Exhibit 10.9
ASSET PURCHASE AGREEMENT
BETWEEN
CAF EXTRUSION, INC.
("BUYER")
XXXXXXX & XXXXXX FLOORCOVERINGS, INC.
("C&A")
AND
CANDLEWICK YARNS, INC.
("SELLER")
BRETLIN, INC.
("BRETLIN")
THE XXXXX GROUP, INC.
("PARENT")
DATED AS OF
MAY 1, 2002
TABLE OF CONTENTS
Page
ARTICLE I SALE AND PURCHASE OF ASSETS............................................................................1
1.1 Transfer of Assets....................................................................................1
1.2 Purchased Assets......................................................................................1
1.3 Excluded Assets.......................................................................................3
1.4 Liabilities...........................................................................................4
ARTICLE II CONSIDERATION.........................................................................................5
2.1 Purchase Price........................................................................................5
2.2 Allocation............................................................................................6
2.3 Prorations............................................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER, BRETLIN AND PARENT.........................................6
3.1 Organization and Good Standing........................................................................6
3.2 Authority.............................................................................................6
3.3 Effect of Agreement...................................................................................7
3.4 Financials; Books; No Undisclosed Liabilities.........................................................7
3.5 Title to and Sufficiency of Assets....................................................................8
3.6 Real Estate...........................................................................................8
3.7 Tangible Property.....................................................................................9
3.8 Contracts and Leases..................................................................................9
3.9 Intellectual Property................................................................................10
3.10 Labor Matters........................................................................................10
3.11 Employees; Benefits..................................................................................10
3.12 Absence of Changes...................................................................................11
3.13 Related Party Transactions...........................................................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND C&A......................................................12
4.1 Organization and Good Standing.......................................................................12
4.2 Authority............................................................................................12
4.3 Effect of Agreement..................................................................................12
ARTICLE V COVENANTS.............................................................................................12
5.1 Termination of Seller's Employees; Settlement of Obligations of Seller...............................12
5.2 Collection of Receivables............................................................................13
5.3 Employee Benefit Matters.............................................................................13
ARTICLE VI CLOSING..............................................................................................13
6.1 Closing..............................................................................................13
6.2 Deliveries by Seller.................................................................................14
6.3 Deliveries by Buyer..................................................................................14
6.4 Other Deliveries.....................................................................................15
6.5 Further Assurances...................................................................................15
6.6 Real Property Acquisition............................................................................15
6.7 Closing Conditions...................................................................................15
ARTICLE VII INDEMNIFICATION.....................................................................................15
7.1 Indemnification by Seller, Bretlin and Parent........................................................15
7.2 Indemnification by Buyer.............................................................................16
7.3 Notice of Claim......................................................................................17
7.4 Defense..............................................................................................17
7.5 Other Remedies.......................................................................................17
7.6 Limitation...........................................................................................17
ARTICLE VIII MISCELLANEOUS......................................................................................18
8.1 Survival of Representations..........................................................................18
8.2 Bulk Sales...........................................................................................18
8.3 Risk of Loss.........................................................................................18
8.4 Brokers..............................................................................................18
8.5 Tax Filings..........................................................................................18
8.6 Expenses.............................................................................................18
8.7 Publicity............................................................................................18
8.8 Notices..............................................................................................19
8.9 Governing Law........................................................................................20
8.10 Counterparts.........................................................................................20
8.11 Assignment...........................................................................................21
8.12 Third Party Beneficiaries............................................................................21
8.13 Headings.............................................................................................21
8.14 Amendments...........................................................................................21
8.15 Specific Performance.................................................................................21
8.16 Jurisdiction.........................................................................................21
8.17 Severability.........................................................................................21
8.18 Entire Agreement.....................................................................................21
8.19 Certain Definitions..................................................................................22
8.20 Schedules............................................................................................22
SCHEDULES
---------
Schedule 1.1 Permitted Liens
Schedule 1.2(a) Real Property
Schedule 1.2(b) Tangible Personal Property/List of Warranties
Schedule 1.2(c) Inventory
Schedule 1.2(d) Assumed Contracts
Schedule 1.2(e) Intellectual Property
Schedule 1.2(f) Permits
Schedule 1.2(h) Claims
Schedule 1.3(h) Unrelated Assets
Schedule 1.3(l) Excluded Claims and Deposits
Schedule 1.3(m) Excluded Assets
Schedule 2.1(c) Inventory Valuation Determination
ii
Schedule 2.2 Purchase Price Allocation
Schedule 3.1 Foreign Qualifications
Schedule 3.3 Required Consents
Schedule 3.4.1 Cost Data
Schedule 3.4.2 Liabilities of the Business
Schedule 3.4.3 Permits used in the Business
Schedule 3.5.1 Required Assets
Schedule 3.5.2 Third Party Rights
Schedule 3.7 Condition of Property
Schedule 3.8 Contracts
Schedule 3.11 Employees; Benefits
Schedule 3.12 Absence of Changes
Schedule 8.19 Knowledge of Sellers
EXHIBITS
--------
Exhibit A Xxxx of Sale
Exhibit B Non-Solicitation Agreement
Exhibit C Opinion of Seller's Counsel
Exhibit D Supply Agreement
Exhibit E Opinion of Buyer's Counsel
Exhibit F Transitional Services Agreement
iii
ASSET PURCHASE AGREEMENT
THIS
ASSET PURCHASE AGREEMENT (together with all Schedules and Exhibits
hereto, this "AGREEMENT"), agreed and entered into on May 1st, 2002, to be
effective in all respects as of the Effective Time, as defined herein, is
entered into by and between Candlewick Yarns, Inc., a Tennessee corporation
("SELLER"), Bretlin, Inc., a
Georgia corporation and the parent company of the
Seller, ("BRETLIN"), The Xxxxx Group, Inc., a Tennessee corporation and the
parent company of Bretlin, (the "PARENT"), CAF Extrusion, Inc., a Delaware
corporation, ("BUYER"), and Xxxxxxx & Xxxxxx Floorcoverings, Inc., a Delaware
corporation and the parent company of Buyer ("C&A").
R E C I T A L S :
1. Seller is the owner and operator of a fiber extrusion plant,
including equipment, fixtures and facilities necessary or appropriate for the
extrusion of yarn filament for the carpet and rug industry, located at 000 Xxx
Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx (the "BUSINESS").
2. Seller desires to sell, and Buyer desires to buy, substantially all
of the properties and assets of Seller owned and used in the operation of the
Business or located on the Real Property, on the terms and conditions set forth
in this Agreement.
THEREFORE, for and in consideration of the above Recitals, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 TRANSFER OF ASSETS. Seller (and Bretlin and Parent to the extent of
their interests) agrees to sell, assign, transfer and deliver to Buyer, and
Buyer agrees to purchase and accept from Seller, (and Bretlin and Parent to the
extent of their interests), at the Closing (as defined below) good and
marketable title, free and clear of all liens and encumbrances whatsoever, other
than (i) liens for current Taxes not yet due and payable and (ii) with respect
to personal property only, liens evidenced by the filing, for notice purposes
only, of financing statements in respect of true leases disclosed on Schedule
1.1 (collectively, "PERMITTED LIENS"), to all of the assets and properties of
every kind and description owned and used by Seller (and Bretlin and Parent to
the extent of their interests) in connection with the operations of the Business
or located on the Real Property, but excluding assets covered by Assumed
Contracts and the Excluded Assets described in Section 1.3, on the terms and
conditions set forth in this Agreement. The assets being sold hereunder are
collectively referred to as the "PURCHASED ASSETS," and the assets described in
Section 1.3 are collectively referred to as the "EXCLUDED ASSETS."
1.2 PURCHASED ASSETS. The Purchased Assets specifically include, but
are not limited to, the following:
(a) REAL ESTATE. Seller's tenant improvements in the real property,
buildings and improvements located at 000 Xxx Xxxxxx Xxxx, Xxxxxxx,
Xxxxxxx, the metes and
bounds of such real property being more particularly described on
Schedule 1.2(a) (the "REAL PROPERTY").
(b) TANGIBLE PERSONAL PROPERTY. All machinery, equipment,
furniture, office equipment, supplies, materials, vehicles and other
items of tangible personal property of every kind owned by Seller (and
Bretlin and Parent to the extent of their interests) and used in
connection with the Business or located on the Real Property,
including, without limitation, those listed on Schedule 1.2(b) (the
"TANGIBLE PERSONAL Property"), and any additions or replacements made
between the date of this Agreement and the Closing Date, together with
any assignable express or implied warranty by the manufacturers of
sellers of any item thereof, to the extent such warranty is
transferable as set forth on Schedule 1.2(b).
(c) INVENTORIES. All inventories of the Business as of the
Effective Time (defined below), including, without limitation, finished
goods under open purchase orders assumed by Buyer pursuant to Section
1.2(d) below (but not including any other finished goods), work in
process, raw materials, packaging materials and spare parts (the
"INVENTORY"), (including supplies relating to such Inventory, and any
deposits, prepayments, rebates or refunds attributable to Inventory
purchased by Buyer) the location and an approximation of the value of
which is described on Schedule 1.2(c).
(d) ASSUMED CONTRACTS. All of Seller's interest arising or accruing
after the Effective Time under all contracts, leases of personal
property, other leases and other agreements, including unfilled
purchase orders (together with any deposits or prepayments pertaining
to such unfilled purchase orders) as of the Closing Date as provided in
Section 1.4, to which the Seller is a party and which pertain primarily
to the Business and were entered into in the ordinary course of
business consistent with past practices, but only to the extent such
contracts are either (i) set forth on Schedule 1.2(d) hereto, or (ii)
individually involve a financial obligation of less than Five Thousand
Dollars ($5,000) over the term of such contract, and which were entered
into in the ordinary course of business and do not contain or create
any restriction or limitation on the ability of the Seller (or any
purchaser of the Business) to utilize the Purchased Assets or to
realize the benefit to be derived therefrom or to conduct the
operations of the Business worldwide (collectively, the "ASSUMED
CONTRACTS").
(e) INTELLECTUAL PROPERTY. All of the intellectual property of
Seller used primarily in connection with the operations of the
Business, including, without limitation, the following: (a) all
trademarks, service marks, trade names, logos (the "MARKS") and all
registrations relating thereto; (b) all copyrighted works and
registrations therefor; (c) all patents and applications therefor; and
(d) all confidential or proprietary processes, formulas, trade secrets
and technical and other similar information, all of which are described
on Schedule 1.2(e) (the "INTELLECTUAL PROPERTY"), together with the
goodwill related thereto and any royalty income therefrom accruing
after the Effective Time.
(f) PERMITS. All assignable Permits, including, without limitation,
those listed on Schedule 1.2(f). For purposes of this Agreement, the
term "PERMITS" means all
2
permits, authorizations, certificates, approvals and licenses relating
to the operation of the Business.
(g) INTANGIBLE PROPERTY. All records, technical data, asset
ledgers, books of account, inventory records, budgets, customer and
supplier records, payroll and personnel records, computer programs,
correspondence and other files of Seller, regardless of the medium on
which stored, created or maintained in connection with the Business
that can be separated from the records of Seller's, Bretlin's or
Parent's other business activities with reasonable efforts, and all
rights to do business with the customers of the Business, subject to
the Non-Solicitation Agreement, and subject to any applicable
obligations of confidentiality imposed by applicable law.
(h) CLAIMS. All of Seller's rights to any causes of action or
claims arising in connection with the Purchased Assets or the Assumed
Contracts, except for causes of action or claims arising prior to the
Closing and listed on Schedule 1.2(h).
(i) GOODWILL. Any and all of Seller's goodwill in and going concern
value of the Business.
(j) OTHER ASSETS. All other assets of any kind or description,
tangible or intangible, which are owned by Seller and used primarily in
or relating to the operations of the Business, whether or not carried
or reflected on the books and records of Seller or Xxxxx.
1.3 EXCLUDED ASSETS. The following assets shall be excluded from the
Purchased Assets and shall be retained by Seller:
(a) ACCOUNTS RECEIVABLE. All accounts receivable due to Seller as
of the Effective Time in connection with the Business (the
"RECEIVABLES"), and the full benefit of any security therefor;
(b) CASH. All cash on hand and on deposit in banks, cash
equivalents and investments, and all customer deposits and prepayments
in connection with the sale of goods by Seller, to the extent the
applicable goods are not included in the Purchased Assets;
(c) INSURANCE. All insurance policies relating to the Business;
(d) ASSETS OF BENEFIT PLANS. Pension, profit sharing, savings, or
other benefit plans and trusts and the reserves thereof;
(e) FINISHED GOODS. All finished goods manufactured by the Seller
prior to the Closing Date, except as provided in 1.2(c), above.
(f) CERTAIN RECORDS. Minute books, stock books and any corporate
documents relating to the organization, maintenance and existence of
Seller as a corporation;
3
(g) EXCLUDED CONTRACTS. Any and all contracts entered into by
Seller or by which Seller or any of the Purchased Assets is bound,
other than the Assumed Contracts;
(h) UNRELATED ASSETS. Any assets, properties, rights, contracts,
operations and businesses of Seller, Parent or Bretlin that are used
primarily in business operations of Seller, Bretlin or Parent other
than the Business, including without limitation all centralized
management information systems and accounting systems, and listed on
Schedule 1.3(h);
(i) TAX REFUNDS. Any rights of Seller or any of its Affiliates to
any tax refund with respect to periods prior to the Closing Date;
(j) INSURANCE BENEFITS. Any property, casualty, workers'
compensation or other insurance policy or related insurance services
contract relating to the Purchased Assets, the Business, Seller or any
of its Affiliates and any rights of Seller or any of its Affiliates
under such insurance policy or contract, other than 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;
(k) PURCHASE CONTRACTS. Any rights of Seller under this Agreement,
the documents to be executed and delivered in connection herewith, or
under any other agreement between Seller and Buyer;
(l) EXCLUDED CLAIMS AND DEPOSITS. Deposits, prepayments, prepaid
assets, refunds, causes of action, rights of recovery, rights of setoff
and rights of recoupment of Seller arising prior to the Closing Date as
itemized on Schedule 1.3(l); and
(m) OTHER EXCLUDED ASSETS. The other excluded assets listed or
described on Schedule 1.3(m).
1.4 LIABILITIES. The Purchased Assets shall be sold and conveyed to
Buyer free and clear of all liabilities, obligations, liens, security interests
and encumbrances whatsoever (collectively, "LIENS", or, individually, a "LIEN")
other than Permitted Liens; PROVIDED, HOWEVER, that Buyer will assume at Closing
only the obligations under the Assumed Contracts (including unfilled purchase
orders as described below) that are to be performed after the Effective Time and
are disclosed in such Assumed Contracts. Buyer shall only assume Seller's
obligation under the Assumed Contracts which are purchase orders issued to
Seller to the extent that the goods ordered have not been shipped by Seller at
the Effective Time, and Buyer shall only assume Seller's obligation under the
Assumed Contracts which are purchase orders issued by Seller to the extent that
the goods ordered by Seller under such contracts have not been received by
Seller as of the Effective Time, and all of which shall be listed on Schedule
1.2(d).
Except as specifically set forth above, Seller shall retain
responsibility for and indemnify Buyer against all liabilities in any way
related to the Business, the Purchased Assets and the Assumed Contracts
(including any existing breach thereof) arising prior to the Effective Time and
for all liabilities arising from Seller's operation of the Business prior to the
Effective Time, whether or not accrued and whether or not disclosed.
Specifically, but without limiting the generality of the foregoing, Seller shall
retain sole liability for and Buyer shall not assume any
4
liability or obligation of Seller with respect to (i) unpaid Taxes of the Seller
or the Business (as defined in Section 3.4 below); (ii) accounts payable or
other liabilities or obligations of the Seller or the Business arising or
accruing as a result of, or caused by, events, conditions or circumstances,
prior to the Effective Time (even if the liability or obligation becomes known
after the Effective Time; (iii) the use, storage, transportation, discharge,
handling or disposal of any Hazardous Material (as defined below) prior to the
Effective Time; and (iv) employees or former employees of Seller, including any
liability for accrued salaries, wages, payroll taxes, severance pay
entitlements, health, medical, retirement, vacation or deferred compensation
benefits or any other obligations or expenses arising out of or relating to the
employment by Seller of its employees or Seller's termination of such employees,
including the terminations effected by Seller pursuant to this Agreement. Seller
shall retain and shall assume and discharge all liabilities and costs under the
Consolidated Omnibus Budget Reconciliation Act, as amended ("COBRA") (including
liabilities for violations thereof) for all "qualifying events" (as defined in
COBRA) occurring with respect to employees and their dependents prior to and on
the Effective Time, including qualifying events that occur as a result of the
sale of the Purchased Assets contemplated by this Agreement. Parent and Seller
agree that the sale of the Purchased Assets contemplated by this Agreement shall
not cause Buyer to become a "successor employer" within the meaning of Section
54.4980B-9, Q&A-8(c) of the Treasury Regulations. As used in this Agreement,
"Hazardous Material" means and includes asbestos, ACM's, polychlorinated
biphenyls, lead-based paints, any petroleum product, petroleum by-products
(including, but not limited to, crude oil or any fraction of it, diesel oil,
fuel oil, gasoline, lubrication oil, oil refuse, oil mixed with other wastes,
oil sludge and all other liquid hydrocarbons, regardless of specific gravity),
natural or synthetic gas products and/or hazardous substance or materials,
waste, pollutant or contaminant, defined as such in (or for the purposes of) the
Environmental Laws (as defined in Section 3.4).
ARTICLE II
CONSIDERATION
2.1 PURCHASE PRICE. (a) The aggregate purchase price (the "PURCHASE
PRICE") for the Purchased Assets shall be the sum of (i) Thirty Million Eight
Hundred Thousand Dollars $30,800,000, for all of the Purchased Assets other than
Inventory, payable as provided below on the Closing Date, plus the amount
determined as the value of all Inventory on hand as of the Effective Time,
calculated and payable as provided below:
(b) The Purchase Price shall be payable as follows: (i) $30,800,000
shall be paid on the Closing Date by wire transfer of immediately
available funds to account(s) designated by Seller; and (ii) the
portion of the Purchase Price set forth in Section 2.1 (a)(ii) above
shall be paid promptly after final determination of the Closing
Inventory Value as provided below in Section 2.1(c).
(c) On the Closing Date, Buyer and Seller shall jointly conduct a
physical inspection of the Inventory and prepare a list of the
Inventory of the Business as of such date. As soon as possible after
the Closing Date, but in any event within fifteen (15) business days
thereafter, Buyer shall provide to Seller a list of the Inventory and a
valuation thereof at standard cost, determined and discounted, if
applicable, in accordance with the Inventory Valuation Determination
set forth on Schedule 2.1(c)
5
hereto (the "CLOSING INVENTORY VALUE"). Seller shall have a period of
ten (10) business days following receipt of such Closing Inventory
Value (the "SELLER OBJECTION PERIOD") to notify Buyer of any
disagreement with Buyer's valuation, and Buyer and Seller shall jointly
endeavor to make a mutually agreeable determination of the Closing
Inventory Value prior to the expiration of the Seller Objection Period.
If Buyer and Seller agree on the Closing Inventory Value, then Seller
and Buyer shall set forth their agreement in writing, and Buyer shall
pay such portion of the Purchase Price attributable to the Inventory
promptly after the date of such mutually agreed written determination.
If Seller and Buyer disagree as to the Closing Inventory Value and have
not reached agreement prior to the expiration of the Seller Objection
Period, then such disputed amount shall be submitted to
PricewaterhouseCoopers for a final and binding determination of the
Closing Inventory Value. The costs and expenses for the services of
PricewaterhouseCoopers shall be borne by Seller and Buyer in proportion
to the amount awarded to each party pursuant to the aforesaid
determination.
2.2 ALLOCATION. The Purchase Price shall be allocated among the
Purchased Assets as mutually agreed between Buyer and Seller, based on the
report to be delivered by Valuation Research Corporation, and such agreed upon
allocation shall be set forth in writing and attached to this Agreement as soon
as possible after Closing as SCHEDULE 2.2 hereto.
2.3 PRORATIONS. The operation of the Business and the income and
expenses attributable thereto up to the Effective Time shall be for the account
of Seller and thereafter for the account of Buyer. All expenses, including,
without limitation, such items as ad valorem property taxes, prepaid items,
utility charges, and rents shall be prorated between Seller and Buyer as of the
Effective Time. Such prorations shall be made and paid by Seller insofar as is
possible as an adjustment to the Purchase Price at the Closing, and such other
proratable items shall be determined within 60 days thereafter, and Seller or
Buyer shall make such payment to the other as is required by such proration.
Unpaid employee salary, benefits and vacation pay, leave pay, severance pay and
other similar benefits or entitlements shall be paid by Seller to the employees
of the Business promptly after Closing as provided in Section 5.1 below.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER, BRETLIN AND PARENT
Seller, Bretlin and Parent jointly and severally represent and warrant
to Buyer and C&A as follows:
3.1 ORGANIZATION AND GOOD STANDING. Each of Seller, Bretlin and Parent
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Seller has all requisite power and
authority to own, operate and lease the Purchased Assets and to conduct the
operations of the Business as presently conducted. Seller is duly qualified to
do business as a foreign corporation and is in good standing in all other
jurisdictions in which it is required to be so qualified and in which the
failure to qualify would have a Material Adverse Effect, and such jurisdictions
are listed on Schedule 3.1.
3.2 AUTHORITY. Each of Seller, Bretlin and Parent has all requisite
power and authority to execute and deliver this Agreement, a Xxxx of Sale,
Assignment and Assumption Agreements,
6
and NonSolicitation Agreement, and such other agreements as are necessary or
appropriate in Buyer's reasonable discretion to effect the transfer of the
Business and the Purchased Assets as contemplated hereby, to the extent each of
Seller, Bretlin and Parent is a party thereto (the "SELLER AGREEMENTS") and to
perform the transactions contemplated hereby and thereby. The execution,
delivery and performance of each of the Seller Agreements to which Seller,
Bretlin or Parent is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate and shareholder action on the part of each of Seller,
Bretlin and Parent. The Seller Agreements have been, or with respect to Seller
Agreements to be executed at the Closing, will be, duly executed and delivered
by Seller, Bretlin and Parent, as applicable, and each constitutes or will
constitute when executed and delivered a valid and binding obligation of Seller,
Bretlin and Parent, enforceable against Seller, Bretlin and Parent in accordance
with its terms, to the extent it is a party thereto, except as enforceability
may be limited by equitable principles or by bankruptcy, fraudulent conveyance
or insolvency laws affecting the enforcement of creditors' rights generally.
3.3 EFFECT OF AGREEMENT. Except as set forth on Schedule 3.3 hereto,
the execution, delivery and performance of the Seller Agreements do not: (a)
conflict with the Articles of Incorporation or Bylaws of Seller, Bretlin or
Parent; (b) violate any law or any rule or regulation of any governmental body
or administrative agency, or conflict with any judicial or administrative order
or decree relating to Seller, Bretlin, Parent or the Purchased Assets; (c)
constitute a breach or default under any Assumed Contract, Real Property Lease
or any other agreement or instrument by which Seller, Bretlin or Parent is bound
or the Purchased Assets are affected; (d) create any Lien on any of the
Purchased Assets; or (e) require any consent, notice to or filing with any
governmental authority or administrative agency or any private person or firm on
behalf of Seller, Bretlin or Parent. The matters described on Schedule 3.3 are
referred to as the "REQUIRED CONSENTS."
3.4 COST DATA; BOOKS; NO UNDISCLOSED LIABILITIES. Seller's Cost
Reconciliation Report and detailed standard cost data for the year ended
December 31, 2001 and the two month period ended February 28, 2002 (the "COST
DATA"), true and complete copies of which are attached hereto as Schedule 3.4.1,
(a) are true, complete and correct in all material respects; and (b) are in
accordance with the books and records of the Seller. Seller has no liability or
obligation related to the Business that is not disclosed on Schedule 3.4.2
outside of the routine, daily, ordinary course of business. Except as disclosed
on Schedule 3.4.2, (i) there are no claims, actions, suits or investigations
("CLAIMS") or potential Claims pending, or to the Knowledge of Seller,
threatened, against Seller or the Business or affecting the Purchased Assets,
nor to the Knowledge of Seller does there exist any basis for a Claim; (ii)
there is not outstanding or, to the Knowledge of Seller, threatened, any order
or decree of any court, governmental agency or arbitration tribunal against or
involving Seller, the Business or the Purchased Assets; (iii) Seller is
currently, and has been at all times, in material compliance with all laws,
rules, regulations and licensing requirements of all federal, state, local and
foreign authorities applicable to the properties and operations of the Business;
(iv) Seller is not in violation of any of the material Permits, all of which are
listed on Schedule 3.4.3 hereto, and no proceedings are pending or, to the
Knowledge of Seller, threatened to revoke or limit any such Permit; (v) all
United States, state and local income, profits, franchise, sales, use,
occupancy, property, severance, excise, value added, withholding and other
taxes, and all taxes owing to any foreign countries and political subdivisions
thereof (including interest, penalties and any additions to tax) (the
7
"TAXES") due from Seller or claimed to be due by each taxing authority for all
periods through the date of this Agreement, including without limitation any
Taxes arising from the transactions evidenced by this Agreement, have been, and
for all periods through the Effective Time will be, fully paid, and Seller has
timely filed all tax returns, reports and declarations of estimated tax required
to be filed before the Effective Time; and (vi) the existing and prior uses of
the Purchased Assets comply in all material respects with, and at all times have
complied in all material respects with, and Seller is not in violation of, and
has not violated, in connection with the ownership, use, maintenance or
operation of the Purchased Assets, any applicable federal, state, county or
local statutes, laws, regulations, rules, ordinances, codes, licenses or permits
of any governmental authorities relating to environmental matters, including by
way of illustration and not by way of limitation the Comprehensive Environmental
Response, Compensation and Liability Act as amended, the Resource Conservation
Recovery Act as amended, the Clean Air Act, the Clean Water Act, the
Occupational Safety and Health Act, the Toxic Substances Control Act, any
"Superfund" or "Superlien" law, all of their state counterparts and implementing
regulations, or any other federal, state or local statute, law, ordinance, code,
rule, regulation, order, decree or guideline (whether published or unpublished)
regulating, relating to or imposing liability or standards of conduct concerning
any petroleum, petroleum by-product (including, but not limited to, crude oil,
diesel oil, fuel oil, gasoline, lubrication oil, oil refuse, oil mixed with
other waste, oil sludge, and all other liquid hydrocarbons, regardless of
specific gravity), natural or synthetic gas, hazardous substance or materials,
toxic or dangerous waste, substance or material, pollutant or contaminant
(collectively "ENVIRONMENTAL LAWS"). The books and records of Seller relating to
the Purchased Assets are true, accurate and complete in all material respects
and have been maintained in accordance with generally accepted accounting
principles applied on a consistent basis.
3.5 TITLE TO AND SUFFICIENCY OF ASSETS. Seller has good and marketable
title to all of the Purchased Assets, and as of the Closing Date the Purchased
Assets shall be free and clear of any Liens, other than Permitted Liens. Except
as set forth on Schedule 3.5.1, the Purchased Assets and the assets covered by
the Assumed Contracts constitute all of the assets of any nature required to
operate the Business in the manner presently operated by Seller and are all
located on the Real Property. No third party has any right, title or interest in
or to, or any claim whatsoever related to, the Purchased Assets, except as set
forth on Schedule 3.5.2, which will be terminated as of the Closing Date.
3.6 REAL ESTATE. Schedules 1.2(a) contains a true and correct
description of the Real Property and a list of all buildings, fixtures and
improvements thereon (the "IMPROVEMENTS"). All Improvements conform in all
material respects to all applicable state and local laws, health and safety
ordinances and zoning and building ordinances. To the Knowledge of the Seller,
none of the Improvements encroach on the property of any third person. The Real
Property is zoned for the purposes for which it is presently being used.
(i) The Real Property has adequate water and sewer supply for the
current use of such property, and all sewer and water supply facilities
required for the current use of all such property are properly and
fully installed and operating. All other public or private utilities
necessary for the operation of such property for current uses are
properly and fully installed and operating.
8
(ii) The Improvements have been completed, and there are no
interior or exterior structural defects or other material defects in
such Improvements or any material defects in the plumbing, electrical,
mechanical, heating, ventilating or air-conditioning systems or other
systems. All such systems are in satisfactory working order for current
use, and all roofs and basements of the Improvements are in good
condition, ordinary wear and tear excepted, and free of leaks.
(iii) Each portion of the Improvements is covered by a permanent
certificate of occupancy which is in full force and effect. Seller has
no knowledge of any alteration, improvement or change in use of any of
the Improvements which would require a new certificate of occupancy or
amendment of an existing certificate of occupancy.
(iv) Seller has received no notice and has no knowledge of any
material violations of any applicable federal, state or local law,
ordinance, regulation, order, rule or requirement affecting the Real
Property, or the construction, management, ownership, maintenance, use,
acquisition or sale thereof (including, without limitation, building,
health and environmental laws, regulations and ordinances)
(collectively, "LEGAL REQUIREMENTS"). Seller has no knowledge of any
pending or contemplated change in any Legal Requirement which may
materially adversely affect the use or ownership of such property.
(v) Seller has entered into no agreement, oral or written, not
referred to herein, with reference to the Real Property, and neither
Seller nor any portion of such property is subject to any claim,
demand, suit, unfiled lien, proceeding or litigation of any kind,
pending or outstanding, or to the Knowledge of Seller or the Parent,
threatened or likely to be made or instituted which would in any way be
binding upon Buyer or its successors or assigns or would affect or
limit the full use and enjoyment of such property by Buyer or its
successors or assigns or which would limit or restrict in any way
Seller's right or ability to enter into this Agreement and consummate
the transactions described herein.
3.7 TANGIBLE PROPERTY. Except as disclosed on Schedule 3.7, all
Improvements, all other tangible property included in the Purchased Assets and
all items of tangible property leased under leases to be assumed by Buyer (a)
are in good operating order, condition and repair, ordinary wear and tear
excepted; (b) are suitable for immediate use in the ordinary course of business
of the Business; and (c) are free from material defects.
3.8 CONTRACTS AND LEASES. Schedule 3.8 lists all contracts,
commitments, agreements (including agreements for the borrowing of money or the
extension of credit), leases (other than leases for the Real Property),
licenses, understandings and obligations, whether written or oral, related to
the Business to which Seller is party or by which Seller or the Purchased Assets
is bound or affected or that are material to the operation of the Business,
including all contracts that relate to the costs of operations of the Business,
which in any case involve a financial obligation or impact of more than $5,000.
Schedule 1.2(d) lists all leases concerning the Real Property to which Seller,
Bretlin or Xxxxx is a party (the "REAL PROPERTY LEASES"). Seller has delivered
to Buyer true and complete copies of all Real Property Leases, all written
contracts and true and
9
complete memoranda of all oral contracts, including any and all amendments
thereto. Each of the Assumed Contracts and the Real Property Leases is valid,
binding and 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, and
is in full force and effect. There are no existing defaults, and no events or
circumstances have occurred which, with or without notice or lapse of time or
both, would constitute defaults, under any of the Assumed Contracts or the Real
Property Leases. Except as set forth in Schedule 3.3, the assignment of the
Assumed Contracts and the Real Property Leases by Seller to Buyer will not, with
respect to any Assumed Contract or Real Property Lease, (a) constitute a default
or accelerate the obligations thereunder; (b) require the consent of any person
or party, except for the Required Consents; or (c) affect the continuation,
validity and effectiveness thereof or the terms thereof.
3.9 INTELLECTUAL PROPERTY. Schedule 1.2(e) lists all intellectual
property rights (other than those included in Excluded Assets) used in
connection with the Business, which includes all intellectual property, trade
secrets, expertise, know-how, designs, ideas and concepts whether or not
patentable, all of which are owned by or licensed to Seller. There are no Marks
or patents used by Seller in connection with the Business. Seller has not
licensed any of the Intellectual Property to any third party, and no third party
has any right to use any of the Intellectual Property. There are no pending or
to the Knowledge of Seller threatened claims or suits challenging Seller's
ownership or right to use any of the Intellectual Property, or alleging that any
of the Intellectual Property infringes any rights of any third parties, nor to
the Knowledge of Seller does there exist any basis therefor.
3.10 LABOR MATTERS. No employees of Seller who work in the Business
have been or are represented by a union or other labor organization or covered
by any collective bargaining agreement. There is no unfair labor practice
complaint, labor organizational effort, strike, slowdown or similar labor matter
pending or, to the Knowledge of Seller, threatened against or affecting Seller
or the Business.
3.11 EMPLOYEES; BENEFITS. Schedule 3.11.1 sets forth a list of the
name, position, rate of compensation and any incentive compensation
arrangements, bonuses or commissions or fringe or other benefits, of each person
who is employed by the Business in any capacity. Except as set forth on Schedule
3.11.2, there are no Plans, as defined below, contributed to, maintained or
sponsored by Seller, to which Seller is obligated to contribute or with respect
to which Seller has any material liability or potential material liability,
whether direct or indirect, including all Plans contributed to, maintained or
sponsored by each member of the controlled group of companies, within the
meaning of Sections 414(b), 414(c), and 414(m) of the Internal Revenue Code (the
"CODE"), of which Seller is a member to the extent Seller has any potential
material liability with respect to such Plans. For purposes of this Agreement,
the term "PLANS" shall mean: (a) employee benefit plans as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not funded; (b) employment agreements; and (c) personnel
policies or fringe benefit plans, policies, programs and arrangements, whether
or not subject to ERISA, and whether or not funded, including, without
limitation, stock bonus, deferred compensation, pension, severance, bonus,
vacation, travel, incentive and health, disability and welfare plans.
10
Each Plan and all related trusts, insurance contracts and funds have
been maintained, funded and administered in compliance in all respects with all
applicable laws and regulations, including, but not limited to, ERISA and the
Code.
Each Plan that is intended to be qualified under Section 401(a) of the
Code, and each trust (if any) forming a part thereof, has received a favorable
determination letter from the Internal Revenue Service as to the qualification
under the Code of such Plan and the tax-exempt status of such related trust, and
nothing has occurred since the date of such determination letter that could
adversely affect the qualification of such Plan or the tax-exempt status of such
related trust.
Seller does not now, nor has it ever, sponsored, maintained or made
contributions to a defined benefit plan (as such term is defined in Section
3(35) of ERISA) (a "DEFINED BENEFIT PLAN"), or any Plan which is subject to the
minimum funding requirements of Section 412 of the Code or the requirements of
Title IV of ERISA.
No underfunded Defined Benefit Plan has been, during the five years
preceding the Closing Date, transferred out of the controlled group of companies
(within the meaning of Sections 414(b), (c) and (m) of the Code) of which Seller
is a member or was a member during such five-year period.
3.12 ABSENCE OF CHANGES. Except as set forth on Schedule 3.12, since
December 31, 2001, Seller has conducted the operations of the Business only in
the ordinary course, and has not:
(a) Suffered any damage to any material asset of the Business,
whether or not covered by insurance;
(b) Sold or disposed of any assets used in the operation of the
Business other than in the ordinary course;
(c) Made any general wage increase for its employees as a group;
(d) Amended or terminated any Assumed Contract, or amended or
terminated any other material contract other than in the ordinary
course;
(e) Incurred any obligation or liability, except normal trade or
business obligations incurred in the ordinary course of business;
(f) Introduced any new method of management, operations or
accounting other than in the ordinary course;
(g) Suffered any Material Adverse Effect, or any other event that
might reasonably be expected to have a Material Adverse Effect; or
(h) Agreed, whether in writing or otherwise, to take any action
described in this Section.
11
3.13 RELATED PARTY TRANSACTIONS. The Assumed Contracts and Real
Property Leases do not include any agreement with, or any other commitment to
(a) any officer or director of Seller, Bretlin or Parent; (b) any person related
by blood or marriage to any such officer or director; or (c) any corporation,
partnership, trust or other entity in which Seller, Bretlin, Parent or any such
officer, director or related person has an equity or participating interest.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND C&A
Buyer and C&A jointly and severally represent and warrant to Seller,
Bretlin and Parent as follows:
4.1 ORGANIZATION AND GOOD STANDING. Each of Buyer and C&A is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.
4.2 AUTHORITY. Each of Buyer and C&A has all requisite power and
authority to execute and deliver this Agreement and the Assumption Agreements
regarding the Assumed Contracts (collectively, the "BUYER AGREEMENTS") and to
perform the transactions contemplated hereby and thereby, to the extent it is a
party thereto. The execution, delivery and performance of the Buyer Agreements,
and the consummation of the transactions contemplated hereby and thereby, have
been duly and validly authorized by all necessary corporate action on the part
of Buyer and C&A. The Buyer Agreements have been, or with respect to Buyer
Agreements to be executed at the Closing, will be duly executed and delivered by
Buyer and C&A and each constitutes or will constitute when executed and
delivered a valid and binding obligation of each of Buyer and C&A, enforceable
against Buyer and C&A in accordance with its terms, to the extent it is a party
thereto.
4.3 EFFECT OF AGREEMENT. The execution, delivery and performance of the
Buyer Agreements do not and will not (a) conflict with the Articles of
Incorporation or Bylaws of Buyer or C&A; (b) violate any law or any rule or
regulation of any governmental body or administrative agency, or conflict with
any judicial or administrative order or decree relating to Buyer or C&A; or (c)
require any consent, notice to or filing with any governmental authority on
behalf of Buyer or C&A.
ARTICLE V
COVENANTS
Seller, Bretlin and Parent covenant and agree with Buyer as follows:
5.1 TERMINATION OF SELLER'S EMPLOYEES; SETTLEMENT OF OBLIGATIONS OF
SELLER. Immediately prior to the Effective Time, Seller shall terminate all of
its employees utilized in or necessary to the operation of the Business. Seller
shall pay all employees of the Business promptly after Closing all outstanding
obligations of Seller to such employees, including accrued salaries, wages,
payroll taxes, any severance pay entitlements, health, medical, retirement,
vacation or deferred compensation benefits and any other obligations and
expenses of any kind or description of Seller arising out of or relating to the
employment by Seller or Seller's termination of the employment of such employees
through the Effective Time. Buyer agrees to offer at-will employment (subject to
Buyer's normal pre-employment testing requirements) to all
12
of the active full-time employees of the Business, which employment, if
accepted, would commence immediately upon the Effective Time. For purposes
hereof, the term "active employees" excludes all employees of the Business on
short or long term disability or maternity leave or other leave on the Closing
Date.
5.2 COLLECTION OF RECEIVABLES. Buyer agrees to assist Seller, as
reasonably requested, in the collection of the Receivables after the Effective
Time and agrees to immediately forward to Seller all funds received by the Buyer
after the Closing for payment of any of the Receivables retained by the Seller
hereunder. Seller agrees to assist Buyer, as reasonably requested, in collecting
any receivables created by Buyer's operation of the Business after the Closing
Date and agrees to immediately forward to Buyer all funds received by the Seller
after the Closing for payment of any of the Buyer's receivables. Payments made
by customers of the Business after the Closing Date shall be applied (i) to the
invoices specified by such customer, or (ii) if the amount of payment
corresponds in amount to an invoice to such customer, then to such invoice, and
(iii) if neither (i) nor (ii) applies to such payment, then to the oldest
outstanding invoice first.
5.3 EMPLOYEE BENEFIT MATTERS. As of the Effective Time, all of the
Seller's current employees in the Business (including those on lay-off,
disability or leave of absence, whether paid or unpaid), former employees and
retired employees ("BUSINESS EMPLOYEES") shall cease active participation in the
Xxxxx 401(k) Plan. Seller shall take, or cause to be taken, all such action as
may be necessary to effect such cessation of participation, and to permit
Business Employees to elect to receive or require Business Employees to receive
total distributions of their vested account balances under the Xxxxx 401(k) Plan
in accordance with applicable law as soon as reasonably practicable after the
Closing Date. Seller shall pay as a bonus the amount of any nonvested account
balances of the Business Employees in the Xxxxx 401(k) Plan to such persons as
soon as reasonably practicable after Closing after withholding all applicable
taxes. In any event such distributions of vested amounts and payment of all
nonvested account balances shall be finalized not later than ninety (90) days
after the Closing Date. Buyer's 401(k) plan shall accept eligible rollover
distributions from the Xxxxx 401(k) Plan. For purposes of administering Buyer's
401(k) Plan, service of a Business Employee with Seller and Parent shall be
deemed to be service with Buyer for participation and vesting purposes, but not
for purposes of benefit accrual. Also, Seller shall pay to the Business
Employees within the aforesaid ninety (90) day period any amounts owed under
Seller's Quarterly Incentive Plan for the period from January 1, 2002, through
the Closing Date.
ARTICLE VI
CLOSING
6.1 CLOSING. The closing of the sale of the Purchased Assets (the
"CLOSING") shall take place at the offices of Xxxx, Xxxxxxx & Xxxxxxxx, P.C. in
Chattanooga, Tennessee at 10:00 a.m., local time, on the date that the Closing
Condition, defined below in Section 6.7, shall be satisfied, or such other date
as may be mutually agreed upon by the parties hereto (the "Closing Date"),
provided that if the Closing Condition as defined in Section 6.7 are not
satisfied by June 1, 2002, then this Agreement and the transactions contemplated
hereby shall be terminated and of no force and effect. For purposes of passage
of title, risk of loss, allocation of expenses and other economic effects, the
Closing when completed shall be deemed to have occurred at 7:00
13
a.m., local time, on the Closing Date (the "EFFECTIVE TIME"). The Business shall
be operated for the benefit and at the risk of the Buyer from and after the
Effective Time.
6.2 DELIVERIES BY SELLER. At the Closing, Seller shall deliver or cause
to be delivered to Buyer the following:
(a) A copy of all corporate resolutions authorizing the execution,
delivery and performance of the Seller Agreements, and the consummation
of the transactions contemplated herein and therein, accompanied by the
certification of the Secretary of Seller to the effect that such
resolutions are in full force and effect and have not been amended,
modified or rescinded;
(b) Good standing certificates from the Secretary of State of the
state of Seller's incorporation and each of the states listed on
Schedule 3.1, and certificates from the Departments of Revenue of each
such jurisdiction stating that all required taxes regarding the
Business have been paid by Seller in full;
(c) Evidence of the termination of Liens;
(d) The legal opinion in the form attached hereto as Exhibit C;
(e) Evidence of that all Required Consents have been obtained or
satisfied;
(f) Assignments of Assumed Contracts, together with any necessary
consent thereto;
(g) Bills of Sale attached hereto as EXHIBIT A and such other
instruments of transfer as Buyer may request to convey and vest in
Buyer all of Seller's right, title and interest in and to all of the
remaining Purchased Assets, free and clear of all Liens, other than
Permitted Liens;
(h) Assignment of any intellectual property rights included in the
Purchased Assets;
6.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver or cause
to be delivered to Seller the following:
(a) A copy of all corporate resolutions authorizing the execution,
delivery and performance of the Buyer Agreements, and the consummation
of the transactions contemplated herein and therein, accompanied by the
certification of the Secretary of Buyer to the effect that such
resolutions are in full force and effect and have not been amended,
modified or rescinded;
(b) An Instrument of Assignment and Assumption of the Assumed
Contracts to be assumed by Buyer pursuant to Section 1.4;
(c) The Purchase Price, evidenced by a wire transfer of immediately
available funds; and
14
(e) The legal opinion in the form set forth in Exhibit D hereto.
(f) The Resale Certificate
6.4 OTHER DELIVERIES. Each of the parties hereto shall execute and
deliver, or cause to be executed and delivered, to the other the following:
(a) This Agreement
(b) The Supply Agreement
(c) The Non-Solicitation Agreement
(d) The Transitional Services Agreement in the form of Exhibit F
hereto
6.5 FURTHER ASSURANCES. Seller and Parent shall, at any time on or
after the Closing Date, take any and all steps reasonably requested by Buyer to
place Buyer in possession and operating control of the Purchased Assets and the
Business, and will do, execute, acknowledge and deliver all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be reasonably requested by Buyer for the more effective transfer to and
reduction to possession of Buyer, or its permitted successors or assigns, of any
of the Purchased Assets.
6.6 REAL PROPERTY ACQUISITION. Buyer's obligations hereunder are
subject to and conditioned upon the simultaneous closing of the acquisition by
Buyer of the Real Property.
6.7 CLOSING CONDITIONS. The parties acknowledge that the operations of
the Business have been interrupted due to electrical outage. The obligations of
all the parties hereunder shall be conditioned upon (i) the operation and
functioning of the Business consistent with past operations at full capacity
with production of first-quality products, satisfactory to Buyer in all
respects; (ii) absence of any material supplement to the Seller's disclosure
Schedules to this Agreement which reveals any change outside the ordinary course
and which is objectionable to Buyer in its sole discretion. Upon satisfaction of
the aforesaid Closing conditions, this Agreement will be deemed effective as of
the Effective Time and all of the agreements and other deliveries referred to in
Section 6 shall be dated as of such Closing Date, with appropriate conforming
date changes and the transactions shall be deemed completed as of such date; and
(iii) the completion of Buyer's acquisition of the Real Property; provided,
however, that if this condition is not met, Seller will exercise its option to
purchase the Real Property and sell such property to Buyer on or before June 1.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLER, BRETLIN AND PARENT. Seller, Bretlin and
Parent shall jointly and severally indemnify, defend and hold harmless Buyer,
C&A and their officers, directors and affiliates (the "BUYER INDEMNITEES") from,
against, and with respect to any and all loss, damage, claim, obligation,
liability, cost and expense (including, without limitation, reasonable
attorneys' fees and costs and expenses incurred in investigating, preparing,
defending
15
against or prosecuting any litigation, claim, proceeding or demand), of any kind
or character (a "LOSS") arising out of or in connection with any of the
following:
(a) any breach of any of the representations or warranties of
Seller, Bretlin and/or Parent contained in or made pursuant to this
Agreement or any of the Seller Agreements;
(b) any failure by Seller, Bretlin or Parent to perform or observe,
in full, any covenant, agreement or condition to be performed or
observed by it pursuant to this Agreement or any of the Seller
Agreements;
(c) Seller's ownership and operation of the Business and the
Purchased Assets prior to the Effective Time, including any and all
liabilities under the Assumed Contracts which relate to events
occurring prior to the Effective Time, and including all other
liabilities and obligations of the Seller and Parent;
(d) any use, release, threatened release, emission, generation,
storage, transportation, disposal, or arrangement for the disposal of
Hazardous Materials by the Seller or the presence of any Hazardous
Materials or circumstance or condition at any Real Property which would
require remediation or other action under any Environmental Laws;
PROVIDED that any required environmental remediation shall be
controlled by Buyer and conducted in accordance with applicable law;
and PROVIDED that Buyer's conduct of such remediation or other response
shall be limited to the work reasonably prudent and necessary to
address requirements imposed by applicable Environmental Laws and
government authorities.
(e) noncompliance by Seller or Buyer with the provisions of the
Georgia bulk sales laws; and
(f) any Taxes accruing prior to the Effective Time, any failure to
properly complete and duly and timely file all tax returns, reports and
declarations of estimated tax, and any failure to make all required
withholdings and payments of Taxes due;
(g) failure to obtain Required Consents with respect to any
subleases of any equipment, computers or other assets, or any
sublicenses of any software, delivered to Buyer at Closing.
7.2 INDEMNIFICATION BY BUYER. Buyer and C&A shall jointly and severally
indemnify, defend and hold harmless Seller, Bretlin and Parent and their
officers, directors and affiliates from, against and with respect to any Loss
arising out of or in connection with any of the following:
(a) any breach of any of the representations and warranties of
Buyer or C&A contained in or made pursuant to this Agreement;
(b) any failure by Buyer or C&A to perform or observe, in full, any
covenant, agreement or condition to be performed or observed by it
pursuant to this Agreement;
16
(c) all obligations under the Assumed Contracts assumed by Buyer
arising on or after the Effective Time, as provided under Section 1.4;
or
(d) Buyer's or C&A's ownership and operation of the Business and
the Purchased Assets on and after the Effective Time.
7.3 NOTICE OF CLAIM. Any party seeking to be indemnified hereunder (the
"INDEMNIFIED PARTY") shall, within 60 days following discovery of the matters
giving rise to a Loss, notify the party from whom indemnity is sought (the
"INDEMNITY OBLIGOR") in writing of any claim for recovery, specifying in
reasonable detail the nature of the Loss and the amount of the liability
estimated to arise therefrom. The failure of the Indemnified Party to notify the
Indemnity Obligor on a timely basis will not relieve the Indemnity Obligor of
any liability that it may have to the Indemnified Party, subject to the survival
provisions of Section 8.1 hereof to the extent applicable, except to the extent
that the Indemnified Party demonstrates that the defense of such action is
materially prejudiced by the Indemnity Obligor's failure to give such notice.
7.4 DEFENSE. If the facts pertaining to a Loss arise out of the claim
of any third party, or if there is any claim against a third party available by
virtue of the circumstances of the Loss, the Indemnity Obligor may, by giving
written notice to the Indemnified Party within 15 days following its receipt of
the notice of such claim, elect to assume the defense or the prosecution
thereof, including the employment of counsel or accountants at its cost and
expense; PROVIDED, HOWEVER, that during the interim the Indemnified Party shall
use its reasonable efforts to take such actions (not including settlement) as
are reasonably necessary to protect against further damage or loss with respect
to the Loss; and provided further that the Indemnity Obligor can only assume the
defense if (i) it provides evidence acceptable to the Indemnified Party that it
will have the financial resources to defend the claim and satisfy its
indemnification obligations; (ii) it obtains counsel which is satisfactory to
the Indemnified Party; (iii) the third party claim involves only money damages
and does not seek an injunction or other equitable relief; (iv) the Indemnity
Obligor conducts the defense of the claim actively and diligently, and (v) such
Loss does not arise from a claim made by a customer or employee of the Business
after the Closing. The Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnity Obligor in any such action and
to participate therein, but the fees and expenses of such counsel shall be at
the Indemnified Party's own expense. Whether or not the Indemnity Obligor
chooses so to defend or prosecute such claim, all the parties hereto shall
cooperate in the defense or prosecution thereof.
7.5 OTHER REMEDIES. The foregoing indemnification provisions are in
addition to, and not in derogation of any equitable claim or cause of action or
common law claim or cause of action for fraud any party may have as a result of
a Loss, but shall be deemed an exclusive election of remedies with respect to
all other claims or causes of action.
7.6 LIMITATION. Notwithstanding the provisions of Sections 7.1 or 7.2,
no Indemnity Obligor shall have any indemnification obligation under Sections
7.1(a) or 7.2(a) of this Agreement unless and until the aggregate amount of the
Losses of the Indemnified Party arising from all breaches of representations and
warranties exceeds Three Hundred Thousand Dollars ($300,000) in the aggregate,
whereupon the Indemnity Obligor shall be liable to indemnify the Indemnified
Party to the extent of the entire amount of such Losses; provided that this
Section
17
7.6 shall not apply to any breach of warranty contained in Sections 3.4 or 3.5.
Provided, that once a breach of any representation or warranty in this Agreement
occurs, any materiality or knowledge qualification contained in such
representation or warranty shall be disregarded in determining the magnitude of
any Loss occasioned by the breach of such representation or warranty for
purposes of this Section 7.6.
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the parties hereto contained in this Agreement or otherwise made in writing in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement and the Closing for a period of twenty-four
months thereafter, other than the representations and warranties contained in
Sections 3.4 and 3.5 which shall survive until the expiration of the applicable
statute of limitation.
8.2 BULK SALES. To the extent any bulk sales law applies to the
transaction evidenced hereby, the parties agree to waive the requirements, if
any, of all applicable bulk sales laws. As an inducement to Buyer to enter into
such waiver, Seller expressly covenants that (a) it will not be rendered
insolvent by the transactions contemplated by this Agreement; and (b) all debts,
obligations and liabilities relating to the Business that are not expressly
assumed by Buyer under this Agreement will be promptly paid and discharged by
Seller as and when they become due.
8.3 RISK OF LOSS. The risk of loss, damage or condemnation of any of
the Purchased Assets from any cause whatsoever shall be borne by Seller at all
times prior to the Effective Time.
8.4 BROKERS. Each party represents and warrants to the other (a) that
no brokers or agents have been retained or employed by it, and (b) that there
are no claims for any brokerage commission, finder's fee or similar payment due
or claimed to be due from it with respect to this transaction.
8.5 TAX FILINGS. Each of the parties acknowledges its understanding of
the requirement under Section 1060 of the Internal Revenue Code for the filing
by each of Form 8594 for its respective tax year in which the Closing occurs and
agrees to timely and properly file such forms with its federal income tax
return. Each of Seller and Buyer agrees to timely and properly allocate the
Purchase Price among the Purchased Assets in accordance with EXHIBIT A hereto
and to use such allocation for all federal, state and local income tax purposes.
8.6 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, whether or not the sale of the Purchased Assets is
consummated. Sales taxes (if any), shall be borne by Seller and recording and
filing fees on the transfer of the Purchased Assets shall be borne by Buyer.
8.7 PUBLICITY. Any press releases or other announcements concerning the
transactions contemplated by this Agreement shall be approved by both Buyer and
Seller prior to their issuance; PROVIDED, HOWEVER, that each of the parties
hereto shall be permitted to make all such
18
disclosures as are determined to be reasonably necessary to be made in order to
comply with relevant securities laws.
8.8 NOTICES. All notices, demands and other communications made
hereunder shall be in writing and shall be given either by personal delivery, by
nationally recognized overnight courier (with charges prepaid) or by telecopy
(with telephone confirmation), and shall be deemed to have been given or made
when personally delivered, the day following the date deposited with such
overnight courier service or when transmitted to telecopy machine and confirmed
by telephone, addressed to the respective parties at the following addresses (or
such other address for a party as shall be specified by like notice):
If to the Seller:
Candlewick Yarns, Inc.
Post Office Box 12542
000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Vice President
Phone: (000) 000-0000
Facsimile: (000) 000-0000
If to Bretlin:
Bretlin, Inc.
Xxxx Xxxxxx Xxx 00000
000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Vice President
Phone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Parent:
The Xxxxx Group, Inc.
000-X Xxxxxx Xxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, CFO
Phone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy in any such case (which shall not constitute notice) to:
00
Xxxx X. Xxxxx, Xx., Xxx.
Xxxx, Xxxxxxx & Xxxxxxxx, P.C.
0000 XxxXxxxx Xxxx Xxxxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
If to Buyer:
CAF Extrusion, Inc.
000 Xxxxx Xxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxx 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
If to C&A:
Xxxxxxx & Xxxxxx Floorcoverings, Inc.
000 Xxxxx Xxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxx 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy in either case (which shall not constitute notice) to:
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: G. Xxxxxx Xxxxxxx, Esq.
Telephone: 000-000-0000
Fax: 000-000-0000
8.9 GOVERNING LAW. This agreement shall be governed by the laws of the
State of
Georgia applicable to agreements made and to be performed entirely
within such state.
20
8.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.11 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by any of the parties hereto without
the prior written consent of all other parties hereto, and any purported
assignment without such consent shall be void; PROVIDED, HOWEVER, that Buyer may
assign its rights hereunder to any subsidiary that is wholly-owned by Buyer.
8.12 THIRD PARTY BENEFICIARIES. None of the provisions of this
Agreement or any document contemplated hereby is intended to grant any right or
benefit to any person or entity which is not a party to this Agreement.
8.13 HEADINGS. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of this
Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.
8.14 AMENDMENTS. Any waiver, amendment, modification or supplement of
or to any term or condition of this Agreement shall be effective only if in
writing and signed by all parties hereto, and the parties hereto waive the right
to amend the provisions of this Section 8.14 orally.
8.15 SPECIFIC PERFORMANCE. Seller acknowledges that the Purchased
Assets are unique and that if Seller fails to consummate the transactions
contemplated by this Agreement such failure will cause irreparable harm to Buyer
for which there will be no adequate remedy at law. Buyer shall be entitled, in
addition to its other remedies at law, to specific performance of this Agreement
if Seller shall, without cause, refuse to consummate the transactions
contemplated by this Agreement.
8.16 JURISDICTION. Any action or proceeding seeking to enforce any
provision, or based on any right arising out of, this Agreement may be brought
against any of the parties in the courts of the State of
Georgia, County of
Xxxxxxxxx, or if it has, or can acquire, jurisdiction in the United States
District Court for the Northern District of
Georgia, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.
8.17 SEVERABILITY. In the event that any provision in this Agreement
shall be determined to be invalid, illegal or unenforceable in any respect, the
remaining provisions of this Agreement shall not be in any way impaired, and the
illegal, invalid or unenforceable provision shall be fully severed from this
Agreement and there shall be automatically added in lieu thereof a provision as
similar in terms and intent to such severed provision as may be legal, valid and
enforceable.
8.18 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits
hereto, constitute the entire contract between the parties hereto pertaining to
the subject matter hereof, and supersede all prior and contemporaneous
agreements and understandings between the parties with respect to such subject
matter. Any items disclosed on any Schedule hereto shall relate only
21
to the representations and warranties in the Section of the Agreement to which
they expressly refer. No Schedule to this Agreement shall incorporate any
disclosure set forth on any other Schedule to this Agreement or in any other
document.
8.19 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
(a) "AFFILIATE" shall mean, with respect to any person, any other
person which directly or indirectly controls, is controlled by or is
under common control with such person. For purposes hereof, "control"
shall mean the direct or indirect ownership of more than fifty percent
of the voting or income interests of such Person.
(b) The phrases, "KNOWLEDGE OF THE SELLER", "Seller has no
knowledge" and like phrases shall mean that no person named on Schedule
8.19 hereto has any actual knowledge, after due inquiry, that the
statement made is incorrect.
(c) "MATERIAL ADVERSE EFFECT" shall mean any material adverse
effect, loss, consequence or result on the business, prospects,
condition (financial or otherwise) or operations of the Business, the
Purchased Assets or the operations of the Facility.
8.20 SCHEDULES. All Schedules hereto are provided as of the date hereof
(or as otherwise set forth in such Schedule). Schedules may be supplemented or
updated at Closing to reflect any and all changes in the ordinary course of
business between the date hereof (or such other date set forth in such Schedule)
and Closing.
22
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed by its duly authorized officer as of the date first above
written.
SELLER:
CANDLEWICK YARNS, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Xxxx X. Xxxxxx, Vice President
PARENT:
THE XXXXX GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxx, Chairman
BRETLIN:
BRETLIN, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------------
Xxxx X. Xxxxxx, Vice President
BUYER:
CAF EXTRUSION, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx, President
23
C&A:
XXXXXXX & XXXXXX FLOORCOVERINGS, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxx X. Xxxxxxx, President
24
