ASSET PURCHASE AGREEMENT
Dated as of May 7, 1999
Between
X.X. XXXXX XXXXX, INC.
And
THE XXXXX GROUP, INC.
================================================================================
TABLE OF CONTENTS
Page
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ARTICLE I......................................................................1
DEFINITIONS....................................................................1
1.1 Definitions...........................................................1
1.2 Interpretation.......................................................10
ARTICLE II....................................................................11
PURCHASE TRANSACTIONS.........................................................11
2.1 Sale and Purchase of Assets..........................................11
2.2 Procedures for Certain Contracts and other Purchased Assets..........17
2.3 Treatment of Excess Cotton Inventory.................................17
2.4 Closing..............................................................18
ARTICLE III...................................................................18
PURCHASE PRICE; ADJUSTMENTS AND PAYMENT.......................................18
3.1 Purchase Price.......................................................18
3.2 Adjustment of Initial Purchase Price.................................19
3.3 Determination of Purchase Price Adjustment...........................20
3.4 Post-Closing Purchase Price Adjustment Payment.......................21
3.5 Purchase Price Allocation............................................21
3.6 Real Property and Other Business Expenses; Proration.................21
ARTICLE IV....................................................................22
REPRESENTATIONS AND WARRANTIES................................................22
4.1 Representations and Warranties of the Seller.........................22
4.1.1 Existence...................................................22
4.1.2 Authorization; Authority; Enforceability....................23
4.1.3 Properties and Assets.......................................23
4.1.4 Intellectual Property and Software..........................24
4.1.5 No Violation; Consents......................................25
4.1.6 Financial Statements........................................26
4.1.7 Governmental Authorizations; Compliance with Laws...........27
4.1.8 Contracts...................................................27
4.1.9 Tax Matters.................................................28
4.1.10 Litigation..................................................28
4.1.11 Environmental Matters.......................................29
4.1.12 Absence of Change...........................................30
4.1.13 Real Property...............................................31
4.1.14 Labor and Employment Matters................................32
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4.1.15 Customers...................................................34
4.1.16 Insurance...................................................34
4.1.17 Employee Benefit Plans......................................34
4.1.18 Brokers; Finders............................................35
4.1.19 Warranties and Product Liability............................35
4.1.20 Suppliers and Employees.....................................35
4.1.21 Tax Qualification...........................................35
4.1.22 Disclaimer of Additional Warranties.........................36
4.2 Representations and Warranties of the Buyers.........................36
4.2.1 Corporate Existence.........................................36
4.2.2 Authorization; Enforceability...............................36
4.2.3 No Violation; Consents......................................36
4.2.4 Litigation..................................................36
4.2.5 Brokers; Finders............................................37
4.2.6 Solvency....................................................37
4.2.7 Seller's Representations and Warranties.....................37
4.2.8 Tax Qualification...........................................37
ARTICLE V.....................................................................37
CERTAIN COVENANTS.............................................................37
5.1 Consummation of Agreement............................................37
5.2 Government and Third Party Consents..................................37
5.3 Filings..............................................................38
5.4 Conduct of Business Before Closing...................................38
5.5 Access and Information; Confidentiality..............................39
5.6 Real Property........................................................40
5.7 Employees............................................................41
5.8 Customers, Suppliers and Employees...................................44
5.9 Assistance in Transition.............................................45
5.10 Lien Search..........................................................45
5.11 Exclusivity..........................................................45
5.12 Cooperation..........................................................46
5.13 Use of Intellectual Property and Business Names......................46
5.14 Requested Business Records...........................................46
5.15 Brokers .............................................................46
5.16 Certain Remediation..................................................46
5.17 Water and Electrical Supply to Golf Course...........................47
5.18 Collection of Trade Receivables......................................47
5.19 Initial Inventory Payment Calculation................................47
5.20 MIS Entity...........................................................47
5.21 Financing............................................................48
5.22 Copy of Proprietary Software.........................................48
ARTICLE VI....................................................................48
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CONDITIONS PRECEDENT..........................................................48
6.1 Conditions to Obligation of the Buyer................................48
6.1.1 Representations; Performance................................48
6.1.2 Noncompetition Agreement....................................48
6.1.3 Opinions of Counsel.........................................48
6.1.4 Consents....................................................49
6.1.5 No Proceeding, Litigation, or Order.........................49
6.1.6 No Material Adverse Change..................................49
6.1.7 Documents Delivered.........................................49
6.1.8 HSR Act Filings.............................................50
6.1.9 Title Insurance on Real Property............................50
6.1.10 Permits.....................................................50
6.1.11 Financing...................................................50
6.2 Conditions to Obligation of the Seller...............................50
6.2.1 Representations; Performance................................51
6.2.2 Opinion of Counsel..........................................51
6.2.3 No Proceeding or Litigation.................................51
6.2.4 Closing Payment and Documents Delivered.....................51
6.2.5 HSR Act Filings.............................................51
ARTICLE VII...................................................................52
INDEMNIFICATION...............................................................52
7.1 Indemnification by the Seller........................................52
7.2 Indemnification by the Buyer.........................................54
7.3 Limitations..........................................................54
7.4 Procedure for Indemnification........................................55
7.4.1 Third Party Claims..........................................55
7.4.2 Direct Claims...............................................56
7.4.3 Interest....................................................57
7.4.4 Remedies....................................................57
ARTICLE VIII..................................................................58
MISCELLANEOUS.................................................................58
8.1 Termination..........................................................58
8.2 Default by the Buyer.................................................58
8.3 Default by Seller....................................................59
8.4 Bulk Sales Law.......................................................59
8.5 Expenses.............................................................59
8.6 Public Announcements.................................................59
8.7 Assignment; Successors...............................................59
8.8 Amendment and Modification; Waivers..................................60
8.9 Notices..............................................................60
8.10 Further Assurances; Records..........................................61
8.11 Mail ............................................................61
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8.12 Governing Law; Submission to Jurisdiction;
Appointment of Agent for Service of Process........................61
8.13 Remedies ............................................................62
8.14 Update to Schedules..................................................62
8.15 Entire Agreement; Counterparts.......................................63
8.16 Enforceability of Provisions.........................................63
Exhibits
A Form of Xxxx of Sale
B Form of Contract Assignment
C Form of Deeds of Conveyance
D Form of Noncompetition Agreement
E Form of Opinion of Xxxx, Xxxxxxx & Xxxxxxxx, P.C.
F Form of Opinion of Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
Schedules
1.1 Permitted Liens
2.1(a)(i) Plants
2.1(a)(iii) Personal Property
2.1(a)(v) Assumed Contracts
2.1(a)(viii) Telephone and Facsimile Numbers; Post Office Boxes
2.1(b) Excluded Assets
2.2 Required Consents
3.1(a) Severance Adjustment
3.1(b) Standard Cost
4.1.1 Foreign Qualifications
4.1.3(a) Title to Purchased Assets
4.1.3(b) Purchased Asset Location
4.1.3(c) Defects in Personal Property
4.1.3(d) Leased Property
4.1.4(b) Trademarks and Copyrights
4.1.4(c) Patents
4.1.4(d) Intellectual Property Ownership Exceptions
4.1.4(e) Third Party Software
4.1.4(f) Proprietary Software
4.1.4(g) Obligations to Third Parties - Software
4.1.6(b) Income Statement Disclosures
4.1.6(d) Financial Statements
4.1.7 Permits
4.1.8 Material Contracts
4.1.11(a) Environmental Reports
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4.1.11(b) Environmental Permits
4.1.11(c) Hazardous Substances; USTs
4.1.12 No Adverse Change
4.1.13(a) Real Property
4.1.13(e) Real Property and Improvements Insurance Notices
4.1.13(g) Structural Condition of Improvements
4.1.13(h) Real Property Dependencies
4.1.14(a) Employment Contracts
4.1.14(e) Employees of the Business
4.1.15 Customers
4.1.16 Insurance
4.1.17 Employee Benefits Plans
4.1.19 Customary Warranty
4.1.20 Employees
5.7 Non-Offer Employees
5.19 Buyer's Credit Policies
5.21 Financing Proposal
7.1(b) Certain Employees
7.2 Severance Policy
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT dated as of May 7, 1999, is by and between X.
X. XXXXX XXXXX, INC., a North Carolina corporation ("Buyer"), and THE XXXXX
GROUP, INC., a Tennessee corporation ("Seller").
Statement of Agreement
NOW, THEREFORE, in consideration of the premises and of the covenants made
herein and of the mutual benefits to be derived herefrom, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, all intending to be legally bound,
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms as used in this Agreement shall have
the following meanings:
"Adjusted Initial Purchase Price" shall have the meaning specified in
Section 3.2.
"Adjustment Amount" shall have the meaning specified in Section 3.4.
"Affiliate" shall mean, with reference to a Person, any Person that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with the specified Person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Agreement" shall mean this Agreement, all Exhibits and Schedules hereto,
all amendments made hereto and thereto by written agreement of the parties, and
all other agreements executed by the parties in connection with any of the
foregoing.
"Arbitrator" and "Arbitrators" shall have the meaning specified in Section
7.4.2.
"April Balance Sheet" shall be the unaudited balance sheet of the Business
as of May 1, 1999.
"Assumed Contracts" shall have the meaning specified in Section 2.1(a)(v).
"Assumed Liabilities" shall have the meaning specified in Section 2.1(c).
"Big Five" shall mean and include any of the following independent
certified public accounting firms: Xxxxxx Xxxxxxxx LLP, PricewaterhouseCoopers
LLP, KPMG Peat Marwick LLP, Deloitte & Touche LLP, Ernst & Young LLP and any
combined entity including any 2 or more of such firms.
"Xxxx of Sale" shall have the meaning specified in Section 2.1(a).
"Business" shall mean the manufacture, marketing, sales and distribution of
mercerized yarn (natural and dyed), dyed yarn (unmercerized), cotton covered
correspun yarn, combed cotton yarn, pima and supima yarn and Tencel(R) yarn, and
any and all related businesses, as conducted by the Seller at, out of or
relating to the Plants as of and prior to the Closing Date, but excluding the
Retained Business.
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which commercial banks in Charlotte, North Carolina, are generally closed for
business.
"Business Records" shall mean: (a) all documents, whether in written or
electronically stored form, in the possession of Seller pertaining solely to the
Business or the Purchased Assets and not the Retained Business, including, but
not limited to, personnel files with respect to employees (but not personnel
files required by law or agreement to be kept confidential absent the consent of
applicable employees), supplier lists, sales listings, advertising and
promotional materials, Seller's customer lists and credit files relative to the
Business but excluding records subject to confidentiality restrictions imposed
by third parties, unless the consents of such parties are obtained; and (b)
copies of documents in the possession of Seller pertaining to the Business but
which are related, in whole or in part, to the Retained Business and which are
either (i) documents reasonably requested by Buyer that can be separated from
the records of the Retained Business with reasonable efforts (the "Requested
Business Records") or (ii) documents which Seller, in its discretion, elects to
include as Business Records, in the case of subparagraphs (i) and (ii) of this
definition, either in their entirety or redacted to delete matters pertaining to
the Retained Business.
"Buyer" shall have the meaning specified in the introductory paragraph.
"Buyer's WARN Obligations" shall have the meaning set forth in Section
5.7(a).
"Charter Documents" shall mean, with respect to any corporation, such
corporation's articles, certificate of incorporation or charter and bylaws, as
amended.
"Closing" and "Closing Date" shall have the meanings specified in Section
2.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Confidential Information" shall have the meaning specified in Section
5.5(b).
"Confidential Retained Business Information" shall have the meaning
specified in Section 5.5(b).
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"Consent" shall mean the approval, consent, authorization, order,
filing, registration or qualification of or with any governmental authority or
other Person other than the Seller or the Buyer.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability (including any "comfort letter") of such Person
with respect to any Indebtedness, liability or other obligation (the "primary
obligation") of another Person (the "primary obligor"), (a) to purchase,
repurchase or otherwise acquire such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet item, level of income
or financial condition of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner or holder
of any such primary obligation of the ability of the primary obligor in respect
thereof to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner or holder of any such primary obligation against loss or
failure or inability of the primary obligor to perform in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements for collection or deposit in the ordinary course of business.
"Contract Assignment" shall have the meaning specified in Section 2.1(a).
"Contracts" shall mean all contracts, licenses and agreements, whether
written or oral, including all instruments; guarantees; liens securing notes or
accounts transferred; leases; subleases; supply and customer contracts; work and
purchase orders; employment and consultancy, representative, dealer and sales
agency contracts; contracts between a Person and its shareholders or their
Affiliates; contracts between a Person and any Affiliate of such Person; labor
union contracts; licenses or other agreements relating to Software or
Intellectual Property or Proprietary Rights; contracts and agreements related to
employment, vacation and severance pay; equipment, capital and real property
leases; indentures, credit agreements, loan agreements, notes, mortgages,
security agreements, interest rate or currency swap, hedge or similar agreements
and agreements for financing with third parties; powers of attorney and agency
agreements with any Person pursuant to which such Person is granted the
authority to act for or on behalf of another; and any other contractual
obligations or rights or contractual arrangements, whether similar or dissimilar
to the foregoing.
"Copyright" shall mean the legal right provided by the Copyright Act of
1976, as amended, to the expression contained in any work of authorship fixed in
any tangible medium of expression.
"December Balance Sheet" shall mean the unaudited balance sheet of the
Business as of December 26, 1998.
"Deeds of Conveyance" shall have the meaning specified in Section 2.1(a).
"Xxxxx Plan" shall mean the Xxxxx Group, Inc. 401(k) Retirement Savings
Plan.
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"Dollars" and "$" shall mean United States Dollars.
"Environmental Law" shall mean any federal, state, municipal or local law,
statute, ordinance, common law, rule, regulation, permit, code, order, decree,
judgment, injunction, notice, demand letter or other legal requirement having
jurisdiction over or pertaining to the Plants, the Business or the Purchased
Assets and relating to the protection of health or the environment, including
without limitation legal requirements relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment
(including without limitation ambient air, surface water, ground water, land
surface or subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, toxic or hazardous substances or wastes,
and specifically including without limitation the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.)
("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. ss. 5101 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean
Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. ss. 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et
seq.), as such laws and regulations thereunder have been amended or
supplemented, and each similar federal, provincial, state, municipal or local
statute, and each rule and regulation promulgated under such federal, state,
municipal and local laws.
"Environmental Permits" shall have the meaning specified in Section
4.1.11(b).
"Environmental Reports" shall have the meaning specified in Section
4.1.11(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning specified in Section 4.1.17(a).
"Excess Cotton" shall have the meaning specified in Section 2.3.
"Excluded Assets" shall have the meaning specified in Section 2.1(b).
"Excluded Liabilities" shall have the meaning specified in Section 2.1(d).
"Final Inventory Value" shall have the meaning set forth in Section 3.3(b).
"Financial Statements" shall mean (a) the November Balance Sheet, (b) the
December Balance Sheet, (c) the April Balance Sheet, (d) the unaudited statement
of operations of the Business for the 1-month period ended January 30, 1999 (the
"January Statement of Operations"), (e) the unaudited statement of operations of
the Business for the 1-month period ended February 27, 1999, which one-month
statement of operations will be delivered by Seller to Buyer prior to the
Closing Date (the "February Statement of Operations"), (f) the unaudited
statement of operations of the Business for the one-month period ended March 27,
1999, which one-month statement will be delivered by Seller to
4
Buyer prior to the Closing Date (the "March Statement of Operations") and (g)
the unaudited statement of operations of the Business for the one-month period
ended May 1, 1999, which one-month statement will be delivered by Seller to
Buyer prior to the Closing (the "April Statement of Operations"). Copies of the
Financial Statements, certified by the Treasurer of the Seller, are attached as
Schedule 4.1.6(a) (or in the case of the April Statement of Operations and April
Balance Sheet, will be certified and attached by Seller to Schedule 4.1.6(d)
prior to the Closing Date).
"GAAP" shall have the meaning specified in Section 1.2.6.
"Hazardous Substance" shall mean and include each substance identified or
designated as such under CERCLA, as well as any other substance or material
meeting any one or more of the following criteria: (i) it is or contains a
substance designated as a hazardous waste, hazardous substance, hazardous
material, pollutant, contaminant or toxic substance under any Environmental Law;
(ii) it is toxic, reactive, corrosive, infectious, radioactive or otherwise
hazardous; or (iii) it is or contains, without limiting the foregoing, petroleum
hydrocarbons.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the regulations thereunder.
"Improvements" shall have the meaning specified in Section 4.1.13(b).
"Income Tax" or "Income Taxes" shall mean all federal, provincial, state,
municipal, local or foreign income taxes (inclusive of any and all interest and
penalties thereon) imposed on the Seller with respect to the assets or
operations of the Seller or any member of any consolidated group of which the
Seller is a party, and which are based in whole or in part upon income, whether
current or deferred, but does not include any Taxes.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind, (ii) all obligations of
such Person evidenced by notes, bonds, debentures or similar instruments, (iii)
all reimbursement obligations of such Person with respect to surety bonds,
letters of credit and bankers' acceptances (in each case, whether or not drawn
or matured and in the stated amount thereof), (iv) all obligations of such
Person to pay the deferred purchase price of property or services, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (vi) all
obligations of such Person as lessee under leases that are or are required to
be, in accordance with GAAP, recorded as capital leases, to the extent such
obligations are required to be so recorded, and (vii) all Contingent Obligations
of such Person.
"Indemnified Party" shall have the meaning specified in Section 7.4.1(a).
"Indemnifying Party" shall have the meaning specified in Section 7.4.1(a).
"Initial Inventory Payment" shall have the meaning set forth in Section
3.1.
"Initial Purchase Price" shall have the meaning specified in Section 3.1.
"Intellectual Property" shall mean Copyrights and copyrightable works;
Trademarks; Know-how; Trade Secrets; Patents, patent disclosures and inventions
(whether or not patentable
5
and whether or not reduced to practice) and any reissues, continuations,
continuations-in-part, revisions, extensions or reexaminations thereof; trade
dress, logos, trade names (including without limitation the use of trade names
and all translations, adaptations, derivations and combinations of the
foregoing); all registrations, applications and renewals for any of the
foregoing; records, correspondence, product literature, designs, drawings,
blueprints, plans, development records and files, technical reports and all
other business documents, whether in written or electronically-stored form,
related to the development, existence, registration or definition of the
foregoing; other proprietary rights associated with the foregoing; all copies
and tangible embodiments of the foregoing (in whatever form or medium); and any
goodwill associated with any of the foregoing.
"Interruption" shall have the meaning set forth in Section 7.1(c).
"Inventory" shall have the meaning specified in Section 2.1(a)(ii).
"Inventory Adjustment Certificate" shall have the meaning set forth in
Section 3.3(b).
"Know-how" shall mean ideas, designs, concepts, compilations of
information, methods, techniques, procedures and processes, whether or not
patentable.
"Letter of Intent" shall have the meaning specified in Section 8.15.
"Lien" shall mean, with respect to any asset, any lien, security interest,
pledge, claim, hypothecation, encumbrance, option, lease (or sublease),
conditional sales agreement, title retention agreement, charge, easement,
restriction, servitude, encroachment or other title exception.
"Material Adverse Effect" shall mean any effect or event that is materially
adverse to the condition (financial or otherwise), results of operations,
business and properties of the Business or the Buyer.
"MIS Entity" shall mean Visicraft Systems, Inc., a Georgia corporation.
"Noncompetition Agreement" shall have the meaning specified in Section
6.1.2.
"November Balance Sheet" shall mean the unaudited balance sheet of the
Business as of November 28, 1998.
"Patent" shall mean any patent granted by the U.S. Patent and Trademark
Office or by the comparable agency of any other country, territory or
jurisdiction and any renewal thereof, and any rights arising under any patent
application, provisional patent application or disclosure filed with the U.S.
Patent and Trademark Office or the comparable agency of any other country,
territory or jurisdiction and any rights which may exist to file any such
application.
"Permits" shall have the meaning specified in Section 2.1(a)(vi).
"Permitted Liens" shall mean (a) Liens for current Taxes not yet due and
payable (provided that with respect to real property, Taxes shall be deemed to
refer to real and personal
6
property ad valorem property taxes only) (b) with respect to personal property
only, Liens arising in the ordinary course of business of the Business for sums
not yet due and payable, but not involving any borrowed money or the deferred
purchase price for property or services; (c) with respect to personal property
only, Liens imposed by law, such as Liens of carriers, warehousemen, mechanics,
materialmen and landlords, and other similar Liens incurred in the ordinary
course of business for sums not constituting borrowed money that will be paid in
full by Seller, that are not overdue for a period of more than thirty (30) days
or that are being contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP (if so
required); (d) with respect to personal property only, Liens (other than any
Lien imposed by ERISA) incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of letters of
credit, bids, tenders, statutory obligations, surety and appeal bonds, leases,
government contracts and other similar obligations (other than obligations for
borrowed money) entered into in the ordinary course of business; (e) with
respect to personal property only, Liens evidenced by the filing, for notice
purposes only, of financing statements in respect of true leases, and Liens that
are leases described in the first sentence of Section 4.1.3(d); (f) with respect
to the Real Property, all easements, restrictions, encroachments, servitudes,
rights of way, licenses and similar encumbrances on title that do not render
title to such real property unmarketable and do not materially impair the use or
value of such property for its intended purposes in the Business as presently
conducted; (g) with respect to the Real Property located in Tennessee, liens
that arise as a matter of law in favor of contractors, materialmen or suppliers
upon the commencement of the construction of improvements but only to the extent
payments for any obligations giving rise to such liens both (i) are current and
(ii) will be paid in full by Seller; (h) Liens created pursuant to the Twister
Notes; and (i) other Liens listed on Schedule 1.1 hereto that do not secure an
obligation to pay money and will not have an adverse effect on the value or
usefulness of the Purchased Assets in the Business after the Closing Date.
"Person" shall mean an individual, firm, partnership, association,
unincorporated organization, trust, corporation, or any other entity.
"Personal Property" shall have the meaning specified in Section
2.1(a)(iii).
"Plans" shall have the meaning specified in Section 4.1.17(a).
"Plant" and "Plants" shall have the meanings specified in Section
2.1(a)(i).
"Property, Plant and Equipment Adjustment Certificate" shall have the
meaning specified in Section 3.3(a).
"Proprietary Rights" shall mean all income, royalties, damages and payments
with respect to any Intellectual Property, (including damages and payments for
past or future infringements or misappropriations thereof), the right to xxx and
recover for past infringements or misappropriations thereof, the right to
prevent, enjoin or otherwise restrict any Person from using any Intellectual
Property or any benefits or products of such use, and any and all rights
corresponding to the foregoing that now or hereafter may be secured throughout
the world.
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"Proprietary Software" shall have the meaning specified in Section
2.1(a)(xi).
"Purchase Price Adjustment" shall have the meaning specified in Section
3.2.
"Purchase Price Adjustment Certificate" shall have the meaning specified in
Section 3.3(b).
"Purchased Assets" shall have the meaning specified in Section 2.1(a).
"Purchased IP" shall have the meaning specified in Section 2.1(a)(iv).
"Purchased Software" shall have the meaning specified in Section
2.1(a)(xi).
"Real Property" shall have the meaning specified in Section 4.1.13(a).
"Retained Business" shall mean the following businesses: Seller's floor
covering business and the Seller's synthetic yarn business.
"Retained Business Records" shall have the meaning set forth in Section
2.1(b)(vi).
"Safety Laws" shall mean any federal, state, municipal or local law,
statute, ordinance, common law, rule, regulation, permit, code, order, decree,
judgment, injunction, notice, demand letter or other legal requirement having
jurisdiction over or pertaining to the Plants, the Business or the Purchased
Assets, and relating to the protection of safety, including the Occupational
Safety and Health Act (29 U.S.C. ss. 651 et seq.) ("OSHA"), as such laws and
regulations thereunder have been amended or supplemented, and each similar
federal, provincial, state, municipal or local statute, and each rule and
regulation promulgated under such federal, state, municipal and local laws.
"Seller" shall have the meaning specified in the introductory paragraph.
"Seller Known Environmental Conditions" shall have the meaning set forth in
Section 7.1(a).
"Software" shall mean
(a) any computer software program, including source code and object
code, including the following:
(i) computer software programs purchased or licensed from third
parties;
(ii) computer software programs, which are (or any portions of
which are) embedded within any equipment or machinery and that are
necessary or useful for the proper operation of such equipment or
machinery; and
(iii) computer software program code that a Person (including its
employees and independent contractors) has designed or created, is in
the process
8
of designing or creating or proposes to design or create, including
without limitation any modifications, enhancements and derivative
works of any of the computer software programs described above; and
(b) all accompanying documentation, including:
(i) all written materials that explain any computer software program
described above or were used in the development of any such computer
software program or represent an interim step in the development of any
such computer software program, including without limitation logic
diagrams, flowcharts, procedural diagrams and algorithms; and
(ii) all written materials used by a Person in connection with the
installation, customization or use of any of the computer software programs
described above.
"1998 Statement of Operations" shall mean the unaudited statement of
operations of the Business for the twelve-month period ended December 26, 1998.
"Xxxxx Plan" shall mean the X. X. Xxxxx Xxxxx, Inc. Employee Retirement
Plan.
"Surveys" shall have the meaning specified in Section 5.6(b).
"Tax" or "Taxes" shall mean federal, provincial, state, municipal, local or
foreign taxes, assessments, additions to tax, deficiencies, duties, fees and
other governmental charges or impositions of each and every kind, whether
measured by properties, assets, wages, payroll, withholding, purchases, value
added, payments, sales, use, business, capital stock or surplus income, and
including without limitation all business, occupation, franchise, excise, stamp,
leasing, lease, transfer, severance and employment, income withholding and
Social Security taxes, real and personal property, sales, use, ad valorem and
other taxes, including interest, penalties and additions in connection
therewith, arising from or in connection with the Business, the Seller or its
properties or assets prior to the Closing Date, but in all cases excluding
Income Taxes.
"Third-Party Software" has the meaning specified in Section 2.1(a)(xi).
"to the knowledge of the Seller" (or like phrases) shall mean that (a) no
officer of the Seller (including but not limited to Xxxxx Xxxxxxxx) has any
actual knowledge or belief (without any required investigation or due diligence)
that the statement made is incorrect, and (b) there is no information available
in the books, records and files of the Seller (including but not limited to the
Environmental Reports) that indicates that the statement made is incorrect.
"Trade Secrets" shall mean trade secrets and other confidential information
(including without limitation ideas, formulae, compositions, Know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, financial, business and marketing plans, and customer, employee, supplier
and vendor lists and related information) and all other business or technical
information of Seller pertaining to the Business, including without limitation
customer lists and
9
Know-how, that is not generally and lawfully known to other Persons who are not
subject to an obligation of nondisclosure and that derives actual or potential
commercial value from not being generally known to or readily ascertainable by
other Persons.
"Trademark" shall mean any symbol used by Seller to identify its goods or
services, whether or not registered, and any right that may exist to obtain a
registration with respect to any such symbol by application to any agency of any
country, territory or jurisdiction. The term "Trademark" includes any service
xxxx and includes any renewals, amendments or extensions of any registrations.
"Twister Notes" shall have the meaning set forth in Section 2.1(c)(i);
"Updating Information" shall have the meaning set forth in Section 8.14.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification
Act, as amended from time to time.
Sections 4.1.21, 5.7(f) and 5.7(g) include certain terms with initial
capital letters that are not expressly defined in this Section 1.1. Such terms
are defined terms under the Xxxxx Plan.
1.2 Interpretation. The following provisions shall govern the
interpretation of this Agreement:
1.2.1 "Herein" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section,
Subsection, Exhibit or Schedule.
1.2.2 Headings or captions are for convenience of reference only and
shall not affect the construction or interpretation of this Agreement.
1.2.3 Words importing the singular number only shall include the
plural and vice versa; words importing the masculine gender shall include
the feminine and neuter genders and vice versa; unless the context
otherwise requires, the term "including" shall be deemed to mean "including
without limitation;" and words importing individuals shall include Persons
and vice versa.
1.2.4 The calculation of time within which or following which any act
is to be done or step is to be taken pursuant to this Agreement excludes
the date which is the reference day in calculating such period.
1.2.5 Payment on a day which is not a Business Day is not required
hereunder. Whenever any payment is required to be made hereunder on or by a
day which is not a Business Day, then payment may be validly made on or by
the next succeeding day that is a Business Day.
1.2.6 Accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles, consistently applied ("GAAP"). Wherever in this Agreement
reference is made to GAAP, such reference shall be deemed to be to GAAP
from time to time then applicable.
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1.2.7 The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
1.2.8 No Schedule to this Agreement shall incorporate any disclosure
set forth on any other Schedule to this Agreement or in any other document
unless such disclosure is expressly and specifically incorporated by
reference. Nothing in the Schedules shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Schedule
identifies the exception with reasonable particularity. The parties intend
that each representation, warranty, and covenant contained herein shall
have independent significance, and any disclosures in the Schedules apply
only to the related Section of this Agreement.
ARTICLE II
PURCHASE TRANSACTIONS
2.1 Sale and Purchase of Assets.
(a) Subject to the terms and conditions of this Agreement, the Seller
shall sell, transfer, convey, assign and deliver to the Buyer, and the
Buyer shall purchase from the Seller, all of Seller's assets, properties,
goodwill, and rights of every nature, kind, and description, tangible and
intangible, wheresoever located and whether or not carried or reflected on
the books and records of the Seller, that constitute or are used by Seller
primarily in the Business or are located on the Real Property (the
"Purchased Assets"), including without limitation:
(i) the three manufacturing plants currently owned by Seller and
located in Chattanooga, Tennessee, the Xxxxxx City section of
Chattanooga, Tennessee, and Mebane, North Carolina, including the land
upon which such plants are located and all rights, privileges,
easements, rights-of-way and other appurtenances thereto, all as more
particularly described on Schedule 2.1(a)(i) attached hereto along
with all buildings, improvements, fixtures and fittings thereon and
all leases and subleases thereof (each a "Plant" and collectively, the
"Plants");
(ii) all of the fiber, yarn, supplies and other inventory either
located at the Plants or used or designated or intended for use in the
Business, including raw materials, work-in-process, greige goods,
completed goods, supplies of any type or nature, spare parts and
packaging materials, in each case whether located at the Plants, in
transit, on order, or otherwise not located at the Plants (the
"Inventory");
(iii) all other tangible personal property either located at the
Plants or used or designated or intended for use primarily in the
Business, including machinery, equipment, vehicles, rolling stock,
furniture, furnishings, fixtures, and
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including but not limited to the property set forth on Schedule
2.1(a)(iii) and the tangible personal property primarily used in the
Xxxxx Yarns Division of the Seller's corporate office, in each case
whether located at the Plants, in transit, on order, or otherwise not
located at the Plants (together with the Inventory, the "Personal
Property");
(iv) all of the Intellectual Property currently used, and
historically used either in the eighteen-month period preceding the
date of this Agreement or the period between the date of this
Agreement and the Closing Date, primarily in or otherwise relating
primarily to the Business of every nature, kind, and description,
whether or not carried or reflected on the books and records of the
Seller, including any licenses and sublicenses granted or obtained
with respect thereto, all rights to protection of interests therein
under the laws of all jurisdictions, all Proprietary Rights with
respect thereto, and any goodwill associated with the Business or such
Intellectual Property, in each case subject to the terms of any
licenses or other agreements granting Seller rights in and to the same
but subject also to the Seller's obligations under Section 2.2
(collectively, the "Purchased IP") and all other Intellectual Property
historically used primarily in the Business to the extent owned by
Seller or in Seller's possession; excluding in each case Seller's
rights to the name "The Xxxxx Group;"
(v) subject to Section 2.2, all of the Seller's rights and
interest in, to and under, and all benefits the Seller may have
arising from (A) all Contracts to which the Seller is a party and
which pertain primarily to the Business as of the Closing Date to the
extent listed on Schedule 2.1(a)(v), (B) all purchase orders relating
to the Business entered into by Seller prior to April 23, 1999 to the
extent such orders are listed on the itemization of purchase orders
provided to Buyer prior to the date hereof, (C) all sales orders
relating to the Business entered into by Seller on or before April 26,
1999 to the extent such orders are listed on the itemization of sales
orders provided to Buyer prior to the date hereof; (D) Contracts
(excluding severance contracts and employment contracts) entered into
after the date hereof and prior to the Closing in the ordinary course
of business consistent with past practices and in accordance with
Section 5.4 (but with respect to purchase orders, only to the extent
entered into on or after April 23, 1999, and with respect to sales
orders, only to the extent entered into on or after April 26, 1999),
and (E) other Contracts (other than employment and severance related
Contracts) to which Seller is a party or beneficiary and which pertain
primarily to the Business and were entered into in the ordinary course
of business consistent with practices, but only to the extent such
other Contracts both (1) both individually involve a financial
obligation of $10,000 or less per annum and collectively involve an
aggregate financial obligation of $100,000 or less per annum and (2)
are at prices not materially higher than market prices as of the date
entered into for the goods or services provided thereunder (the
"Assumed Contracts");
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(vi) all federal, state and local franchises, approvals, permits,
licenses, orders, registrations, certificates, variances and similar
rights appurtenant to the conduct of the Business, including
environmental discharge permits for the Plants (the "Permits") to the
extent assignment thereof is permitted by applicable law but subject
also to the Seller's obligations under Section 2.2;
(vii) the Business Records;
(viii) the telephone and facsimile numbers (including the
directory listings related thereto), and post office boxes listed on
Schedule 2.1(a)(viii).
(ix) all deposits posted by or on behalf of the Seller in
connection with the operation of the Business and related to Purchased
Assets or Assumed Contracts;
(x) all leasehold interests and improvements thereon related
primarily to the Business (whether Seller is the lessor or the
lessee);
(xi) all Software that is used or is intended for use primarily
in the Business or that has been used primarily in the Business at any
time during the eighteen-month period preceding the date of this
Agreement or the period between the date of this Agreement and the
Closing Date (excluding replaced Software), including all accompanying
documentation (the "Purchased Software;" that portion of the Purchased
Software owned by the Seller, the "Proprietary Software;" and Seller's
rights to use that portion of the Purchased Software owned by any
Person other than the Seller, "Third-Party Software") and all other
software used by Seller primarily in the Business in the past three
years to the extent owned by Seller or in Seller's possession;
(xii) all rights (including Proprietary Rights, covenants not to
xxx and other third-party obligations owed to the Seller), claims,
causes of actions and suits which the Seller has or may have against
third parties in connection with the Purchased Assets or the Assumed
Liabilities, to the extent such rights do not constitute Excluded
Assets pursuant to Section 2.1(b)(xii); and
(xiii) the Business as a going concern;
but excluding (and excluding only) the Excluded Assets. On the Closing Date, the
Seller shall convey to the Buyer good and marketable title to the Purchased
Assets, free and clear of all Liens other than Permitted Liens, which conveyance
shall be made pursuant to a xxxx of sale substantially in the form of Exhibit A
attached hereto (the "Xxxx of Sale"), an assignment substantially in the form of
Exhibit B attached hereto (the "Contract Assignment"), deeds of conveyance
substantially in the form of Exhibit C hereto (the "Deeds of Conveyance"), the
other real estate documentation required by Section 5.6, and such other
instruments of conveyance as are required to be delivered pursuant to this
Agreement or are reasonably requested by the Buyer. Seller agrees to execute and
deliver, either at Closing or after Closing such specific documents of
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transfer as may be required or reasonably may be requested to record
assignments, transfers or conveyances of any specific items of the Purchased
Assets.
(b) Excluded Assets. Notwithstanding any other provision of this
Agreement, the parties agree that the Purchased Assets (and, as applicable,
the other terms defined in Section 2.1(a)) shall not include any of the
following (collectively, the "Excluded Assets"):
(i) cash and cash equivalents;
(ii) all customer deposits and prepayments made by customers or
other third parties in connection with sales of goods by the Business;
(iii) all accounts receivable, promissory notes, chattel paper
and other receivables payable to Seller or, with respect to bearer
instruments, in Seller's possession arising directly from or related
directly to goods shipped or billed by Seller prior to 7:00 a.m. on
the Closing Date;
(iv) any of Seller's corporate seals, certificates or articles of
incorporation, minute books, stock books, tax returns, and other
records having to do with the organization, maintenance and existence
of the Seller or Seller's Affiliates;
(v) any rights of the Seller under this Agreement or under any
other agreement between the Seller on the one hand and the Buyer on
the other hand entered into on or after the date of this Agreement;
(vi) books and records, files and operating data which relate to
the Retained Business but which are not Business Records (the
"Retained Business Records");
(vii) rights in or with respect to the Plans or any assets, trust
accounts or reserves thereof;
(viii) the Excess Cotton (unless purchased by Buyer pursuant to
Section 2.3);
(ix) receivables which are due from Affiliates of Seller;
(x) any rights of Seller or of its Affiliates to any refund
(including Tax refunds) with respect to periods prior to the Closing
Date, but excluding refunds relating to Inventory purchased by Buyer
hereunder;
(xi) Seller's rights to the trade name "The Xxxxx Group;"
(xii) any property, casualty, workers' compensation or other
insurance policy or related insurance services contract relating to
the Purchased Assets, the Retained Business, Seller or any of its
Affiliates and any rights of Seller or any of
14
its Affiliates under such insurance policy or contract; provided that
any rights under such insurance policies or contracts with respect to
any Assumed Liability or any casualty occurring prior to Closing and
affecting any of the Purchased Assets shall be a Purchased Asset;
provided, however, that any insurance policy and proceeds related to
business interruption and time elements coverages shall be Excluded
Assets to the extent such proceeds relate directly to periods prior to
Closing;
(xiii) claims, causes of action and suits that Seller may have
against third parties that relate directly to the Excluded Assets; and
(xiv) the items listed on Schedule 2.1(b).
(c) Assumed Liabilities. As of the Closing Date, the Buyer shall
assume, and shall thereafter pay and perform, the following obligations and
liabilities of the Seller existing as of end of business on the Closing
Date and none other (collectively the "Assumed Liabilities"):
(i) Seller's obligations under the agreements with Saurer
Textiles Systems Charlotte dated May 14, 1998, promissory note to
Saurer Textile Systems Charlotte dated May 14, 1998 and agreement with
Xxxxxxx Schweitor Muttler Corp. dated May 19, 1998 (the payments under
such obligations having an initial aggregate principal amount of
$6,361,100) (the "Twister Notes"), but only to the extent such
obligations are not past due as of the Closing Date.
(ii) (A) the obligations of the Seller under the Assumed
Contracts to the extent such obligations are obligations other than
payment obligations, but only to the extent such obligations arise
after the Closing and (B) the payment obligations of the Seller under
the Assumed Contracts to the extent such payment obligations accrue
for periods after the Closing; provided that (A) Buyer shall assume
Seller's payment obligations under the purchase Contracts contained in
the Assumed Contracts only to the extent the goods purchased under
such Contracts have not been received by Seller as of 7:00 a.m. on the
Closing Date; (B) Buyer shall assume Seller's obligations under the
sales contracts contained in the Assumed Contracts only to the extent
the relevant goods have not been shipped or billed by Seller under
such Contracts as of 7:00 a.m. on the Closing Date and (C) Buyer shall
not assume any of Seller's obligations under any purchase contract
where the goods purchased have been received by Seller as of 7:00 a.m.
on the Closing Date and Buyer shall not assume any of Seller's
obligations (including any warranty obligations) under any sales
contract where the relevant goods sold have been shipped or billed by
Seller as of 7:00 a.m. on the Closing Date and, notwithstanding
anything to the contrary set forth in Section 2.1(a)(v) to the
contrary, the Contracts described in this Subsection 2.1(c)(ii)(C)
shall not be Assumed Contracts.
but excluding in each of the cases (i) and (ii) set forth above any liabilities
or alleged liabilities of the Seller (A) relating to any Taxes or Income Taxes
arising from the operations of the Business
15
prior to the Closing; (B) relating to any breach or alleged breach of contract,
default, breach or alleged breach of warranty (including without limitation any
warranty claims with respect to products manufactured or sold by the Seller
prior to the Closing Date), tort, derelict, infringement, or violation or
alleged violation of law by the Seller, including violations of ERISA or any
other law applicable to any employee benefit plan of the Seller, including the
Plans; (C) payable to any Affiliate of the Seller, except for yarn orders from
Seller's Candlewick Division approved by Buyer; (D) arising from or relating to
the termination of, or any employment-related claim asserted by, any employee of
the Seller, including without limitation claims for wrongful or illegal
termination, severance pay, accrued vacation or sick days or other employment
related claims, together with all costs or liabilities associated with any such
employees except to the extent such liabilities are Buyer's WARN Liabilities (as
defined in Section 5.7); (E) arising under or related to any of the Plans; and
(F) other than the Twister Notes, arising under any Indebtedness, including
Indebtedness for money borrowed or from the funding, financing or factoring of
the accounts receivable of the Business (other than Indebtedness directly
related to the Purchased Assets and assumed pursuant to Section 2.1(c)(i) and
(ii)) (the "Excluded Liabilities"). The foregoing, notwithstanding, all
liability of the parties under all Environmental Laws relating to the Real
Property and all other environmental matters relating to the Real Property are
addressed in Article VII..
(d) No Other Assumed Liabilities. All liabilities or alleged
liabilities of the Seller of any nature whatsoever, whether accrued or
unaccrued, known or unknown, fixed or contingent which are not Assumed
Liabilities are "Excluded Liabilities." The Buyer shall not assume or
become liable for the payment or performance of any Excluded Liability. The
Seller shall be and shall remain responsible for all Excluded Liabilities,
all Taxes and Income Taxes incurred by the Seller in connection with this
Agreement and the transactions contemplated hereby, and all sales, use and
transfer taxes, if any, imposed by law in connection with the sale of the
Purchased Assets.
2.2 Procedures for Certain Contracts and other Purchased Assets. If any
Purchased Asset, including any Assumed Contract, Purchased IP, Permit or any
other property or right of the Business transferred or intended to be
transferred to the Buyer as a result of the transactions contemplated by this
Article II is not fully assignable or transferable to the Buyer (either by
virtue of the provisions thereof or under applicable law) without the Consent of
some other party or parties, or would otherwise be adversely affected by the
consummation of the transactions contemplated hereby without the Consent of some
other party or parties, the Seller shall use all reasonable efforts to obtain
such Consent prior to the Closing Date and shall notify the Buyer on or prior to
the Closing Date of any Consent not so obtained. Schedule 2.2 lists each such
Consent by asset category. If any Consent cannot be obtained prior to Closing
and Seller has not provided to Buyer the equivalent practical benefit of the
property or right that Buyer would receive or hold if such Consent were obtained
(as determined in Buyer's reasonable discretion), and the Buyer does not
terminate this Agreement pursuant to Section 8.1, then Buyer shall have the
right to either (i) if such Consent is material, elect to defer the Closing for
a period of up to sixty (60) days (which election shall act to extend the date
referred to in Sections 8.1(b) and 8.1(c) by the extension period so elected),
during which time the Seller shall remain obligated to observe the terms of this
Agreement and to use its best efforts to obtain all Consents (whether or
16
not material) not theretofore obtained; or (ii) in the exercise of its sole
discretion, waive the obtaining of such Consent as a condition to closing.
Should the Buyer waive the obtaining of any Consent as a condition to closing,
the Seller shall use its best reasonable efforts to obtain such Consent as soon
as possible after the Closing Date and thereafter assign such agreement to the
Buyer or shall otherwise obtain for the Buyer the practical benefit of such
property or right, and, with respect to each Consent not obtained prior to
Closing (and if such Consent is obtained, such Agreement shall be an Assumed
Contract). Unless and until such Consent or equal benefit is obtained, (i) this
Agreement and the related instruments of transfer shall not constitute an
assignment or transfer of the Purchased Asset which is the subject thereof; and
(ii) the Assumed Liabilities shall not include any liabilities or obligations
with respect thereto.
2.3 Treatment of Excess Cotton Inventory. The Purchased Assets shall not
include any raw cotton inventory of the Business as of the Closing Date in
excess of two thousand (2,000) xxxxx, which 2,000 xxxxx shall be representative
of the type and quality of the raw cotton used by the Business (such excess, the
"Excess Cotton") unless, on or prior to the Closing Date and in its sole
discretion, the Buyer elects in writing to purchase from the Seller the Excess
Cotton, which purchase shall be at the prevailing market price for the Excess
Cotton on the Closing Date based upon the type and availability. Buyer shall, at
Seller's expense, remove any Excess Cotton located at the Plants not purchased
by Buyer, such removal to be completed within a reasonable time after Closing,
such time not to exceed sixty (60) Business Days. In the event Buyer elects to
purchase the Excess Cotton, such Excess Cotton purchased by Buyer shall
constitute a Purchased Asset and the warehouse lease expense after the Closing
Date for the Excess Cotton shall be an Assumed Liability.
2.4 Closing. The closing of the sale and purchase of the Purchased Assets
(the "Closing") will take place at the offices of Xxxxxxxx, Xxxxxxxx & Xxxxxx,
P.A., 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000, on May 28, 1999, at 10:00
a.m., or at such other place, time and date as the parties may agree upon in
writing (the "Closing Date") or as soon as practical thereafter when all of the
conditions to close set forth in Article VI are met.
ARTICLE III
PURCHASE PRICE; ADJUSTMENTS AND PAYMENT
3.1 Purchase Price. In consideration of the transfer to the Buyer of the
Purchased Assets and the assumption by the Buyer of the Assumed Liabilities, and
subject to the terms and conditions of this Agreement, the Buyer shall pay to
the Seller at the Closing an amount equal to the sum of (a) Thirty Million One
Hundred Fifty-One Thousand and Eight Hundred and Nine Dollars ($30,151,809) plus
(b) an amount equal to the product of (i) .95 multiplied by (ii) (1) if the
Closing Date occurs within the first twenty (20) days of a calendar month, the
value of the Inventory (excluding any inventory purchase Contracts, the Excess
Cotton and any other Inventory not of the same type reflected in the Inventory
valuation shown on the November Balance Sheet) as of the end of the second month
preceding the month in which the Closing Date occurs, such value to be
determined in accordance with GAAP at the lower of Seller's standard cost or
market on a first-in first-out basis, with reserves to be set consistent with
the reserves set on the December Balance Sheet, except to the extent the
December Balance Sheet was not prepared in accordance with GAAP and (2) if the
Closing Date does not occur in the first twenty (20) days of any calendar month,
the value of such Inventory (excluding any inventory purchase Contracts, the
Excess Cotton and any other Inventory not of the type reflected on the Inventory
valuation shown in the November Balance Sheet) as of the end of the month
immediately preceding the month in which the Closing occurs, such value to be
determined in accordance with GAAP at the lower of Seller's standard
17
cost or market on a first-in first-out basis, with reserves to be set consistent
with the December Balance Sheet, except to the extent the December Balance Sheet
was not determined in accordance with GAAP (the amount of the product of
subsections 3.1(b)(i) and (ii) being the "Initial Inventory Payment") minus (c)
an amount equal to the principal payment obligations and accrued interest
payment obligations under the Twister Notes as of the Closing Date minus (d)
with respect to cotton purchase Assumed Contracts, to the extent the cotton
required to be purchased by Buyer under such Assumed Contracts exceeds the
cotton necessary for the sales order Assumed Contracts by more than 500 xxxxx,
an amount equal the difference between (i) the aggregate purchase price (price
times quantity) to be paid by Seller (or Buyer after Closing) for such excess
cotton xxxxx over 500 minus (ii) the aggregate market price of such excess over
500 xxxxx as of the Closing Date plus (e) the severance payments to be made by
Seller as set forth in Schedule 3.1(a), but only to the extent the employees to
whom the severance is to be paid actually are employed by Seller on the Closing
Date (the "Initial Purchase Price"), subject to (1) the Purchase Price
Adjustment to be made pursuant to Section 3.2 below, and (2) any payments to be
made by Buyer to Seller for the Excess Cotton pursuant to Section 2.3. For
purposes of this Section 3 and Section 4.1.6, "Seller's standard cost" shall be
determined in accordance with the principles set forth in Schedule 3.1(b),
examples of the application of which is attached to Schedule 3.1(b). The Initial
Purchase Price will be paid by the Buyer on the Closing Date by wire transfer in
immediately available funds to such account or accounts as the Seller shall
designate in writing not later than three (3) Business Days in advance thereof.
At least two (2) Business Days prior to Closing, Seller will provide Buyer with
Seller's computation of the Initial Inventory Payment and will provide Buyer
with work papers supporting each computation.
3.2 Adjustment of Initial Purchase Price. The Initial Purchase Price shall
be adjusted as follows (such adjustment being referred to herein as the
"Purchase Price Adjustment"):
(a) The Initial Purchase Price shall be increased by the dollar
amount, equal to the excess of (i) the Final Inventory Value determined in
accordance with Section 3.3 over (ii) the Initial Inventory Payment;
(b) The Initial Purchase Price shall be decreased by the dollar amount
equal to the excess of (i) the Initial Inventory Payment over (ii) the
Final Inventory Value determined in accordance with Section 3.3;
(c) The Initial Purchase Price shall be increased by the sum of (i)
the cost of any property, plant and equipment capital expenditure that is a
Purchased Asset acquired by purchase by Seller after November 28, 1998 and
before Closing plus (ii) the fair market value as of Closing of any
property, plant and equipment that is a Purchased Asset acquired by the
18
Business by transfer from another business segment of Seller after November
28, 1998 and before the Closing, but in the case of the immediately
preceding subparagraphs (i) and (ii), the Initial Purchase Price shall not
be increased to the extent Seller does not have good and marketable title
to such acquired property, plant and equipment, free and clear of all Liens
unless such Liens are completely released no later than thirty (30) days
after the Closing Date; provided, further, that there shall be no
adjustments to the Initial Purchase Price for any plant, property and
equipment capital expenditure or acquisition related to the following: the
twister doubler projects, "year 2000 compliance" issues, Seller's
environmental or acquisition remediation efforts required pursuant to
Section 5.16 or the last two sentences of Section 7.1(a) and any plant,
property and equipment acquired or purchased to remedy any matters
disclosed in the Updating Information.
(d) The Initial Purchase Price shall be decreased by (i) the sum of
(A) the gross proceeds received, as of the Closing Date, for any property,
plant and equipment either used primarily in the Business as of November
28, 1998 or located on the Real Property as of November 28, 1998 and sold
by the Seller prior to Closing plus (B) the fair market value (as of
transfer) of any property, plant and equipment either used primarily in the
Business as of November 28, 1998 or located on the Real Property as of
November 28, 1998 and transferred out of the Business prior to Closing,
including transfers to the Seller's Affiliates or to Seller's other
facilities or other business segments; and (ii) an amount equal to any
reduction due to damage or destruction (other than ordinary wear and tear)
of the fair market value as of November 28, 1998 of any property, plant and
equipment either used primarily in the Business as of November 28, 1998 or
located on the Real Property as of November 28, 1998, net of the cash value
of Buyer's right to any of Seller's insurance proceeds which is included in
the Purchased Assets; provided, however, that there shall be no adjustment
to the Initial Purchase Price for the transfer of the items set forth in
Schedule 2.1(b) to the MIS Entity.
The Initial Purchase Price, as adjusted by the Purchase Price Adjustment, shall
be referred to herein as the "Adjusted Purchase Price."
3.3 Determination of Purchase Price Adjustment.
(a) Within thirty (30) days after the Closing Date, (i) the Seller
shall cause to be prepared (allowing Buyer assistance and input in such
preparation) and shall deliver to the Buyer a statement of any acquisitions
and divestitures, transfers of or damage to plant, property and equipment
giving rise to a Purchase Price Adjustment pursuant to Section 3.2(c) or
Section 3.2(d), such statement to set forth the respective cost, proceeds
or value applicable to each such Purchase Price Adjustment, the accuracy of
which shall be certified by an officer of the Buyer (the "Property, Plant
and Equipment Adjustment Certificate"); and
(b) Within thirty (30) days after the Closing Date, the Seller shall
cause to be prepared (allowing Buyer assistance and input in such
preparation) and shall deliver to the Buyer a certificate (the "Inventory
Adjustment Certificate") showing the value of the Inventory (excluding any
inventory purchase Assumed Contracts, the Excess Cotton and any Inventory
not of the type reflected in the Inventory valuation shown on the November
Balance Sheet) such value being the lower of Seller's standard cost or
market, all as of 7:00 a.m. on the Closing Date, prepared (i) in accordance
with GAAP and (ii) on a basis consistent with the December Balance
19
Sheet, except to the extent the December Balance Sheet was not prepared in
accordance with GAAP (the "Final Inventory Value"). Based on the Inventory
Adjustment Certificate, the Seller shall compute the difference between
Final Inventory Value and the Initial Inventory Value (the Property, Plant
and Equipment Adjustment Certificate and the Inventory Adjustment
Certificate shall jointly be referred to as the "Purchase Price Adjustment
Certificate").
(c) If the Buyer does not accept the Purchase Price Adjustment
Certificate or the Seller's calculation of the Purchase Price Adjustment,
the Buyer shall give written notice to the Seller within twenty (20) days
after receipt thereof. The notice shall set forth in reasonable detail the
amount and basis for the Buyer's objections. The Buyer shall be deemed to
have accepted the Purchase Price Adjustment Certificate and the computation
of the Purchase Price Adjustment prepared by the Seller at 5:00 p.m.
(Charlotte, North Carolina time) on the 20th day after receipt thereof by
the Buyer if the Buyer has not by then given the Seller written notice of
objection. If the Buyer and the Seller are unable to resolve any
disagreement within twenty (20) days after the Seller receives the Buyer's
written objection, the parties shall engage an independent Big Five
certified public accounting firm selected by agreement of the parties
(which may not be the independent public accountant for either Seller or
Buyer) to resolve the issues. The accounting firm shall apply the
provisions of Section 3.3(a) and (b) to the issues at hand and shall not
have the power to alter, modify, amend, add to or subtract from any term or
provision of this Agreement. The decision of the accounting firm shall be
rendered within twenty (20) days of the engagement and shall be binding on
the parties. The Buyer and the Seller each shall pay one-half of the cost
of the accounting firm's engagement.
3.4 Post-Closing Purchase Price Adjustment Payment. Within three (3)
Business Days of the final determination of the Purchase Price Adjustment
pursuant to Section 3.3, an amount equal to the Purchase Price Adjustment (the
"Adjustment Amount") shall be payable, by wire transfer in immediately available
funds to an account or accounts designated by the Seller or the Buyer (as
applicable), as follows: (a) if the Initial Purchase Price is to be increased by
the Purchase Price Adjustment pursuant to Section 3.2, the Buyer shall pay the
Adjustment Amount to the Seller; and (b) if the Initial Purchase Price is to be
decreased by the Purchase Price Adjustment pursuant to Section 3.2, the Seller
shall pay the Adjustment Amount to the Buyer. Any payments required to be paid
pursuant to this Section 3.4 shall be paid by wire transfer of immediately
available funds to such account or accounts as the Buyer or the Seller, as the
case may be, shall designate not less than two (2) Business Days in advance of
the day any such payment is due. Interest shall accrue on the Adjustment Amount
from the Closing Date at a per annum rate of interest of 7.5%.
3.5 Purchase Price Allocation. Within four (4) months after the Closing
Date, the parties shall agree upon an allocation of the Initial Purchase Price
(as adjusted by the Purchase Price Adjustment) plus the value of the Assumed
Liabilities among the Purchased Assets and Seller's obligations contained in the
Noncompetition Agreement, with the amount allocated to the Noncompetition
Agreement not to exceed $20,000. Such allocation is intended to comply with the
requirements of Section 1060 of the Code. The Seller and the Buyer agree to file
all Income Tax returns or reports, including without limitation IRS Form 8594,
for their respective taxable years in which the Closing occurs, to reflect such
allocation and agree not to take any position
20
inconsistent therewith before any governmental agency charged with the
collection of any Tax or Income Tax or in any judicial proceeding.
3.6 Real Property and Other Business Expenses; Proration.
(a) The Seller shall pay all applicable real property transfer taxes,
sales taxes, deed stamps and similar taxes on the deeds conveying the Real
Property and the Seller shall pay the cost of the Surveys. The Buyer shall
pay any recording fees for such deeds and assignments, and the cost of any
title insurance and title opinions obtained by the Buyer.
(b) All ad valorem taxes on the Purchased Assets for 1999 shall be
prorated per diem on a calendar-year basis up to the Closing Date. If the
amount of any such taxes is not known as of the Closing Date, such
proration shall be based on the tax bills for 1998, and either the Buyer or
the Seller, as the case may be, will remit to the other any amount due with
respect to its pro rata share of such taxes when the actual amounts for the
year of Closing are known based upon the 1999 tax bills; provided, Seller
shall not be responsible for any increase in assessment after Closing as a
result of any improvements or actions of Buyer for any improvements or
actions of Seller made after November 28, 1999 at Buyer's request. The
Seller shall, prior to the Closing Date, pay all ad valorem taxes
applicable to the Purchased Assets in all periods prior to the year in
which the Closing occurs, and all unpaid assessments levied with respect to
the Purchased Assets for that period of 1999 prior to the Closing Date. The
Seller shall pay all sales taxes due as a result of the transactions
contemplated hereunder.
(c) Real Property expenses of the Business customarily prorated in
transactions of the type contemplated hereby shall be prorated between the
Seller and the Buyer on a daily basis as of the Closing Date; provided that
if the amount of any such expenses is not known as of the Closing Date,
such proration shall be based on the expenses for the most recently
available period, and either the Buyer or the Seller, as the case may be,
will remit to the other any amount due with respect to the its pro rata
share of expenses when the actual amounts are known. The Seller agrees that
all costs, expenses, charges, bills, or trade accounts maintained or
incurred by the Seller or its agents in connection with the management or
operation of the Business and the Plants or otherwise accrued for the
period prior to the Closing Date (whether or not related to the Real
Property) that are not Assumed Liabilities will be paid in full by Seller
on or prior to the date when due. Without limiting the generality of the
foregoing, the following items, to the extent that they are not Assumed
Liabilities, will be adjusted as of the Closing Date or as soon thereafter
as is reasonably feasible, and each of Seller and Buyer agrees it promptly
will pay adjustment amounts as necessary to prorate such amounts as of the
Closing Date:
(i) rent, lease payments and other charges payable under any
Assumed Contract for the calendar month in which the Closing Date
occurs;
(ii) municipal taxes, water and utility charges, sanitary sewer
taxes and unpaid real and personal property taxes, if any; and
(iii) charges under service, management or other agreements, if
any, that remain in effect after the Closing Date and are Assumed
Contracts.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Buyer as follows:
4.1.1 Existence. The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power and authority to own or lease
its properties and to carry on the Business as now conducted. The Seller
will deliver to the Buyer prior to the Closing true and complete copies of
its Charter Documents. With respect to the Business, the Seller is duly
qualified to do business and in good standing as a foreign corporation in
the states and provinces set forth on Schedule 4.1.1 attached hereto, which
are all the states in which either the ownership or use of the Purchased
Assets or the nature of the Business requires such qualification. No other
jurisdiction has given notice to the Seller demanding, requesting, or
otherwise indicating that the Seller is required so to qualify on account
of the ownership or leasing of the Purchased Assets or the conduct of the
Business.
4.1.2 Authorization; Authority; Enforceability. The Seller has the
full corporate power, authority and capacity to enter into and perform its
obligations under this Agreement and to consummate the transactions
contemplated herein. The execution, delivery and performance by the Seller
of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized and approved by all requisite
corporate and other action on the part of the Seller. This Agreement, the
Noncompetition Agreement and all other agreements and documents executed by
the Seller in connection with the transactions contemplated hereby have
been duly and validly executed by the Seller and constitute legal, valid
and binding obligations of the Seller, enforceable in accordance with their
terms, except as enforceability may be limited by equitable principles or
by bankruptcy, fraudulent conveyance or insolvency laws affecting the
enforcement of creditors' rights generally.
4.1.3 Properties and Assets.
(a) Except as shown on Schedule 4.1.3(a), the Seller has good and
marketable title to, is the lawful owner of, and has the full right to
sell, convey, transfer, assign, and deliver the Purchased Assets, free and
clear of any Liens other than Permitted Liens. At and as of Closing, the
Seller will convey the Purchased Assets to the Buyer, and the Buyer will
have good and marketable title to all of the Purchased Assets, free and
clear of all Liens other than Permitted Liens. Schedule 2.1(a)(iii) lists
each item of material tangible personal property constituting a Purchased
Asset.
(b) The Purchased Assets constitute all of the property and assets
(including machinery but excluding working capital items) necessary to
operate the Plants and the Business as presently operated by the Seller and
in a manner and in a condition consistent with the operation of the Plants
and the Business as in 1998 and that period of 1999 prior to the Closing.
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Each item of tangible personal property constituting a Purchased Asset
either is located on the Real Property or at such other location listed on
Schedule 4.1.3(b).
(c) To the knowledge of Seller, except as set forth on Schedule
4.1.3(c) and except for items held for salvage use on the date hereof, each
of the tangible Purchased Assets, including all buildings, fixtures,
equipment and machinery in or constituting part of the Plants has been well
maintained and is in good working condition, subject to normal wear and
tear; provided that the determination of "well maintained" and "good
working condition" shall be made in accordance with standard industry
practices.
(d) Schedule 4.1.3(d) identifies each item of the property, assets and
equipment (other than real property) used in the Business that is leased
rather than owned by the Seller, other than leases pursuant to which Seller
has an annual financial obligation not exceeding $10,000 individually and
not exceeding $100,000 in the aggregate. The Seller has delivered or made
available to Buyer true and complete copies of all available leases and
other agreements affecting such property, assets or equipment.
4.1.4 Intellectual Property and Software.
(a) The Purchased IP is all of the Intellectual Property that is
material for the operation of the Business as presently conducted, and the
Purchased Software is all of the Software that is material for the
operation of the Business as presently conducted.
(b) Schedule 4.1.4(b) separately lists (i) all registered Trademarks
(in connection with which all required filings, renewals and fee payments
have been timely made to date) and registered Copyrights that are part of
the Purchased IP (together with any pending applications therefor); and
(ii) all non-registered Trademarks and trade names known to Seller that are
part of the Purchased IP.
(c) Schedule 4.1.4(c) separately lists (i) to Seller's knowledge, all
Patents that are part of the Purchased IP (together with any pending
applications therefor); and (ii) all Patents licensed by the Seller from
third parties and used in the Business. Each of the Patents set forth on
Schedule 4.1.4(c) are valid and enforceable and fully transferable to Buyer
pursuant to this Agreement and the Xxxx of Sale, and all applicable
maintenance fees have been timely paid to date.
(d) Except as set forth on Schedule 4.1.4(d), (i) the Seller owns all
of the Purchased IP, free and clear of any Lien (whether pending,
threatened or anticipated); and (ii) the Seller has not granted any Person
any right, license or interest whatsoever in any Purchased IP.
(e) Schedule 4.1.4(e) separately lists all Third Party Software,
except for object code versions of generally commercially available
software programs that are used by the Seller in the Business for word
processing, accounting, internal communications or other similar internal
administrative functions. Except as set forth on Schedule 4.1.4(e), the
Seller has perpetual licenses to all such Third Party Software. The Seller
has the legal right to use, copy, modify, sublicense, distribute or
otherwise market all such Third Party Software in the manner that such
Third Party Software is currently being used, copied, modified,
sublicensed, distributed
23
or otherwise marketed in the Business, all without the payment of any
additional royalties or other fees or payments, now or in the future, to
any other Person, other than annual maintenance or upgrade fees in
accordance with normal industry practices.
(f) Schedule 4.1.4(f) separately lists all Proprietary Software. The
Seller owns all right, title and interest in such Proprietary Software,
including all of the Intellectual Property therein. Each other Person who
has participated in the development of such Proprietary Software has
either: (i) so participated as an employee of the Seller within the scope
of his or her employment obligations; (ii) so participated as an
independent contractor pursuant to a valid and binding agreement that
specifically assigns all Copyrights and other rights with respect to such
Proprietary Software to the Seller; or (iii) otherwise assigned to the
Seller the Copyright in such Proprietary Software. The Seller has not
entered into any agreement that limits or restricts its right to use, copy,
modify, prepare derivatives of, sublicense, distribute or otherwise market
all or any part of the Proprietary Software which is part of the Purchased
Software.
(g) Other than as set forth in Schedule 4.1.4(g), the Seller does not
have any obligation to any other Person: (i) to provide, create, maintain,
correct, modify or enhance any Purchased Software; or (ii) to obtain,
create, register, assign or defend any Copyright, Trademark, Patent or
Trade Secret that is part of the Purchased IP.
(h) The present use by the Seller of all of the Purchased Software and
Purchased IP does not and (to the extent such Purchased Software and
Purchased IP is employed in a manner substantially consistent with the
current or past operation of the Business by the Seller) will not, infringe
the rights of any other Person. No litigation or proceeding by any Person
is pending against the Seller alleging, and to the knowledge of the Seller,
no claim has been asserted or threatened by any Person alleging: (i) that
such Person has any right, title or interest in or to any of the Purchased
IP; (ii) to the effect that any past or present act or omission by the
Business infringes any rights of such Person in the Purchased IP; (iii)
that such Person has the right to use or prevent the Seller (or after the
Closing, the Buyer) from using, any of the Purchased IP; or (iv) that
challenges the right of the Seller to use any of the Purchased IP or that
seeks to deny, modify or revoke any registration or application therefor or
renewal thereof. To the knowledge of the Seller, no facts or circumstances
exist that, with or without the passing of time or the giving of notice or
both, might reasonably serve as the basis for any such claim or that would
limit or adversely affect the Buyer's carrying on the Business after the
Closing Date substantially in the manner and scope conducted by the Seller
prior to the Closing Date.
(i) The Seller has taken efforts that are reasonable under the
circumstances to prevent the unauthorized disclosure to other Persons of
such portions of the Seller's Trade Secrets and Know-how as would enable
any other Person to use the Seller's Trade Secrets to compete with the
Seller (and, after Closing, Buyer) within the scope of the Business as now
conducted and as presently proposed to be conducted.
4.1.5 No Violation; Consents. Except for the possible diminished
capability of Seller to borrow under its March 1998 Credit Agreement,
neither the execution and delivery of, nor the performance by the Seller of
its obligations under, this Agreement, nor the consummation of the
transactions contemplated herein will (a) conflict with, violate or result
in a breach of any of
24
the terms or provisions of, or constitute a default (with the passage of
time or giving of notice or both) or give rise to any right of termination,
cancellation or acceleration under any indenture, mortgage, deed of trust,
lease, note, or other agreement or instrument to which the Seller is a
party that adversely affects the Business, the Purchased Assets or the
Buyer; (b) result in the creation or imposition of any Lien on the
Purchased Assets pursuant to any indenture, mortgage, deed of trust, lease,
note, or other agreement or instrument to which the Seller is a party; (c)
conflict with any provision of the Charter Documents of the Seller; or (d)
violate any law, order, judgment, decree, rule or regulation of any
federal, state or local court or governmental authority having jurisdiction
over the Seller or any of the Purchased Assets. Except for any required
filing under the HSR Act and as otherwise set forth on Schedule 2.2, no
Consent is required to be obtained by the Seller in connection with the
execution and delivery of this Agreement by the Seller or the consummation
of the transactions contemplated herein (including (x) the assignment or
transfer to Buyer of any Assumed Contract or Permit or (y) to Seller's
knowledge, the Buyer's carrying on the Business after the Closing Date
substantially in the manner conducted by the Seller prior to the Closing
Date).
4.1.6 Financial Statements.
(a) Each of the line items on the November Balance Sheet and the
December Balance Sheet was (and the April Balance Sheet when delivered will
be) prepared in accordance with GAAP consistently applied, and together
such line items fairly present the financial condition of the Business as
of the dates indicated, except that (i) inventory is reflected on the books
and records of Seller at the lower of Seller's standard cost or market in
accordance with GAAP on a last-in-first-out basis and on Financial
Statements at the lower of Seller's standard cost (computed in accordance
with Schedule 3.1) or market on a first-in-first-out basis, and does not
include the Excess Cotton, (ii) accrued expenses are allocated based on
numbers of employees at the Plants as a percentage of certain of Seller's
total employees, (iii) Excluded Assets and Excluded Liabilities are not
reflected and (iv) the April Balance Sheet reflects only the categories
included in the Purchased Assets and Assumed Liabilities as of the date
indicated.
(b) The 1998 Statement of Operations, the January Statement of
Operations and the February Statement of Operations reflect (and the April
Statement of Operations from and after the date of delivery by Seller to
Buyer shall reflect) the reasonable best efforts of the Seller to prepare
statements of operations of the Business as if the Business were a
stand-alone division of a larger company and the 1998 Statement of
Operations, the January Statement of Operations and the February Statement
of Operations fairly present (and the April Statement of Operations from
and after the date of delivery by Seller to Buyer shall fairly present) the
results of operations of the Business for the periods covered; provided
that the 1998 Statement of Operations and the January, February and March
Statements of Operations include (and the April Statement of Operations
when delivered will include) reasonable estimates for (i) selling, general
and administrative expenses allocated to the Business based on methods
described in Schedule 4.1.6(b)(i) used by Seller in 1996 when such expenses
were allocated to Plants for the Seller's internal accounting purposes,
(ii) corporate and other non-gross profit margin expenses listed in
Schedule 4.1.6(b)(ii) are estimates of such expenses that would be incurred
if the Business were operated on a stand-alone basis as a division of a
larger company, and (iii) depreciation and amortization expenses determined
by annualizing the Seller's depreciation
25
and amortization of the Business for periods prior to September 26, 1998,
the date when Seller first began to account for the Business as a
discontinued operation; provided further that the 1998 Statement of
Operations and the January, February and March Statement of Operations do
not (and the April Statement of Operations, when delivered, will not)
reflect (x) interest expense, (y) Income Tax expense and (z) the charges
for discontinued operations listed on Schedule 4.1.6(b)(iii).
(c) Except as set forth in Section 4.1.6(a) and (b), the Financial
Statements are consistent with the books and records of the Seller.
(d) Accurate and complete copies of all the Financial Statements are
attached hereto as Schedule 4.1.6(d), except that the April Balance Sheet
and the April Statement of Operations will be attached by Seller to
Schedule 4.1.6(d) prior to the Closing Date.
4.1.7 Governmental Authorizations; Compliance with Laws.
(a) All of the Permits known to Seller are either specifically
disclosed in the Environmental Reports or are set forth in Schedule 4.1.7
attached hereto. Except as set forth in Schedule 4.1.7, the Seller holds
all of the Permits, and no other licenses, certificates, permits,
authorizations, franchises, approvals or rights issued by any governmental
authority, federal, provincial, state, municipal, local or foreign, are
necessary for the lawful operation of the Business as presently conducted.
Except as set forth in Schedule 4.1.7, the Permits are in full force and
effect, and no violations of any of the Permits have occurred or, to the
knowledge of the Seller, have been alleged to have occurred. Furthermore,
no proceedings are pending or, to the knowledge of the Seller, threatened,
that would have the effect of revoking or limiting or affecting the
transfer or renewal of any of the Permits. The Permits are not subject to
any restrictions or conditions that would limit the ability of the Buyer to
conduct the Business after the Closing Date as presently conducted. The
Seller has delivered to the Buyer true and complete copies of each of the
Permits.
(b) To Seller's knowledge, except as disclosed on Schedule 4.1.7 or in
the Environmental Reports, the Seller has conducted the Business and has
operated the Plants now and, since January 1, 1995, in compliance with all
laws and regulations applicable to the operation of the Business and the
ownership of Purchased Assets, and has not received written notice that it
is in violation of or in default under any judgment, order or decree of any
court or administrative agency or any laws, rule or regulation applicable
to it. Except as disclosed on Schedule 4.1.7, Seller is now and, since
January 1, 1995, has been, in compliance with all OSHA laws and
regulations, including any applicable respirable dust standards contained
thereunder, applicable to the operation of the Business and the ownership
of the Purchased Assets, and has not received written notice that it is in
violation of or in default under any judgment, order or decree of any court
or administrative agency or any law, rule or regulation applicable to it.
4.1.8 Contracts. Schedule 4.1.8 attached hereto is an accurate and
complete list of each and every Contract in effect as of the date of this
Agreement (organized by subject matter categories), whether oral or
written, (i) which involves annual obligations to or by the Seller in the
future exceeding $10,000; (ii) has a future term (excluding any portion
subject to a cancelable
26
right exercisable without penalty) of one year or more; (iii) pursuant to
which the Seller has made product warranties (other than Seller's customary
warranty set forth in Schedule 4.1.19) that continue in effect beyond the
Closing Date, (iv) that is a yarn sale contract as of April 26, 1999, or
(v) which is otherwise material to the Business. With respect to each
Assumed Contract and except as disclosed in Schedule 4.1.8, the Seller has
delivered to the Buyer a true and correct copy of each such written Assumed
Contract. With respect to each Assumed Contract, (a) such Contract is
valid, binding and in full force and effect and enforceable against the
Seller, and to the knowledge of the Seller, against each other party
thereto, subject in each case to applicable bankruptcy and insolvency laws
and laws affecting enforcement of creditors rights generally; (b) the
Seller is not in default thereunder nor does there exist any condition or
event which after notice, lapse of time or both would constitute a default
thereunder by the Seller; (c) to the knowledge of the Seller, no other
party thereto is in default or alleged to be in default; (d) to the
knowledge of the Seller, there does not exist any condition or event which,
after notice, lapse of time or both, would constitute a default thereunder
by any other party; and (e) the Seller has not received notice of the
election of any party thereto to cancel, terminate or not to renew such
Contract, whether in accordance with the terms thereof or otherwise.
Schedule 2.2 sets forth each Assumed Contract with respect to which the
Consent of another party or parties is necessary for the full assignment
and transfer to Buyer (either by virtue of the provisions thereof or under
applicable law). Upon assignment at Closing as contemplated by this
Agreement, either (a) each Assumed Contract shall remain in full force and
effect and shall be enforceable by the Buyer and none of the Assumed
Contracts or the enforceability thereof will be adversely affected by the
transactions contemplated under this Agreement or (b) Seller shall have
obtained for Buyer the equivalent practical benefit of each such Assume
Contract, as determined in Buyer's reasonable discretion. The Assumed
Contracts constitute all Contracts necessary or material for the Buyer to
carry on the Business after the Closing substantially as conducted by the
Seller as of the Closing.
4.1.9 Tax Matters. The Seller has timely filed or will timely file all
tax returns and reports required to be filed by it for any period ending on
or before the Closing Date, or if applicable, any period that includes the
Closing Date. All such tax returns are or will be correct and complete in
all material respects. The Seller has timely paid or will timely pay or
cause to be paid all Income Taxes and Taxes set forth on such tax returns
and has, or timely will, pay all Income Taxes and Taxes (whether or not
shown on any tax return) due to any taxing authority with respect to all
such periods. All deposits required by law to be made by the Seller with
respect to employees' withholding taxes have been timely made. The Seller
has withheld and timely paid all Taxes and Income Taxes required to have
been withheld and paid in connection with the amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third
party in connection with the Business. Seller has received no notice of any
tax liens on any of the Purchased Assets, except for Permitted Liens.
4.1.10 Litigation. There are no actions, suits, labor disputes or
other litigation, proceedings or governmental investigations pending or, to
the knowledge of the Seller, threatened against or affecting the Seller and
related to the Business or any of the Purchased Assets, including the
Purchased IP, or relating to the transactions contemplated by this
Agreement, that could adversely affect the Business or the ability of the
Buyer to carry on the Business after the Closing Date substantially in the
manner conducted by the Seller prior to the Closing Date. There are no
outstanding orders, judgments, decrees, stipulations or consents of or with
any court,
27
governmental body or agency to which the Seller or the Purchased Assets are
bound or which would affect the enforceability of this Agreement against
the Seller, impair the ability of the Seller to consummate the transactions
contemplated by this Agreement or prevent the Buyer from carrying on the
Business after the Closing Date substantially in the manner conducted by
the Seller prior to the Closing Date.
4.1.11 Environmental Matters.
(a) Schedule 4.1.11(a) identifies each material environmental report,
audit or assessment, or occupational health study that relates to any Plant
or Real Property and that (i) is in Seller's possession or (ii) available
to Seller and of which Seller has knowledge (the "Environmental Reports").
Prior to the date hereof, Seller has delivered to Buyer a complete copy of
each Environmental Report, except with respect to occupational health
studies, Seller has delivered to Buyer only the studies completed in the
year prior to the date hereof (provided that Seller shall make available
any other such studies upon Buyer's request). To Seller's knowledge and
except as specifically disclosed in Schedule 4.1.11(a) or in the
Environmental Reports, the Plants, the Real Property and the Business are
and while owned by Seller or its predecessors have been in compliance with
all Environmental Laws and Safety Laws, and to Seller's knowledge and
except as specifically disclosed in the Environmental Reports or Schedule
4.1.11(a), there does not exist, is not occurring, and has not occurred any
presence, generation, storage, treatment, transport, release or disposal of
any Hazardous Substance on, in, under, about, to or from any Plant or any
Real Property in violation of any Environmental Law or which Seller
reasonably believes could lead to any liability or obligation on the part
of the Buyer or any owner or operator, now or in the future, of any Plant
or Real Property. Except as set forth in Schedule 4.1.11(a) or in the
Environmental Reports, the Seller (i) has not received any notice, since
January 1, 1995, from any governmental entity or other party that alleges
that any Plant or the Business is not, or at any time has not been, in such
compliance, or has caused unlawful exposure of any person or the
environment to any Hazardous Substance (and Seller is not aware of any such
notice prior to January 1, 1995 which has not been resolved to the
satisfaction of the party giving the notice), and (ii) has all permits and
other approvals required by applicable Environmental Laws and Safety Laws
for the operation of the Plants and the conduct of the Business.
(b) To the extent not specifically disclosed in the Environmental
Reports, Schedule 4.1.11(b) identifies, with respect to each Plant and the
Business, all material environmental licenses, permits, approvals,
authorizations, exemptions, classifications, certificates and registrations
(collectively the "Environmental Permits") made or held by the Seller,
together with a description of any compliance schedules relating thereto.
Except for the Permits not currently held by Seller as disclosed in
Schedule 4.1.7, the Environmental Permits are sufficient under the
Environmental Laws for the operation of the Plants and conduct of the
Business in a manner consistent with their operation and conduct to date by
the Seller.
(c) To the extent not specifically disclosed in the Environmental
Reports, Schedule 4.1.11(c) identifies (i) all underground storage tanks,
and the capacity and contents of such tanks, located or, to the Seller's
knowledge, formerly located at any Plant and (ii) to the Seller's knowledge
all polychlorinated biphenyls (PCB's) used or present at any Plant, except
for certain capacitors contained in equipment that are in compliance with
applicable law.
28
4.1.12 Absence of Change. Except as set forth on Schedule 4.1.12,
since November 28, 1998, there has not been (a) as of the date hereof, any
material adverse change in the financial condition, financial statements,
business, properties, assets or results of operations of the Business; (b)
any material loss, casualty or damage (whether or not covered by insurance)
to the Seller's assets or properties adversely affecting or impairing the
ability of the Seller to conduct the Business or adversely affecting the
value of the Purchased Assets, or any other event or condition of any
character that has materially adversely affected the Business or the value
of the Purchased Assets; (c) except for any Permitted Lien, any mortgage,
encumbrance, lien or pledge of any of the Purchased Assets; (d) except for
Contracts listed on Schedule 4.1.8, any material Contract, commitment or
transaction entered into, amended or terminated by the Seller relating to,
or adversely affecting the Business or the operation thereof, other than in
the ordinary course of business consistent with past practice; (e) any sale
or transfer of the assets of the Seller used in the Business, except for
the sale of inventory in the ordinary course of business, (f) except in the
ordinary course of business consistent with past practices cancellation of
any claim of the Seller that is a Purchased Asset; (g) any imposition or
incurring of any obligation or liability, fixed or contingent, relating to
the Business, except in the ordinary course of business; (h) any commitment
to make any purchase for, or sale of, any inventories relating to the
operation of the Business, except in the ordinary course of business; (i)
any commitment or commitments which are individually or in the aggregate in
excess of $50,000 for any capital expenditure relating to the Business for
which the Buyer shall have any financial obligation to discharge subsequent
to Closing except for commitments after the date hereof made in accordance
with Section 5.4; (j) except in the ordinary course of business consistent
with Seller's past practices, any material changes in the terms of any
instruments, accounts, notes, contracts, or other instruments identified in
the exhibits and schedules hereto, except as consented to in writing by the
Buyer; (k) any changes in the accounting systems, policies or practices of
the Seller relating to the Business or the manner in which it maintains its
books and records relating to the Business, except that the price of cotton
has been fixed only to the extent necessary to reserve a supply of cotton
sufficient to operate the Business; (l) any increase in the rate or terms
of compensation payable to employees of the Business, except annual
increases occurring in accordance with the Seller's customary practices and
except for incentive bonus for data processors described in documents
previously provided to Buyer; (m) any modifications in employee benefits to
any of the employees of the Business; (n) any waiver by the Seller of any
rights which have any material value to the Business; (o) any transactions
with any Affiliates of the Seller relating to the Business or the Purchased
Assets, other than in the ordinary course of business consistent with past
practices and at arms length terms; (p) any acquisitions (by purchase or by
transfer) or disposition (by sale or transfer) of any equipment or
machinery of the Business, to the extent such acquisitions exceed $50,000
in fair market value in the aggregate or to the extent such dispositions
exceed $50,000 in fair market value in the aggregate, except for
acquisitions made after the date hereof in accordance with Section 5.4; or
(q) any agreement by the Seller to do any of the things described in
preceding clauses (a) through (p).
4.1.13 Real Property.
(a) Schedule 4.1.13(a) separately lists all of the real property owned
by the Seller (including the Plants) and used primarily in connection with
the Business (the "Real
29
Property"). Except as set forth in Schedule 4.1.13(a), the Seller has
legal, valid, good and marketable title to all of the Real Property,
insurable at regular rates by a nationally recognized title insurer of
Buyer's choice, free and clear of all Liens, other than the Permitted
Liens. No part of the Real Property is subject to any assignment, lease,
license, sublease, or other agreement granting to any Person any right to
the possession, use, occupancy or enjoyment of the Real Property. The
Seller has and shall deliver to Buyer at Closing actual and exclusive
possession of all the Real Property, subject to the Permitted Liens.
(b) The Real Property, and the improvements, buildings and structures
thereon (the "Improvements"), constitute all of the real property used by
the Seller primarily in the conduct of the Business, may continue to be
used for the operation of the Business as currently operated, and comply
with, and may be conveyed to the Buyer without violating, any federal,
state, or local building, zoning, health, safety, platting, subdivision or
other statute, ordinance or regulation, or any applicable private
restriction. The Seller has received no notice that the current use of the
Real Property and the Improvements is a pre-existing, nonconforming use,
and no notice of the violation of any such legal requirement has been
received by the Seller.
(c) Other than amounts owed for normal maintenance consistent with
past practices, which amounts will be paid by Seller (and not Buyer) in
full when due, the Seller does not owe any money to any architect,
contractor, subcontractor or materialmen or any Person entitled to claim
any Lien or other charge on any of the Real Property or any of the
Improvements for labor, services or materials performed, rendered or
supplied to or in connection with the Real Property or any of the
Improvements, and there is no construction or other improvement work being
done at nor are there any construction or other improvement materials being
supplied to the Real Property or any of the Improvements.
(d) The Seller has received no notice, and it has no knowledge, of any
pending, threatened, or contemplated condemnation, expropriation or like
proceedings, or of any administrative agency action, litigation, or other
material proceeding of any kind (nor is there any basis for any such
action), affecting the Real Property, or any part thereof, or of any
assessments made or threatened with respect to the Real Property or any
part thereof, or of any sales or other disposition of the Real Property, or
any part thereof, in lieu of condemnation.
(e) Except as disclosed on Schedule 4.1.13(e), the Seller has not
received notice from any insurance company or board of fire underwriters
requesting the performance of any work or alteration with respect to the
Real Property or any of the Improvements, or requiring an increase in the
insurance rates applicable to the Real Property or any of the Improvements
outside of the ordinary course of business, consistent with past practice.
(f) The Seller does not own or hold, and is not obligated under or a
party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell or dispose of the Real Property, or any portion
thereof or interest therein.
(g) To Seller's knowledge, except as set forth on Schedule 4.1.13(g),
all of the Improvements are structurally sound. Seller has received no
notice from any governmental
30
authority that any of the Improvements are prior nonconforming structures
under either the applicable zoning regulations or the applicable building
codes;
(h) The Real Property and the Improvements are serviced by all
necessary utilities, including water, sewage, gas, electricity and
telephone, and the Seller is not aware of any inadequacies with respect to
such utilities for the operation of the Business consistent with Seller's
past practices. All water, rail, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other
similar systems serving the Real Property and/or the Improvements are
installed and operating and are sufficient to enable the Real Property and
all of the Improvements to continue to be used and operated in the manner
currently being used and operated, and any so-called hookup fees or other
associated charges have been fully paid. Except as set forth on Schedule
4.1.13(h), each such utility or other service is provided by a public or
private utility or service company and enters the Real Property from an
adjacent public street or valid private easement owned by the supplier of
such utility or other service which is part of the Real Property. The
Seller will cooperate with the Buyer to negotiate with those utility
services the terms of the continuation of service after the Closing. Except
as set forth in Schedule 4.1.13(h), and except for recorded and insurable
easements which will be in existence at Closing and part of the Real
Property, no Improvement or portion thereof is dependent for its access,
operation or any utility service (including, without limitation, water
supply and/or disposition of waste water) on any land, building or other
improvement not included in the Real Property.
(i) There have been no additions, improvements, alterations or changes
of any nature whatsoever to the Real Property and/or the Improvements
(other than additions, improvements, alterations or changes which are not
material and have been made indoors) since the date any surveys were
provided to the Buyer.
(j) The Seller has delivered to the Buyer complete and correct copies
of any leases, memoranda of lease, assignments, subleases, trust agreements
and other documents and instruments establishing Liens upon the Real
Property other than encumbrances or restrictions of record.
4.1.14 Labor and Employment Matters.
(a) With respect to the employees of the Business not listed on
Schedule 5.7, the Seller has delivered to the Buyer complete and accurate
copies of each written (and a summary of each oral) employment, consulting
and similar agreement to which Seller is a party and which relates to the
Business, each of which is listed on Schedule 4.1.14(a), (i) for any
employment of any individual, or the provision of services by any
individual, not terminable by the Seller without penalty upon thirty (30)
days notice or less; (ii) with any labor union; or (iii) relating to the
payment of any severance or termination payment or bonus to any employee or
former employee or his or her estate or designated beneficiary. Except as
listed on Schedule 4.1.14(a) and except with respect to employees listed on
Schedule 5.7, the Seller is not a party to nor is it bound by any written
agreement, any employment manual (unless previously delivered to Buyer) or
employment handbook (unless previously delivered to Buyer) constituting a
contractual obligation, or any consent decree, court order or statutory
obligation with respect to the Business:
31
(i) for the employment of any individual, or the provision of services by
any individual, who is not terminable by the Seller without penalty upon
thirty (30) days notice or less; (ii) with any labor union; or (iii)
relating to the payment of any severance or termination payment or bonus to
any employee or former employee or his or her estate or designated
beneficiary.
(b) Except for a Printers Union union election at the Business'
Chattanooga Plant in 1994 which failed by a vote of approximately
two-thirds against and one-third in favor of, Seller is not a party to any
collective bargaining agreement affecting the Business, nor during the past
five (5) years has it recognized or received a demand for recognition of
any collective bargaining representative with respect thereto nor have the
employees of the Seller in the Business been subject to any union
organizing attempts during such period; and during the past five (5) years
there have been no labor strikes, disputes or work stoppages nor, to the
knowledge of the Seller, are any such actions threatened against the Seller
relating to the Business.
(c) There are no loans, debts or other obligations payable or owing to
any officers, directors or employees of the Seller by the Business, except
salaries, wages, bonuses and salary advances, reimbursement of expenses
incurred and accrued, or liabilities of employees for stock purchases under
the Plans in each instance incurred in the ordinary course of business.
(d) With respect to the Business and to Seller's knowledge, the Seller
is in compliance with all laws and other obligations relating to
employment, denial of employment, human rights or employment opportunity,
wages, hours, collective bargaining, the payment of social security or
similar taxes, discrimination laws and termination of employment. There is
no unfair labor practice charge or complaint pending with respect to
employees of the Business pending before any agency or board against or
affecting the Business or any of its operations and there is no controversy
pending or, to the knowledge of the Seller, threatened between the Seller
and any of its present or former officers, directors, supervisory or
non-supervisory personnel or any employees relating to the Business. There
are no charges with respect to or relating to the Seller's conduct of the
Business and its employment of Persons therein before any commission,
agency or body responsible for the prevention of unlawful employment
practices; the Business has not received any notice from any federal,
provincial, state, local or other agency responsible for the enforcement of
labor or employment laws of an intention to conduct an investigation of the
Business or any of Seller's employment practices in connection with the
Business that would in any way adversely affect the Business and no such
investigation is in progress.
(e) Schedule 4.1.14(e) lists the names and current salary of all the
salaried employees of the Seller who are employed in connection with the
Business and the hourly rate, job codes and number of employees under each
job code for each hourly employee employed in connection with the Business.
There has been no occurrence involving the Seller that has resulted or
likely will result, to the best knowledge of the Seller, in any adverse
rate adjustment under any applicable workers' compensation or similar
legislation with respect to the Business.
4.1.15 Customers. Schedule 4.1.15 attached hereto lists each customer
Contract or account representing sales by the Business in excess of $50,000
in the 12 months ended December 26, 1998. Except as set forth on Schedule
4.1.15, the Seller has not received any notice and does not have cause to
reasonably believe that (a) any material Contract or account
32
with any such customer is being terminated or is being considered for
termination or nonrenewal or (b) any such customer is considering any
material reduction in its business with the Seller.
4.1.16 Insurance. Schedule 4.1.16 attached hereto is a summary of all
material policies of insurance (other than employee benefit insurance)
covering the Seller and relating to the Business or any of the Purchased
Assets as of the date hereof. All such policies are in full force and
effect and neither the Seller nor, to the Seller's knowledge, any other
party thereto is in breach or default thereunder (and no event has occurred
which, with the giving of notice or the passage of time, or both, would
constitute a breach or default).
4.1.17 Employee Benefit Plans.
(a) Schedule 4.1.17 identifies each employee pension, retirement,
profit sharing, bonus, incentive, stock option, deferred compensation,
hospitalization, medical, dental, vacation, insurance, sick pay, disability
and severance plan, fund, program, policy, contract or arrangement,
including all welfare benefit plans or employee pension benefit plans
within the meaning of Section 3 of ERISA and the regulations issued by the
Department of Labor, maintained or contributed to by the Seller or any
trade or business and related to the employees of the Business, whether or
not incorporated (an "ERISA Affiliate"), that is a member of a controlled
group of corporations or a trade or business under common control with the
Seller for any employees of the Business (within the meaning of Sections
414(b), (c), (m) or (o) of the Code, or Section 4001(a)(14) of ERISA) (the
"Plans"). The Seller has not incurred (nor has any event occurred that
could result in the Seller incurring) any liability in connection with any
existing or previously existing Plan (including for this purpose not only
any "Plan" as defined above in this Section 4.1.17(a) but also any other
plan maintained by the Seller or any ERISA Affiliate that would be so
defined if it related to the employees of the Business) could become, on or
after the Closing Date, an obligation or liability of the Buyer.
(b) Neither the Seller nor any ERISA Affiliate participates in or
contributes to, or has ever participated in or contributed to any
"multiemployer plan" (as defined in Section 3(37) or 4001(a)(3) of ERISA.
(c) The Seller has provided to the Buyer a true and complete copy of
the Xxxxx Plan.
4.1.18 Brokers; Finders. Other than Xxxxxx Xxxxxxxxx & Xxxxxx, whose
fees shall be paid in full by Seller, the Seller has not retained any
broker or finder in connection with the transactions contemplated herein so
as to give rise to any valid claim against the Buyer for any fee, sales
commissions, finders' fees, financial advisory fee or other fees or
expenses for which the Buyer shall be liable.
4.1.19 Warranties and Product Liability. Attached as Schedule 4.1.19
hereto is a copy of the customary warranty given by the Seller with respect
to products manufactured by or sold through the Business. Except as
disclosed on Schedule 4.1.19, there is no action, suit, inquiry, proceeding
or investigation by or before any court or governmental or other regulatory
or administrative agency or commission pending or, to the best knowledge of
the Seller, threatened
33
against or involving the Seller relating to any product alleged to have
been manufactured or sold by the Seller through the Business and alleged to
have been defective, or improperly designed or manufactured, and the Seller
does not know or have any reason to know of any basis for any such action,
proceeding or investigation.
4.1.20 Suppliers and Employees. To the knowledge of the Seller, the
relationships of the Seller with each of the suppliers of the Seller are
good commercial working relationships and no supplier of the Seller has
cancelled or otherwise terminated, or threatened in writing to cancel or
otherwise terminate, its relationship with the Seller, or has during the
last twenty-four (24) months (at the volition of the supplier) decreased
materially, or threatened to decrease or limit materially, its services,
supplies or materials to the Seller. Except as set forth on Schedule
4.1.20, to the knowledge of Seller, no employee of the Business (other than
those set forth on Schedule 5.7) intends to terminate his or her employment
relationship with the Business as a result of the transactions contemplated
hereby. Except as set forth in Schedule 4.1.20, Seller has not terminated
any employee of the Business in the thirty-day period prior to the date of
this Agreement.
4.1.21 Tax Qualification. The Xxxxx Plan is tax-qualified under
Section 401(a) of the Code. The transfer of accounts described in Section
5.7(f) from the Xxxxx Plan to the Xxxxx Plan is permitted under the terms
of the Xxxxx Plan, and will not violate any provision of the Xxxxx Plan or
of the Code or ERISA as applied to the Xxxxx Plan. The employees whose
accounts are to be transferred from the Xxxxx Plan to the Xxxxx Plan
pursuant Section 5.7(f) will not have any right to receive a distribution
or benefit payment from the Xxxxx Plan as a result of their termination as
common law employees of the Seller as of the end of the Closing Date in
connection with the sale of the Business pursuant to this Agreement. None
of such employees have any of the following subaccounts under the Xxxxx
Plan: Pension Account, Thrift Account (excepting accounts treated as Thrift
Accounts that are derived solely from contributions to the Xxxxx Yarns,
Inc. Defined Contribution Plan, and earnings thereon), and accounts from
the Carriage Industries, Inc. 401(k) Retirement Savings Plan as referred to
in section 4.16(c) of the Xxxxx Plan. Only one participant has a Rollover
Account in the Xxxxx Plan that may be transferred to the Xxxxx Plan
pursuant to Section 5.7(f).
4.1.22 Disclaimer of Additional Warranties. Except as expressly set
forth in this Agreement, the Schedules and Exhibits hereto, and any other
certificate or instrument delivered pursuant to the terms hereof or
thereof, Seller makes no warranties, express or implied, at law or in
equity, with respect to the Business or the Purchased Assets, including,
with respect to the Purchased Assets, any representation or warranty or
merchantability, suitability or fitness for a particular purpose, or
quality as to the Purchased Assets, or any part thereof, or as to the
condition or workmanship thereof, or the absence of any defects therein,
whether latent or patent, and any such other warranties are hereby
expressly disclaimed.
4.2 Representations and Warranties of the Buyers. The Buyer hereby
represents and warrants to the Seller as follows:
4.2.1 Corporate Existence. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the jurisdiction
of its incorporation. The Buyer has full
34
corporate power and authority to enter into and perform this Agreement and
to consummate the transactions contemplated herein.
4.2.2 Authorization; Enforceability. The execution, delivery and
performance of this Agreement by the Buyer and the consummation of the
transactions contemplated herein have been duly authorized by all requisite
corporate action on the part of the Buyer. This Agreement has been duly
executed and delivered by the Buyer and constitutes the valid, legal and
binding obligation of the Buyer enforceable in accordance with its terms,
except as enforceability may be limited by equitable principles or by
bankruptcy, fraudulent conveyance or insolvency laws affecting the
enforcement of creditors' rights generally.
4.2.3 No Violation; Consents. Neither the execution, delivery and
performance by the Buyer of its obligations under this Agreement, nor the
consummation of the transactions contemplated hereby, will (a) conflict
with, violate or result in a breach of any of the terms or provisions of,
or constitute a default (with the passage of time or giving of notice or
both) under any indenture, mortgage, deed of trust, lease, note, or other
agreement or instrument to which the Buyer is a party; (b) conflict with
any provision of the articles of incorporation or bylaws of the Buyer; or
(c) violate any law, order, judgment, decree, rule or regulation of any
court or governmental agency or body having jurisdiction over the Buyer or
its properties. Assuming the truthfulness of the Seller's representations
and warranties and except for any filing under the HSR Act, no consent,
approval, authorization, order, filing, registration or qualification of or
with any governmental authority or other Person is required to be obtained
by the Buyer in connection with the execution and delivery of this
Agreement by the Buyer or the consummation of the transactions contemplated
herein.
4.2.4 Litigation. There are no actions, suits, labor disputes or other
litigation, proceeding or governmental investigations pending or, to the
knowledge of the Buyer, threatened against or affecting the Buyer, nor is
the Buyer subject to any order, judgment, decree, stipulation or consent of
or with any court, governmental body or agency, which would affect the
enforceability of this Agreement against the Buyer or impair the ability of
the Buyer to consummate the transactions contemplated by this Agreement.
4.2.5 Brokers; Finders. Other than NationsBanc Xxxxxxxxxx Securities,
LLC, whose fees shall be paid in full by Buyer, the Buyer has not retained
any broker or finder in connection with the transactions contemplated
herein so as to give rise to any valid claim against the Seller for any
fee, sales commissions, finders' fees, financial advisory fee or other fees
or expenses for which the Seller shall be liable.
4.2.6 Solvency. Buyer is financially solvent with the ability to pay
and perform its obligations when and as they become due.
4.2.7 Seller's Representations and Warranties To the actual knowledge
of Xxxxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxx Xxxxxx, Xxxxxxxx Xxxxxxx and Xxxxxx Xxxxxx (without any required
investigation or due diligence), the Seller's representations and
warranties (excepting the representations and warranties made in Sections
4.1.17(c) and 4.1.21) are true in all material respects. To the actual
knowledge of
35
Xxxxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxx Xxxxxx, Xxxxxxxx Xxxxxxx and Xxxxxx Xxxxxx (without any required
investigation or due diligence), the Environmental Reports constitute all
environmental reports, audits or assessments or material occupational
health studies relating to the Plants or the Real Estate.
4.2.8 Tax Qualification The Xxxxx Plan is tax-qualified under Section
401(a) of the Code.
ARTICLE V
CERTAIN COVENANTS
5.1 Consummation of Agreement. The Seller and the Buyer each will use its
best reasonable efforts to perform or fulfill all conditions and obligations to
be performed or fulfilled by it under this Agreement so that the transactions
contemplated hereby shall be consummated. Except for events that are the subject
of specific provisions of this Agreement, if any event should occur, either
within or outside the control of the parties, that would materially delay or
prevent fulfillment of the conditions upon the obligations of any party hereto
to consummate the transactions contemplated by this Agreement, the parties will
use their respective best, diligent and good faith efforts to cure or minimize
the same as expeditiously as possible.
5.2 Government and Third Party Consents. The Seller hereby agrees to use
its best efforts in preparing, filing, prosecuting, and taking any other actions
with respect to any applications, requests, or actions that are or may be
reasonable and necessary to obtain the Consent of any governmental
instrumentality or any third party or to accomplish the transactions
contemplated by this Agreement, including the Consents listed on Schedule 2.2.
5.3 Filings. The Buyer and the Seller will make or cause to be made all
such filings and submissions under applicable laws and regulations as may be
required for the consummation of the transactions contemplated hereunder,
including without limitation any filings required under the HSR Act. The Buyer
and the Seller will cooperate and coordinate with one another in connection with
any such filings or submissions. Except as otherwise stated herein, any such
filings required of the Buyer shall be at the Buyer's expense, and any such
filings required of the Seller shall be at the Seller's expense; provided that
Buyer shall pay any HSR Act filing fee relating to the transactions contemplated
hereby.
5.4 Conduct of Business Before Closing. Except as expressly agreed to by
Buyer in writing or as otherwise contemplated by the terms of this Agreement,
from the date hereof until the Closing, the Seller will: (a) not enter into any
Contract relating to the Business unless such Contract is entered into in the
ordinary course of business consistent with past practice and pricing and (i)
involves an aggregate financial obligation on the part of the Seller of $50,000
or less, (ii) is terminable upon not more than thirty (30) days' prior notice,
or (iii) is a Contract for (A) the sale of inventory to a customer or (B) for
purchase of raw materials or supplies at prices not greater than market prices
on the date of Seller's order; (b) perform the Seller's obligations under all
Contracts relating to the Business and not amend, modify or waive any material
provision of any such Contract, except in the ordinary course of business
consistent with past
36
practice and pricing; (c) not mortgage, encumber or pledge any of the assets
relating to the Business; (d) not sell or transfer any of the assets relating to
the Business, except in the ordinary course of business consistent with past
practice and pricing; (e) conduct the Business only in the ordinary course
(including with respect to the payment of payables and the collection of
receivables) and in substantially the same manner as heretofore conducted; (f)
maintain and keep the properties and equipment of the Business in good repair,
working order and condition, except for ordinary wear and tear; (g) use
reasonable efforts to maintain, preserve and retain the Business' present
employees, and relationships with suppliers, customers and others; (h) maintain
the books of account and records of or relating to the Business in the usual and
regular manner and not make any changes in the accounting practices of the
Business; (i) comply with all material laws and regulations applicable to the
conduct of the Business and the ownership of the Purchased Assets; (j) maintain
and protect the Purchased IP and the Proprietary Software; (k) not make any
change in the compensation to any employees of the Business or terminate
administrative or salaried employees or, out of the ordinary course, any hourly
employees without the prior written consent of the Buyer; (l) not acquire or
agree to acquire any assets that are material to the Business other than
replacements in the ordinary course of business; (m) not acquire or agree to
acquire or dispose of any equipment or machinery (including transfer from the
Business to any other business segment of Seller) for use in the Business
without Buyer's consent, to the extent either the fair market value of such
acquisitions or the fair market value of such dispositions exceed $50,000 in the
aggregate; (n) not take, or agree in writing or otherwise to take, any action
that would make any of the representations or warranties of the Seller contained
in this Agreement untrue or incorrect or would result in any of the conditions
set forth in this Agreement not being satisfied; and (o) not agree, whether in
writing or otherwise, to do any of the foregoing. Without limiting the
foregoing, prior to the Closing, the Seller will consult with the Buyer
regarding all significant developments, transactions and proposals relating to
the Business. Subject to the provisions of Section 5.5(b), representatives of
Xxxxx (including but not limited to Xxxx Xxxxxxxxx) shall have full access to
observe the Business and the Purchased Assets (including but not limited to the
customers of the Business). In the event Seller requests that Buyer consent to
an action set forth in the first sentence of this Section 5.4, Buyer shall
respond to such consent request within 36 hours (and if Buyer does not so
respond, Buyer shall have been deemed to have consented to such action). Buyer
shall not unreasonably withhold any such consent. Seller agrees to contact Xxxxx
Xxxxxxx, Xxxxxxx Xxxxx or Xxxxxx Xxxxxxx at their home telephone number in the
event any such consent is requested on a weekend or holiday.
5.5 Access and Information; Confidentiality. From the date hereof until the
Closing Date or such later date as may be specified below:
(a) The Seller will, upon prior notice from the Buyer and during
normal business hours, (i) give the Buyer and its authorized
representatives reasonable access to the Purchased Assets and Real Property
and to Business Records, offices and other facilities and properties
relating to the Business; (ii) permit the Buyer to make such inspections
thereof and the performance of such soil and groundwater tests, surveys,
environmental assessments and audits, and other inspections, tests and
inquiries as the Buyer may desire (provided that, with respect to
environmental tests, Buyer's environmental consultant has recommended or in
the future recommends the tests (provided that any additional testing
recommended by Buyer's environmental consultant in the future must be
reasonably related to Hazardous Substances
37
discovered in its initially recommended testing), and the tests shall be
coordinated with Seller, but shall not be delayed by Seller); (iii) cause
its officers or other appropriate officials to furnish the Buyer with such
financial and operating data and other information with respect to the
Business as the Buyer may from time to time reasonably request; and (iv)
permit the Buyer and its representatives access to information pertaining
to the Business as the Buyer reasonably may request; provided, however,
that any such investigation by the Buyer shall be conducted in such a
manner as not to interfere unreasonably with the operation of the Business
and will be subject to the provisions of Section 5.5(b). Prior to the
Closing Date, Seller shall deliver to Buyer the April Statement of
Operations and the April Balance Sheet.
(b) The Buyer agrees to, and to cause its employees and agents to,
protect the confidentiality of all proprietary and confidential information
received from Seller and relating to the Purchased Assets and the Business
received from the Seller pursuant to this Agreement (the "Confidential
Information"), using the same care and procedures used to protect the
Buyer's own proprietary and confidential information, and agrees not to
disclose, and to cause its Affiliates, employees and agents not to
disclose, the Confidential Information to any other Persons except as may
be reasonably necessary in connection with the transactions contemplated
herein or except to the extent (i) such Confidential Information is in the
public domain or becomes publicly available or obtainable from independent,
nonconfidential sources and not in breach of the Buyer's obligations
hereunder or any other party's confidentiality obligations owed to the
Seller and known by the Buyer; (ii) such Confidential Information is
required to be disclosed by law or by governmental authorities having
jurisdiction over the Buyer; (iii) the Buyer can demonstrate by written
records that such Confidential Information was in the possession of the
Buyer or its Affiliates prior to any disclosure by the Seller or subsequent
to such disclosure was independently developed by the Buyer or its
Affiliates without use of or reliance on the Confidential Information; or
(iv) disclosure is necessary for the Buyer to enforce any or all of its
rights under this Agreement. In the event this Agreement is terminated
pursuant to Section 8.1, the Buyer shall return to the Seller all written
Confidential Information provided to the Buyer by the Seller and all copies
thereof and will not use any Confidential Information in any of its
manufacturing or sales processes or procedures, or make any use of such
Confidential Information in its businesses, or pass any such Confidential
Information on to any third party, without the prior written consent of the
Seller. The restrictions on the Buyer set forth in the preceding sentence
shall terminate on the earlier of (x) the occurrence of the Closing and (y)
the fifth anniversary of the date hereof. In the event the Closing occurs,
then for the period ending five (5) years after the Closing Date, the
Seller agrees to, and to cause its employees and agents to, protect the
confidentiality of all Confidential Information (except to the extent
related directly to the Retained Business) using the same care and
procedures used to protect the Seller's own proprietary and confidential
information, and agrees not to disclose, and to cause its Affiliates,
employees and agents not to disclose, such Confidential Information to any
other Persons except as may be reasonably necessary in connection with the
transactions contemplated herein or except to the extent (i) such
Confidential Information is in the public domain or becomes publicly
available or obtainable from independent, nonconfidential sources and not
in breach of the Seller's obligations hereunder or any other party's
confidentiality obligations owed to the Buyer and known by the Seller; (ii)
such Confidential Information is required to be disclosed by law or by
governmental authorities having jurisdiction over the Seller; or (iii)
disclosure is necessary for the Seller to enforce any or all of its
38
rights under this Agreement. For the period ending five (5) years after the
date hereof, the Buyer agrees to, and to cause its employees and agents to,
protect the confidentiality of all confidential and proprietary information
received from Seller and relating to the Retained Business ("Confidential
Retained Business Information") using the same care and procedures used to
protect the Buyer's own proprietary and confidential information, and
agrees not to disclose, and to cause its Affiliates, employees and agents
not to disclose, such Confidential Retained Business Information to any
other Persons except as may be reasonably necessary in connection with the
transactions contemplated herein or except to the extent (i) such
Confidential Retained Business Information is in the public domain or
becomes publicly available or obtainable from independent, nonconfidential
sources and not in breach of the Buyer's obligations hereunder or any other
party's confidentiality obligations owed to the Seller and known by the
Buyer; (ii) such Confidential Retained Business Information is required to
be disclosed by law or by governmental authorities having jurisdiction over
the Buyer; (iii) the Buyer can demonstrate by written records that such
Confidential Retained Business Information was in the possession of the
Buyer or its Affiliates prior to any disclosure by the Seller or its
Affiliates without use of or reliance on the Confidential Retained Business
Information; or (iv) disclosure is necessary for the Buyer to enforce any
or all of its rights under this Agreement.
5.6 Real Property.
(a) The Seller shall not allow any Lien to be placed on or granted
with respect to any of the Real Property or any of the Improvements, other
than Permitted Liens, without the prior written consent of the Buyer. If
any such Lien arises prior to Closing and the Buyer objects, the Seller
shall, at its sole expense, cure the objections prior to Closing.
(b) Seller, at Seller's expense, has delivered to Buyer accurate
as-built surveys (the "Surveys") of the Real Property. The Surveys (a) are
sufficient to eliminate any general survey exception in Buyer's title
insurance commitments and/or policies for the property in question, (b)
show all setback or building lines and all Liens (with recording
information provided) that are locatable and shown as exceptions in Buyer's
title insurance commitments and/or policies for the property in question,
(c) show access to a public street, and the distances and bearings to the
nearest intersection of public streets if not a point on the boundary of
the property in question. Buyer and Seller shall split equally the cost of
any update of such Surveys required by Buyer's financing source.
(c) Seller shall request and exercise due diligence to obtain from the
local governmental authority with zoning jurisdiction over the property in
question zoning certificates for each parcel of the Real Property, stating
that the property complies with applicable zoning regulations and may
legally be used for the purposes for which it is presently used in the
Business and, upon receipt, shall deliver the same to Buyer at least ten
(10) days prior to Closing.
(d) On or before Closing, the Seller shall deliver to the Buyer all
plans, specifications, as built drawings, plans and specifications for
mechanical, electrical, plumbing or security systems, operating manuals,
warranties and guarantees, in the Seller's possession and reasonably
available to the Seller covering the Real Property and/or the Improvements.
39
5.7 Employees.
(a) As of the Closing, Buyer shall offer at-will employment (subject
to Buyer's normal pre-employment testing requirements other than pulmonary
function tests) to the employees employed at the Plants and administrative
and sales employees of the Business employed by Seller immediately prior to
the Closing; provided, however, that Buyer shall have no obligation to
offer employment to any employee of the Business if such employee is listed
on Schedule 5.7 or if such employee is on short or long term disability or
maternity leave or other leave on the Closing Date. As soon as practicable
after the Closing Date, Seller agrees to pay in full all amounts owed by
Seller to all employees of the Business, including but not limited to all
obligations for accrued vacation and severance. Seller agrees it shall be
responsible for any and all costs, obligations and claims relating to the
Seller's termination of the employment of any employees of the Business,
including but not limited to any costs for COBRA insurance and any
liability based on claims for severance or wrongful dismissal, and any such
obligations shall be "Excluded Liabilities" for purposes of this Agreement;
provided, however, that the Buyer hereby agrees that it will be responsible
for all WARN Act obligations related to the Business and resulting directly
from Buyer's failure to hire as required by this Section 5.7 the employees
of the Business employed by Seller on the Closing Date not listed on
Schedule 5.7 (with Buyer's obligation to hire such employees being
specifically subject to the disability and leave qualifications as set
forth in this Section 5.7) (such WARN Act obligations, the "Buyer's WARN
Obligations"). The Seller will take all action necessary to provide that
the employees of the Business will be fully 100% vested in their benefits
under any qualified retirement plans of the Seller effective as of the
Closing Date.
(b) The parties acknowledge and agree that it is their intention that,
consistent with the terms of such agreements, all existing contracts of
noncompetition between the Seller and its employees who accept employment
by the Buyer shall be transferred to or assumed by the Buyer as a result of
the transactions described herein and that such contracts shall constitute
Assumed Contracts hereunder.
(c) The Seller shall, if requested by the Buyer and subject to any
restrictions imposed by law, assign to the Buyer the Seller's unemployment
insurance and worker's compensation experience ratings and take such steps
as the Buyer shall reasonably request to effect such assignment.
(d) Subject to any legal restrictions and to any contrary agreements
with its employees, the Seller shall make available to the Buyer all
personnel records, including without limitation names, Social Security
numbers, dates of hire by the Seller, dates of birth, number of hours
worked each calendar year, salary histories and breathing test results, for
all of the employees of the Business. The Seller and the Buyer shall also
cooperate, both before and after the Closing Date, in (i) exchanging
information, including pertinent employment records, benefit information,
salary and compensation records, financial statements and other data, and
(ii) taking other action respecting the interests of the employees of the
Business who become employees of the Buyer, and their respective
beneficiaries and dependents, under each of the employee benefit plans of
the Seller and any plans established by the Buyer, so as to secure an
orderly and effective
40
transition of the benefit arrangements for such employees of the Business
and their respective beneficiaries and dependents.
(e) Notwithstanding anything herein to the contrary, Seller will pay,
or Seller will maintain an insurance policy that will pay, the following
unpaid claims for medical expenses under Seller's Plans that exist at the
Closing Date incurred by the employees of the Business ("Incurred But
Unpaid Claims"): (i) any valid but unpaid claim for the payment of any
medical benefits for health care expenses incurred by an employee of the
Business which was submitted for payment prior to the Closing Date; and,
(ii) any valid but unpaid claim for the payment of any medical benefits for
health care expenses incurred by an employee of the Business on or before
the Closing Date. All Incurred But Unpaid Claims will be paid in accordance
with the provisions of Seller's Plans. Incurred But Unpaid Claims shall be
Excluded Liabilities.
(f) In the event the Closing occurs, the Seller and Buyer agree to the
transfer of certain accounts (benefit liabilities and assets) from the
Xxxxx Plan to the Xxxxx Plan pursuant to this Section 5.7(f). The transfer
will be a so-called trustee-to-trustee transfer and shall be made in cash,
except for outstanding participant loans from the Xxxxx Plan, which shall
be transferred in kind. Buyer agrees to cause the Xxxxx Plan to accept the
benefit liabilities relating to such accounts and Seller agrees to cause
the Xxxxx Plan to transfer cash (and such participant loans) to the Xxxxx
Plan equal to the amount of the benefit liabilities transferred. The
participants in the Xxxxx Plan whose accounts shall be transferred to the
Xxxxx Plan are the common law employees of the Business immediately prior
to the end of the Closing Date meeting all of the following requirements:
(1) whose employment with the Seller terminates as of the end of the
Closing Date, (2) who are common law employees of the Buyer immediately
after the Closing Date, and (3) who are common law employees of the Buyer
on the initial date of the transfer of accounts, July 1, 1999. The accounts
to be transferred from the Xxxxx Plan to the Xxxxx Plan are the following
subaccounts: (1) Deferred Savings Accounts, (2) Matching Accounts, (3)
Non-Elective Accounts, (4) Return on Equity Accounts, (5) Rollover
Accounts, (6) DCP Accounts maintained pursuant to Section 4.16(d) of the
Xxxxx Plan that are treated as Thrift Accounts, and (7) DCP Accounts
maintained pursuant to Section 4.16(d) of the Xxxxx Plan that are treated
as Return on Equity Accounts. The benefit liabilities to be transferred
shall be the value of the accounts to be transferred determined as of the
June 30, 1999 Valuation Date under the Xxxxx Plan (including amounts to be
contributed to the Xxxxx Plan by the Seller pursuant to Section 5.7(g)). No
later than June 23,1999, Buyer shall furnish to Seller a list of the names
and Social Security numbers of the employees whose accounts it reasonably
believes are to be transferred pursuant to this Section 5.7(f). On July 1,
1999, the Xxxxx Plan shall transfer to the Xxxxx Plan an amount equal to
ninety percent (90%) of the amount (other than participant loans) that
Seller reasonably believes is required to be transferred to the Xxxxx Plan
pursuant to this Section 5.7(f), based on such list of employees furnished
by Buyer to Seller, and all of the participant loans to be transferred in
kind. Buyer shall promptly notify Seller of and cause the Xxxxx Plan to
return to the Xxxxx Plan the account of any participant no longer employed
by the Buyer on July 1, 1999. Subsequently, the Xxxxx Plan shall transfer
to the Xxxxx Plan the remainder of the amount required to be transferred to
the Xxxxx Plan pursuant to this Section 5.7(f). Seller shall use its best
efforts to cause such transfer to be made no later than August 31, 1999,
but in any event shall cause such transfer to be made no later than
September 30, 1999. Seller shall also use its best
41
efforts to provide to Buyer, no later than August 31, 1999, in hard copy
and/or electronic format reasonably acceptable to Buyer complete
information necessary for Buyer and the Xxxxx Plan to administer the
transferred accounts, including (without limitation): (1) the name, Social
Security number and date of birth of each participant, (2) the identity and
amount of each participant's subaccount, (3) the net amount of the
participant's Deferred Savings Account eligible for a hardship withdrawal
under Section 6.11 of the Xxxxx Plan, (4) the amount of each participant's
own after-tax employee contributions remaining in the participant's Thrift
Account, (5) all information necessary to determine the taxability under
Section 72 of the Code of any distributions from the Thrift Account of a
participant transferred from the Xxxxx Plan to the Xxxxx Plan, and (6) all
information necessary to determine any special lump sum income tax
treatment under Section 402 of the Code for distributions from the Xxxxx
Plan with respect to any amounts transferred from the Xxxxx Plan; provided,
that Seller must in any event furnish all of the foregoing information to
Buyer no later than September 30, 1999. On July 1, 1999 Seller shall
furnish to Buyer all information necessary for Buyer to continue to collect
and otherwise administer the participant loans transferred in kind on such
date, including original copies of all notes and security agreements, and
payroll withholding agreements, transferred or endorsed to the Xxxxx Plan
or the Buyer, as appropriate, and all other loan documents. Seller will
furnish to Buyer at or prior to Closing complete information regarding any
rights with respect to the transferred Rollover Account that are protected
to the participant under the terms of the Xxxxx Plan or under any
applicable law.
(g) The Seller agrees that pursuant to section 1.16(d) of the Xxxxx
Plan the Chairman of the Seller shall designate the Closing Date as the
last day of the Plan Year under the Xxxxx Plan for the purpose of
qualifying participants of the Xxxxx Plan who are the common law employees
of the Business immediately prior to the end of the Closing Date whose
employment with the Seller terminates as of the end of the Closing Date to
receive the following contributions (and for the purpose of determining the
amount of such contributions) from the Seller under the Xxxxx Plan for the
Plan Year ending in 1999: Matching Contributions and Non-Elective
Contributions. The Seller agrees to amend the Xxxxx Plan on a timely basis,
retroactively if necessary, to assure that the Xxxxx Plan remains a
tax-qualified plan under Section 401(a) of the Code as of the date of any
account transfer made pursuant to Section 5.7(f).
(h) The Buyer agrees to amend the Xxxxx Plan to permit all employees
of the Business that the Buyer employs immediately after the Closing Date
who were eligible to participate in the Xxxxx Plan on the Closing Date to
begin immediate participation in the Xxxxx Plan no later than September 1,
1999. Buyer agrees to amend the Xxxxx Plan to provide all other employees
of the Business that the Buyer employs immediately after the Closing Date
with credit for hours of service with the Seller for the purpose of
satisfying the eligibility service requirement of the Xxxxx Plan, and to
provide for a Xxxxx Plan special participation commencement date of no
later than September 1, 1999 for such employees who satisfy the eligibility
service requirement of the Xxxxx Plan prior to July 1, 1999. The Seller
agrees to provide Buyer with such information regarding employment with the
Seller and eligibility for participation in the Xxxxx Plan as may be
necessary for the Buyer to determine the eligibility and participation
commencement dates under the Xxxxx Plan (as provided above in this Section
5.7(h)) of the employees of the Business employed by the Buyer immediately
after the Closing Date. The Buyer agrees to amend
42
the Xxxxx Plan prior to July 1, 1999 to authorize the acceptance of the
transfer of accounts as described in Section 5.7(f) and to protect
transferred accounts (accrued benefits) as required by Section 411(d)(6) of
the Code. The Buyer agrees to amend the Xxxxx Plan on a timely basis,
retroactively if necessary, to assure that the Xxxxx Plan remains a
tax-qualified plan under Section 401(a) of the Code as of the date of any
account transfer made pursuant to Section 5.7(f).
(i) During the ten-year period immediately following the Closing Date,
Buyer agrees to use its reasonable best efforts to comply in all material
respects with all Safety Laws applicable to the use or operation of the
Purchased Assets, including the performance of all medical surveillance
relating to other dust inhalation of the employees listed on Schedule
7.1(b) required by any of the Safety Laws. Buyer agrees to provide Seller
with copies of all documents relating to such surveillance within thirty
(30) days of their preparation. Buyer agrees to notify Seller of the
termination of the employment of each employee listed on Schedule 7.1(b)
within thirty days after such termination.
5.8 Customers, Suppliers and Employees. The Seller hereby agrees not to
discourage any customer or supplier of the Business from continuing to do
business or maintaining a business relationship with the Business. Seller agrees
that for the period ending two (2) years after the Closing Date, Seller shall
not solicit or encourage any employee offered employment by Buyer to cease
employment with Buyer and become employed by Seller or any of Seller's
Affiliates.
5.9 Assistance in Transition. The Seller and the Buyer agree that for a
reasonable period of time, they will render reasonable assistance to one another
for the purpose of effectuating the change in control of the Business from the
Seller to the Buyer. Without limiting the generality of the foregoing, for a
reasonable period of time following the Closing (such period not to exceed four
months), the Buyer will allow the Seller and Seller's agents and the MIS Entity
access to the computer systems sold by Seller to Buyer hereunder and the Real
Property and certain tangible personal property Purchased Assets located at
Seller's corporate office for the purpose of, without limitation, processing
transactions, collecting its accounts, closing its books, preparing its tax
returns and effecting the transition for other business segments sold, all
without charge or cost. Such access to be provided only at reasonable times and
only to the extent such access does not unreasonably interfere with Buyer's use
of such system. For a period of four (4) months following the Closing Date,
Seller shall allow Buyer access at reasonable times to Seller's corporate office
and systems for purposes of transition of the Business to Buyer's systems and
operations, all without charge or cost. Buyer agrees that for the extent of this
transition period, Buyer will consult with Seller prior to any reduction in work
force or transfer of Seller's former employees who reasonably could be expected
to be in a position to assist Seller in this transition.
5.10 Lien Search. Prior to Closing, the Seller at its expense shall obtain
and deliver Uniform Commercial Code and tax lien search results for liens
covering the Purchased Assets from each jurisdiction in which such assets are
located. The searches shall be dated as of a date not earlier than 20 days prior
to the Closing Date.
5.11 Exclusivity. Without limiting the effect of any other warranty or
representation contained in this Agreement, at no time from the date hereof
through the earlier of (i) the Closing Date, and (ii) the termination of this
Agreement will the Seller, directly or through any agents or
43
representatives, without the prior written consent of the Buyer, (a) transfer,
pledge, hypothecate or otherwise encumber any of the Purchased Assets, other
than sales of Inventory in the ordinary course of business, or grant to any
Person any right to purchase any of the Purchased Assets, other than purchases
of Inventory in the ordinary course of business and other than the rights
granted to the Buyers hereunder, (b) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of the Business or any of the Purchased Assets (including any acquisition
structured as a merger, consolidation or share exchange), or (c) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Seller shall
notify the Buyer immediately if any Person makes any proposal, offer, inquiry,
or contract with respect to any of the foregoing.
5.12 Cooperation After the Closing, the Buyer and the Seller shall
cooperate with each other in connection with any official tax inquiry, tax
audit, tax determination, tax-related proceeding affecting the tax liability of
the Seller or the Buyer relating to the Business, in connection with information
required to prepare any tax return or report, and to make available to each
other within a reasonable time, at no cost to such party, relevant sections of
such party's tax returns, documents, correspondence, reports, books and records
and other materials bearing on such tax matters; provided that each party shall
be reimbursed for any out-of-pocket expenses it incurs in assisting another
party hereunder.
5.13 Use of Intellectual Property and Business Names. From and after the
Closing Date, the Seller shall not use any of the Purchased IP without the prior
written consent of the Buyer. Without limiting the generality of the foregoing,
from and after the Closing, the Seller shall not use any Trademarks or trade
names used in the Business, including "Xxxxx Yarns," or any acronym,
abbreviation, variation, translation or combination thereof or any similar xxxx
or name which might be confused with any of the Purchased IP, including use for
signage, letterhead publications, public actions, or announcements or other oral
or written references to the Business; provided, Seller may use the name Xxxxx
Yarns until the earlier of December 31, 1999 or the date on which Seller sells
its Xxx Plant. From and after the Closing Date, Buyer and Buyer's Affiliates may
use any of the Purchased IP, including all such Trademarks and trade names in
any manner and for any purpose. Xxxxx may use the name "Xxxxx" after the Closing
Date.
5.14 Requested Business Records Seller promptly shall provide Buyer copies
of the Requested Business Records upon Buyer's written request.
5.15 Brokers. The Seller shall pay when due any amounts owed to Xxxxxx
Xxxxxxxxx Xxxxxx and any other broker engaged by Seller in connection with the
transactions contemplated herein. The Buyer shall pay when due any amounts owed
to NationsBanc Xxxxxxxxxx Securities, LLC and any other broker engaged by Buyer
in connection with the transactions contemplated hereby.
5.16 Certain Remediation. Buyer shall use commercially reasonable efforts
to complete its environmental investigations not less than ten (10) days prior
to Closing. The parties, before Closing, shall agree on the items set forth in
Schedule 4.1.11 and the Environmental Reports that Seller will be responsible to
remediate pursuant to Section 7.1(a)(vii) and the last two sentences
44
of Section 7.1(a). Seller agrees that removal and remediation of
asbestos-containing material existing at the Plants on the Closing Date shall be
handled as follows: (a) as soon as practical after the date hereof, Buyer's
environmental consultant, Environmental Resources Management, will deliver to
Buyer and Seller the factual results of its asbestos survey of the Chattanooga
and Xxxxxx City Plants, and (b) no later than fifteen (15) days after delivery
of such report, Seller and Buyer shall agree upon an independent, reputable
asbestos abatement contractor or other expert to provide promptly to Buyer and
Seller a recommendation, based on the Environmental Resources Management factual
report and any other investigation by such contractor or expert, regarding
removal and/or other abatement measures that a reasonably responsible owner of a
manufacturing facility should undertake at the Plants (excluding the Mebane
Plant). Seller shall pay to Buyer all amounts paid by Buyer to asbestos
remediators/abators/removers to implement and accomplish the work specified by
such contractor or other expert in its recommendation within ten (10) days after
notice from Buyer (with copies of supporting invoices); provided that Seller
shall have no obligation to pay for any costs of implementing and accomplishing
such recommendation to the extent the cost of such implementation and
accomplishment exceeds $275,000, and provided, further, that Seller shall have
no responsibility for asbestos removal or abatement at the Mebane Plant.
5.17 Water and Electrical Supply to Golf Course. Buyer agrees to supply
Seller access (consistent with past practices) to water and electrical power for
Seller's golf course real property located at adjacent to the Xxxxxx City Real
Property (to the extent Buyer owns such property) purchased by Buyer pursuant to
this Agreement. Seller agrees that it will use its reasonable best efforts to
have the electrical supply and presently metered water supply to such golf
course separately metered as soon as possible after the Closing but no later
than sixty (60) days after the Closing Date. Seller will reimburse Buyer for
estimated reasonable amounts of such electrical supply and presently metered
water supply prior to such separate metering. Notwithstanding the foregoing,
Buyer shall not have the obligation to supply Seller access to water if Seller's
use of such water unreasonably interferes with Buyer's operation of the Business
or if such supply of access imposes additional cost on Buyer (unless Seller
reimburses Buyer for such cost).
5.18 Collection of Trade Receivables. Seller will collect the Seller's
retained accounts receivable of the Business in accordance with prior reasonable
commercial practices of the Seller (but without resort to litigation or the use
of collection agencies or similar efforts unless Buyer has been notified and
consulted with in advance of such efforts). During the 180-day period after the
Closing Date, if the Seller is unable to collect such retained accounts
receivable from a Customer then doing business with the Business (as owned by
Buyer), Buyer shall enforce its credit policies as set forth in Schedule 5.18
with respect to sales to such customers as if such receivable was its own;
provided that if the non-paying customer reasonably alleges cause for such
non-payment (e.g., quality problems) Buyer shall have no obligation to cease
shipping goods to such customer.
5.19 Initial Inventory Payment Calculation. At least three (3) days before
the Closing Date, Seller shall provide Buyer with Seller's calculation of the
Initial Inventory Payment and the work papers supporting such calculation.
45
5.20 MIS Entity. In the event Buyer is notified that the MIS Entity will
not provide agreed-upon services to Buyer, Seller shall use its best reasonable
efforts to assist Buyer in locating similar services at similar prices (and
Buyer will reimburse Seller for out-of-pocket expenses incurred by Seller in
such assistance) and Buyer shall use its best reasonable business efforts in
obtaining such services.
5.21 Financing. Up until June 15, 1999, Buyer shall use its reasonable best
efforts to obtain financing on terms (including maturity and amortization)
substantially equivalent to the financing proposal attached hereto as Schedule
5.21, such financing to be for a principal amount at least equal to the amount
described in such proposal, at an interest rate (on a weighted average basis
based on the amounts set forth in the proposal) no greater than 0.25% above the
rate described in such proposal (on a weighted average basis based on the
amounts set forth in the proposal). Buyer and Seller acknowledge that Buyer has
advised Seller of the following: Congress Financial Corporation has advised
Buyer that it may not be able to supply the financing set forth in the proposal
attached hereto as Schedule 5.21.
5.22 Copy of Proprietary Software. Buyer and Seller agree that Seller shall
have the right to keep one copy of the Proprietary Software constituting a
Purchased Asset. Seller agrees that such Proprietary Software shall constitute a
Business Record and shall be kept confidential by Seller, its employees and
agents after the Closing and shall not be licensed, disclosed or provided to any
third party. Seller agrees to return all copies of the Proprietary Software to
Buyer no later than the date one (1) year after the Closing Date and agrees not
to use or disclose the Proprietary Software after such date other than as set
forth in Schedule 4.1.4(g).
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
under this Agreement to purchase the Purchased Assets and to consummate the
other transactions contemplated by this Agreement is subject to the fulfillment,
at or prior to the Closing, of each of the following conditions, each of which
may be waived in whole or in part by the Buyer in writing in its sole
discretion:
6.1.1 Representations; Performance. The representations and warranties
of the Seller contained herein shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though made
on and as of the Closing Date. The Seller shall have duly performed and
complied in all material respects with all agreements, covenants and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing. The Seller shall have delivered to the Buyer
a certificate, dated the Closing Date and signed by the Seller's Chief
Executive Officer, Vice President or Treasurer, to the effect set forth
above in this Section 6.1.1.
6.1.2 Noncompetition Agreement. The Buyer and Seller shall have
entered into a noncompetition agreement substantially in the form of
Exhibit D attached hereto (the "Noncompetition Agreement").
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6.1.3 Opinions of Counsel. The Buyer shall have received a favorable
opinion of Xxxx, Xxxxxxx & Xxxxxxxx, P.C., counsel to the Seller, addressed
to the Buyer and dated as of the Closing Date, substantially in the form
attached hereto as Exhibit E.
6.1.4 Consents. All material Consents required to be obtained by the
Seller pursuant to the terms of this Agreement shall have been obtained or
Seller shall have supplied Buyer with the equivalent practical benefit of
such Consent, as determined in Buyer's reasonable discretion.
6.1.5 No Proceeding, Litigation, or Order. No claim, action, suit,
arbitration, investigation or other formal proceeding shall be pending or
threatened and no order of any governmental authority shall have been
issued on or before the Closing which (i) enjoins, restrains or prohibits,
or seeks to enjoin, restrain or prohibit, the transactions contemplated
herein, (ii) imposes or seeks to impose limitations on the ability of the
Buyer to conduct the Business in any material respect or exercise full
rights of ownership over any material Purchased Assets, (iii) requires or
seeks to require the divestiture by the Buyer or its Affiliates of any
material Purchased Assets; or (iv) could otherwise have a Material Adverse
Effect. Any and all applicable waiting periods mandated by any governmental
authority for the consummation of any transaction contemplated hereby shall
have expired.
6.1.6 No Material Adverse Change. There shall have been no material
adverse change in the condition (financial or otherwise), results of
operations or business properties of the Business after March 31, 1999.
6.1.7 Documents Delivered. The Buyer shall have received at the
Closing the following documents:
(a) corporate and tax certificates of good standing for the Seller
issued by the Secretary of State and Department of Revenue (or similar
applicable offices) of Seller's state of incorporation and in each
jurisdiction in which any Purchased Asset is located;
(b) a certificate of the secretary of the Seller, certifying and
attaching copies of the Charter Documents (including a copy of its articles
of incorporation, certified as of a recent date by the Secretary of State
of the Seller's jurisdiction of incorporation) and the resolutions of the
directors and/or Shareholders, as required, approving the execution and
delivery by the Seller of this Agreement and all related agreements and the
consummation of the transactions contemplated hereby, and certifying the
incumbency of the officers of the Seller executing all such agreements and
instruments;
(c) the Noncompetition Agreement;
(d) (i) the Deeds of Conveyance, conveying good and marketable title
to the Real Property and the Improvements to the Buyer, free and clear of
all liens, charges, encumbrances and other Liens and exceptions other than
Permitted Liens; and (ii) an affidavit indicating that, as of the Closing
Date, there are no outstanding unsatisfied judgments, tax liens or
47
bankruptcies against or involving the Business or the Purchased Assets, and
that there are no other unrecorded interests in the Real Property and the
Improvements of any kind; and
(e) the Xxxx of Sale, the Contract Assignment and all other documents
affecting title to and possession of the Purchased Assets and necessary to
transfer and assign the same to the Buyer free and clear of all Liens,
charges and encumbrances except Permitted Liens; and all such other
documents, opinions, certificates and items required to be delivered
pursuant to this Agreement or otherwise reasonably requested by the Buyer
to consummate the transactions contemplated hereby and effect the transfer
of the Purchased Assets as provided herein.
6.1.8 HSR Act Filings. All filings required by any Person under the
HSR Act with respect to the transactions contemplated hereby shall have
been made, all applicable waiting periods with respect thereto shall have
expired or been terminated, and no action shall have been taken or
threatened by the United States Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the transactions contemplated
under this Agreement.
6.1.9 Title Insurance on Real Property. Fully effective commitments
(marked-up and endorsed by the issuing title insurance company at Closing
to reflect conveyance to Buyer of the Real Property) to issue title
insurance policies, in amount and form, and from a title insurance company,
reasonably acceptable to Buyer, shall have been issued to Buyer agreeing to
insure fee simple title to the Real Property in Buyer, free and clear of
Liens other than the Permitted Liens, without any conditions, requirements
or exceptions.
6.1.10 Permits All Permits (including Environmental Permits) set forth
on Schedule 4.1.7 shall, as of the Closing Date (i) have been transferred
by Seller to Buyer, with all required Consents, if any, obtained, and be in
full force and effect, or Seller shall have supplied Buyer with the
equivalent practical benefit of such Permit as determined in Buyer's
reasonable discretion, or (ii) have been re-issued to Buyer and be in full
force and effect, in either case without material cost or adverse change.
6.1.11 Financing. Buyer shall have obtained financing on terms
(including maturity and amortization) substantially equivalent to the
financing proposal attached hereto as Schedule 5.21, such financing to be
for a principal amount at least equal to the amount described in such
proposal, at an interest rate (on a weighted average basis based on the
amounts set forth in the proposal) no greater than 0.25% above the rate
described in such proposal (on a weighted average basis based on the
amounts set forth in the proposal).
6.2 Conditions to Obligation of the Seller. The obligations of the Seller
under this Agreement to sell the Purchased Assets and to consummate the other
transactions contemplated by this Agreement is subject to the fulfillment, at or
prior to the Closing, of each of the following conditions, each of which may be
waived in whole or in part by the Seller in its sole discretion:
6.2.1 Representations; Performance. The representations and warranties
of the Buyer contained herein shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing
Date. The Buyer shall have duly performed and complied with all agreements,
covenants and conditions required by this Agreement to be
48
performed or complied with by it prior to or at the Closing. The Buyer
shall have executed and delivered to the Seller a certificate, dated the
Closing Date and signed by the Buyer's Chief Executive Officer or a Vice
President, to the effect set forth above in this Section 6.2.1.
6.2.2 Opinion of Counsel. The Seller shall have received an opinion of
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A., counsel to the Buyer, addressed to the
Seller and dated as of the Closing Date, in substantially the form attached
hereto as Exhibit F.
6.2.3 No Proceeding or Litigation. No claim, action, suit, proceeding,
injunction or order of any court or administrative agency of competent
jurisdiction shall be pending or in effect and no actions by any public or
governmental authority seeking any such injunction or order shall be
pending as of the Closing Date that restrains or prohibits the purchase and
sale of the Purchased Assets or any other action to be taken in connection
herewith.
6.2.4 Closing Payment and Documents Delivered. The Seller shall have
received at the Closing the Initial Purchase Price and the following
documents required to be delivered by the Buyer at the Closing as provided
herein:
(a) the Noncompetition Agreement; and
(b) a certificate of the secretary of the Buyer, certifying and
attaching copies of its Charter Documents (including the articles of
incorporation of the Buyer, certified as of a recent date by the Secretary
of State of its jurisdiction of incorporation), the resolutions of the
directors of the Buyer approving the execution and delivery by it of this
Agreement, and the incumbency of the officers of the Buyer executing all
such agreements and instruments.
6.2.5 HSR Act Filings. All filings required by any Person under the
HSR Act with respect to the transactions contemplated hereby shall have
been made, all applicable waiting periods with respect thereto shall have
expired or been terminated and no action shall have been taken or
threatened by the United States Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the transactions contemplated
under this Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by the Seller. (a) The Seller agrees to indemnify,
defend and hold harmless the Buyer and each of its shareholders, officers and
directors, Affiliates, agents and employees from and against and in respect of
any and all damages, losses, claims, liabilities, diminution of value, or
expenses suffered or incurred by any such party (whether as a result of third
party or other claims (whether valid or not), demands, suits, causes of action,
proceedings, investigations, judgments or liabilities or otherwise), including
reasonable costs of defense and reasonable attorneys' fees, assessed, incurred
or sustained by or against any of them (in each case net of any tax benefits
received, but only when such benefits are actually used by Buyer), with respect
to, by reason of or arising out of (i) any breach of the representations or
warranties of the Seller set forth herein or in any other agreement or
instrument executed by the Seller in
49
connection herewith (for purposes of this Article VII only, disregarding any
"material", "in all material respects", "taken as a whole" or having "a Material
Adverse Effect" qualification or limitation provided in any such representation
and warranty in determining the existence and extent of any such breach), (ii)
any breach or other failure to perform any covenant, agreement or obligation of
the Seller set forth herein or in any other agreement or instrument executed by
the Seller in connection herewith (for purposes of this Article VII only,
disregarding any "material", "in all material respects", "taken as a whole" or
having "a Material Adverse Effect" qualification or limitation provided in any
such covenant in determining the existence and extent of any such breach), (iii)
any Excluded Liability (including without limitation any Excluded Liability that
becomes, or is alleged to have become, a liability of the Buyer under any
applicable bulk sales law, under any doctrine of de facto merger or successor
liability, or otherwise by operation of law), (iv) any failure to obtain any
required Consent, (v) any disposal or transport of Hazardous Substances by
Seller or its Affiliates at or to property other than the Real Property, (vi)
any liability under any sales contract that is an Assumed Contract resulting
because Seller's obligations under such sales contract are past due as of the
Closing, or (vii) any violation of Environmental Law or presence or release of
Hazardous Substance at, arising out of or with respect to the Plants, the
Business or the Real Property known by or made known to Seller prior to Closing
(including but not limited to the violations of Environmental Law and presence
or release of Hazardous Substances set forth in the Environmental Reports or on
Schedule 4.1.11, each as updated by Seller or Buyer prior to Closing) (the
"Seller Known Environmental Conditions"), in all cases subject to each of the
terms, conditions and limitations set forth in this Article VII. In addition to
and without limiting the generality of the foregoing, Seller (A) agrees to
undertake, at its expense, all investigation, remediation and other response
required by applicable Environmental Laws to be conducted as a result of the
Seller Known Environmental Conditions, (B) shall indemnify and defend Buyer
against any claim or liability arising out of such investigation, remediation
and other response, and (C) shall indemnify and defend Buyer against any claim
of or liability to any third party with respect to the Seller Known
Environmental Conditions, all such environmental remediation to be controlled by
Seller and conducted in accordance with applicable law and in a manner that does
not interfere unreasonably with Buyer's operation of the Plants or the Business
following Closing; provided that Seller's obligation to conduct such remediation
or other response shall be limited to the work reasonably necessary to (1)
address requirements imposed by Environmental Laws and governmental authorities
and (2) continue operation of the Purchased Assets for the purposes operated as
of the date hereof. Imposition of institutional or engineering controls
acceptable to all governmental authorities with jurisdiction shall be deemed an
acceptable means of remediation for the purposes of this Agreement; provided,
further, that they do not result in any substantial loss, cost, expense, loss of
production or profits, loss of value, interference with operations (whether
existing or planned), or risk of claims or liability of, to or against Buyer or
the Purchased Assets (or any of them).
(b) The Seller agrees to indemnify, defend and hold harmless the Buyer and
each of its shareholders, officers and directors, Affiliates, agents and
employees from and against and in respect of fifty percent (50%) of any and all
damages, losses, claims, liabilities, diminution of value, or expenses suffered
or incurred by any such party (whether as a result of third party or other
claims (whether valid or not), demands, suits, causes of action, proceedings,
investigations, judgments or liabilities or otherwise), including reasonable
costs of defense and reasonable
50
attorneys' fees, assessed, incurred or sustained by or against any of them (in
each case net of any tax benefits received, but only when such benefits are
actually used by Buyer), with respect to, by reason of or arising out claims,
suits or causes of action of the employees set forth on Schedule 7.1(b) relating
to pulmonary function (as updated through Closing), but only to the extent such
claims, suits or causes of action were brought or asserted within the period
ending ten years after the Closing Date.
(c) The Seller agrees to indemnify, defend and hold harmless the Buyer and
each of its shareholders, officers and directors, Affiliates, agents and
employees from and against and in respect of any interruption whatsoever of the
Business as operated by Buyer after the Closing, including without limitation
any adverse effect on or interruption of any production, billing or shipping
function of the Business whatsoever (each an "Interruption") and any and all
damages, losses, claims, liabilities, diminution of value, or expenses suffered
or incurred by any such party (whether as a result of third party or other
claims (whether valid or not), demands, suits, causes of action, proceedings,
investigations, judgments or liabilities or otherwise), including reasonable
costs of defense and reasonable attorneys' fees, assessed, incurred or sustained
by or against any of them (in each case net of any tax benefits received, but
only when such benefits are actually used by Buyer) related to any Interruption,
by reason of or arising out of or related to any failure of any Purchased
Software, at no additional cost and without human intervention, to: (i) include
year 2000 date conversion capabilities, including date data century recognition,
calculations that accommodate same century/multi-century formulas and date
values, and correct sort ordering and date data interface values that reflect
the century; (ii) automatically compensate for and manage and manipulate data
involving dates, including single-century formulas and multi-century formulas,
and not cause an abnormal event or abort within the application or result in the
generation of incorrect values or invalid outputs involving such dates; (iii)
provide that all date related user interface functionalities and data fields
include the indication of the correct century; and (iv) provide that all date
related system to system or application to application data interface
functionalities will include the indication of the correct century; provided
that Seller shall not be required to indemnify any Person under this Section
7.1(c) unless and until the aggregate amount of indemnification liability under
this Section 7.1(c) shall have exceeded $150,000, in which such Person shall be
entitled only to the excess amount of such indemnification over $150,000.
7.2 Indemnification by the Buyer. The Buyer agrees to indemnify, defend and
hold harmless the Seller and each of its shareholders, officers and directors,
Affiliates, agents and employees from and against and in respect of any and all
damages, losses, claims, liabilities, diminution of value, or expenses suffered
or incurred by any such party (whether as a result of third party or other
claims (whether valid or not), demands, suits, causes of action, proceedings,
investigations, judgments or liabilities or otherwise), including reasonable
costs of defense and reasonable attorneys' fees, assessed, incurred or sustained
by or against any of them (in each case net of any tax benefits received, but
only when such benefits are actually used by Seller), with respect to, by reason
of or arising out of (a) any breach of the representations and warranties of
Buyer set forth herein (for purposes of this Article VII only, disregarding any
"material", "in all material respects", "taken as a whole" or having "a Material
Adverse Effect" qualification or limitation provided in any such representation
and warranty in determining the existence and extent of any such breach), (b)
any breach of or other failure to perform any covenant, agreement
51
or obligation of the Buyer set forth herein (for purposes of this Article VII
only, disregarding any "material", "in all material respects", "taken as a
whole" or having "a Material Adverse Effect" qualification or limitation
provided in any such covenant in determining the existence and extent of any
such breach), or in any other agreement or instrument executed by Buyer in
connection herewith, (c) any conditions arising solely and directly out of
Buyer's operation of the Business after Closing to the extent such conditions
create or materially exacerbate liability of Seller, excluding any conditions
arising through operation of the Purchased Assets in a manner substantially
similar to the manner of operation of the Purchased Assets prior to the date
hereof and excluding any conditions exacerbating a condition existing as of the
Closing Date that is not known to Buyer, in all cases subject to each of the
terms, conditions and limitations set forth in this Article VII. In addition,
Buyer agrees to indemnify, defend and hold harmless the Seller and each of its
officers and directors, Affiliates and agents from and against any and all
damage, loss, claim, liability, dimunition in value or expense suffered or
incurred by such party, including reasonable attorneys fees, (net of any tax
benefits received, but only to the extent actually used by Buyer) resulting
directly from Buyer's failure to pay to each salaried employee of Seller whom
Buyer is obligated to hire pursuant to Section 5.7 and whose employment is
terminated by Buyer within the two (2) year period following the Closing Date
for reasons other than death, disability and cause (in the case of "disability"
and "cause," as determined pursuant to Buyer's employment policies existing on
the date hereof) the amounts determined pursuant to Schedule 7.2.
7.3 Limitations.
(a) Notwithstanding anything contained herein to the contrary, no
Person shall be entitled to indemnification under the provisions of this
Article VII: (i) unless and until the aggregate amount of all
indemnification liability under Section 7.1 or Section 7.2 (as applicable)
shall have exceeded $150,000 in which event the indemnified person shall be
entitled only to the excess amount of such indemnification over such
$150,000 limit; and (ii) to the extent that the aggregate amount of all
indemnification liability under Section 7.1 or Section 7.2 (as applicable)
exceeds $10,000,000; provided that in determining whether such $10,000,000
amount set forth in Section 7.3(a)(ii) has been reached, any amounts not
payable by reason of Section 7.3(a)(i) shall not be counted and any amounts
payable pursuant to Xxxxxxx 0.00, Xxxxxxx 0.0(x)(xx), (xxx), (xx), (x),
(xx) and (vii), Section 7.1(b) and the last two sentences of Section 7.1(a)
shall not be counted; provided, further, the limitations contained in
subsections 7.3(a)(i) and (ii) shall not apply to (A) any breach of the
representations made in Section 4.1.1, 4.1.2, 4.1.4(d), 4.1.17(c), 4.1.18,
4.1.21, 4.2.1, 4.2.2, 4.2.5, the first sentence of Section 4.1.3(a), the
second sentence of Section 4.1.4(f), the first sentence of Section
4.1.4(h), and the second sentence of Section 4.1.13(a); (B) Section
7.1(a)(ii), (iii), (iv), (v), (vi) and (vii), Section 7.1(b) and Section
7.2(b); or (C) any breach of any covenant of the Buyer or Seller contained
in this Agreement, including, without limitation, the indemnification and
other obligations set forth in Section 8.4, the last sentence of Section
2.3, and the last two sentences of Section 7.1(a); and provided, finally,
that the limitations set forth in subsection 7.3(a)(i) shall not apply to
Section 7.1(c).
(b) The representations and warranties of the parties as set forth in
Article IV of this Agreement shall survive the Closing until the date
eighteen months after the Closing Date; provided that the representations
and warranties of the Seller set forth in Section 4.1.1, 4.1.2,
52
4.1.4(d), 4.1.17(c), 4.1.21, the first sentence of Section 4.1.3(a), the
second sentence of Section 4.1.4(f), the first sentence of Section
4.1.4(h), and the second sentence of Section 4.1.13(a) and of the Buyer set
forth in Sections 4.2.1 or 4.2.2 shall survive the Closing without
limitation. The covenants of the parties contained in this Agreement shall
survive Closing without limitation.
7.4 Procedure for Indemnification.
7.4.1 .Third Party Claims.
(a) If any Person shall claim indemnification hereunder arising from
any claim or demand of a third party, the party seeking indemnification
(the "Indemnified Party") shall promptly notify the party from whom
indemnification is sought (the "Indemnifying Party") in writing of the
basis for such claim or demand setting forth the nature of the claim or
demand in reasonable detail. The failure of the Indemnified Party to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of
any indemnification obligation hereunder except to the extent the
Indemnifying Party demonstrates that the defense of such claim or demand is
materially prejudiced by the failure to give such notice.
(b) If any legal proceeding or action is brought by a third party
against an Indemnified Party and the Indemnified Party gives notice to the
Indemnifying Party pursuant to Section 7.4.1(a), the Indemnifying Party
will be entitled to participate in such proceeding and, to the extent that
it wishes, to assume the defense of such proceeding if (i) the Indemnifying
Party provides written notice to the Indemnified Party that the
Indemnifying Party intends to undertake such defense and the Indemnifying
Party will indemnify the Indemnified Party against all claims for
indemnification resulting from or relating to such third party claim as
provided in this Article VII, (ii) the Indemnifying Party provides to the
Indemnified Party evidence acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
third party claim and to fulfill its indemnification obligations hereunder,
(iii) the Indemnifying Party conducts the defense of the third party claim
actively and diligently with counsel reasonably satisfactory to the
Indemnified Party, and (iv) if the Indemnifying Party is a party to the
proceeding, the Indemnifying Party has not determined in good faith that
joint representation would be inappropriate. The Indemnified Party shall,
in its sole discretion, have the right to employ separate counsel (who may
be selected by the Indemnified Party in its sole discretion) in any such
action and to participate in the defense thereof, and the fees and expenses
of such counsel shall be paid by such Indemnified Party. The Indemnified
Party shall fully cooperate with the Indemnifying Party and its counsel in
the defense or compromise of such claim or demand, provided that all
reasonable out-of-pocket expenses incurred by Indemnified Party shall be
paid by Indemnifying Party (except as aforesaid). If the Indemnifying Party
assumes the defense of a proceeding, (1) no compromise or settlement of
such claims may be effected by the Indemnifying Party without the
Indemnified Party's consent unless (A) there is no finding or admission of
any violation of law or any violation of the rights of any Person and no
effect on any other claims that may be made against the Indemnified Party,
and (B) the sole relief provided is monetary damages that are paid in full
by the Indemnifying Party; and (2) the Indemnified Party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent.
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(c) If (i) notice is given to the Indemnifying Party of the
commencement of any proceeding and the Indemnifying Party does not, within
ten (10) days after the Indemnified Party's notice is given, give notice to
the Indemnified Party of its election to assume the defense of such
proceeding, (ii) any of the conditions set forth in clauses (i)-(iv) of
Section 7.4.1(b) above become unsatisfied, or (iii) an Indemnified Party
determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it other than as a result of monetary
damages for which it would be entitled to indemnification from the
Indemnifying Party under this Agreement, the Indemnified Party will (upon
further notice to the Indemnifying Party) have the right to undertake the
defense, compromise or settlement of such claim; provided that the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the third party claim
(including reasonable attorneys' fees and expenses) and the Indemnifying
Party will remain responsible for any indemnifiable amounts arising from or
related to such third party claim to the fullest extent provided in this
Article VII. The Indemnifying Party may elect to participate in such
proceedings, negotiations or defense at any time at its own expense.
7.4.2 Direct Claims. If either party shall claim indemnification
hereunder for any claim other than third party claims, the Indemnified
Party shall promptly notify the Indemnifying Party in writing of the basis
for such claim setting forth the nature and amount of the damages resulting
from such claim. The Indemnifying Party shall give written notice of any
disagreement with such claim within twenty (20) days following receipt of
Indemnified Party's notice of the claim, specifying in reasonable detail
the nature and extent of such disagreement. If the Indemnifying Party and
Indemnified Party are unable to resolve any disagreement within thirty (30)
days following receipt by the Indemnified Party of the notice referred to
in the preceding sentence, the disagreement shall be submitted for
resolution at a neutral location agreed upon by the parties (which neutral
location shall be Atlanta, Georgia if the parties are unable to agree) to
an independent individual person (the "Arbitrator") mutually agreed by the
Indemnifying Party and Indemnified Party. If the Indemnifying Party and
Indemnified Party cannot agree on a single Arbitrator, then the
disagreement shall be submitted to a panel of three independent individual
persons (the "Arbitrators"), one selected by the Indemnifying Party, one by
the Indemnified Party and one by the two Arbitrators so selected and shall
be conducted in accordance with the Rules of the American Arbitration
Association. The parties shall request that the Arbitrator's (or
Arbitrators') determination shall be made within thirty (30) days of the
submission of the dispute, shall be in accordance with this Agreement,
shall be set forth in a written statement delivered to Indemnifying Party
and the Indemnified Party and shall be final, binding and conclusive.
Judgment upon the decision rendered by the Arbitrator(s) may be entered in
any court having jurisdiction thereof and may include the award of
attorneys' fees and other costs to the extent provided by this Article. The
Person who is prevailed against in the resolution of such disagreement
shall pay the fees and expenses of the Arbitrator(s); and if one Person
does not prevail on all issues, the fees and expenses shall be apportioned
in such manner as the Arbitrator(s) shall determine. Any amount owing by
any Person as a result of this Section 7.4.2 shall be paid within three (3)
Business Days after final determination of such amount.
7.4.3 Interest. Interest shall accrue on the unpaid amount of all
indemnification obligations hereunder at the per annum prime rate of
interest announced from time to time by
54
Bank of America, N.A. (or, if such bank discontinues its practice of
announcing its prime rate, such other institution approved by the Seller
and the Buyer) as its prime rate of interest, as in effect from time to
time, such interest to be calculated based on the actual number of days
elapsed from the date each indemnification obligation becomes due and owing
until paid in full and based on a 365-day year.
7.4.4 Remedies. The Buyer and Seller understand and agree that Buyer's
right to indemnification and other rights under Section 7.1 shall
constitute Buyer's sole and exclusive remedy against the Seller with
respect to any claim by Buyer against Seller arising under any
Environmental Law except to the extent such claim results from a claim of a
third-party against Buyer. This Section 7.4.4 shall not apply with respect
to any claims of third parties (including governmental authorities) against
Buyer, and notwithstanding anything to the contrary herein, Buyer retains,
in addition to its rights under Section 7.1, all remedies against Seller
under all Environmental Laws in the event of such a claim (including
without limitation all remedies under CERCLA and the applicable Tennessee
or North Carolina Environmental Laws, for site conditions or off-site
conditions resulting from any environmental matter, including, without
limitation, any rights whether arising at law or in equity, to seek
contribution, cost recovery, damages or any other recourse or remedy).
ARTICLE VIII
MISCELLANEOUS
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) (1) by mutual written consent of the Buyer and the Seller, (2) by
Seller, in its sole discretion, from and after May 18, 1999 and up until
the date Buyer has provided to Seller reasonable written evidence that
Buyer is able to obtain the financing described in Section 6.1.11; or
(b) by the Buyer by written notice to the Seller if (i) any of the
material Purchased Assets are not fully assignable or transferable (and
Seller has not provided to Buyer the equivalent practical benefit of the
property or right that Buyer would receive or hold if such Purchased Asset
were transferred or assigned in full, such equivalency determined in
Buyer's reasonable discretion) on the Closing Date as set forth in Section
2.2, or (ii) any of the conditions set forth in Section 6.1 shall not have
been fulfilled on or prior to June 15, 1999 or shall have become incapable
of fulfillment and shall not have been waived by the Buyer;
(c) by the Seller by written notice to the Buyer if (i) Seller
reasonably estimates that the total cost of the sum of (A) Seller's
obligations pursuant to the last two sentences of Section 7.1(a) plus (B)
the amount of Seller's indemnity obligations pursuant to Section 7.1(a) for
any Updating Information matter will exceed $5,000,000, or (ii) any of the
conditions set forth in Section 6.2 hereof shall not have been fulfilled on
or prior to June 15, 1999 or shall have become incapable of fulfillment and
shall not have been waived by the Seller.
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Subject to the provisions set forth in Section 8.2 and Section 8.3, if this
Agreement is terminated in accordance with this Section 8.1 (including Section
8.1(a)), all further obligations of the parties hereunder shall terminate;
provided that the obligations contained in Sections 5.5(b), 8.5 and 8.6 shall
survive such termination; and provided, further, that if Seller terminates this
Agreement pursuant to Section 8.1(c)(i)(A), then, immediately upon such
termination, Seller shall pay to Buyer an amount equal to the sum of (x) all HSR
Act filing fees paid by Buyer relating to the transaction contemplated hereby
plus (y) of all amounts paid or payable by Buyer to ERM as a result of ERM's
environmental investigation of the Business plus (z) all amounts paid or payable
to Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A., Deloitte & Touche, LLP and NationsBanc
Xxxxxxxxxx Securities LLC, and Congress Financial Corporation for loan fees and
charges and services (including any expense charges) rendered to Buyer in
connection with the transactions contemplated hereby.
8.2 Default by the Buyer. In the event that (a) this Agreement is
terminated by the Seller pursuant to Section 8.1(c)(ii) by reason of the failure
of the Buyer to satisfy one or more of the conditions set forth in Section 6.2
and (b) all of the conditions set forth in Section 6.1 have been satisfied or
offered to be immediately satisfied by the Seller, then the Buyer shall be
liable to the Seller for all loss, damage or expense incurred by the Seller as a
result of the Buyer's default, and the Seller shall be entitled to seek any
remedy to which it may be entitled at law or in equity in the event of a
material violation or breach of any agreement, representation or warranty
contained in this Agreement (which remedies shall include, without limitation,
an injunction or injunctions to prevent breaches of, or to obtain specific
performance of any obligation hereunder, without limiting any monetary damages
to which the Seller shall be entitled).
8.3 Default by Seller. In the event that (a) this Agreement is terminated
by the Buyer pursuant to Section 8.1(b) by reason of the failure of the Seller
to satisfy one or more of the conditions set forth in Section 6.1 and (b) all of
the conditions set forth in Section 6.2 have been satisfied or offered to be
immediately satisfied by the Buyer, then the Seller shall be liable to the Buyer
for all loss, damage or expense incurred by the Buyer as a result of the
Seller's default, and the Buyer shall be entitled to seek any remedy to which it
may be entitled at law or in equity in the event of a material violation or
breach of any agreement, representation or warranty contained in this Agreement
(which remedies shall include, without limitation, an injunction or injunctions
to prevent breaches of, or to obtain specific performance of any obligation
hereunder, without limiting any monetary damages to which the Buyer shall be
entitled).
8.4 Bulk Sales Law. The Buyer hereby waives compliance by the Seller with
the provisions of any applicable bulk sales (sale of an enterprise) legislation,
or other law for the protection of creditors. The Seller agrees to jointly and
severally indemnify, defend and hold harmless the Buyer in accordance with
Article VII hereof from any liability, claim, loss or expense (including
reasonable attorneys' fees) arising from any noncompliance with such laws.
8.5 Expenses. Except as otherwise provided herein, each party shall assume
and bear all expenses, costs and fees incurred or assumed by it in the
preparation and execution of this Agreement and compliance herewith, whether or
not the transactions contemplated hereby are consummated.
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8.6 Public Announcements. Except as may otherwise be required by law, no
party to this Agreement shall, directly or indirectly, make or cause to be made
any public announcement or issue any notice in any form with respect to this
Agreement or the transactions contemplated herein prior to or on the Closing
Date without the prior written consent of the other party hereto.
8.7 Assignment; Successors. This Agreement shall not be assigned by any
party without the prior written consent of the other party, which consent shall
not be unreasonably withheld; provided, however, that (i) the Buyer may assign
this Agreement and its rights hereunder to any director or indirect subsidiary
of Buyer so long as Buyer guarantees performance in full by such subsidiary of
any and all obligations it may have under this Agreement or any agreement
executed in connection herewith and (ii) the Seller and the Buyer may assign
this Agreement and its rights hereunder to any Affiliate in the context of a
reorganization. This Agreement is intended for the exclusive benefit of the
parties hereto and their respective heirs, successors and permitted assigns, and
shall not create any rights in or be enforceable by any other Person whomsoever,
other than any Person entitled to indemnification from the Seller on the one
hand or the Buyer on the other hand pursuant to Article VII hereof, it being the
intention of the parties that no one shall be deemed to be a third party
beneficiary of this Agreement. This Agreement shall inure to the benefit of, and
be binding on and enforceable against, the successors and permitted assigns of
the respective parties. Without limiting the generality of the foregoing,
nothing in this Agreement, express or implied, shall confer upon any employees
of either Seller or any other third party any rights or remedies of any nature
or kind, including without limitation any right to employment or employee
benefits, or to continued employment or benefits for any specified period.
8.8 Amendment and Modification; Waivers. This Agreement or any term hereof
may be changed, waived, discharged or terminated only by an agreement in writing
signed by both parties. No waiver by a party of any condition or of any breach
of any term, covenant, representation or warranty contained herein shall be
effective unless in writing, and no waiver in any one or more instances shall be
deemed to be a further or continuing waiver of any such condition or breach in
any other instances or a waiver of any other condition or breach of any other
term, covenant, representation or warranty.
8.9 Notices. All notices, Consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard thereof
shall be validly given, made or served, if in writing and delivered personally
or sent by telecopier, telex, nationally recognized overnight courier or
registered or certified mail, postage prepaid, to the following address:
If to the Seller, to: The Xxxxx Group, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
ATTENTION: Treasurer
Facsimile: (000) 000-0000
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with a copy to: Xxxx, Xxxxxxx & Xxxxxxxx, P.C.
0000 Xxx Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
ATTENTION: Xxxxxx Xxxxxxxx, Xx.
Facsimile: (000) 000-0000
If to the Buyer, to: X. X. Xxxxx Xxxxx
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
ATTENTION: X. Xxxxxxx Xxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
ATTENTION: Xxxxxx X. XxXxxx
Facsimile: (000) 000-0000
or, in each case, at such other address as may be specified in writing, but no
such change shall be deemed to have been given until it is actually received by
the parties sought to be charged with its contents. All notices and other
communications given hereunder shall be effective (a) upon delivery, if
delivered personally or sent by telecopier or telex, (b) if delivered by
overnight courier, one Business Day after delivery to such courier, and (c) if
delivered by mail, three (3) Business Days after deposit in the United States
mail.
8.10 Further Assurances; Records.
(a) Each of the Seller and the Buyer shall cooperate and take such
actions, and execute all such further instruments and documents, at or
subsequent to the Closing, as either may reasonably request in order to
convey title to the Purchased Assets to the Buyer and otherwise to effect
the terms and purposes of this Agreement. Each party shall provide the
other party or parties with access to all relevant documents and other
information pertaining to the Purchased Assets which are needed by such
other party or parties for the purposes of preparing tax returns or
responding to an audit by any governmental agency or for any other
reasonable purpose. Such access will be during normal business hours and
not subject to time limitations, except as provided below.
(b) Without limitation of the foregoing, the Seller and the Buyer
agree to cooperate with each other after the Closing in connection with any
official tax inquiry, tax audit, tax determination or tax related
proceeding affecting tax liability of the Seller or the Buyer and to make
available to each other party within a reasonable amount of time, its
employees and officers, together with documents, correspondence, reports,
books and records and other materials bearing on such tax inquiry, audit,
examination, proceeding or determination of tax liability or treatment,
provided that each party shall be reimbursed for any out-of-pocket expenses
it incurs in assisting another party hereunder.
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8.11 Mail. The Seller hereby authorizes the Buyer and its representatives
and Affiliates after the Closing Date to receive and open any mail or other
communications received by them apparently relating to the Business even if
addressed to the Seller, and to act with respect to such communications in such
manner as the Buyer may elect if such communications relate to the Business or
any of the Purchased Assets, or, if such communications do not so relate, to
forward the same to the Seller on a weekly basis. The Seller shall promptly
deliver to the Buyer the original of any mail or other communication received by
it after the Closing Date relating to the Business or the Purchased Assets.
8.12 Governing Law; Submission to Jurisdiction; Appointment of Agent for
Service of Process. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina, without regard to
principles of conflict of laws. The parties hereto hereby declare that it is
their intention that this Agreement shall be regarded as made under the laws of
the State of North Carolina and that the laws of said State shall be applied in
interpreting its provisions in all cases where legal interpretation shall be
required. Each of the parties hereto hereby irrevocably and unconditionally
agrees (a) to be subject to, and hereby irrevocably and unconditionally submits,
to the exclusive jurisdiction of the courts of the State of North Carolina and
of the federal courts sitting in the State of North Carolina for the purposes of
any action, suit or proceeding (including appeals to their respective appellate
courts) arising out of this Agreement or the transactions contemplated hereby
(and agrees not to commence any action or proceeding except in such courts), and
(b)(1) to the extent such party is not otherwise subject to service of process
in the State of North Carolina, to appoint and maintain an agent in the State of
North Carolina as such party's agent for acceptance of legal process, and (2) to
the fullest extent permitted by law, that service of process may also be made on
such party by prepaid certified mail with a proof of mailing receipt validated
by the United States Postal Service constituting evidence of valid service, and
that service made pursuant to (b)(1) or (2) above shall have the same legal
force and effect as if served upon such party personally within the State of
North Carolina. Each party irrevocably and unconditionally waives any objections
to the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (i) the courts of the State
of North Carolina or (ii) any United States District Court in the State of North
Carolina (including appeals to their respective appellate courts), and hereby
further irrevocably and unconditionally to the fullest extent permitted by law
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum. Each party irrevocably and unconditionally waives trial by jury in any
legal action or proceeding in connection with this Agreement or the transactions
contemplated hereby and for any counterclaim with respect thereto. Nothing
contained in this Section 8.12 shall affect the right of any party hereto to
serve legal process in any other matter permitted by law or affect the right of
any party hereto to bring any action or proceeding against any other party
hereto or any party's property in the courts in any other jurisdiction.
8.13 Remedies. Except as set forth in Section 7.4.4, Article VII and
Section 8.1, 8.2 and 8.3 are the exclusive remedy of either party for a breach
of this Agreement, absent fraud.
8.14 Update to Schedules. Seller hereby agrees that it has the continuing
obligation to supplement, modify or amend, during the period of time between the
date of this Agreement and the Closing Date, the information required to be set
forth on the respective Schedules to its
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representations and warranties contained in Section 4.1 with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to have been set forth on such
Schedules (such information being called the "Updating Information"), all
subject to the provisions of this Section 8.14. As a condition to so supplement,
modify or amend any Schedule with Updating Information, the Seller shall
promptly upon becoming aware thereof disclose in writing to Buyer such Updating
Information and the Schedule to which the Updating Information applies and (a)
any Updating Information that does not signify or disclose a Material Adverse
Effect shall be deemed to amend and supplement the Schedule identified in
Seller's notice of the Updating Information, and (b) if the Updating Information
signifies or discloses a Material Adverse Effect, the Updating Information shall
be deemed to amend and supplement the Schedule disclosed in Seller's notice only
if Buyer consents in writing to such amendment and supplementation (which
consent may be withheld in Buyer's sole discretion) and if Buyer does not
consent to such amendment and supplementation, such Schedule shall not be deemed
to be supplemented and amended; provided that if a Schedule is updated pursuant
to either subsection (a) or (b) of this sentence, such Schedule shall be deemed
to have been supplemented and amended only for purposes of Section 6.1 (Buyer's
Condition to Close) and specifically shall not be deemed to have been updated
for purposes of Article VII (indemnity) (in other words, the Updating
Information shall not be considered a part of the Schedule for purposes of
Article VII and Seller shall be obligated to indemnify Buyer in accordance with
Article VII to the extent the Updating Information causes a breach of Seller's
representations and warranties contained in Section 4.1 without such Updating
Information being scheduled).
8.15 Entire Agreement; Counterparts. This Agreement, together with the
Exhibits and Schedules, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, including without limitation the
letter of intent dated February 2, 1999, between the Buyer and the Seller, as
amended (the "Letter of Intent"). This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which,
together, shall constitute one and the same instrument.
8.16 Enforceability of Provisions. If any provision of this Agreement or
the application thereof to any person or circumstance shall be invalid or
unenforceable, then the remaining provisions of this Agreement or the
application of such provisions to persons or circumstances other than those as
to whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision hereof shall be valid and enforceable to the
fullest extent permitted by law.
(signatures on following page)
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
BUYER:
X.X. XXXXX XXXXX, INC.
By: /s/ X. Xxxxxxx Xxxxx
-------------------------
Name: X. Xxxxxxx Xxxxx
Title: President - CEO
SELLER:
THE XXXXX GROUP, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------
Name: Xxxx X. Xxxxxx
Title: Treasurer
The Xxxxx Group, Inc. hereby undertakes to provide supplementally, upon request
of the Staff of the Securities and Exchange Commission, copies of any Exhibits
or Schedules to this Agreement which have been omitted from this filing.
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