, or (ii) will be required to
pay any Taxes attributable to any corporation (other than the Seller or any of
the Subsidiaries) that is a member of any group of affiliated corporations that
file consolidated returns for Federal income tax purposes of which the Seller or
any of the Subsidiaries was a member before the Closing Date by reason of Treas.
Reg. ss. 1.1502-6 or any comparable provision of state, local or foreign Law
that provides for joint or several liability, in whole or in part, in each case
except to the extent that the Seller is indemnified for such Taxes by any person
other than the Subsidiaries.
(e) Except as could not reasonably be expected to
have a Material Adverse Effect on the Seller, none of the Seller or any of the
Subsidiaries has entered into or is bound by any closing agreement that could
affect their Taxes for periods ending after the Closing Date.
(f) Except as previously disclosed in Tax returns
made available to Buyer or as set forth in Section 3.10(f) of Seller's
Disclosure Memorandum, none of the Seller or any of the Subsidiaries has agreed
to or, to the knowledge of Seller, is required to make any adjustments under
section 481(a) of the Code by reason of a change in accounting method or
otherwise.
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(g) To the knowledge of Seller, except as set forth in
Section 3.10(g) of Seller's Disclosure Memorandum, and except as could not
reasonably be expected to have a Material Adverse Effect on the Seller, no gain
or loss from deferred intercompany transactions or excess loss accounts of the
Seller or any of the Subsidiaries will be triggered by the transactions
contemplated by this Agreement.
(h) The Seller and the Subsidiaries have not at any
time consented under Section 341(f)(1) of the Code to have the provisions of
Section 341(f)(2) of the Code apply to any sale of its capital stock.
(i) Except as set forth in Section 3.10(i) of Seller's
Disclosure Memorandum and except as could not reasonably be expected to have a
Material Adverse Effect on the Seller, none of the Seller or any of the
Subsidiaries has been or is in violation of any applicable law relating to the
payment or withholding of Taxes, and each of them has duly and timely withheld
and paid over to the appropriate taxing authorities all material amounts
required to be so withheld and paid over.
(j) The Seller has made available to Buyer true and
complete copies of all Tax returns of the Seller and the Subsidiaries, together
with all related examination reports and statements of deficiency, and true and
complete copies of the portion of all other Tax returns relating to the
activities of Seller and the Subsidiaries, together with all related examination
reports and statements of deficiency.
3.11. Compliance with Laws. Except as set forth in Section 3.11
of Seller's Disclosure Memorandum, to the knowledge of Seller, neither the
Seller nor any of the Subsidiaries nor any of the Investment Entities is in
violation of any applicable order, judgment, injunction, award, decree or writ
(collectively, "Orders"), or any applicable law, statute, code, ordinance,
regulation or other requirement (collectively, "Laws") (including Orders or Laws
that affect the use, occupancy and operation of any real property assets of the
Seller or any of the Subsidiaries), of any government or political subdivision
thereof, whether Federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any
insurance company or fire rating and any other similar board or organization or
other non-governmental regulating body (to the extent that the rules,
regulations or orders of such body have the force of law) or any court or
arbitrator (collectively, "Governmental Bodies") (but not including, however,
Safety and Environmental Laws, which are addressed in Section 3.14, Tax Laws,
which are addressed in Section 3.10, and Laws relating to Benefit Plans, which
are addressed in Section 3.20), and to the knowledge of Seller, none of the
Seller or any of the Subsidiaries or any of the Investment Entities has received
notice that any such xxxxx tion is being or may be alleged.
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3.12. Permits. The Seller and the Subsidiaries have all
licenses, permits, exemptions, consents, waivers, authorizations, rights,
certificates of occupancy, franchises, orders or approvals of, and have made all
required registrations with, any Governmental Body that are required for the
conduct of the business of, or the intended use of any properties of, the Seller
or any of the Subsid iaries (collectively, "Permits"), not including, however,
Permits relating to compliance with Safety and Environmental Laws, which are
addressed in Section 3.14, and no suspension or cancellation of any of the
Permits is pending or, to the knowledge of the Seller, threatened, except where
the failure to have, or the suspension or cancellation of, any of the Permits,
individually or in the aggregate, could not have a Material Adverse Effect on
the Seller (Permits other than those excluded by the foregoing exception being
the "Material Permits"). Except as set forth in Section 3.12 of the Seller's
Disclosure Memorandum, to the knowledge of Seller, no action by the Seller,
Reorganized Paragon, any Subsidiary, or the Buyer is required in order that all
Material Permits will remain in full force and effect following the consummation
of the Contemplated Transactions.
3.13. No Breach.
(a) The execution and delivery of this Agreement by
the Seller does not, and, assuming approval of this Agreement and confirmation
of the Plan by the Bankruptcy Court, the consummation of the Plan, and the
performance of this Agreement by Seller (including Reorganized Paragon) will
not:
(i) conflict with or violate any provision of any
Certificate of Incorporation or by-laws of the Seller or Reorganized
Paragon (to the extent that such document is then governing such entity)
or any equivalent organizational documents of any Subsidiary;
(ii) conflict with or violate any Law applicable to the
Seller or Reorganized Paragon or any Subsidiary or by which any property
or asset of the Seller, Reorganized Paragon or any Subsidiary is or may be
bound or affected, except for any such conflicts or violations that,
individually or in the aggregate, could not have a Material Adverse Effect
on the Seller; or
(iii) assuming that all Required Consents (as defined in
Section 3.13(b)) have been obtained or deemed by operation of the Plan or
the Confirmation Order to have been given, result in any breach of or
constitute a default (or an event which with or without notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien, other than a Permitted Lien, on any property or asset
of the Seller, Reorganized Paragon or any Subsidiary under any note, bond,
mortgage, indenture, contract, agreement, commitment, lease, license,
permit, franchise
8
or other instrument or obligation (collectively, "Contracts") to which the
Seller or any Subsidiary is a party or by which any of them or their
assets or properties is or may be bound or affected, except for such
breaches, defaults or other occurrences which, individually or in the
aggregate, could not have a Material Adverse Effect on the Seller.
(b) Section 3.13(b) of Seller's Disclosure
Memorandum identifies each Contract to which the Seller or any Subsidiary is a
party or by which any of them or their assets or properties is or may be bound
or affected in respect of which a Required Consent must be obtained. For
purposes hereof, a "Required Consent" means any consent under a Contract
required so that the execution, delivery and/or performance by the Seller of
this Agreement, the consummation of the Contemplated Transactions, and the
assumption and/or continued enforcement thereof by Reorganized Paragon will not
result in any breach of or constitute a default (or an event which with or
without notice or lapse of time or both would become a default) under, or give
to others any right of termination, amendment, acceleration or cancellation of,
such Contract, or result in the creation of a Lien, other than a Permitted Lien,
on any property or asset of the Seller, Reorganized Paragon or any Subsidiary
except where the failure to obtain any such consent or consents could not,
individually or in the aggregate, have a Material Adverse Effect on the Seller.
For purposes hereof, the Seller shall be deemed to have obtained a Required
Consent if, and to the extent that, pursuant to the Plan and the Confirmation
Order the Seller is authorized to assume the Contract pursuant to section 365 of
the Bankruptcy Code.
3.14. Environmental Matters.
(a) Except as disclosed in the Identified SEC
Documents, the Seller and the Subsidiaries are and have been in compliance with
all applicable Safety and Environmental Laws, which compliance includes the
possession of permits and governmental authorizations required under applicable
Safety and Environmental Laws ("Environmental Permits") and compliance with the
terms and conditions thereof, except where such non-compliance would not result
in a Material Adverse Effect on Seller (Environmental Permits other than those
excluded by the foregoing exception being the "Material Environmental Permits").
(b) Except as disclosed in the Identified SEC
Documents or as will be discharged on the Effective Date, there are no Claims
brought pursuant to any Safety or Environmental Law pending or, to the knowledge
of Seller, threatened against Seller or any Subsidiary that could reasonably be
expected to result in a Material Adverse Effect on Seller.
(c) Except as disclosed in the Identified SEC
Documents, the real properties presently or to the knowledge of Seller formerly
9
owned, leased or operated by the Seller or the Subsidiaries (including
groundwater under such real properties) (the "Real Properties") do not contain
any Hazardous Substance other than as permitted under applicable Safety and
Environmental Law; provided, however, that with respect to Real Properties
formerly owned, leased or operated by the Seller or the Subsidiaries, such
representation is limited to the period prior to the disposition of such Real
Properties by the Seller or the Subsidiaries.
(d) Except as disclosed in the Identified SEC
Documents, to the knowledge of Seller, no Hazardous Substance has been disposed
of or transported from any of the Real Properties during the time any such Real
Property was owned, leased or operated by the Seller or any of the Subsidiaries,
except as could not reasonably be expected to have a Material Adverse Effect on
the Seller.
(e) Except as disclosed in the Identified SEC
Documents, to the knowledge of Seller, the Seller and the Subsidiaries have not
become obligated, whether by operation of law or through contractual agreement,
to indemnify any other person or otherwise to assume liability for any Claim
brought pursuant to any Safety and Environmental Law which could reasonably be
expected to have a Material Adverse Effect on the Seller.
3.15. Claims and Proceedings. There are no outstanding Orders of
any Governmental Body against or involving the Seller or any of the Subsidiaries
which could have a Material Adverse Effect on the Seller or interfere with
consummation of the Contemplated Transactions. To the knowledge of the Seller,
except as to claims arising prior to the Petition Date that are within the
jurisdiction of the Bankruptcy Court and are to be resolved in the Case or by
force of the discharge granted to the Seller in connection with the Case, as of
the date of this Agreement, there are no actions, causes of action, suits,
claims, complaints, demands, litigations or legal, administrative or arbitral
proceedings or investigations (collectively, "Claims") (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
pending, threatened against or involving the Seller or any of the Subsidiaries
or any of their properties, owned or leased, which, individually or in the
aggregate, could have a Material Adverse Effect on the Seller. There are no
claims pending or, to Seller's knowledge, threatened against the Seller or any
Subsidiary or Wal*Mart which, if successful, would materially interfere with the
Seller's or any Subsidiary's use of the White Cloud trademark in connection with
Seller's performance of the White Cloud Arrangement with Wal*Mart. To the
knowledge of Seller, there are no Claims pending, or threatened, against any
third party which, if successful, would in the reasonable business judgment of
Seller evidence a material risk with respect to Seller's use of the White Cloud
trademark in connection with Seller's performance of the White Cloud Arrangement
with Wal*Mart.
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3.16. Contracts.
(a) Section 3.16 of Seller's Disclosure Memorandum
sets forth all of the Material Contracts to which the Seller or any of the
Subsidiaries is a party or by or to which any of them or any of their properties
may be bound or subject (other than those specifically set forth in any other
Section of Seller's Disclosure Memorandum or any Material Contracts made
available to Buyer as set forth in Section 3.22 hereof); provided; however, in
the case of Material Contracts to which the Seller is a party, only those
Material Contracts which have or will be assumed in the Case are set forth in
Section 3.16 of Seller's Disclosure Memorandum.
(b) There have been delivered or otherwise made
available to Buyer true and complete copies of all of the Material Contracts set
forth in Section 3.16 of Seller's Disclosure Memorandum. All of the Material
Contracts referred to in the preceding sentence (i) to which the Seller is a
party and which are susceptible of assumption, upon the assumption thereof by
the Seller pursuant to section 365 of the Bankruptcy Code, are valid and binding
upon the Seller and, to Seller's knowledge, the other party or parties thereto
in accordance with their terms and (ii) to which any Subsidiary is a party are
valid and binding upon such Subsidiary and, to Seller's knowledge, the other
party or parties thereto in accordance with their terms. Except as set forth in
Section 3.16(b) of Seller's Disclosure Memorandum or as will be cured upon the
assumption of such Material Contract pursuant to section 365 of the Bankruptcy
Code, neither the Seller nor any of the Subsidiaries is in default in any
material respect under any of such Material Contracts, nor to the knowledge of
Seller does any condition exist that with notice or lapse of time or both would
constitute such a material default thereunder. To the knowledge of Seller, no
parties to any Material Contracts (other than the Seller or any Subsidiary) are
in default thereunder in any respect nor does any condition exist that with
notice or lapse of time or both would constitute such a default thereunder
except where the existence of any such defaults (including the existence of any
conditions that with notice or lapse of time would constitute defaults) could
not, individually or in the aggregate, have a Material Adverse Effect on the
Seller.
3.17. Tangible Property. To the knowledge of Seller, the
facilities, machinery, equipment, furniture, buildings and other improvements,
fixtures, vehicles, structures, any related capitalized items and other tangible
property material to the business of the Seller or any of the Subsidiaries (the
"Tangible Property") are in good operating condition and repair, subject to
continued repair and replacement in accordance with past practice, and are
suitable for their intended use.
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3.18. Intellectual Property.
(a) The Seller or a Subsidiary owns or is licensed or
otherwise has the right to (i) with respect to such items that the Seller owns
outright, sell, license and dispose of such items, without restriction, and (ii)
with respect to such items with respect to which the Seller has a license, use
and practice all Copyrights, Patents, Trade Secrets, Trademarks, Internet
Assets, Mask Works, Software and other proprietary rights (collectively, the
"Intellectual Property") that are material to the businesses of the Seller and
the Subsidiaries, the loss or cancellation of which would have a Material
Adverse Effect on the Seller.
(b) Section 3.18(b) of Seller's Disclosure
Memorandum lists (i) all Intellectual Property (other than unregistered
Copyrights and Trademarks and Trade Secrets) owned by the Seller or any of the
Subsidiaries, specifying as to each such item, as applicable: (A) the category
of Intellectual Property; (B) the jurisdictions in which the item is issued or
registered or in which any application for issuance has been filed, including
the respective issuance, registration or application number; (C) the date of
application, issuance or registration and the expiration date of the item; and
(D) with respect to any Trademarks, the class or classes of goods or services on
which each such Trademark is or is intended to be used; and (ii) all material
licenses, sublicenses and other agreements under which the Seller or any of the
Subsidiaries is either a licensor or licensee of any Intellectual Property the
cancellation or termination of which could have a Material Adverse Effect on the
Seller (the "IP Licences"), specifying as to each such item, as applicable: (A)
the category of Intellectual Property, (B) the licensor of such item, (C) the
licensee of such item and (D) the term of such license agreement. The Seller
heretofore has made available, or has caused the Subsidiaries heretofore to make
available, to the Buyer true, correct and complete copies of all material
documents evidencing Intellectual Property and IP Licenses (including all
modifications, amendments and supplements thereto).
(c) None of the Seller, the Subsidiaries or, to the
knowledge of Seller, any other party, is in breach of or default under any IP
License (i) which will not (in the case of Seller) be cured under section 365 of
the Bankruptcy Code pursuant to the Plan or (ii) which breach or default (in the
case of either the Seller or the Subsidiaries) could have a Material Adverse
Effect on the Seller. As of the Effective Date, each IP License will be valid
and in full force and effect.
(d) Except as will be satisfied, waived or released in
the Xxxxxxxx-Xxxxx Settlement or the Procter & Xxxxxx Settlement, no Claim is
pending or, to the knowledge of the Seller, threatened, that challenges the
validity, enforceability, ownership of or right (i) in the case of Intellectual
Property owned by the Seller, to sell, license or dispose of any item of
Intellectual Property, or (ii) in the
12
case of the IP Licenses, the right to use or practice any item of Intellectual
Property, nor to the knowledge of the Seller, are there any valid grounds for
any such Claim.
(e) Except as will be released, satisfied or waived in
the Xxxxxxxx-Xxxxx Settlement or the Procter & Xxxxxx Settlement, to the
knowledge of the Seller, no item of Intellectual Property is subject to any
outstanding Order, Contract or Claim restricting in any manner the use or the
licensing thereof by the Seller or any of the Subsidiaries.
(f) Except for issues resolved by the Xxxxxxxx-Xxxxx
Settlement and the Procter & Xxxxxx Settlement, to the knowledge of Seller,
neither the Seller nor any of the Subsidiaries has infringed upon or otherwise
violated the intellectual property rights of third parties or, except as set
forth in Section 3.18(f) of Seller's Disclosure Memorandum, has received or has
been the subject of any Claim, charge or notice alleging any such infringement
or other violation which infringement, violation, alleged infringement or
alleged violation could have a Material Adverse Effect on the Seller. To the
knowledge of the Seller, the continued operation of the businesses of the Seller
and the Subsidiaries as presently conducted will not infringe upon or otherwise
violate any intellectual property rights of third parties, in a manner that
could result in a Material Adverse Effect on the Seller.
(g) Neither Seller nor any of the Subsidiaries is in
default under any provisions of the Xxxxxxxx-Xxxxx Settlement or the Procter &
Xxxxxx Settlement.
(h) To the knowledge of Seller, the Seller or one of
the Subsidiaries has the exclusive right to file, procure and maintain all
applications and registrations with respect to the Intellectual Property owned
by the Seller or any of the Subsidiaries.
(i) To the knowledge of Seller, all Patents and
registered Trademarks and Copyrights held by the Seller or any of the
Subsidiaries are presumed valid and subsisting. The Seller and the Subsidiaries
have taken all necessary action to maintain and, in the case of Trade Secrets,
protect each item of Intellectual Property owned or used by the Seller or any of
the Subsidiaries.
3.19. Title to Properties. The Seller and the Subsidiaries (a)
have good and marketable title in fee simple to all real property owned by them
(as reflected in the Identified SEC Documents) and valid leasehold interests in
all leased real property leased by them (as reflected in the Identified SEC
Documents), and (b) own outright and have good title to all of their properties,
including all of the assets reflected on the Balance Sheet, free and clear of
any Lien, except in the case of each of clauses (a) and (b) hereof for (i) Liens
which will be released pursuant to the Plan; (ii) properties disposed of, or
subject to purchase or sales orders, in the
13
ordinary course of business since the Balance Sheet Date; (iii) Liens securing
Taxes, assessments, governmental charges or levies, or the claims of
materialmen, carriers, landlords and like persons, all of which are not yet due
and payable or are being contested in good faith, so long as such contest does
not involve any substantial danger of the sale, forfeiture or loss of any assets
which individually or in the aggregate are material to Seller; (iv) Liens
securing Reorganized Paragon's obligations to its lenders in respect of the Exit
Financing and (v) Liens set forth in Section 3.19 of Seller's Disclosure
Memorandum (the Liens described in clauses (i) through (v) above being
"Permitted Liens").
3.20. Employee Benefit Plans.
(a) Section 3.20 of Seller's Disclosure Memorandum
contains a true and complete list of each "material employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), including, without limitation, multiemployer
plans within the meaning of ERISA section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, welfare benefit,
collective bargaining, bonus, incentive, deferred compensation and all other
material employee benefit plans, agreements, programs, policies or other
material arrangements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of the
transaction contemplated by this Agreement or otherwise), whether formal or
informal, oral or written, legally binding or not, under which any employee or
former employee of the Seller or any of the Subsidiaries has any present or
future right to benefits or under which the Seller or any of the Subsidiaries
has any present or future liability. All such plans, agreements, programs,
policies and arrangements shall be collectively referred to as the "Benefit
Plans."
(b) With respect to each Benefit Plan, the Buyer has
made available to the Purchaser a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) thereof and, to the
extent applicable: (i) any related trust agreement or other funding instrument;
(ii) the most recent determination letter, if applicable; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by Seller to its employees concerning the extent of the benefits
provided under a Benefit Plan; and (iv) for the three most recent years (A) the
Form 5500 and attached schedules, (B) audited financial statements, (C)
actuarial valuation reports and (D) attorney's response to an auditor's request
for information.
(c) (i) Each Benefit Plan has been established and
administered in all material respects in accordance with its terms, and in
material compliance with the applicable provisions of ERISA, the Code and other
applicable laws, rules and regulations; (ii) to the knowledge of the Seller, no
event has occurred
14
and no condition exists that would subject the Seller or any of the
Subsidiaries, either directly or by reason of its affiliation with any Commonly
Controlled Entity (defined as any organization which is a member of a controlled
group of organizations within the meaning of Code section 414(b), (c), (m) or
(o)), to any tax, fine, lien, penalty or other liability imposed by ERISA, the
Code or other applicable laws, rules and regulations; (iii) to the knowledge of
the Seller, no "prohibited transaction" (as such term is defined in ERISA
section 406 and Code section 4975) has occurred with respect to any Benefit
Plan; (iv) each Benefit Plan with respect to which a Form 5500 has been filed,
no material change has occurred with respect to the matters covered by the most
recent Form since the date thereof; (v) each Benefit Plan which is intended to
be qualified within the meaning of Code section 401(a) is so qualified and has
received a favorable determination letter as to its qualification, and nothing
has occurred, whether by action or failure to act, that could reasonably be
expected to cause the loss of such qualification; (vi) except as provided in the
TEEP Plan, for each Benefit Plan that is a "welfare plan" within the meaning of
ERISA section 3(1), neither the Seller nor any of the Subsidiaries has nor will
have any liability or obligation under any plan which provides medical or death
benefits with respect to current or former employees of the Seller beyond their
termination of employment (other than coverage mandated by law); and (vii) no
Benefit Plan is subject to Title IV of ERISA.
(d) With respect to any Benefit Plan, no actions, suits
or claims (other than routine claims for benefits in the ordinary course) are
pending or, to the Seller's knowledge, threatened, and no facts or circumstances
exist that could give rise to any such actions, suits or claims which
individually or in the aggregate could have a Material Adverse Effect on the
Seller.
(e) Except as set forth in Section 3.20(e) of the
Seller's Disclosure Memorandum, no Benefit Plan exists that provides for, or to
the Seller's knowledge could result in, the payment to any present or former
employee of any Seller or any of the Subsidiaries of any money or other property
or accelerate or provide any other rights or benefits to any present or former
employee of any Seller as a result of the transaction contemplated by this
Agreement.
(f) With respect to each Benefit Plan, there are no
funded post-petition benefit obligations for which contributions have not been
made or properly accrued and there are no unfunded post-petition benefit
obligations that have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
Audited Financials except for such unfunded post-petition benefit obligations as
could not, individually or in the aggregate, have a Material Adverse Effect on
the Seller.
3.21. Employee Relations. None of the Employees is represented
by a union, and to the knowledge of the Seller no union organizing efforts
15
are now being conducted. Neither the Seller nor any of the Subsidiaries has at
any time during the last three years had, nor to the knowledge of any of the
Seller, is there now threatened, a strike, picket, work stoppage, work slowdown
or other labor dispute.
3.22. Insurance. Seller has heretofore made available for
inspection to Buyer true and correct copies of all policies or binders of fire,
liability, product liability, worker's compensation, directors and officers
liability, vehicular and other insurance held by or on behalf of the Seller or
any of the Subsidiaries and which are presently in effect. Such policies and
binders are valid and binding in accordance with their terms, are in full force
and effect, and, to the knowledge of Seller, insure against risks and
liabilities to an extent and in a manner customary in the industries in which
the Seller and the Subsidiaries operate. Neither the Seller nor any of the
Subsidiaries has received any notice of cancellation or non-renewal of any such
policy or binder.
3.23. Company Products. Except as set forth in Section 3.23 of
Seller's Disclosure Memorandum, to the knowledge of Seller, there are no
statements, citations or decisions by any Governmental Body specifically stating
that any Company Product is defective or unsafe or fails to meet any standards
promulgated by any such Governmental Body. Except as set forth in Section 3.23
of Seller's Disclosure Memorandum, there have been no recalls ordered by any
such Governmental Body with respect to any Company Product. Except as set forth
in Section 3.23 of Seller's Disclosure Memorandum, to the knowledge of any of
the Seller, there is no (a) fact relating to any Company Product that may impose
upon the Seller or any of the Subsidiaries a duty to recall any Company Product
or a duty to warn customers of a defect or of any Hazardous Substance in any
Company Product, (b) latent or overt design, manufacturing or other defect in
any Company Product, (c) Company Product, the reasonably foreseeable use of
which may expose any person to any Hazardous Substance or (d) material liability
for warranty claims or returns with respect to any Company Product not fully
reflected on the Audited or Interim Financials.
3.24. Operations of the Company. Except as set forth in Section
3.24 of Seller's Disclosure Memorandum or as contemplated by this Agreement,
since June 27, 1999 neither the Seller nor any of the Subsidiaries has:
(a) waived any material right under any Material Contract
or other agreement of the type required to be set forth in Seller's Disclosure
Memorandum;
(b) made any material change in its accounting
methods or practices or made any material change in depreciation or amortization
policies or rates adopted by it;
16
(c) materially changed any of its business policies,
including advertising, investment, marketing, pricing, purchasing, production,
personnel, sales, returns, budget or product acquisition policies;
(d) except for inventory or equipment in the ordinary
course of business, sold, abandoned or made any other disposition of any of its
properties or assets or made any acquisition of all or any part of the
properties, capital stock or business of any other person;
(e) terminated or failed to renew, or received any
written threat (that was not subsequently withdrawn) to terminate or fail to
renew, any Material Contract or other agreement that is or was material to the
properties, business, prospects, results of operations or financial condition of
the Seller and its Subsidiaries;
(f) entered into any Material Contract; or
(g) engaged in any other material transaction other than
in the ordinary course of business.
3.25. Projections. The projections relating to operations of the
Seller and the Subsidiaries dated September 7, 1999 (the "Projections"),
heretofore delivered by the Seller to the Buyer, have been prepared in good
faith on a reasonable basis. The assumptions on which the Projections are based
are consistent with past practices (including accounting practices) of the
Seller and the Subsidiaries and with historical conditions applicable to the
business of the Seller and the Subsidiaries. Except as set forth in Section 3.25
of the Seller's Disclosure Memorandum, to Seller's knowledge there is nothing to
indicate that the Projections or the assumptions upon which they are based are
not reasonable.
3.26. Inventories. Since the Balance Sheet Date, the Inventories
related to the Seller's and its Subsidiaries' business have been maintained in
the ordinary course of business. After giving effect to any applicable reserves,
all of the Inventories recorded on the Balance Sheet consist of, and all
Inventories related to the business on the Closing Date will consist of, items
of a quality usable or saleable in the normal course of the business consistent
with past practices and are and will be in quantities reasonable for the normal
operation of such business in accordance with past practice.
3.27. Receivables. All Accounts Receivable (other than
receivables collected since the Balance Sheet Date) reflected on the Balance
Sheet are valid and fully collectible in the aggregate amount thereof, subject
to trade discounts, less any applicable reserves recorded on the Balance Sheet.
All Accounts Receivable arising out of or relating to the business at the
Balance Sheet Date have been included in the Balance Sheet, in accordance with
GAAP applied on a consistent basis.
17
4. Representations and Warranties of the Buyer. Buyer represents
and warrants to the Seller as follows:
4.1. Due Organization and Authority. Buyer is duly organized,
validly existing and in good standing under the Laws of the jurisdiction under
which it was organized and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being and as
heretofore conducted.
4.2. Authority to Execute and Perform Agreement. Buyer has the
full legal right and power and all authority and approvals required to enter
into, execute and deliver this Agreement and each and every agreement and
instrument contemplated hereby to which Buyer is or will be a party and to
perform fully its obligations hereunder and thereunder. This Agreement has been
duly executed and delivered by Buyer, and on the Closing Date each and every
agreement and instrument contemplated hereby to which Buyer is a party will be
duly executed and delivered by Buyer and (assuming due execution and delivery
hereof and thereof by the other parties hereto and thereto) this Agreement and
each such other agreement and instrument will be valid and binding obligations
of Buyer enforceable against Buyer in accordance with their respective terms.
The execution and delivery by Buyer of this Agreement and each and every other
agreement and instrument contemplated hereby to which Buyer is a party, the
consummation of the transactions contemplated hereby and thereby and the
performance by Buyer of this Agreement and each such other agreement and
instrument in accordance with their respective terms and conditions will not (a)
violate any provision of Buyer's governing or organizational documents; (b)
except for filings or approvals under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, and the rules and regulations thereunder (the "HSR
Act"), and the Investment Canada Act and the Competition Act of Canada
(together, the "Canadian Acts"), if applicable, require Buyer to obtain any
consent, approval, authorization or action of, or make any filing with or give
any notice to, any Governmental Body or any other person; (c) violate, conflict
with or result in the breach of any of the terms and conditions of, result in a
material modification of the effect of, otherwise cause the termination of or
give any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any Contract to
which Buyer is a party or by or to which Buyer or any of its properties is or
may be bound or subject; or (d) violate any Law or Order of any Governmental
Body applicable to Buyer.
4.3. Purchase for Investment. Buyer is purchasing the Purchased
Shares for its own account for investment and not with a view to public resale
or distribution thereof.
4.4. Plan Acknowledgment. The Plan in the form attached
hereto as Exhibit C is satisfactory to Buyer in all material respects.
18
4.5. Financing. At the Closing, the Buyer, together with its
designees and assignees, considered together, will have the financial ability to
purchase the Purchased Shares. The Buyer has delivered true and correct copies
of commitments that it has heretofore received from potential assignees, which
commitments have not been withdrawn or modified as of the date of this
Agreement.
5. Covenants and Agreements.
5.1. Conduct of Business. From the date hereof through the
Closing Date, the Seller agrees that it (a) shall conduct its (and shall cause
its Subsidiaries to conduct their) business in the ordinary course and, without
the prior written consent of the Buyer, not to undertake any of the actions
specified in Section 3.24; (b) shall (and shall cause its Subsidiaries to) use
commercially reasonable efforts to preserve intact its business relationships
with third parties and (c) shall conduct its (and shall cause its Subsidiaries
to conduct their) business in a manner such that the representations and
warranties contained in Article 3 shall continue to be true and correct on and
as of the Closing Date as if made on and as of the Closing Date. The Seller
shall give the Buyer prompt notice of any event, condition or circumstance
occurring from the date hereof through the Closing Date that would constitute a
violation or breach of (i) any representation or warranty, whether made as of
the date hereof or as of the Closing Date, or (ii) any covenant of Seller
contained in this Agreement.
5.2. Corporate Examinations and Investigations. Prior to the
Closing Date, the Seller agrees that the Buyer shall be entitled, through their
employees and representatives, including, without limitation, Xxxx, Weiss,
Rifkind, Xxxxxxx & Xxxxxxxx, Xxxxxx & Xxxxxx, and KPMG Peat Marwick
(collectively, the "Representatives"), to make such investigation of the
properties, businesses and operations of the Seller and the Subsidiaries, and
such examination of the books, records and financial condition of the Seller and
the Subsidiaries, as they wish. Any such investigation and examination shall be
conducted at reasonable times and under reasonable circumstances, and the Seller
shall, and shall cause the Subsidiaries to, cooperate fully therein. No
investigation by the Buyer shall diminish or obviate any of the representations,
warranties, covenants or agreements of the Seller contained in this Agreement.
In order that the Buyer may have full opportunity to make such physical,
business, accounting and legal review, examination or investigation as they may
wish of the affairs of the Seller and the Subsidiaries, the Seller shall make
available and shall cause the Subsidiaries to make available to the
Representatives during such period all such information and copies of documents
concerning the affairs of the Seller and the Subsidiaries as the Representatives
may reasonably request, shall permit the Representatives reasonable access to
the properties of the Seller and the Subsidiaries and all parts thereof
including access for the purpose of conducting sampling of the air, soil,
surface water and groundwater and shall cause their officers, Employees, consul
tants, agents, accountants and attorneys to cooperate fully with the
Representatives in
19
connection with such review and examination. The Seller shall make reasonably
available and shall cause the Subsidiaries to make reasonably available to the
Representatives during such period all reports, assessments, audits, reviews,
plans, analyses and other documents or correspondence in the possession or
control of the Seller or any of the Subsidiaries relating to the condition of
the Environment, the effect of the operations of the Seller or any of the
Subsidiaries on the Environment or the compliance of the Seller or any of the
Subsidiaries with Safety and Environmental Laws. If this Agreement terminates,
(a) the Buyer shall keep confidential and shall not use in any manner any
information or documents obtained from the Seller or the Subsidiaries concerning
their properties, businesses and operations, unless (i) use or disclosure of
such information or documents shall, based on the advice of its legal counsel,
be required by applicable Law or Order of any Governmental Body, (ii) use or
disclosure of such information or documents is reasonably required, based on the
advice of its legal counsel, in connection with any Claim against or involving
the Buyer or (iii) such information or documents are readily ascertainable from
public or published information or trade sources (other than information known
generally to the public as a result of a violation of this Section 5.2) or are
already known or subsequently developed by the Buyer independently of any
investigation of the Seller or the Subsidiaries; and (b) any documents obtained
from the Seller or the Subsidiaries and all copies thereof shall be returned.
5.3. Publicity. The parties will cooperate in the issuance of
any press releases or otherwise in making any public statements with respect to
the Contemplated Transactions. The parties further agree that no publicity
release or public statement or public communication concerning this Agreement or
the Contemplated Transactions shall be made without written advance approval
thereof by the Seller and Buyer, which approval shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement as may, upon
the advice of counsel, be required by law or any listing agreement with any
national securities exchange.
5.4. Expenses. Subject to the occurrence of the Closing
hereunder, Reorganized Paragon shall bear the reasonable out-of-pocket expenses
incurred by each party (including any assignee of the Buyer), in connection with
the preparation, execution and performance of this Agreement and the
Contemplated Transactions, including the reasonable fees and expenses of agents,
representatives, counsel and accountants.
5.5. Brokerage. The Seller represents and warrants to Buyer
that, except for The Blackstone Group LP, no broker, finder, agent or similar
intermediary (a "Broker") has acted on behalf of the Seller or any of the
Subsidiaries in connection with this Agreement or the Contemplated Transactions,
and that, except for a fee to The Blackstone Group LP payable pursuant to a
Final Order of the Bankruptcy Court (the "Seller's Fee") there are no brokerage
commissions, finder's
20
fees or similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with the Seller or any of the
Subsidiaries, or any action taken by the Seller or any of the Subsidiaries.
Buyer shall have no responsibility to pay the Seller's Fee.
5.6. Required Consents. The Seller shall use commercially
reasonable best efforts, prior to the Closing, to obtain all Required Consents
and undertake all actions required pursuant to the Required Consents. Buyer
shall not incur or be liable for any expenses, costs or obligations in
connection therewith.
5.7. Permit Transfers. The Seller shall use commercially
reasonable best efforts, at and as of the Closing, to cause the transfer,
reissuance or modification of any Material Permits or Material Environmental
Permits to the extent that such is required to cause the Material Permits and
Material Environmental Permits to remain in full force and effect in the
possession of Reorganized Paragon or any of the Subsidiaries, as the case may
be, after the Closing. Buyer shall not incur or be liable for any expenses,
costs or obligations in connection therewith.
5.8. Further Assurances. Each of the parties shall execute such
Documents and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and the Contemplated Transactions.
Each such party shall use commercially reasonable efforts to fulfill or obtain
the fulfillment of the conditions to the Closing set forth in Articles 6 and 7.
5.9. Bankruptcy Covenants.
(a) The Seller shall promptly provide the Buyer with
(i) proposed final drafts of all documents, motions, orders, filings or
pleadings that the Seller proposes to file with the Bankruptcy Court which
relate to the consummation or approval of the Plan, this Agreement or any
provision therein or herein, and will provide the Buyer with reasonable
opportunity to review such filings and (ii) copies of any written objections to
the Plan or Disclosure Statement.
(b) In the event an appeal is taken, or a stay pending
appeal is requested or reconsideration is sought, from either the Confirmation
Order or the Order of the Bankruptcy Court approving the Disclosure Statement,
the Seller shall promptly after becoming aware thereof notify the Buyer of such
notice of appeal, request for a stay pending appeal or motion for
reconsideration. The Seller shall also provide the Buyer with written notice
(and copies) of any other or further notice of appeal, motion or application
filed in connection with any appeal from or application for reconsideration of,
either of such orders and any related briefs.
21
5.10. Calculation of Cash Deficit and Cash Excess; Net Working
Capital.
(a) For purposes of determining the principal amount
of the New Notes to be issued under the Plan, the Cash Deficit and Cash Excess
shall be determined as of the Measuring Date and shall be adjusted upward or
downward, as the case may be, by (1) the amount by which the liabilities listed
on Schedule 5.10 hereto are greater or less on the Measuring Date than the
amounts set forth on Schedule 5.10 hereto and (2) any change in Seller's Net
Working Capital from June 27, 1999. As used herein, the "Measuring Date" shall
mean the last day of the fiscal month immediately preceding the fiscal month in
which the Closing occurs, unless the Buyer and Seller agree to use a different
date.
(b) Seller's Net Working Capital as of the Measuring
Date (the "Measuring Date Working Capital"), will be calculated using the
balance sheet (the "Measuring Date Balance Sheet"), substantially in the form
attached hereto as Exhibit D, prepared by Seller in accordance with past
practice and with the consultation and full participation of Buyer and as of the
close of business on the Measuring Date. The Measuring Date Balance Sheet
together with the calculation of the Measuring Date Net Working Capital shall be
certified by the Seller's chief financial officer as having been prepared in
accordance with the terms of this Agreement. The Measuring Date Balance Sheet
shall (a) fairly present in all material respects the consolidated financial
position of the Seller and the Subsidiaries as at the close of business on the
Measuring Date in accordance with GAAP applied on a basis consistent with those
used in the preparation of the Balance Sheet (but shall not include the
footnotes and other disclosures normally required by GAAP), (b) include line
items substantially consistent with those in the Balance Sheet, and (c) be
prepared in accordance with accounting policies and practices consistent with
those used in the preparation of the Balance Sheet (including calculating
reserves in accordance with the same methodology used to calculate such reserves
in preparation of the Balance Sheet).
(c) Simultaneously with the delivery of the Measuring
Date Balance Sheet, Seller will also prepare with the consultation and full
participation of the Buyer and cause to be delivered to Buyer a calculation of
the Cash Deficit or Cash Excess as of the Measuring Date (the "Measuring Date
Statement"), in the form attached hereto as Exhibit E, together with a
certificate from its chief financial officer certifying that the Measuring Date
Statement has been prepared in accordance with the terms of this Agreement, and
a schedule based on such Measuring Date Statement setting forth Seller's
calculation of the projected Cash Deficit or Cash Excess as of the Measuring
Date (the "Measuring Date Costs").
(d) Buyer and Seller agree that they will, and agree to
cause their respective employees to, cooperate in good faith and assist in the
preparation of the Measuring Date Statement and Measuring Date Balance Sheet and
22
the calculation of Measuring Date Working Capital and Measuring Date Costs and
in the conduct of the audits, reviews and negotiations referred to in this
Section, including without limitation, making available their books, records,
work papers and personnel.
6. Conditions Precedent to the Obligation of the Buyer to Close. The
obligation of Buyer to enter into and complete the Closing is subject, at the
option of Buyer acting in accordance with the provisions of Article 11 with
respect to termination of this Agreement, to the fulfillment on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
by the Buyer:
6.1. Representations and Covenants. All representations and
warranties of the Seller contained in this Agreement (disregarding all
qualifications and exceptions contained therein related to materiality) shall be
true in all respects on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date, except for such breaches
that, individually or in the aggregate, would not have a Material Adverse Effect
on the Seller. The Seller shall have performed and complied in all respects with
all covenants and agreements required by this Agreement to be performed or
complied with by the Seller on or prior to the Closing Date, except for such
breaches that, individually or in the aggregate, would not have a Material
Adverse Effect on the Seller. The Seller shall have delivered to Buyer a
certificate, dated the date of the Closing and signed by the Seller, to the
foregoing effect.
6.2. Consents and Approvals. All Required Consents shall have
been obtained or deemed by operation of the Plan and/or the Confirmation Order
to have been given and shall be in full force and effect, and Buyer shall have
been furnished with evidence reasonably satisfactory to it that each such
Required Consent has been either (i) expressly granted, or (ii) deemed, by
operation of the Plan and/or the Confirmation Order, to have been given.
6.3. Opinion of Counsel to the Seller. The Buyer shall have
received the opinion of bankruptcy counsel to the Seller, dated the date of the
Closing, addressed to Buyer, in the form of Exhibit A.
6.4. HSR Act Filing; Canada Acts. Any person required in
connection with the Contemplated Transactions to file a notification and report
form in compliance with, or obtain any consent or approval required under, the
HSR Act and/or the Canadian Acts shall have filed such form or requested such
consent or approval and the applicable waiting period with respect to each such
form (including any extension thereof by reason of a request for additional
information) shall have expired or been terminated or the requisite consent or
approval required thereby shall have been obtained without any material
condition or limitation.
6.5. No Claims. No Claims shall be pending or, to the knowledge
of the Buyer, the Seller or any of the Subsidiaries, threatened, before any
23
Governmental Body (including investigations instituted by the United States
Department of Justice or the Federal Trade Commission in connection with
antitrust regulations) to restrain or prohibit, or to obtain damages or a
discovery order in respect of, this Agreement or the consummation of the
Contemplated Transactions or which has had or may have, in the reasonable
judgment of the Buyer, a Material Adverse Effect on the Seller.
6.6. Confirmation Order. The Confirmation Order in form and
substance satisfactory to the Buyer, shall have been entered by the Bankruptcy
Court and shall not be stayed or reversed, ordered to be reconsidered, or, in
any manner not approved by Buyer, amended or modified.
6.7. Plan Confirmation. The Plan shall have been confirmed by
January 15, 2000 and shall have become effective in accordance with its terms.
Sections 7.5, 7.6, 9.5 (other than 9.5(b)), 9.6, 9.10, (other than 9.10(a)(ii)),
9.16(a), 9.22, 14.1, 14.2, 14.3, 14.4, 15.4, and any definition of New Notes,
New Securities, New Organizational Documents, Wellspring Investment Price,
Wellspring Rights Offering, New Notes Amount, Warrants or Rights, of the Plan
shall not have been modified or supplemented without the prior consent of the
Buyer and the Plan shall otherwise be satisfactory to Buyer in all material
respects.
6.8. Management. Senior management of Reorganized
Paragon shall be reasonably acceptable to Buyer (i.e., Reorganized Paragon shall
retain at least the previously identified senior management team, with exception
of Xxxxx Xxxxxxx and Xxxxx X. Xxxx, which team presently includes Seller's
present senior management, including those individuals currently covered by the
TEEP Plan).
6.9. No Material Adverse Change. No material adverse change (or
event or condition that could result in a material adverse change) shall have
occurred in Seller's or any of the Subsidiaries' business, condition (financial
or otherwise), prospects, operations, assets or liabilities or in financial
markets generally ("Material Adverse Change") between September 26, 1999 and the
Effective Date.
6.10. Overbid Order. The Overbid Order shall remain in full
force and effect, and shall not have been stayed, vacated, modified or
supplemented without Buyer's prior consent, and the Seller shall have complied
with the terms of the Overbid Procedures and Overbid Order.
6.11. Ordinary Course. Seller shall (and shall have caused its
Subsidiaries to) have operated its business in the ordinary course consistent
with past practices and substantially consistent with the Projections from
September 26, 1999 through the Effective Date.
24
6.12. Exit Financing. All conditions precedent to closing and
initial borrowing under the Exit Financing (other than the occurrence of the
Effective Date) shall have been satisfied or waived and the Exit Financing shall
have been consummated in accordance with the material terms contained in the
Financing Commitment Letter and the Exit Financing shall otherwise be reasonably
satisfactory in form and substance to the Buyer in all material respects.
6.13. Settlement Orders. The Xxxxxxxx-Xxxxx Settlement Order and
Procter & Xxxxxx Settlement Order shall be Final Orders; provided, however, that
if such Orders are not Final Orders on the Effective Date they shall be deemed
Final Orders upon the occurrence of the Effective Date.
6.14. Settlements. The Xxxxxxxx-Xxxxx Settlement and the Procter
& Xxxxxx Settlement (including the licenses provided for therein) shall have
been extended through the Effective Date and shall be in full force and effect.
6.15. Exclusive Period. Seller shall have maintained its
exclusive period to file and solicit acceptances of a plan through January 15,
2000, and Seller shall not have either (i) filed with the Bankruptcy Court a
chapter 11 plan providing for the acquisition of Seller (or a substantial
portion of its ownership or assets) by a person or entity other than Buyer, (ii)
sought Bankruptcy Court approval of an acquisition of Seller (or a substantial
portion of its ownership or assets) other than by Buyer, or (iii) except as
described in the Plan, filed any amendment or modification to the chapter 11
plan for Seller dated August 24, 1999 (the "Standalone Plan") or any other
chapter 11 plan providing for an internal reorganization of Seller, or obtained
Bankruptcy Court approval of a disclosure statement for the Standalone Plan.
6.16. PTB Canada. PTB Canada shall have retained $200,000, or
such lesser amount as is required to satisfy its potential liabilities. (It is
understood that PTB Canada shall dividend any excess cash to Seller for
distribution pursuant to the Plan).
6.17. Other Documents. The form and substance of each of the New
Notes (whose material terms shall include, among other things, substantially the
same terms as the material terms contained in Appendix 1), New Note Indenture
(whose material terms shall include, among other things, substantially the same
terms as the material terms contained in Appendix 1), Restated Bylaws, Restated
Certificate of Incorporation, Registration Rights Agreement and Warrants, shall
be satisfactory to Buyer in all material respects and all conditions precedent
to the issuance by Reorganized Paragon of the New Notes and the Warrants other
than the Closing hereunder shall have been satisfied.
25
7. Conditions Precedent to the Obligation of the Seller to Close. The
obligation of the Seller to enter into and complete the Closing is subject, at
the option of the Seller acting in accordance with the provisions of Article 11
with respect to termination of this Agreement, to the fulfillment on or prior to
the Closing Date of the following conditions, any one or more of which may be
waived by the Seller:
7.1. Representations and Covenants. The representations and
warranties of the Buyer contained in this Agreement shall be true in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the Closing Date. The Buyer shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date. Buyer shall have delivered to the Seller a certificate, dated the
date of the Closing and signed by an officer of Buyer, to the foregoing effect.
7.2. Certain Consents and Approvals. The Required Consents shall
have been obtained or deemed by operation of the Plan and/or the Confirmation
Order to have been given and shall be in full force and effect.
7.3. HSR Act Filing; Canadian Acts. Any person required in
connection with the Contemplated Transactions to file a notification and report
form in compliance with, or obtain any consent or approval required under, the
HSR Act and/or the Canadian Acts shall have filed such form or requested such
consent or approval and the applicable waiting period with respect to each such
form (including any extension thereof by reason of a request for additional
information) shall have expired or been terminated or the requisite consent or
approval required thereby shall have been obtained without any material
condition or limitation.
7.4. Confirmation Order. The Confirmation Order shall have been
entered by the Bankruptcy Court and shall not be stayed or reversed, ordered to
be reconsidered, or, in any manner not approved by Seller, amended or modified.
7.5. New Securities Issued. All conditions precedent to the
issuance of the New Notes and Warrants (other than the Closing hereunder) shall
have been satisfied.
8. Designation of Executory Contracts; Employment Agreements;
Confirmation of Overbid Order and Auction.
(a) The Buyer will have until thirty days before the
Confirmation Hearing to designate in writing the previously nonassumed executory
Contracts and unexpired Leases it wishes Seller to assume or reject, in addition
to the executory contracts and unexpired leases that Seller shall have
identified to the Buyer on or before thirty-five days before the Confirmation
Hearing that it intends to assume
26
or reject. The Seller has determined to reject all non-designated, nonassumed
executory Contracts and unexpired Leases and to assume all designated executory
Contracts and unexpired Leases.
(b) Buyer shall use its good faith efforts to agree to mutually
acceptable employment terms with the senior management team referred to in
Section 6.8 on or before one day before the Disclosure Statement Hearing;
provided that if Buyer does not either (a) waive the condition set forth in
Section 6.8 on or prior to the scheduled Closing Date, or (b) agree to such
employment terms on or before such date other than as a result of Seller's
actions, Buyer shall waive its rights to the Termination Fee.
(c) Seller agrees that (i) Buyer's bid is the best bid and that
the Bid Deadline has passed and the Auction is concluded and (ii) other than
sales to customers in the ordinary course of Seller's and its Subsidiaries'
businesses, it shall not seek any higher or better offer for all or any portion
of the Seller, its Subsidiaries or any of their respective assets or businesses
unless this Agreement is terminated according to its terms.
9. Monetization. Buyer shall use its best efforts (which shall not
require Buyer to commit or expend its own funds) prior to the Effective Date to
obtain third party financing for Reorganized Paragon if such third party
financing is available on commercially reasonable terms that (i) will not, among
other things, materially diminish the value of the New Common Stock and (ii)
will not be materially different than the terms of the New Notes, in lieu of all
or a portion of the New Notes (the "Monetization"), in each case in the
determination of Seller and Buyer. Any Monetization shall be described in the
form of a binding commitment delivered to the Seller not later than ten days
prior to the Confirmation Hearing. Reorganized Paragon shall distribute the net
cash proceeds of such Monetization, if any, pursuant to the Plan on the
Effective Date or as soon thereafter as practicable in place of New Notes with a
principal amount equal to such net cash proceeds. The Monetization shall not
delay the occurrence of the Effective Date if all other conditions to the
Effective Date are satisfied.
10. Survival of Representations and Warranties of the Seller.
Notwithstanding any right of the Buyer to investigate fully the affairs of the
Seller and the Subsidiaries and notwithstanding any knowledge of facts
determined or determinable by the Buyer pursuant to such investigation or right
of investigation, the Buyer has the right to rely fully upon the
representations, warranties, covenants and agreements of the Seller contained in
this Agreement or in any documents delivered pursuant to this Agreement. All
representations and warranties of the Seller contained in this Agreement shall
terminate on the Closing Date.
27
11. Termination of Agreement.
11.1. Termination. This Agreement may be terminated prior to
the Closing as follows:
(a) at the election of the Seller, if any one or more of
the conditions to the obligation of the Seller to close set forth in Article 7
has not been fulfilled as of the scheduled Closing Date;
(b) at the election of the Buyer, if any one or more of
the conditions to the obligation of the Buyer to close set forth in Article 6
has not been fulfilled as of the scheduled Closing Date;
(c) at the election of the Buyer, if there is any
injunction, stay, order, or decree of any nature of any Governmental Body of
competent jurisdiction that is in effect that prohibits or materially restrains
the consummation of the Contemplated Transactions;
(d) at the election of the Seller, if the Buyer has
materially breached any representation, warranty, covenant or agreement
contained in this Agreement, which breach cannot be or is not cured prior to the
scheduled Closing Date;
(e) at the election of the Buyer, if the Seller has
breached any representation, warranty, covenant or agreement contained in this
Agreement, which breach cannot be or is not cured prior to the scheduled Closing
Date and which breach(es), individually or in the aggregate, would have a
Material Adverse Effect on the Seller;
(f) at any time on or prior to the Closing Date, by
mutual written consent of the Seller and the Buyer;
(g) at any time after February 15, 2000, at the election
of the Buyer, if by such date the Effective Date has not occurred; or
(h) at any time after January 15, 2000, at the election
of Buyer, if by such date the Confirmation Order has not been entered.
If this Agreement so terminates, it shall become null and void and
have no further force or effect, except as provided in Section 11.2.
28
11.2. Survival After Termination; Expense Reimbursement and
Termination Fee.
(a) If this Agreement terminates pursuant to
Section 11.1 and the Contemplated Transactions are not consummated, this
Agreement shall become null and void and have no further force or effect except
that any such termination shall be without prejudice to the rights of (i) Buyer
to receive the damages and payments described in Section 11.2(b) and 11.2(g) or
(ii) Seller to seek damages on account of the nonsatisfaction of the conditions
set forth in Article 7 resulting from the material breach or violation of the
representations, warranties, covenants or agreements of Buyer under this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
provisions of Section 5.2 relating to the obligation of the Buyer to keep
confidential and not to use certain information and data obtained by them from
the Seller or the Subsidiaries, as the case may be, and to return documents to
the Seller or the Subsidiaries, as the case may be, shall remain in full force
and effect.
(b) The parties agree that if this Agreement is
terminated under Section 11.1 for any reason other than (i) the occurrence of a
Material Adverse Change, (ii) notwithstanding the reasonable efforts of Seller,
the Plan is not confirmed or confirmable by the Bankruptcy Court or not
consummated due to, as applicable, (x) failure to obtain the requisite votes
accepting the Plan or (y) the Plan's failure to comply with the provisions of
the Bankruptcy Code, (iii) pursuant to Sections 11.1(b), but only if the failure
to satisfy such condition is as a result of the non-satisfaction of Section 6.4,
which was not the result of the failure by Seller to make any timely filing or
provide any required submission or information, 11.1(c) or 11.1(d), or (iv)
pursuant to Sections 11.1(g) or 11.1(h), but only if the event specified in such
Section has not occurred on or prior to the date giving rise to such termination
right (and could not have occurred on or prior to the date of Buyer's
termination pursuant thereto) solely as a result of an act of God, the Buyer
shall be entitled at its option to either (1) the remedy of specific performance
or (2) payment of a $2 million Termination Fee, which shall be in lieu of any
Termination Fee provided under the Overbid Order and the Stipulation. Buyer
shall not otherwise have the right to a Termination Fee arising from the
confirmation of a chapter 11 plan providing for an internal reorganization of
Seller.
(c) If Buyer elects to receive payment of the
Termination Fee (in lieu of specific performance) under Section 11.2(b), such
payment, together with the Expense Reimbursement, shall (i) be full
consideration for the Buyer's efforts and expenses in connection with this
Agreement and the Contemplated Transactions, including the substantial due
diligence efforts of the Buyer and its professionals and advisors and (ii)
constitute liquidated and agreed damages in respect of this Agreement and the
Contemplated Transactions, and Seller and Reorganized Paragon shall have no
further obligations under this Agreement or further liability to Buyer. The
Buyer and Seller believe that it is impossible to determine accurately the
29
amount of all damages that Buyer would incur by virtue of the failure to proceed
with the Contemplated Transactions, and Buyer's sole and exclusive remedy for
any such failure shall be to receive payment of the Expense Reimbursement and,
at Buyer's election, either specific performance or the Termination Fee. Except
as provided in this Section, Buyer shall have no right or remedy against Seller,
at law or in equity, by reason of a breach by Seller of its obligation to
proceed with the Contemplated Transactions.
(d) The Expense Reimbursement and Termination Fee
shall constitute first priority administrative expenses of the Seller pursuant
to sec tion 503(b) of the Bankruptcy Code.
(e) Notwithstanding anything herein to the contrary, in
no event shall the aggregate of all damages for which Seller shall have an
obligation to compensate Buyer in respect of any Claim or Claims for breach of
this Agreement exceed the Termination Fee and Expenses Reimbursement.
(f) The Seller acknowledges that the Buyer would not
have invested efforts in negotiating and documenting the Contemplated
Transactions and incurring duties to pay its Representatives if the Buyer were
not entitled to the Termination Fee plus Expense Reimbursement in accordance
with the terms hereof.
(g) Seller, after consultation with the Creditors'
Committee, the Equity Committee, Procter & Xxxxxx and Xxxxxxxx-Xxxxx, hereby
acknowledges and reconfirms that the Buyer shall receive the Expense
Reimbursement if this Agreement is terminated for any reason, except that Buyer
shall only receive the Partial Expense Reimbursement if this Agreement is
terminated pursuant to Section 11.1(d).
(h) If this Agreement is terminated by Seller pursuant
to Section 11.1(d), Seller shall set-off the Partial Expense Reimbursement
against damages (if any) which it may be awarded by Final Order against Buyer.
12. Mabesa; Dilution.
(a) On the Effective Date, Reorganized Paragon and Buyer shall
enter into an option agreement (the "Mabesa Option Agreement") which shall
provide that if during the period commencing on the Effective Date and ending on
the date which is three hundred and sixty-five days thereafter, Reorganized
Paragon determines to cause its Subsidiary to exercise its option (the "Mabesa
Option") to acquire up to an additional 34% of the shares of Groupo P.I. Xxxx,
X.X. de C.V., Buyer shall have the right to invest up to an additional $25
million (the "Mabesa Amount") to be used by Reorganized Paragon for such
purpose. The Mabesa Option Agreement will also provide that the if Buyer invests
the Mabesa Amount in
30
Reorganized Paragon, upon making such investment, Buyer and those persons who
exercise preemptive rights shall acquire additional shares of New Common Stock
attributable to the Mabesa Amount (the "Mabesa Shares") at a purchase price per
share based on the price per share paid for the Purchased Shares hereunder. The
Mabesa Shares will dilute, pro rata, the percentage of New Common Stock that
will be issued (x) to Buyer and (y) to Classes 4 and 5 under the Plan. The
Mabesa Option Agreement will provide that the investment of the Mabesa Amount
will be on terms mutually acceptable to Buyer and Reorganized Paragon and that
Buyer reserves the right to fund the exercise of the Mabesa Option in any other
economically equivalent manner permitted under applicable law; provided,
however, that such investment will be in a form which allows for the exercise of
preemptive rights.
(b) The New Common Stock to be purchased by Buyer and any New
Common Stock purchased pursuant to the Rights Offering shall be subject to pro
rata dilution pursuant to Section 12(a) and the Management Incentive Plan.
13. Miscellaneous.
13.1. Certain Definitions.
(a) Capitalized terms used herein but not otherwise
defined herein have the meaning assigned thereto in the Bankruptcy Code or in
the Plan, as applicable. In addition to the terms defined above, as used in this
Agreement, the following terms have the following meanings:
"Accounts Payable" means all accounts payable of the Seller and the
Subsidiaries, taken as a whole, whether arising under a Contract or otherwise.
"Accounts Receivable" means any right to payment for goods sold or leased
or for services rendered, whether arising under a Contract or otherwise.
"affiliate" means, with respect to any person, any other person
controlling, controlled by or under common control with, or the parents, spouse,
lineal descendants or beneficiaries of, such person.
"Auction" has the meaning set forth in the Overbid Order.
"Bankruptcy Code" means title 11 of the United States Code, as amended
from time to time, as applicable to the Case.
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as
amended, promulgated under section 2075 of title 28 of the United States Code,
as applicable to the Case.
31
"Bid Deadline" has the meaning set forth in the Overbid Order.
"Business Day" means any day other than a Saturday, Sunday or "legal
holiday" as defined in Bankruptcy Rule 9006(a).
"Cash Deficit" means the amount, if any, by which the amount of (a) Exit
Financing Costs and other closing expenses (not to exceed $2 million),
Monetization costs, the amount of any proceeds of sales or other dispositions of
assets out of the ordinary course consummated after October 14, 1999 (with the
exception of the Macon equipment line sale to Groupo P.I. Xxxx, X.X. de C.V.),
reductions in capital expenditures from the amount included in the Projections
(such amount to be determined in consultation with Buyer), the amount of any
income tax refunds not included in the Projections, any payments after October
14, 1999 in respect of indebtedness of PMI to Seller in excess of $2.9 million,
and Allowed Administrative Claims (exclusive, however, of the Assumed
Liabilities listed on Schedule 13.1 hereto), including without limitation all
bankruptcy-related professional fees,1/ "confirmation bonuses," and paid and
estimated pro rated 1999 tax liabilities, (b) Priority Tax Claims and Other
Priority Claims, and (c) Priority Claims and Class 2 Claims (secured) paid in
cash or reinstated by Reorganized Paragon ((a), (b) and (c), above,
collectively, the "Cash Deductions") exceeds cash available for distribution
under the Plan on the Effective Date.
"Cash Excess" means the amount, if any, by which the amount of cash
available for distribution on the Effective Date exceeds the Cash Deductions.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Products" means all goods manufactured by the Seller or any of
its Subsidiaries.
"Confirmation Date" means the date that the Confirmation Order is entered
by the Bankruptcy Court.
"Confirmation Hearing" means the hearing held by the Bankruptcy Court
pursuant to section 1128 of the Bankruptcy Code on confirmation of the Plan, as
such hearing may be adjourned or continued from time to time.
"Confirmation Order" means the Order of the Bankruptcy Court confirming
the Plan pursuant to section 1129 of the Bankruptcy Code.
--------
1/ Non-ordinary course professionals shall submit an estimate of their total
unpaid fees and expenses at least 10 days prior to the date of the
Confirmation Hearing.
32
"Copyrights" means any foreign or United States copyright registrations
and applications for registration thereof, and any non-registered copyrights.
"Creditors Committee" means the Official Committee of Unsecured Creditors
appointed in the Case by the United States Trustee pursuant to section 1102 of
the Bankruptcy Code, on or about January 16, 1998, as reconstituted from time to
time.
"DIP Credit Agreement" means that certain Debtor in Possession credit
facility approved by the Bankruptcy Court by interim order dated January 21,
1998 and Final Order dated January 30, 1998, as provided under the Revolving
Credit and Guaranty Agreement dated as of January 7, 1998, among the Debtor, as
borrower, certain subsidiaries of the Debtor, as guarantors, and the DIP Bank
Agent, as agent for the lenders thereunder, as amended by the First Amendment,
dated January 30, 1998, the Second Amendment, dated March 23, 1998, the Third
Amendment, dated April 15, 1998, the Fourth Amendment, dated September 28, 1998,
and the Fifth Amendment, dated as of June 14, 1999, and as thereafter amended in
accordance with its terms up to and including the Effective Date, or the
agreement or other documents evidencing any successor or replacement
postpetition financing facility, and all documents related thereto.
"Disclosure Statement" means the disclosure statement, including all
exhibits, appendices and attachments thereto, filed in connection with the Plan
and approved by Order of the Bankruptcy Court in accordance with section 1125 of
the Bankruptcy Code, as such statement may be amended or supplemented from time
to time.
"Disclosure Statement Hearing" means the hearing held by the Bankruptcy
Court to consider approval of the Disclosure Statement, as such hearing may be
adjourned or continued from time to time.
"D&O Insurance" means tail coverage for a period of six years under
Seller's existing or comparable directors and officers insurance policy covering
its current directors and officers.
"D&O Insurance Cost" means the cost of the D&O Insurance.
"Effective Date" means the first Business Day following satisfaction of
the conditions precedent to the effectiveness of the Plan specified in the Plan
(subject to the terms of this Agreement), unless otherwise waived as provided in
the Plan (subject to the terms of this Agreement), or such other date fixed by
the Seller upon notice to the Bankruptcy Court.
"Employee" means any individual employed by the Seller or any of the
Subsidiaries.
33
"Environment" means navigable waters, waters of the contiguous zone, ocean
waters, natural resources, surface waters, ground water, drinking water supply,
land surface, subsurface strata, ambient air, both inside and outside of
buildings and structures, man-made buildings and structures, and plant and
animal life on earth.
"Equity Committee" means the Official Committee of Interest Holders
appointed in the Case by the United States Trustee pursuant to section 1102 of
the Bankruptcy Code, on or about November 2, 1998, as reconstituted from time to
time.
"Exit Financing" means a working capital line of credit for post-Effective
Date operations that provides for a committed facility of not less than $75
million (subject to borrowing availability) as of the Effective Date (including
the DIP Credit Agreement, if reinstated pursuant to the Plan).
"Exit Financing Costs" means all fees and expenses payable on or prior to
the Effective Date in connection with the Exit Financing pursuant to the
Financing Commitment Letter.
"Expense Reimbursement" has the meaning set forth in the Overbid Order.
"Final Order" means an order or judgment of the Bankruptcy Court that has
not been reversed, stayed, modified or amended and as to which the time to
appeal or seek review, rehearing, reargument or certiorari has expired and as to
which no appeal or petition for review, rehearing, reargument, stay or
certiorari is pending, or as to which any right to appeal or to seek certiorari,
review, or rehearing has been waived, or, if an appeal, reargument, petition for
review, certiorari or rehearing has been sought, the order or judgment of the
Bankruptcy Court that has been affirmed by the highest court to which the order
was appealed or from which the reargument, review or rehearing was sought, or
certiorari has been denied, and as to which the time to take any further appeal
or seek further reargument, review or rehearing has expired.
"Financing Commitment Letter" means the commitment and/or agreement from
financial institutions with respect to a revolver/working capital facility (not
for purposes of the Monetization and which would be undrawn on the Effective
Date except for purposes of funding the Cash Deficit) of at least $75 million
(subject to borrowing availability) that would be available to Reorganized
Paragon on the Effective Date. A copy of the Financing Commitment Letter is
attached hereto as Exhibit B.
"Hazardous Substance" means any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance or waste, petroleum or petroleum-derived substance or waste,
radioactive substance or waste, or any constituent of any such substance or
waste regulated under or defined by any Safety and Environmental Law.
34
"IRS" means the Internal Revenue Service.
"Internet Assets" means any internet domain names and other computer user
identifiers and any rights in and to sites on the world wide web including
rights in and to any text, graphics, audio and video files, and html or other
code incorporated in such sites.
"Inventories" means all of the inventory of the Seller and its
Subsidiaries including without limitation: (i) all raw materials, work in
process, parts, components, assemblies, supplies and materials used or consumed
in the business of the Seller and its Subsidiaries; (ii) all goods, wares and
merchandise, finished or unfinished, held for sale or lease or leased or
furnished or to be furnished under contracts of service; and (iii) all goods
returned or repossessed by the Seller and its Subsidiaries.
"Xxxxxxxx-Xxxxx" means Xxxxxxxx-Xxxxx Corporation, a Delaware corporation.
"Xxxxxxxx-Xxxxx Settlement" means the settlement agreement dated March 19,
1999, as amended through the date of this Agreement, by and between the Seller
and Xxxxxxxx-Xxxxx (including all exhibits thereto and any related agreements).
"Xxxxxxxx-Xxxxx Settlement Order" means the Order of the Bankruptcy Court
authorizing and approving the Xxxxxxxx-Xxxxx Settlement.
"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, license, charge, option, right of first refusal, easement,
servitude, transfer restriction, encumbrance or any other restriction or
limitation whatsoever.
"Management Employment Agreement" means the existing or superseding
employment contracts agreed to between Seller's senior management and Buyer.
"Management Incentive Plan" means the equity incentive plan for members of
Reorganized Paragon's management on terms which are otherwise mutually
acceptable for Seller and Buyer in substantially the form set forth in Appendix
2.
"Mask Works" has the meaning set forth in section 901(a)(2) of Title 17 of
the United States Code.
"Material Contract" means (i) any (x) Lease for real property or (y) Lease
for personal property, in each case requiring aggregate payments after Closing
of $250,000 or more; (ii) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets that has a term of at least one year
and that requires aggregate payments after Closing of $250,000 or more; (iii)
any contract that requires aggregate payments after Closing of $250,000 or more;
(iv) any sales, distribution or other similar contracts not entered into in the
ordinary course providing for the sale by
35
the Seller or any of its Subsidiaries of materials, supplies, goods, services,
equipment or other assets that requires aggregate payments after Closing of
$250,000 or more; or (v) any partnership, joint venture or other similar
Contract.
"Net Working Capital" means Accounts Receivable plus Inventories less
Accounts Payable (including checks issued but not cleared) as determined in
accordance with GAAP as consistently applied.
"New Note Indenture" means the indenture, dated as of the Effective Date,
executed by Reorganized Paragon and the New Note Indenture Trustee, pursuant to
which the New Notes will be issued, which Indenture will contain terms
substantially similar to the summary of terms contained on Appendix 1 annexed
hereto.
"New Note Indenture Trustee" means any person denominated as the trustee
in the New Note Indenture.
"New Notes" means, collectively, the notes to be issued on or after the
Effective Date by Reorganized Paragon pursuant to the New Note Indenture in the
principal amount of $160,000,000, as adjusted in accordance with the Note
Adjustment provisions of the Plan.2/ The principal terms of the New Notes are
attached hereto as Appendix 1.
"Overbid Order" means that certain Order entered by the Bankruptcy Court
on July 13, 1999 approving the Expense Reimbursement and Termination Fee and
"Overbid Procedures" (as defined therein); as modified by that certain
Stipulation approved by the Bankruptcy Court on September 13, 1999 and the
commitment letter between Wellspring Capital Management LLC and Seller dated
October 14, 1999.
"Overbid Procedures" means the Overbid Procedures approved by the Overbid
Order as amended or modified from time to time with the consent of the Buyer and
Seller.
"PMI" means Paragon-Mabesa International, S.A. de C.V.
--------
2/ Alternatively, Reorganized Paragon would issue $150 million of New Notes
(subject to the Monetization and the Note Adjustment) in substantially the
form set forth in Appendix 1 hereto, with the exception that the interest
rate for such New Notes shall not be the rate provided in Appendix 1 but,
instead, shall be the prevailing market rate for high-yield notes rated
"B" on the most recent weekly rating date prior to the Effective Date, as
reported by Xxxxxxx Xxxxx Xxxxxx, rounded down to the nearest 1/8th.
Seller, after consultation with the Creditors Committee, Procter & Xxxxxx,
Xxxxxxxx-Xxxxx and the Equity Committee, shall elect whether to accept
this alternate form of the New Notes on or prior to the second day prior
to the Disclosure Statement Hearing.
36
"PTB Canada" means Paragon Trade Brands (Canada) Inc., a Canadian
corporation.
"Partial Expense Reimbursement" means $565,000, representing fees, costs
and expenses included in the Expense Reimbursement which were incurred (i) on or
prior to October 14, 1999 and (ii) in connection with the Wellspring Commitment
(as defined in the Overbid Order) and the satisfaction of the conditions
thereof.
"Patents" means any foreign or United States patents and patent
applications including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"person" means any individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.
"Petition Date" means January 6, 1998.
"Plan" means the Second Amended Plan of Reorganization, dated November 15,
1999, for the Seller, and all exhibits and supplements hereto, as amended or
modified by the Proponents (as defined in the Plan) in accordance with the Plan,
the Bankruptcy Code and the Bankruptcy Rules and the terms of this Agreement,
pursuant to which the Contemplated Transactions will be consummated in
accordance with the terms of this Agreement. A copy of the Plan is attached
hereto as Exhibit C.
"Procter & Xxxxxx" means The Procter & Xxxxxx Company, an Ohio
corporation.
"Procter and Xxxxxx Settlement Agreement" means the settlement agreement
dated February 2, 1999, as amended through the date of this Agreement, by and
between the Seller and P&G (including all exhibits thereto and any related
agreements).
"Procter and Xxxxxx Settlement Order" means the Order of the Bankruptcy
Court authorizing and approving the Procter and Xxxxxx Settlement Agreement.
"property" or "properties" means real, personal or mixed property,
tangible or intangible.
"Restated Bylaws" means the bylaws of Reorganized Paragon, as amended and
restated in connection with the Plan.
"Restated Certificate of Incorporation" means the certificate of
incorporation of Reorganized Paragon, as amended and restated in connection with
the Plan, which shall
37
provide that holders of New Common Stock will have the right to participate on a
pro rata basis in any offering of New Common Stock by Reorganized Paragon on the
same terms and conditions as Buyer, including, without limitation, with respect
to the Mabesa Amount (the "Preemptive Rights"), provided that Buyer shall have
no obligation to invest the Xxxx X.X. Amount or any portion thereof.
"Rights" means the rights to purchase shares of New Common Stock for a
purchase price based upon the Buyer's purchase price in accordance with the
principal terms set forth on Appendix 4.
"Rights Offering" has the meaning set forth in Appendix 4.
"Safety and Environmental Laws" means all Laws and Orders relating to
pollution, protection of the Environment, public or worker health and safety, or
the emission, discharge, release or threatened release of Hazardous Substances
into the Environment or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances including the Comprehensive Environmental Response,
Compensation and Liability Act, 42 X.X.X.xx. 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the Toxic Substances
Control Act, 15 X.X.X.xx. 2601 et seq., the Federal Water Pollution Control Act,
33 X.X.X.xx. 1251 et seq., the Clean Air Act, 42 X.X.X.xx. 7401 et seq., the
Federal Insecticide, Fungicide and Rodenticide Act, 7 X.X.X.xx. 121 et seq., the
Occupational Safety and Health Act, 29 X.X.X.xx. 651 et seq., the Asbestos
Hazard Emergency Response Act, 15 X.X.X.xx. 2601 et seq., the Safe Drinking
Water Act, 42 X.X.X.xx. 300f et seq., the Oil Pollution Act of 1990, 33
X.X.X.xx. 2701 et seq., and analogous state acts.
"Seller's Disclosure Memorandum" means the disclosure memorandum of even
date herewith delivered by the Seller to the Buyer in connection with the
execution and delivery of this Agreement by the parties hereto.
"Software" means any computer software programs, source code, object code,
data and documentation.
"TEEP Plan" means that certain top eight executives incentive plan
authorized and approved by Final Order of the Bankruptcy Court dated August 10,
1998.
"Termination Fee" has the meaning set forth in the Overbid Order.
"Trade Secrets" means any trade secrets, research records, processes,
procedures, manufacturing formulae, technical know-how, technology, blue prints,
designs, plans, inventions (whether patentable and whether reduced to practice),
invention disclosures and improvements thereto.
38
"Trademarks" means any foreign or United States trademarks, service marks,
trade dress, trade names, brand names, designs and logos, corporate names,
product or service identifiers, whether registered or unregistered, and all
registrations and applications for registration thereof.
"Wal*Mart" means Wal*Mart Stores, Inc.
"Warrants" means warrants to purchase New Common Stock of Reorganized
Paragon which shall contain terms substantially similar to the summary of terms
contained on Appendix 3.
"Weyerhaeuser" means Weyerhaeuser Company, a Washington corporation.
"White Cloud Arrangement" means the placement of orders by Wal*Mart, and
Seller's or Reorganized Paragon's fulfillment of such orders for diaper products
manufactured under the "White Cloud" trademark or any understanding or agreement
between Wal*Mart and Seller or Reorganized Paragon as to the placement of such
orders and the fulfillment thereof.
(b) The following capitalized terms are defined in the
following Sections of this Agreement:
Term Section
---- -------
Audited Financials 3.8
Balance Sheet 3.8
Balance Sheet Date 3.8
Bankruptcy Court Recitals
Benefit Plan 3.20
Broker 5.5
Buyer Preamble
Canadian Acts 4.2
Case Recitals
Claims 3.15
Closing 1.1
Closing Costs 5.10(e)
Closing Date 2
Closing Statement 5.10(e)
Code 3.10(f)
Commonly Controlled Entity 3.20(c)
Contemplated Transactions 3.1
Contracts 3.13
ERISA 3.20
Exchange Act 3.7
39
Term Section
---- -------
Governmental Bodies 3.11
HSR Act 4.2
Identified SEC Documents 3.7
Intellectual Property 3.18(a)
Interim Financials 3.8
IP Licenses 3.18(b)
Laws 3.11
Liabilities 3.8
Mabesa Amount 12
Mabesa Shares 12
Mabesa Option 12
Mabesa Option Agreement 12
Material Adverse Change 6.9
Material Adverse Effect on Seller 3.1
Material Environment Permits 3.14(a)
Material Permits 3.12
Measuring Date 5.10(a)
Measuring Date Balance Sheet 5.10(b)
Measuring Date Costs 5.10(c)
Measuring Date Statement 5:10(c)
Measuring Date Working Capital 5.10(b)
Monetization 9
New Common Stock Recitals
Orders 3.11
Permits 3.12
Permitted Liens 3.19
Projections 3.25
Purchase Price 1.1
Purchased Shares 1.1
Real Properties 3.14(c)
Reorganized Paragon Recitals
Representatives 5.2
Required Consents 3.13
SEC 3.7
SEC Documents 3.7
Seller Preamble
Sellers' Fee 5.5
Seller's Termination Fee 11.2(d)
Standalone Plan 6.15
Subsidiaries 3.2
Tangible Property 3.17
Taxes 3.10(a)
13.2. Consent to Jurisdiction and Service of Process. All
disputes arising out of or related to this Agreement, including, without
limitation, any dispute relating to the interpretation, meaning or effect of any
provision hereof, will be resolved in the Bankruptcy Court and the parties
hereto each submit to the exclusive jurisdiction of the Bankruptcy Court for the
purpose of adjudicating any such dispute.
13.3.Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, or sent by facsimile transmission or, if mailed, five days after the
date of deposit in the United States mails, as follows:
(i) if to the Buyer, to:
PTB Acquisition Company, LLC
c/o Wellspring Capital Management, LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Drain, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(ii) if to the Seller, to:
Paragon Trade Brands, Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
40
with a copy to:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
13.4. Entire Agreement. This Agreement and any other collateral
agreements executed in connection with the consummation of the Contemplated
Transactions (including, without limitation, the Overbid Order) contain the
entire agreement among the parties with respect to the purchase of the Purchased
Shares and supersede all prior agreements, written or oral, with respect
thereto.
13.5. Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the Buyer and the Seller or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any other such right,
power or privilege. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity. The rights and remedies of any party based upon, arising out
of or otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in this Agreement or any documents
delivered pursuant to this Agreement shall in no way be limited by the fact
41
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement or any documents delivered pursuant to this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach.
13.6. Governing Law. This Agreement shall be governed and
construed in accordance with (a) the laws of the State of New York applicable to
agreements made and to be performed entirely within such State and (b) any
applicable provisions of the Bankruptcy Code.
13.7. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable except by
operation of law, except that Buyer may assign its rights hereunder to any of
its affiliates, to any successor to all or substantially all of its business or
assets or to any bank or other financial institution that may provide financing
for the Contemplated Transactions.
13.8. Usage. All pronouns and any variations thereof refer to
the masculine, feminine or neuter, singular or plural, as the context may
require. All terms defined in this Agreement in their singular or plural forms
have correlative meanings when used herein in their plural or singular forms,
respectively. Unless otherwise expressly provided, the words "include,"
"includes" and "including" do not limit the preceding words or terms and shall
be deemed to be followed by the words "without limitation."
13.9. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
13.10. Exhibits and Schedules; Cross References. The Exhibits,
Schedules and Seller's Disclosure Memorandum are a part of this Agreement as if
fully set forth herein and all references to this Agreement shall be deemed to
include the Exhibits, Schedules and Seller's Disclosure Memorandum. All
references herein to Sections, Exhibits, Schedules and Seller's Disclosure
Memorandum shall be deemed references to such parts of this Agreement, unless
the context shall otherwise require. Disclosure of any fact or item in any
Schedule hereto or in any Section of Seller's Disclosure Memorandum referenced
by a particular Section in this Agreement shall not be deemed disclosed with
respect to any other Section or Schedule or in any other section of Seller's
Disclosure Memorandum unless an explicit cross-reference appears indicating the
other Sections or Schedules to which such fact or item also relates.
42
13.11. Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
13.12. Interpretation. The parties acknowledge and agree that:
(i) each party and its counsel reviewed and negotiated the terms and provisions
of this Agreement and have contributed to its revision; (ii) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto, regardless of which party was generally responsible
for the preparation of this Agreement.
13.13. Severability of Provisions.
(a) If any provision or any portion of any provision of
this Agreement shall be held invalid or unenforceable, the remaining portion of
such provision and the remaining provisions of this Agreement shall not be
affected thereby.
(b) If the application of any provision or any portion of
any provision of this Agreement to any person or circumstance shall be held
invalid or unenforceable, the application of such provision or portion of such
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby.
13.14. Assignment by Buyer. Subject to, and without limiting
Buyer's obligation to timely consummate this Agreement in accordance with its
terms, the parties acknowledge and agree that the Buyer may assign its right to
purchase any or all of the Purchased Shares to one or more assignees upon
written notice to the Seller at any time prior to the Closing, subject only to
such assignee confirming in writing to the Seller as follows:
(a) Such assignee is duly organized, validly existing
and in good standing under the Laws of the jurisdiction under which it was
organized and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being and as heretofore
conducted.
(b) Such assignee agrees to assume the obligations of
the Buyer to purchase the Purchased Shares assigned to such assignee.
(c) Such assignee has the full legal right and power
and all authority and approvals required to enter into, execute and deliver its
assumption confirmation and to perform fully its obligations hereunder and
thereunder. Such assumption confirmation has been duly executed and delivered by
such assignee, and is a valid and binding obligation of such assignee
enforceable against such assignee in accordance with its terms. The execution
and delivery by such assignee of such
43
assignment confirmation, the consummation of the transactions contemplated
thereby and the performance by such assignee of its obligations thereunder will
not (a) violate any provision of such assignee's governing or organizational
documents; (b) except for filings under the HSR Act, require such assignee to
obtain any consent, approval, authorization or action of, or make any filing
with or give any notice to, any Governmental Body or any other person; (c)
violate, conflict with or result in the breach of any of the terms and
conditions of, result in a material modification of the effect of, otherwise
cause the termination of or give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both constitute) a
default under, any Contract to which such assignee is a party or by or to which
such assignee or any of its properties is or may be bound or subject; or (d)
violate any Law or Order of any Governmental Body applicable to such assignee.
(d) Such assignee is purchasing the Purchased Shares
assigned to it for its own account for investment and not with a view to public
resale or distribution thereof.
13.15. Seller's Knowledge. For purposes of any representation or
warranty of Seller set forth in this Agreement, the words "to Seller's
knowledge" or "to the knowledge of Seller" shall mean the actual knowledge as of
the date of such representation or warranty of any of the persons identified on
Schedule 13.15 hereto.
44
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BUYER:
PTB ACQUISITION COMPANY, LLC
By: /s/ Xxxxx X. Xxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Treasurer
SELLER:
PARAGON TRADE BRANDS, INC.
By: /s/ Xxxx X. Xxxxx
---------------------
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
The undersigned hereby agrees that it shall cause the Buyer to pay,
or that it shall pay, any damages to which the Seller may be entitled in the
event that the foregoing Stock Purchase Agreement is terminated by the Seller
pursuant to Section 11.1(d) thereof.
WELLSPRING CAPITAL MANAGEMENT LLC
By: /s/ Xxxxx X. Xxxxxxx
------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Treasurer
45
SCHEDULE 5.10
Calculation of Cash Deficit and Cash Excess
-------------------------------------------
The Cash Deficit and Cash Excess shall be adjusted upward or downward, as the
case may be, by the amount by which the following accrued liabilities are
greater or less on the Measuring Date than the amount set forth opposite such
liabilities:
1. Accrued payroll, payroll taxes and related liabilities (including PTB
Canada): $1.6 million
2. Accrued P&G Royalty: $5.3 million
3. Accrued K-C Royalty: $3 million
46
SCHEDULE 13.1
Reorganized Paragon Assumed Liabilities
---------------------------------------
1. Pre-Effective Date accrued ordinary course operating and working capital
expenses and accounts payable (as provided in Projections), with the
exception of:
a. One-half of Defined Contribution Plan Payable
b. One-half of Incentive PIP (1999 Bonus)
c. Any modification of (a)-(b)
2. Administrative Claims or expenses incurred out of the ordinary course of
the Projections at Wellspring's option or insistence
3. The D&O Insurance Cost
--------------------------------------------------------------------------------
The aggregate amount of (a)-(b) shall not exceed $2.7 million.
47
