STOCK PURCHASE AGREEMENT
between
XXXX FURNITURE, INC.,
and
BJCL, INC.
Dated as of November 7, 1995
TABLE OF CONTENTS
Page
ARTICLE 1: SALE AND PURCHASE OF SHARES................................................................ 1
1.1 Sale and Purchase of Shares.......................................................... 1
1.2 Closing.............................................................................. 2
1.3 Delivery of Shares................................................................... 2
1.4 Payment of Purchase Price............................................................ 2
ARTICLE 2: REPRESENTATIONS AND WARRANTIES............................................................. 4
2.1 Representations and Warranties as to the Company..................................... 4
2.1.1 Corporate Status............................................................ 4
2.1.2 Capitalization.............................................................. 5
2.1.3 Conflicts, Consents......................................................... 5
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities..................................................... 6
2.1.5 No Liens.................................................................... 7
2.1.6 Accounts Receivable......................................................... 8
2.1.7 Inventories................................................................. 8
2.1.8 Real Property............................................................... 8
2.1.9 Insurance................................................................... 10
2.1.10 Litigation................................................................... 10
2.1.11 Compliance with Laws, Permits................................................ 10
2.1.12 Tax Matters.................................................................. 11
2.1.13 Brokers, Finders............................................................. 12
2.1.14 Absence of Certain Changes................................................... 12
2.1.15 Material Agreements.......................................................... 14
2.1.16 Compliance with ERISA........................................................ 16
2.1.17 Intellectual Property........................................................ 22
2.1.18 Labor Matters................................................................ 22
2.1.19 No Material Liabilities...................................................... 23
2.1.20 No Judgments or Orders....................................................... 23
2.1.21 Bank Accounts................................................................ 23
2.1.22 Affiliate Transactions....................................................... 23
2.1.23 Disclosure................................................................... 24
2.1.24 Assets Necessary for Operations/Condition of Properties...................... 24
2.1.25 Questionable Payments........................................................ 24
2.1.26 Principal Customers and Suppliers............................................ 25
2.1.27 Product Returns.............................................................. 25
2.1.28 Product Warranty............................................................. 25
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2.2 Representations and Warranties of XXXX............................................... 26
2.2.1 Authorization, etc.......................................................... 26
2.2.2 Conflicts and Consents...................................................... 26
2.2.3 Title to Shares, etc........................................................ 27
2.2.4 Litigation.................................................................. 27
2.2.5 Brokers, Finders............................................................ 27
2.3 Representations and Warranties of Purchaser.......................................... 28
2.3.1 Purchaser's Corporate Status................................................ 28
2.3.2 Authorization, etc.......................................................... 28
2.3.3 Conflicts, Consents......................................................... 28
2.3.4 Brokers, Finders............................................................ 29
2.3.5 Purchase for Investment..................................................... 29
2.3.6 Financing................................................................... 29
ARTICLE 3: CERTAIN COVENANTS.......................................................................... 29
3.1 Access and Information............................................................... 29
3.2 Conduct of Business of the Company................................................... 30
3.3 Efforts to Consummate Transaction.................................................... 31
3.4 Employee Matters..................................................................... 31
3.5 Consents and Approvals; Releases..................................................... 36
3.6 Purchase of Intellectual Property.................................................... 37
3.7 Tax Matters................................................................................... 37
3.8 Intercompany Debt.................................................................... 39
3.9 Non-Solicitation..................................................................... 39
3.10 Evidence of Insurance. ............................................................. 39
3.11 Noncompetition....................................................................... 39
3.12 Nondisclosure........................................................................ 40
3.13 Liquidation.......................................................................... 41
ARTICLE 4: CONDITIONS PRECEDENT....................................................................... 41
4.1 Conditions to Obligations of Purchaser............................................... 41
4.1.1 Representations, Performance, etc........................................... 41
4.1.2 Opinion of Counsel.......................................................... 42
4.1.3 Resignation of Directors and Officers....................................... 42
4.1.4 Certain Approvals, etc...................................................... 42
4.1.5 No Injunction............................................................... 42
4.1.6 No Liens.................................................................... 42
4.1.7 No Material Adverse Changes................................................. 43
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4.1.8 Transfer of Cherry Grove Intellectual Property.............................. 43
4.1.9 Intercompany Debt........................................................... 43
4.1.10 Notification of Maytag Corporation............................................ 43
4.1.11 Corporate Action.............................................................. 43
4.1.12 Delivery of Audit Opinion. .................................................. 43
4.1.13 Title Policies................................................................ 44
4.2 Conditions to Obligations of Sellers................................................. 44
4.2.1 Representations, Performance, etc........................................... 44
4.2.2 Opinion of Counsel.......................................................... 45
4.2.3 Certain Approvals, etc...................................................... 45
4.2.4 No Injunction............................................................... 45
4.2.5 Purchase Price.............................................................. 45
4.2.6 Guaranties.................................................................. 45
4.2.7 Transfer of Cherry Grove Intellectual Property.............................. 45
4.2.8 Notification of Maytag Corporation.......................................... 46
4.2.9 Intercompany Debt........................................................... 46
4.2.10 Corporate Action............................................................ 46
ARTICLE 5: TERMINATION................................................................................ 46
5.1 Grounds for Termination.............................................................. 46
5.1.1 Termination by XXXX......................................................... 46
5.1.2 Termination by Purchaser.................................................... 46
5.2 Effect of Termination................................................................ 47
ARTICLE 6: INDEMNIFICATION............................................................................ 47
6.1 Indemnification by XXXX.............................................................. 47
6.2 Indemnification by Purchaser................................................ 49
6.3 Notice of Claims............................................................ 50
6.4 Third Party Claims.......................................................... 51
6.5 Environmental Matters....................................................... 53
ARTICLE 7: MISCELLANEOUS
7.1 Survival............................................................................. 59
7.2 Expenses............................................................................. 59
7.3 Assignment; Successors; Parties in Interest.......................................... 60
7.4 Amendment and Modification........................................................... 60
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7.5 Access After Closing................................................................. 60
7.6 Best Efforts......................................................................... 61
7.7 Knowledge............................................................................ 61
7.8 Notices.............................................................................. 61
7.9 Public Announcement.................................................................. 62
7.10 Captions............................................................................. 62
7.11 Entire Agreement..................................................................... 62
7.12 Counterparts......................................................................... 63
7.13 Severability......................................................................... 63
7.14 Arbitration.......................................................................... 63
7.15 Confidential Nature of Information................................................... 63
7.16 Schedules and Exhibits............................................................... 64
7.17 Definitions.......................................................................... 64
7.18 Governing Law........................................................................ 70
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SCHEDULES AND EXHIBITS
Schedule 2.1.1 Subsidiaries
Schedule 2.1.2 Capitalization
Schedule 2.1.3 Required Consents
Schedule 2.1.4 Financial Statements/Material Changes/Undisclosed Liabilities
Schedule 2.1.5 Liens
Schedule 2.1.6 Accounts Receivable Aging
Schedule 2.1.8 Real Property (Owned and Leased)
Schedule 2.1.9 Insurance
Schedule 2.1.10 Litigation
Schedule 2.1.11 Noncompliance with Laws
Schedule 2.1.12 Tax Matters
Schedule 2.1.14 Absence of Certain Changes
Schedule 2.1.15 Material Agreements
Schedule 2.1.16 Employee Benefit Plans
Schedule 2.1.17 Intellectual Property
Schedule 2.1.18 Labor Matters
Schedule 2.1.21 Bank Accounts
Schedule 2.1.22 Affiliate Transactions
Schedule 2.1.24 Fixed Assets
Schedule 2.1.26 Principal Customers and Suppliers
Schedule 2.1.27 Product Returns
Schedule 2.1.28 Product Warranty
Schedule 3.2 Conduct of Business
Schedule 3.5 Guaranties
Schedule 3.6 Cherry Grove Intellectual Property
Schedule 6.5 Environmental
Schedule 7.7 Knowledge
Schedule 7.17 Permitted Liens
Exhibit A Form of Opinion of XXXX'x Counsel
Exhibit B Form of Opinion of Purchaser's Counsel
Exhibit C Agreement of Sale (Cherry Grove Intellectual Property)
Exhibit D Maytag Agreement
Exhibit E Assignment and Assumption Agreement
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 7, 1995 (the
"Agreement"), between XXXX Furniture, Inc., a North Carolina corporation
("XXXX") and BJCL, Inc., a Delaware corporation (the "Purchaser").
W I T N E S S E T H
WHEREAS, XXXX owns all of the issued and outstanding capital
stock of Xxxxx Xxxxxx Company, a North Carolina corporation and a wholly owned
subsidiary of XXXX (together with its Subsidiaries unless the context requires
in Section 2.1.1 and 2.1.2, the "Company"), consisting of 10,000 shares of
Common Stock, par value $1.00 per share (the "Shares");
WHEREAS, XXXX wishes to sell the Shares to the Purchaser, and
the Purchaser wishes to purchase the Shares from XXXX, on the terms and
conditions and for the consideration set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made
herein and of the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Subject to all of the terms
and conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing provided for in Section 1.2, (a)
XXXX will sell to the Purchaser the Shares, and (b) the Purchaser will purchase
from XXXX the Shares for the Purchase Price, free and clear of all Liens (as
defined in Section 7.17). The Shares shall be delivered by XXXX as provided in
Section 1.3, and such Purchase Price shall be paid by the Purchaser as provided
in Section 1.4.
1.2 Closing. The closing of the purchase and sale of the
Shares contemplated hereby (the "Closing") will take place at the offices of
Xxxxxx Stockton, L.L.P., Winston-Salem, North Carolina at 9:00 a.m., on December
15, 1995 or at such other place, time or date as the parties hereto may agree in
writing (the "Closing Date"), subject to Section 5.1.
1.3 Delivery of Shares. At the Closing, XXXX will transfer to
the Purchaser, against payment of the Purchase Price therefor as provided in
Section 1.4, good, marketable and valid title to the Shares, free and clear of
any Liens, by delivering to the Purchaser certificate(s) for such Shares, duly
endorsed in blank or accompanied by a stock power or other proper instrument of
assignment duly executed in blank, and having all requisite stock transfer
stamps attached.
1.4 Payment of Purchase Price.
(a) Estimated Purchase Price. At the Closing, Purchaser shall
pay $16,600,000 (the "Estimated Purchase Price") to XXXX in cash or other
immediately available funds.
(b) Purchase Price Adjustment. (x) Delivery and Review of
Effective Date Balance Sheet. As promptly as practicable, but not later than 10
days after the Effective Date, the Company will cause to be prepared and
delivered to XXXX and the Purchaser (i) the Effective Date Balance Sheet and
(ii) a certificate of the vice president/controller of the Company, setting
forth the Effective Date Working Capital, together with supporting calculations
in reasonable detail (the "Adjustment Certificate"). The Purchaser and XXXX
shall be given an opportunity to discuss with the Company matters relating to
the determination of Effective Date Working Capital. XXXX and Purchaser shall
have 30 days from the date on which the Effective Date Balance Sheet and the
Adjustment Certificate are delivered to review such documents (the "Review
Period"). XXXX and Purchaser shall be provided with full access to the work
papers of the Company in connection with such review. If XXXX or the Purchaser
asserts that the Effective Date Balance Sheet or the Adjustment Certificate are
not materially
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correct or that the determination of Effective Date Working Capital was arrived
at other than in accordance with GAAP applied on a basis consistent with
accounting principles used in the preparation of the Audited Balance Sheet, the
objecting party may, on or prior to the last day of the Review Period, deliver a
notice to the other party setting forth, in reasonable detail, the basis for the
disagreement therewith, together with supporting calculations (the "Dispute
Notice"). If no Dispute Notice is received by either party on or prior to the
last day of the Review Period, the Effective Date Balance Sheet and the
Adjustment Certificate shall be deemed accepted by both parties.
(y) Disputes. Within 30 days after delivery of the Dispute
Notice, if the Purchaser and XXXX shall be unable, despite their reasonable
efforts to resolve the dispute set forth in the Dispute Notice, the Purchaser
and XXXX shall jointly retain a nationally recognized firm of independent public
accountants mutually acceptable to them. Such independent firm shall review the
Effective Date Balance Sheet (and, if necessary or appropriate in their
judgment, any related Company work papers), the Adjustment Certificate and the
Dispute Notice, and shall, as promptly as practicable and in no event later than
45 days following the date of their engagement, deliver to XXXX and the
Purchaser a report (the "Adjustment Report") setting forth, in reasonable
detail, their determination with respect to the issues specified in the Dispute
Notice, and the revisions, if any, to be made to the Effective Date Balance
Sheet, the Adjustment Certificate and the calculation of Effective Date Working
Capital to reflect such determination, together with supporting calculations.
The Adjustment Report shall be final and binding upon the Purchaser and XXXX.
XXXX shall pay one-half, and the Purchaser shall pay one-half, of the fees and
expenses of such independent firm incurred in preparing and delivering such
Adjustment Report.
(z) Adjustment and Payment. To the extent Effective Date
Working Capital is less than Audited Working Capital minus $100,000, XXXX shall
pay to Purchaser such deficit amount as a reduction in Purchase Price. To the
extent Effective Date Working Capital is greater than Audited Working Capital
plus $100,000, Purchaser shall pay such excess to XXXX as additional Purchase
Price. Any adjustment to the Purchase Price pursuant to this Section 1.4 shall
be paid two business days after the date on which the Adjustment Report is
delivered to
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XXXX and the Purchaser or, if no Dispute Notice is received by either party on
or prior to the last day of the Review Period, then on the business day
following the last day of the Review Period. Any such payment shall be made in
cash or by wire transfer of immediately available funds to an account designated
by the party to receive such payment. The Estimated Purchase Price as reduced or
increased, if at all, pursuant to this Section 1.4(b) shall be deemed to be the
Purchase Price of the Shares (the "Purchase Price").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to the Company. XXXX
represents and warrants to the Purchaser as of the date hereof as follows:
2.1.1 Corporate Status. (a) Corporate existence. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of North Carolina and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. The Company is duly qualified and in good standing as a
foreign corporation duly authorized to do business in all jurisdictions in which
the failure to be so qualified would have a Material Adverse Effect (as defined
in Section 7.17 hereof, along with other capitalized terms not otherwise defined
herein).
(b) Each of the subsidiaries of the Company listed on Schedule
2.1.1 (the "Subsidiaries") is a corporation duly organized, validly existing and
in good standing under the laws of the state of its organization set forth on
Schedule 2.1.1 with the corporate power and authority to own, lease and operate
its properties and conduct its business as now being conducted. Except as set
forth on Schedule 2.1.1, the Company has no subsidiaries and owns no interest in
any other entities for purposes of consolidated financial reporting. Each of the
Subsidiaries is duly qualified and in goodstanding as a foreign corporation duly
authorized to do business in all jurisdictions in which the failure to be so
qualified would have a Material Adverse Effect. The mergers of BJ Mexico I,
Inc., BJ Mexico II, Inc. and BJ Mexico III, Inc. into BJ
4
Mexico V, Inc. effective May 25, 1993 were accomplished in compliance with all
applicable laws and resulted in BJ Mexico V, Inc. assuming all of the rights and
liabilities of BJ Mexico I, Inc., BJ Mexico II, Inc. and BJ Mexico III, Inc.
(c) Corporate Records. XXXX has delivered to the Purchaser
complete and correct copies, as in effect on the date hereof, of the Articles of
Incorporation and Bylaws of the Company and the Subsidiaries and all amendments
to each thereof. The Purchaser has been given the opportunity to inspect the
corporate minute and stock transfer books of the Company.
2.1.2 Capitalization. (a) Capital Stock. The authorized
capital stock of the Company consists of 100,000 shares of Common Stock, par
value $1.00 per share (the "Common Stock"), of which 10,000 shares are issued
and outstanding, and the Company has no authority to issue any other capital
stock. The authorized capital stock of each of the Subsidiaries, the number of
shares issued and outstanding, and the beneficial owner of such shares are
listed on Schedule 2.1.2 hereto. The Shares, constituting all of the issued and
outstanding capital stock of the Company, have been duly authorized and validly
issued, and are fully paid and nonassessable, are held of record by XXXX, have
not been issued in violation of any preemptive rights, rights of first refusal
or similar rights, and were offered and sold in compliance with all applicable
securities laws.
(b) Agreements with Respect to Common Stock. There are no
preemptive or similar rights on the part of any holder of any Shares. No
options, warrants, conversion or other rights, agreements, commitments,
arrangements or understandings of any kind obligating the Company, contingently
or otherwise, to issue or sell any shares of its Common Stock or any securities
convertible into or exchangeable for any such shares or any other securities,
are outstanding, and no authorization therefor has been given.
2.1.3 Conflicts, Consents. (a) Conflicts. Except as set forth
on Schedule 2.1.3, the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby in the manner contemplated
hereby, will not (x) result in the creation of
5
any Lien upon any assets or properties of the Company; or (y) conflict with or
result in any violation of or default under (or any event that, with notice or
lapse of time or both, would constitute a default under), require any consent,
notice or other action under, or result in the acceleration or required
prepayment of any indebtedness pursuant to the terms of, any provision of (i)
the Articles of Incorporation or Bylaws of the Company (ii) any mortgage,
indenture, loan agreement, note, bond, deed of trust, other agreement,
commitment or obligation for the borrowing of money or the obtaining of credit,
material lease or other material agreement, contract, license, franchise, permit
or instrument to which the Company is a party or by which the Company or its
properties may be bound, or (iii) any judgment, order, decree, law, statute,
rule or regulation applicable to the Company, which failure to receive such
consent would have a Material Adverse Effect on the Company.
(b) Consents. Other than filings required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx") and except
as set forth in Schedule 2.1.3, no material consent, approval, authorization,
permit, order, filing, registration or qualification of or with any court,
governmental authority or third person is required to be obtained by the Company
or XXXX (whether under applicable law, pursuant to agreements to which the
Company is a party, or otherwise) in connection with the execution and delivery
of this Agreement or the consummation by XXXX of the transactions contemplated
hereby in the manner contemplated hereby.
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities. (a) Financial Statements. XXXX has delivered to the
Purchaser unaudited statements of operations, retained earnings (deficit) and
cash flows of the Company for the fiscal years ended January 1, 1994 and
December 31, 1994 and unaudited balance sheets of the Company as of such dates
(the "Annual Financials") in each case prepared from and in accordance with the
books and records of the Company as of, and for the period ended on, such date
and representing only bona fide transactions. XXXX also has delivered to the
Purchaser an unaudited statement of operations for the nine (9) month period
ended September 30, 1995 and an unaudited balance sheet of the Company as of
September 30, 1995 (the "Interim Financials"),
6
prepared from and in accordance with the books and records of the Company as of,
and for the period ended on, such date and representing only bona fide
transactions. The Annual Financials and Interim Financials are set forth in
Schedule 2.1.4. The Annual Financials and the Interim Financials have been
prepared in accordance with generally accepted accounting principles ("GAAP")
and accounting practices utilized by subsidiaries and divisions of XXXX
disclosed in the footnotes to the Annual Financials and the Interim Financials,
consistently applied throughout the periods indicated and present fairly the
financial condition of the Company at the respective dates indicated and the
results of operations and (in the case of the Annual Financials) cash flows of
the Company for the respective periods indicated, except that the Interim
Financials are subject to year-end audit adjustments.
(b) Material Adverse Effect. Except as disclosed on Schedule
2.1.4, since September 30, 1995, there has been no change in the business,
financial condition, properties, liabilities, operations or prospects of the
Company that has had or could reasonably be expected to have a Material Adverse
Effect on the Company.
(c) Undisclosed Liabilities. Except (i) as and to the extent
reflected in the unaudited balance sheet of the Company as of December 31, 1994
included in the Annual Financials or in the notes to the Annual Financials for
the year then ended, and (ii) as disclosed in Schedule 2.1.4, as of December 31,
1994, there were no other liabilities or obligations, secured or unsecured
(whether absolute, accrued, known or unknown, contingent or otherwise, and
whether due or to become due) that has had or could reasonably be expected to
have a Material Adverse Effect on the Company. Since December 31, 1994, the
Company has not incurred any liabilities or obligations of any nature (whether
accrued, absolute, known or unknown, contingent or otherwise, and whether due or
to become due) except (x) as and to the extent reflected in the Interim
Financials, (y) as disclosed in Schedule 2.1.4, or (z) nonmaterial current
liabilities incurred in the ordinary course of business consistent with past
practice.
2.1.5 No Liens. The Company has good and marketable title to,
and owns free and clear of any Liens, except for Permitted Liens, all of the
personal property reflected in the
7
Annual Financials and the Interim Financials, and all personal property acquired
by the Company since September 30, 1995, except such personal property as has
been disposed of between such date and the date hereof in the ordinary course of
business, it being understood that a disposition of any asset, other than
inventory or marketable products, carried on the books of the Company at more
than $37,500 shall not be deemed to be a disposition in the ordinary course of
business.
2.1.6 Accounts Receivable. The accounts receivable of the
Company reflected on the Annual Financials and the Interim Financials, and those
that have arisen since September 30, 1995, have arisen from bona fide sales
transactions in the ordinary course of business, and are valid claims
enforceable against the account debtor. Schedule 2.1.6 contains a true and
complete aging of the Company's accounts receivable as of September 30, 1995.
2.1.7 Inventories. The inventories of the Company are fit and
sufficient in all material respects for the purposes for which they were
purchased or manufactured, except for inventories for which adequate reserves
have been provided and reflected in the Annual Financials and the Interim
Financials. The amounts shown for inventories on the Annual Financials and the
Interim Financials reflect valuations at the lower of cost or market and are not
in excess of the value of such inventories computed in accordance with GAAP and
accounting practices utilized by subsidiaries and divisions of XXXX disclosed in
the footnotes to the Annual Financials and the Interim Financials applied on a
consistent basis. The Company owns its inventories free and clear of any Liens.
XXXX has no reason to believe that the Company will experience in the
foreseeable future any material difficulties in obtaining, in the desired
quantity and quality, the inventory necessary to conduct its business as it is
currently being conducted.
2.1.8 Real Property. (a) The Company has good and marketable
title in fee simple to the real property, including the plants, buildings and
other improvements thereon, set forth and described in Schedule 2.1.8 hereto
(the "Owned Real Property"), free and clear of any Liens, except for Permitted
Liens.The Owned Real Property constitutes all of the real property
8
reflected in the Annual Financials and the Interim Financials and all real
property acquired by the Company since September 30, 1995. XXXX has heretofore
furnished Purchaser with true and complete copies of all deeds, other
instruments of title and policies of insurance describing the Company's
ownership of the Owned Real Property, and copies of environmental reports
relating to any real property owned or operated by the Company. Schedule 2.1.8
sets forth all leasehold interests in real property held by the Company at the
Closing Date. The Owned Real Property, including the buildings and operations of
the Company conducted thereon, are in substantial compliance with all applicable
ordinances, regulations and zoning laws and do not encroach on property of
others.
(b) Except as set forth in Schedule 2.1.8:
(i) The Company is not in violation of, or default
under, any legal requirement pertaining to any of the Owned Real Property or
leased real property. No notice of violation of any legal requirement, or of any
covenant, condition, restriction or easement affecting any Owned Real Property
or leased real property or with respect to the use or occupancy thereof, has
been given by any Person;
(ii) All of the structures located on Owned Real
Property and leased real property are supplied with utilities and other services
necessary for the operation of such structures, and the business conducted by
the Company therein, including gas, electricity, water, telephone, sanitary
sewer and storm sewer;
(iii) No condemnation proceeding is pending or, to
the knowledge of XXXX, threatened which would impair the occupancy, use or value
of any Owned Real Property or leased real property; and
(iv) There are no (a) leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any other Person
the right to acquire, use or occupy any portion of, any Owned Real Property or
leased real property, (b) outstanding options or rights
9
of first refusal to purchase all or any portion of Owned Real Property or
interest therein, and (c) persons (other than the Company) in possession of any
Owned Real Property or leased real property;
2.1.9 Insurance. The assets, properties and business of the
Company are insured under the various policies of general liability and other
forms of insurance, as set forth on Schedule 2.1.9 hereof. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policies has been received by the Company. To the best knowledge of
XXXX, such insurance policies provide such coverage against risk of loss in such
amounts as are customary for corporations of established reputation engaged in
similar business as the Company and similarly situated.
2.1.10 Litigation. Except as set forth in Schedule 2.1.10,
there are no actions, suits or proceedings pending or, to the knowledge of XXXX,
threatened or any basis for any such actions, suits or proceedings against or
affecting the Company or its respective properties, assets or business.
2.1.11 Compliance with Laws, Permits. (a) Compliance with
Laws. Except as set forth on Schedule 2.1.11, the Company is not, nor previously
has it been, in violation of any applicable laws or regulations or any
applicable orders, rules, writs, judgments, injunctions, decrees or ordinances
applicable to the business or operations of the Company, the violation of which
would have a Material Adverse Effect on the Company.
(b) Permits. All necessary material licenses, permits or
orders with respect to the conduct of the business of the Company have been
obtained by the Company and are in effect as of the date hereof. All material
permits, licenses, orders, registrations, or other approvals of all federal,
state, local or foreign governmental or regulatory bodies, have been obtained,
are set forth on Schedule 2.1.11 hereto, are in full force and effect, and,
there has been neither any violation, suspension or cancellation thereof nor any
basis for any such claim. The consummation of the transactions contemplated by
this Agreement will not result in the
10
revocation, suspension or limitation of any material license or permit, nor will
there be required any consent of its respective issuing authority as a result of
the consummation of the transactions contemplated hereby.
2.1.12 Tax Matters. The Company or XXXX has timely filed, on
behalf of the Company, all federal, foreign, state and local tax returns and
other tax reports required to be filed by the Company and has paid, or, with
respect to current taxes not yet due and payable, set up an adequate reserve on
the books of the Company for the payment of, all federal, foreign, state and
local income taxes and all other taxes (including, without limitation, all
franchise, gross receipts, license, property, sales, use, excise, intangible,
severance, stamp, occupation, environmental, social security, withholding,
employment, unemployment or payroll taxes, and interest or penalties thereon,
and all such other taxes along with all federal, foreign, state and local income
taxes being defined collectively as "Taxes") required to be paid in respect of
the periods covered by such returns, and has set up an adequate reserve on the
books of the Company for the payment of all Taxes payable by the Company in
respect of the period subsequent to the last of such periods. As of the Closing
Date, such reserve as reflected on the balance sheet included as part of the
Interim Financials will be sufficient for the then-unpaid Taxes of or with
respect to the Company through and including the Closing Date, except as
increased or decreased for normal operational Tax liabilities and consistent
with prior practices for the period between September 30, 1995 and the Closing
Date. All such returns are true, complete and correct. The Company or XXXX is
not delinquent in the payment of any Taxes, has not waived any statute of
limitations in respect of Taxes, and has not requested or agreed to any
extension of time within which to file any tax return or report or with respect
to a tax assessment or deficiency. No deficiencies for Taxes have been assessed
or asserted, and except as set forth on Schedule 2.1.12, the Company and XXXX
know of no unresolved questions or claims concerning the Tax liability of the
Company. XXXX has delivered to Purchaser a true and correct copy of all foreign,
state (except California) and local Tax returns (including amended returns) and
tax audit reports (if any). No transfer taxes will be payable by the Company as
a result of the transactions contemplated hereby other than New York realty
transfer gains tax attributable to the Company's New York showroom lease. Except
as set forth on
11
Schedule 2.1.12, there is no pending or, to the knowledge of XXXX, threatened
examination or audit by the Internal Revenue Service or any state taxing
authorities of such returns. All proper amounts have been collected or withheld
by the Company for all Taxes payable or anticipated to be payable. Except as set
forth on Schedule 2.1.12, (i) the Company has not been audited by any taxing
authority, (ii) the Company is not and has not previously been a party to a tax
allocation or sharing agreement and has not otherwise assumed any liability for
Taxes of any third party, including as a transferee or successor, whether under
section 1.1502-6 of the Treasury regulations or otherwise, or (iii) the Company
has never been (nor does it have any liability for unpaid taxes because it was)
a member of an affiliated group within the meaning of Internal Revenue Code
Section 1504(a) or any unitary, affiliated or similar group for state, local or
foreign tax purposes.
2.1.13 Brokers, Finders. The Company and XXXX have not
retained any broker or finder in connection with the transactions contemplated
hereby so as to give rise to any claim against the Purchaser or the Company for
any brokerage or finder's commission, fee or similar compensation, except that
Xxxxxx, Read & Co. Inc. has acted as financial advisor to XXXX and its fees and
expenses will be paid by XXXX.
2.1.14 Absence of Certain Changes. Except as set forth in
Schedule 2.1.14, since September 30, 1995, the Company has not:
(a) issued, sold or delivered or agreed to issue, sell or
deliver any additional shares of its capital stock or any options, warrants or
rights to acquire any such capital stock, or securities convertible into or
exchangeable for such capital stock;
(b) mortgaged, pledged or subjected to any lien, lease,
security interest or other charge or encumbrance any of its assets, tangible or
intangible, except in the ordinary course of business;
12
(c) acquired or disposed of any material assets or properties,
or entered into any agreement or other arrangements for any such acquisition or
disposition, or entered into or amended or terminated any Material Agreement,
except inventory in the ordinary course of business consistent with past
practice;
(d) declared, made, paid or set apart any sum for any dividend
or other distribution to its shareholders or purchased or redeemed any shares of
its capital stock or any option, warrant or right to purchase any of its capital
stock, or reclassified its capital stock;
(e) increased the wages, salaries, compensation, pension or
other benefits payable to any employee other than in accordance with the normal
compensation and benefits policies of the Company consistent with past practice,
or granted any severance or termination pay, or entered into any employment,
severance or consulting agreement or arrangement with any officer or salaried
employee that is not terminable by the employer without cause and without
penalty or changed any benefit plan or labor agreement except to comply with
applicable law;
(f) forgiven or cancelled any material debts or claims or
waived any material rights of value other than intercompany debts, claims or
rights and other than in the ordinary course of business consistent with past
practice;
(g) suffered any damage, destruction or loss (whether or not
covered by insurance) affecting its properties or assets that could reasonably
be expected to have a Material Adverse Effect on the Company;
(h) suffered any strike or other labor trouble materially
affecting its business or operations;
13
(i) suffered or experienced any change in relations with or
loss of any employees or customers that could reasonably be expected to have a
Material Adverse Effect on the Company;
(j) incurred any indebtedness for borrowed money other than
trade indebtedness incurred in the ordinary course of business consistent with
past practice;
(k) changed any pricing practices (other than in the ordinary
course consistent with past practices) or any method of accounting or accounting
practice or policy of the Company;
(l) conducted its business other than in the ordinary course
consistent with past practice, except as required by this Agreement;
(m) settled or compromised any claim, suit or cause of action
involving more than $37,500;
(n) materially altered its collection practices with respect
to accounts receivable;
(o) materially altered its payment practices with respect to
accounts payable;
(p) made any capital expenditures or commitments therefor
outside the ordinary course of business in excess of $37,500 or
(q) agreed to do any of the foregoing.
2.1.15 Material Agreements. Except for the contracts,
franchises, agreements, plans, leases and licenses described in Schedule 2.1.15
hereto, the Company is not a party to or subject to:
14
(a) any written employment contract or any other agreement or
arrangement relating to compensation or severance payments with any officer,
consultant, director or employee;
(b) any plan or contract or arrangement providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing or
other benefits for employees;
(c) any contract or agreement with any labor union;
(d) any lease (other than leases of real property described in
Schedule 2.1.8 hereto) involving payment of annual rentals in excess of $37,500;
(e) any contract or agreement for the purchase of any
materials, services, or supplies involving annual payments in excess of $37,500
and of more than one year in duration;
(f) any contract or agreement for the purchase of equipment or
any construction or other contract or agreement, not otherwise covered by this
Section 2.1.15, involving annual payments in excess of $37,500 and of more than
one year in duration;
(g) any contract or agreement for the sale of its products,
exceeding $37,500 on an annual basis and of more than one year in duration;
(h) any contract or agreement with an agent, sales
representative, dealer or other distributor of products of the Company;
(i) any instrument evidencing or related to indebtedness for
money loaned or borrowed by the Company or indebtedness guaranteed by the
Company, in any case in excess of $37,500;
15
(j) any contract or agreement, not otherwise covered by this
Section 2.1.15, containing covenants materially limiting the freedom of the
Company (or, to the knowledge of XXXX, any key employee of the Company) to
compete in any line of business or with any person;
(k) any license or franchise agreement in which the Company is
the licensor, licensee or franchisor;
(l) any license or franchise agreement in which the Company is
the licensee or franchisee;
(m) any contract or agreement, not of the type covered by any
of the other items of this Section 2.1.15, which involves the payment or receipt
by the Company of $37,500 or more in any one year and which by its terms is
either (i) not to be performed by the Company prior to one year from the date
hereof, or (ii) does not terminate, or is not terminable, by and without penalty
to the Company prior to one year from the date hereof.
XXXX has delivered to Purchaser correct and complete copies of
all contracts, franchises, agreements, plans, leases and licenses described in
Schedules 2.1.8 and 2.1.15 (the "Material Agreements"), and all such Material
Agreements are valid and in full force and effect and the Company (or, to the
knowledge of XXXX, any other party to such Material Agreements) has not breached
any material provision of, and is not in default in any material respect under
the terms of, any such Material Agreement. Schedules 2.1.8 and 2.1.15 correctly
identifies each Material Agreement which is or might be terminable by any other
party upon the change of control of the Company.
2.1.16 Compliance with ERISA. (a) The term "Plan" shall
include each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or other
medical, life or other insurance pension or retirement, profit sharing, stock
appreciation rights, supplemental unemployment, layoff, consulting, fringe
16
benefit (including, but not limited to, vacation, paid holidays, personal leave,
or any similar plan, program, agreement, arrangement, policy or understanding
(other than arrangements involving the payment of wages) sponsored, maintained
or contributed to by the Company or by any trade or business, whether or not
incorporated, that together with the Company or XXXX would be deemed a "single
employer" within the meaning of section 4001(a)(14) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA") (an "ERISA Affiliate"), whether or not subject
to the laws of a country or jurisdiction other than the United States, for the
benefit of any current or former employee, director, or independent contractor
of the Company, whether foreign or domestic and whether formal or informal and
whether legally binding or not with respect to which the Company, XXXX or any
ERISA Affiliate has or may in the future have any liability or obligation to
contribute or make payments of any kind.
(b) Schedule 2.1.16 contains a true and complete list of each
Plan.
(c) Neither the Company nor any ERISA Affiliate has any formal
plan or commitment, whether legally binding or not, to create any additional
Plan or modify or change any existing Plan that would affect any current or
former employee, director or independent contractor of the Company.
(d) With respect to each of the Plans, the Company has
heretofore delivered to the Purchaser (or will deliver to the Purchaser no later
than 30 days prior to the Closing) true, correct and complete copies of each of
the following documents: (i) the Plans (including all amendments thereto) or, in
the case of unwritten Plans, descriptions thereof, (ii) the three most recent
Form 5500 annual reports, if required under ERISA, including all attachments
thereto, filed with the Internal Revenue Service with respect to each such Plan,
(iii) if the Plan is funded through a trust or any third party funding vehicle,
such as an insurance contract, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements and trust
reports thereof, (iv) the most recent determination letter received from the
Internal Revenue Service with respect to each such Plan that is intended to be
qualified under
17
section 401 of the Internal Revenue Code of 1986, as amended (the "Code") as
well as any pending application for a determination letter,(v) the most recent
summary plan descriptions, together with each summary of material modifications,
required under ERISA with respect to such Plan or as otherwise provided to Plan
participants or beneficiaries, and all material employee communications relating
to each Plan, (vi) a copy of the actuarial report, if required under ERISA, with
respect to each such Plan for the last three years, (vii) all contracts relating
to the Plans with respect to which the Company or any ERISA Affiliate may have
any liability, including, without limitation, insurance contracts, investment
management agreements, subscription and participation agreements and record
keeping agreements, and (viii) a copy of all material documents and
correspondence relating to the Plans received from or provided to the Department
of Labor ("DOL"), the IRS, and the Pension Benefit Guaranty Corporation (the
"PBGC") during the past three years.
(e) Each Plan has been administered and operated in all
material respects in accordance with its terms and all applicable laws,
including but not limited to ERISA and the Code.
(f) All reports, returns and similar documents with respect to
the Plans required to be filed with any governmental agency or distributed to
any Plan participant have been duly and timely filed or distributed and, to the
knowledge of XXXX, all reports, returns and similar documents actually filed or
distributed were true, complete and correct in all material respects.
(g) No liability under Title IV of ERISA has been incurred by
the Company or any ERISA Affiliate since the effective date of ERISA that has
not been satisfied in full, and no condition exists that presents a material
risk to the Company of incurring a liability under such Title, other than
liability for premiums due the PBGC, which payments have been or will be made
when due. To the extent this representation applies to sections 4064, 4069 or
4204 of Title IV of ERISA, it is made not only with respect to the Plans but
also with respect to any employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to
18
which the Company or an ERISA Affiliate made, or was required to make,
contributions during the six year period ending on the Closing Date.
(h) Neither the Company, any ERISA Affiliate, Plan, trust
thereunder, nor any trustee or administrator thereof has engaged in any
transaction in connection with which the Company or any ERISA Affiliate, any of
the Plans, any such trust, or any trustee or administrator thereof, or any party
dealing with the Plans or any such trust could be subject to either civil
liability or a penalty pursuant to section 409, 502(i) or 502(1) of ERISA or a
tax imposed pursuant to Chapter 43 of the Code.
(i) The PBGC has not instituted proceedings to terminate any
of the Plans, no condition exists that presents a material risk that such
proceedings will be instituted and no reportable event (within the meaning of
Section 4043 of ERISA) has occurred or will occur as a result of the
transactions contemplated by this Agreement with respect to any Plan.
(j) No Plan is a "multi-employer plan" (within the meaning of
Section 3(37) of ERISA) or a "multiple employer" plan (within the meaning of
Section 4063 or 4064 of ERISA) and the Company has not and will not incur any
withdrawal liability on account of any ERISA Affiliate. Each Plan that is
intended to be qualified under Section 401(a) of the Code is so qualified, has
received a favorable determination letter from the Internal Revenue Service to
that effect or has a timely application pending for such a determination letter
with the Internal Revenue Service, no such determination letter has been
revoked, and, to the knowledge of XXXX, revocation has not been threatened, no
event has occurred and no circumstances exist that would adversely affect the
tax-qualification of such Plan; and such Plan has not been amended since the
effective date of its most recent determination letter in any respect that might
adversely affect its qualification, materially increase its cost or require
security under section 307 of ERISA. The Company has also provided to Purchaser
a list of all amendments to each Plan which is intended to be qualified as to
which a favorable determination letter has not yet been received.
19
(k) Except as set forth on Schedule 2.1.10, there are no
pending or, to the knowledge of XXXX, threatened claims, investigations by any
governmental agency or other claims against any Plan, the Company, XXXX, any
ERISA Affiliate, trustee of any Plan, or administrator of any Plan or otherwise
involving any of the Plans (other than routine claims for benefits) or asserting
any rights to or claims for benefits under any Plan that could give rise to any
material liability and there are not any facts that could give rise to any
material liability in the event of any such investigation, claim, suit or
proceeding.
(l) All contributions required to have been made by the
Company, XXXX or any ERISA Affiliate to any Plan pursuant to the terms of each
of the Plans, any applicable collective bargaining agreement, and when
applicable, Section 412 of the Code or Section 302 of ERISA, have been made
within the time prescribed by such terms or provisions. All such amounts
properly accrued through the Closing Date with respect to the current plan year
thereof will be paid by the Company on or prior to the Closing Date or will be
properly recorded on the balance sheet. None of the Plans or any trust
established thereunder had an "accumulated funding deficiency" (as defined in
section 412 of the Code), whether or not waived, as of the last day of its most
recent fiscal year ended prior to the date of this Agreement.
(m) No employee of the Company will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Plan as a result of the transactions contemplated by this
Agreement, except as provided below in Section 3.4 of this Agreement.
(n) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of Company
or any of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation section 1.280G-1) under any employment
severance or termination agreement, other compensation arrangement or Plan
currently in effect would not be characterized as an "excess parachute payment"
as such term is defined in section 280G(b)(1) of the Code.
20
(o) No compensation payable by the Company to any of their
employees under any existing contract, Plan or other employment arrangement
(including by reason of the transactions contemplated hereby) will be subject to
disallowance under section 162(m) of the Code.
(p) No Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company upon retirement or other termination of service
(other than (i) coverage mandated by applicable law, (ii) death benefits or
retirement benefits under any "employee pension plan," as that term is defined
in section 3(2) of ERISA, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or the ERISA Affiliates or (iv) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary)). The Accumulated Post-Retirement Benefit Obligation (as defined
in Statement of Financial Accounting Standards No. 106) as of December 31, 1994
in respect of post-retirement health and life benefits for the Company's
employees is estimated by the Company's independent actuary to be $0 calculated
using the actuarial assumptions used for the Company's last available annual
report.
(q) Schedule 2.1.16 lists each Plan that is subject to laws of
a country or jurisdiction other than the United States (the "Foreign Plans").
Except as provided in Schedule 2.1.16, all contributions required to be made to
each Foreign Plan for all prior plan years in order for each of the Foreign
Plans which are pension plans (the "Foreign Pension Plans") to comply with the
minimum funding standards imposed by applicable law have been made or properly
accrued. All employee contributions to the Foreign Plans for all prior plan
years have been properly withheld by the Company and have been fully paid into
the applicable funding arrangements. There has been no withdrawal by the Company
of assets from the Foreign Pension Plans and no application for approval of a
withdrawal of assets has been made to any regulatory authority. Each of the
Foreign Pension Plans is registered or qualified within the meaning of
applicable law and nothing has occurred which would result in the revocation of
the registration or qualification of such Foreign Pension Plans. The
representation and warranties
21
contained in this Section 2.1.16(q) are in addition to each of the other
representations and warranties contained in Section 2.1.16 that are applicable
to the Foreign Plans.
(r) Other than current or contingent liabilities previously
disclosed on Schedule 2.1.4, the Company, XXXX and each ERISA Affiliate has, and
will have, no material current or contingent liability with respect to any Plan.
2.1.17 Intellectual Property. Schedule 2.1.17 contains a list
of all trademarks, patents and patent applications, trade names and copyrights,
whether registered or not, owned or used by the Company or in which it has an
interest by license, agreement, shop right, common law, or otherwise and which
are material to the conduct of its business (the "Intellectual Property"). To
the knowledge of XXXX, no third party is engaged in any activity not duly
authorized by the Company or XXXX which would constitute an infringement of the
Intellectual Property of the Company. There are no claims or proceedings pending
or, to the knowledge of XXXX, threatened against the Company asserting that the
Company has or is infringing the valid patents, copyrights, trademarks or trade
names of any third party. XXXX is unaware of any claim by any third party that
the Company does now own or have the right to use all patents (including patents
pending), trademarks, trade names, copyrighted material, processes, designs,
formulas, inventions, trade secrets, know-how, ideas, concepts or other
proprietary or confidential information which are presently used in and are
material to the operation of the Company's business. Except as set forth in
Schedules 2.1.3 and 2.1.17, all of the Intellectual Property listed in Schedule
2.1.17 are fully assignable to the extent permitted by applicable law and, to
the knowledge of XXXX, are free and clear of any attachments or Liens.
2.1.18 Labor Matters. Except as set forth on Schedule 2.1.18,
there has been no material work stoppage or slowdown or other material labor
difficulties relating to the Company. Except as set forth on Schedule 2.1.18,
the Company is not a party to any collective bargaining agreement with any labor
union or similar organization, nor does XXXX know of any such organization which
represents or claims to represent any of the Company's employees or
22
is currently seeking to represent or organize the employees at any of the
principal facilities of the Company.
2.1.19 No Material Liabilities. There are no liabilities of
the Company, other than:
(a) liabilities disclosed or provided for in the Annual
Financials or the Interim Financials;
(b) liabilities incurred or recorded in the ordinary course of
business since September 30, 1995, none of which has been materially adverse to
the business, assets or operations of the Company.
2.1.20 No Judgments or Orders. The Company is not a party to
or subject to any judgment, order or decree entered in any action or proceeding
brought by any governmental agency or any other party either enjoining it in
respect of any business practice or the conduct of business in any area or the
acquisition of any property or which otherwise materially adversely affects the
Company.
2.1.21 Bank Accounts. Schedule 2.1.21 sets forth a list of all
bank accounts, xxxxx cash or imprest funds maintained by the Company, with the
persons authorized to sign thereon. Also included on Schedule 2.1.21 is a list
of safe deposit boxes in the Company's name and the persons authorized to enter
such boxes.
2.1.22 Affiliate Transactions. Except as reflected in the
Annual Financials, the Interim Financials or otherwise set forth in Schedule
2.1.22, there are no transactions involving the Company or XXXX or any of their
respective affiliates (which includes officers, directors and key employees)
arising out of any transaction with the Company (other than for services as
employees, officers and directors), and the Company is not subject to any
liability that will survive Closing with respect to any transactions involving
XXXX or any of its affiliates
23
including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from XXXX
or any affiliate of XXXX.
2.1.23 Disclosure. To XXXX'x knowledge, this Agreement, the
Schedules hereto and the certificates and other documents furnished by the
Company or XXXX to the Purchaser pursuant hereto, taken as a whole, do not as of
their respective dates contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements contained herein and
therein not misleading.
2.1.24 Assets Necessary for Operations/Condition of
Properties. The real and personal properties of the Company described in
Sections 2.1.6, 2.1.7, 2.1.8 and 2.1.17 and the real property and personal
property held by the Company pursuant to the leases and licenses described in
Schedules 2.1.8, 2.1.17 and 2.1.24 hereto constitute all of the material assets
and properties utilized by the Company in connection with its business and
operations as presently conducted. All material facilities, machinery,
equipment, fixtures, vehicles and other tangible property owned, leased or
utilized by the Company are in good operating condition and repair, normal wear
and tear excepted, are reasonably fit and useable for the purposes for which
they are being used, and, to the knowledge of XXXX, will not likely require a
major overhaul or repair in the foreseeable future except in the ordinary course
of business; provided, however, Purchaser acknowledges that the Company's
Newport, Arkansas leased warehouse facility may require repairs.
2.1.25 Questionable Payments. Neither the Company nor, to
XXXX'x knowledge, any of its directors, officers, agents, employees or other
person associated with or acting on behalf of the Company has (a) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payments to government officials or employees, or foreign
government officials or employees, from corporate funds, (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets,
(d) made any false or fictitious entries on
24
the books of account of the Company, (e) made or received any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment, or (f) made any
other material payment, favor or gift not fully deductible for federal income
tax purposes.
2.1.26 Principal Customers and Suppliers.
(a) Schedule 2.1.26 contains a true and complete
list of the ten largest customers of the Company during each of fiscal 1994 and
during the nine months ended September 30, 1995, indicating the amount of
revenues attributable to each such customer, and since that date no such
customer listed for 1995 has terminated its relationship with or adversely
curtailed its purchases from the Company or indicated (for any reason) its
intention so to terminate its relationship or curtail its purchases.
(b) Schedule 2.1.26 also contains a true and
complete list of the ten largest suppliers from whom the Company purchased goods
or services during fiscal 1994 and during the nine months ended on September 30,
1995, indicating the amount purchased from such supplier, and since that date no
such supplier listed for 1995 has terminated its relationship with or adversely
curtailed its accommodations, sales or services to the Company or indicated (for
any reason) its intention to terminate such relationship or curtail its
accommodations, sales or services.
2.1.27 Product Returns. Schedule 2.1.27 contains a true
summary of the product return experience of the Company for the fiscal years
1993 and 1994 and the nine month period ended September 30, 1995. The Company
has not experienced any product returns which have had or may have a Material
Adverse Effect.
2.1.28 Product Warranty. Schedule 2.1.28 contains a true and
complete description of all warranties granted or made with respect to products
sold, or services rendered, by the Company. The Company has not suffered any
product liability or product warranty claims which have had or may have a
Material Adverse Effect.
25
2.2 Representations and Warranties of XXXX. XXXX represents
and warrants to the Purchaser as follows:
2.2.1 Authorization, etc. XXXX is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina. XXXX has all requisite corporate power and authority to execute
and deliver this Agreement and each of the other agreements, instruments and
documents required to be executed, delivered and performed by XXXX hereunder and
to perform fully its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and each such other agreement,
instrument and document and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of XXXX. This Agreement has been duly executed and delivered by XXXX
and constitutes the legal, valid and binding obligation of XXXX enforceable
against XXXX in accordance with its terms.
2.2.2 Conflicts and Consents. (a) Conflicts. Except as set
forth in Schedule 2.1.3, the execution, delivery and performance by XXXX of this
Agreement and each other agreement, instrument or document required to be
executed and delivered by XXXX hereunder, and the consummation by XXXX of the
transactions contemplated hereby and thereby, in the manner contemplated hereby
and thereby, do not and will not conflict with or result in the breach of any of
the terms or provisions of, or constitute a default under (or an event that,
with notice or lapse of time or both, would constitute a default under), require
any consent under, or result in the acceleration or required prepayment of any
indebtedness pursuant to the terms of, any provision of (i) the Articles of
Incorporation or Bylaws of XXXX, (ii) any material mortgage, indenture, loan
agreement, note, other agreement for the borrowing of money or the obtaining of
credit, deed of trust, will, lease or other material agreement or instrument to
which XXXX is a party or by which XXXX or the Shares owned by XXXX may be bound,
or (iii) any judgment, order, decree, law, statute, rule or regulation
applicable to XXXX or to the Shares to be sold by XXXX.
26
(b) Consents. Other than filings required under the HSR Act
and except as set forth in Schedule 2.1.3, no consent, approval, authorization,
order, filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by XXXX in connection with
the execution, delivery and performance by XXXX of this Agreement or any other
agreement, instrument or document required to be executed and delivered by XXXX
hereunder or consummation by XXXX of the transactions contemplated herein or
therein in the manner contemplated hereby or thereby.
2.2.3 Title to Shares, etc. XXXX is the record and beneficial
owner of and has good, valid and marketable title to the Shares, free and clear
of any Lien. Upon the delivery of and payment for the Shares at Closing, as
provided for in this Agreement, XXXX will transfer to the Purchaser good,
marketable and valid title to the Shares, free and clear of any Lien.
2.2.4 Litigation. There is no action, claim, suit or
proceeding pending or, to the knowledge of XXXX, threatened by or against or
affecting XXXX and, to the knowledge of XXXX, there is no investigation pending
or threatened against or affecting XXXX, in each case before any court or
governmental or regulatory authority or body, that could reasonably be expected
to have a material adverse effect on the consummation of the transactions
contemplated by this Agreement or on the ability of XXXX to perform its
obligations under this Agreement and each of the other agreements, instruments
and documents required to be executed and delivered by XXXX hereunder.
2.2.5 Brokers, Finders. XXXX has not retained any broker or
finder in connection with the transactions contemplated hereby so as to give
rise to any claim against the Purchaser or the Company for any brokerage or
finder's commission, fee or similar compensation, except that Xxxxxx, Read & Co.
Inc. has acted as financial advisor to XXXX and its fees and expenses will be
paid by XXXX at the Closing.
27
2.3 Representations and Warranties of Purchaser. The Purchaser
represents and warrants to XXXX as of the date hereof as follows:
2.3.1 Purchaser's Corporate Status. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
2.3.2 Authorization, etc. The Purchaser has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser and constitutes the legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms.
2.3.3 Conflicts, Consents. (a) Conflicts. The execution and
delivery of this Agreement by the Purchaser, and the consummation by the
Purchaser of the transactions contemplated hereby in the manner contemplated
hereby, do not and will not conflict with or result in any violation of, or
default under (or any event that, with notice or lapse of time or both, would
constitute a default under), any provision of (i) the Certificate of
Incorporation or Bylaws of the Purchaser, (ii) any mortgage, indenture, loan
agreement, note, bond, deed of trust, other agreement, commitment or obligation
for the borrowing of money or the obtaining of credit, material lease or other
material agreement, contract, license, franchise, permit or instrument to which
the Purchaser is a party or by which it may be bound, or (iii) any judgment,
order, decree, law, statute, rule or regulation applicable to the Purchaser.
(b) Consents. Other than filings required under the HSR Act,
no consent, approval, authorization, permit, order, filing, registration or
qualification of or with any court, governmental authority or third person is
required to be obtained by the Purchaser in connection with the execution and
delivery by the Purchaser of this Agreement or the consummation by the Purchaser
of the transactions contemplated hereby in the manner contemplated hereby.
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2.3.4 Brokers, Finders. The Purchaser has not retained any
broker or finder in connection with the transactions contemplated hereby so as
to give rise to any valid claim against XXXX or the Company for any brokerage or
finder's commission, fee or similar compensation.
2.3.5 Purchase for Investment. The Purchaser is acquiring the
Shares for its own account for investment and not with a view to any
distribution thereof. The Purchaser acknowledges receipt of advice from the
Company to the effect that the Shares have not been registered under the
Securities Act of 1933 or any state securities laws.
2.3.6 Financing. Purchaser has furnished or will furnish to
XXXX within one business day of receipt true and complete copies of all
commitment or proposal letters received from the lending and equity sources
setting forth the amount of funds necessary for Purchaser to purchase the Shares
and the Cherry Grove Assets as provided in this Agreement. All fees required to
be paid by Purchaser to such financing sources as of the date hereof have been
paid by Purchaser and such commitment letters are subject only to normal
conditions. Purchaser is not in default with respect to any requirements or
conditions contained in such commitment or proposal letters and knows of no
conditions, events or circumstances that would cause such financing sources not
to fund such commitments in connection with the transactions contemplated
hereby.
ARTICLE 3
CERTAIN COVENANTS
3.1 Access and Information. Prior to the Closing, XXXX will
cause the Company (a) to give to the Purchaser and its representatives full and
free access to the Company's properties, books, records, contracts and
commitments upon reasonable notice during normal business hours, (b) to furnish
all such information and documents relating to its properties and business as
the Purchaser may reasonably request, and (c) to allow the Purchaser to discuss
matters relating to the Company with the outside auditors, attorneys and such
other representatives for the Company as are reasonably requested by the
Purchaser.
29
3.2 Conduct of Business of the Company. (A) Except as set
forth in Schedule 3.2 and in Section 3.2(B) below, from the date hereof to the
Closing, XXXX will cause the Company (a) to conduct its business only in the
ordinary course in substantially the same manner as heretofore conducted, (b) to
maintain and keep its properties and equipment in such repair, working order and
condition as is sufficient for the operation of its business in the ordinary
course, (c) to keep in full force and effect insurance comparable in amount and
scope of coverage to that now maintained by it (to the extent available on
commercially reasonable terms in the case of any renewal or replacement
policies), (d) to perform in all material respects all of its obligations under
all contracts and commitments applicable to its business or properties, (e) to
use its best efforts to maintain and preserve the Company's business
organization intact, and maintain satisfactory relationships with officers,
employees, suppliers, distributors and customers so that they will be preserved
after the Closing, (f) to maintain its books of account and records in the usual
and regular manner, (g) to comply in all material respects with all laws and
regulations applicable to it and to the conduct of its business, (h) not to
amend its Articles of Incorporation or Bylaws, (i) not to merge or consolidate
with, or agree to merge or consolidate with, or to purchase substantially all of
the assets of, or otherwise acquire, any business or any business organization
or division thereof, (j) not to make any material commitments or expenditures,
other than those previously disclosed to Purchaser, and not to enter into any
transaction with XXXX or any affiliate of XXXX or the Company not consistent
with past practice, (k) promptly to advise the Purchaser in writing of any
emergency or other change in the normal course of business or in the operations
of its properties and of any governmental or any other third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), (l) promptly advise the Purchaser of any material adverse change
in its business, operations or financial condition, (m) to collect its accounts
receivable in the ordinary course of business consistent with past practice, (n)
to pay its accounts payable in the ordinary course of business consistent with
past practice, (o) to use its best efforts to insure that the representations
and warranties contained in Section 2 hereof or elsewhere in this Agreement
shall be true and correct as of the Closing Date and (p) not to take any action
described in section 2.1.14 hereof.
30
(B) Notwithstanding the foregoing provisions of Section
3.2(A), following the Effective Date, XXXX will cease withdrawing all cash
balances from the Company and the Company shall retain for its own account all
cash from collections, including, without limitation, the collection of accounts
receivable and customer deposits, and shall utilize such cash proceeds to fund
the working capital needs of the Company from the Effective Date until the
Closing Date. To the extent that XXXX is required to contribute additional cash
to the Company on or after the Effective Date, such amount shall not be treated
as an intercompany account, and Purchaser shall, or shall cause the Company, to
reimburse XXXX for all amounts so advanced on or after the Effective Date.
Further, from the Effective Date until the Closing Date, all intercompany
accounts, including, without limitation, interest payable to LFI Capital
Management, Inc. and royalties payable to Cherry Grove, Inc., shall be treated
as third party accounts and all amounts owing to XXXX pursuant to such accounts
shall be paid to XXXX. Such reimbursement and payment shall occur within two
business days of the Closing Date and shall be made in cash or other immediately
available funds. Purchaser shall be responsible for and agrees to protect, save
and hold XXXX harmless from and against any and all Taxes attributable to the
ordinary course operations of the Company after the Effective Date (specifically
excluding therefrom those matters for which XXXX indemnifies Purchaser
Indemnified Parties pursuant to Sections 3.7(b) and 3.13).
3.3 Efforts to Consummate Transaction. Subject to the terms
and conditions herein provided, each of the parties agrees to use its best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby in accordance with the terms of this Agreement.
3.4 Employee Matters. (a) Purchaser shall use its reasonable
best efforts to, or shall cause the Company to use its reasonable best efforts
to, maintain employee benefit plans, programs, policies and arrangements for
employees of the Company who are employees of the Company as of the Closing Date
("Affected Employees") which provide benefits that are of substantially similar
value in the aggregate as those provided under the employee benefit
31
plans, programs, policies and arrangements of the Company in effect as of the
date of this Agreement. To the extent Purchaser establishes comparable plans,
programs or policies, Affected Employees shall be given credit for all service
with the Company, XXXX, any ERISA Affiliates and predecessor employers to the
same extent as such service was credited for such purpose by the Company, XXXX
or any ERISA Affiliates under each employee benefit plan, program, policy or
arrangement of the Company, XXXX, or any ERISA Affiliates in which the employees
are eligible to participate for purposes of eligibility and vesting.
(b) XXXX'x Obligations. XXXX shall retain, and neither
Purchaser nor the Company shall assume, any liabilities or obligations of XXXX
or the Company or any of their affiliates relating to the Plans or current or
former employees of the Company with respect to claims incurred and employment
prior to the Closing Date. As of the Closing Date, the Company shall cease to be
a participating employer under the Plans maintained by XXXX and XXXX shall take
all action as may be necessary to effect such cessation of participation. XXXX
shall indemnify and hold Purchaser harmless for any liabilities or obligations
of the Company or XXXX relating to employees, employee benefit plans or Plans
arising at or before, or by reason of, the Closing Date, or otherwise in respect
of any period at or before the Closing Date.
(c) Purchaser's Obligations. Except as provided in Section
3.4(n), nothing in this Agreement shall be construed to obligate Purchaser to
offer any particular benefit at any particular level with respect to any
Affected Employee, and nothing in this Agreement shall be construed to entitle
any Affected Employee to any specific compensation.
(d) Savings Plans. As soon as practicable after the Closing,
the Choice Plus Plan of Pennsylvania House, Inc. and any other savings plan
sponsored or maintained by XXXX or any of its ERISA Affiliates for the benefit
of Affected Employees (hereinafter referred to collectively as the "Savings
Plans"), shall be amended to provide that (i) all account balances of Affected
Employees shall become fully vested as of the Closing and (ii) all Affected
Employees who are participants in the Savings Plans shall have the right to
elect to receive a distribution or direct rollover of their respective account
balances, subject to, and in accordance
32
with, the provisions of applicable law. Purchaser shall establish or maintain,
or cause the Company to establish or maintain, a defined contribution plan for
the benefit of some or all of the Affected Employees, which shall permit
Affected Employees to roll their benefits under the Savings Plans over into
Purchaser's defined contribution plan.
(e) Welfare Plans. Effective as of the Closing Date, all
Affected Employees shall cease to be covered by all employee welfare benefit
plans (as such term is defined in Section 3(i) of ERISA) sponsored or maintained
by XXXX or its ERISA Affiliates on behalf of the Affected Employers and their
dependents (the "Welfare Plans"), other than those Welfare Plans maintained
exclusively by the Company. XXXX shall retain liability for all claims for
benefits under the Welfare Plans, in accordance with the terms of the Welfare
Plans, incurred by employees or former employees of the Company (and their
dependents) under XXXX'x employee welfare benefit plans prior to the Closing
Date. Purchaser shall, or shall cause the Company to, be liable for all Welfare
Plan claims incurred by Affected Employees (and their dependents) to the extent
covered under any employee welfare benefit plans of Purchaser or its affiliates
after the Closing. For purposes of this paragraph, a claim shall be deemed to
have been incurred on the date on which each medical or other treatment or
service was rendered and not the date of the inception of the related illness or
injury or the date of submission of a claim related thereto.
(f) Medical and Dental Plans. If Affected Employees become
eligible to participate in 1995 in a medical and dental plan of Purchaser or its
affiliates, Purchaser shall use its reasonable best efforts to, or shall cause
the Company to use its reasonable best efforts to cause such plan to (i) waive
any preexisting condition limitations for conditions covered under the
applicable medical or dental plans of the Company (the "Company Medical Plans")
and (ii) honor any deductible and out of pocket expenses incurred by the
employees and their beneficiaries under the Company Medical Plans during the
portion of 1995 preceding the Closing. If Affected Employees become eligible to
participate in 1995 in a group term life insurance plan maintained by Purchaser
or its affiliates, Purchaser shall use its reasonable best efforts to cause such
plan to waive any medical certification for such employees up to the
33
amount of coverage the employees had under the life insurance plan of the
Company (but subject to any limits on the maximum amount of coverage under
Purchaser's life insurance plan).
(g) Disability Benefits. XXXX shall be responsible, or cause
its insurance carriers to be responsible, for payment of any and all short and
long-term disability benefits, regardless of whether payment is required to be
made after the Closing for: (i) any individual who is currently receiving such
benefits as of the Closing; (ii) any individual who becomes disabled prior to
the Closing and who remains disabled for the length of any qualifying disability
period; and (iii) any individual described in (i) and (ii) above whose
disability ceases and who returns to active employment immediately after the
Closing and who subsequently becomes disabled prior to the expiration of ninety
(90) days of active employment with the Company where such subsequent disability
is a continuation of such prior disability for which benefits were due under any
of XXXX'x or its ERISA Affiliates' disability plans.
(h) COBRA. XXXX shall be responsible for complying with the
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") under Section 4980B(f) of the Code with
respect to any individual who incurs a "qualifying event" prior to the Closing
Date; provided, however, that Purchaser shall assume such responsibility with
respect to all individuals covered under insured medical plans maintained by the
Company, regardless of when a "qualifying event" occurs, for so long as it is
able to provide COBRA coverage under such insured plans or successor insured
plans established by the Purchaser. Purchaser shall be responsible for complying
with the continuation health care coverage requirements of COBRA with respect to
any Affected Employee (or eligible dependent of such Affected Employee) whose
employment is terminated on or after the Closing Date.
(i) Severance. XXXX shall pay any severance costs payable
pursuant to any severance policies that are incurred with respect to any
Affected Employee due solely to the change of control of the Company resulting
from the sale of the Shares contemplated by this Agreement.
34
(j) Incentive and Supplemental Retirement Plans. Neither
Purchaser nor the Company shall assume or have any liability under any bonus,
incentive, or supplemental retirement plans maintained by XXXX, including,
without limitation, phantom stock plans, long term cash and incentive
compensation plans, covering any Affected Employee or persons employed by or who
at any time prior to the Closing were employed by XXXX. XXXX shall take such
actions as are necessary to insure the preservation and delivery of all benefits
accrued through the Closing, whether payable presently or at some future date,
to such employees in respect of any such bonus, incentive, or supplemental
retirement plans. If such benefits do not accrue ratably, this provision shall
apply to a pro rata portion of the benefits, calculated as of the Closing Date,
that would have been earned had the Affected Employee remained employed through
the applicable accrual date.
(k) Workers' Compensation. XXXX shall retain liability for all
workers' compensation claims made by employees or former employees of the
Company filed on or before the Closing Date. XXXX shall also retain liability
for all workers' compensation claims filed by such employees within 30 days
after the Closing Date to the extent that such claims relate in any manner to
any events occurring prior to the Closing Date or events otherwise occurring
while such employees were employed by XXXX or any of its affiliates.
(l) Vacation Pay. Accrual for vacation pay as of September 30,
1995 attributable to the Affected Employees is accurately reflected as a
liability in the Interim Financials.
(m) Pension Plans. As of the Closing, the Company shall cease
to be a participating employer under the Retirement Plan for Employees of
Pennsylvania House, Inc., the Retirement Plan for Hourly Employees of the
Divisions and Subsidiaries of XXXX Furniture, Inc., and any other defined
benefit pension plan sponsored or maintained by XXXX or its ERISA Affiliates for
the benefit of the Affected Employees (hereinafter referred to collectively as
the "Pension Plans"), and XXXX shall take all such action as may be necessary to
effect such cessation of participation. As of the Closing, XXXX shall cause the
sponsor(s)
35
of the Pension Plans to assume or retain all liabilities under the Pension Plans
for benefits accrued by the Affected Employees under the Pension Plans, through
the Closing Date. XXXX shall cause the Pension Plans to be amended to provide
that the accrued benefits of all Affected Employees shall be nonforfeitable.
Purchaser shall establish or maintain, or cause the Company to establish or
maintain, a defined benefit pension plan for the benefit of some or all of the
Affected Employees. Purchaser shall not be obligated to cause its defined
benefit pension plan to provide past service credits for benefit accrual
purposes, but past service credit shall be given for vesting purposes. There
shall be no transfer of assets or liabilities of the Pension Plans to the
Purchaser's retirement plan.
(n) Notwithstanding anything in this Section 3.4 to the
contrary, following the Closing Date, Purchaser shall cause the Company to
comply with the requirements of the labor union contracts with the Aluminum,
Brick and Glass Works International Union AFL-CIO, Local 231 and United
Paperworkers International Union, Local 7600 set forth on Schedule 2.1.18
hereto.
3.5 Consents and Approvals; Releases. XXXX shall use its best
efforts (without the obligation to make any payment or concession to any third
party) promptly to obtain all consents and amendments from parties to the
Material Agreements and from governmental authorities, which are required by the
terms thereof, this Agreement or otherwise for the due and punctual consummation
of the transactions contemplated by this Agreement. Purchaser will cooperate
(without the obligation to make any payment or concession to any third party)
with XXXX in obtaining such consents and approvals. Purchaser and XXXX shall use
their best efforts to cause Purchaser to be substituted in all respects for XXXX
or any of its affiliates, effective as of the Closing, in respect of all
obligations of XXXX under each of the guaranties, severance agreements and
letters of credit set forth in Schedule 3.5 (the "Guaranty" or "Guaranties"). If
Purchaser and XXXX are unable to effect such a substitution with respect to any
Guaranty after using their best efforts to do so, Purchaser shall fully
indemnify XXXX and its affiliates with respect to the obligations covered by
each of the Guaranties for which
36
Purchaser does not effect such substitution, with such indemnification secured
by a letter of credit acceptable to XXXX. XXXX shall also cooperate with and
assist Purchaser and its authorized representatives in order to provide an
efficient transfer of the control and management of the Company and to avoid any
undue interruption in the activities and operations of the Company following the
Closing Date.
3.6 Purchase of Intellectual Property. Cherry Grove, Inc. has
agreed to sell and otherwise transfer to Purchaser or an affiliate of Purchaser
the intellectual property listed on Schedule 3.6 hereto, being all of the
intellectual property owned or licensed by Cherry Grove, Inc. ("Cherry Grove")
and licensed or sublicensed to the Company (the "Cherry Grove Intellectual
Property"), for a purchase price of $12,000,000, less the purchase price of that
portion of the Cherry Grove Intellectual Property currently owned by Meridian
Leasing, Inc. ("Meridian") and listed on Exhibit C to Schedule 2.1.17 (the
"Meridian Intellectual Property") in the event Cherry Grove does not purchase
the Meridian Intellectual Property, pursuant to the terms and conditions of the
Cherry Grove Agreement of Sale in substantially the form attached hereto as
Exhibit C; provided, however if Cherry Grove does purchase the Meridian
Intellectual Property, the purchase price for the Cherry Grove Intellectual
Property shall be $12,000,000. Such transfer shall occur on the Closing Date
simultaneously with the closing of the sale of the Shares. The purchase price
for the Cherry Grove Intellectual Property shall be in addition to the Purchase
Price for the Shares.
3.7 Tax Matters. (a) Purchaser agrees that following the
Closing Date it will permit and cooperate fully with XXXX regarding any
assistance needed in XXXX'x determination of any Federal income tax refund
claims for the years 1992 through 1995 and the carry back of any net operating
losses, capital losses or tax credits that have arisen prior to the Closing Date
to be applied to reduce XXXX'x federal or California tax liability or the
Company's other state tax liabilities attributable to earnings prior to Closing
in all situations where such carrybacks are allowed by law.
37
(b) XXXX and Purchaser shall jointly make an election under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code")
and the Treasury Regulations promulgated thereunder and under any similar state
tax law (collectively, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the Shares hereunder. XXXX and the Purchaser covenant and
agree that they will join in the filing of Internal Revenue Service Form 8023,
and such other forms or schedules as are necessary or required to make the
Section 338(h)(10) Election and any similar state forms and shall perform all
such other acts as are necessary to timely make or perfect such election. XXXX
and Purchaser agree to negotiate in good faith on an allocation of the Purchase
Price among the assets of the Company that are deemed to have been acquired
pursuant to Section 338(h)(10) of the Code or any similar state law. If XXXX and
Purchaser have not agreed to such allocation within sixty (60) days after the
Closing Date, the matter shall be submitted to a nationally recognized
accounting firm for its binding decision. XXXX and Purchaser shall use the asset
values determined from such agreed allocation for purposes of filing all reports
and returns with respect to federal and state income taxes, including Internal
Revenue Service Form 8594 or any equivalent statement. XXXX shall indemnify any
Purchaser Indemnified Party (as defined herein) and agrees to protect, save and
hold harmless each Purchaser Indemnified Party from and against any increase in
Taxes resulting from the sale of the Shares by XXXX to Purchaser that is
attributable to the making of the Section 338(h)(10) Election or any similar
state election or any election under section 338(g) of the Code or any similar
state election made by XXXX in connection therewith; provided, however, that no
amount shall be payable under this Section 3.7(b) by XXXX to any Purchaser
Indemnified Party with respect to any additional Taxes resulting from a decrease
in the historic tax basis of the assets of the Company.
(c) After the Closing Date, each of XXXX and Purchaser shall
cooperate (and shall cause their respective affiliates to cooperate) with each
other and with each other's respective agents, including accounting firms and
legal counsel, in connection with the preparation or audit of any Tax return,
amended return or report, claim for refund and any tax claim or litigation in
respect of the Company or its activities, which cooperation shall include, but
not be limited to making available to the other all information, records and
documents in
38
their possession relating to the liabilities for Taxes associated with the
Company. XXXX and Purchaser shall also make available to the other, as
reasonably requested and available, personnel responsible for preparing,
maintaining and interpreting information, records and documents in connection
with Taxes as well as related litigation. Any information provided or obtained
under this Section 3.7 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or reports, refund claims,
audits, tax claims and litigation.
3.8 Intercompany Debt. All forms of intercompany obligations
of or to the Company with respect to XXXX or any XXXX affiliate shall be
extinguished on or before the Effective Date.
3.9 Non-Solicitation. XXXX covenants that from the date hereof
through the Closing Date, it shall not, directly or indirectly, and will not
permit any employee, representative, financial or legal advisor or agent of the
Company or XXXX to, make, solicit, assist or encourage the initiation of any
inquiries or proposals or participate in any negotiations with any party or
furnish any confidential information to any party (other than the Purchaser and
its employees, representatives, advisors and agents) concerning the acquisition
of the Shares or all or any portion of the assets, properties or business of the
Company, other than dispositions of inventories and other assets in the ordinary
course of business consistent with past practice and in accordance with Section
3.2.
3.10 Evidence of Insurance. Purchaser shall deliver to XXXX at
least five business days prior to the Closing Date evidence of insurance
coverage in amounts and coverage sufficient to satisfy the requirements of
Purchaser's lenders contained in Purchaser's financing commitment letters and
loan documentation.
3.11 Noncompetition. For a period of two years following the
Closing (the "Noncompetition Period"), XXXX will not (i) (a) in any county or
subdivision of the United States (including the 58 counties of the State of
California); or (b) in any foreign country where
39
the Company or any of its subsidiaries conducts business during the
Noncompetition Period, in either case engage or participate in directly or
indirectly (whether as holder of an equity or debt investment, lender or in any
other manner or capacity, including through a subsidiary), or lend its name (or
any part or variant thereof) to, any business which is, or as a result of XXXX'x
engagement or participation would be, a business which derives a substantial
portion of its revenues from the patio furniture (whether indoor or outdoor)
segment of the furniture industry ("Patio Furniture Products"); (ii) deal,
directly or indirectly, in a competitive manner with respect to Patio Furniture
Products with any customers doing business with the Company or any of its
subsidiaries during the Noncompetition Period; (iii) solicit any officer,
director, employee, or agent of the Company or any of its subsidiaries to become
an officer, director, employee, or agent of XXXX, its affiliates or anyone else;
and (iv) engage in or participate in, directly or indirectly, any business
conducted under any name that shall be the same as or similar to the name of the
Company or any of its subsidiaries or any trade name used by them; provided,
however, neither (a) ownership by XXXX for investment of less than five percent
of the outstanding shares of capital stock of any corporation listed on a
national securities exchange or actively traded in the over-the-counter market
nor (b) the manufacture, marketing and sale of lines of Patio Furniture Products
currently manufactured, marketed and sold by XXXX or any of its affiliates
(other than the Company) or lines of Patio Furniture Products reasonably similar
to such current lines of Patio Furniture Products, whether or not such lines of
Patio Furniture Products compete directly or indirectly with the Company or are
sold to any of the Company's current or future customers, shall not constitute a
breach of the foregoing covenant.
3.12 Nondisclosure. XXXX will not at any time after the date
of this Agreement divulge, furnish to or make accessible to any nonaffiliate of
XXXX any knowledge or information with respect to confidential or secret
processes, inventions, discoveries, improvements, formulae, plans, material,
devices or ideas or know-how, whether patentable or not, with respect to any
confidential or secret aspects of the business of the Company or its
Subsidiaries (including without limitation, customer lists, supplier lists and
pricing arrangements with customers or suppliers); provided, however, that
nothing herein shall prohibit XXXX from complying with any order or decree of
any court of competent jurisdiction or governmental
40
authority, but XXXX will give Purchaser timely notice of the receipt of any such
order or decree, and the foregoing provision shall not apply to any information
which is or becomes generally available to the public through no breach of this
Agreement.
3.13 Liquidation. On November 3, 1995, the Company's Board of
Directors and XXXX, as the Company's sole shareholder, adopted a Plan of
Liquidation and Dissolution of the Company. Pursuant to this Plan of Liquidation
and Dissolution, and simultaneously with the sale of the Shares to the
Purchaser, effective the Effective Date, the Company will distribute all of the
stock of Cherry Grove, Inc., which it owns, to XXXX as a liquidating
distribution. The parties hereto agree that for tax purposes, the distribution
of the stock of Cherry Grove, Inc., pursuant to the Plan of Liquidation and
Dissolution is being made pursuant to Section 332 of the Code. Pursuant to the
Section 338(h)(10) Election as provided by Section 3.7(b) and the related
Treasury Regulations, the Company will be deemed to have sold all of its
remaining assets to the Purchaser and distributed the proceeds of the sale to
XXXX pursuant to Section 332 of the Code. The adoption of the Plan of
Liquidation and Dissolution is not intended by the parties to affect the
continued existence of the Company. XXXX shall indemnify any Purchaser
Indemnified Party and agrees to protect, save and hold harmless each Purchaser
Indemnified Party from and against any Taxes that are attributable to, or arise
from, the distribution of the stock of Cherry Grove, Inc., contemplated by this
Section 3.13.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser. The obligations of
the Purchaser under this Agreement are subject to the fulfillment, at or prior
to the Closing, of the following conditions, any one or more of which may be
waived by the Purchaser at its sole discretion:
4.1.1 Representations, Performance, etc. The representations
and warranties of XXXX contained in this Agreement or in any certificate or
document delivered in connection herewith that are not conditioned as to
materiality shall be true and correct when made and true
41
and correct in all material respects at and as of the Closing Date with the same
effect as though made at and as of the Closing Date, except as modified by
transactions permitted by this Agreement, and all representations and warranties
of the Company and XXXX that are so qualified as to materiality shall be true
and correct when made and at and as of the Closing Date with the same effect as
though made at and as of the Closing Date. The Company and XXXX shall have duly
performed and complied with all agreements, covenants and conditions required by
this Agreement or in any other agreement, instrument or document contemplated
hereby to be performed or complied with by them prior to or at the Closing Date.
XXXX shall have delivered to the Purchaser a certificate of XXXX signed by an
officer of XXXX familiar with the transactions contemplated by this Agreement,
to the effect set forth above in this Section 4.1.1.
4.1.2 Opinion of Counsel. The Purchaser shall have received a
favorable opinion, addressed to the Purchaser and dated the Closing Date, of
Xxxxxx Stockton, L.L.P., counsel to the Company and XXXX, in substantially the
form attached hereto as Exhibit A.
4.1.3 Resignation of Directors and Officers. Each Director and
officer of the Company and the Subsidiaries shall have submitted his resignation
effective as of the Closing.
4.1.4 Certain Approvals, etc. All material consents and
approvals from governmental authorities, including under the HSR Act, and third
parties required to be obtained by the Company and XXXX to consummate the
transactions contemplated hereby shall have been obtained, including all such
consents set forth on Schedule 2.1.3.
4.1.5 No Injunction. No injunction or other order issued by a
court of competent jurisdiction restraining or prohibiting the consummation of
the transactions contemplated by this Agreement shall be in effect.
4.1.6 No Liens. The Shares shall be free and clear of all
Liens. The Purchaser shall receive the stock certificates representing the
Shares duly endorsed for transfer and the
42
stock certificates in the name of the Company representing the outstanding
capital stock of each Subsidiary. All contingent security interests of
NationsBank, N.A. (Carolinas) with respect to the assets of the Company and the
Shares and the guarantee of the Company of XXXX'x obligations to NationsBank,
N.A. (Carolinas) shall have been cancelled in writing.
4.1.7 No Material Adverse Changes. From the date hereof to the
Closing Date, there shall have been no material adverse change in the business,
assets, prospects, operations, or financial condition of the Company; provided,
however, that an event, change or effect that arises from general economic
conditions or that otherwise affects the furniture industry generally shall not
be considered a material adverse change with respect to the Company.
4.1.8 Transfer of Cherry Grove Intellectual Property. The
transfer of the Cherry Grove Intellectual Property to Purchaser shall have been
completed, all as more specifically provided in Section 3.6.
4.1.9 Intercompany Debt. All forms of intercompany obligations
owed by or to the Company shall have been extinguished as provided in Section
3.8 in a manner that will not result in a Tax to the Company.
4.1.10 Notification of Maytag Corporation. XXXX shall have
given written notification to Maytag Corporation of the sale of the Shares and
the assignment of all indemnification rights under the Maytag Agreement to
Purchaser.
4.1.11 Corporate Action. Each of XXXX and the Company shall
have taken all corporate action necessary to approve the transactions
contemplated by this Agreement and shall have furnished Purchaser with certified
copies of the resolutions adopted by their respective boards of directors.
4.1.12 Delivery of Audit Opinion. Purchaser shall have
received from KPMG Peat Marwick LLP the audit opinion with respect to the
September 30, 1995 balance
43
sheet of the Company stating that the September 30, 1995 balance sheet included
in the Interim Financials presents fairly, in all material respects, the
financial condition of the Company as of September 30, 1995, in conformity with
GAAP consistently applied and Purchaser shall be satisfied with the results
thereof. Such audit opinion shall be deemed satisfactory to Purchaser if the net
adjustments to the audited balance sheet prepared in accordance with the
foregoing standards do not have a negative pretax impact to the income statement
contained in the Interim Financials in excess of $250,000 in the aggregate.
4.1.13 Title Policies. Purchaser shall have received the
preliminary title reports and owners title policies with respect to the Owned
Real Property containing only those exceptions reasonably acceptable to
Purchaser set forth on the preliminary title reports and Permitted Liens.
4.2 Conditions to Obligations of Sellers. The obligations of
XXXX under this Agreement are subject to the fulfillment, at or prior to the
Closing, of the following conditions, any one or more of which may be waived by
XXXX in its sole discretion:
4.2.1 Representations, Performance, etc. The representations
and warranties of the Purchaser contained in Section 2.3 that are not
conditioned as to materiality shall be true and correct when made and true and
correct in all material respects at and as of the Closing Date with the same
effect as though made at and as of the Closing Date, except as modified by
transactions permitted by this Agreement, and all representations and warranties
of the Purchaser that are so qualified as to materiality shall be true and
correct when made and at and as of the Closing Date with the same effect as
though made at and as of the Closing Date. The Purchaser shall have duly
performed and complied with all agreements, covenants and conditions required by
this Agreement to be performed or complied with by it prior to or at the Closing
Date. The Purchaser shall have delivered to XXXX a certificate of the Purchaser
signed by an officer of the Purchaser familiar with the transactions
contemplated by this Agreement, dated the Closing Date, to the effect set forth
above in this Section 4.2.1.
44
4.2.2 Opinion of Counsel. XXXX shall have received a favorable
opinion, addressed to it and dated the Closing Date, of Paul, Hastings, Xxxxxxxx
& Xxxxxx, counsel for the Purchaser, in substantially the form attached hereto
as Exhibit B.
4.2.3 Certain Approvals, etc. All consents and approvals from
governmental authorities and third parties required to be obtained by the
Purchaser to consummate the transactions contemplated hereby shall have been
obtained, other than any consents and approvals of third parties in respect of
any contract or agreement of the Purchaser (not involving the borrowing of
money) in respect of which the failure to obtain such consent or approval,
either in any case or in the aggregate, could not reasonably be expected to have
a material adverse effect on the transactions contemplated hereby.
4.2.4 No Injunction. No injunction or other order issued by a
court of competent jurisdiction restraining or prohibiting the consummation of
the transactions contemplated by this Agreement shall be in effect.
4.2.5 Purchase Price. XXXX shall have received from Purchaser
the Purchase Price.
4.2.6 Guaranties. Purchaser shall have been substituted in all
respects for XXXX and its respective affiliates in respect of each of the
Guaranties, or Purchaser shall have entered into indemnification agreements
satisfactory to XXXX with respect to such Guaranties, all as more specifically
provided in Section 3.5.
4.2.7 Transfer of Cherry Grove Intellectual Property. The
transfer of the Cherry Grove Intellectual Property to Purchaser shall have been
completed, all as more specifically provided in Section 3.6.
45
4.2.8 Notification of Maytag Corporation. XXXX shall give
written notification to Maytag Corporation of the sale of the Shares and the
assignment of all indemnification rights under the Maytag Agreement to
Purchaser.
4.2.9 Intercompany Debt. All forms of intercompany obligations
owed by or to the Company with respect to XXXX or any XXXX affiliate shall have
been extinguished as provided in Section 3.8 in a manner that will not result in
a Tax to the Company.
4.2.10 Corporate Action. Purchaser shall have taken all
corporate action necessary to approve the transactions contemplated by this
Agreement and shall have furnished XXXX with certified copies of the resolutions
adopted by its Board of Directors.
ARTICLE 5
TERMINATION
5.1 Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing Date in the circumstances set forth in this
Section 5.1, by delivery of written notice of such termination by the
terminating party to the other party hereto.
5.1.1 Termination by XXXX. This Agreement may be terminated by
XXXX upon the happening of an occurrence or circumstance which will result in a
failure to satisfy any of the conditions set forth in Section 4.2 and the
Purchaser shall have failed to satisfy such a condition within 20 days after
notice by XXXX.
5.1.2 Termination by Purchaser. This Agreement may be
terminated by the Purchaser upon the happening of an occurrence or circumstance
which will result in the failure to satisfy any of the conditions set forth in
Section 4.1 and XXXX shall have failed to satisfy such a condition within 20
days after notice by the Purchaser.
46
5.1.3 Termination by Either Party. This Agreement may be
terminated by either the Purchaser or XXXX if (i) the representations and
warranties of the other party shall prove not to have been true in all material
respects as of the date when made or if any representation or warranty qualified
as to materiality shall prove not to be true and correct as of the date when
made, (ii) events shall have occurred subsequent to the date hereof as a result
of which the representations and warranties of the other party could not be true
in all material respects as of the Closing Date or if any representation or
warranty qualified as to materiality shall prove not to be true and correct as
of the date when made, unless the occurrence of such events shall be due to the
failure of the party seeking to terminate this Agreement to perform or comply
with any of the covenants, agreements or conditions hereof to be performed or
complied with by such party prior to the Closing, or (iii) the Closing shall not
have occurred prior to December 15, 1995 (or such other date as may be mutually
agreed to by the parties) through no fault of the terminating party.
5.2 Effect of Termination. If this Agreement is terminated as
permitted under Section 5.1, such termination shall be without liability of or
to any party to this Agreement or any shareholder, partner, director, officer,
employee or agent of such party, except that the provisions of Sections 5.2, 7.2
and 7.15 shall survive any such termination.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by XXXX. XXXX agrees to indemnify and hold
harmless Purchaser and its affiliates (including the Company) and its and their
respective officers, directors, shareholders, agents, employees and other
representatives and their respective, successors and assigns (collectively, the
"Purchaser Indemnified Parties") from and against any and all (a) liabilities,
losses, claims, costs or damages ("Loss") and (b) reasonable attorneys' and
accountants' fees and expenses, court costs and all other reasonable
out-of-pocket expenses ("Expense") suffered or incurred by any
PurchaserIndemnified Parties in connection with or arising from:
47
(i) any breach by XXXX of any warranty or the
inaccuracy of any representation of XXXX contained in this Agreement or in
any agreement or instrument contemplated hereby;
(ii) any breach by the XXXX of any of its covenants
in this Agreement or in any agreement or instrument contemplated hereby;
(iii) any failure of XXXX to perform any of its
obligations in this Agreement or any agreement or instrument contemplated
hereby; and
(iv) any breach by Cherry Grove, Inc. of any of its
representations, warranties or covenants contained in the Cherry Grove
Agreement of Sale;
provided, however, that XXXX shall be required to indemnify and hold harmless
under this Section 6.1 with respect to Loss and Expense suffered or incurred by
the Purchaser Indemnified Parties only to the extent that the aggregate amount
of such Loss and Expense, together with the aggregate amount of Loss and Expense
indemnifiable pursuant to Section 6.5(b), exceeds $400,000, at which time claims
hereunder may be asserted for all such claims in excess of the initial $400,000;
provided, however, if the Closing does not occur on or before December 30, 1995
for any reason other than the fault of XXXX, the $400,000 threshold amount shall
increase to $1,000,000. The indemnification provided for in this Section 6.1
shall terminate 18 months after the Closing Date (and no claims shall be made by
any party indemnified under this Section 6.1 thereafter), except that the
indemnification by XXXX shall continue as to:
(a) the obligations, covenants, representations and warranties
of XXXX under Sections 2.1.1, 2.1.2, 2.2.1, 2.2.3 and 2.2.5 of this Agreement
and the instruments delivered pursuant thereto, as to all of which no time
limitation shall apply;
48
(b) the obligations, covenants, representations and warrants
of XXXX set forth in Sections 2.1.12, 2.1.16, 3.7 and 3.13 shall survive for 30
days following the expiration of the applicable statutes of limitation; and
(c) any Loss or Expense of which any Purchaser Indemnified
Party has notified XXXX in accordance with the requirements of Section 6.3 on or
prior to the date such indemnification would otherwise terminate in accordance
with this Section 6.1, as to which the obligation of XXXX shall continue until
the liability of XXXX shall have been determined pursuant to this Article 6, and
XXXX shall have reimbursed, indemnified and held harmless such Purchaser
Indemnified Parties for the full amount of such Loss and Expense in accordance
with this Article 6.
6.2 Indemnification by Purchaser. Purchaser agrees to
indemnify and hold harmless XXXX and its affiliates and its and their respective
officers, directors, shareholders, agents, employees and other representatives
and their respective successors and assigns (collectively, "XXXX Indemnified
Parties") from and against any and all Loss and Expense suffered or incurred by
any XXXX Indemnified Party in connection with or arising from:
(i) any breach by Purchaser of any warranty or the
inaccuracy of any representation of Purchaser contained in this Agreement
or in any agreement or instrument contemplated hereby;
(ii) any breach by Purchaser of any of its covenants
or agreements in this Agreement or any agreement or instrument contemplated
hereby;
(iii) any failure by the Company to perform any of
its obligations pursuant to Sections 3 and 4 of the Assignment and
Assumption Agreement; and
(iv) any liability, Loss or Expense associated with
the conduct of the business and operations of the Company arising after
Closing if such liability,
49
Loss or Expense is not a liability, Loss or Expense for which
a Purchaser Indemnified Party may be indemnified under this
Agreement (without regard to any limitations or restrictions
on a Purchaser Indemnified Party's right to such
indemnification);
The foregoing indemnification shall terminate 18 months after the Closing Date
(and no claims shall be made by any party indemnified under this Section 6.2
thereafter) except that (w) the foregoing indemnification contained in Section
6.2(iii) shall survive until the termination of the obligation to which it
relates in accordance with its terms, (x) the foregoing indemnification
contained in Section 6.2(iv) shall survive without termination, (y) the
obligations, covenants and representations of Purchaser set forth in Section
3.2(B) shall survive for 30 days following the expiration of the applicable
statutes of limitation, and (z) the indemnification by Purchaser shall continue
as to any Loss or Expense of which a party indemnified pursuant to this Section
6.2 has notified Purchaser in accordance with the requirements of Section 6.3 on
or prior to the date such indemnification would otherwise terminate in
accordance with this Section 6.2, as to which the obligation of Purchaser shall
continue until the liability of Purchaser shall have been determined pursuant to
this Article 6, and Purchaser shall have reimbursed such party for the full
amount of such Loss and Expense in accordance with this Article 6.
6.3 Notice of Claims. (a) If Purchaser or XXXX believes that
any of the persons indemnified under this Article 6 has suffered or incurred any
Loss or incurred any Expense, Purchaser or XXXX shall so notify the other
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or other agreement, instrument or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred, except that
the failure to so notify shall not relieve a party of its obligations to
indemnify, except to the extent its rights are thereby materially prejudiced. If
any action at law or suit in equity is instituted by or against a third party
with respect to which any of the indemnified persons intends to claim any
liability or
50
expense as Loss or Expense under this Article 6, any such indemnified person
shall promptly notify the indemnifying party of such action or suit.
(b) In calculating any Loss or Expense there shall be deducted
any insurance recovery in respect thereof to the extent such insurance recovery
was not taken into account in assessing the amount of liability, Loss or Expense
suffered or incurred by any person indemnified under this Article 6.
(c) The amount to which an indemnified person shall be
entitled under this Article 6 shall be determined by the written agreement
between the indemnified person and the indemnifying party. If the parties are
unable to agree upon such amount within 30 days of the claim for indemnification
hereunder, the indemnifying party shall pay that amount agreed upon between the
parties and the remainder shall be determined as provided in Section 7.14
hereto.
6.4 Third Party Claims. (a) Subject to Section 6.4(b), the
persons indemnified under Sections 6.1 and 6.2 shall have the right to conduct
and control, through counsel of their choosing, any third party claim, action or
suit at the expense of the indemnifying party. The persons indemnified may
compromise or settle the same, provided that any of the indemnified persons
shall give the indemnifying party advance notice of any proposed compromise or
settlement. The indemnified persons shall permit the indemnifying party to
participate in the defense of any such action or suit through counsel chosen by
it, provided that the fees and expenses of such counsel shall be borne by the
indemnifying party. Subject to Section 6.4(b), any compromise or settlement with
respect to a claim for money damages proposed by the indemnifying party which is
disapproved in writing by the indemnified party shall discharge the indemnifying
party from liability with respect to the subject matter thereof, and no amount
in respect thereof shall be claimed as Loss or Expense under this Article 6.
(b) If the remedy sought in any action or suit referred to in
Section 6.4(a) is solely money damages and will have no continuing effect on the
business of any indemnified person, the indemnifying party shall have 30 days
after receipt of the notice referred to in the
51
first sentence of Section 6.4(a) to notify the indemnified persons that it
elects to conduct and control such action or suit. If the indemnifying party
does not give the foregoing notice, or, following the giving of such notice, one
of the following occurs: (i) the indemnifying party authorizes the indemnified
party in writing to employ its own counsel in such defense or (ii) the
indemnified party shall have reasonably and in good faith concluded that there
may be defenses available to it that are different from or additional to
defenses available to the indemnifying party, then the indemnified persons shall
have the right to defend, contest, settle or compromise such action or suit in
the exercise of their exclusive discretion and through counsel of their own
choosing, and the indemnifying party shall, upon request from any of the
indemnified persons, promptly pay to such indemnified persons in accordance with
the other terms of this Article 6 the amount of any Loss resulting from its
liability to the third party claimant and all related Expense. If the
indemnifying party gives the foregoing notice, the indemnifying party shall have
the right, subject to the preceding sentence, to undertake, conduct and control,
through counsel of its own choosing and at the sole expense of the indemnifying
party, the conduct and settlement of such action or suit, and the indemnified
persons shall cooperate with the indemnifying party in connection therewith;
provided that (w) the indemnifying party shall not settle or compromise any such
action or suit without the indemnified party's prior written consent, unless the
terms of such settlement or compromise release the indemnified party from any
and all liability with respect to such action or suit, (x) the indemnifying
party shall not thereby permit to exist any Lien upon any asset of any
indemnified person; (y) the indemnifying party shall permit the indemnified
persons to participate in such conduct or settlement through counsel chosen by
the indemnified persons, but the fees and expenses of such counsel shall be
borne by the indemnified persons except as provided in clause (z) below and in
the immediately preceding sentence; and (z) the indemnifying party shall agree
promptly to reimburse to the extent required under this Article 6 the
indemnified persons for the full amount of any Loss resulting from such action
or suit and all related Expense incurred by the indemnified persons, except fees
and expenses of counsel for the indemnified persons incurred after the
assumption of the conduct and control of such action or suit by the indemnifying
party (subject, however, to the preceding sentence). So long as the indemnifying
party is contesting any such action or suit in good faith, the indemnified
persons shall not pay or settle any such action or suit.
52
Notwithstanding the foregoing, the indemnified persons shall have the right to
pay or settle any such action or suit, provided that in such event the
indemnified persons shall waive the right to indemnity therefor by the
indemnifying party, and no amount in respect thereof shall be claimed as Loss or
Expense under this Article 6.
6.5 Environmental Matters. (a) Pursuant to the provisions of
the Assignment and Assumption Agreement and the Maytag Agreement, the Company
obtained certain rights to indemnification by Maytag with respect to
environmental matters under Section 8.5 and other related sections of Article
VIII of the Maytag Agreement (the "Maytag Indemnification") and the Company
assumed certain obligations thereunder. The parties to this Agreement have
agreed that the following provisions set forth in this Section 6.5 are the
exclusive provisions of this Agreement applicable to the liabilities of the
parties with respect to Environmental Laws and to any claim for indemnification
in respect thereof (such claim being referred to herein as an "Environmental
Claim"). To the extent any of the provisions of this Section 6.5 conflict with
any other provisions of this Agreement, this Section 6.5 shall govern.
(b) Subject to the provisions of this Section 6.5, XXXX agrees
to hold harmless and indemnify the Purchaser Indemnified Parties from and
against any and all Loss and Expense arising from:
(i) the breach of any of XXXX'x representations and
warranties contained in this Section 6.5;
(ii) Off-site Liabilities or On-site Liabilities, as
those terms are defined in Section 7.17 herein; or
(iii) the violation of any Environmental Law by the
Company or the Company's predecessors prior to the Closing
Date;
53
provided, however, the indemnifications set forth above in Section 6.5(b) shall
be subject to the following conditions and limitations:
(x) With respect to any claim pursuant to Section 6.5(b), XXXX
shall be required to indemnify and hold harmless with respect to Loss and
Expense incurred by the Purchaser Indemnified Parties only to the extent that
the aggregate amount of such Loss and Expense so incurred, together with other
Loss and Expense similarly incurred but not subject to indemnification due to
the $400,000 (or $1,000,000 as the case may be) threshold amount set forth in
Section 6.1, exceeds $400,000 (or $1,000,000 as the case may be) at which time
claims hereunder may be asserted for all claims in excess of such initial
$400,000 (or $1,000,000 as the case may be);
(y) With respect to claims brought pursuant to Section
6.5(b)(ii) or (iii) that are or may be covered by Section 8.5 of the Maytag
Agreement, Purchaser shall look first to Maytag (with contemporaneous written
notice to XXXX) to be held harmless and to be indemnified under the Maytag
Agreement. However, in the event that Maytag denies or disputes any obligation
to indemnify or hold harmless the Purchaser Indemnified Parties under such
Section 8.5 of the Maytag Agreement, or is unable or unwilling to hold harmless
and indemnify the Purchaser Indemnified Parties under Section 8.5 of the Maytag
Agreement (including, without limitation, because the applicable indemnification
deductible amounts contained in the Maytag Agreement have not been met, which
shall remain the obligation of XXXX after the $400,000 (or $1,000,000 as the
case may be) referenced in Section 6.5(b)(x) above has been met), XXXX shall
hold harmless and indemnify the Purchaser Indemnified Parties for any claims
made by Purchaser against Maytag, and Purchaser shall then have no further
obligations to pursue or negotiate with Maytag on that issue. XXXX shall not be
required to indemnify and hold the Purchaser Indemnified Parties harmless if it
is determined that Maytag is contractually required to do so pursuant to the
Maytag Indemnification but for post-Closing Date conduct of the Purchaser
Indemnified Parties, including, but not limited to failure to give proper or
timely notice to Maytag regarding the existence of a claim (including the giving
of notice to Maytag
54
prior to the expiration of any limitations period of the existence of claim of
which Purchaser or the Company has notice).
(z) The indemnifications provided by this Section 6.5 shall
terminate upon the 30 days following the expiration of the applicable statute of
limitations (and no claims shall be made by any party indemnified under this
Section 6.5 thereafter), except that the indemnification shall continue as to
any Loss or Expense of which the Purchaser Indemnified Parties have notified
XXXX in accordance with the provisions of Section 6.5(e) on or prior to the date
such indemnification would otherwise terminate in accordance with this Section
6.5, as to which obligation of XXXX shall continue until the liability of XXXX
shall have been determined pursuant to this Section 6.5, and XXXX shall have
reimbursed the Purchaser Indemnified Parties for the full amount of such Loss or
Expense in accordance with this Section 6.5.
(c) XXXX represents and warrants that:
(i) the Facilities as operated prior to the Closing
Date complied in all material respects with all Environmental
Laws, except as disclosed in Schedule 6.5;
(ii) there are not and will not be any Hazardous
Substances present or located on, or migrating from, or
generated at or by any of the Facilities prior to and on the
Closing Date with respect to which any past or present owner,
operator or occupant may be required by any applicable
Environmental Law to take, cause to take or pay for any
investigative response, cleanup or remedial action or with
respect to which any investigation by any government agency
would reasonably be expected, based on the Environmental Laws
in effect, applicable and enforceable prior to the Closing
Date, except as disclosed in Schedule 6.5;
55
(iii) The Company has not received in respect of the
Company any notice from any person alleging noncompliance with
any Environmental Law or alleging discharges or releases of
Hazardous Substances into the environment for which XXXX or
Purchaser may be liable, and as of the date of this Agreement
there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the knowledge of XXXX,
threatened against the Company or XXXX in respect thereof,
except as disclosed in Schedule 6.5; and
(iv) The Company has given proper and timely notice
to Maytag of any and all claims of which the Company or XXXX
has knowledge arising prior to or on the Closing Date that are
or may be covered by Section 8.5 of the Maytag Agreement,
including any such claims relating to those matters disclosed
in Schedule 6.5, thereby perfecting all such claims, and
Maytag is not in breach as of the Closing Date of any of its
obligations under Section 8.5 of the Maytag Agreement.
(d) Purchaser and the Company shall be solely and wholly
responsible for, and shall indemnify and hold harmless the XXXX Indemnified
Parties from and against any and all Loss and Expense to the extent directly
caused by Purchaser's or the Company's post-Closing Date conduct with respect to
Hazardous Substances on the Facilities on or after the Closing Date.
(e) If Purchaser or XXXX believes that any of the persons
indemnified under this Section 6.5 has suffered or incurred any Loss or incurred
any Expense, the party claiming a right to indemnification hereunder (the
"Indemnified Party") shall provide the party against whom such claim is
asserted, including without limitation Maytag (the "Indemnifying Party"), prompt
written notice of any claim or facts that have given or may give rise to a
claim, including any inquiry or investigation by a governmental agency or any
investigation undertaken voluntarily by the Indemnified Party and which the
Indemnified Party believes may give rise to a claim, and the Indemnified Party
shall provide supplemental written notice as may be
56
necessary to keep the Indemnifying Party fully informed, provided that
reasonable delays in providing notice shall not invalidate the rights of the
Indemnified Party hereunder by the extent that such delay does not materially
prejudice any rights of the Indemnifying Party hereunder. As between Purchaser
and XXXX, the provisions of Sections 6.3(b) and 6.3(c) shall apply to all
Environmental Claims.
(f) After reasonable notice to Purchaser, Purchaser, as the
Indemnified Party shall provide reasonable access to the premises of such of the
Facilities as may be necessary or appropriate to enable the Indemnified Party
and its employees, agents, attorneys, consultants and contractors to evaluate
the claim and take remedial or other appropriate action;
(g) The Indemnified Party shall make available to the
Indemnifying Party or its representatives all information, records and other
materials in the possession or control of the Indemnified Party which are
reasonably required by the Indemnifying Party for its use in connection with any
claim, investigation or remedial action (it being understood that any such
materials that constitute confidential information will be subject to the same
confidentiality provisions of Section 7.15) and shall otherwise cooperate and
assist the Indemnifying Party in connection with such claim, investigation or
remedial action (including, where appropriate, providing testimony in connection
with any litigation);
(h) Purchaser or XXXX, as the Indemnifying Party, shall have
the right and responsibility of defending, remedying, compromising and settling
any Environmental Claim and shall have the right to employ and control its own
counsel, consultants and contractors in connection therewith. As between XXXX
and Purchaser, the Indemnifying Party shall have full control over any actions
(including, without limitation, any remedial action, negotiation or litigation)
in connection with any such Environmental Claim; provided, that (i) if a
remedial or other action proposed to be taken by the Indemnifying Party in
settlement of the Environmental Claim could materially and adversely affect the
Indemnified Party's operations at a facility, such action shall not be taken
without the prior written consent of the Indemnified Party (which consent shall
not unreasonably be withheld); (ii) the Indemnifying Party shall not compromise
57
or settle any Environmental Claim without the consent of the Indemnified Party
(which consent shall not unreasonably be withheld); and (iii) in the event the
Indemnified Party shall refuse to consent to the taking of any remedial or other
action approved by applicable regulatory agencies in respect of, or the
compromise or settlement of, any Environmental Claim, the Indemnified Party may
elect to take over the defense of such Environmental Claim, and in any case, the
liability of the Indemnifying Party shall not exceed the amount for which the
Environmental Claim could have been settled plus the amount of Expense incurred
by the Indemnified Party prior to the time of the proposed settlement to which
it is entitled to indemnification;
(i) The obligations of XXXX or Purchaser as the Indemnifying
Party in respect of an Environmental Claim shall be limited to the taking of
such reasonable actions as are necessary under the circumstances giving rise to
such Environmental Claim, and XXXX (i) shall not be liable for any unavoidable
effect upon the business operations of any of the Facilities (including, without
limitation, business interruption or loss of profits) caused by or resulting
from remedial or other action taken by XXXX in furtherance of its obligations
hereunder, unless resulting from XXXX'x willful misconduct or gross negligence;
and (ii) shall not be liable for any Loss or Expense resulting from actions
taken or omitted by Purchaser or the Company on or after the Closing Date. Any
Loss and Expense in respect of a violation of Environmental Law occurring both
before and after the Closing Date shall be allocated between XXXX and Purchaser
on a fair and equitable basis;
(j) Effective upon being indemnified as provided in Section
6.5, the Indemnified Party hereunder agrees to (A) transfer and assign to the
Indemnifying Party all rights and claims the Indemnified Party has or may have
against third parties for reimbursement or contribution; (B) execute such
instruments and take such other actions as may be necessary or appropriate to
transfer and assign the foregoing rights or claims to the Indemnifying Party;
and (C) take such reasonable actions when and as necessary or appropriate to
assist the Indemnifying Party to obtain reimbursement or contribution from third
parties; and
58
(k) The parties to this Agreement shall use reasonable efforts
and shall cooperate with each other to obtain any necessary consent, transfer or
reissuance of any governmentally issued environmental permits, licenses and
registrations necessary to operate the Company as it was operated as of the
Closing Date. XXXX makes no representations or warranties with respect to
whether or when such consent, transfer or reissuance will occur or whether such
consent, transfer or reissuance will be conditioned upon new or additional
requirements. XXXX shall not be required to incur any liability or make any
payment or concession to any third party in order to obtain such consent,
transfer or reissuance.
ARTICLE 7
MISCELLANEOUS
7.1 Survival. Notwithstanding any otherwise applicable statute
of limitations, all agreements, covenants, representations and warranties of
Purchaser and XXXX in this Agreement and in any other agreement, instrument or
document delivered in connection herewith shall survive the Closing in
accordance with their terms. XXXX and Purchaser agree that the indemnification
provisions set forth in Article 6 are the exclusive post closing remedies with
respect to the liability of XXXX or the Purchaser for the breach or inaccuracy
of a representation or warranty or the breach of any covenant in this Agreement
or in any agreement or instrument contemplated hereby; provided, that nothing
herein shall preclude either party from seeking an equitable remedy, to which
the parties hereto agree each other is entitled (including, without limitation,
under Section 3.11 hereof) for any such breach or the bringing of an action for
fraud.
7.2 Expenses. Each of XXXX and the Purchaser shall assume and
bear their own expenses, costs and fees incurred in the preparation and
execution of this Agreement and compliance herewith, including attorneys' and
accountants' fees, whether or not the purchase and sale provided for herein
shall be consummated; provided, however, the fees and expenses relating to the
HSR filing, the audit performed by KPMG Peat Marwick LLP required by Section
4.1.12, the cost of title opinions and premiums for title policies required by
Section
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4.1.13, and the New York transfer gains tax attributable to the Company's New
York showroom lease shall be borne by Purchaser. XXXX shall pay the fees and
expenses of Xxxxxx, Read & Co. Inc.
7.3 Assignment; Successors; Parties in Interest. This
Agreement shall not be assignable by any party hereto without the prior written
consent of all of the other parties (which consent shall not be unreasonably
withheld) and any attempt to assign this Agreement without such consent shall be
void and of no effect. This Agreement shall inure to the benefit of, and be
binding on and enforceable against, each party hereto and such permitted
successors and assigns of the respective parties hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under this Agreement.
7.4 Amendment and Modification. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated orally, but only
with the written consent signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent or other breach, whether similar or not.
7.5 Access After Closing. Each party shall retain for a period
of six years following Closing all books and records within its possession or
control which relate to the operation and conduct of the business of the Company
prior to Closing. Each party shall provide to the other party and its
representatives reasonable access during normal business hours to copies of all
such books and records upon request by the other party hereto. XXXX will
cooperate with Purchaser and the Company with respect to continuation or
transfer of payroll, telephone and fixed asset systems upon mutually agreeable
terms at market rates.
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7.6 Best Efforts. Each party agrees to use its best efforts to
satisfy the conditions to the Closing set forth in this Agreement and otherwise
to consummate the transactions contemplated by this Agreement.
7.7 Knowledge. For the purposes of the representations and
warranties of XXXX contained in this Agreement which are qualified to knowledge,
the knowledge of XXXX in such instances shall be deemed to consist solely of the
actual knowledge of those individuals listed on Schedule 7.7 after such persons
have conducted an inquiry sufficient to express an informed view. XXXX
represents to Purchaser that those individuals listed on Schedule 7.7 have
reviewed this Agreement, are familiar with the terms of the Company's Material
Contracts and the matters set forth herein, and either have personal knowledge
or have obtained information from officers or employees of XXXX or the Company
in whom they have confidence and whose duties require them to have personal
knowledge thereof.
7.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal processes
in regard hereto shall be validly given, made or served, if in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by commercial courier or by telecopy (promptly confirmed in writing) to the
following addresses (or at such other addresses for such party as shall be
specified by like notice):
To XXXX:
XXXX Furniture, Inc.
Xxx Xxxxx Xxxxxx, Xxx XX-0
Xxxx Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx
Chairman and Chief Executive Officer
Telecopy: 910/888-6344
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With a copy to:
(which copy shall not constitute notice)
Xxxxxx Xxxxxxxx, L.L.P.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopy: 910/607-7505
To the Purchaser:
c/o Hancock Park Associates
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy: 310/201-0403
With a copy to:
(which copy shall not constitute notice)
Paul, Hastings, Xxxxxxxx & Xxxxxx
000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Esq.
Telecopy: 213/627-0705
7.9 Public Announcement. During the period through the Closing
Date, neither XXXX, the Company nor Purchaser will make, directly or indirectly,
any public announcement with respect to this transaction without the prior
written approval of the other party, except as required by law.
7.10 Captions. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.11 Entire Agreement. This Agreement (including the Schedules
and Exhibits) and any further agreements entered into by Purchaser, XXXX and/or
the Company at the
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Closing constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
7.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute one and the same instrument.
7.13 Severability. If any term or provision of this Agreement
(including Section 3.11) is held by a court or other authority of competent
jurisdiction to be invalid, void or unenforceable, the remaining terms and
provisions of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
7.14 Arbitration. Except for (i) matters relating to specific
performance, injunctive relief or other equitable remedies, (ii) indemnifiable
third party claims pursuant to Article 6 hereof or (iii) disputes relating to
the determination of Effective Date Working Capital as provided in Section 1.4
hereof, the parties hereto agree to submit to arbitration any and all matters in
dispute or in controversy among them concerning the terms and provisions of this
Agreement. All such disputes and controversies shall be determined and adjudged
by the arbitrators, and the hearing shall be held in Greensboro, North Carolina.
The selection of arbitrators and the procedure shall be in accordance with the
commercial arbitration rules then in effect of the American Arbitration
Association. Any award rendered shall be final and conclusive upon the parties
and a judgment thereon may be entered in the highest court of the forum, state
or federal, having jurisdiction. The expenses of the arbitration shall be borne
equally by the parties to the arbitration, provided that each party shall pay
for and bear the costs of their own experts, evidence and counsel's fees, except
that in the discretion of the arbitrator, any award may include the costs of a
party's counsel if the arbitrator expressly determines that the party against
whom such award is entered has caused the dispute, controversy or claim to be
submitted to arbitration as a dilatory tactic.
7.15 Confidential Nature of Information. Each party agrees
that it will treat in confidence all documents, materials and other information
which it shall have obtained regarding
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the other party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether obtained before or
after the date of this Agreement), the investigation provided for herein and the
preparation of this Agreement and other related documents, and, in the event the
transactions contemplated hereby shall not be consummated, each party will
return to the other party all copies of nonpublic documents and materials which
have been furnished in connection therewith. The obligation of each party to
treat such documents, materials and other information in confidence shall not
apply to any information which (i) such party can demonstrate was already
lawfully in its possession prior to the disclosure thereof by the other party,
(ii) is known to the public and did not become so known through any violation of
a legal obligation, (iii) became known to the public through no fault of such
party or (iv) is later lawfully acquired by such party from other sources, and
following the Closing, Purchaser shall have no obligation to treat documents,
materials and other information concerning the Company in confidence.
7.16 Schedules and Exhibits. The Schedules and Exhibits are a
part of this Agreement as if fully set forth herein. All references to Sections,
subsections, Schedules and Exhibits shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require. Disclosure of any
fact in any Schedule hereto referenced by a particular section in this Agreement
shall, should the existence of the fact be relevant to any other section, be
deemed to be disclosed with respect to that other section whether or not an
explicit cross-reference appears.
7.17 Definitions. Used in this Agreement, the following terms
have the meanings specified or referred to in this Section 7.17:
(a) "Affected Employees" shall have the meaning set forth in
Section 3.4(a).
(b) "Agreement" shall have the meaning set forth on Page 1 of
this Agreement.
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(c) "Annual Financials" shall have the meaning set forth in
Section 2.1.4(a).
(d) "Assignment and Assumption Agreement" shall mean that
Assignment and Assumption Agreement dated on or before the Closing between XXXX
and the Company in the form attached as Exhibit E hereto.
(e) "Audited Balance Sheet" shall mean the audited balance
sheet of the Company as of September 30, 1995 prepared as provided in Section
4.1.12.
(f) "Audited Working Capital" shall mean the excess of current
assets over current liabilities (exclusive of cash, the current portion of
long-term indebtedness, current deferred tax assets or liabilities, and
intercompany indebtedness or receivables) of the Company as shown on the Audited
Balance Sheet.
(g) "Cherry Grove Agreement of Sale" shall be that Agreement
of Sale between Cherry Grove, Inc. and Purchaser substantially in the form of
Exhibit C hereto.
(h) "Closing" shall have the meaning set forth in Section 1.2.
(i) "Closing Date" shall have the meaning set forth in Section
1.2.
(j) "COBRA" shall have the meaning set forth in Section
3.4(h).
(k) "Code" shall have the meaning set forth in Section
2.1.16(d).
(l) "Common Stock" shall have the meaning set forth in Section
2.1.2(a).
(m) "Company" shall have the meaning set forth on Page 1 of
this Agreement.
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(n) "Company Medical Plans" shall have the meaning set forth
in Section 3.4(f).
(o) "Effective Date Balance Sheet:" the balance sheet of the
Company as of the Effective Date, which shall be prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the Audited Balance Sheet.
(p) "Effective Date Working Capital:" the excess of current
assets over current liabilities (exclusive of cash, the current portion of
long-term indebtedness, current deferred tax assets or liabilities, and
intercompany indebtedness or receivables) of the Company as shown on the
Effective Date Balance Sheet.
(q) "Effective Date" shall mean the end of business on
November 25, 1995.
(r) "Effective Date Balance Sheet" shall mean the balance
sheet of the Company as of November 25, 1995 prepared as provided in Section
1.4.
(s) "Environmental Claim" shall mean any claim with respect to
indemnification or being held harmless relating to any toxic or environmental
matters.
(t) "Environmental Laws" means all federal, state or local
laws, rules, regulations, governmental permits or other binding determinations
of any governmental authority relating to or addressing the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, and the Resource Conservation and Recovery Act.
(u) "ERISA" shall have the meaning set forth in Section
2.1.16(a).
(v) "ERISA Affiliate" shall have the meaning set forth in
Section 2.1.16(a).
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(w) "Facilities" shall mean the Company's El Monte, California
facility, the Company's Newport Arkansas facility, and the Company's Juarez,
Mexico facility.
(x) "GAAP" shall have the meaning set forth in Section
2.1.4(a).
(y) "Guaranties" shall have the meaning set forth in Section
3.5.
(z) "Hazardous Substances" means any hazardous substance,
hazardous wastes, pollutants or contaminants as such terms are defined and used
in Environmental Laws.
(aa) "HSR Act" shall have the meaning set forth in Section
2.1.3(b).
(ab) "Intellectual Property" shall have the meaning set forth
in Section 2.1.17.
(ac) "Interim Financials" shall have the meaning set forth in
Section 2.1.4(a).
(ad) "XXXX" shall have the meaning set forth on Page 1 of this
Agreement.
(ae) "XXXX Indemnified Parties" shall have the meaning set
forth in Section 6.2.
(af) "Liens" means, with respect to any assets or properties
(whether real, personal or mixed or tangible or intangible), any mortgage,
pledge, option, escrow, hypothecation, lien, security interest, financing
statement, lease, charge, preemptive subscription, encumbrance, easement,
conditional sale or other title retention or security agreement or any other
similar restriction, claim or right of others, on, in, or with respect to such
assets or properties, whether arising by contract, operation of law or
otherwise.
(ag) "Loss and Expense" shall have the meaning set forth in
Section 6.1.
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(ah) "Material Adverse Effect" shall mean a material adverse
effect on the business, properties, assets (tangible and intangible), prospects,
liabilities or financial condition or results of operations of the Company;
provided that an event, change or effect that arises from general economic
conditions or that otherwise affects the furniture industry generally shall not
be considered material or to have a material adverse effect on the Company.
(ai) "Material Agreements" shall have the meaning set forth in
Section 2.1.15.
(aj) "Maytag" shall mean Maytag Corporation, a Delaware
corporation.
(ak) "Maytag Agreement" shall mean the Asset Purchase
Agreement dated as of June 1, 1989 among XXXX, Maytag Corporation, the BJC
Company and The Gunlocke Company, as amended by the First Amendment and Waiver
to Asset Purchase Agreement dated as of July 7, 1989 by and among XXXX, Maytag
Corporation, The BJC Company, The Gunlocke Company (a Delaware corporation),
Pennsylvania House, Inc., The XxXxxxx Furniture Company, The Xxxxxxxxx Company,
Charter Furniture, Inc., Xxxxx Xxxxxx Company and The Gunlocke Company (a North
Carolina corporation), as further amended by the Amendment to First Amendment
and Waiver to Asset Purchase Agreement dated as of August 1, 1989, as further
amended by the Agreement and Release between XXXX and Maytag dated August 6,
1992, as further amended by the Agreement and Release as to Environmental Claims
dated as of March 31, 1994 between XXXX and Maytag.
(al) "Meridian Intellectual Property" shall have the meaning
set forth in Section 3.6.
(am) "Off-site Liabilities" shall mean any and all liabilities
associated with the alleged and actual disposal or release of Hazardous
Substances by the Company (or its predecessors in interest) in respect of the
business of the Company prior to the Closing Date off-site from the Facilities.
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(an) "On-site Liabilities" shall mean any and all liabilities
associated with the alleged and actual presence or location of any Hazardous
Substances prior to the Closing Date at the Facilities.
(ao) "Owned Real Property" shall have the meaning set forth in
Section 2.1.8.
(ap) "Patio Furniture Products" shall have the meaning set
forth in Section 3.11.
(aq) "PBGC" shall have the meaning set forth in Section
2.1.16(d).
(ar) "Pension Plans" shall have the meaning set forth in
Section 3.4(m).
(as) "Permitted Liens" means (i) Liens for taxes not yet due
or which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with generally accepted accounting principles; (ii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of the business of the Company which are
not overdue for a period of more than 30 days or which are being contested in
good faith and by appropriate proceedings, if adequate reserves with respect
thereto are maintained on the books of the Company in accordance with generally
accepted accounting principles; (iii) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social security
legislation; (iv) deposits, which in the aggregate are not material, to secure
the performance of any or all of the following: bids, trade contracts (other
than for borrowed money), leases (other than financing leases), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of the business of the Company
consistent with past practice; (v) with respect to real property easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of the business of the Company consistent with past practice
which, in the aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject thereto
69
or interfere with the ordinary conduct of the business of the Company; (vi) such
imperfections or irregularities of title and encumbrances, if any, as are not
substantial in character, amount or extent so as to materially detract from the
value or interfere with the present use of the properties affected thereby or
otherwise materially impair present business operations, and (vii) those liens
or encumbrances described on Schedule 7.17 attached hereto.
(at) "Plans" shall have the meaning set forth in Section
2.1.16(a).
(au) "Purchase Price" shall have the meaning set forth in
Section 1.4.
(av) "Purchaser" shall have the meaning set forth on Page 1 of
this Agreement.
(aw) "Purchaser Indemnified Parties" shall have the meaning
set forth in Section 6.1.
(ax) "Savings Plans" shall have the meaning set forth in
Section 3.4(d).
(ay) "Shares" shall have the meaning set forth in the recitals
to this Agreement.
(az) "Subsidiaries" shall have the meaning set forth in
Section 2.1.1(b).
(ba) "Taxes" shall have the meaning set forth in Section
2.1.12.
7.18 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of North Carolina, without giving effect to the conflict of laws rules
thereof.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
XXXX:
XXXX FURNITURE, INC.
By: (Signature of Xxxxxxx X. Xxxxx)
Chairman and Chief Executive
Officer
PURCHASER:
BJCL, INC.
By: (Signature of M. Fourtieq)
Title:
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