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Exhibit 2.1
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
SIMON MATTRESS MANUFACTURING CO.,
SLEEPMASTER L.L.C.,
AND
THE STOCKHOLDERS LISTED ON
THE STOCKHOLDER SIGNATURE
PAGE ATTACHED HERETO
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April 28, 2000
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TABLE OF CONTENTS
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SECTION 1. PURCHASE AND SALE................................................................1
1A. Purchase and Sale of the Shares...............................................1
1B. Purchase Price................................................................1
1C. The Closing...................................................................1
1D. Target Net Worth Purchase Price Adjustment....................................2
1E. Determination of Closing Net Worth............................................2
1F. Cash on Hand Adjustment.......................................................4
SECTION 2. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT THE CLOSING.........................4
2A. Representations and Warranties; Covenants.....................................4
2B. Opinion of the Sellers' Counsel...............................................4
2C. Litigation....................................................................5
2D. Consents and Approvals........................................................5
2E. Escrow Agreements.............................................................5
2F. Material Adverse Change.......................................................5
2G. Due Diligence.................................................................5
2H. Employment and Noncompetition Xxxxxxxxxxxx....................................0
0X. Real Estate Matters...........................................................5
2J. Closing Documents.............................................................6
2K. Financing.....................................................................7
2L. Transfer Taxes................................................................7
2M. Resignation of Directors......................................................7
2N. Release of Liens..............................................................7
2O. Transactions with Affiliates..................................................7
2P. Financial Statements..........................................................7
2Q. Cash on Hand..................................................................7
2R. Waiver........................................................................7
SECTION 3. CONDITIONS OF THE SELLERS' OBLIGATIONS AT THE CLOSING............................8
3A. Representations and Warranties; Covenants.....................................8
3B. Escrow Agreements.............................................................8
3C. Employment Agreements.........................................................8
3D. Litigation....................................................................8
3E. Opinion of the Purchaser's Counsel............................................8
3F. Due Diligence Certificate.....................................................8
3G. Closing Documents.............................................................8
3H. Waiver........................................................................8
SECTION 4. PRE-CLOSING COVENANTS AND AGREEMENTS.............................................9
4A. Best Efforts; Further Assurances..............................................9
4B. Third Party Notices and Consents..............................................9
4C. Operation of Business.........................................................9
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4D. Full Access..................................................................10
4E. Press Release and Announcements..............................................10
4F. HSR Act......................................................................10
4G. Compliance with Agreements and Laws..........................................10
4H. Payment of Xxxxxxxxxxx.......................................................00
0X. Notice of Material Developments..............................................11
4J. Exclusivity..................................................................11
4K. Certain Pre-Closing Tax Matters..............................................12
SECTION 5. POST-CLOSING COVENANTS AND AGREEMENTS...........................................12
5A. Confidentiality..............................................................12
5B. Noncompete, Nonsolicitation..................................................12
5C. Certain Post-Closing Tax Matters.............................................13
SECTION 6. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY...........................14
6A. Organization, Corporate Power and Licenses...................................14
6B. Capital Stock and Related Matters; Subsidiaries..............................15
6C. Authorization; No Breach. ...................................................16
6D. Consents.....................................................................16
6E. Financial Statements.........................................................17
6F. Absence of Undisclosed Liabilities...........................................17
6G. Accounts Receivable..........................................................18
6H. Xxxxxxxxx....................................................................00
0X. Product Warranty.............................................................18
6J. Product Liability............................................................18
6K. No Material Adverse Effect...................................................18
6L. Indebtedness.................................................................19
6M. Absence of Certain Developments..............................................19
6N. Assets.......................................................................21
6O. Tax Matters..................................................................21
6P. Contracts and Commitments....................................................23
6Q. Intellectual Property Rights.................................................25
6R. Litigation, etc..............................................................26
6S. Brokerage....................................................................27
6T. Insurance....................................................................27
6U. Employees....................................................................27
6V. ERISA........................................................................28
6W. Compliance with Laws; Permits................................................30
6X. Environmental and Safety Matters.............................................30
6Y. Affiliate Transactions.......................................................31
6Z. Real Property................................................................32
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLERS...................................33
7A. Power and Authority. ........................................................33
7B. Authorization; No Breach. ...................................................33
7C. Title to Shares..............................................................33
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7D. Brokerage....................................................................34
7E. Litigation, etc. ............................................................34
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................................34
8A. Organization, Power and Authority. ..........................................34
8B. Authorization; No Breach. ...................................................34
8C. Consents.....................................................................35
8D. Brokerage....................................................................35
8E. Investment Representations...................................................35
8F. Closing Date.................................................................35
SECTION 9. INDEMNIFICATION AND OTHER AGREEMENTS............................................35
9A. Survival of Representations and Warranties...................................35
9B. General Indemnification. ....................................................36
SECTION 10. DEFINITIONS....................................................................39
SECTION 11. TERMINATION....................................................................46
11A. Conditions of Termination....................................................46
11B. Effect of Termination........................................................47
SECTION 12. MISCELLANEOUS..................................................................47
12A. Fees and Expenses............................................................47
12B. Remedies.....................................................................47
12C. Consent to Amendments; Waivers...............................................47
12D. Successors and Assigns.......................................................47
12E. Severability.................................................................48
12F. Counterparts.................................................................48
12G. Descriptive Headings; Interpretation.........................................48
12H. Entire Agreement.............................................................48
12I. No Third-Party Beneficiaries.................................................48
12J. Cooperation on Tax Matters...................................................48
12K. Schedules and Exhibits.......................................................49
12L. Governing Law................................................................49
12M. Notices......................................................................49
12N. Jurisdiction and Venue.......................................................50
12O. Waiver of Right to Jury Trial................................................51
12P. No Strict Construction.......................................................51
12Q. Dispute Resolution...........................................................51
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EXHIBITS AND SCHEDULES
Exhibits:
Exhibit A - Adjustment Escrow Agreement
Exhibit B - Indemnity Escrow Agreement
Exhibit C - Opinion of the Sellers' Counsel
Exhibit D - Opinion of the Purchaser's Counsel
Disclosure Schedules (with Section references):
Consents Schedule - 0X, 0X, 0X
Xxxxxxxxxxxx Xxxxxxxx - 0X
Xxxxxxx Qualifications Schedule - 6A
Capitalization Schedule - 6B(i)
Subsidiaries Schedule - 6B(iii)
Authorization Schedule - 6C
Consents Schedule - 6D
Financial Statements Schedule - 6E
Disclosed Liabilities Schedule - 6F
Product Warranty Schedule - 6I
Indebtedness Schedule - 6L
Developments Schedule - 6M
Liens Schedule - 6N
Tax Schedule - 6O
Contracts Schedule - 6P
Intellectual Property Schedule - 6Q
Litigation Schedule - 6R
Brokerage Schedule - 6S, 7D, 8D
Insurance Schedule - 6T
Employees Schedule - 6U
Employee Benefits Schedule - 6V
Compliance Schedule - 6W
Permits Schedule - 6W
Environmental Schedule - 6X
Affiliate Transactions Schedule - 6Y
Real Property Schedule - 6Z
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
April 28, 2000, by and among Sleepmaster L.L.C., a New Jersey limited liability
company (the "Purchaser"), Simon Mattress Manufacturing Co., a California
corporation (the "Company"), and the stockholders listed on the stockholder
signature page attached hereto (collectively, the "Sellers" and individually a
"Seller"). Capitalized terms used herein and not otherwise defined herein have
the meanings given to such terms in Section 10 below.
WHEREAS, as of the date hereof, the Sellers collectively own all
of the outstanding capital stock of the Company (the "Shares");
WHEREAS, subject to the terms and conditions set forth herein,
the Purchaser desires to purchase the Shares from the Sellers, and the Sellers
desire to sell the Shares to the Purchaser.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and understandings herein contained, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereby agree as follows:
SECTION 1. PURCHASE AND SALE
1A. Purchase and Sale of the Shares. At the Closing, subject
to the terms and conditions set forth in Sections 2 and 3 below, as applicable,
the Purchaser shall purchase from the Sellers, and the Sellers shall sell,
convey, assign, transfer, and deliver to the Purchaser, all of the Shares free
and clear of any Liens.
1B. Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") will be $45,000,000 less (i) gross amounts paid or
payable by the Company (without regard to any reduction for withholding or
similar taxes) to Xxxxxxx Xxxxxxx pursuant to the Phantom Plan and (ii) the
aggregate amount of any payroll or employment taxes payable to federal, state,
and local taxing authorities in connection with (x) the Phantom Plan and (y) the
exercise of stock options by Xxxxxx X. Xxxxx, Xx. that are expenses of the
Company, and the Purchase Price will be subject to adjustment as provided in
Sections 1D and 1F, payable as described in Section 1C below.
1C. The Closing. The closing of the purchase and sale of the
Shares and the transactions relating thereto (collectively, the "Closing") will
take place at the offices of Xxxxx & Xxx Xxxxx, 000 Xxxxx Xxxxx Xxxxxx, Xxxxx
00, Xxxxxxxxx, XX 00000-0000, or at such other place as the Purchaser may
specify by notice to the Sellers, commencing at 9:00 a.m. local time on April
28, 2000, or, if any of the conditions to Closing set forth in Sections 2 and 3
below have not been satisfied or waived by the Party entitled to the benefit
thereof on or prior to such date on the third business day following
satisfaction or waiver of such conditions. The date and time of the Closing are
referred to as the "Closing Date." At the Closing, subject to the satisfaction
or waiver of each of the conditions specified in Sections 2 and 3 below:
(i) The Purchaser will deliver Seven Hundred Fifty Thousand
Dollars ($750,000) (the "Adjustment Escrow Fund") to Bank One Trust Company,
N.A., escrow agent (the "Escrow
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Agent") as security for any liability of the Sellers pursuant to the purchase
price adjustment in Sections 1D and 1F below. The Adjustment Escrow Fund shall
be held by the Escrow Agent pursuant to the terms and conditions of the
Adjustment Escrow Agreement.
(ii) The Purchaser will deliver Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000) (the "Indemnity Escrow Fund") to the Escrow Agent
as security for any amounts owed to the Purchaser pursuant to the
indemnification provisions set forth in Section 9B(i). The Indemnity Escrow Fund
shall be held by the Escrow Agent pursuant to the terms and conditions of the
Indemnity Escrow Agreement.
(iii) The Purchaser will deliver the balance of the Purchase
Price (reduced pursuant to Section 1C(i) and (ii) above and Section 1F(ii)
below) by wire transfer of immediately available funds to the account or
accounts specified in writing by the Company.
(iv) The Sellers will deliver to the Purchaser the stock
certificates for all of the Shares of the Company endorsed in blank or
accompanied by duly executed assignment documents.
1D. Target Net Worth Purchase Price Adjustment. If the Target
Net Worth exceeds the Closing Net Worth (defined below) by an amount greater
than $250,000, then not later than the third business day after the Closing Net
Worth is finally determined pursuant to Section 1E below, the Sellers jointly
and severally agree to pay to the Purchaser, in proportion to their prior
respective holdings in the Company, an amount equal to the amount by which the
Target Net Worth exceeds the sum of (x) Closing Net Worth plus (y) $250,000 in
immediately available funds to the account specified by the Purchaser; provided
that, together with any amount to be paid pursuant to Section 1F(ii) below, the
Sellers shall not be required to pay an amount greater than $750,000 to the
Purchaser pursuant to this adjustment. Any amount to be paid pursuant to this
Section 1D will be treated as an adjustment to the Purchase Price for all
purposes and shall first be satisfied out of the Adjustment Escrow Fund.
1E. Determination of Closing Net Worth.
(i) Definitions. The "Closing Net Worth" means the Net Worth
as of the opening of business on the Closing Date, as determined in accordance
with Sections 1E(ii), (iii) and (iv) below.
(ii) Inventory Audit; Closing Balance Sheet. On the close of
business on the day immediately preceding the Closing Date the Company will
complete a full physical inventory of the Company. The Purchaser and the
Purchaser's Accountant (as defined below) shall be entitled to be present while
the inventory review is being conducted. On or before the 60th day after the
Closing Date, the Sellers' Representative will prepare a balance sheet as of the
opening of business on the Closing Date (without giving effect to any of the
transactions contemplated hereby), which shall be audited by Stonefield
Xxxxxxxxx (the "Sellers' Accountant") (together with the related audit report of
such firm, the "Closing Balance Sheet"), and which shall set forth a calculation
of the Closing Net Worth, and the Sellers' Representative will promptly deliver
a copy of the Closing Balance Sheet to the Purchaser. The Sellers shall pay all
fees and expenses in connection with the preparation of the
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Closing Balance Sheet, including the fees of the Sellers' Accountant. The
Closing Balance Sheet shall (x) be prepared in accordance with GAAP consistent
with the preparation of the historical financial statements of the Company and
(y) fairly present the financial position of the Company as of the Closing Date.
During such 60-day period, the Purchaser will provide the Sellers'
Representative and the Sellers' Accountant reasonable access to the Company's
records. To facilitate the preparation of the Closing Balance Sheet and the
calculation of Closing Net Worth, during the 30-day period immediately following
the Sellers' Representative's delivery of the Closing Balance Sheet, the
Sellers' Representative will use commercially reasonable best efforts to provide
the Purchaser and PricewaterhouseCoopers LLP (the "Purchaser's Accountant")
reasonable access to the Sellers' Accountant, and the work papers related to the
preparation of the Closing Balance Sheet and the calculation of the Closing Net
Worth. On or prior to the 30th day following delivery of the Closing Balance
Sheet by the Sellers' Representative, the Purchaser may give the Sellers'
Representative a written notice stating in reasonable detail the Purchaser's
objections (an "Objection Notice") to the Closing Balance Sheet. Any Objection
Notice shall specify in reasonable detail the dollar amount of any objection and
the basis therefor. Any determination expressly set forth on the Closing Balance
Sheet which is not specifically objected to in the Objection Notice shall be
deemed final and binding upon the Parties upon delivery of the Objection Notice.
If the Purchaser does not give the Sellers' Representative an Objection Notice
within such 30-day period, then the Closing Balance Sheet will be conclusive and
binding upon the Parties and the Closing Net Worth set forth in the Closing
Balance Sheet will constitute the Closing Net Worth for purposes of Section
1E(i) above.
(iii) Dispute and Amicable Resolution. If the Purchaser gives a
timely Objection Notice as described in Section 1E(ii) above, then the Purchaser
and the Sellers' Representative shall negotiate in good faith to resolve their
disputes regarding the Closing Balance Sheet.
(iv) Resolution by Independent Accounting Firm. If the
Purchaser and the Sellers' Representative are unable to resolve all disputes
regarding the Closing Net Worth on or prior to the 45th day after the Objection
Notice is given, then the Purchaser and the Sellers' Representative will retain
a firm of certified public accountants chosen randomly by lot from among the
"big five" accounting firms other than the Sellers' accountant and the
Purchaser's Accountant (the "Independent Accounting Firm") to determine the
Closing Net Worth as soon as practicable. The Independent Accounting Firm shall
only decide the specific items under dispute by the Parties and shall be
instructed to determine the Closing Net Worth in accordance with the principles
set forth in this Agreement. The Closing Net Worth determined by the Independent
Accounting Firm will be conclusive and binding upon the Parties and will
constitute the Closing Net Worth for purposes of Section 1D above. The fees and
expenses of the Independent Accounting Firm in connection with its determination
of the Closing Net Worth will be paid one-half by the Sellers and one-half by
the Purchaser.
(v) Instructions to Escrow Agent. Upon the final determination
of the Closing Net Worth, the Purchaser and the Sellers' Representative agree to
prepare, execute and deliver joint written instructions to the Escrow Agent
(pursuant to the terms of the Adjustment Escrow Agreement) with respect to the
distribution of the entire Adjustment Escrow Fund.
1F. Cash on Hand Adjustment.
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(i) Definitions. "Closing Cash" means the amount of the
Company's cash and cash equivalents on hand as of the Closing Date (which amount
shall (x) include amounts expended by the Company in connection with the
acquisition and construction of the planned new manufacturing facility (the "New
Facility Project") and set forth on the Construction Schedule 2Q attached hereto
or, from the date hereof until the Closing, any amounts expended in connection
with the New Facility Project with the Purchaser's prior written consent, (y)
exclude amounts required to be withheld by the Company in connection with the
Phantom Plan and (z) exclude amounts required to be withheld by the Company in
connection with the exercise of stock options by Xxxxxx X. Xxxxx, Xx. if such
amounts are funded by Xxxxxx Xxxxx Xx. (either directly or through a reduction
in sales proceeds received by him) prior to the calculation of Closing Cash).
(ii) Adjustment. If the Target Cash exceeds Closing Cash, then
the Sellers jointly and severally agree to pay to the Purchaser, in proportion
to their prior respective holdings in the Company, an amount equal to the entire
amount by which the Target Cash exceeds the Closing Cash in immediately
available funds to the account specified by the Purchaser; provided that,
together with any amount required to be paid pursuant to Section 1D above, the
Sellers shall not be required to pay an amount greater than $750,000 to the
Purchaser pursuant to this adjustment. Any amount to be paid pursuant to this
Section 1F will be treated as an adjustment to the Purchase Price for all
purposes and shall be satisfied out of the Adjustment Escrow Fund.
SECTION 2. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT THE
CLOSING. The obligation of the Purchaser to take the actions set forth in
Section 1 above is subject to the satisfaction as of the Closing of the
following conditions:
2A. Representations and Warranties; Covenants. The
representations and warranties contained in Sections 6 and 7 hereof shall be
true and correct in all material respects at and as of the Closing as though
then made and as though the Closing Date was substituted for the date of this
Agreement throughout such representations and warranties (except for any
representations and warranties which are qualified by materiality which such
representations and warranties shall be true and correct in all respects), and
the Company and the Sellers shall have performed in all material respects all of
the covenants required to be performed by the Company and the Sellers hereunder
prior to the Closing.
2B. Opinion of the Sellers' Counsel. The Purchaser shall have
received from Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx & Xxxx LLP, counsel for the Company,
an opinion with respect to the matters set forth in Exhibit C attached hereto,
which shall be addressed to the Purchaser, and dated as of the Closing Date.
2C. Litigation. No suit, action or other proceeding, or
injunction, order, decree or judgment relating thereto, shall be threatened or
shall be pending in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with the transactions contemplated hereby
or that would reasonably be expected to have a Material Adverse Effect, and no
injunction, judgment, order, decree or ruling with respect thereto shall be in
effect.
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2D. Consents and Approvals. The Company and its Subsidiaries
shall have made all filings and shall have obtained and delivered to the
Purchaser all governmental and/or third party permits, authorizations, consents
and approvals required to be obtained by the Company and its Subsidiaries to
consummate the transactions contemplated by this Agreement (the "Consents") as
set forth on the Consents Schedule 2D, (except as otherwise set forth in
Consents Schedule 2D) and the Purchaser shall have received any governmental
and/or third party consents required to be obtained in connection with the
transactions contemplated hereby, including the consents of Serta, Inc. and its
stockholders. All applicable waiting periods under the HSR Act shall have
expired or been terminated.
2E. Escrow Agreements. Each of the Sellers' Representative,
the Purchaser and the Escrow Agent will have executed and delivered the
Adjustment Escrow Agreement and the Indemnity Escrow Agreement (together, the
"Escrow Agreements") and the Escrow Agreements shall be in full force and effect
as of the Closing and shall not have been amended or modified.
2F. Material Adverse Change. Since December 31, 1999, there
shall not have occurred any material adverse change (including any litigation in
excess of $100,000 (whether pursuant to an isolated incident or a series of
related incidents), but excluding the Washington Facility Fire) in the business,
assets, condition (financial or otherwise), results of operations, cash flows,
or prospects of the Company.
2G. Due Diligence. The Purchaser shall be satisfied in its
sole discretion with the results of its business, legal, environmental and
accounting due diligence review of the Company.
2H. Employment and Noncompetition Arrangements. The Company
shall have entered into a three year employment and noncompetition agreement
with Xxxxxx Xxxxxxx Simon, Jr. and a one year employment and noncompetition
agreement with Xxxxxxx Xxxxxxx, in each case satisfactory in form and substance
to the Purchaser, and such employment and noncompetition arrangements shall be
in full force and effect as of the Closing and shall not have been amended or
modified.
2I. Real Estate Matters. (i) A title insurance company
selected by the Purchaser (the "Title Company") shall be willing to insure at
standard rates the Company's or its applicable Subsidiary's marketable title in
and to the Owned Real Property in fee simple, the Company's or its applicable
Subsidiary's leasehold estate in any financable Leased Real Property (a
"Financable Leasehold"), and Purchaser's lender's ("Lender") mortgage lien on
the Owned Real Property and each Financable Leasehold, in each case free and
clear of all Liens except for Permitted Liens including such endorsements and
affirmative coverages as the Purchaser and Lender shall reasonably require
(including non-imputation endorsements). The Sellers shall provide all such
affidavits and indemnities as the Title Company reasonably shall require in
order to afford such coverages and the Purchaser shall bear 100% of the cost of
obtaining such title insurance.
(ii) The Purchaser shall have received a survey of each Owned
Real Property and each Leased Real Property to which the Company or a Subsidiary
of the Company holds a Financable Leasehold, in each case conforming to the
Minimum Standard Detail Requirements jointly established
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and approved in 1992 by ALTA and ACSM, certified to the Company or its
applicable Subsidiary, the Purchaser and the Title Company and showing no Liens
except for Permitted Liens. The Purchaser shall bear 100% of the cost of
obtaining such surveys.
(iii) All Real Property shall be in substantially the same
condition and repair as that on the date of this Agreement, reasonable wear and
tear excepted.
(iv) The Managing Sellers shall use commercially reasonable
best efforts to deliver to the Purchaser (i) from each landlord under a Lease,
an estoppel, and (ii) from each mortgagee and ground lessor of any Leased
Property, a nondisturbance agreement, in each case in form and substance
reasonably satisfactory to the Purchaser and the Lender. The Lender shall have
received from each landlord under a Lease designated by the Lender an agreement
regarding the subordination to Lender of such landlord's lien against personal
property on the applicable demised premises and such other matters as Lender
reasonably may require.
(v) The Sellers shall deliver to the Purchaser an affidavit
dated as of the Closing Date and in form and substance required under Section
1445 of the Internal Revenue Code so that Buyer is not required to withhold any
portion of the Purchase Price thereunder.
2J. Closing Documents. At the Closing, the Company and the
Sellers shall have delivered to the Purchaser all of the following:
(i) a certificate of an officer of the Company, dated as of
the Closing Date, stating that the conditions specified in Sections 2A, 2C, 2D,
2E, 2F, 2O and 2P have been fully satisfied;
(ii) all existing minute books, stock transfer records,
corporate seals and other materials relating to the Company's respective
corporate administration which are in the possession of the Company, the Sellers
or any Affiliate of the Sellers;
(iii) good standing certificates of the Company from its
jurisdiction of incorporation and each jurisdiction in which the Company is
qualified to do business as a foreign corporation, in each case dated within 5
days prior to the Closing Date; and
(iv) copies of all Consents.
2K. Financing. The Purchaser shall have received the cash
proceeds of the financing transactions necessary in order to consummate the
transactions contemplated hereby and to fund the ongoing working capital needs
of the Company, all on terms and conditions satisfactory to the Purchaser. No
later than five (5) days prior to the Closing Date, the Purchaser shall deliver
to the Sellers' Representative a copy of the executed bank commitment letter.
2L. Transfer Taxes. The Sellers shall timely pay any and all
real property transfer, transfer gains, documentary, sales, use, stamp,
registration and other such similar transfer taxes and fees, if any, assessed in
connection with the transactions contemplated by this Agreement and shall
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deliver to the Purchaser evidence satisfactory to Purchaser and the Title
Company of the payment of such taxes.
2M. Resignation of Directors. The Company and the Purchaser
shall have received the resignation of all of the directors of the Company.
2N. Release of Liens. The Company shall have obtained releases
of all Liens (other than any Permitted Liens) relating to the assets and
properties of the Company and shall have delivered satisfactory evidence, as
determined by the Purchaser, of such releases to the Purchaser.
2O. Transactions with Affiliates. Except as set forth on the
Affiliate Transactions Schedule 6Y, all transactions, agreements or other
arrangements between the Company and any of its Affiliates or any of the
Sellers, other than this Agreement, shall have been terminated.
2P. Financial Statements. The Purchaser shall have received
audited financial statements for the three prior fiscal years prepared by an
accounting firm, at the Sellers' cost, in accordance with Regulation S-X of the
Securities Act.
2Q. Cash on Hand. After giving effect to payments required to
be made by the Company pursuant to Section 12A, the Company shall have on hand
an amount of cash and cash equivalents (which amount shall (x) include amounts
expended by the Company in connection with the acquisition and construction of
the New Facility Project and set forth on the Construction Schedule 2Q attached
hereto or, from the date hereof until the Closing, any amounts expended in
connection with the New Facility Project with the Purchaser's prior written
consent, (y) exclude amounts required to be withheld by the Company in
connection with the Phantom Plan and (z) exclude amounts required to be withheld
by the Company in connection with the exercise of stock options by Xxxxxx X.
Xxxxx, Xx. if such amounts are funded by Xxxxxx Xxxxx, Xx. (either directly or
through a reduction in sales proceeds received by him) prior to the calculation
of Closing Cash) equal to at least $2,850,000 (the "Target Cash").
2R. Waiver. Any condition specified in this Section 2 may be
waived if consented to in writing by the Purchaser.
SECTION 3. CONDITIONS OF THE SELLERS' OBLIGATIONS AT THE CLOSING.
The obligation of each of the Sellers to take the actions set forth in Section 1
above is subject to the satisfaction as of the Closing of the following
conditions:
3A. Representations and Warranties; Covenants. The
representations and warranties contained in Section 8 hereof shall be true and
correct in all material respects at and as of the Closing as though then made
and as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Purchaser shall have
performed in all material respects all of the covenants required to be performed
by the Purchaser prior to the Closing.
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3B. Escrow Agreements. Each of the Purchaser, the Sellers'
Representative and the Escrow Agent will have executed and delivered the Escrow
Agreements, and the Escrow Agreements shall be in full force and effect as of
the Closing and shall not have been amended or modified.
3C. Employment Agreements. The Company shall have entered into
employment and noncompetition agreements in form and substance satisfactory to
the Purchaser with each of Xxxxxx Xxxxxxx Xxxxx, Jr. and Xxxxxxx Xxxxxxx and
such employment and noncompetition agreements shall be in full force and effect
as of the Closing and shall not have been amended or modified.
3D. Litigation. No suit, action or other proceeding, or
injunction, order, decree or judgment relating thereto, shall be threatened or
shall be pending in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with the transactions contemplated hereby
and no injunction, judgment, order, decree or ruling with respect thereto shall
be in effect.
3E. Opinion of the Purchaser's Counsel. The Sellers shall have
received from Xxxxxxxx & Xxxxx, special counsel to the Purchaser, an opinion
with respect to the matters set forth in Exhibit D attached hereto, which shall
be addressed to the Sellers and dated as of the Closing Date.
3F. Due Diligence Certificate. The Sellers shall have received
from the Purchaser a certificate of an officer of the Purchaser, dated as of the
Closing Date, stating that Purchaser is satisfied with the results of its
business, legal, environmental and accounting due diligence review of the
Company.
3G. Closing Documents. At the Closing, the Purchaser shall
have delivered to the Sellers a certificate of an officer of the Purchaser,
dated the Closing Date, stating that the conditions specified in Section 3A
shall have been fully satisfied.
3H. Waiver. Any condition specified in this Section 3 may be
waived if consented to in writing by the Managing Sellers.
SECTION 4. PRE-CLOSING COVENANTS AND AGREEMENTS. Each of the
Parties agrees as follows with respect to the period between the date of this
Agreement and the Closing:
4A. Best Efforts; Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto shall use its
commercially reasonable best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement and to fulfill all of the
conditions set forth in Sections 2 and 3 above and the execution and delivery of
the agreements and instruments contemplated hereby to be executed and delivered
at the Closing. In the event any claim, action, suit, investigation or other
proceeding by any Governmental Authority or other Person is commenced which
questions the validity or legality of the transactions contemplated hereby or
seeks damages in connection therewith, the Parties agree to cooperate and use
commercially reasonable best efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order is issued
in any such action, suit
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or other proceeding, to use reasonable best efforts to have such injunction or
other order lifted, and to cooperate reasonably regarding any other impediment
to the consummation of the transactions contemplated hereby.
4B. Third Party Notices and Consents. The Managing Sellers
shall and shall cause the Company to use their respective best efforts to (i)
give required notices to third parties, (ii) obtain any required Consents
(including cooperating with the Purchaser to obtain the consents of Serta, Inc.
and its stockholders), and (iii) take any actions reasonably required by any
third party, in each case in connection with the matters contemplated by this
Agreement.
4C. Operation of Business. Each of the Company and its
Subsidiaries shall, and the Managing Sellers shall cause the Company to, operate
its business only in the usual and ordinary course of business consistent with
past custom and practice and in accordance with all Laws and will preserve the
goodwill and organization of its business and the relationships with its
customers, suppliers, employees and other Persons having business relations with
the Company. Without limiting the generality of the foregoing, prior to the
Closing, without the prior written consent of the Purchaser, the Company and
each of the Managing Sellers covenant that:
(i) the Company shall not, and each of the Managing Sellers
shall cause the Company to not, directly or indirectly, except as expressly
contemplated by this Agreement, take or omit to take any action that would
require disclosure under Section 6M below or that would otherwise result in a
breach of any of the representations, warranties or covenants made by the
Company or the Sellers in this Agreement; and
(ii) the Company will, and each of the Managing Sellers shall
cause the Company to, use its commercially reasonable best efforts to (1)
preserve intact the organization and goodwill of the Company, (2) keep available
the services of each of its officers, employees and sales representatives, and
(3) maintain satisfactory relationships with each of its material suppliers and
customers.
(iii) the Company shall not, and each of the Managing Sellers
shall cause the Company to not, sell, assign, transfer, lease, license, or
abandon any of its assets, tangible or intangible, except in the ordinary course
of business consistent with past custom and practice for a fair consideration.
4D. Full Access. Subject to the confidentiality provisions of
the Letter of Intent, the Company shall, and each of the Managing Sellers shall
cause the Company to, afford, and cause its affiliates, officers, directors,
employees, attorneys, accountants, advisors and other agents (the "Company
Personnel") to afford, to the Purchaser, its financing sources and the
Purchaser's accounting, legal and other representatives full and complete access
at all reasonable times to all premises, properties, accountants and Company
Personnel of the Company and its Subsidiaries and to all business, financial,
legal, real estate, tax, compensation and other data and information (including
all books, records, contracts, customer lists, other documents and records and
any working papers of the Company Personnel) concerning the Company, its
Subsidiaries and its affairs and operations as requested by the Purchaser or its
representatives or agents.
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4E. Press Release and Announcements. None of the Company or
the Sellers, on the one hand, or the Purchaser, on the other hand, or any of
their respective representatives shall make any public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior
written consent of the other. The foregoing notwithstanding, any such public
announcement may be made if required by applicable law or a securities exchange
rule, provided that the Party required to make such public announcement shall
provide notice with the other Parties concerning the timing and content of such
public announcement before the same is made.
4F. HSR Act. In connection with the transactions contemplated
by this Agreement, the Parties shall comply promptly with the notification and
reporting requirements of the HSR Act and use all commercially reasonable best
efforts to obtain early termination of the waiting period under the HSR Act. The
Parties shall substantially comply with any additional requests for information,
including requests for production of documents and production of witnesses for
interviews or depositions, by any antitrust authority. The Purchaser shall pay
all fees and expenses associated with compliance under the HSR Act.
4G. Compliance with Agreements and Laws. The Company shall,
and each of the Managing Sellers shall cause the Company to, (i) comply with all
material obligations pursuant to any contract or agreement, whether oral or
written, express or implied and (ii) comply in all material respects with all
applicable Laws. Without limiting the generality of the foregoing, each of the
Managing Sellers shall cause the Company to comply in all material respects with
all Environmental and Safety Requirements and all permits, licenses or other
authorizations issued thereunder; respond in accordance with applicable law to
any Release or threatened Release of any hazardous material, substance or waste
in a manner which complies in all material respects with all Environmental and
Safety Requirements; and provide such documents or information, or conduct such
studies or assessments, relating to matters arising under Environmental and
Safety Requirements as the Purchaser may reasonably request.
4H. Payment of Obligations. The Company shall, and each of the
Managing Sellers shall cause the Company to, pay and discharge when payable all
Taxes, assessments and governmental charges imposed upon its properties or upon
the income or profits therefrom (in each case before the same becomes delinquent
and before penalties accrue thereon) and all claims for labor, materials or
supplies.
4I. Notice of Material Developments. Each Party shall give
prompt written notice to the other Parties of (i) any variances in any of its
representations or warranties contained in this Agreement, (ii) any material
breach of any covenant hereunder by such Party, and (iii) any other material
development which would render any of the conditions in Section 2 or 3 incapable
of being satisfied.
4J. Exclusivity. None of the Company, the Sellers or any of
their respective representatives, officers, directors, agents, stockholders or
Affiliates (all such persons and entities, the "Company Group") shall directly
or indirectly initiate, solicit, entertain, negotiate, accept or discuss any
proposal or offer (an "Acquisition Proposal") to acquire all or any significant
part of the Company, whether by merger, purchase of stock, purchase of assets,
tender offer or otherwise (a
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"Third Party Acquisition"), or provide any nonpublic information to any third
party in connection with an Acquisition Proposal or a Third Party Acquisition,
or enter into any agreement, arrangement or understanding requiring the Company
or any Seller to abandon, terminate or fail to consummate the transactions
contemplated under this Agreement. The Company shall (i) immediately notify the
Purchaser if any member of the Company Group receives any indication of
interest, request for information or offer in respect of an Acquisition
Proposal, (ii) communicate to the Purchaser in reasonable detail the terms of
any such indication, request or proposal, and (iii) provide the Purchaser with
copies of all written communications relating to any such indication, request or
proposal. The Company and the Sellers represent that no member of the Company
Group is party to or bound by any agreement with respect to an Acquisition
Proposal or a Third Party Acquisition other than under this Agreement and the
members of the Company Group have terminated all discussions with third parties
(other than the Purchaser) regarding Acquisition Proposals or Third Party
Acquisitions. The Company and the Sellers shall use their best efforts to cause
each other member of the Company Group to comply with the provisions of this
Section 4J. In the event that any of the Company or the Sellers breaches the
provisions of this Section 4J and the transactions contemplated hereby are not
consummated for any reason (other than as a direct result of a breach of this
Agreement by the Purchaser in the absence of any breach of this Agreement by the
Company or the Sellers), the Company and/or the Sellers shall promptly reimburse
the Purchaser and its Affiliates for all out-of-pocket fees and expenses
incurred before or after the date of this Agreement by the Purchaser and its
Affiliates related to the transactions contemplated hereby, including fees and
expenses of legal counsel, accountants and other consultants and advisors
retained by the Purchaser in connection with the transactions contemplated
hereby. The foregoing provisions are in addition to, and not in derogation of,
any statutory or other remedy that the Purchaser may have for a breach of this
Section 4J.
4K. Certain Pre-Closing Tax Matters. Except as expressly
contemplated by this Agreement, without the prior written consent of the
Purchaser, neither the Sellers nor the Company shall make or change any
election, change an annual accounting period, adopt or change any accounting
method, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment relating to the Company, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to the Company, fail
to timely file any Tax Return, take a position on a Tax Return not in keeping
with prior practice or take any other similar action, or omit to take any action
relating to the filing of any Tax Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement, surrender, consent
or other action or omission could have the effect of increasing the present or
future Tax liability or decreasing any present or future Tax asset of the
Company or the Purchaser.
SECTION 5. POST-CLOSING COVENANTS AND AGREEMENTS.
5A. Confidentiality. In consideration of the mutual covenants
contained herein, each of the Sellers agrees that, for all times after the
Closing Date, except as required by law or court order, he or she shall not,
directly or indirectly, disclose to any unauthorized Person or use for his or
her own account any Confidential Information unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of such Seller's acts or omissions to act. Each of
the Sellers further agrees to use his or her commercially reasonable
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best efforts and diligence to safeguard the Confidential Information and to
protect it against disclosure, misuse, espionage, loss or theft.
5B. Noncompete, Nonsolicitation.
(i) For a period of 5 years following the Closing Date (the
"Noncompete Period"), none of the Managing Sellers shall directly or indirectly
own, operate, lease, manage, control, participate in, consult with, advise,
permit his name to be used by, provide services for, or in any manner engage in
(x) any business (including by himself or in association with any person, firm,
corporate or other business organization or through any other entity) that
manufactures any product or provides any service that may be used as a
substitute for or otherwise compete with any product or service of the Company,
its Subsidiaries or (y) any business in competition with, or potential
competition with, the businesses of the Company or its Subsidiaries, within any
geographical area in which the Company Group has obtained or is in the process
of obtaining a Serta license as of the Closing. Nothing herein shall prohibit
any of the Managing Sellers from being a passive owner of not more than 2% of
the outstanding stock of a corporation which is publicly traded, so long as such
Managing Seller has no active participation in the business of such corporation.
(ii) During the Noncompete Period, none of the Managing Sellers
shall directly or indirectly (x) induce or attempt to induce any employee of the
Company or any Subsidiary to leave the employ of the Company or such Subsidiary,
or in any way interfere with the relationship between the Company or any
Subsidiary and any employee thereof, including , inducing or attempting to
induce any union, employee or group of employees to interfere with the business
or operations of the Company or its Subsidiaries, (y) hire any person who was a
Key Employee of the Company or any Subsidiary, or (z) induce or attempt to
induce any customer, supplier, distributor, franchisee, licensee or other
business relation of the Company or any Subsidiary to cease doing business with
the Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, distributor, franchisee, licensee or
business relation and the Company or any Subsidiary.
(iii) Each of the Managing Sellers agrees and acknowledges that:
(a) the covenants set forth in this Section 5B are reasonably limited in both
time and geographical scope and in all other respects, (b) the covenants set
forth in this Section 5B are reasonably necessary for the protection of the
Company, (c) the Purchaser would not have entered into this Agreement but for
the covenants of each of the Managing Sellers contained herein, and (d) the
covenants contained herein have been made as a material incentive to the
Purchaser to enter into this Agreement.
(iv) If, at the time of enforcement of this Section 5B, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(v) Each of the Managing Sellers recognizes and affirms that in
the event of his breach of any provision of this Section 5B, money damages would
be inadequate and the Purchaser
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and the Company would have no adequate remedy at law. Accordingly, each of the
Managing Sellers agrees that in the event of a breach or a threatened breach by
any such Managing Seller of any of the provisions of this Section 5B, the
Purchaser and the Company, in addition and supplementary to other rights and
remedies existing in their favor, may apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof
(without posting a bond or other security).
5C. Certain Post-Closing Tax Matters. The Company shall
prepare, or cause to be prepared, and file, or cause to be filed, any Tax
Returns of the Company for Tax periods which end on or before the Closing Date
and which have not been filed as of the Closing Date. The Company shall prepare,
or cause to be prepared, and file, or cause to be filed, any Tax Returns of the
Company for Tax periods which begin before the Closing Date and end after the
Closing Date. The Company shall permit the Sellers to review and comment on each
such Tax Return described in the preceding sentence prior to filing. The Sellers
shall pay to the Company within ten days following the date on which Taxes are
paid with respect to the Tax periods described in the first two sentences of
this Section 5C, an amount equal to the portion of such Taxes which relates to
the portion of such Tax periods ending on and including the Closing Date to the
extent such Taxes were not paid in full prior to the Closing Date and were not
reflected in the reserve for Taxes (rather than any reserve for deferred Taxes
established to reflect timing differences between book and tax income) shown on
the face of the Closing Balance Sheet and taken into account in determining
Closing Net Worth. For purposes of this Section 5C, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Taxable period ending on the Closing Date shall
(a) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction, the numerator of which is the number of days in the
Taxable period ending on and including the Closing Date and the denominator of
which is the number of days in the entire Taxable period, and (b) in the case of
any Tax based upon or related to income or receipts, be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date.
SECTION 6. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
As a material incentive to the Purchaser to enter into this Agreement and
purchase the Shares hereunder, the Company and each of the Managing Sellers,
jointly and severally, hereby represent and warrant to the Purchaser that the
following statements contained in this Section 6 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though then made and as though the Closing Date was substituted for the
date of this Agreement throughout this Section 6) as set forth in the disclosure
schedule delivered by the Sellers to the Purchasers on the date hereof:
6A. Organization, Corporate Power and Licenses. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the Laws of its state of incorporation and is duly
authorized to conduct business in every jurisdiction where such qualification is
required, which such jurisdictions are set forth on the Foreign Qualifications
Schedule 6A attached hereto. Each of the Company and its Subsidiaries possesses
all requisite corporate power and authority and all licenses, permits, and
authorizations necessary to own and
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operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the charter documents and bylaws
which have been furnished to the Purchaser reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
The minute books (containing the records of meetings of the stockholders, the
board of directors and any committees of the board of directors), the stock
certificate books and the stock record books of each of the Company and its
Subsidiaries are correct and complete.
6B. Capital Stock and Related Matters; Subsidiaries.
(i) As of immediately prior to the Closing, the authorized
capital stock of the Company consists of 10,000 shares of common stock, of which
1,970 shares shall be issued and outstanding as of the Closing Date. The Shares
constitute all of the outstanding capital stock of the Company and are held
beneficially and of record by the Sellers (free and clear of all Liens) as set
forth on the Capitalization Schedule 6B attached hereto. The Capitalization
Schedule 6B(i) attached hereto, sets forth the capitalization of each of the
Company's Subsidiaries and the name of each Person holding any equity securities
of the Company, any securities convertible or exchangeable for any equity
securities of the Company and any options or other rights to purchase equity
securities of the Company and the amount and type of such securities or options
or rights held by such Persons as of the Closing Date and immediately
thereafter. Other than pursuant to the Phantom Plan and the Stock Option Plan,
none of the Company or any of its Subsidiaries has outstanding (1) any stock or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor any rights or options to
subscribe for or to purchase its capital stock or (2) any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock or similar plans or rights. None of the Company or any
of its Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock. As of the
Closing and immediately thereafter, all of the outstanding shares of the
Company's (and each of its Subsidiaries') capital stock shall be validly issued,
fully paid and nonassessable.
(ii) The Company has not violated any applicable federal or
state securities laws in connection with the offer, sale or issuance of any of
its capital stock or the offer, sale or issuance of any of its debt securities.
Except as set forth on the Capitalization Schedule 6B(ii), there are no voting
trusts, proxies, or other agreements or understandings among the Company's
shareholders or any other Person with respect to the voting, transfer or
registration of the Company's capital stock or with respect to any other aspect
of the Company's affairs.
(iii) The Subsidiaries Schedule 6B(iii) sets forth for each
Subsidiary of the Company (i) its name and jurisdiction of incorporation, (ii)
the number of shares of authorized capital stock of each class of its capital
stock, (iii) the number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof, and the number of shares held
by each such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of each
Subsidiary of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable. Each of the Company and its Subsidiaries holds of
record and owns beneficially all of the outstanding shares of each Subsidiary of
the Company, free
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and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of the Company and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its Subsidiaries or that could require any Subsidiary of the Company to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of the Company.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of the Company.
None of the Company and its Subsidiaries controls directly or indirectly or has
any direct or indirect equity participation in any corporation, partnership,
trust, or other business association which is not a Subsidiary of the Company.
6C. Authorization; No Breach. The Sellers' and the Company's
execution, delivery and performance of this Agreement and all other agreements
and instruments contemplated hereby to which such person is a party have been
duly authorized by such person. This Agreement constitutes a valid and binding
obligation of the Sellers and the Company, enforceable in accordance with its
terms, except as such enforceability may be limited by (x) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (y) applicable equitable principles
(whether considered in a proceeding at law or in equity), and all other
agreements and instruments contemplated hereby to which the Company or any
Subsidiary of the Company is a party, when executed and delivered by the Company
in accordance with the terms hereof, shall each constitute a valid and binding
obligation of the Company or such Subsidiary, enforceable in accordance with its
terms, except as such enforceability may be limited by (a) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (b) applicable equitable principles
(whether considered in a proceeding at law or in equity). Except as set forth on
the attached Authorization Schedule 6C, the execution and delivery by the
Sellers and the Company of this Agreement and all other agreements and
instruments contemplated hereby to which any such person is a party, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company or such Subsidiary do not and shall not (i) conflict with or result
in a breach of the terms, conditions or provisions of, (ii) constitute a default
under (whether with or without the passage of time, the giving of notice or
both), (iii) result in the creation of any Lien upon the Company's or any of its
Subsidiaries' capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or notice or declaration to, the articles of incorporation or
bylaws of the Company, or, to the knowledge of the Company and the Managing
Sellers, any Law to which the Company or any Subsidiary of the Company is
subject, or any order, judgment or decree or any material agreement or
instrument to which the Company is subject. None of the Company or any
Subsidiary of the Company is a party to or bound by any written or oral
agreement or understanding with respect to an Acquisition Proposal or a Third
Party Acquisition other than this Agreement, and all of them have terminated all
discussions with third parties (other than the Purchaser) regarding Acquisition
Proposals or Third Party Acquisitions.
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6D. Consents. No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Entity or other third
party is necessary for the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby, except for
applicable requirements of the HSR Act or as set forth on the attached Consents
Schedule 6D.
6E. Financial Statements. The following financial statements
shall be attached hereto as the Financial Statements Schedule 6E:
(i) the audited consolidated balance sheets of the Company as
of December 31, 1997 and December 31, 1998, and the related statements of
combined income and cash flows (or the equivalent) for the respective
twelve-month periods then ended (which shall be delivered to Purchaser on or
prior to April 20, 2000);
(ii) the audited consolidated balance sheets of the Company as
of December 31, 1999, and the related statements of combined income and cash
flows (or the equivalent) for the respective twelve-month period then ended (the
"Latest Balance Sheet") (which shall be delivered to Purchaser on or prior to
April 20, 2000); and
(iii) the unaudited consolidated balance sheets of the Company
as of January 31, 2000, February 29, 2000 and March 31, 2000, and the related
statements of combined income (or the equivalent) for the respective monthly
periods then ending (which shall be delivered to Purchaser on or prior to the
Closing Date).
Except as set forth on the Financial Statements Schedule 6E as of their delivery
date to the Purchaser and as of the Closing Date all of the foregoing financial
statements (including in all cases the notes thereto, if any) are correct and
complete and are consistent with the books and records of the Company (which
books and records are correct and complete) and fairly present the financial
condition, operating results and cash flows of the Company and its Subsidiaries,
if applicable, and have been prepared in accordance with GAAP consistently
applied throughout such financial statements and the periods covered thereby,
subject in the case of the unaudited financial statements to the absence of
footnote disclosure and year end adjustment. Each of the financial statements
referenced in subsections 6E(i) and (ii) above have been prepared in accordance
with Regulation S-X of the Securities Act.
6F. Absence of Undisclosed Liabilities. Except as set forth on
the attached Disclosed Xxxxxxxxxxx Xxxxxxxx 0X, xxxx of the Company or any of
its Subsidiaries has any obligation or liability (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due and
regardless of when asserted) arising out of transactions entered into at or
prior to the date hereof, or any action or inaction at or prior to the date
hereof, or any state of facts existing at or prior to the date hereof (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, or demand against the Company or any of its
subsidiaries giving rise to any liability), other than: (i) liabilities set
forth on the liabilities side of the Latest Balance Sheet (excluding any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit and none of which, either
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individually or in the aggregate, is material) and (iii) other liabilities and
obligations expressly disclosed on Disclosed Liabilities Schedule 6F.
6G. Accounts Receivable. All notes and accounts receivable
reflected on the Latest Balance Sheet and all notes and accounts receivable to
be reflected on the Closing Balance Sheet (net of allowances for doubtful
accounts as reflected thereon and as determined in accordance with GAAP
consistently applied with respect to each such financial statement) are or shall
be valid receivables arising in the ordinary course of business consistent with
past custom and practice, subject to no setoffs or counterclaims, and are
current and collectible.
6H. Inventory. The inventory of the Company and its
subsidiaries consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and none of which
is slow moving, obsolete, damaged, or defective, subject only to the reserve for
inventory shown on the Latest Balance Sheet and the reserve inventory to be
shown on the Closing Balance Sheet (as determined in accordance with GAAP
consistently applied with respect to each such financial statement), and such
inventory consists or shall consist of a quantity and quality usable and
saleable in the ordinary course of business consistent with past custom and
practice.
6I. Product Warranty. All products manufactured, sold, leased
or delivered by the Company or any of its Subsidiaries have been in conformity
with all applicable contractual commitments and all express and implied
warranties to the extent that any may exist, and, to the knowledge of the
Company and the Managing Sellers, none of the Company or any of its Subsidiaries
has any liability (and there is no reasonable basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against it giving rise to any such liability) for replacement or repair
thereof or other damages in connection therewith in excess of past custom and
practice and experience. To the knowledge of the Company and the Managing
Sellers, no products manufactured, sold, leased or delivered by the Company or
any of its Subsidiaries and no services rendered by the Company or any of its
Subsidiaries are subject to any Guarantee, warranty or other indemnity beyond
the applicable standard terms and conditions of such sale, lease or service. The
attached Product Warranty Schedule 6I includes copies of such standard terms and
conditions of sale, lease and service for the Company and any of its
Subsidiaries (containing applicable guaranty, warranty and indemnity
provisions).
6J. Product Liability. To the knowledge of the Company and the
Managing Sellers, none of the Company and its Subsidiaries has any Liability
(and there is not basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold or delivered by any of the Company or its Subsidiaries.
6K. No Material Adverse Effect. Since December 31, 1999, there
has occurred no fact, event or circumstance which has had or would reasonably be
expected to have a Material Adverse Effect other than the Washington Facility
Fire.
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6L. Indebtedness. On December 31, 1999, all Indebtedness of
the Company and its Subsidiaries was $0 and is described on the Indebtedness
Schedule 6L. None of such Indebtedness shall exist following the Closing.
6M. Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth on the attached Developments
Schedule 6M, since December 31, 1999, each of the Company and its Subsidiaries
has conducted its business only in the ordinary course of business consistent
with past custom and practice, and none of the Company and its Subsidiaries has:
(i) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities or rights
convertible, exchangeable or exercisable into any capital stock or other equity
securities, other than (x) equity transfers in the ordinary course of business
by shareholders of the Company pursuant to applicable laws of descent and
distribution or among such shareholder's Family Group or (y) pursuant to the
Stock Option Plan or the Phantom Plan;
(ii) incurred any Indebtedness, other than any Indebtedness
incurred in the ordinary course of business consistent with past custom and
practice;
(iii) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid in the
ordinary course of business consistent with past custom and practice;
(iv) declared, set aside or made any payment or distribution of
cash or other property to the Sellers with respect to their capital stock or
other equity securities or purchased, redeemed or otherwise acquired any shares
of its capital stock or other equity securities (including any warrants, options
or other rights to acquire its capital stock or other equity securities);
(v) mortgaged or pledged or imposed any security interest upon
any of its properties or assets, tangible or intangible, or subjected them to
any Lien, except Permitted Liens;
(vi) sold, assigned, transferred, leased, licensed or abandoned
any of its assets, tangible or intangible (including the Intellectual Property
Rights), or other than in the ordinary course of business consistent with past
custom and practice for a fair consideration;
(vii) made or granted any bonus or any wage or salary increase
(other than wage increases made in the ordinary course of business consistent
with past custom and practice) or made any other change in employment to any
director, officer, employee or group of employees (except as required by
pre-existing contracts described on the attached Contracts Schedule 6P), or made
or granted any increase in any bonus, profit sharing, incentive, severance, or
other employee benefit plan, contract or arrangement, or amended or modified or
terminated any existing employee benefit plan or arrangement or adopted any new
employee benefit plan or arrangement;
(viii) entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any existing
such contracts or agreements;
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(ix) made capital expenditures or commitments therefor that
aggregate in excess of $50,000 other than in connection with the reconstruction
of the Washington Facility as set forth on the Construction Schedule 2Q attached
hereto;
(x) delayed, postponed or canceled the payment of any accounts
payable or any other liability or obligation or agreed or negotiated with any
party to extend the payment date of any accounts payable or accelerated the
collection of any accounts or notes receivable;
(xi) made any loans or advances to, Guarantees for the benefit
of, or any Investments in, any Persons or formed any Subsidiary;
(xii) suffered any damage, destruction or casualty loss
exceeding in the aggregate $50,000 (other than the damage caused by the
Washington Facility Fire), whether or not covered by insurance, or experienced
any material changes in the amount and scope of insurance coverage;
(xiii) made any change in any method of accounting or accounting
policies or its cash management processes, other than those required by GAAP
which have been disclosed in writing to the Purchaser, or made any write-down in
the value of its inventory that is other than in the ordinary course of business
consistent with past custom and practice;
(xiv) directly or indirectly engaged in any transaction, made
any loan to or entered into any arrangement with any officer, director, partner,
shareholder, employee or other Affiliate of the Company;
(xv) except as contemplated hereby, amended its articles of
incorporation, bylaws or other organizational documents;
(xvi) granted any license or sublicense of any rights under or
with respect to any Intellectual Property Rights;
(xvii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) involving more than $25,000;
(xviii) entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $25,000;
(xix) accelerated, terminated, modified, or canceled any
agreement, contract or license (or series of related agreements, contracts, or
licenses) involving more than $25,000 to which any of the Company and its
Subsidiaries is a party or by which any of them is bound;
(xx) experienced any other occurrence, event, incident, or
taken any action or omitted to take any action which would have a Material
Adverse Effect; or
(xxi) agreed, whether orally or in writing, to do any of the
foregoing.
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6N. Assets.
(i) Except as set forth on the Liens Schedule 6N attached
hereto, each of the Company and its Subsidiaries has good and valid title to, or
a valid leasehold interest in, the properties and assets, tangible or
intangible, used by it, located on its premises or shown on the Latest Balance
Sheet or acquired thereafter, free and clear of all Liens, except for (a)
properties and assets disposed of in the ordinary course of business since the
date of the Latest Balance Sheet and (b) Permitted Liens.
(ii) Each of the Company and its Subsidiaries owns, has a valid
leasehold interest in, or has a valid license to use, all the assets, properties
and rights, whether tangible or intangible, necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted.
6O. Tax Matters.
(i) Except as set forth on the attached Taxes Schedule 6O:
(a) each of the Company and its Subsidiaries has filed
all Tax Returns which it is required to file under applicable laws and
regulations, and all such Tax Returns are complete and correct and have
been prepared in compliance with all applicable laws and regulations;
(b) each of the Company and its Subsidiaries has paid
all Taxes due and owing by it (whether or not such Taxes are shown or
required to be shown on a Tax Return) and has withheld and paid over to
the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, shareholder,
creditor or other third party;
(c) none of the Company or any of its Subsidiaries has
waived any statute of limitations with respect to any Taxes or agreed to
any extension of time for filing any Tax Return which has not been
filed; and none of the Company or any of its Subsidiaries has consented
to extend to a date later than the date hereof the period in which any
Tax may be assessed or collected by any Taxing Authority;
(d) the accrual for Taxes on the Latest Balance Sheet
would be adequate to pay all Tax liabilities of each of the Company and
its Subsidiaries if its current tax year were treated as ending on the
date of the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income);
(e) no foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being conducted
with respect to the Company or any of its Subsidiaries;
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(f) there are no material unresolved questions or
claims concerning the Company's Tax liability (or any Tax liability of
any of its Subsidiaries);
(g) no claim has ever been made by a taxing authority
in a jurisdiction where the Company (or any Subsidiary of the Company)
does not file Tax Returns that the Company (or any such Subsidiary) so
not filing is or may be subject to Taxes assessed by such jurisdiction
or a filing requirement in that jurisdiction;
(h) none of the Company or any of its Subsidiaries has
ever been a member of an Affiliated Group or filed or been included in a
combined, consolidated or unitary income Tax Return, other than for an
Affiliated Group of which the Company is the common parent corporation;
(i) none of the Company or any of its Subsidiaries is a
party to or bound by any Tax allocation or Tax sharing agreement;
(j) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company or
any of its Subsidiaries; and
(k) none of the Company or any of its Subsidiaries
shall be required to (i) as a result of a change in method of accounting
for a taxable period ending on or prior to the Closing Date, include any
adjustment in taxable income for any taxable period (or portion thereof)
ending after the Closing Date, (ii) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any similar
provision of state, local or foreign income Tax law), include any item
of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date,
(iii) as a result of any sale reported on the installment method where
such sale occurred on or prior to the Closing Date, include any item of
income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date, or
(iv) as a result of any prepaid amount received on or prior to the
Closing Date, include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date.
(ii) None of the Company or any of its Subsidiaries:
(a) has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(b) has made an election under Section 341(f) of the
Code; or
(c) is liable for the Taxes of another Person that is
not currently a member of the Affiliated Group of which the Company is
the common parent corporation (1) under Treasury Regulation Section
1.1502-6 (or comparable provisions of state, local or foreign law), (2)
as a transferee or successor, or (3) by contract or indemnity or
otherwise; or
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(d) has made, is obligated to make or is party to an
agreement which under certain circumstances could obligate it to make
payments which will not be deductible under Section 280G of the Code (or
any similar provision of state, local or foreign income Tax law), as a
result of any sale reported on the installment method where such sale
occurred on or prior to the Closing Date, include any item of income in,
or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date, or as a
result of any prepaid amount received on or prior to the Closing Date,
include any item of income in, or exclude any item of deduction from,
taxable income for any taxable period (or portion thereof) ending after
the Closing Date.
6P. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or as
set forth on the attached Contracts Schedule 6P, none of the Company or any of
its Subsidiaries is a party to or bound by any written or oral:
(a) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for deferred or
other compensation to its current or former directors, officers or
employees or any other employee benefit plan, arrangement or practice,
whether formal or informal;
(b) collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(c) management agreement or contract for the employment
of any officer, individual employee or other Person on a full-time,
part-time, consulting or other basis (i) providing annual cash or other
compensation in excess of $10,000, (ii) providing for the payment of any
cash or other compensation or benefits upon the consummation of the
transactions contemplated hereby or (iii) otherwise restricting its
ability to terminate the employment of any employee at anytime for any
lawful reason or for no reason without penalty or liability;
(d) contract or agreement involving any Governmental
Entity;
(e) agreement or indenture relating to borrowed money
or other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Company
(or any of its Subsidiaries) or any letter of credit arrangements;
(f) Guarantee, other than endorsements made for
collection in the ordinary course of business or the Xxxxxxx Guarantee;
(g) lease or agreement under which the Company or any
of its Subsidiaries is (i) lessee of or holds or operates any personal
property, owned by any other party, except for any lease of personal
property under which the aggregate annual rental payments do not
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exceed $25,000 or (ii) lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by the
Company or any of its Subsidiaries;
(h) contract or group of related contracts with the
same party or group of affiliated parties for the purchase or sale of
raw materials, commodities, supplies, products, equipment or other
personal property or services under which the undelivered balance since
December 31, 1999 of such products and services has a selling price in
excess of $25,000;
(i) other contract or group of related contracts with
the same party or group of affiliated parties continuing over a period
of more than six months from the date or dates thereof, not terminable
by the Company or any of its Subsidiaries upon 30 days' or less notice
without penalty or involving more than $25,000;
(j) contract relating to the marketing, sale,
advertising or promotion of its products;
(k) agreements relating to the ownership of,
investments in or loans and advances to any Person, including
investments in joint ventures and minority equity investments;
(l) license, royalty, indemnification or other
agreement with respect to any intangible property (including any
Intellectual Property Rights);
(m) broker, agent, sales representative, sales or
distribution agreement;
(n) power of attorney or other similar agreement or
grant of agency;
(o) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world, including
any nondisclosure or confidentiality agreements;
(p) contract or agreement containing a change of
control provision or other provision requiring the payment of severance
other than the Phantom Plan and the Stock Option Plan; or
(q) other agreement which involves a consideration in
excess of $100,000 annually, whether or not in the ordinary course of
business.
(ii) All of the contracts, agreements and instruments set forth
or required to be set forth on the attached Contracts Schedule 6P (the "Material
Contracts") are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by (x) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (y) applicable equitable principles
(whether considered in a proceeding at law or in equity). Each of the
Material Contracts shall be in full force and effect without penalty in
accordance with its terms upon consummation of the transactions contemplated
hereby. Each of the
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Company and its Subsidiaries has performed all obligations required to be
performed by it and is not in default under or in breach of nor in receipt of
any claim of default or breach under any Material Contract; no event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company or any of
its Subsidiaries under any Material Contract; and none of the Company or any of
its Subsidiaries has any knowledge of any breach or cancellation or anticipated
breach or cancellation by the other parties to any Material Contract to which
they are parties.
(iii) The Purchaser has been supplied with a true and correct
copy of each written Material Contract, together with all amendments, waivers or
other changes thereto (all of which amendments, waivers or other changes thereto
are described on the attached Contracts Schedule 6P).
6Q. Intellectual Property Rights.
(i) The attached Intellectual Property Schedule 6Q contains a
complete and accurate list of all (a) patented and registered Intellectual
Property Rights owned or used by the Company and any of its Subsidiaries, (b)
pending patent applications and applications for registrations of other
Intellectual Property Rights filed by the Company and any of its Subsidiaries,
(c) all computer software owned or used by the Company or any of its
Subsidiaries other than commercially available software with a license fee of
less than $1,000, and (d) material unregistered trade names, corporate names,
trademarks, service marks and copyrights owned or used by the Company and any of
its Subsidiaries. The attached Intellectual Property Schedule 6Q also contains a
complete and accurate list of all licenses or similar agreements relating to
Intellectual Property Rights to which the Company or any of its Subsidiaries is
a party, in each case identifying the subject Intellectual Property Rights.
(ii) Each of the Company and/or its Subsidiaries owns all
right, title and interest to, or has the right to use pursuant to a valid and
effective written license, all Company Intellectual Property Rights. The Company
Intellectual Property Rights comprise all of the Intellectual Property Rights
necessary and desirable for the operation of the business of the Company and its
Subsidiaries as presently conducted and as presently proposed to be conducted,
free and clear of all Liens other than Permitted Liens. No loss or expiration of
any of the Company Intellectual Property Rights is threatened, pending or
reasonably foreseeable. Each of the Company and its Subsidiaries has taken all
commercially reasonable action to maintain and protect the Company Intellectual
Property Rights. To the knowledge of the Company and its Subsidiaries, the
owners of any Intellectual Property Rights licensed to the Company or its
Subsidiaries have taken all commercially reasonable action to maintain and
protect the Intellectual Property Rights subject to such licenses.
(iii) Except as set forth on the attached Intellectual Property
Schedule 6Q, (a) there are no claims against the Company or any of its
Subsidiaries that were either made within the past five (5) years or are
presently pending asserting the invalidity, misuse or unenforceability of any of
the Company Intellectual Property Rights, and there is no basis for any such
claim, (b) the operation of the business of the Company and its Subsidiaries as
currently conducted and as proposed to be conducted has not infringed,
misappropriated or conflicted with and will not infringe, misappropriate or
conflict with any Intellectual Property Rights of other Persons and none of the
Company or its Subsidiaries has received any notice regarding any of the
foregoing (including any demands or offers
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to license any Intellectual Property Rights from any other Person) or is aware
of any facts which indicate a likelihood of any of the foregoing, (c) to the
knowledge of the Company and the Managing Sellers, no third party has infringed,
misappropriated or otherwise conflicted with any of the Company Intellectual
Property Rights. The transactions contemplated by this Agreement shall have no
Material Adverse Effect on the right, title or interest of the Company and its
Subsidiaries in and to the Company Intellectual Property Rights and all of such
Company Intellectual Property Rights shall be owned or available for use by the
Company and its Subsidiaries on substantially identical terms and conditions
immediately after the Closing.
(iv) Except as described on the attached Intellectual Property
Schedule 6Q(iv), to the knowledge of the Company and the Managing Sellers, none
of the computer software (including peoplesoft), computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems that are used or relied on by the
Company or by any of its Subsidiaries in the conduct of their respective
businesses (the "Computer Systems") has malfunctioned, ceased to function,
generated incorrect data or produced incorrect results.
6R. Litigation, etc. Except as set forth on the attached
Litigation Schedule 6R, there are no (and, during the five years preceding the
date hereof, there have not been any) actions, suits, proceedings (including any
arbitration proceedings, orders, investigations or claims pending or threatened
against the Company or, to the knowledge of the Company and the Managing
Sellers, pending or threatened against any of the officers, directors or
employees of the Company with respect to their businesses or proposed business
activities), or, to the knowledge of the Company and the Managing Sellers,
pending or threatened by the Company against any third party, at law or in
equity, or before or by any Government Entity (including any actions, suits,
proceedings or investigations with respect to the transactions contemplated by
this Agreement); none of the Company or any of its Subsidiaries is subject to
any arbitration proceedings under collective bargaining agreements or otherwise
or any governmental investigations or inquiries; and there is no basis for any
of the foregoing. Except as indicated on the attached Litigation Schedule 6R,
the Company and its Subsidiaries are fully insured with respect to each of the
matters set forth on such Litigation Schedule 6R. None of the Company or its
Subsidiaries is subject to any judgment, order or decree of any Government
Entity, and none of the Company or its Subsidiaries has received any opinion or
memorandum or legal advice from legal counsel to the effect that it is exposed,
from a legal standpoint, to any liability which would reasonably be expected to
have a Material Adverse Effect.
6S. Brokerage. Except as set forth on the Brokerage Schedule
6S attached hereto (all items listed on the Brokerage Schedule 6S shall be the
responsibility of, and shall be borne by, the Sellers), there are and shall be
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement to which the Company or any Subsidiary of the Company
is a party or to which the Company or any Subsidiary of the Company is subject.
Neither the Company nor the Purchaser shall have any obligation for any fees or
expenses set forth on the Brokerage Schedule 6S.
6T. Insurance. The attached Insurance Schedule 6T contains a
description of each insurance policy maintained by the Company and its
Subsidiaries with respect to its properties, assets
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and business, and each such policy shall be in full force and effect as of the
Closing or a substituted policy shall have been obtained therefor. None of the
Company or any of its Subsidiaries is in default with respect to its obligations
under any insurance policy maintained by it, and none of the Company or any of
its Subsidiaries has ever been denied insurance coverage. Except as set forth on
the attached Insurance Schedule 6T, none of the Company or any of its
Subsidiaries has any self-insurance or co-insurance programs, and the reserves
set forth on the Latest Balance Sheet are (and the reserves to be set forth on
the Closing Balance Sheet will be) adequate to cover all anticipated liabilities
with respect to any such self-insurance or co-insurance programs.
6U. Employees. The Employees Schedule 6U attached hereto
contains a true and complete list as of December 31, 1999 of (i) the employees
employed by the Company and its Subsidiaries having an annual base salary in
calendar year 1999 of $50,000 or more, (ii) the rate of all current compensation
payable by the Company or its Subsidiaries to each such employee, including any
bonus, contingent or deferred compensation, and (iii) the directors of each of
the Company and the Subsidiaries. To the knowledge of the Company and the
Managing Sellers, no executive or key employee of the Company or any Subsidiary
of the Company and no group of employees of the Company or any Subsidiary of the
Company has any plans to terminate employment with the Company or any Subsidiary
of the Company. To the knowledge of the Company and the Managing Sellers, none
of the Company or any of its Subsidiaries has (a) any material labor relations
problems (including any additional union organization activities, threatened or
actual strikes or work stoppages or material grievances), (b) engaged in any
unfair labor practices, (c) during the past five years, suffered any labor
strike, lockout, work stoppage or other material labor dispute or, (d) any union
organization campaign is in progress with respect to any of the employees, nor
any question concerning representation exists respecting such employees. Neither
the Company nor any Subsidiary has engaged in any plant closing or employee
layoff activities within the last two (2) years that would violate or in any way
implicate the Worker Adjustment Retraining and Notification Act of 1988, as
amended, or any similar state or local plant closing or mass layoff statute,
rule or regulation.
6V. ERISA.
(i) The Employee Benefits Schedule 6V lists each Employee
Benefit Plan which any of the Company and its Subsidiaries maintains,
contributes to, or has an obligation to contribute to, or with respect to which
any of the Company and its Subsidiaries has any liability or potential
liability.
(a) Each Employee Benefit Plan (and each related trust,
insurance contract, or fund) materially complies in form and in
operation with its terms and with the applicable requirements of ERISA,
the Code, and other applicable laws.
(b) All required reports and descriptions (including
Form 5500 annual reports, summary annual reports, PBGC-1's, and summary
plan descriptions) have been filed or distributed appropriately with
respect to each Employee Benefit Plan. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code Section 4980B have been met
with respect to each Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
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(c) All contributions (including all employer
contributions and employee salary reduction contributions) which are due
have been paid to each Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of the Company and its Subsidiaries. All
premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(d) Each Employee Benefit Plan which is intended to be
qualified under Code Section 401(a) has received a favorable
determination letter from the Internal Revenue Service and nothing has
occurred since the date of such determination letter that could
adversely affect the qualified status of such plan.
(e) The market value of assets under each Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
(f) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 annual report, and all related trust
agreements, insurance contracts, and other funding agreements which
implement each Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that any of the
Company, its Subsidiaries, and the Controlled Group of Corporations which
includes the Company and its Subsidiaries maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has been required
to contribute:
(a) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a Reportable
Event as to which notices would be required to be filed with the PBGC.
No proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted or
threatened.
(b) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has any
Liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or threatened. The Company has no knowledge of
any basis for any such action, suit, proceeding, hearing, or
investigation.
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(c) None of the Company and its Subsidiaries has
incurred, and the Company and its Subsidiaries have no reason to expect
that any of the Company and its Subsidiaries will incur, any Liability
to the PBGC (other than PBGC premium payments) or otherwise under Title
IV of ERISA (including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) None of the Company, its Subsidiaries, and the other
members of the Controlled Group of Corporations that includes the Company and
its Subsidiaries contributes to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal liability) under any Multiemployer Plan.
(iv) None of the Company and its Subsidiaries has any
obligation to provide medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code Section 4980B).
6W. Compliance with Laws; Permits. Except as set forth on the
attached Compliance Schedule 6W:
(i) To the knowledge of the Company and the Managing Sellers,
each of the Company and its Subsidiaries has complied with all applicable Laws
relating to the operation of its respective business. No notices have been
received by and no claims have been filed against the Company or any Subsidiary
of the Company alleging a violation of any such Laws.
(ii) Except with respect to permits relating to Environmental
and Safety Regulations which are addressed in Section 6X below, each of the
Company and its Subsidiaries holds all permits, licenses, certificates,
accreditations and other authorizations of all Government Entities required for
the conduct of its business and the ownership of its properties, and the
attached Permits Schedule 6W sets forth a list of all of such permits, licenses,
certificates, accreditations and other authorizations. No notices have been
received by the Company or any Subsidiary of the Company alleging the failure to
hold any permit, license, certificate, accreditation or other authorization of
any Government Entity. Each of the Company and its Subsidiaries is in compliance
with all terms and conditions of all permits, licenses, accreditations and
authorizations which it holds. Except as disclosed on the attached Permits
Schedule 6W all of such permits, licenses, accreditations and authorizations
will be available for use by the Company and its Subsidiaries immediately after
the Closing.
6X. Environmental and Safety Matters. Except as set forth on
the attached Environmental Schedule 6X:
(i) To the knowledge of the Company and the Managing Sellers,
Each of the Company and its Subsidiaries has complied with and is currently in
compliance with all Environmental and Safety Requirements. The Company has not
received any oral or written notice, report or information regarding any
violations of or any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) or corrective, investigatory or remedial obligations
arising
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under Environmental and Safety Requirements which relate to the Company (or any
of its Subsidiaries) or any of its current or former properties or facilities.
(ii) Without limiting the generality of the foregoing, each of
the Company and its Subsidiaries has obtained and complied with, and is
currently in compliance with, all permits, licenses and other authorizations
that may be required pursuant to any Environmental and Safety Requirements for
the occupancy of its properties or facilities or the operation of its business.
A list of all such permits, licenses and other authorizations is set forth on
the attached Environmental Schedule 6X.
(iii) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations on the
Company or any Subsidiary of the Company for site investigation or cleanup, or
notification to or consent of any government agencies or third parties under any
Environmental and Safety Requirements (including any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
(iv) None of the following exists at any property or facility
owned, occupied or operated by the Company or any Subsidiary of the Company:
(1) underground storage tanks;
(2) asbestos-containing materials in any form or
condition;
(3) materials or equipment containing
polychlorinated biphenyls; or
(4) landfills, surface impoundments or other
disposal areas.
(v) None of the Company or any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including any hazardous
substance) or owned, occupied or operated any facility or property (and no such
property or facility is contaminated by any such substance) in a manner that has
given or could give rise to any liabilities (including any liability for
response costs, corrective action costs, personal injury, natural resource
damages, property damage or attorneys fees or any investigative, corrective or
remedial obligations) pursuant to CERCLA or any other Environmental and Safety
Requirements.
(vi) None of the Company or any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective, investigatory or remedial obligation of any other Person relating to
any Environmental and Safety Requirements.
6Y. Affiliate Transactions. Except as set forth on the
attached Affiliate Transactions Schedule 6Y, no officer, director, employee,
shareholder or Affiliate of the Company or any of its Subsidiaries or any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such Person or individual owns any beneficial interest, is a
party
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to any agreement, contract, commitment or transaction with the Company or any of
its Subsidiaries or has any material interest in any material property used by
the Company or any of its Subsidiaries.
6Z. Real Property.
(i) The attached Real Property Schedule 6Z sets forth the
address and description of each parcel of real property owned by the Company or
any Subsidiary of the Company (the "Owned Real Property"). The company or its
applicable Subsidiary has good and marketable fee simple title in and to all of
the Owned Real Property subject to no Liens other than Permitted Liens.
(ii) The attached Real Property Schedule 6Z sets forth a list
of all leases, subleases and other occupancy agreements, including all
amendments, extensions and other modifications (the "Leases") for real property
(the "Leased Real Property"; the Owned Real Property and the Leased Real
Property are collectively the "Real Property") to which the Company or any
Subsidiary of the Company is a "tenant," "subtenant" or other lessee party. The
Company or its applicable Subsidiary has a good and valid leasehold interest in
and to all of the Leased Real Property, subject to no Liens except Permitted
Liens. Each Lease is in full force and effect and is enforceable in accordance
with its terms. There exists no default or condition which, with the giving of
notice, the passage of time or both, could become a default under any Lease. The
Company and the Sellers have previously delivered to Purchaser true and complete
copies of all the Leases. Except as described on Consents Schedule 2D, no
consent, waiver, approval or authorization is required from the landlord under
any Lease as a result of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
(iii) The Real Property constitutes all of the real property
owned, leased, occupied or otherwise utilized in connection with the business of
the Company and its Subsidiaries. Other than the Company and its Subsidiaries,
there are no parties in possession or parties having any current or future right
to occupy any of the Real Property. The Real Property is in good condition and
repair and is sufficient and appropriate for the conduct of the business of the
Company and its Subsidiaries. To the knowledge of the Company and the Managing
Sellers, the Real Property and all plants, buildings and improvements located
thereon conform to all applicable building, zoning and other laws, ordinances,
rules and regulations. All permits, licenses and other approvals necessary to
the current occupancy and use of the Real Property have been obtained, are in
full force and effect and have not been violated. There exists no violation of
any covenant, condition, restriction, easement, agreement or order affecting any
portion of the Real Property. All improvements located on the Real Property have
direct access to a public road adjoining such Real Property. No such
improvements or accessways encroach on land not included in the Real Property
and no such improvement is dependent for its access, operation or utility on any
land, building or other improvement not included in the Real Property. There is
no pending or any threatened condemnation proceeding affecting any portion of
the Real Property. There are no outstanding options or rights of first refusal
with respect to the purchase or use of any of the Real Property, any portion
thereof or interest thereon. Neither the Company nor any of its Subsidiaries is
obligated to purchase or lease any real property.
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SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. As a
material incentive to the Purchaser to enter into this Agreement and purchase
the Shares hereunder, each Seller hereby, jointly and severally represents and
warrants to the Purchaser and the Company that the following representations and
warranties are true and correct as of the date hereof and will be true and
complete as of the Closing Date as though the Closing Date were substituted for
the date of this Agreement throughout such representations and warranties:
7A. Power and Authority. Each Seller that is an entity is duly
organized, validly existing and in good standing under the laws of its
incorporation and possesses all requisite power and authority necessary to carry
out the transactions contemplated by this Agreement.
7B. Authorization; No Breach. This Agreement and all other
agreements or instruments contemplated hereby to which any Seller is a party or
by which any Seller is bound, when executed and delivered by such Seller in
accordance with the terms hereof, shall each constitute a valid and binding
obligation of such Seller, enforceable in accordance with its terms, except as
such enforceability may be limited by (x) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (y) applicable equitable principles (whether considered in a
proceeding at law or in equity). The execution, delivery and performance by each
Seller of this Agreement and all other agreements contemplated hereby to which
such Seller is a party, and the fulfillment of and compliance with the
respective terms hereof and thereof by such Seller, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under (whether with or without the passage of time,
the giving of notice or both), (iii) result in the creation of any lien,
security interest, mortgage, charge or encumbrance upon such Seller's assets
pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any third party or Government Entity pursuant
to, any Law to which such Seller is subject, the articles of incorporation or
bylaws of such Seller, if applicable, or any material agreement, instrument,
order, judgment or decree to which such Seller is subject. Neither of the
Sellers is a party to or bound by any written or oral agreement or understanding
with respect to an Acquisition Proposal or a Third Party Acquisition other than
this Agreement, and all of them have terminated all discussions with third
parties (other than the Purchaser) regarding Acquisition Proposals or Third
Party Acquisitions.
7C. Title to Shares. All of the Shares are owned of record and
beneficially by the Sellers, and each Seller has good and marketable title to
the Shares owned by such Seller, free and clear of all Liens, agreements, voting
trusts, proxies and other arrangements or restrictions of any kind whatsoever.
None of the Sellers is a Party to any plan, warrant, purchase right or other
contract or commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than this
agreement). The Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
7D. Brokerage. Except as set forth on the Brokerage Schedule
7D attached hereto, there are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement to which any Seller is a party
or to which any Seller is subject. Each Seller shall pay, indemnify, defend and
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hold the Company, its Subsidiaries and the Purchaser harmless against, any
liability, loss or expense (including reasonable attorneys' fees and
out-of-pocket expenses) arising in connection with any such claim.
7E. Litigation, etc. There are no actions, suits, proceedings
(including any arbitration proceedings), orders, investigations or claims
pending or threatened against or affecting any of the Sellers in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with the transactions contemplated hereby.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. As a
material incentive to the Company and the each of the Sellers to enter into this
Agreement and take the actions set forth in Section 1, the Purchaser hereby
represents and warrants to the Company and each of the Sellers that the
following statements contained in this Section 8 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though then made and as though the Closing Date was substituted for the
date of this Agreement throughout this Section 8) as set forth in the disclosure
schedule delivered by the Sellers to the Purchasers on the date hereof:
8A. Organization, Power and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the Laws
of its jurisdiction of incorporation. The Purchaser possesses all requisite
power and authority necessary to carry out the transactions contemplated by this
Agreement.
8B. Authorization; No Breach. The execution, delivery and
performance of this Agreement and all other agreements or instruments
contemplated hereby to which the Purchaser is a party or by which the Purchaser
is bound have been duly authorized by the Purchaser. This Agreement and all
other agreements contemplated hereby to which the Purchaser is a party, when
executed and delivered by the Purchaser in accordance with the terms hereof,
shall each constitute a valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except as such enforceability may be
limited by (x) applicable insolvency, bankruptcy, reorganization, moratorium or
other similar laws affecting creditors' rights generally and (y) applicable
equitable principles (whether considered in a proceeding at law or in equity).
The execution, delivery and performance by the Purchaser of this Agreement and
all other agreements contemplated hereby to which the Purchaser is a party, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and shall not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default under
(whether with or without the passage of time, the giving of notice or both),
(iii) give any third party the right to modify, terminate or accelerate any
obligation under, (iv) result in a violation of the organizational documents of
the Purchaser, or any Law to which the Purchaser is subject, or any agreement,
instrument, order, judgment or decree to which the Purchaser is subject.
8C. Consents. No consent, approval or authorization of, or
designation, declaration or filing with any Governmental Entity or other third
party is necessary for the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby, except for
applicable requirements of the HSR Act, the consents of Serta, Inc. and its
stockholders, or as set forth on the attached Consents Schedule 8C.
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8D. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement to which
the Purchaser is a party or to which the Purchaser is subject. The Purchaser
shall pay, indemnify, defend and hold the Company and the Sellers harmless
against, any liability, loss or expense (including reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim.
8E. Investment Representations.
(i) The Purchaser hereby represents that it is acquiring the
Shares purchased hereunder for its own account with the present intention of
holding such Shares for purposes of investment, and that it has no intention of
selling any such Shares in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided, that nothing
contained herein shall prevent the Purchaser or any subsequent holder of any of
the Shares from transferring such securities.
(ii) The Purchaser is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
(iii) The Purchaser understands that the Shares have not been
registered under the Securities Act on the basis that the sale provided for in
this Agreement is exempt from the registration provisions thereof and that the
Company's reliance on such exemption is predicated upon the representations of
the Purchaser set xxxxx xxxxxx.
0X. Closing Date. The representations and warranties of the
Purchaser contained in this Section 8 and elsewhere in this Agreement shall be
true and correct in all respects on the Closing Date as though then made and as
though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties.
SECTION 9. INDEMNIFICATION AND OTHER AGREEMENTS.
9A. Survival of Representations and Warranties. The
representations and warranties in this Agreement and the Schedules and Exhibits
attached hereto shall survive the Closing as follows:
(i) the representations and warranties in Section 6O (Tax
Matters) shall terminate on the sixtieth (60th) day following the expiration of
the applicable statute of limitations (after giving effect to any extensions or
waivers thereof);
(ii) the representations and warranties in Section 6B (Capital
Stock and Related Matters; Subsidiaries), Section 6C (Authorization; No Breach),
Section 6L (Indebtedness), Section 6S (Brokerage), Section 6Y (Affiliate
Transactions), Section 7B (Authorization; No Breach), Section 7C (Title to
Shares), Section 7D (Brokerage), Section 8B (Authorization; No Breach) and
Section 8D (Brokerage) shall terminate on the fourth anniversary of the Closing
Date;
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(iii) the representations and warranties in Section 6V (ERISA)
and Section 6X (Environmental and Safety Matters) shall terminate on the third
anniversary of the Closing Date; and
(iv) all other representations and warranties in this Agreement
and the Schedules and Exhibits attached hereto shall terminate on the second
anniversary of the Closing Date;
provided, that any representation or warranty in respect of which indemnity may
be sought under Section 9B, and the indemnity with respect thereto, shall
survive the time at which it would otherwise terminate pursuant to this Section
9A if notice of the inaccuracy or breach or potential inaccuracy or breach
thereof giving rise to such right or potential right of indemnity shall have
been given to the Party against whom such indemnity may be sought prior to such
time. The representations and warranties in this Agreement and the Schedules and
Exhibits attached hereto or in any writing delivered by any Party to another
Party in connection with this Agreement shall survive for the periods set forth
in this Section 9A and shall in no event be affected by any investigation,
inquiry or examination made for or on behalf of any Party, or the knowledge of
any Party's officers, directors, shareholders, employees or agents or the
acceptance by any Party of any certificate or opinion hereunder.
9B. General Indemnification.
(i) Indemnification for the Benefit of the Company and the
Purchaser by the Sellers. Following the Closing, the Sellers, jointly and
severally, shall indemnify the Purchaser and its members, officers, directors,
employees, agents, representatives, successors and permitted assigns and the
Company (collectively, the "Seller Indemnified Parties") and save and hold each
of them harmless against and pay on behalf of or reimburse such Seller
Indemnified Parties as and when incurred for any direct or indirect loss,
liability, demand, claim, action, cause of action, cost, damage (excluding
consequential damages and damages for lost profits), deficiency, Tax, penalty,
fine or expense, whether or not arising out of third party claims (collectively,
"Losses"), which any such Seller Indemnified Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of: (a) any facts or circumstances which constitute a breach of any
representation or warranty of the Company or the Sellers under this Agreement,
or in any of the certificates or other instruments or documents furnished by the
Company or the Sellers pursuant to this Agreement; (b) any nonfulfillment or
breach of any covenant, agreement or other provision by the Company or the
Sellers under this Agreement required to be performed or complied with by the
Company or the Sellers at or prior to the Closing; (c) any nonfulfillment or
breach of any covenant, agreement or other provision by the Sellers under this
Agreement required to be performed or complied with by the Sellers after the
Closing; or (d) any claim by any Person (other than the Purchaser) with respect
to, or arising as a result of, any Acquisition Proposal or Third Party
Acquisition proposed prior to the Closing Date. If and to the extent any
provision of this Section 9B is unenforceable for any reason, each Seller hereby
agrees to make the maximum contribution to the payment and satisfaction of any
Loss for which indemnification is provided for in this Section 9B which is
permissible under applicable Laws. Notwithstanding anything contained herein, in
no event shall the Company be required to provide indemnification or
contribution for any obligation of the Sellers under this Section 9B(i).
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(ii) Indemnification for the Benefit of the Sellers by the
Company. Following the Closing, the Company shall indemnify the Sellers and
their shareholders, officers, directors, employees, agents, representatives,
successors and permitted assigns (collectively, the "Company Indemnified
Parties") and hold them harmless against any Losses which the Company
Indemnified Parties may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of: (a) any facts or
circumstances which constitute a breach of any representation or warranty of the
Purchaser under this Agreement, or in any of the certificates or other
instruments or documents furnished by the Purchaser pursuant to this Agreement;
(b) any nonfulfillment or breach of any covenant, agreement or other provision
by the Purchaser under this Agreement; or (c) any matters which occur after the
Closing Date as a result of the direction or approval of the Board following the
Closing Date.
(iii) Manner of Payment.
(a) Any indemnification obligations of the Sellers
pursuant to Section 9B(i) shall first be satisfied out of the Indemnity
Escrow Fund to the extent thereof and thereafter shall be paid by wire
transfer of immediately available funds to an account designated in
writing by the applicable Seller Indemnified Party within 15 days after
the determination thereof.
(b) Any indemnification obligations of the Company
pursuant to Section 9B(ii) shall be paid by wire transfer of immediately
available funds to an account designated in writing by the applicable
Company Indemnified Party within 15 days after the determination
thereof.
(c) Any such indemnification payments described in
clause (a) or (b) above shall include interest at 8% per annum
calculated on the basis of the actual number of days elapsed over 360,
from the date any such Loss is suffered or sustained to the date of
payment. The amount of any Loss for which indemnification is provided
pursuant to this Section 9B shall be net of any amounts actually
recovered by the indemnified party under insurance policies with respect
to such Loss.
(iv) Instructions to Escrow Agent. In the event of a
determination that a payment is due to any Seller Indemnified Party, the
Purchaser and the Sellers' Representative shall issue joint written instructions
to the Escrow Agent to distribute a portion of the Indemnity Escrow Fund equal
to such payment.
(v) Defense of Third Party Claims. Any Person making a claim
for indemnification under this Section 9B (an "Indemnitee") shall notify the
indemnifying party (an "Indemnitor") (in the case of a notice to the Sellers,
notice shall be sufficient if made solely to the Sellers' Representatives) of
the claim in writing promptly after receiving written notice of any action,
lawsuit, proceeding, investigation or other claim against it (if by a third
party), describing the claim, the amount thereof (if known and quantifiable) and
the basis thereof; provided that the failure to so notify an Indemnitor shall
not relieve the Indemnitor of its obligations hereunder unless the Indemnitor
shall be actually prejudiced by such failure to so notify. Any Indemnitor shall
be entitled to participate in the defense
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of such action, lawsuit, proceeding, investigation or other claim giving rise to
an Indemnitee's claim for indemnification at such Indemnitor's expense, and at
its option (subject to the limitations set forth below) shall be entitled to
assume the defense thereof by appointing a reputable counsel reasonably
acceptable to the Indemnitee to be the lead counsel in connection with such
defense; provided, that prior to the Indemnitor assuming control of such
defense, it shall first demonstrate to the Indemnitee in writing such
Indemnitor's financial ability to provide full indemnification to the Indemnitee
with respect to such action, lawsuit, proceeding, investigation or other claim
giving rise to such claim for indemnification hereunder; and provided further,
that:
(a) the Indemnitee shall be entitled to participate in
the defense of such claim and to employ counsel of its choice for such
purpose; provided that the fees and expenses of such separate counsel
shall be borne by the Indemnitee (other than any fees and expenses of
such separate counsel that are incurred prior to the date the Indemnitor
effectively assumes control of such defense which, notwithstanding the
foregoing, shall be borne by the Indemnitor);
(b) the Indemnitor shall not be entitled to assume
control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnitee if (1) the claim for indemnification relates
to or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation; (2) the Indemnitee reasonably
believes an adverse determination with respect to the action, lawsuit,
investigation, proceeding or other claim giving rise to such claim for
indemnification would be detrimental to or injure the Indemnitee's
reputation or future business prospects; (3) the claim seeks an
injunction or equitable relief against the Indemnitee; (4) a conflict of
interest exists between the Indemnitor and the Indemnitee; or (5) the
Indemnitor failed or is failing to vigorously prosecute or defend such
claim; and
(c) if the Indemnitor shall control the defense of any
such claim, the Indemnitor shall obtain the prior written consent of the
Indemnitee before entering into any settlement of a claim or ceasing to
defend such claim if, pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief will be imposed against
the Indemnitee or if such settlement does not expressly and
unconditionally release the Indemnitee from all liabilities and
obligations with respect to such claim, without prejudice.
(d) if the claim for Indemnification relates to Taxes,
the Indemnitor's rights to control the defense of such matter shall
extend only to the specific issue for which indemnification is claimed
(and not the entire return or taxable period).
(vi) Limitations on Indemnification. Notwithstanding any
provision herein to the contrary, the maximum liability of all of the Sellers
with respect to any Losses suffered by the Seller Indemnified Parties as a
result of any facts or circumstances which constitute a breach of any
representation or warranty set forth in Section 9A above shall be an aggregate
amount equal to $2,250,000; provided, that the Sellers will only be required to
indemnify the Seller Indemnified Parties for any breaches of the representations
and warranties described in Section 9A if such Losses
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in the aggregate exceed $250,000 (the "Basket Amount") and then only to the
extent of such excess over the Basket Amount not to exceed $2,250,000.
(vii) Other Indemnification Provisions; Certain Waivers; etc.
The foregoing indemnification provisions are in addition to, and are not in
derogation of, any statutory or common law remedy that any of the Seller
Indemnified Parties or the Company Indemnified Parties may have for breach of
any representation, warranty, covenant or agreement contained herein or in any
of the Schedules or Exhibits attached hereto. Each Seller hereby agrees that he
shall not make any claim for indemnification hereunder against the Company by
reason of the fact that he was a shareholder, director, officer, employee or
agent of the Company or was serving at the request of the Company as a partner,
trustee, director, officer, employee or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise) with respect to any action, suit,
proceeding, complaint, claim or demand brought by any of the Seller Indemnified
Parties against such Seller pursuant to this Agreement and such Seller hereby
acknowledges and agrees that he shall have no claims or right to contribution or
indemnity from the Company with respect to any amounts paid by the Sellers
pursuant to this Section 9B.
SECTION 10. DEFINITIONS. For the purposes of this Agreement,
the following terms have the meanings set forth below:
"Acquisition Proposal" has the meaning set forth in Section 4J.
"Adjustment Escrow Agreement" shall be the Adjustment Escrow
Agreement to be entered into among the Purchaser, the Sellers' Representative
and the Escrow Agent substantially in the form of Exhibit A attached hereto.
"Adjustment Escrow Fund" has the meaning set forth in Section 1C.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Affiliated Group" means any affiliated group as defined in Code
Section 1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local or foreign law) for a period
during which any of the Company was a member.
"Agreement" has the meaning set forth in the Preamble.
"Board" means the board of directors of the Company.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
"Closing" has the meaning set forth in Section 1C.
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"Closing Balance Sheet" has the meaning set forth in Section
1E(ii).
"Closing Date" has the meaning set forth in Section 1C.
"Closing Net Worth" has the meaning set forth in Section 1E.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Intellectual Property Rights" means all of the
Intellectual Property Rights owned or used by the Company or any of its
Subsidiaries (along with all income, royalties, damages and payments due or
payable at the Closing or thereafter (including , damages and payments for past
or future infringements or misappropriations thereof)), the right to xxx and
recover for past infringements or misappropriations thereof, any and all
corresponding rights that, now or hereafter, may be secured throughout the world
and all copies and tangible embodiments of any such Intellectual Property
Rights.
"Confidential Information" means the information and data of the
Company or any of its Subsidiaries concerning the business or affairs of the
Company or any Subsidiary (including the Company's technology, computer
programs, know-how, designs, inventions, methods of doing business and supplier
and customer information) (i) which is material nonpublic information, (ii)
which is proprietary to the Company or any of its Subsidiaries, (iii) the
disclosure of which could reasonably be expected to be detrimental or adverse to
the Company or any of its Subsidiaries, or (iv) is the property of the Company
or such Subsidiary and that the continued success of the Company and its
Subsidiaries depends in large part on keeping this information from becoming
known to competitors of the Company and its Subsidiaries.
"Consents" has the meaning set forth in Section 2D.
"Controlled Group of Corporations" has the meaning set forth in
Code Section 1563.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution or defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan, (including any Multiemployer Plan), (c) Employee
Welfare Benefit Plan, or (d) other material fringe benefit plan, program or
arrangement.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Environmental and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release,
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threatened Release, control or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" has the meaning set forth in Section 1C.
"Family Group" means such shareholder's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of such
shareholder and/or such shareholder's spouse, their respective ancestors and/or
descendants (whether natural or adopted).
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Government Entity" means individually, and "Government Entities"
means collectively, the United States of America or any other nation, any state
or other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government,
including any court, in each case having jurisdiction over the Company or any of
its Subsidiaries.
"Guarantee" means any guarantee of the payment or performance of
any Indebtedness or other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of such Person, whether that
promise is expressed in terms of an obligation to pay the Indebtedness of such
obligor, to provide reimbursement, or to purchase an obligation owed by such
obligor, or to purchase goods and services from such obligor pursuant to a
take-or-pay contract, or to maintain the capital, working capital, solvency or
general financial condition of such obligor, whether or not any such arrangement
is listed in the balance sheet of such Person, or referred to in a footnote
thereto, but shall not include endorsements of items for collection in the
ordinary course of business.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and the regulations promulgated thereunder.
"Indebtedness" means at a particular time, without duplication,
(i) any obligations under any indebtedness for borrowed money (including all
principal, interest premiums, penalties, fees, expenses and brokerage costs),
(ii) any indebtedness evidenced by any note, bond, debenture or other debt
security, (iii) any commitment by which a Person assures a creditor against loss
(including contingent reimbursement obligations with respect to letters of
credit), (iv) any indebtedness pursuant to a Guarantee (other than the Xxxxxxx
Guarantee), (v) any obligations under capitalized leases (other than equipment
leases entered into in the ordinary course of business) or with respect to which
a Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or with respect to which obligations a Person assures a creditor
against loss, (vi) any payments required upon a change
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of control, (vii) any indebtedness pursuant to deferred compensation
obligations, (viii) any amounts owed to Persons who hold options to purchase the
Company's or its Subsidiaries' stock, and (ix) any indebtedness secured by a
Lien on a Person's assets.
"Indemnity Escrow Agreement" shall be the Indemnity Escrow
Agreement to be entered into among the Purchaser, the Sellers' Representative
and the Escrow Agent substantially in the form of Exhibit B attached hereto.
"Indemnity Escrow Fund" has the meaning set forth in Section 1C.
"Intellectual Property Rights" means all (i) patents, patent
applications and patent disclosures, as well as any reissues, continuations,
continuations-in-part, divisions, extensions or reexaminations thereof, (ii)
trademarks, service marks, trade dress, trade names, logos and corporate names,
domain names and registrations and applications for registration thereof,
together with all of the goodwill associated therewith, (iii) copyrights and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans and
customer and supplier lists and information).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Key Employee" means all salaried employees of the Company
receiving a base salary greater than $50,000 per year from the Company as
compensation.
"Latest Balance Sheet" has the meaning set forth in Section 6E.
"Laws" means all statutes, laws, codes, ordinances, regulations,
rules, orders, judgments, writs, injunctions, acts or decrees of any Government
Entity.
"Leased Real Property" has the meaning set forth in Section
6Z(ii).
"Letter of Intent" means the Letter of Intent, dated as of
January 25, 2000, by and between the Purchaser and the Company.
"Liabilities" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
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"Lien" or "Liens" means any mortgage, pledge, security interest,
encumbrance, encroachment, claim, lease, right of possession, other defect in
title or lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute (other than to reflect ownership by a third party of property leased to
the Company under a lease which is not in the nature of a conditional sale or
title retention agreement), or any subordination arrangement in favor of another
Person.
"Managing Sellers" means Xxxxxx Xxxxx, Xx., Xxxxxx Xxxxx, Xx.,
Xxxx Xxxxxx and Xxx Xxxxxxxxx.
"Xxxxxxx Guarantee" means the limited guaranty dated as of August
31, 1998, granted by the Company in favor of Pleasanton Square I Partners, L.P.,
and Marina Square Partners, L.P. (together, the "Landlord") to guaranty the
lease, dated as of August 31, 1998, by and between Landlord for the premises
located at Pleasanton Square I Shopping Center, 0000 Xxxxxxx Xxxxx, Xxxxx X,
Xxxxxxxxxx, Xxxxxxxxxx, currently leased by Mattress Retailers, Inc., a wholly
owned subsidiary of Xxxxxxx Sleep World.
"Material Adverse Effect" means a material and adverse effect
upon the business, operations, assets, liabilities, financial condition,
operating results, business prospects, cash flow, net worth or employee,
customer or supplier relations of the Company and its Subsidiaries taken as a
whole.
"Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).
"Net Worth" means, for purposes of Section 1D above, the excess
of the consolidated assets of the Company and its Subsidiaries as of the opening
of business on the date of determination over the consolidated liabilities of
the Company as of the opening of business on the date of determination
determined in accordance with GAAP, except as otherwise specified below. In
determining consolidated assets and liabilities hereunder, (i) all accounting
entries shall be taken into account regardless of their amount and all known
errors and omissions shall be corrected, (ii) all known proper adjustments shall
be made, (iii) appropriate reserves for all known and quantifiable liabilities
and obligations for which reserves are appropriate in accordance with GAAP shall
be included in the calculation, (iv) inventory shall be accounted for on a
first-in-first-out basis, (v) amounts required to be withheld by the Company in
connection with the Phantom Plan and the exercise of stock options by Xxxxxx X.
Xxxxx, Xx. and any other liabilities relating thereto shall be excluded from the
calculation, and (vi) cash and cash equivalents, loss receivable with respect to
the Washington Facility Fire and any other receivable relating to such fire, all
deferred tax assets and liabilities, any receivable from Bedtime Stores, Inc.,
any receivable from Dataworks Corp., any bonuses to Sellers and/or employees,
any dividends payable, any note or other receivable from any of the Sellers, and
all other non-operating assets and liabilities shall be excluded from the
calculation.
"Noncompete Period" has the meaning set forth in Section 5B(i).
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"Owned Real Property" has the meaning set forth in Section 6Z(i).
"Party" has the meaning set forth in the Preamble.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means (i) Liens for Taxes or assessments and
similar charges, which either are (a) not delinquent or (b) being contested in
good faith and by appropriate proceedings, and adequate reserves (as determined
in accordance with GAAP, consistently applied) have been established on the
Company's books with respect thereto, (ii) mechanics', materialmen's or
contractors' Liens or encumbrances or any similar statutory Lien or restriction
for amounts not yet due and payable and for which the Title Company has
affirmatively insured against collection, (iii) zoning, entitlement, building
and other land use regulations imposed by governmental agencies having
jurisdiction over the Real Property which are not violated by the current use
and operation of the Real Property, and (iv) covenants, conditions,
restrictions, easements and other similar matters of record affecting title to
the Real Property which do not materially impair the occupancy or use, value or
marketability of the Owned Real Property which they encumber for the purposes
for which it is currently used in connection with the business of the Company
and its Subsidiaries.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Phantom Plan" means the Simon Mattress Manufacturing Co. 1995
Phantom Stock Plan for the benefit of Xxxxxxx Xxxxxxx.
"Prohibited Transactions" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Purchaser" has the meaning set forth in the Preamble.
"Release" shall have the meaning set forth in CERCLA.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Sellers" has the meaning set forth in the Preamble.
"Sellers' Representative" has the meaning set forth in Section
1E(ii).
"Stock Option Plan" means the 1995 Stock Option Plan for the
benefit of Xxxxxx Xxxxx, Xx.
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"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Target Cash" has the meaning set forth in Section 2Q.
"Target Net Worth" means $10,500,000.
"Tax" or "Taxes" means federal, state, county, local, foreign or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest attributable thereto)
whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"Third Party Acquisition" has the meaning set forth in Section
4J.
"Title Company" has the meaning set forth in Section 2I
"Treasury Regulation" means the United States Treasury
Regulations promulgated under the Code, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered or
classified.
"Washington Facility Fire" means the fire which occurred on
November 10, 1999 at the Company's operating plant located at 000 Xxxxx Xxxxx
Xxxx, Xxxxxxxx, Xxxxxxxxxx 00000.
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SECTION 11. TERMINATION.
11A. Conditions of Termination. This Agreement may be
terminated at any time prior to the Closing (or as otherwise specified):
(i) by the mutual written consent of the Parties;
(ii) by the Purchaser if the Purchaser shall have received
notice of a breach of the representations and warranties set forth in Sections 6
and/or 7 or a breach of a covenant hereunder, in each case, which renders the
condition in Section 2A incapable of being satisfied; or
(iii) by the Sellers if the Sellers shall have received notice
of a breach of the representations and warranties set forth in Section 8 or a
breach of a covenant hereunder, in each case, which renders the condition in
Section 3A incapable of being satisfied; or
(iv) by the Purchaser on the one hand, or the Sellers and the
Company on the other hand, if the transactions contemplated hereby have not been
consummated by May 31, 2000; provided that the reason for the delay beyond May
31, 2000 shall not have been caused by the Party initiating such termination.
11B. Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and of
no further force and effect, except that the covenants and agreements set forth
in the second to last sentence of Section 4J and in Sections 00X, 00X, 00X, 00X,
00X, 00X, 00X, 12N, 12O, 12P and 12Q shall survive such termination
indefinitely, and except that nothing in this Section 11B shall be deemed to
release any Party from any liability for any breach by such Party of the terms
and provisions of this Agreement or to impair the right of any Party to compel
specific performance by another Party of its obligations under this Agreement.
SECTION 12. MISCELLANEOUS.
12A. Fees and Expenses. Except as otherwise set forth herein,
the Purchaser will be responsible for all costs and expenses incurred by the
Purchaser in connection with the negotiation, preparation and entry into this
Agreement and the consummation of the transactions contemplated hereby, and the
Company will pay all costs and expenses incurred by the Sellers or the Company
in connection with the negotiation, preparation and entry into this Agreement
and the consummation of the transactions contemplated hereby.
12B. Remedies. Any Person having any rights under any provision
of this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by
Laws. All such rights and remedies shall be cumulative and non-exclusive, and
may be exercised singularly or concurrently. One or more successive actions may
be brought against the Company, either in the same action or in separate
actions, as often as the Purchaser or any of such holders deems advisable, until
all of the obligations to such Person are paid and performed in full.
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12C. Consent to Amendments; Waivers. This Agreement may be
amended, or any provision of this Agreement may be waived upon the approval, in
a writing, executed by the Purchaser, the Company, and the Sellers'
Representative. No course of dealing between or among the Purchaser, the
Company, and the Sellers' Representative shall be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any such Party or such holder under or by reason of this Agreement.
12D. Successors and Assigns.
(i) This Agreement and all covenants and agreements contained
herein and rights, interests or obligations hereunder, by or on behalf of any of
the Parties hereto, shall bind and inure to the benefit of the respective
successors and permitted assigns of the Parties hereto whether so expressed or
not, except that neither this Agreement nor any of the covenants and agreements
herein or rights, interests or obligations hereunder may be assigned or
delegated by the Sellers, or assigned or delegated by the Company prior to the
Closing, without the prior written consent of the Purchaser and except as
otherwise provided by Section 12D(ii) below, neither this Agreement nor any of
the covenants and agreements herein or rights, interests or obligations
hereunder may be assigned or delegated by the Purchaser without the prior
written consent of the Sellers.
(ii) The Purchaser may assign this Agreement and its rights and
obligations hereunder to one of its Affiliates and to its lenders for collateral
assignment purposes; provided, that no such assignment shall relieve the
Purchaser from its obligations hereunder. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which are for
a Party's benefit as a holder of the Company's equity securities are also for
the benefit of, and enforceable by, any subsequent holder of the Company's
equity securities.
12E. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held to be prohibited by,
illegal or unenforceable under applicable law or rule in any respect by a court
of competent jurisdiction, such provision shall be ineffective only to the
extent of such prohibition, illegality or unenforceability, without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
12F. Counterparts. This Agreement may be executed in
counterparts (including by means of telecopied signature pages), any one of
which need not contain the signatures of more than one Party, but all such
counterparts taken together shall constitute one and the same agreement.
12G. Descriptive Headings; Interpretation. The headings and
captions used in this Agreement and the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized terms used in any Schedule or
Exhibit attached hereto and not otherwise defined therein shall have the
meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation."
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12H. Entire Agreement. This Agreement, the agreements and
documents referred to herein and the Confidentiality Agreement contain the
entire agreement and understanding among the Parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, whether
written or oral, relating to such subject matter in any way, including, without
limitation the letter of intent dated January 25, 2000 by and among the Company,
certain of the Sellers and the Purchaser.
12I. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the Parties and their permitted successors and assigns and
nothing herein expressed or implied shall give or be construed to give any
Person, other than the Parties and such permitted successors and assigns, any
legal or equitable rights hereunder.
12J. Cooperation on Tax Matters. The Parties shall cooperate
fully, as and to the extent reasonably requested by each Party and at the
requesting Party's expense, in connection with any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon any Party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
12K. Schedules and Exhibits. All Schedules and Exhibits
attached hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein.
12L. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
SCHEDULES AND EXHIBITS HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
12M. Notices. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient or when sent by facsimile followed by delivery by
reputable overnight courier service, one day after being sent to the recipient
by reputable overnight courier service (charges prepaid) or five days after
being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
shall be sent to the Purchaser, the Sellers and the Company at the addresses
indicated below or to such other address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party. All notices, demands and other communications hereunder may be
given by any other means (including telecopy or electronic
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mail), but shall not be deemed to have been duly given unless and until it is
actually received by the intended recipient.
The Company:
Simon Mattress Manufacturing Co.
0000 Xxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Mr. Xxxxxx Xxxxxxx Simon, Jr.
Facsimile: (000) 000-0000
with copies to:
(which shall not constitute notice to the Company)
Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx & Xxxx LLP
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
The Sellers' Representative (on behalf of the Sellers):
with a copy to:
(which shall not constitute notice to the Sellers)
Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx & Xxxx LLP
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
The Purchasers:
Sleepmaster L.L.C.
c/o Serta Mattress Co.
0000 Xxxxx Xxxx
Xxxxxx, XX 00000-0000
Attention: Xx. Xxxxxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
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with a copy to:
(which shall not constitute notice to the Purchaser)
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
12N. Jurisdiction and Venue. SUBJECT TO SECTION 12Q, ALL
JUDICIAL PROCEEDINGS BROUGHT BY OR AGAINST THE COMPANY, THE PURCHASER OR THE
SELLERS WITH RESPECT TO THIS AGREEMENT, ANY OTHER AGREEMENT CONTEMPLATED HEREBY
OR ANY TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN STATE COURT
IN THE COUNTY OF XXXXXX IN THE STATE OF CALIFORNIA OR FEDERAL COURT IN THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA IN THE STATE
OF CALIFORNIA. BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE COMPANY, THE
PURCHASER AND EACH SELLER ACCEPTS FOR ITSELF AND HIMSELF AND IN CONNECTION WITH
ITS OR HIS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE COMPANY, THE
PURCHASER AND EACH SELLER HEREBY WAIVES ANY CLAIM THAT SUCH JURISDICTION IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. A COPY OF SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE COMPANY, THE
PURCHASER OR ANY SELLER AT SUCH PERSON'S RESPECTIVE ADDRESSES PROVIDED HEREIN.
TO THE EXTENT PERMITTED BY LAW, IF ANY AGENT APPOINTED BY THE COMPANY, THE
PURCHASER OR ANY SELLER REFUSES TO ACCEPT SERVICE, SUCH PERSON HEREBY AGREES
THAT SERVICE UPON SUCH PERSON BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
12O. Waiver of Right to Jury Trial. THE COMPANY, THE PURCHASER
AND EACH SELLER HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL
BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AGREEMENT, ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR
THEREBY OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT
THEREOF.
12P. No Strict Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties, and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
12Q. Dispute Resolution.
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(a) Arbitration. In the event of disputes between the Parties
with respect to the terms and conditions of this Agreement (other than disputes
with respect to Section 1E and claims for specific performance), such disputes
shall be resolved by and through an arbitration proceeding to be conducted under
the auspices of the American Arbitration Association (or any like organization
successor thereto) in California. Such arbitration proceeding shall be conducted
in as expedited a manner as is practical, and the arbitrator or arbitrators in
any such arbitration (an "Arbitration") shall be persons who are expert in the
subject of mergers and acquisitions. Both the foregoing agreement of the Parties
to arbitrate any and all such claims, and the results, determination, finding,
judgment and/or award rendered through such Arbitration, shall be final and
binding on the Parties hereto and may be specifically enforced by legal
proceedings. The Parties agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
Party may, in its sole discretion, ask for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
(b) Procedure. The Arbitration shall be conducted before a
panel of arbitrators selected in accordance with the rules of the American
Arbitration Association. Each Party shall bear separately the cost of their
respective attorneys, witnesses and experts in connection with such arbitration.
Time is of the essence of this arbitration procedure, and the arbitrators shall
be instructed and required to render their decision within ten (10) days
following completion of the Arbitration.
(c) Venue and Jurisdiction. Any and all legal proceedings to
enforce this Agreement (including any action to compel arbitration hereunder or
to enforce any award or judgment rendered thereby), shall be governed in
accordance with Section 12N.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
SIMON MATTRESS MANUFACTURING CO.
By:
------------------------------------
Name:
Title:
SLEEPMASTER L.L.C.
By:
------------------------------------
Name:
Title:
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SELLER SIGNATURE PAGE
XXXXXX XXXXXXX XXXXX, JR.
---------------------------------------
XXXXXX XXXXX, XX.
--------------------------------------
XXXX XXXXXX
---------------------------------------
XXX XXXXX PIER
---------------------------------------
XXX XXXXXXXXX
---------------------------------------
XXX XXXXXXXXX (AS TRUSTEE)
---------------------------------------
XXXXX XXXXX
---------------------------------------
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XXXXX XXXXX (AS TRUSTEE)
---------------------------------------
XXXXX XXXXX (AS MILES TRUSTEE)
---------------------------------------
XXXXX XXXXX (AS TYLER TRUSTEE)
---------------------------------------
XXXX XXXXXXXXX
---------------------------------------
MILES XXXXX
---------------------------------------
XXXXX XXXXX
---------------------------------------
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EXHIBIT A
Adjustment Escrow Agreement
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EXHIBIT B
Indemnity Escrow Agreement
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60
EXHIBIT C
Opinion of the Sellers' Counsel
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EXHIBIT D
Opinion of the Purchaser's Counsel
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