EXHIBIT 2.1
Execution Copy
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ASSET PURCHASE AGREEMENT
dated as of
July 27, 2001
between
BEACON MANUFACTURING COMPANY
and
BEACON ACQUISITION CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.............................................................. 2
1.1 Definitions..................................................................... 2
ARTICLE II PURCHASE AND SALE........................................................ 16
2.1 Purchase and Sale............................................................... 16
2.2 Nonassignable Contracts......................................................... 16
2.3 Mixed Assets.................................................................... 17
ARTICLE III ASSUMPTION OF LIABILITIES................................................ 17
3.1 Retained Liabilities............................................................ 17
3.2 Assumed Liabilities............................................................. 18
ARTICLE IV PURCHASE PRICE........................................................... 18
4.1 Purchase Price.................................................................. 18
4.2 Deposit......................................................................... 18
4.3 Estimated Purchase Price........................................................ 19
4.4 Purchase Price Escrow........................................................... 19
4.5 Purchase Price Adjustment....................................................... 21
ARTICLE V CLOSING.................................................................. 24
5.1 The Closing..................................................................... 24
5.2 Closing Deliveries.............................................................. 25
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER................................. 25
6.1 Organization.................................................................... 25
6.2 Authority....................................................................... 26
6.3 Consents and Approvals.......................................................... 26
6.4 Financial Statements............................................................ 27
6.5 Absence of Certain Changes...................................................... 27
6.6 Real Property................................................................... 27
6.7 Tangible Personal Property...................................................... 29
6.8 Contracts....................................................................... 30
6.9 Intellectual Property........................................................... 31
6.10 Permits......................................................................... 32
6.11 Compliance with Law............................................................. 32
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TABLE OF CONTENTS
(continued)
Page
6.12 Litigation......................................................................... 32
6.13 Environmental Matters.............................................................. 32
6.14 Employee Matters................................................................... 33
6.15 Employees.......................................................................... 35
6.16 Tax Matters........................................................................ 35
6.17 Brokers and Finders................................................................ 36
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF ACQUIROR...................................... 36
7.1 Organization....................................................................... 36
7.2 Authority.......................................................................... 36
7.3 Consents and Approvals............................................................. 36
7.4 Adequacy of Information............................................................ 37
7.5 Sufficiency of Funds............................................................... 38
7.6 Brokers and Finders................................................................ 38
ARTICLE VIII CERTAIN COVENANTS............................................................... 38
8.1 Conduct and Management of the Business............................................. 38
8.2 Disclosure Supplements............................................................. 38
8.3 Access to Information; Confidentiality............................................. 39
8.4 Commercially Reasonable Efforts; Regulatory Matters................................ 40
8.5 Title Insurance.................................................................... 41
8.6 Bankruptcy Court Approval.......................................................... 41
8.7 Notice of Breaches................................................................. 42
8.8 Objections to Transaction.......................................................... 42
8.9 Public Announcements............................................................... 43
8.10 Employees.......................................................................... 43
8.11 Employment and Employee Benefit Matters............................................ 44
8.12 Tax Matters........................................................................ 45
8.13 Environmental Matters.............................................................. 46
8.14 Non-Solicitation................................................................... 47
8.15 Noncompetition..................................................................... 47
8.16 Reimbursement of Erroneous Customer Charges; Erroneous Payments.................... 48
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TABLE OF CONTENTS
(continued)
Page
8.17 Treatment of Returns............................................................ 50
ARTICLE IX CONDITIONS................................................................... 52
9.1 Conditions to the Obligations of Each Party..................................... 52
9.2 Conditions to the Obligations of Seller......................................... 52
9.3 Conditions to the Obligations of Acquiror....................................... 54
ARTICLE X TERMINATION.................................................................. 56
10.1 Termination..................................................................... 56
10.2 Effect of Termination........................................................... 57
10.3 Breakup Fee and Expense Reimbursement........................................... 58
ARTICLE XI INDEMNIFICATION.............................................................. 59
11.1 Survival of Representations and Warranties...................................... 59
11.2 Indemnification by Acquiror..................................................... 60
11.3 Indemnification by Seller....................................................... 60
11.4 Limitations..................................................................... 61
11.5 Procedures...................................................................... 62
11.6 Exclusive Remedies.............................................................. 63
11.7 Known Claims.................................................................... 63
ARTICLE XII MISCELLANEOUS................................................................ 64
12.1 Entire Agreement................................................................ 64
12.2 Notices......................................................................... 64
12.3 Amendments and Waivers.......................................................... 65
12.4 Expenses........................................................................ 66
12.5 Successors and Assigns.......................................................... 66
12.6 Certain Interpretive Matters.................................................... 66
12.7 Governing Law................................................................... 67
12.8 Bulk Sales...................................................................... 67
12.9 Knowledge....................................................................... 67
12.10 Consent to Jurisdiction......................................................... 67
12.11 Arbitration..................................................................... 68
12.12 Severability.................................................................... 69
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TABLE OF CONTENTS
(continued)
Page
12.13 Counterparts; Effectiveness................... 69
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TABLE OF SCHEDULES AND EXHIBITS*/1/
SCHEDULES
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Schedule 1.1 Prorated and Prepaid Items; Excluded Assets
Schedule 4.5.4 Purchase Price Allocation
Schedule 6.3 Seller Consents
Schedule 6.4 Financial Statements
Schedule 6.5 Absence of Certain Changes
Schedule 6.6.1 Owned Real Property
Schedule 6.6.2 Leased Real Property
Schedule 6.7.1 Owned Tangible Personal Property
Schedule 6.7.2 Leased Tangible Personal Property
Schedule 6.7.3 Preliminary Inventory Statement
Schedule 6.8 Material Contracts
Schedule 6.9.1 Owned Intellectual Property
Schedule 6.9.2 Licensed Intellectual Property
Schedule 6.10 Permits
Schedule 6.11 Compliance with Law
Schedule 6.12 Litigation
Schedule 6.13 Environmental Matters
Schedule 6.14.1 Company Plans
Schedule 6.16.1 Tax Matters
Schedule 6.16.2 Other Tax Matters
Schedule 7.3 Acquiror Consents
Schedule 8.1 Conduct and Management of the Business
Schedule 8.10.1 Employees - Force Reductions
Schedule 8.10.3 Employees - Maximum Reductions Post Closing
Schedule 8.15.1 Specified Products
Schedule 12.9 Seller's Knowledge
EXHIBITS
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Exhibit A Form of Purchase Price Escrow Agreement
Exhibit B Form of Lease
Exhibit C Form of License Agreement
Exhibit D Form of Transitional Services Agreement
Exhibit E Form of Promissory Note
Exhibit F Form of Subordinated Security Agreement
________________________
/1/ Pursuant to Item 601 of Regulation S-K, the Schedules and Exhibits listed
herein are not being filed at this time; however, Pillowtex Corporation agrees
to furnish supplementally a copy of any of the omitted Schedules or Exhibits
upon the request of the Securities Exchange Commission.
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of July 27, 2001, by and between Beacon Manufacturing Company, a North
Carolina corporation ("Seller"), and Beacon Acquisition Corporation, a North
Carolina corporation ("Acquiror").
RECITALS:
A. Seller is engaged in the business of designing, manufacturing and
selling blankets, including infant blankets, and throws (the "Business").
B. On November 14, 2000, Seller, together with Pillowtex Corporation, a
Texas corporation and Seller's sole shareholder ("Parent"), and certain other
subsidiaries of Parent (collectively with Seller and Parent, the "Debtors"),
filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code, 11
U.S.C. (S)(S) 101-1330 (as now in effect or hereafter amended, the "Bankruptcy
Code") in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy court"), and the Debtors' chapter 11 cases (the "Bankruptcy Cases")
have been consolidated for procedural purposes only and are being administered
jointly as Case No. 00-4211 (SLR).
C. Seller and the other Debtors are continuing in possession of their
respective properties and are operating their businesses as debtors in
possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
D. Seller desires to sell and Acquiror desires to purchase, pursuant to
section 363(b) of the Bankruptcy Code, certain of the assets used by Seller in
the conduct of the Business, and Seller desires to assign and Acquiror desires
to assume, pursuant to section 365 of the Bankruptcy Code, certain of the
executory contracts to which Seller is a party, all on the terms and subject to
the conditions hereinafter set forth.
E. Seller and Acquiror have determined to enter into this Agreement
which, among other things, provides for Seller to sell, transfer and convey
("Transfer") to Acquiror, and
Acquiror to purchase and acquire from Seller, all of the Purchased Assets (as
hereinafter defined).
NOW, THEREFORE, in consideration of the representations, warranties and
covenants set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Acquiror hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms used in this Agreement shall have
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the respective meanings ascribed to them in this Section 1.1:
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"AAA" has the meaning set forth in Section 12.11.
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"Acquiror" has the meaning set forth in the introductory paragraph of this
Agreement.
"Acquiror Employees" has the meaning set forth in Section 8.10.2.
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"Acquiror Reimbursement Statement" has the meaning set forth in Section
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8.16.1.
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"Adjusted Inventory Increase Amount" means, if there is a Gross Inventory
Increase Amount that is greater than $250,000, the product of (a) 0.30 and (b)
the amount of the Gross Inventory Increase Amount above $250,000.
"Adjusted Inventory Reduction Amount" means, if there is a Gross Inventory
Reduction Amount that is greater than $250,000, the product of (i) 0.30 and (ii)
the amount of the Gross Inventory Reduction Amount above $250,000.
"Adjustment Escrow Amount" has the meaning set forth in Section 4.4.
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"Affiliate" means, with respect to any Person, any other Person who is
directly or indirectly controlling, controlled by or under the common control
with such Person. For the purposes of this definition, the term "Control," when
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
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and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.
"Agreement" has the meaning set forth in the introductory paragraph of this
Asset Purchase Agreement.
"Assumed Liabilities" means only the following liabilities and obligations
of Seller:
(a) all liabilities and obligations of Seller arising under the
terms of Contracts that are included in the Purchased Assets,
but (i) only to the extent such liabilities and obligations
arise, accrue or first become due after the Closing Date and
(ii) not including (A) any cure agreed or ordered under section
365(b)(1)(A) of the Bankruptcy Code with respect to the
assumption and assignment of such Contracts or (B) any liability
or obligation arising under or in connection with any Company
Plan;
(b) all liabilities and obligations of Seller arising under or
relating to any violation of any Environmental Laws or otherwise
relating to any Hazardous Substances, but not including (i) any
liability or obligation arising solely as a result of Seller's
ownership of the Owned Real Property that is not included in the
Purchased Assets or (ii) remediation costs associated with the
"outlet store" underground storage tank referenced as assessment
activity 3.1, the "bank" underground storage tank referenced as
assessment activity 3.2 and the "loading dock" referenced as
assessment activity 3.5 in the Phase II Environmental Site
Assessment performed for Acquiror entitled "Phase II Limited
Soil and Ground Water Assessment" conducted by ERM NC, PC with
respect to Seller's facility
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located at 000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx, which
remediation shall be performed by Seller or its agents; and
(c) all liabilities and obligations of Seller to third Persons for
Closing Date Prorated Items.
"Assumption Documents" means such instruments of assumption and other
instruments and documents, duly executed by Acquiror in such forms and covering
such matters as Seller may reasonably request, reflecting assumption of the
Assumed Liabilities by Acquiror in accordance with the terms of this Agreement.
"Balance Sheet" has the meaning set forth in Section 6.4.
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"Balance Sheet Date" has the meaning set forth in Section 6.4.
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"Bankruptcy Cases" has the meaning set forth in Recital B of this
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Agreement.
"Bankruptcy Code" has the meaning set forth in Recital B of this
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Agreement.
"Bankruptcy Court" has the meaning set forth in Recital B of this
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Agreement.
"Bankruptcy Court Order" has the meaning set forth in Section 8.6.1.
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"Bankruptcy Laws" means the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure, as amended, and the local rules of the Bankruptcy Court.
"Bankruptcy Pleadings" means all pleadings filed with the Bankruptcy Court
by Seller or any other Person relating to this Agreement.
"Basket" has the meaning set forth in Section 11.4.1.
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"Bidding Procedures Order" means, collectively, (a) the Motion of Debtors
and Debtors in Possession for an Order (A) Approving Global Bidding Procedures
and (B) Authorizing Debtors to Grant Pre-Approved Bid Protections to Prospective
Purchasers filed with the Bankruptcy Court on or about March 29, 2001 and (b)
the Order (A) Approving Global Bidding
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Procedures and (B) Authorizing Debtors to Grant Pre-Approved Bid Protections to
Prospective Purchasers entered by the Bankruptcy Court on or about April 9,
2001.
"Breakup Fee" has the meaning set forth in Section 10.3.
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"Business" has the meaning set forth in Recital A of this Agreement.
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"Cap" has the meaning set forth in Section 11.4.1.
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"Closing" means the consummation of the purchase and sale of the Purchased
Assets contemplated by this Agreement.
"Closing Date" has the meaning set forth in Section 5.1.
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"Closing Date Prepaid Amount" means the aggregate amount of all items paid
by or on behalf of Seller on or prior to the Closing Date relating to any period
after the Closing Date.
"Closing Date Prepaid Items" means the items listed or described on Part X-
0 of Schedule 1.1.
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"Closing Date Prorated Amount" means the aggregate amount of accrued but
unpaid Closing Date Prorated Items relating to periods or portions thereof
ending on or before the Closing Date.
"Closing Date Prorated Items" means the items listed or described on Part
A-1 of Schedule 1.1.
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"Closing Inventory Statement" means a listing of the Inventory and the
Gross Book Value thereof as of the Closing Date, setting forth separately the
Xxxxx Xxxxxx Inventory and the Gross Book Value thereof as of the Closing Date,
in a form substantially identical to the Preliminary Inventory Statement and
prepared in accordance with United States generally accepted accounting
principles (subject to the lack of reserves and/or writedowns) using the
5
same item costs used in the preparation of the Preliminary Inventory Statement
and otherwise on a basis consistent with the Preliminary Inventory Statement.
"Closing Prepaid/Proration Statement" means a statement setting forth the
Closing Date Prepaid Amount and the Closing Date Prorated Amount.
"Closing Statements" means, collectively, the Closing Inventory Statement
and the Closing Prepaid/Proration Statement.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"Company Plan" means each employee benefit plan within the meaning of
Section 3(3) of ERISA, and any other material benefit or compensation plan,
program or arrangement whether or not in writing, maintained by Seller or any
ERISA Affiliate for the benefit of any current or former employee, officer or
director of Seller other than a Multiemployer Plan.
"Confidentiality Agreements" means (a) the Confidentiality Agreement dated
January 1, 2001 between (i) Parent (acting on behalf of Seller and its
Affiliates) and (ii) Xxxxx Xxxxx (acting on behalf of Acquiror and its
Affiliates) and (b) the Confidentiality Agreement dated January 1, 2001 between
(i) Parent (acting on behalf of Seller and its Affiliates) and (ii) Xxxxx Xxxx
(acting on behalf of Acquiror and its Affiliates).
"Consent" means any consent, waiver, approval, order or authorization of,
or registration, declaration or filing with or notice to, any Governmental
Entity or other Person.
"Contracts" means all rights, benefits and interests of Seller in and to
all licenses, leases, subleases, loan or credit agreements, notes, bonds,
mortgages, indentures, purchase orders, permits, contracts, agreements,
commitments and undertakings, whether written or oral, to which Seller is a
party or by which Seller or any of its assets are bound and relating to the
conduct of
6
the Business, including without limitation joint venture or partnership
agreements, employment agreements, contracts, tenant leases, equipment leases,
equipment maintenance agreements, agreements with municipalities and labor
organizations, loan agreements, bonds, mortgages, liens or other security
agreements.
"Customer Charges" means charges taken by third Persons in respect of
returns, allowances for returns, restocking fees, discounts, chargebacks, lodes,
coop payments or similar fees.
"Debtors" has the meaning set forth in Recital B of this Agreement.
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"Deposit" has the meaning set forth in Section 4.2.
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"Deposit Escrow Agent" means Fidelity National Title Insurance Company of
New York or such other escrow agent as may be mutually acceptable to Seller and
Acquiror.
"Deposit Escrow Agreement" means an escrow agreement by and among Seller,
Acquiror and the Deposit Escrow Agent, to be executed and delivered upon the
execution of this Agreement.
"Dip Facility" means the debtor-in-possession financing facility of Parent,
Seller and certain other subsidiaries of Parent in the Bankruptcy Cases, as such
facility may be amended from time to time, and the order of the Bankruptcy Court
approving such facility, as such order may be amended from time to time.
"Dispute Notice" has the meaning set forth in Section 4.5.1.
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"Dispute Notice Period" has the meaning set forth in Section 4.5.1.
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"Environmental Laws" means any and all Laws relating to discharge or
releases of Hazardous Materials into the environment, including without
limitation ambient air, surface
7
water, ground water or land, or otherwise relating to the manufacture, use,
treatment, storage, disposal or handling of Hazardous Materials or the clean-up
or other remediation thereof.
"Erisa" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Erisa Affiliate" means each trade or business (whether or not
incorporated) which, together with Seller, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
"Estimated Closing Inventory Statement" has the meaning set forth in
Section 4.3.
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"Estimated Closing Prepaid/proration Statement" has the meaning set forth
in Section 4.3.
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"Estimated Purchase Price" has the meaning set forth in Section 4.3.
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"Excluded Assets" means (a) cash and cash equivalents, (b) accounts
receivable, (c) insurance policies insuring the Business or the Purchased
Assets, (d) Seller's corporate seals, minute books, charter documents, income
and franchise Tax Returns and reports, corporate stock record books and other
books and records pertaining to organization, existence or share capitalization
and such books and records as are necessary to enable Seller to file its Tax
Returns and reports, (e) the Xxxxx Xxxxxx Inventory, and (f) any other assets
listed or described on Part B of Schedule 1.1.
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"Expense Reimbursement" has the meaning set forth in Section 10.3.
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"Final Purchase Price" has the meaning set forth in Section 4.1.
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"Force Reductions" shall have the meaning set forth in Section 8.10.1.
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8
"Governmental Entity" means any United States federal, state, local or
municipal government, court, administrative agency or commission or other
governmental or other regulatory authority or agency.
"Gross Book Value" means with respect to Inventory, gross book value before
reserves and writedowns.
"Gross Inventory Increase Amount" has the meaning set forth in Section
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4.5.2.
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"Gross Inventory Reduction Amount" has the meaning set forth in Section
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4.5.2.
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"Hazardous Materials" means any substance defined as toxic, radioactive or
otherwise hazardous under any Laws.
"Hsr Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Hsr Filings" means any filings required under the HSR Act.
"Independent Accounting Firm" means an independent accounting firm of
recognized standing mutually acceptable to Seller and Acquiror.
"Independent Observer" means Xxx Xxxxxx, or if Xx. Xxxxxx refuses or is
unable to serve, such other person as Seller and Acquiror mutually agree.
"Initial Payment Amount" has the meaning set forth in Section 4.1.
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"Intellectual Property" means customer lists, trade secrets, trademarks,
trade names, brand names and other marks or trade rights, and patents,
copyrights (including copyright rights in artwork, packaging and designs),
patterns, know-how, formulae, treatments, processes and all other intellectual
property or proprietary rights, whether registered or unregistered, domestic or
foreign, and all applications thereof and goodwill associated therewith and all
rights under and remedies against infringement of any of the foregoing.
9
"Inventory" means, collectively (a) all of Seller's inventory held for sale
to customers in the ordinary course of the Business and (b) all of the raw
materials, work in process, finished product, wrapping, supplies and packaging
items, and all similar items relating to the Business.
"Kerp" means the Key Employee Retention Plan approved by the Bankruptcy
Court pursuant to an Order Authorizing Pillowtex to implement the Key Employee
Retention Plan entered on the Bankruptcy Court's docket on March 14, 2001, as
such plan may be modified from time to time.
"Laws" means all applicable laws, regulations, rules, judgments, orders and
decrees of Governmental Entities.
"Lease" means a lease, dated as of the Closing Date, by and between
Acquiror and Seller for the Owned Real Property located in Mauldin, South
Carolina, in the form of Exhibit B, with such modifications thereto as the
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parties thereto may agree.
"Leased Real Property" has the meaning set forth in Section 6.6.2.
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"Leased Tangible Personal Property" has the meaning set forth in Section
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6.7.2.
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"License Agreement" means a license agreement, dated as of the Closing
Date, by and between Licensor and Acquiror in the form of Exhibit c, with such
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modifications thereto as Licensor and Acquiror may agree.
"Licensed Intellectual Property" has the meaning set forth in Section
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6.9.2.
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"Licensor" means, collectively, Fieldcrest Xxxxxx, Inc., a Delaware
corporation, and Fieldcrest Xxxxxx Licensing, Inc., a Delaware corporation.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, security interest or other encumbrance thereon.
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"LOAN DOCUMENTS" means, collectively, the Promissory Note, the Subordinated
Security Agreement between the Acquiror and the Seller in the form of Exhibit F,
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with such modifications as Seller and Acquiror may agree, the Subordinated Deed
of Trust, Security Agreement, Assignment of Rents and Financing Statement (to
the extent that such is not prohibited by the terms of Acquiror's acquisition
financing facility for the transactions contemplated by this Agreement or the
standby Letter of Credit in the amount of $1,000,000 required by Acquiror's
acquisition financing facility), executed by the Acquiror in favor of a trustee
(to be mutually agreed upon by Acquiror and Seller), for the benefit of Seller,
the Pledge Agreement executed by Xxxx Kuklensi and any other holders of an
equity interest in Acquiror in favor of the Seller, and all other financing
statements, agreements, documents, certificates and instruments related to,
delivered or required to be delivered hereunder or under any of the foregoing
agreements or in connection herewith or therewith or as security therefor.
"Losses" has the meaning set forth in Section 11.2.
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"Material Adverse Effect" means a material adverse effect on (a) the
Purchased Assets, taken as a whole, (b) the operation of the Business, taken as
a whole, after the Closing or the ability of Acquiror to succeed to or exercise
rights or interests of Seller that are necessary to operate the Business, taken
as a whole, after the Closing, or (c) the ability of Seller to consummate the
transactions contemplated by this Agreement, other than (i) effects as a result
of the announcement or performance of this Agreement, (ii) effects as a result
of the commencement and pendency of the Bankruptcy Cases or the circumstances
leading thereto, (iii) effects as a result of the continuation of trends
experienced in the operation of the Business during the past three years, (iv)
effects as a result of events, changes or developments relating to the
financial, banking or capital markets or the economy in general or industry-wide
11
developments affecting Persons in businesses similar to the Business, or (v)
effects as a result of the events listed or described on Schedule 8.1.
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"Material Contracts" has the meaning set forth in Section 6.8.
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"Mixed Assets" has the meaning set forth in Section 2.3.
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"Multiemployer Plan" has the meaning as set forth in Section 3(37) of
ERISA.
"Xxxxxxx Acquisition Agreement" means the Amended and Restated Acquisition
Agreement, dated as of November 30, 1994, by and among Xxxxx X. Xxxxxxx, Beacon
Manufacturing Company, Wicassett Xxxxx Company, Parent, Be-Ac, Inc., Realmac,
Inc. and Wiscat, Inc.
"Xxxxxxx Indemnified Matters" means matters for which there are Xxxxxxx
Rights.
"Xxxxxxx Rights" means rights of Seller for indemnification with respect to
Losses arising under or relating to any Environmental Laws or otherwise relating
to any Hazardous Substances under the Xxxxxxx Acquisition Agreement.
"Owned Intellectual Property" has the meaning set forth in Section 6.9.1.
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"Owned Real Property" has the meaning set forth in Section 6.6.1.
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"Owned Tangible Personal Property" has the meaning set forth in Section
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6.7.1.
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"Parent" has the meaning set forth in Recital B of this Agreement.
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"Permits" means all licenses, permits and authorizations issued to Seller
by any Governmental Entity in connection with the conduct of the Business or the
ownership or use of any of the Purchased Assets.
"Permitted Liens" means (a) Liens listed or described on Schedule 6.6.1,
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Schedule 6.6.2, Schedule 6.7.1, Schedule 6.7.2, Schedule 6.9.1 or Schedule
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6.9.2, (b) Liens arising as a matter of Law, (c) Liens related to Taxes other
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than income Taxes, (d) Liens that are created, suffered
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or assumed by Acquiror, (e) Liens relating to Assumed Liabilities, and (f) Liens
that do not have, individually or in the aggregate, a Material Adverse Effect.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including without
limitation a Governmental Entity.
"Preliminary Inventory Statement" means the statement of the Inventory and
the Gross Book Value thereof as of February 3, 2001 attached as Schedule 6.7.3,
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setting forth separately the Xxxxx Xxxxxx Inventory and the Gross Book Value
thereof as of February 3, 2001, prepared in accordance with United States
generally accepted accounting principles (subject to the lack of reserves and/or
writedowns) using valuation and other accounting practices based on Seller's
standard inventory costs consistent with Seller's past practices and reflecting
the name, description, quantity and quality of each item included in the
Inventory and the cost of each item or group of items included in the Inventory.
"Promissory Note" has the meaning set forth in Section 4.1.
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"Purchased Assets" means all of Seller's right, title and interest in, to
and under all of the rights, properties and assets of every kind, character or
description, wherever located and whether real, personal or mixed, or fixed,
contingent or otherwise, owned, used or held for use by Seller in connection
with the conduct of the Business, including without limitation the Owned Real
Property, the Owned Tangible Personal Property (including the Inventory other
than the Xxxxx Xxxxxx Inventory), the Contracts (subject to Section 2.2 and item
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3 of Part B of Schedule 1.1 (Excluded Assets)), the Intellectual Property, the
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Permits (to the extent assignable or transferable by Seller to Acquiror), the
Mixed Assets and the goodwill and going concern value
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of the Business, but excluding, in each and every case and notwithstanding
anything to the contrary contained in this Agreement, the Excluded Assets.
"Purchase Price Escrow Agent" means Bank of Texas or an Affiliate thereof,
or such other escrow agent as may be mutually acceptable to Seller and Aquiror.
"Purchase Price Escrow Agreement" means an escrow agreement, dated as of
the Closing Date, by and among Seller, Acquiror and the Purchase Price Escrow
Agent in the form of Exhibit A, with such modifications as the parties thereto
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may agree.
"Purchase Price Escrow Amount" has the meaning set forth in Section 4.4.
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"Xxxxx Lauren Inventory" means any and all Inventory manufactured by Seller
pursuant to the terms and provisions of the Xxxxx Xxxxxx License Agreement.
"Xxxxx Lauren License Agreement" means the Agreement dated as of July 1,
1998 among Xxxxx Xxxxxx Home Collection, Inc., Xxxx Xxxxx Lauren Corporation and
Parent, as amended by the Letter Agreement dated January 31, 2001 among Xxxxx
Xxxxxx Home Collection, Inc., Xxxx Xxxxx Lauren Corporation, Parent and
WestPoint Xxxxxxx Inc.
"Xxxxx Lauren Purchase Price Reduction Amount" has the meaning set forth in
Section 4.5.2.
-------------
"Releasing Parties" has the meaning set forth in Section 9.3.10.
--------------
"Retained Liabilities" means all liabilities and obligations of Seller
other than the Assumed Liabilities, including any cure agreed or ordered under
section 356(b)(1)(A) of the Bankruptcy Code with respect to the assumption and
assignment of any Contracts.
"Return Reimbursement Statement" has the meaning set forth in Section
-------
8.17.2.
------
"Sales Motion" has the meaning set forth in Section 8.6.1.
-------------
"Seller" has the meaning set forth in the introductory paragraph of this
Agreement.
14
"Seller Reimbursement Statement" has the meaning set forth in Section
-------
8.16.2.
------
"Specified Products" has the meaning set forth in Section 8.15.1(a).
-----------------
"Specified Territory" means the United States of America, Canada, Mexico,
Argentina, Bolivia, Brazil, British Guyana, Chile, Columbia, Paraguay, Peru,
Uruguay and Venezuela.
"Subsidiary" with respect to any Person, means any other Person of which
(a) the first mentioned Person (or any Subsidiary thereof) is a general partner,
(b) voting power to elect a majority of the board of directors or others
performing similar functions with respect to such other Person is held by the
first mentioned Person and/or by any one or more of its Subsidiaries, or (c) at
least 50% of the equity interests of such other Person is, directly or
indirectly, owned or controlled by such first mentioned Person and/or by any one
or more of its Subsidiaries.
"Superior Transaction" has the meaning set forth in Section 10.1.2.
--------------
"Tax" means any United States federal, state, local or municipal net
income, gross income, gross receipts, sales, goods and services, use, ad
valorem, transfer, franchise, profits, withholding, payroll, employment, excise,
stamp, occupation, property, severance, customs, duties or other tax, together
with any interest, penalties or addition to tax imposed or assessed with respect
thereto.
"Tax Benefit" has the meaning set forth in Section 11.4.2.
--------------
"Tax Return" means any return, declaration, report, claim for refund,
information return or other document (including any related or supporting
estimates, elections, schedules, statements or information) filed or required to
be filed in connection with the determination, assessment or collection of any
Tax or the administration of any Laws relating to any Tax.
"Termination Fee Event" has the meaning set forth in Section 10.3.
------------
"Transfer" has the meaning set forth in Recital E of this Agreement.
---------
15
"Transfer Documents" means such limited warranty deeds, bills of sale,
assignments, certificates of title, certificates, affidavits and other
instruments of transfer, as may be necessary or appropriate to Transfer to
Acquiror the Purchased Assets, to be prepared and duly executed by Seller in
form and substance reasonably satisfactory to Acquiror.
"Transitional Services Agreement" means a transitional services agreement,
dated as of the Closing Date, by and between Acquiror, on the one hand, and
Parent, on the other hand, in substantially the form of Exhibit D, with such
---------
modifications thereto as Acquiror and Parent may agree.
"Unadjusted Purchase Price" means $16,840,000.
"WARN Act" means the worker Adjustments and Retraining Notification Act of
1988, as amended, and the regulations promulgated thereunder.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. On the terms and subject to the conditions set forth
-----------------
in this Agreement, at the Closing Seller shall Transfer to Acquiror, and
Acquiror shall purchase and accept from Seller, the Purchased Assets.
2.2 Nonassignable Contracts.
-----------------------
2.2.1 Nonassignability. To the extent that any Contract to be
----------------
Transferred pursuant to the terms of Section 2.1 is not capable of being
-----------
Transferred without the Consent of a third Person, or if such Transfer or
attempted Transfer would constitute a breach thereof or a violation of any Law,
nothing in this Agreement shall constitute a Transfer or an attempted Transfer
thereof prior to the time at which all Consents necessary for such Transfer
shall have been obtained.
16
2.2.2 Efforts to Obtain Consents. Seller shall use commercially
--------------------------
reasonable efforts and Acquiror shall reasonably cooperate with Seller in such
efforts to obtain such Consents necessary to Transfer to Acquiror all of the
Contracts referred to in Section 2.2.1 hereof.
-------------
2.2.3 Alternative Arrangements if Consents Not Obtained. To the
-------------------------------------------------
extent that the Consents referred to in Section 2.2.1 are not obtained, Seller
-------------
shall, during the term of the affected Contract, use commercially reasonable
efforts to (i) provide to Acquiror the benefits under any Contract referred to
in Section 2.2.1, (ii) cooperate in any reasonable and lawful arrangement
-------------
designed to provide such benefits to Acquiror, and (iii) enforce, at the written
request of Acquiror, for the account of Acquiror, any rights of Seller under the
affected Contract (including the right to elect to terminate such Contract in
accordance with the terms thereof upon the direction of Acquiror). Acquiror
shall reasonably cooperate with Seller in order to enable Seller to provide the
benefits contemplated by this Section 2.2.3 to Acquiror.
-------------
2.2.4 Obligation of Acquiror to Perform. Acquiror shall perform the
---------------------------------
obligations of Seller arising under the affected Contracts referred to in
Section 2.2.1, but only if and to the extent that Seller provides to Acquiror
-------------
the benefits thereof pursuant to Section 2.2.3.
-------------
2.3 Mixed Assets. In the event the parties determine before or after
------------
Closing that any asset owned or held by Parent or a Subsidiary thereof (other
than Seller) is used primarily in, or relates primarily to, the Business, other
than an Excluded Asset (collectively, the "Mixed Assets"), Seller shall cause
the Transfer of such asset to Acquiror at or after the Closing, as applicable,
as part of the Purchased Assets.
17
ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 Retained Liabilities. Seller shall retain, and Acquiror shall not
--------------------
assume or be responsible or liable for, the Retained Liabilities.
3.2 Assumed Liabilities. On the terms and subject to the conditions
-------------------
hereof, as of the Closing, Acquiror shall assume and thereafter in due course
pay, perform and discharge the Assumed Liabilities.
ARTICLE IV
PURCHASE PRICE
4.1 Purchase Price. In consideration of the Transfer of the Purchased
--------------
Assets and in addition to assumption by Acquiror of the Assumed Liabilities, at
the Closing, Acquiror shall pay to Seller an amount equal to the Estimated
Purchase Price (with the Deposit being applied thereto as set forth in Section
-------
4.2) less $600,000 (the "Initial Payment Amount"), by means of delivery of (i) a
---
promissory note, by Acquiror in favor of Seller, in the original principal
amount of $1,340,000 and in substantially the form attached as Exhibit E (the
---------
"Promissory Note") and (ii) cash in an amount equal to the Initial Payment
Amount less $1,340,000 via wire transfer of immediately available funds. The
Estimated Purchase Price is subject to adjustment as provided in Section 4.5 (as
-----------
so adjusted, the "Final Purchase Price").
4.2 Deposit. Upon execution of this Agreement, Acquiror shall pay to
-------
Seller an amount of $850,000 (the "Deposit") via wire transfer of immediately
available funds to the account set forth in the Deposit Escrow Agreement. The
Deposit shall be subject to the terms and provisions of the Deposit Escrow
Agreement. Pursuant to the Deposit Escrow Agreement, the Deposit shall be
applied to payment of the Estimated Purchase Price at the Closing. Pursuant
18
to the Deposit Escrow Agreement, (a) a portion of the Deposit equal to $600,000
shall be refunded to Acquiror upon execution and delivery of a definitive
agreement by and between Seller and any third Person providing for a Superior
Transaction and (b) the Deposit or the remaining portion thereof and (if
applicable) all interest or earnings thereon subsequent to the date of execution
of a definitive agreement for a Superior Transaction shall be refunded to
Acquiror upon termination of this Agreement (i) pursuant to Section 10.1.2(c),
-----------------
but only if (A) Acquiror is not then in breach of this Agreement and (B) the
condition set forth in Section 9.1.3 has not been satisfied, or (ii) pursuant to
-------------
Section 10.1.2(a), Section 10.1.2(d), Section 10.1.3(a) or Section 10.1.3(b).
----------------- ----------------- ----------------- -----------------
4.3 Estimated Purchase Price. Not later than the third business day prior
------------------------
to the Closing Date, Seller shall deliver to Acquiror (a) an estimated Closing
Inventory Statement (the "Estimated Closing Inventory Statement"), (b) an
estimated Closing Prepaid/Proration Statement (the "Estimated Closing
Prepaid/Proration Statement"), and (c) a statement setting forth the estimated
Final Purchase Price (the "Estimated Purchase Price") and the calculation
thereof. The Estimated Closing Inventory Statement shall be in a form
substantially identical to the Preliminary Inventory Statement and prepared
using the same item costs used in the preparation of the Preliminary Inventory
Statement and otherwise on a basis consistent with the Preliminary Inventory
Statement. The Estimated Purchase Price shall be calculated by adjusting the
Unadjusted Purchase Price upward or downward based on the formula set forth in
Section 4.5.2 (assuming no Dispute Notice is delivered by Acquiror to Seller),
-------------
using the amounts set forth on the Estimated Closing Inventory Statement instead
of those set forth on the Closing Inventory Statement and the Estimated Closing
Prepaid/Proration Amounts instead of the Closing Prepaid/Proration Amounts.
19
4.4 Purchase Price Escrow. At the Closing, Acquiror shall deliver to the
---------------------
Purchase Price Escrow Agent an amount of $700,000 (the "Purchase Price Escrow
Amount") via wire transfer of immediately available funds to the account set
forth in the Purchase Price Escrow Agreement. Of the Purchase Price Escrow
Amount, $600,000 shall be credited toward and applied to Acquiror's obligation
to pay the Estimated Purchase Price at the Closing and $100,000 of which shall
be held and distributed as part of the Adjustment Escrow Amount. The Purchase
Price Escrow Amount shall be subject to the terms and provisions of the Purchase
Price Escrow Agreement. The Purchase Price Escrow Agreement shall provide that
$500,000 of the Purchase Price Escrow Amount shall be held by the Purchase Price
Escrow Agent to secure Seller's obligation under Section 11.3 and that $200,000
------------
of the Purchase Price Escrow Amount (the "Adjustment Escrow Amount") shall be
held by the Purchase Price Escrow Agent to secure the obligations, if any, of
Seller and Acquiror under Section 4.5.2 and delivered as provided in the next
-------------
following sentence. Pursuant to the Purchase Price Escrow Agreement, promptly
(but, in any event, within three business days) following the expiration of the
Dispute Notice Period or, in the event a Dispute Notice is delivered by Acquiror
to Seller, the date on which Seller and Acquiror agree to the Final Purchase
Price or the date on which the determination of the Independent Accounting Firm
with respect thereto becomes final and binding, as the case may be, the
Adjustment Escrow Amount shall be delivered by the Purchase Price Escrow Agent
as follows: (a) if the Final Purchase Price exceeds the Estimated Purchase
Price, (i) the Purchase Price Escrow Agent shall deliver to Seller an amount
equal to the sum of (A) $100,000 and (B) the lesser of (x) the amount of such
excess and (y) $100,000 and (ii) if such excess is less than $100,000, the
Purchase Price Escrow Agent shall deliver to Acquiror an amount equal to the
amount by which such excess is less than $100,000; and (b) if the Estimated
Purchase Price
20
exceeds the Final Purchase Price, (i) the Purchase Price Escrow Agent shall
deliver to Acquiror an amount equal to the sum of (A) $100,000 and (B) the
lesser of (x) the amount of such excess and (y) $100,000 and (ii) if such excess
is less than $100,000, the Purchase Price Escrow Agent shall deliver to Seller
an amount equal to the amount by which such excess is less than $100,000.
4.5 Purchase Price Adjustment.
-------------------------
4.5.1 Closing Statements. As promptly as practicable (and, in any
------------------
event, within 30 calendar days) following the Closing Date, Seller shall prepare
and deliver to Acquiror the Closing Statements. Acquiror shall have 20 calendar
days following Acquiror's receipt of the Closing Statements to review the
Closing Statements. During such 20-day period (the "Dispute Notice Period"),
Acquiror may give notice (a "Dispute Notice") to Seller in the event that
Acquiror determines in good faith that the Closing Statements were not prepared
in accordance with this Agreement and, as a result, the Closing Inventory
Statement misstates the Gross Book Value of the Inventory as of the Closing Date
or the Closing Prepaid/Proration Statement misstates the Closing Date Prepaid
Amount or the Closing Date Prorated Amount. If Acquiror fails to deliver a
Dispute Notice within the Dispute Notice Period, Acquiror shall be deemed to
have irrevocably waived its right to deliver a Dispute Notice. If a Dispute
Notice is delivered by Acquiror, Seller and Acquiror shall negotiate in good
faith to agree upon the Gross Book Value of the Inventory as of the Closing
Date, the Closing Date Prepaid Amount, the Closing Date Prorated Amount and the
Final Purchase Price. If Seller and Acquiror fail to agree to such matters
within 30 calendar days after the Dispute Notice is delivered to Seller, the
Closing Statements and the Dispute Notice shall be submitted to the Independent
Accounting Firm, which shall then determine, in accordance with the provisions
of this Agreement, the Gross Book Value of the Inventory as of the Closing Date,
the Closing Date Prepaid Amount, the Closing
21
Date Prorated Amount and the Final Purchase Price. The determination of the
Independent Accounting Firm shall be made as promptly as practicable (and, in
any event, within 30 calendar days) following its receipt of the Closing
Statements and the Dispute Notice, and such determination shall be final and
binding on all parties absent manifest error. The fees, costs and expenses of
the Independent Accounting Firm shall be borne equally by Seller and Acquiror.
4.5.2 Post-Closing Payment. The Final Purchase Price shall be equal to
--------------------
the Unadjusted Purchase Price (a) increased by the sum of (i) the Closing Date
Prepaid Amount and (ii) if the Gross Book Value of the Inventory (including the
Xxxxx Xxxxxx Inventory) as of the Closing Date as reflected in the Closing
Inventory Statement (or, in the event a Dispute Notice is delivered by Acquiror
to Seller, as determined in accordance with Section 4.5.1) exceeds the gross
-------------
Book Value of the Inventory (including the Xxxxx Xxxxxx Inventory) as of
February 3, 2001 as reflected in the Preliminary Inventory Statement (such
excess being referred to herein as the "Gross Inventory Increase Amount") by
more than $250,000, the Adjusted Inventory Increase Amount and (b) decreased by
the sum of (i) the Closing Date Prorated Amount, (ii) if the Gross Book Value of
the Inventory (including the Xxxxx Xxxxxx Inventory) as of February 3, 2001 as
reflected in the Preliminary Inventory Statement exceeds the Gross Book Value of
the Inventory (including the Xxxxx Xxxxxx Inventory) as of the Closing Date as
reflected in the Closing Inventory Statement (or, in the event of a Dispute
Notice is delivered by Acquiror to Seller, as determined in accordance with
Section 4.5.1) (such excess being referred to herein as the "Gross Inventory
-------------
Reduction Amount") by more than $250,000, the Adjusted Inventory Reduction
Amount, and (iii) the product of (A) 0.50 and (B) the Gross Book Value of the
Xxxxx Xxxxxx Inventory as of the Closing Date as reflected in the Closing
Inventory Statement (or, in the event a Dispute Notice is delivered by Acquiror
to Seller, as determined in accordance with
22
Section 4.5.1) (such product being referred to herein as the "Xxxxx Lauren
-------------
Purchase Price Reduction Amount"). If the Final Purchase Price exceeds the
Estimated Purchase Price, Acquiror shall pay to Seller an amount equal to such
excess (less any amount delivered to Seller by the Purchase Price Escrow Agent
pursuant to the Purchase Price Escrow Agreement as contemplated by clause
(a)(i)(B) of the fourth sentence of Section 4.4), and if the Estimated Purchase
-----------
Price exceeds the Final Purchase Price, Seller shall pay to Acquiror an amount
equal to such excess (less any amount delivered to Acquiror by the Purchase
Price Escrow Agent pursuant to the Purchase Price Escrow Agreement as
contemplated by clause (b)(i)(B) of the fourth sentence of Section 4.4). Any
-----------
amount payable pursuant to this Section 4.5.2 shall be paid in cash promptly
-------------
(but, in any event, within three business days) following the expiration of the
Dispute Notice Period or, in the event a Dispute Notice is delivered by Acquiror
to Seller, the date on which Seller and Acquiror agree to the Final Purchase
Price or the date on which the determination of the Independent Accounting Firm
with respect thereto becomes final and binding, as the case may be. Any such
payment shall bear interest at a rate equal to 10% per annum from the date such
payment is due until the date of payment.
4.5.3 Physical Inventory. Prior to the Closing, commencing on the day
------------------
immediately following the fulfillment or, if permitted, waiver of the conditions
set forth in Article IX (other than those conditions set forth in Article IX
----------
that are to be fulfilled at the Closing), Seller shall cause a physical
inventory of the Inventory (including the Xxxxx Xxxxxx Inventory) as of the
Closing Date to be taken using the individuals employed in the Business. Such
physical inventory may be observed by representatives of Acquiror. Seller and
Acquiror shall cause such physical inventory to be observed by the Independent
Observer and shall cause the Independent Observer to report on such physical
inventory and to furnish a copy of such
23
report to both Seller and Acquiror. The report to be rendered by the Independent
Observer on the physical inventory shall be based upon procedures reasonably
acceptable to Seller and Acquiror. The fees, costs and expenses of such physical
inventory, including the fees, costs and expenses of the Independent Observer,
but excluding the salaries or other compensation of individuals employed in the
Business conducting the physical inventory, shall be borne equally by Seller and
Acquiror.
4.5.4 Purchase Price Allocation. The Purchase Price, as adjusted
-------------------------
pursuant to Section 4.4, plus the aggregate amount of Assumed Liabilities
-----------
represents the amount agreed upon by the parties to be the aggregate
consideration for the Purchased Assets, and shall be allocated among the
Purchased Assets in accordance with Schedule 4.5.4. Each of the parties shall
--------------
report the purchase and sale of the Purchased Assets, including, without
limitation, in all federal, foreign, state, local and other Tax returns and
reports prepared and filed by or for either of Seller and Acquiror, in
accordance with the basis of allocation described in this Section 4.5.4.
-------------
4.5.5 Access. Following the Closing Date, Acquiror shall afford Seller
------
and its representatives reasonable access upon reasonable notice to the
Purchased Assets and Acquiror's books, records and personnel for purposes of
preparing the Closing Statements.
ARTICLE V
CLOSING
5.1 The Closing. Unless this Agreement has been terminated and the
-----------
transactions contemplated under this Agreement have been abandoned pursuant to
Article X and subject to the fulfillment or, if permitted, waiver of the
---------
conditions set forth in Article IX, the Closing shall take place at the offices
----------
of Xxxxxxxxxx Xxxxxxxx LLP, 3500 One First Union Center, 000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx, at 9:00 a.m. Eastern time on the second
business day
24
following the fulfillment or, if permissible, waiver of the conditions set forth
in Article IX (other than those conditions set forth in Article IX that are to
---------- ----------
be fulfilled at the Closing) and the completion of the physical inventory
contemplated by Section 4.5.3, unless another place, date or time is agreed to
-------------
in writing by the parties to this Agreement or ordered by the Bankruptcy Court
(the date of the Closing being referred to herein as the "Closing Date"). The
Closing shall be effective as of 11:59 p.m. Eastern time on the Closing Date.
5.2 Closing Deliveries.
------------------
5.2.1 Seller Deliveries. At the Closing, Seller shall deliver to
-----------------
Acquiror (a) each of the documents, certificates and instruments described in
Section 9.3, and (b) such receipts, duly executed by Seller, as Acquiror may
-----------
reasonably request.
5.2.2 Acquiror Deliveries. At the Closing, Acquiror shall deliver to
-------------------
(a) Seller (i) an amount equal to the Initial Payment Amount less $1,340,000,
via wire transfer of immediately available funds to an account designated by
Seller and (ii) each of the documents, certificates and instruments described in
Section 9.2, and (b) the Purchase Price Escrow Agent, an amount equal to
-----------
$700,000, via wire transfer of immediately available funds to the account
designated in the Purchase Price Escrow Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Acquiror as follows:
6.1 Organization. Seller is a corporation duly organized, validly existing
------------
and in good standing under the laws of its jurisdiction of incorporation. Seller
has the requisite corporate power and authority to own and operate the Purchased
Assets and carry on the Business as it is
25
now being conducted. Seller is duly qualified to do business as a foreign
corporation in each jurisdiction in which its assets or operations require such
qualification, except for those jurisdictions where the failure to so qualify
would not have, individually or in the aggregate, a Material Adverse Effect.
6.2 Authority. Seller has the requisite corporate power and authority to
---------
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Seller and
the performance by Seller of the obligations contemplated to be performed by
Seller hereunder have been duly authorized by all necessary corporate actions of
Seller. Subject to the approval of the Bankruptcy Court, this Agreement is a
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms.
6.3 Consents and Approvals. No Consent is required in connection with the
----------------------
execution or delivery by Seller of, or the performance by Seller of its
obligations under, this Agreement except for (a) the Consents listed or
described on Schedule 6.3, (b) the filing of applicable HSR Filings, if any, and
------------
the expiration or termination of the applicable waiting period thereunder, (c)
the approval of the Bankruptcy Court, (d) the approval of the senior lenders
required pursuant to the DIP Facility, or (e) Consents that would not have,
individually or in the aggregate, a Material Adverse Effect if not obtained or
made. Except as listed or described on Schedule 6.3, assuming that, as of the
------------
Closing Date, the Consents referred to in the preceding sentence shall have been
obtained or made and shall remain in full force and effect, the execution and
delivery of this Agreement by Seller do not, and the performance by Seller of
its obligations under this Agreement will not, conflict with or result in the
violation of, or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation under, (a) the
charter or bylaws of Seller, (b) any Law to which Seller or any of the Purchased
Assets is
26
subject, (c) any Contract, or (d) any Permit, except in the case of clauses (b),
(c) and (d) conflicts, violations, defaults or rights that would not have,
individually or in the aggregate, a Material Adverse Effect.
6.4 Financial Statements. Attached hereto as Schedule 6.4 is an unaudited
-------------------- ------------
balance sheet (the "Balance Sheet") of Seller as of June 2, 2001 (month end May
2001) (the "Balance Sheet Date"). The Balance Sheet is consistent with the books
and records of Seller (which are accurate and complete in all material respects)
and fairly presents the financial position of Seller at the Balance Sheet Date.
Except (i) as listed or described on Part (b) of Schedule 6.4, (ii) as disclosed
------------
on or reserved against on the Balance Sheet, and (iii) for liabilities and
obligations that were incurred after the Balance Sheet Date in the ordinary
course of the Business, Seller does not have any liabilities or obligations of
any nature (whether known, unknown, absolute, accrued, contingent or otherwise)
that relate to or otherwise arise out of the Business or the Purchased Assets
that, individually or in the aggregate, would have a Material Adverse Effect.
6.5 Absence of Certain Changes. Except as listed or described on Schedule
-------------------------- --------
6.5, from the Balance Sheet Date to the date of this Agreement, there has not
---
occurred any change or event that would have a Material Adverse Effect.
6.6 Real Property.
-------------
6.6.1 Owned Real Property. Schedule 6.6.1 is a true and complete
------------------- --------------
listing as of the date of this Agreement of all of the real property owned by
Seller that is used by Seller in connection with the conduct of the Business
(the "Owned Real Property"). Except as listed or described on Schedule 6.6.1,
--------------
at the Closing Seller will Transfer to Acquiror good, marketable and
indefeasible fee simple title to the Owned Real Property that is included in the
Purchased
27
Assets, free and clear of all Liens except for Permitted Liens. Except as listed
or described on Schedule 6.6.1, Seller has all easements, rights-of-way and
--------------
similar authorizations required for the use of the Owned Real Property that is
included in the Purchased Assets in the conduct of the Business as heretofore
conducted, except where the failure to have such easements, rights-of-way or
similar authorizations would not have, individually or in the aggregate, a
Material Adverse Effect. As of the date of this Agreement, neither the whole nor
any portion of any Owned Real Property that is included in the Purchased Assets
and occupied by Seller has been condemned or otherwise taken by any public
authority, and to Seller's knowledge, no such condemnation or taking is
threatened or contemplated. To Seller's knowledge, neither the Owned Real
Property that is included in the Purchased Assets nor the occupancy or operation
by Seller thereof is in violation of any Law or any building, zoning or other
ordinance, code or regulation except where such violations would not have,
individually or in the aggregate, a Material Adverse Effect. Except as listed or
described on Schedule 6.6.1, as of the date of this Agreement, Seller has
--------------
received no notice from any Governmental Entity (i) claiming any such violation
of any such Law, ordinance, code or regulation or (ii) requiring Seller to
perform, or notifying it of the need to perform, any work, repair, construction,
alterations or installation on or in connection with any Owned Real Property
that is included in the Purchased Assets. To Seller's knowledge, there is no
encroachment of the improvements located on the Owned Real Property that is
included in the Purchased Assets upon any adjoining property, or of improvements
located on any adjoining property upon any Owned Real Property that is included
in the Purchased Assets.
6.6.2 Leased Real Property. Schedule 6.6.2 is a true and complete
-------------------- --------------
listing as of the date of this Agreement of all of the real property leased by
Seller in connection with the
28
conduct of the Business (the "Leased Real Property"). Except as listed or
described on Schedule 6.6.2, Seller is in actual possession of the Leased Real
--------------
Property and is entitled to quiet enjoyment of the Leased Real Property and the
use of the Leased Real Property in connection with the conduct of the Business
in accordance with the terms of the applicable Contracts. Except as listed or
described on Schedule 6.6.2, with respect to each lease of real property listed
--------------
on Schedule 6.6.2 (i) the lease has been neither assumed nor rejected pursuant
--------------
to Section 365(a) of the Bankruptcy Code, (ii) to Seller's knowledge, there is
no default that would prevent the assumption of the lease pursuant to Section
365(a) of the Bankruptcy Code and its assignment to Acquiror, subject to the
satisfaction of Seller's cure obligations, if any, at or prior to Closing, and
(iii) the lease has not been terminated.
6.7 Tangible Personal Property.
--------------------------
6.7.1 Owned Tangible Personal Property. Seller and Acquiror
--------------------------------
acknowledge that Schedule 6.7.1 is an incomplete listing as of the date of this
--------------
Agreement of the tangible personal property owned by Seller that is used by
Seller in connection with the conduct of the Business, except for Inventory and
items of tangible personal property having a book value of less than $20,000
(the "Owned Tangible Personal Property"). Upon the completion of a more complete
Schedule 6.7.1 contemplated by Section 8.2, to Seller's knowledge, such Schedule
-------------- ----------- --------
6.7.1 shall contain a listing of all the Owned Tangible Personal Property
-----
necessary to conduct the Business as such is being conducted as of the date of
this Agreement. Except as listed or described on Schedule 6.7.1, at the Closing
--------------
Seller will Transfer to Acquiror title to the Owned Tangible Personal Property
that is included in the Purchased Assets, free and clear of all Liens except for
Permitted Liens.
29
6.7.2 Leased Tangible Personal Property. To Seller's knowledge,
---------------------------------
Schedule 6.7.2 is a true and complete listing as of the date of this Agreement
--------------
of all of the tangible personal property that is used by Seller in connection
with the conduct of the Business in accordance with the terms of any Material
Contract (the "Leased Tangible Personal Property"). Except as listed or
described on Schedule 6.7.2, Seller is in actual possession of the Leased
--------------
Tangible Personal Property and is entitled to quiet enjoyment of the Leased
Tangible Personal Property and the use of the Leased Tangible Personal Property
in connection with the conduct of the Business in accordance with the terms of
the applicable Material Contracts.
6.7.3 Inventory. Seller has heretofore delivered to Acquiror the
---------
Preliminary Inventory Statement, a copy of which is attached as Schedule 6.7.3.
--------------
The Preliminary Inventory Statement presents fairly the Inventory and the Gross
Book Value thereof as of February 3, 2001 and, except as specified in the notes
thereto, was prepared in accordance with United States generally accepted
accounting principles (subject to the lack of reserves and/or writedowns) and,
in all material respects, using valuation and other accounting practices based
on Seller's standard inventory costs consistent with Seller's past practices.
6.8 Contracts. Schedule 6.8 constitutes a true and complete listing as of
--------- ------------
the date of this Agreement of each Contract that imposes on Seller remaining
monetary obligations in excess of $20,000 or imposes material non-monetary
obligations (the "Material Contracts"). Seller has delivered or made available
true and correct copies of all Material Contracts to Acquiror. The copy of each
of the Material Contracts delivered or made available by Seller to Acquiror
constitutes the entire agreement by and between the respective parties thereto.
Except as listed or described on Schedule 6.8, with respect to each Material
------------
Contract, (i) the Material Contract has been neither assumed nor rejected
pursuant to Section 365(a) of the Bankruptcy
30
Code, (ii) to Seller's knowledge, there is no default that would prevent the
assumption of the Material Contract pursuant to Section 365(a) of the Bankruptcy
Code and its assignment to Acquiror, subject to the satisfaction of Seller's
cure obligations, if any, at or prior to Closing, and (iii) the Material
Contract has not been terminated.
6.9 Intellectual Property.
---------------------
6.9.1 Owned Intellectual Property Rights. Schedule 6.9.1 is a true and
---------------------------------- --------------
complete listing as of the date of this Agreement of all of the Intellectual
Property owned by Seller that is used by Seller in connection with the conduct
of the Business ("Owned Intellectual Property") with the exception of trade
secrets and customer lists. Except as listed or described on Schedule 6.9.1, at
--------------
the Closing Seller will Transfer to Acquiror the Owned Intellectual Property
that is included in the Purchased Assets, free and clear of all Liens except for
Permitted Liens. Except as listed or described on Schedule 6.9.1, Seller has
--------------
granted no license to any other Person relating to any of the Owned Intellectual
Property.
6.9.2 Licensed Intellectual Property. To Seller's knowledge, Schedule
------------------------------ --------
6.9.2 is a true and complete listing as of the date of this Agreement of all of
-----
the Intellectual Property that is used by Seller in connection with the conduct
of the Business in accordance with the terms of any Material Contract required
to be listed on Schedule 6.8 ("Licensed Intellectual Property") with the
------------
exception of trade secrets. Except as listed or described on Schedule 6.9.2,
--------------
Seller is entitled to the use of the Licensed Intellectual Property in
connection with the conduct of the Business in accordance with the terms of the
applicable Material Contract.
6.9.3 No Unresolved Claims. To Seller's knowledge, there is no
--------------------
unresolved claim asserting a conflict with the rights of others in connection
with Seller's use of any
31
Intellectual Property necessary for the conduct of the Business in all material
respects as conducted on the date hereof, except claims that would not have,
individually or in the aggregate, a Material Adverse Effect if decided
adversely.
6.10 Permits. To Seller's knowledge, Schedule 6.10 is a true and complete
------- -------------
listing as of the date of this Agreement of all licenses, permits and
authorizations issued to Seller by Governmental Entities that are used in
connection with the conduct of the Business or the ownership or use of the
Purchased Assets.
6.11 Compliance with Law. Except as listed or described on Schedule 6.11,
------------------- -------------
to Seller's knowledge Seller's conduct of the Business and its ownership and use
of the Purchased Assets are in compliance with all Laws, except where
noncompliance would not, individually or in the aggregate, result in a Material
Adverse Effect. Except as listed or described on Schedule 6.11, to Seller's
-------------
knowledge Seller has all licenses, permits and authorizations from Governmental
Entities that Seller is required to have in connection with the conduct of the
Business or the ownership or use of the Purchased Assets, except where the
failure to have such licenses, permits or authorizations would not have,
individually or in the aggregate, a Material Adverse Effect.
6.12 Litigation. Except as listed or described on Schedule 6.12, there are
---------- -------------
no civil, criminal or administrative actions or suits pending or, to Seller's
knowledge, threatened against Seller arising out of or relating to the conduct
of the Business or otherwise pertaining to or affecting the Purchased Assets or
the Business that would have, individually or in the aggregate, a Material
Adverse Effect if decided adversely.
6.13 Environmental Matters. Except as listed or described in Schedule 6.13,
--------------------- -------------
(a) to Seller's knowledge, Seller's conduct of the Business and ownership or use
of the Purchased
32
Assets is in compliance with all Environmental Laws applicable to the Business
except where noncompliance would not have, individually or in the aggregate, a
Material Adverse Effect, and (b) there is no civil, criminal or administrative
action or suit pending or, to Seller's knowledge, threatened against Seller
alleging any violation of Environmental Laws that would have, individually or in
the aggregate, a Material Adverse Effect if decided adversely.
6.14 Employee Matters.
----------------
6.14.1 Company Plans. Except as listed or described in Schedule
------------- --------
6.14.1:
------
(i) Seller does not contribute to and is not obligated to
contribute to any Multiemployer Plan;
(ii) none of the Company Plans promises or provides retiree
health or life insurance benefits to any individual;
(iii) none of the Company Plans nor any other employment
agreement with any employee of Seller provides for payment of a benefit, the
increase of a benefit amount, the payment of a contingent benefit or the
acceleration of the payment or vesting of a benefit by reason of the execution
of this Agreement or the consummation of the transactions contemplated by this
Agreement, which in any case could result in liability to Acquiror;
(iv) except as contemplated by the KERP or required by Law,
Seller has no obligation to adopt, nor is Seller considering the adoption of,
any new Company Plan or any amendment of an existing Company Plan;
33
(v) each Company Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service that it is so qualified and, to Seller's knowledge,
nothing has occurred since the date of such letter that would affect the
qualified status of such Company Plan in any manner that could result in
liability to Acquiror;
(vi) to Seller's knowledge, each Company Plan has been
operated in accordance with its terms and the requirements of all Law, except
which noncompliance with such terms or requirements of Law that would not have,
individually or in the aggregate, a Material Adverse Effect;
(vii) neither Seller nor any ERISA Affiliate has incurred any
direct or indirect liability under, arising out of or by operation of Title IV
of ERISA which could result in liability to Acquiror, and no event occurred that
is reasonably expected to give rise to any such liability to Acquiror; and
(viii) to Seller's knowledge, there are no claims relating to
the Company Plans, other than routine claims for benefits.
6.14.2 Collective Bargaining Agreements. There is no collective
--------------------------------
bargaining or union contract or other similar type of labor agreement covering
individuals employed in connection with the Business, and to Seller's knowledge,
as of the date of this Agreement, there are no labor unions or other labor
organizations representing, purporting to represent or attempting to represent
any individuals employed in connection with the Business. As of the date of this
Agreement, Seller has not experienced any material strike, dispute, slowdown,
34
picketing, work stoppage, concerted refusal to work overtime or other similar
labor activity with respect to individuals employed in connection with the
Business during the last three years.
6.15 Employees. Seller has provided to Acquiror a listing of all employees
---------
of Seller as of the date hereof, (including each employee on leave, disability
and workers' compensation), indicating for each employee, such employee's job
title, date of hire, facility at which employed, hourly rate or annual
compensation for the year 2000 and any commission arrangement or other incentive
compensation.
6.16 Tax Matters.
-----------
6.16.1 Filing of Tax Returns; Payment of Taxes. Except as listed or
---------------------------------------
described in Schedule 6.16.1, Seller has filed or will file by the Closing Date
---------------
all material Tax Returns for the periods ending prior to the Closing Date which
are required to be filed with any federal, state or local Governmental Entity,
and has paid, or made adequate provision for the payment of, all Taxes shown to
be due on such Tax Returns. To Seller's knowledge, there are no additional
assessments since the date of such Tax Returns.
6.16.2 Other Tax Matters. Except as listed or described in Schedule
----------------- --------
6.16.2, (a) there are no Liens for Taxes (other than current Taxes not yet due
------
and payable) on any of the Purchased Assets; (b) Seller has withheld and paid
all Taxes (other than current Taxes not yet due and payable) required to have
been withheld and paid, for the periods ending prior to the Closing Date, in
connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party for activities relating to the Business; and (c)
none of the Assumed Liabilities represents an obligation to make any payments,
or an obligation that under certain
35
circumstances could obligate Acquiror to make any payments, that will not be
deductible under Section 280G of the Code.
6.17 Brokers and Finders. Neither Seller nor any of its Affiliates has
-------------------
employed any broker or finder or incurred any liability for any brokerage fees,
commission or finders fees in connection with the transactions contemplated
hereby, except for fees and expenses of E&Y Capital Advisors LLC, which shall be
paid by Seller or its Affiliates.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to Seller as follows:
7.1 Organization. Acquiror is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of North Carolina.
Acquiror is not a Subsidiary of any Person. Acquiror has the requisite power and
authority to own and operate its properties and carry on its business as it is
now being conducted.
7.2 Authority. Acquiror has the requisite corporate power and authority to
---------
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Acquiror
and the performance by Acquiror of the obligations contemplated to be performed
by Acquiror hereunder have been duly authorized by all necessary corporate
actions of Acquiror. This Agreement is a valid and binding obligation of
Acquiror, enforceable against Acquiror in accordance with its terms.
7.3 Consents and Approvals. No Consent is required in connection with the
----------------------
execution or delivery by Acquiror of, or the performance by Acquiror of its
obligations under, this Agreement except for (a) the Consents listed or
described on Schedule 7.3, (b) the filing of
------------
36
any applicable HSR Filings, if any, and the expiration or termination of the
applicable waiting period thereunder, or (c) Consents that would not have,
individually or in the aggregate, a material adverse effect on the ability of
Acquiror to consummate the transactions contemplated by this Agreement if not
obtained or made. Except as listed or described on Schedule 7.3, assuming that,
------------
as of the Closing Date, the Consents referred to in the preceding sentence shall
have been obtained or made and shall remain in full force and effect, the
execution and delivery of this Agreement by Acquiror do not, and the performance
by Acquiror of its obligations under this Agreement will not, conflict with or
result in the violation of, or constitute a default under, or give rise to a
right of termination, cancellation or acceleration of any obligation under, (a)
the charter or bylaws or similar documents of Acquiror, (b) any Law to which
Acquiror is subject, (c) any agreement or contract to which Acquiror is a party
or by which Acquiror is bound, or (d) any license, permit or authorization
issued to Acquiror by any Governmental Entity, except in the case of clauses
(b), (c) and (d) conflicts, violations, defaults, or rights that would not have,
individually or in the aggregate, a material adverse effect on the ability of
Acquiror to consummate the transactions contemplated by this Agreement.
7.4 Adequacy of Information. Acquiror acknowledges that: (a) Acquiror or
-----------------------
its representatives have been furnished with all information regarding Seller,
the Business, the Purchased Assets and the Assumed Liabilities that Acquiror has
requested; (b) Acquiror has had an opportunity to make such inspections of
Seller's facilities as Acquiror has desired and to ask questions of and receive
answers from Seller and its respective representatives regarding Seller, the
Business, the Purchased Assets and the Assumed Liabilities; and (c) except as
expressly set forth in this Agreement, Seller has made no representation or
warranty as to itself, the Business,
37
the Purchased Assets or the Assumed Liabilities. Acquiror further acknowledges
that this Agreement is subject to any applicable order or act of the Bankruptcy
Court.
7.5 Sufficiency of Funds. Acquiror has unencumbered cash on hand or credit
--------------------
arrangements with financially responsible third parties, or a combination
thereof, in an aggregate amount sufficient to enable it to pay the Purchase
Price and all fees and expenses payable by it in connection with this Agreement
and the transactions contemplated hereby.
7.6 Brokers and Finders. Neither Acquiror nor any of its Affiliates has
-------------------
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders fees in connection with the transactions contemplated
hereby.
ARTICLE VIII
CERTAIN COVENANTS
8.1 Conduct and Management of the Business. During the period from the
--------------------------------------
date of this Agreement until the Closing Date, except as otherwise contemplated
by this Agreement, as required by the Bankruptcy Court or otherwise required by
Law, or as listed or described on Schedule 8.1, Seller shall use its reasonable
------------
best efforts to assure that the Business is conducted in the ordinary course of
business consistent with past practices.
8.2 Disclosure Supplements. From time to time prior to the Closing (and
----------------------
subject to the rights of Acquiror to terminate this Agreement under Section
-------
10.1.3), Seller by written notice to Acquiror may amend or supplement the
------
Schedules to this Agreement to modify the representations and warranties made
herein with respect to (a) any matter that arises hereafter if had it existed or
occurred on or prior to the date hereof such matter would have been required to
be listed or described on the Schedules to this Agreement, or (b) any matter the
disclosure of
38
which is necessary to correct any information on the Schedules to this Agreement
or to make accurate any representation and warranty of Seller contained herein.
No such amendment or supplement to the Schedules to, or such modifications to
the representations and warranties contained in, this Agreement after the date
of this Agreement shall be deemed, without the written consent of Acquiror, to
cure any breach of any representation or warranty contained in the Agreement for
purposes of, or otherwise modify, affect or diminish Acquiror's right to assert,
the condition set forth in Section 9.3.2; provided, however, that any matter
------------- -------- -------
disclosed to Acquiror pursuant to this Section 8.2 shall not form the basis of
-----------
any right to indemnification pursuant to Section 11.3(A). Notwithstanding the
---------------
foregoing, the parties acknowledge that as of the date of this Agreement,
Schedule 6.7.1 contains an incomplete listing of the Owned Tangible Personal
--------------
Property. The parties shall mutually cooperate to promptly prepare a complete
listing of the Owned Tangible Personal Property and supplement Schedule 6.7.1
--------------
with such complete listing no later than the date that is 14 days after the date
of this Agreement.
8.3 Access to Information; Confidentiality. Seller shall afford to
--------------------------------------
Acquiror and its representatives reasonable access (subject, however, to
existing confidentiality and similar non-disclosure obligations) during normal
business hours and upon reasonable notice during the period prior to the Closing
to all of Seller's properties, books and records and personnel and, during such
period, Seller shall furnish as promptly as practicable to Acquiror such
information (subject, however, to existing confidentiality and similar
nondisclosure obligations) concerning the Business as Acquiror may from time to
time reasonably request. Acquiror shall hold, and shall cause its
representatives and Affiliates to hold, any nonpublic information obtained from
Seller in confidence to the extent required by, and in accordance with the
provisions of, the Confidentiality Agreement. To the extent that Seller or any
of its Affiliates incurs any
39
incremental out-of-pocket costs in processing, retrieving or transmitting any
such information requested by Acquiror pursuant to this Section 8.3, Acquiror
-----------
shall reimburse Seller, for such costs promptly upon the submission by Seller to
Acquiror of an invoice therefor accompanied by supporting documentation in
reasonable detail. Prior to the consummation of the Closing, Acquiror shall
hold, and shall cause its representatives and Affiliates to hold, any nonpublic
information obtained from Seller in confidence to the extent required by, and in
accordance with the provisions of, the Confidentiality Agreement. From and after
the Closing, Acquiror shall hold, and shall cause its representatives and
Affiliates to hold, any nonpublic information obtained from Seller in confidence
to the extent required by, and in accordance with the provisions of, the
Confidentiality Agreement with respect to the Excluded Assets and any businesses
or operations of Parent or any Subsidiary thereof that are not Transferred to
Acquiror pursuant to this Agreement.
8.4 Commercially Reasonable Efforts; Regulatory Matters. On the terms and
---------------------------------------------------
subject to the conditions set forth in this Agreement, each of the parties shall
use its commercially reasonable efforts to take, or cause to be taken, all
actions, and do, or cause to be done, and assist and cooperate with the other
party in doing, all things necessary, proper or advisable to consummate, in the
most expeditious manner practicable, the transactions contemplated hereby,
including the satisfaction of the conditions set forth in Article IX. Without
----------
limiting the generality or effect of the foregoing, each of the parties hereto
shall (a) if required, make promptly its respective HSR Filing, and thereafter
make any other required submissions, with respect to the transactions
contemplated hereby under the HSR Act and (b) use its commercially reasonable
efforts to take, or cause to be taken, all other appropriate actions, and to do,
or cause to be done, all other things necessary, proper or advisable under Laws
to consummate and make
40
effective the transactions contemplated by this Agreement, including using its
commercially reasonable efforts to obtain all Consents of Governmental Entities
as are necessary for the consummation of the transactions contemplated hereby
and to fulfill the conditions thereto.
8.5 Title Insurance. Acquiror shall be responsible for obtaining its own
---------------
title insurance (or commitment therefor) with respect to the Owned Real Property
included in the Purchased Assets. All costs associated with any such policy (or
commitment), including without limitation premium charges, search fees,
commitment fees and other similar administrative fees of the title company,
shall be borne by Acquiror. Seller shall reasonably cooperate with the title
company with respect to the resolution of any disputes not otherwise covered by
the Bankruptcy Court Order with lienholders (including without limitation taxing
authorities) with respect to any Liens appearing in title reports that would
preclude the title company from issuing any such policy without exception for
such matters; provided, however that the existence of any such Lien shall not
constitute a breach of this Agreement so long as at or prior to Closing the
title company agrees to issue the relevant title policy without such Lien being
listed as an exception to such title policy.
8.6 Bankruptcy Court Approval.
-------------------------
8.6.1 Sales Motion. Promptly after the date hereof, Seller shall
------------
file a motion with the Bankruptcy Court (the "Sales Motion") seeking, among
other things, the entry of an order of the Bankruptcy Court that authorizes the
sale of the Purchased Assets and the other transactions contemplated by this
Agreement (the "Bankruptcy Court Order"). Seller shall provide Acquiror with an
opportunity to review and comment on the Sales Motion prior to the filing
thereof with the Bankruptcy Court. The Bankruptcy Court Order shall provide,
among
41
other things, that the minimum opening bid in an auction must be for an amount
not less than $15,500,000, plus the deemed value, determined in the sole
discretion of Seller, of the Promissory Note, plus an overbid amount having a
minimum value of $1,250,000 and that the bidder shall make a deposit upon
execution of an agreement related thereto of an amount not less than $850,000.
8.6.2 Bankruptcy Court Hearing. Promptly after the filing of the
------------------------
Sales Motion, Seller shall use commercially reasonable efforts to obtain a
hearing thereon at the earliest permissible date on which the Bankruptcy Court
will hear such matter, after expiration of the applicable notice period, which
notice period shall not be less than 20 calendar days, unless a shorter notice
period is approved by the Bankruptcy Court. Upon obtaining a hearing date,
Seller shall give notice of the Sales Motion and the hearing thereon as and when
required by applicable provisions of the Bankruptcy Laws and orders of the
Bankruptcy Court. Seller shall promptly deliver to Acquiror a copy of such
notice and shall provide Acquiror with copies of any and all objections or other
Bankruptcy Pleadings relating to the Sales Motion promptly after Seller's
receipt thereof. This Agreement, the Sales Motion and the transactions
contemplated by this Agreement shall be subject to the Bidding Procedures Order.
Seller shall use commercially reasonable efforts to obtain the prompt entry of
the Bankruptcy Court Order.
8.7 Notice of Breaches. Acquiror will promptly, and in any event prior to
------------------
the Closing, notify Seller if Acquiror becomes aware prior to the Closing that
any representation or warranty made by Seller in this Agreement is inaccurate or
untrue.
42
8.8 Objections to Transaction. Acquiror shall use its commercially
-------------------------
reasonable efforts to assist Seller with responding and providing evidence with
respect to any and all objections or challenges to the transactions contemplated
hereby relating to Acquiror.
8.9 Public Announcements. Each of Seller and Acquiror shall consult with
--------------------
the other before issuing, and provide the other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by Law or by the Bankruptcy Court.
8.10 Employees.
---------
8.10.1 Force Reductions. Promptly after the execution and delivery
----------------
of this Agreement by Seller and Acquiror, Seller shall take such steps as are
necessary to reduce the number of employees at each of Seller's facilities as
set forth on Schedule 8.10.1 (the "Force Reductions"). The Force Reductions
---------------
shall be completed no later than the day immediately preceding the Closing Date.
Seller acknowledges that Acquiror shall not have any liability for severance
obligations as a result of the Force Reductions.
8.10.2 Offer of Employment. At the Closing, Acquiror shall offer
-------------------
employment to all individuals who are employees of Seller at Closing (including
employees on leave, disability or workers' compensation) after giving effect to
the Force Reductions (the "Acquiror Employees"). All such offers shall be for
pay and benefits that will satisfy Acquiror's obligations under Section 8.11.
Employment with Acquiror shall be deemed to have commenced immediately after
11:59 p.m., Eastern time, on the Closing Date. Except as
43
provided in Section 8.10.3, Acquiror shall not be obligated to continue to
--------------
employ any Acquiror Employee for any particular period.
8.10.3 WARN Act. For a period of 91 calendar days after the Closing
--------
Date, Acquiror shall not terminate any of the Acquiror Employees except within
the permissible limits set forth on Schedule 8.10.3.
---------------
8.11 Employment and Employee Benefit Matters.
---------------------------------------
8.11.1 Continuation of Pay and Benefits. After the Closing and until
--------------------------------
the first anniversary of the Closing Date, subject to the last sentence of
Section 8.10.2, Acquiror shall provide base pay, incentive compensation and
--------------
employee benefits to Acquiror Employees that are, in Acquiror's reasonable
discretion, competitive with the level of base pay, incentive compensation and
employee benefits provided to similarly situated employees of employers engaged
in businesses that are the same as, or similar to, the Business and that are
located in the Southeastern United States.
8.11.2 Credit for Service with Seller. Subject to applicable Laws,
------------------------------
if Acquiror Employees are included in any benefit plan of Acquiror or its
Affiliates following the Closing Date, the Acquiror Employees shall receive
credit for service prior to the Closing Date with Seller to the same extent such
service was counted under similar Company Plans for purposes of eligibility,
vesting, eligibility for retirement and, with respect to vacation, disability
and severance, benefit accrual. If Acquiror Employees are included in any
medical, dental or health plan other than the plan or plans they participated in
on the Closing Date, any such plans shall not include preexisting condition
exclusions, except to the extent such exclusions were applicable under the
similar Company Plan on the Closing Date, and shall provide credit for any
44
deductibles and co-payments applied or made with respect to each Acquiror
Employee in the calendar year of the change.
8.11.3 No Transfer of Plan Assets or Liabilities. There shall be no
-----------------------------------------
Transfer of assets or liabilities from any Company Plan to any plan or
arrangement of Acquiror. Notwithstanding anything to the contrary herein
contained, following the Closing Date Acquiror shall have no right, title or
interest in any of the assets of any Company Plan and shall have no liability or
responsibility in respect of any Company Plan.
8.12 Tax Matters.
-----------
8.12.1 Seller Tax Returns. Seller shall cause to be included in its
------------------
income Tax Returns for all periods or portions thereof ending on or before or
which include the Closing Date, tax items relating to the operations of the
Business during such periods or portions thereof determined by an interim
closing of the books as of the Closing Date. Seller shall prepare and file or
cause to be prepared and filed all such Tax Returns with the appropriate
Governmental Entities. Seller shall make all payments shown thereon as owing
with respect to such Tax Returns.
8.12.2 Assistance and Records. Seller and Acquiror shall (a) each
----------------------
provide the other with such assistance as may reasonably be requested by either
of them in connection with the preparation of any Tax Return, audit or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (b) each retain and provide the other with any
records or other information that may be relevant to such Tax Return, audit or
examination, proceeding or determination, and (c) each provide the other with
any final determination of any such audit or examination, proceeding or
determination that affects any
45
amount required to be shown on any Tax Return of the other for any period.
Without limiting the generality of the foregoing, Seller and Acquiror shall
retain until the applicable statutes of limitations (including any extensions)
have expired copies of all records or information that may be relevant to Tax
Returns filed by the other party for all tax periods or portions thereof ending
before or including the Closing Date.
8.13 Environmental Matters.
---------------------
8.13.1 Subrogation of Certain Environmental Rights. Following the
-------------------------------------------
Closing Date, to the extent that Acquiror suffers any Losses related to any
Xxxxxxx Indemnified Matters, Seller shall grant to Acquiror a right of
subrogation with respect to, or shall enforce for the account and at the expense
of Acquiror, the Xxxxxxx Rights.
8.13.2 Preliminary Due Diligence. With respect to certain
-------------------------
environmental assessments of the Owned Real Property and the Leased Real
Property that were performed before the date hereof at the request of Acquiror,
Acquiror and Purchaser agree that (a) Seller shall reimburse Acquiror for no
more than $20,000 of all reasonable fees, costs and expenses actually incurred
with respect to such assessment (such reimbursement to be paid within 10
business days after receipt by Seller of appropriate documentation of such fees,
costs and expense) and thereafter Acquiror shall bear all fees, costs and
expenses of such assessment in excess of $20,000 and (b) Seller shall retain
certain liabilities as more fully set forth in the subsection (b)(ii) of the
definition of "Assumed Liabilities." Acquiror understands and acknowledges that
any information obtained by Acquiror or it Affiliates in connection with any
environmental assessment is subject to the terms and conditions of the
Confidentiality Agreement.
46
8.14 Non-Solicitation.
----------------
8.14.1 Seller's Obligations. From the date of this Agreement to the
--------------------
first anniversary of the Closing Date, except as mutually agreed by Seller and
Acquiror, Seller shall not, and shall cause its Affiliates not to, solicit or
encourage any employee of Acquiror or any of its Affiliates employed in the
Business to leave the employ of Acquiror or any of its Affiliates, provided that
--------
nothing contained herein shall prevent or restrict Seller or any of its
Affiliates from employing any individual who responds to a general solicitation
for employment made by or on behalf of Seller or any of its Affiliates, or any
individual who, after the Closing, initiates contact with Seller or any of its
Affiliate for purposes of seeking employment.
8.14.2 Acquiror's Obligations. From the date of this Agreement to the
----------------------
first anniversary of the Closing Date, except as provided in Section 8.10 or as
------------
mutually agreed in writing by Seller and Acquiror, Acquiror shall not, and shall
cause its Affiliates not to, solicit or encourage any employee of Seller or any
of its Affiliates to leave the employ of Seller or any of its Affiliates;
provided that nothing contained herein shall prevent or restrict Acquiror or any
--------
of its Affiliates from employing any individual who responds to a general
solicitation for employment made by or on behalf of Acquiror or any of its
Affiliates, or any individual who, after the Closing, initiates contact with
Acquiror or any of its Affiliates for purposes of seeking employment.
8.15 Noncompetition.
-------------
8.15.1 Noncompetition Covenant. Following the Closing Date until the
-----------------------
first to occur of (i) the fifth anniversary of the Closing Date and (ii) the
expiration or termination of the
47
License Agreement, Seller shall not, and shall cause Parent and each of its
other Subsidiaries not to:
(a) design, manufacture or distribute the products listed or
described on Schedule 8.15.1 (the "Specified Products") in the
---------------
Specified Territory;
(b) own any interest in, manage or serve as a consultant, business
advisor or independent contractor for, or make any loan to or
guarantee any obligation of, any Person primarily engaged in
the design, manufacture or distribution of Specified Products
in the Specified Territory;
(c) solicit sales of the Specified Products to any customer in the
Specified Territory to whom the Business had sales during the
12-month period prior to the date hereof; or
(d) request, induce or attempt to influence any supplier of goods
or services to the Business in the Specified Territory to
curtail or cancel any business it transacts with Acquiror with
respect to the Business.
8.15.2 Exceptions to Covenant. Nothing contained in Section 8.15.1
---------------------- --------------
shall prohibit (a) Seller, Parent or any other Subsidiary of Parent from
holding, directly or indirectly, up to 5% of the outstanding securities of any
class of publicly-traded securities of any Person, (b) Seller, Parent or any
other Subsidiary of Parent from being acquired by a Person engaged in the
design, manufacture or distribution of Specified Products, or any such Person
from engaging in any of the activities described in Section 8.15.1 directly or
--------------
through its Affiliates other than Seller, Parent or another Subsidiary of
Parent, (c) Seller, Parent or any other Subsidiary of Parent from purchasing
goods or services used by them from a supplier to the Business, (d) Seller,
Parent or any other Subsidiary of Parent from distributing or soliciting sales
of the Xxxxx Lauren Inventory, or (e) Seller, Parent or any Subsidiary of Parent
from continuing or renewing any business relationship existing prior to the
Closing that is not otherwise prohibited by Section 8.15.1 or from engaging in
--------------
any transaction with or having any business relationship with Acquiror.
48
8.16 Reimbursement of Erroneous Customer Charges; Erroneous Payments.
---------------------------------------------------------------
8.16.1 Seller Reimbursement of Acquiror. After the Closing Date,
--------------------------------
Acquiror may deliver to Seller, on the first and fifteenth day of each month,
statements (each an "Acquiror Reimbursement Statement") showing Customer Charges
taken against Acquiror (other than Customer Charges taken with respect to
returns or allowances for returns) and not previously reimbursed by Seller that
arise from the operation by Seller of the Business on or prior to the Closing
Date and, accordingly, should have been taken against Seller. Each Acquiror
Reimbursement Statement shall be accompanied by reasonable supporting
documentation. Promptly (and, in any event, within 10 calendar days) following
receipt of an Acquiror Reimbursement Statement and the required supporting
documentation, Seller shall pay to Acquiror an amount equal to the Customer
Charges shown in the Acquiror Reimbursement Statement. In the event Seller
receives a payment for product(s) sold by Acquiror after the effective time of
the Closing, Seller shall promptly forward such payment to Acquiror.
8.16.2 Acquiror Reimbursement of Seller. After the Closing Date,
--------------------------------
Seller may deliver to Acquiror, on the first and fifteenth day of each month,
statements (each a "Seller Reimbursement Statement") showing Customer Charges
taken against Seller, Parent or another Subsidiary of Parent and not previously
reimbursed by Acquiror that arise from the operation of the Business after the
Closing Date and, accordingly, should have been taken against Acquiror. Each
Seller Reimbursement Statement shall be accompanied by reasonable supporting
documentation. Promptly (and, in any event, within 10 calendar days) following
receipt of a Seller Reimbursement Statement and the required supporting
documentation, Acquiror shall pay to Seller an amount equal to the Customer
Charges shown in the Seller Reimbursement
49
Statement. In the event Acquiror receives a payment for product(s) sold by
Seller prior to the effective time of the Closing, Acquiror shall promptly
forward such payment to Seller.
8.17 Treatment of Returns.
--------------------
8.17.1 Acquiror to Accept Returns. Acquiror shall accept returns of
--------------------------
all products distributed in connection with the operation of the Business,
whether distributed on, prior to or after the Closing Date. Seller shall forward
to Acquiror all returned products received by Seller that were distributed in
connection with the operation of the Business, whether distributed on, prior to
or after the Closing Date. Acquiror shall use commercially reasonable efforts to
refurbish, repackage and place in inventory all such returned products.
8.17.2 Returns Involving a Customer Charge to Acquiror. In the event
-----------------------------------------------
that a Customer Charge has been taken against Acquiror with respect to returns
or allowances for returns related to products distributed in connection with the
operation of the Business on or prior to the Closing Date and returned to
Acquiror, Acquiror may, after discharging its obligations under Section 8.17.1
--------------
with respect to such returned products, deliver to Seller a statement (each a
"Return Reimbursement Statement") showing (a) the Customer Charge taken against
Acquiror with respect to returns or allowances for returns related to such
returned products, (b) Acquiror's cost associated with refurbishing and
repackaging such returned products, and (c) the price invoiced or to be invoiced
by Acquiror for such returned products on resale. Each Return Reimbursement
Statement shall be accompanied by reasonable supporting documentation. Promptly
following receipt of a Return Reimbursement Statement and the required
supporting documentation, Seller shall pay to Acquiror an amount equal to (a)
the sum of (i) the Customer Charge taken against Acquiror with respect to
returns or allowances for
50
returns related to the returned products to which such Return Reimbursement
Statement relates and (ii) Acquiror's cost associated with refurbishing and
repackaging such returned products, less (b) the price invoiced or to be
invoiced by Acquiror for such returned products on resale, all as shown in the
Return Reimbursement Statement.
8.17.3 Returns Not Involving a Customer Charge to Acquiror. In the
---------------------------------------------------
event that any returned products distributed in connection with the operation of
the Business on or prior to the Closing Date are delivered to Acquiror and no
Customer Charge with respect to returns or allowances for returns is taken
against Acquiror in connection therewith, Acquiror shall, after discharging its
obligations under Section 8.17.1 with respect to such returned products, pay to
--------------
Seller an amount equal to (a) the price invoiced or to be invoiced by Acquiror
for such returned product on resale, less (b) Acquiror's cost associated with
refurbishing and repackaging such returned products. Each such payment shall be
accompanied by a statement showing the computation thereof, together with
reasonable supporting documentation.
8.17.4 Records. Acquiror shall maintain complete and accurate records
-------
with respect to product returns and actions taken by Acquiror pursuant to this
Section 8.17. Such records shall include without limitation information
------------
regarding the type and quantity of returned products, the dates on which
returned products were received by Acquiror, the actions taken in connection
with refurbishing and repackaging returned products and the prices invoiced or
to be invoiced by Acquiror on resale of returned products. At any time during
normal business hours upon reasonable notice, Acquiror shall permit Seller and
its representatives to examine and make copies of such records.
51
ARTICLE IX
CONDITIONS
9.1 Conditions to the Obligations of Each Party. The obligations of each
-------------------------------------------
Seller and Acquiror to consummate the Transfer of the Purchased Assets are
subject to the satisfaction of the following conditions:
9.1.1 No Injunction. There shall not have been entered a preliminary
-------------
or permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any domestic jurisdiction, the effect of which
prohibits the Closing.
9.1.2 Governmental Consents. All Consents of Governmental Entities
---------------------
necessary to consummate the transactions contemplated hereby, including without
limitation the expiration or termination of any applicable waiting period under
the HSR Act, shall have been obtained.
9.1.3 Bankruptcy Court Approval. The Bankruptcy Court Order shall
-------------------------
have been entered, and no stay of the Bankruptcy Court Order pending appeal
shall have been entered.
9.1.4 Approval of Senior Lenders. The approval of the senior lenders
--------------------------
required pursuant to the DIP Facility in connection with the execution and
delivery by Seller, and the performance by Seller of its obligations under this
Agreement, and the guarantee of such performance by Parent, shall have been
obtained.
9.2 Conditions to the Obligations of Seller. The obligation of Seller to
---------------------------------------
consummate the Transfer of the Purchased Assets is subject to the satisfaction
(or written waiver by Seller) of each of the following further conditions:
52
9.2.1 Compliance by Acquiror. Acquiror shall have performed and
----------------------
complied with in all material respects all material obligations required to be
performed or complied with by it under this Agreement at or prior to the Closing
Date, and Seller shall have received a certificate signed by an executive
officer of Acquiror to the foregoing effect.
9.2.2 Accuracy of Acquiror's Representations. The representations and
--------------------------------------
warranties of Acquiror contained in this Agreement that are qualified as to
materiality shall be true in all respects, and those that are not so qualified
shall be true in all material respects, at and as of the Closing Date as if made
at and as of such time (other than representations and warranties made as of a
specific time or date which shall speak at and as of such specific time or
date), and Seller shall have received a certificate signed by an executive
officer of Acquiror to the foregoing effect.
9.2.3 License Agreement. Acquiror shall have executed and delivered
-----------------
the License Agreement.
9.2.4 Lease. Acquiror shall have executed and delivered the Lease for
-----
the real property located in Mauldin, South Carolina.
9.2.5 Transitional Services Agreement. Acquiror shall have executed
-------------------------------
and delivered the Transitional Services Agreement.
9.2.6 Promissory Note. Acquiror shall have executed and delivered the
---------------
Promissory Note and the other Loan Documents, and each of the conditions to the
making of the loan contemplated by the Loan Documents set forth in the Loan
Documents shall have been satisfied.
53
9.2.7 Assumption Documents. Acquiror shall have executed and
--------------------
delivered the Assumption Documents.
9.2.8 Purchase Price Escrow Agreement. Acquiror and the Purchase
-------------------------------
Price Escrow Agent shall have executed and delivered the Purchase Price Escrow
Agreement and Acquiror shall have delivered to the Purchase Price Escrow Agent,
via wire transfer of immediately available funds to the account designated in
the Purchase Price Escrow Agreement, $700,000.
9.2.9 Payment of Estimated Purchase Price. Acquiror shall have paid,
-----------------------------------
via wire transfer of immediately available funds to an account designated by
Seller, an amount equal to the Initial Payment Amount less $1,340,000.
9.2.10 Resolutions of Acquiror. Seller shall have received from
-----------------------
Acquiror copies of the resolutions adopted by the Board of Directors of Acquiror
approving the execution and delivery of this Agreement, the Loan Documents and
the consummation of the transactions contemplated hereby, certified by the
Secretary of Acquiror.
9.3 Conditions to the Obligations of Acquiror. The obligation of Acquiror
-----------------------------------------
to consummate the Transfer of the Purchased Assets is subject to the
satisfaction (or written waiver by Acquiror) of each of the following further
conditions:
9.3.1 Compliance by Seller. Seller shall have performed and complied
--------------------
with in all material respects all material obligations required to be performed
or complied with by it under this Agreement at or prior to the Closing Date, and
Acquiror shall have received a certificate signed by an executive officer of
Seller to the foregoing effect.
54
9.3.2 Accuracy of Seller's Representations. The representations and
------------------------------------
warranties of Seller contained in this Agreement that are qualified as to
materiality shall be true in all respects, and those that are not so qualified
shall be true in all respects other than inaccuracies that would not have,
individually or in the aggregate, a Material Adverse Effect, at and as of the
Closing Date as if made at and as of such time (other than representations and
warranties made as of a specific time or date which shall speak at and as of
such specific time or date), and Acquiror shall have received a certificate
signed by an executive officer of Seller to the foregoing effect.
9.3.3 License Agreement. Seller shall have caused Licensor to have
-----------------
executed and delivered the License Agreement.
9.3.4 Lease. The then-current owner of Owned Real Property located in
-----
Mauldin, South Carolina, shall have executed and delivered the Lease.
9.3.5 Transitional Services Agreement. Seller shall have, and shall
-------------------------------
have caused Parent to have, executed and delivered the Transitional Services
Agreement.
9.3.6 Transfer Documents. Seller shall have executed and delivered
------------------
the Transfer Documents.
9.3.7 Purchase Price Escrow Agreement. Seller and the Purchase Price
-------------------------------
Escrow Agent shall have executed and delivered the Purchase Price Escrow
Agreement.
9.3.8 Material Adverse Effect. From the date of this Agreement to the
-----------------------
Closing Date, there shall not have occurred any change or event that would have
a Material Adverse
55
Effect, and Acquiror shall have received a certificate signed by Seller's duly
authorized executive to the foregoing effect.
9.3.9 Resolutions of Seller and Parent. Acquiror shall have received
--------------------------------
from Seller copies of the resolutions adopted by the respective Boards of
Directors of Seller and Parent approving the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
certified by the respective Secretaries of Seller and Parent.
9.3.10 Waiver and Release. Acquiror, Xxxxxxx X. Xxxxx and Xxxxxxx
------------------
Xxxxxx Xxxx (collectively, the "Releasing Parties") shall have delivered a
waiver and release, in form and substance satisfactory to Seller, of any and all
claims against Seller and any of its Affiliates with respect to any advice or
assistance provided by Seller or any of its Affiliates to the Releasing Parties
with respect to the Businesses or the effectuation or consummation of the
transactions contemplated hereby.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby may be abandoned at any time prior to the Closing:
10.1.1 Mutual Consent. By mutual written consent of Seller and
--------------
Acquiror.
10.1.2 Seller Termination. By Seller, upon written notice to
------------------
Acquiror, (a) if the Closing shall not have occurred prior to September 28,
2001, (b) so long as Acquiror could not then terminate this Agreement pursuant
to Section 10.1.3(b), if Acquiror is in material breach of any material covenant
-----------------
contained in this Agreement or the representations and warranties of Acquiror
contained in this Agreement that are qualified as to materiality are not true in
all
56
respects, and those that are not so qualified are not true in all material
respects, at and as of the date of such termination as if made at and as of such
time (other than representations and warranties made as of a specific time or
date which shall speak as of such specific time or date), (c) if Seller receives
a bona fide offer for the purchase of the Business and determines in good faith
that the transaction proposed in such other offer is on more favorable terms and
conditions in favor of Seller than the transaction contemplated by this
Agreement (such transaction being referred to herein as a "Superior
Transaction"), provided, however, that unless Seller gives a written notice of
-------- -------
termination, Acquiror shall remain bound by the terms of this Agreement and by
any improvement of the terms set forth herein proposed by Acquiror for the
benefit of Seller at an auction of the Purchased Assets, until such Superior
Transaction is consummated, or (d) if termination is authorized pursuant to an
order of the Bankruptcy Court.
10.1.3 Acquiror Termination. By Acquiror, upon written notice to
--------------------
Seller, (a) if the Closing shall not have occurred prior to September 28, 2001
or (b) so long as Seller could not then terminate this Agreement pursuant to
Section 10.1.2(b), if Seller is in material breach of any material covenant
----------------
contained in this Agreement or the representations and warranties of Seller
contained in this Agreement that are qualified as to materiality are not true in
all respects, and those that are not so qualified are not true in all respects
other than inaccuracies that would not have, individually or in the aggregate, a
Material Adverse Effect, at and as of the date of such termination as if made at
and as of such time (other than representations and warranties made as of a
specific time or date which shall speak as of such specific time or date).
10.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 10.1, this Agreement, except for the provisions of
------------
this Section 10.2 and Sections 10.3, 12.4, 12.7, 12.10 and 12.11, shall
------------ -------- ---- ---- ---- ----- -----
forthwith become null and void and have no effect,
57
without any liability on the part of either party or their
respective Affiliates. Nothing in this Article X shall, however, relieve either
---------
party to this Agreement of liability for breach of this Agreement occurring
prior to such termination, or for breach of any provision of this Agreement
which specifically survives termination hereunder.
10.3 Breakup Fee and Expense Reimbursement. Subject to the provisions of
-------------------------------------
any order of the Bankruptcy Court, if Seller fails to consummate the
transactions contemplated by this Agreement because either (a) Seller has
received an offer contemplating a Superior Transaction and consummates such
Superior Transaction or (b) Acquiror terminates this Agreement pursuant to
Section 10.1.3(a) at such time as Seller is a party to an definitive agreement
-----------------
providing for a Superior Transaction and, then, in either such event Seller
shall pay to Acquiror a breakup fee in the amount of $450,000 (the "Breakup
Fee") and reimburse Acquiror for its reasonable and necessary out-of-pocket
expenses actually incurred by it in connection with this Agreement (the "Expense
Reimbursement"), provided, however, the Expense Reimbursement shall not exceed
-------- -------
$250,000. The Breakup Fee shall be paid promptly (and, in any event, within two
business days) following either the consummation of the Superior Transaction as
contemplated by clause (a) of the immediately preceding sentence or the
termination of this Agreement as contemplated by clause (b) of the immediately
preceding sentence (each such event being a "Termination Fee Event"). The
Expense Reimbursement shall be paid promptly (and, in any event, within two
business days) after the later to occur of (a) the applicable Termination Fee
Event and (b) Acquiror's receipt of reasonable documentation supporting such
Expense Reimbursement.
58
ARTICLE XI
INDEMNIFICATION
11.1 Survival of Representations and Warranties. EXCEPT AS EXPRESSLY SET
------------------------------------------
FORTH IN THIS AGREEMENT, THERE ARE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND,
EXPRESSED OR IMPLIED, (INCLUDING ANY REPRESENTATIONS OR WARRANTIES AS TO THE
QUALITY OR FITNESS OF THE PURCHASED ASSETS FOR THEIR INTENDED PURPOSES OR ANY
PARTICULAR PURPOSE) WITH RESPECT TO SELLER, THE BUSINESS, THE PURCHASED ASSETS
OR THE ASSUMED LIABILITIES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO (a) ANY
PROJECTIONS, ESTIMATES OR BUDGETS DELIVERED TO OR MADE AVAILABLE TO ACQUIROR OF
THE FUTURE RESULTS OF OPERATIONS, CASH FLOWS OR FINANCIAL CONDITION (OR ANY
COMPONENT OF ANY OF THEM) OF THE BUSINESS OR (b) ANY OTHER INFORMATION OR
DOCUMENTS MADE AVAILABLE TO ACQUIROR OR ITS REPRESENTATIVES REGARDING SELLER,
THE BUSINESS, THE PURCHASED ASSETS OR THE ASSUMED LIABILITIES. The
representations and warranties of the parties contained in this Agreement (or in
any certificate delivered pursuant hereto) shall expire on the first anniversary
of the Closing Date except with respect to claims asserted with respect to such
representations and warranties prior to such expiration in which case they shall
survive until the resolution of such claims in accordance with this Article XI;
----------
provided, however, (a) the representations and warranties of Seller contained in
-------- -------
Section 6.2, the second sentence of Section 6.6.1, the third sentence of Section
----------- ------------- -------
6.7.1, the second sentence of 6.9.1 and the representations and warranties of
----- -----
Acquiror contained in Section 7.2 shall expire on the third anniversary of the
-----------
Closing Date except with respect to
59
claims asserted with respect to such representations and warranties prior to
such expiration in which case they shall survive until the resolution of such
claims in accordance with this Article XI, and (b) the representations and
----------
warranties of Seller contained in Section 6.4 and Section 6.5 shall terminate
----------- -----------
upon the Closing. The covenants of the parties contained in this Agreement shall
remain operative and in full force and effect without any time limitation,
except as any such covenant is limited in duration by the express terms hereof.
11.2 Indemnification by Acquiror. From and after the Closing, Acquiror
---------------------------
shall indemnify, defend and hold Seller and its Affiliates, and their respective
directors, officers, representatives, employees and agents, harmless from and
against any and all claims, actions, suits, demands, assessments, judgments,
losses, liabilities, damages, costs, royalties, payments, license fees and
expenses (including interest, penalties, attorneys' fees, accounting fees and
investigation costs) (collectively, "Losses") resulting from or arising out of
(a) any breach of any representation or warranty of Acquiror contained herein or
in any certificate delivered by Acquiror pursuant hereto (provided that Seller
properly notifies Acquiror of the claim that such representation or warranty has
been breached and such notice is given by Seller in writing prior to the
expiration or termination of the applicable representation or warranty), or (b)
any breach of any covenant of Acquiror contained herein, which covenant requires
performance by Acquiror after the Closing, (c) any of the Assumed Liabilities,
or (d) the operation by Acquiror of the Business or the ownership or use by
Acquiror of the Purchased Assets after the Closing, except to the extent Seller
is obligated to indemnify Acquiror with respect thereto.
11.3 Indemnification by Seller. From and after the Closing, Seller shall
-------------------------
indemnify, defend and hold Acquiror and its Affiliates, and their respective
directors, officers, representatives, employees and agents, harmless from and
against any and all Losses resulting
60
from or arising out of (a) any breach of any representation or warranty of
Seller contained herein or in any certificate delivered by Seller pursuant
hereto (provided that Acquiror properly notifies Seller of the claim that such
representation or warranty has been breached and such notice is given to Seller
in writing prior to the expiration or termination of the applicable
representation or warranty), (b) any breach of any covenant of Seller contained
herein, which covenant requires performance by Seller after the Closing, or (c)
any of the Retained Liabilities.
11.4 Limitations.
-----------
11.4.1 Basket; Cap. Notwithstanding anything to the contrary
-----------
contained in this Agreement, no Person shall be entitled to receive any amount
in respect of breaches of representations and warranties made by Seller in this
Agreement or in any certificate delivered by Seller pursuant hereto (a) except
to the extent, and only to the extent, the aggregate of all Losses arising from
breaches of such representations and warranties shall exceed an amount equal to
$350,000 (the "Basket") or (b) in excess of an amount equal to $4,500,000 in the
aggregate (the "Cap"), above which amount Seller shall have no obligation or
liability to indemnify Acquiror or its Affiliates, or their respective
directors, officers, representatives, employees and agents, hereunder.
11.4.2 Netting of Tax Benefits. The amount of any Losses subject to
-----------------------
indemnification hereunder or any claim therefor shall be calculated net of any
Tax Benefit inuring to Acquiror or any of its Affiliates on account of such
Losses. If Acquiror or its Affiliates receive a Tax Benefit after an
indemnification payment is made, Acquiror shall promptly pay to Seller the
amount of the Tax Benefit at such time or times as and to the extent that such
Tax Benefit is received. For purposes hereof, "Tax Benefit" shall mean any
refund of
61
Taxes paid or reduction in the amount of Taxes which would otherwise be paid
currently, in each case computed assuming that the indemnified party pays income
Taxes for federal income taxes at a marginal rate of 35% and at a combined state
income and franchise tax rate (without regard to federal deductibility of state
taxes) of 5%, for a combined federal and state tax rate of 40%.
11.4.3 Netting of Insurance Proceeds. No Person shall be entitled to
-----------------------------
indemnification from Seller for any Losses (a) unless and until Acquiror and its
Affiliates have vigorously pursued to final conclusion all claims for insurance
available with respect to such Losses and (b) to the extent of the amount of
insurance recovered by Acquiror or its Affiliates with respect to such Losses.
The amount of any Losses subject to indemnification hereunder shall be
calculated net of any insurance recovered by Acquiror or its Affiliates with
respect to such Losses.
11.5 Procedures. In the event that any third party claim or demand shall
----------
be asserted against any indemnified party in respect of any Losses, the
indemnified party shall promptly, and in any event within 30 days after the
receipt of notice of such claim or demand which may give rise to a claim under
this Article XI, if a claim in respect thereof is to be made against the
----------
indemnifying party hereunder, cause written notice thereof to be given to the
indemnifying party; provided, however, that failure to so notify the
-------- -------
indemnifying party shall not relieve the indemnifying party from any obligations
it may have to the indemnified party hereunder, except to the extent that it is
prejudiced by such failure. In the event any claim or demand for indemnification
is made under this Article XI, the indemnifying party shall be entitled to
----------
meaningfully participate therein and, upon delivery by the indemnifying party to
the indemnified party of written notice, the indemnifying party may assume and
control the defense thereof with counsel of its choice, and thereafter the
indemnifying party shall not be liable to the indemnified
62
party hereunder for any fees of other counsel subsequently accrued by the
indemnified party in connection with the defense thereof. In the event that any
claim or demand is made under this Article XI, the indemnifying party and the
----------
indemnified party shall cooperate fully with each other in connection with the
defense, negotiation or settlement of any such claim or demand. If the
indemnifying party assumes the defense of an action, (a) the indemnified party
shall be entitled to participate therein at its sole cost and expense; and (b)
no settlement or compromise thereof may be effected by the indemnified party
without the consent of the indemnifying party. If the indemnifying party does
not assume the defense of an action, no compromise or settlement thereof may be
effected at the expense of the indemnifying party without the consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed.
11.6 Exclusive Remedies. From and after the Closing, Acquiror's right to
------------------
indemnification under this Article XI with respect to any Losses shall be its
----------
sole and exclusive remedy for claims under or with respect to this Agreement or
the transactions contemplated hereby, except for equitable relief (including
specific performance) and for claims based on fraud, willful misconduct or bad
faith.
11.7 Known Claims. Notwithstanding anything to the contrary herein
------------
contained, if the Closing occurs, (a) no claim for indemnification may be
asserted under Section 11.3(a) with respect to any matter known to Acquiror on
---------------
or before the Closing Date and (b) no claim for indemnification may be asserted
under Section 11.2(a) with respect to any matter known to Seller on or before
---------------
the Closing Date.
63
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits to this Agreement, and the Confidentiality Agreement constitute the
entire agreement of the parties to this Agreement with respect to the subject
matter hereof and thereof and supersede all prior agreements and undertakings,
both written and oral, with respect to the subject matter hereof and thereof.
12.2 Notices. All notices, requests and other communications to any party
-------
hereunder shall be in writing (including facsimile) and shall be given
if to Seller, to:
Beacon Manufacturing Company
c/o Pillowtex Corporation
0000 Xxxx Xxx
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Vice President and General Counsel
with copies to:
Beacon Manufacturing Company
c/o Pillowtex Corporation
Xxx Xxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Treasurer
and:
Xxxxx, Day, Xxxxxx & Xxxxx
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
64
if to Acquiror to:
Beacon Acquisition Corporation
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
with a copy to:
Xxxxxxx & Xxxxxxx, XX
XX&X Xxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
or such other address or facsimile number as such party may hereafter specify
for such purpose by notice to the other party to this Agreement. Each such
notice, request or other communication shall be effective (a) if given by
facsimile transmission, when such facsimile is transmitted to the facsimile
number specified in this Section 12.2 and the appropriate confirmation is
------------
received, or (ii) if given by any other means, when delivered at the address
specified in this Section 12.2.
------------
12.3 Amendments and Waivers.
----------------------
12.3.1 Writing Required. Any provision of this Agreement may be
----------------
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Seller and Acquiror or in the case of a
waiver, by the party against whom the waiver is to be effective.
12.3.2 No Implied Waiver. No failure or delay by either party hereto
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in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
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12.4 Expenses. Except as otherwise provided in this Agreement, all costs
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and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense. All filing fees associated with Consents
of Governmental Entities necessary to consummate the Transfers contemplated
hereby (including those associated with any HSR Filings) shall be borne solely
by Acquiror. All sales, use, transfer, stamp or similar Taxes imposed by any
Governmental Entity, and all recording, filing, notarial or similar fees
incurred, in connection with the Transfer of the Purchased Assets pursuant to
this Agreement shall be borne solely by Acquiror.
12.5 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns. Acquiror may not Transfer or
delegate any of its rights or obligations under this Agreement without the prior
written consent of Seller. Seller may Transfer or delegate its rights and
obligations under this Agreement to one or more of its Affiliates.
Notwithstanding anything to the contrary contained in this Agreement, except as
provided Section 8.10 and in Article XI, nothing in this Agreement, expressed or
------------ ----------
implied, is intended to confer on any Person other than the parties to this
Agreement or their respective successors and permitted assigns, any rights,
remedies obligations or liabilities under or by reason of this Agreement.
12.6 Certain Interpretive Matters.
----------------------------
12.6.1 Certain References. Unless the context otherwise requires,
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(a) all references in this Agreement to Sections, Articles, Exhibits or
Schedules are to Sections, Articles, Exhibits or Schedules of or to this
Agreement, (b) each term defined in this Agreement
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has the meaning ascribed to it, and (c) words in the singular include the plural
and vice versa. All references to "$" or dollar amounts are to lawful currency
---- -----
of the United States of America.
12.6.2 Titles and Headings. Titles and headings to Sections and
-------------------
Articles in this Agreement are inserted for convenience of reference only, and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement. No provision of this Agreement shall be interpreted in favor of,
or against, either of the parties to this Agreement by reason of the extent to
which any such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
12.7 Governing Law. This Agreement shall be construed in accordance with
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and governed by the internal substantive law of the State of Delaware regardless
of the laws that might otherwise govern under principles of conflict of laws
applicable thereto. This Agreement is subject to any order or act of the
Bankruptcy Court applicable hereto, including without limitation the Bidding
Procedures Order.
12.8 Bulk Sales. Each of Acquiror and Seller waives compliance by the
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other with the provisions of the so-called "bulk sales" laws of any
jurisdiction.
12.9 Knowledge. For purposes of this Agreement, references to "knowledge"
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of Seller refer to the actual knowledge of the individuals listed on Part (a) of
Schedule 12.9 and references to "Knowledge" of Acquiror refer to the actual
-------------
knowledge of the individuals listed on Part (b) of Schedule 12.9.
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12.10 Consent to Jurisdiction. The Bankruptcy Court shall have
-----------------------
jurisdiction over any dispute arising out of or in connection with the
transactions contemplated by this Agreement.
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The parties to this Agreement consent to the exclusive jurisdiction of the
Bankruptcy Court (and of the appropriate appellate courts therefrom) in any such
dispute and irrevocably waive, to the fullest extent permitted by Law, any
objection that they may now or hereafter have to the laying of the venue of any
such dispute in the Bankruptcy Court or that any such dispute brought in the
Bankruptcy Court has been brought in an inconvenient forum. Process may be
served on any party anywhere in the world, whether within or without the
jurisdiction of the Bankruptcy Court. Without limiting the foregoing, the
parties to this Agreement agree that service of process on such party may be
made upon the designated Person at the address provided in Section 12.2 and
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shall be deemed to be effective service of process on such party.
12.11 Arbitration. The Bankruptcy Court shall have jurisdiction to resolve
-----------
any dispute prior to the parties' submission to arbitration. In the event the
Bankruptcy Court declines jurisdiction over any dispute, including any claim for
indemnification under Article XI, concerning this Agreement, its effect or the
----------
transactions contemplated by it, or the Bankruptcy Court is found not to have
such jurisdiction, the same shall be settled before a panel of three arbitrators
in accordance with the then applicable provisions of the American Arbitration
Association ("AAA") using the rules of procedure of the State of North Carolina.
Each of Seller and Acquiror shall appoint one arbitrator, and those two
arbitrators shall appoint a third arbitrator. In the event that the two
arbitrators cannot agree on a third arbitrator within 10 calendar days following
the appointment of the second arbitrator, then the third arbitrator shall be
appointed by the AAA in accordance with its then applicable rules. If either
Seller or Acquiror fails to appoint an arbitrator within 45 calendar days after
written notice from one party to the other party detailing the dispute, the
arbitrator chosen by the party that has chosen an arbitrator shall act as the
sole arbitrator. The arbitration shall take place in Mecklenburg County,
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North Carolina or in such other place as Seller and Acquiror may agree. Punitive
or exemplary damages shall not be permitted under any circumstances. All
determinations made by a majority of the arbitrators shall be final and binding
upon the parties, with costs of the arbitration to be allocated by the
arbitration panel.
12.12 Severability. If any provision of this Agreement is determined by a
------------
Governmental Entity to be invalid, void or unenforceable, the remainder of the
provisions of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
12.13 Counterparts; Effectiveness. This Agreement may be signed in any
---------------------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and to this Agreement were upon the same
instrument. This Agreement shall become effective when each party to this
Agreement shall have received counterparts hereof signed by the other party to
this Agreement.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
SELLER:
BEACON MANUFACTURING COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------------------
Xxxxxxx X. Xxxxxx
Vice President and Chief Financial Officer
ACQUIROR:
BEACON ACQUISITION CORPORATION
By: /s/ Xxxx Xxxxxxxxx
------------------------------------------------
Xxxx Xxxxxxxxx
Chief Executive Officer
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GUARANTEE
---------
Parent shall cause Seller to perform its obligations under this Agreement
and Parent hereby guarantees the due performance of all such obligations by
Seller. The foregoing guarantee is an independent obligation of Parent and upon
any default by Seller in the performance of its obligations under this
Agreement, Acquiror may immediately proceed against Parent without proceeding
against or joining Seller. Parent has the requisite corporate power and
authority to execute and deliver this Guarantee and to perform its obligations
hereunder. The execution and delivery of this Guarantee by Parent and the
performance by Parent of is obligations hereunder have been duly authorized by
all necessary corporate actions of Parent. Subject to the approval of the
Bankruptcy Court, this Guarantee is a valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms. No Consent is required
in connection with the execution or delivery by Parent of, or the performance by
Parent of its obligations under, this Guarantee, except for (a) the Consents
listed or described on Schedule 6.3, (b) the filing of applicable HSR Filings,
------------
if any, and the expiration or termination of the applicable waiting period
thereunder, (c) the approval of the Bankruptcy Court, (d) the approval of the
senior lenders required pursuant to the DIP Facility, or (e) Consents that would
not have, individually or in the aggregate, a Material Adverse Effect if not
obtained or made.
PILLOWTEX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxx,
Executive Vice President and Chief
Financial Officer
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