ACQUISITION OF THE ASSETS
OF
ARTEE INDUSTRIES, INCORPORATED
BY
CULP, INC.
October 14, 1997
8
TABLE OF CONTENTS
ARTICLE I
SALE OF ASSETS AND TERMS OF PAYMENT
1.1. The Sale..................................................-1-
1.2. Purchase Price............................................-2-
1.3. Purchase Price Adjustment.................................-3-
1.4. Preparation of Closing Balance Sheet......................-3-
1.5. Procedure for Determination of Purchase Price Adjustment..-3-
1.6. Post-Closing Payment......................................-4-
1.7. Contingent Payment........................................-4-
1.8. Assignment and Assumption of Obligations and Liabilities..-6-
1.9. Procedures for Purchased Assets Not Transferable..........-7-
1.10. Allocations...............................................-7-
ARTICLE II
THE CLOSING
2.1. Time and Place of Closing.................................-7-
2.2. Deliveries by Seller......................................-8-
2.3. Deliveries by Buyer.......................................-8-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1. Existence; Capital Stock; and Ownership...................-9-
3.2. Authority Relative to this Agreement......................-9-
3.3. Consent and Approvals; No Violation.......................-9-
3.4. Financial Statements.....................................-10-
3.5. Undisclosed Liabilities..................................-10-
3.6. Absence of Certain Changes or Events.....................-10-
3.7. Certain Contracts and Arrangements.......................-10-
3.8. Litigation...............................................-11-
3.9. Labor Matters............................................-11-
3.10. Employee Benefit Plans; ERISA............................-11-
3.11. Tax Matters..............................................-13-
3.12. Licenses and Authorizations..............................-13-
3.13. Compliance with Laws.....................................-14-
3.14. Title to Purchased Assets................................-14-
3.15. Tangible Purchased Assets................................-14-
3.16. Leased Property..........................................-14-
3.17. Bank Accounts............................................-14-
3.18. Corporate and Personnel Data; Labor Relations............-14-
3.19. Insurance................................................-14-
3.20. Customers................................................-15-
3.21. Inventories..............................................-15-
3.22. Accounts Receivable......................................-15-
3.23. Intellectual Property....................................-15-
3.24. Environmental Matters....................................-15-
3.25. Product Warranty.........................................-17-
3.26. Product Liability........................................-17-
3.27. Claims and Charges against Products......................-17-
3.28. Disclosure...............................................-17-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1. Organization.............................................-18-
4.2. Authority Relative to this Agreement.....................-18-
4.3. Consents and Approvals; No Violation.....................-18-
ARTICLE V
COVENANTS OF THE PARTIES
5.1. Conduct of Business......................................-18-
5.2. Financial Statements.....................................-20-
5.3. Access to Information; Confidentiality...................-20-
5.4. Change of Corporate Name.................................-20-
5.5. Filings..................................................-21-
5.6. Employees and Employee Benefits..........................-21-
5.7. Noncompetition...........................................-22-
5.8. Lien Search..............................................-23-
5.9. Other Actions............................................-24-
5.10. Corporate Action.........................................-24-
5.11. No Solicitation..........................................-24-
5.12. Robert T. Davis..........................................-24-
5.14. Equipment Lease..........................................-24-
ARTICLE VI
CLOSING CONDITIONS
6.1. Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby................................-25-
6.2. Conditions to the Obligations of Seller to Effect the
Transactions Contemplated Hereby................................-25-
6.3. Conditions to the Obligations of Buyer to Effect the
Transactions Contemplated Hereby................................-26-
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1. Survival of Representations...............................-27-
7.2. Seller's Agreement to Indemnify...........................-27-
7.3. Buyer's Agreement to Indemnify............................-30-
ARTICLE VIII
TERMINATION
8.1. Termination...............................................-32-
8.2. Procedure and Effect of Termination or Failure to Close...-32-
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1. Commissions...............................................-33-
9.2. Expenses..................................................-33-
9.3. Further Assurances........................................-33-
9.4. Amendment and Modification................................-33-
9.5. Waiver of Compliance; Consents............................-33-
9.6. Notices...................................................-34-
9.7. Action by Shareholders....................................-35-
9.8. Right of Set-Off..........................................-35-
9.9. Assignment................................................-35-
9.10. Governing Law.............................................-35-
9.11. Counterparts..............................................-35-
9.12. Interpretation............................................-35-
9.13. Entire Agreement..........................................-35-
4
EXHIBITS
A Form of Assignment Agreement
B Form of Seller's Opinion
C Form of Equipment Lease Agreement
1.7 Calculation of Contingent Payment
SCHEDULES
1.1(a) Purchased Property
1.1(b) Leased Property
1.1(c) Tangible Personal Property
1.1(d) Contracts
1.1(f) Prepaid Expenses
1.8 Debt to Be Paid at Closing
3.1 Qualification
3.5 Undisclosed Liabilities
3.6 Absence of Certain Changes or Events
3.7 Contracts and Arrangements
3.8 Litigation
3.9 Labor Matters
3.10 Employee Benefit Plans; ERISA
3.12 Licenses and Authorizations
3.14(a) Exceptions to Title
3.14(b) Excluded Assets
3.17 Bank Accounts
3.18 Corporate and Personnel Data
3.19 Insurance
3.20 Customers
3.23 Intellectual Property
3.24 Environmental Matters
5
7
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of the 14th day
of October, 1997, is among CULP, INC., a North Carolina corporation ("Buyer"),
ARTEE INDUSTRIES, INCORPORATED, a North Carolina corporation (the "Seller"), and
ROBERT T. DAVIS, ROBERT L. DAVIS, Trustee of Robert T. Davis Irrevocable Trust
under agreement dated 8/25/94, ROBERT L. DAVIS, LOUIS W. DAVIS, KELLY D.
ENGLAND, J. MARSHALL BRADLEY, FRANKIE S. BRADLEY and MICKY R. BRADLEY
(collectively, the "Shareholders").
Background Statement
Seller desires to sell and Buyer desires to purchase Seller's assets and
assume certain of Seller's liabilities held or incurred in connection with
Seller's yarn manufacturing operations (the "Business"), as more specifically
provided herein. Based upon the representations and warranties made by each
party to the other in this Agreement, the parties have agreed to consummate the
sale of such assets and assumption of such liabilities on the terms contained
herein.
Statement of Agreement
In consideration of the premises and the mutual covenants herein contained,
the parties hereto, for themselves, their successors and assigns, agree as
follows:
ARTICLE I
SALE OF ASSETS AND TERMS OF PAYMENT
I.1. The Sale. Upon the terms and subject to the conditions of this
Agreement, at Closing, Seller will sell and deliver to Buyer, and Buyer will
purchase and accept from Seller, all the assets of Seller held or used in
connection with the Business, whether personal, tangible or intangible, but
excluding those assets specifically listed on Schedule 3.14(b) hereto (all such
assets being referred to herein as the "Purchased Assets"), including without
limitation:
(a) Seller's real property identified on Schedule 1.1(a) (the "Purchased
Property");
(b) Seller's rights with respect to the leased real property identified on
Schedule 1.1(b) (the "Leased Property");
(c) Seller's tangible personal property, including machinery, equipment,
supplies and inventories, vehicles, furniture, furnishings, fixtures, and spare
parts, including without limitation the property listed on Schedule 1.1(c);
(d) Seller's accounts receivable and rights under the contracts, purchase
orders, options, leases and other agreements that are listed on Schedule 1.1(d)
(the "Contracts");
(e) Seller's right, title and interest in and to all permits, licenses and
other governmental authorizations, copyrights, patents, trademarks, trade names
and any combination or shortened form thereof, processes, computer programs and
program rights, trade secrets, customer lists, and other intangible rights and
interests owned by Seller and used in connection with the Business;
(f) All prepaid expenses, surety bonds, surety deposits and security
deposits posted by or on behalf of Seller in connection with the operation of
the Business, a recent listing of which is attached hereto as Schedule 1.1(f)
hereto;
(g) All books, records, correspondence, customer lists, vendor lists,
product literature, designs, development records and files, computer files,
technical reports and all other business documents relating to the operation of
the Business;
(h) All of Seller's telephone numbers and telephone directory listings and
advertisements;
(i) All claims, causes of action and suits that Seller have or may have
against third parties in connection with the Business;
(j) All insurance policies, including life insurance policies, currently
issued in favor of Seller; and
(k) The Business as a going concern.
. Upon the terms and subject to the conditions and adjustments contained in
this Agreement, and in consideration of the sale of the Purchased Assets, Buyer
will pay or issue and deliver on the Closing Date (a) to Seller an amount equal
to $2,000,000 in cash and a note (the "Note") made payable to Seller in the
aggregate amount of $1,600,000 and (b) to the Shareholders the number of shares
of the common stock of Buyer (the "Buyer's Stock") valued in the aggregate at
$5,400,000 based on a price per share of the Buyer's Stock of $19.
The amount of the foregoing payments, collectively, are referred to in this
Agreement as the "Base Purchase Price," which price is subject to the Purchase
Price Adjustment to be made pursuant to Section 1.3. The amount upon such
adjustment is referred to herein as the "Final Purchase Price."
Not later than 30 days prior to the Closing Date, Seller shall deliver to
Buyer a schedule specifying the manner in which the foregoing payment of shares
of the Buyer's Stock will be allocated among the Shareholders. Such schedule
shall be binding upon Seller and the Shareholders upon delivery to Buyer. No
fractional shares of the Buyer's Stock shall be issued in connection with this
Agreement. If a person otherwise has the right to receive .5 or more of a share
of the Buyer's Stock, such person shall receive an additional share of the
Buyer's Stock; otherwise, such person shall receive no such shares or other
consideration for such a fractional interest in the Final Purchase Price. The
shares of the Buyer's Stock to be issued hereunder shall be registered and fully
transferrable without limitation under the federal securities laws, except as
may be imposed by Rule 145 of the Securities and Exchange Commission promulgated
thereby under the Securities Act of 1933, as amended, and shall be approved for
listing on the New York Stock Exchange.
The Note shall bear interest at 6.5% per annum, and the interest and
principal thereunder shall become due and payable on the 10th day following
final determination of the Final Purchase Price.
. (a) The Base Purchase Price shall be adjusted as follows (such
adjustment, the "Purchase Price Adjustment"): The Base Purchase Price shall be
increased by the dollar amount, if any, by which the Stockholders' Equity
Computation (as defined below) exceeds $6,300,000, and the Base Purchase Price
shall be decreased by the dollar amount, if any, by which the Stockholders'
Equity Computation is less than $6,000,000.
(b) "Stockholders' Equity Computation" means, as of 11:59 p.m. on the date
immediately preceding the Closing Date, the dollar amount of the total assets of
Seller less the dollar amount of the total liabilities of Seller, as derived
from the audited Closing Balance Sheet prepared pursuant to Section-1.4 below
and subject to the procedure for its determination in Section 1.5 below. Assets
and liabilities shall have the meanings given to them under generally accepted
accounting principles (as recognized by the American Institute of Certified
Public Accountants), as in effect from time to time and consistent with Seller's
past practices as reflected in the Financial Statements, as defined in
Section-3.4 ("Generally Accepted Accounting Principles").
(c) Based on the Closing Balance Sheet, Buyer shall compute the Purchase
Price Adjustment and Stockholders' Equity Computation and shall deliver to
Seller and the Shareholders within 90 days after the Closing Date, a certificate
attached to the Closing Balance Sheet setting forth its calculation of the
Stockholders' Equity Computation and the Purchase Price Adjustment.
. (a) Within 90 days after the Closing Date, Buyer shall cause to be
prepared and audited by its independent public accountants and shall deliver to
Seller and the Shareholders an audited balance sheet of Seller as of 11:59 p.m.
on the date immediately prior to the Closing Date (the "Closing Balance Sheet").
Seller and the Shareholders shall give their full cooperation and shall provide
such information required for Buyer to prepare and its accountants to audit the
Closing Balance Sheet. Seller and the Shareholders shall have the right to audit
the Closing Balance Sheet and shall be permitted to have access to the records
and information involved in the preparation of the Closing Balance Sheet,
Stockholders' Equity Computation and Purchase Price Adjustment upon request by
Seller or the Shareholders, and Buyer shall give reasonable assistance as
requested by Seller and the Shareholders in reviewing such matters.
(b) The Closing Balance Sheet shall be prepared in accordance with
Generally Accepted Accounting Principles, and it shall reflect all expenses and
fees of Seller and the Shareholders incurred and not paid, or to be incurred or
paid by Seller, in connection with this Agreement, including without limitation
all attorneys' and accountants' fees and costs for fringe benefits of employees
(including those related to health care and vacation).
. If Seller and the Shareholders do not accept the Closing Balance Sheet or
the Stockholders' Equity Computation prepared by Buyer, Seller or the
Shareholders shall give written notice to Buyer within 30 days after delivery
thereof. The notice shall set forth in reasonable detail the bases for any
objections by Seller or the Shareholders. Seller shall be deemed to have
accepted the Closing Balance Sheet and the Stockholders' Equity Computation
prepared and proposed by Buyer at 5:00 p.m. Charlotte, North Carolina time on
the 30th day after delivery thereof if Seller has not by then given written
notice of disagreement. Within 30 days after delivery of Seller's written
notice, the parties shall engage Arthur Andersen LLP or another mutually
agreeable independent public accounting firm to resolve the issues. Such
accounting firm shall apply Generally Accepted Accounting Principles to the
issues at hand and shall not have the power to alter, modify, amend, add to or
subtract from any terms or provisions of this Agreement. The decision of the
accounting firm shall be rendered within 30 days of its engagement and shall be
binding on the parties hereto. Buyer and Seller each shall pay one-half of the
cost of the accounting firm.
. If the Final Purchase Price exceeds the Base Purchase Price, Buyer shall
pay the difference to Seller in cash. If the Final Purchase Price is less than
the Base Purchase Price, the amount payable under the Note (including any
accrued but unpaid interest) shall be offset and decreased by the difference. If
the amount payable under the Note is less than the amount to be offset, Seller
and each of the Shareholders shall have a joint and several obligation to pay
such deficiency to Buyer in cash. Any payment to be made pursuant to this
Section 1.6 shall be made within 10 days after the final determination of the
Final Purchase Price.
. I.7. Contingent Payment
(i) After the fiscal year of Buyer beginning May 4, 1998 and ending May 2,
1999 (the "Measurement Period"), Buyer shall pay to Seller the following
amounts, as and if applicable (the "Contingent Payment"):
(A) if Artee Pre-tax Income (as defined below) for the Measurement Period
is $2,200,000, Buyer shall pay to Seller $2,200,000;
(B) if Artee Pre-tax Income for the Measurement Period is greater than
$2,200,000 but less than $5,200,000, Buyer shall pay to the Seller an amount
equal to the sum of (i) $2,200,000 plus (ii) the amount determined by
multiplying $5,000,000 by a fraction, the numerator of which is the amount by
which Pre-tax Income exceeds $2,200,000 and the denominator of which is
$3,000,000; or
(C) if Artee Pre-tax Income for the Measurement Period is equal to or
greater than $5,200,000, Buyer shall pay to Seller $7,200,000.
Forty percent (40%) of the amount of any payment required by this Section
1.7 shall be paid in cash and sixty percent (60%) of any such amount (the
"Contingent Stock Payment") shall be paid by the delivery of shares of the
Buyer's Stock, the number of which will be based upon a price of $19 per share;
provided, however, that in the event the average closing price of the Buyer's
Stock, as reported in The Wall Street Journal, for the 20 trading days
immediately prior to the Contingent Payment Date (as defined below): (i) is
greater than $24, the number of shares of Buyer's Stock to be issued and
delivered under this Section 1.2 shall be computed by (A) multiplying $24 by the
fraction of which the amount of the Contingent Stock Payment is the numerator
and $19 is the denominator, the product of which is then (B) divided by such
20-day average price; or (ii) is less than $14, the number of shares of Buyer's
Stock to be issued and delivered under this Section 1.2 shall be computed by (A)
multiplying $14 by the fraction of which the amount of the Contingent Stock
Payment is the numerator and $19 is the denominator, the product of which is
then (B) divided by such 20-day average price; and provided, further, that in
the event that any such shares of the Buyer's Stock are to be issued at $15 per
share or less, Buyer shall have the option, at its sole discretion, to make a
payment of cash in lieu of all or any portion of its obligation to issue and
deliver shares of the Buyer's Stock under this Section 1.7.
The issuance of such shares of the Buyer's Stock is subject to the same
fractional share adjustment set forth in Section 1.2. Buyer shall make such
payment and issue such shares of the Buyer's Stock by the latest to occur of (A)
45 days after the end of Buyer's fiscal year ended May 2, 1999, (B) ten days
after the certification of Artee Pre-tax Income for the Measurement Period by
Buyer's independent public accountants in connection with the fiscal year-end
audit of Buyer's financial condition and results of operations, or (C)-30 days
after Seller delivers the notice required below specifying the allocation of the
Buyer's Stock among the Shareholders (such date, the "Contingent Payment Date").
Not later than 30 days prior to such payment, Seller shall deliver to Buyer a
schedule specifying the manner in which the foregoing payment of the Buyer's
Stock will be allocated among the Shareholders. Such schedule shall be binding
upon Seller and the Shareholders upon delivery to Buyer.
"Artee Pre-tax Income" shall mean the income of Buyer's division comprised
of the Business before income taxes, all as computed in accordance with
Generally Accepted Accounting Principles, applied to the Artee business unit
using the Seller's historical cost basis. For purposes of calculating Artee
Pre-tax Income during the Measurement Period, the depreciation schedules
currently used by the Seller will continue to be used, even though Buyer may
institute different depreciation schedules for financial accounting purposes. In
addition, for such purpose, LIFO inventory accounting policies will be applied
to the inventory of the Artee business unit as a separate inventory pool and
using Seller's historical LIFO cost basis.
(ii) Books and Records. Throughout the period commencing at Closing and
continuing thereafter through May 2, 1999, Buyer shall maintain books and
records of its operations to the extent necessary for ensuring the accurate
calculation of Artee Pre-tax Income.
(iii) Operation of the Business. The parties intend that the following
principles will govern the conduct of the Business and the calculation of Artee
Pre-tax Income during the Measurement Period: The Business will be operated as a
separate business unit of the Buyer, with Robert T. Davis ("Bob") serving as
chairman and Robert L. Davis ("Rob") serving as chief executive of the business
unit. Rob will succeed Bob as chairman of the business unit if Bob is unable to
serve as chairman throughout the Measurement Period. The volume of yarn that
will be available for the Buyer's internal consumption is set forth on Exhibit
1.7 hereto. The Business will make such volumes of yarn available to Buyer, as
Buyer shall request, and the transfer pricing for such yarn will be as set forth
on Exhibit 1.7. If the Buyer requires more yarn from the Artee business unit
than the volumes set forth on Exhibit 1.7, the transfer pricing for such
additional yarn will be established with reference to the outside business of
the business unit, if any, displaced by such additional requirements. If raw
material prices to the Artee business unit increase or decrease, then such
increased or decreased costs will be passed through to the transfer pricing
established hereunder, on a dollar-for-dollar basis. The Artee business unit
will be charged for the financing provided to it by the Buyer from and after the
closing (including the payoff of outside debt, financing of capital expenditures
and working capital needs, and financing of the chenille machines to be
installed at the Artee premises (whether purchased or "leased" from the Buyer)),
all at the Buyer's cost of funds under its bank loan documents. The Buyer will
not allocate overhead costs to the Artee business unit for purposes of
calculating Artee's Pre-tax Income during the Measurement Period. If the
adoption of Buyer's benefit plans causes an increase in Artee's costs of doing
business from the costs that would have been experienced by Seller using its
current benefit plans in an amount that is in excess of cost savings realized by
other changes instituted by Buyer (e.g. elimination of factoring), such amount
of net increased cost will be disregarded in calculating Artee Pre-tax Income.
The parties intend that, to the extent feasible, the Artee business unit will be
operated as an independent entity after the closing by its current management.
Notwithstanding the foregoing, it is understood and agreed that the ultimate
control of the Business will transfer to the Buyer as of the Closing Date. The
parties hereto understand and acknowledge that (a) Buyer is a public company and
must be managed and operated in the best interests of its shareholders by
Buyer's management and board of directors, (b) the Contingent Payment provided
for in this Section 1.7 could create a conflict of interest between Seller and
Buyer during the Measurement Period and (c) in the unlikely event of such a
conflict, decisions may have to be made before and during the Measurement Period
that would be in the best interests of Buyer and its shareholders but contrary
to the best interests of Seller and its shareholders as beneficiaries of the
Contingent Payment provided for in this Section 1.7.
(iv) Calculation of Contingent Payment.
Buyer shall deliver to Seller a schedule, prepared by Buyer and reviewed by
Buyer's independent accountants, setting forth the computation of Artee Pre-tax
Income for each fiscal quarter of Buyer during the Measurement Period, along
with copies of such backup documentation and such financial information as is
reasonable to inform Seller of the information and calculations used in making
such computation. The computation of such Artee Pre-tax Income shall be made on
the basis of financial statements prepared in accordance with Generally Accepted
Accounting Principles applied as described above in this Section and a physical
count of inventory. Buyer's computation of any such payment shall be conclusive
and binding upon the parties hereto unless, within thirty (30) days following
Seller's receipt of such schedule or, with respect to Buyer's fiscal fourth
quarter in the Measurement Period, 10 days after Buyer's independent public
accountants certify Artee's Pre-tax Income for the Measurement Period, whichever
is later, Seller notifies Buyer in writing that it disagrees with Buyer's
computation of Artee Pre-tax Income or the amount of any Contingent Payment;
provided, however, that in the event any such computations are discovered to be
in error as a result of the fiscal year-end audit of Buyer's financial condition
and results of operations by its independent public accountants, equitable and
appropriate adjustments will be made thereto. If such disagreement is not
resolved within 30 days after delivery of Seller's timely written notice, Buyer
and Seller shall request Arthur Andersen LLP or such other national firm of
independent certified public accountants mutually agreeable to such parties to
compute the amount of Artee Pre-tax Income for the Measurement Period and any
Contingent Payment and resolve any other objection as promptly as possible,
which computation and resolution shall be conclusive and binding upon the
parties hereto. Buyer and Seller shall each pay one-half of the expenses and
fees of such accounting firm relating to the resolution of such disagreement.
. I.8. Assignment and Assumption of Obligations and Liabilities
(a) As of the Closing, Buyer shall assume and pay, discharge and perform,
and Seller shall assign all the obligations and liabilities of Seller listed on
the Closing Date Balance Sheet, including the following, but only to the extent
that such obligations and liabilities arise or accrue with respect to a time or
period before the Closing Date: accounts payable; accrued wages and bonuses;
payroll taxes-accrued and withheld; commissions payable; accrued interest
payable; accrued profit sharing; property taxes payable; accrued claims; and
other accrued expenses.
(b) Buyer will not assume Seller's bank debt to NationsBank, N.A. and the
other note made to Robert T. Davis, both as described in detail on Schedule 1.8,
but at Closing will make payment in immediately available funds of an amount
necessary to pay such liabilities and obligations of Seller as of the Closing.
Upon such payments, Seller will cause all liens on any of the Purchased Assets
securing such liabilities and obligations to be released at Seller's expense and
appropriate instruments and documents to be executed and filed evidencing such
release of liens.
(c) Except as explicitly set forth in this Agreement, Buyer shall neither
assume nor become liable for the payment or performance of any obligations,
claims, liabilities, contracts, commitments or undertakings of Seller or the
Shareholders, whether known or unknown, fixed or contingent, reported or
unreported. Without limiting the foregoing, the Buyer shall not be liable for
workers' compensation claims that relate to any accident, injury or other events
occurring prior to the Closing Date.
. If any of the Contracts or the Lease or any other property or rights
included in the Purchased Assets are not assignable or transferable either by
virtue of the provisions thereof or under applicable law without the consent of
some other party or parties, Seller and the Shareholders shall use each of their
best efforts to obtain such consents prior to Closing and shall notify Buyer on
or prior to the Closing Date of any consents not so obtained. If any such
consent cannot be obtained prior to Closing, Buyer may (a) in the exercise of
its sole discretion waive such requirement as a condition to Closing, and in
such event, this Agreement, and the related instruments of transfer shall not
constitute an assignment or transfer thereof and Buyer shall not assume any
obligations with respect thereto or (b)-terminate this Agreement pursuant to
Section 8.1(d). Following the Closing, each Shareholder shall use his best
efforts to obtain any consents not previously obtained as soon as possible after
Closing or otherwise obtain for Buyer the practical benefit of such property or
rights.
I.10. Allocations. The Purchase Price will be allocated in a manner
mutually determined by Buyer and Seller.
ARTICLE II
THE CLOSING
II.1. Time and Place of Closing. The closing (the "Closing") of the
transactions contemplated hereby shall take place at the offices of Robinson,
Bradshaw & Hinson, P.A. on the earlier to occur of (a) May 4, 1998 or (b) the
first day of Buyer's fiscal month immediately following the fiscal month during
which it shall be determined (as provided below) that Artee Pre-tax Income for
any consecutive three-month period shall be at least $200,000 (with no month
during any such period having negative Pre-tax Income), or on such other date or
at such other time or place as shall be mutually satisfactory to the parties
hereto (the "Closing Date"); provided, however, that if there shall be less than
10 days between such determination of Pre-tax Income and the first day of
Buyer's next fiscal month, Closing shall not occur until the first day of the
second fiscal month of Buyer following such determination of Pre-tax Income.
Such Artee Pre-tax Income shall be computed on the basis of financial
statements prepared by Seller in accordance with Generally Accepted Accounting
Principles. It shall be Seller's obligation to notify Buyer of Seller reaching
such level of profitability, and Seller shall deliver to the Shareholders a
schedule prepared by Seller setting forth the computation of Artee Pre-tax
Income for any such three-month period, along with copies of such backup
documentation and such financial information as is reasonable to inform Buyer of
the information and calculations used in making such computation. Seller's
computation of such Artee Pre-tax Income shall be conclusive and binding upon
the parties hereto unless, within 15 days following Seller's delivery of such
schedule to Buyer, Buyer notifies Seller in writing that it disagrees with
Seller's computation of Artee Pre-tax Income for such three-month period. If
such disagreement is not resolved within ten days after Seller's receipt of any
such notice, Buyer and Seller shall request Arthur Andersen LLP or such other
national firm of independent certified public accountants mutually agreeable to
them to compute the amount of Artee Pre-tax Income for any such three-month
period and resolve any other objection as promptly as possible, which
computation and resolution shall be conclusive and binding upon the parties
hereto. Buyer and Seller shall each pay one-half of the expenses and fees of
such accounting firm relating to the resolution of such disagreement.
II.2. Deliveries by Seller. At the Closing, Seller will deliver to Buyer
the following:
(a) General warranty deeds to the Purchased Property;
(b) Assignment and Assumption Agreement (the "Assignment Agreement"),
substantially in the form attached hereto as Exhibit A;
(c) All bills of sale, certificates of title, assignments of leases and
other agreements, and other instruments of transfer necessary to transfer title
to the Purchased Assets, as may be reasonably required by Buyer;
(d) Evidence satisfactory to Buyer and its counsel that all liens on the
Purchased Assets will be released at or upon Closing;
(e) The opinions, certificates, consents and other documents contemplated
by Section-6.3 hereof; and
(f) All other documents, certificates, instruments and writings required
hereunder to be delivered by Seller, or as may reasonably be requested by Buyer
at or prior to the Closing pursuant to this Agreement.
II.3. Deliveries by Buyer. At the Closing, Buyer will deliver to Seller or
the Shareholders (as provided herein) the following:
(a) The payment of $2,000,000 in cash;
(b) The Note;
(c) The stock certificates representing the number of shares of Buyer's
Stock valued in the aggregate at $5,400,000 based on the price per share of
Buyer's Stock determined in accordance with Section 1.2, such certificates
bearing legends reflecting any restrictions on the resale of the underlying
shares imposed by Rule 145 of the Securities and Exchange Commission promulgated
thereby under the Securities Act of 1933, as amended;
(d) The Assignment Agreement;
(e) The certificates and other documents contemplated by Section 6.2
hereof; and
(f) All other documents, certificates, instruments and writings required
hereunder to be delivered by Buyer, or as may reasonably be requested by Seller
at or prior to the Closing pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDERS
Each of Seller and the Shareholders jointly and severally represent and
warrant to Buyer as follows:
III.1. Existence; Capital Stock; and Ownership. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of organization. Seller has the full power and authority to own, lease and
operate the Purchased Assets and carry on its Business as such operations are
now being conducted. All of the issued and outstanding capital stock of Seller
has been duly authorized and validly issued and is fully paid and nonassessable
and is entirely owned by the Shareholders. Except as set forth on Schedule 3.1,
there are no outstanding options, warrants, convertible rights, calls, puts or
other rights or commitments of any character to acquire the capital stock of
Seller, no contracts or commitments to issue any such options, warrants,
convertible rights, calls, puts or other rights or similar agreements affecting
the shares of stock of Seller. Seller is duly qualified to do business and in
good standing as a foreign corporation or limited liability company, as
applicable, in the states set forth on Schedule 3.1 attached hereto, which are
all the states in which either the ownership or use of its properties, or the
nature of the activities conducted by it, requires such qualification. Seller
does not presently own, directly or indirectly, any shares of capital stock of
or other equity interest in any corporation, partnership or other entity nor is
Seller otherwise under any obligation to purchase or subscribe for any interest
in, make any loan or advance to, or otherwise in any manner make any investment
in, any corporation, partnership or other entity.
III.2. Authority Relative to this Agreement. Seller has the full corporate
power, authority and legal right to execute and deliver this Agreement and to
carry out the transactions and perform its obligations contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Seller (including approval by its
shareholders in accordance with applicable law), and no other proceedings on the
part of Seller are necessary to authorize this Agreement or consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Seller and the Shareholders and constitutes a
legal, valid and binding obligation of each of them, enforceable against each of
them in accordance with its terms.
III.3. Consent and Approvals; No Violation. No permit, consent, approval or
authorization of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with any aspect of the execution,
delivery and performance of this Agreement, except for compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). The
execution, delivery and performance of this Agreement by each of Seller and the
Shareholders will not (a) conflict with any provision of the Articles of
Incorporation or bylaws of Seller, (b) result in a default (or give rise to any
right of termination, cancellation or acceleration or creation of liens) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, agreement, lease or other instrument or obligation relating to the
Business or to which any of Seller or the Shareholders is a party or to which
any of the Purchased Assets may be subject, except for such defaults (or rights
of termination, cancellation or acceleration or creation of liens) as to which
requisite waivers or consents have been obtained, or (c) violate any law,
statute, rule, regulation, order, writ, injunction or decree of any federal,
state or local governmental authority or agency.
III.4. Financial Statements. Seller has furnished to Buyer audited
financial statements as of and for the twelve-month periods ending on or about
December 31, 1994, 1995 and 1996, and unaudited balance sheets and statements of
income for each completed month thereafter. The foregoing statements are
hereinafter referred to as the "Financial Statements." The Financial Statements
(a) fairly present the results of operations and financial position of Seller
for the periods and as of the dates set forth, in accordance with Generally
Accepted Accounting Principles, except for normal adjustments in the case of
unaudited financial statements, and (b) are consistent with the books and
records of Seller (which books and records are correct and complete).
III.5. Undisclosed Liabilities. Except as set forth in Schedule-3.5 hereto,
Seller has no obligation or liability (whether absolute, contingent or
otherwise, including, without limitation, product liability and warranty
obligations) except liabilities, obligations or contingencies (i) that are fully
accrued or reserved against in the Financial Statements or (ii) that were
incurred in the ordinary course of business since the date of the Financial
Statements.
III.6. Absence of Certain Changes or Events. Except as set forth in
Schedule 3.6 and except as otherwise contemplated by this Agreement, since
December 31, 1996 there has not been (a) any material adverse change in the
Business or the results of its operation, properties or prospects; (b) any
damage, destruction or casualty loss, whether covered by insurance or not,
adversely affecting the Purchased Assets or the Business; (c)-(i)-any increase
in the rate or terms of compensation payable to or to become payable to any of
Seller's employees (the "Employees"), except increases occurring in accordance
with such Seller's customary practices or as required by existing employment
agreements or (ii)-any modifications in employee benefits to the Employees;
(d)-entry into, termination of (except by reason of the occurrence of a
contractually specified termination date) or amendment to any contract or
commitment or license or permit applicable to the Business, except in the
ordinary course of business or as contemplated herein; (e) any creation of or
assumption of any mortgage, pledge, or other lien or encumbrance upon any of the
assets of Seller, including the Purchased Assets; (f)-any sale, assignment,
lease, transfer or other disposition of any of its assets, except in the
ordinary course of business; (g) any imposition or incurring of any obligation
or liability, fixed or contingent, except in the ordinary course of business;
(h) entry into any agreement with respect to the operation of the Business
pursuant to which the aggregate annual financial obligation of Buyer may exceed
$10,000, or which is not terminable by Buyer without penalty upon thirty (30)
days' notice or less; (i)-any commitment with respect to any inventories
relating to the operation of any Business, except in the ordinary course of
business; (j)-any commitment in excess of $10,000 for any capital expenditure;
(k)-any change in the accounting practices of Seller or the manner in which it
maintains its books of account and records; or (l) any transaction otherwise
relating to the Business not in the ordinary course of business.
III.7. Certain Contracts and Arrangements. All contracts existing as of the
date hereof to which Seller is a party and that relate to the Business are
either (a)-listed in Schedule 3.7 or (b) listed on Schedule 1.1(d). All of the
Contracts (as defined in Section 1.1) may be assigned by Seller to Buyer without
the consent of any other party, or, if required, such consent will be obtained
by Seller prior to the Closing. Seller has complied in all respects with the
provisions of such Contracts and is not now and at the Closing will not be in
default under any of them. There is not any breach or anticipated breach by
Seller or any other party to, or any right of acceleration or termination with
respect to, such Contracts. Each of such Contracts will be in full force and
effect at the Closing with no modification of its respective terms, unless by
its terms it expires prior thereto. Except as set forth on Schedule 3.7, Seller
has no contracts, oral or written, with any sales representatives. Seller has no
written contract with any of its employees. Seller has delivered to Buyer a
correct and complete copy of each such Contract and all contracts listed on
Schedule 3.7.
III.8. Litigation. Except as set forth in Schedule 3.8, there are no legal,
administrative, arbitration or other proceedings or governmental investigations
pending or, to the knowledge of each Seller and Shareholder, threatened against
Seller or the Shareholders in connection with the operation of the Business.
There is no court order, judgment or decree adversely affecting the Business.
III.9. Labor Matters. Except as disclosed on Schedule-3.9 hereto, Seller is
not a party to any collective bargaining agreement or any other union labor
agreement covering or relating to any of the Employees, and has not recognized
and has not received a demand for recognition of any collective bargaining
representative with respect thereto. There are no strikes, labor disputes or
work stoppages in effect or, to the knowledge of Seller or any Shareholder,
threatened against Seller. Seller has not committed any unfair labor practice.
Neither Seller nor any of it officers, directors, members, managers or employees
with responsibility for employment matters nor any Shareholder has any knowledge
of any organizational effort presently being made or threatened by or on behalf
of any labor union with respect to employees of Seller.
. III.10. Employee Benefit Plans; ERISA
(a) Schedule 3.10 lists all employee pension and welfare plans or
arrangements, including, without limitation, pension or profit sharing or thrift
plans, company contributions to medical benefit, death benefit and disability
programs, and vacation, severance and sick leave policies applicable to the
Employees. Except as set forth on Schedule-3.10, with respect to all "employee
benefit plans" (as defined in Section-3(3) of the Employee Retirement Income
Security Act ("ERISA")) to which Seller contributes on behalf of Employees
(capitalized terms used in this Section 3.10 and not otherwise defined herein
shall have the meanings specified in ERISA):
(i) all such plans comply with ERISA and other applicable laws and
regulations;
(ii) all contributions which were due and payable by Seller on or before
the date hereof to such plans have been made;
(iii) none of the plans subject to Title-IV of ERISA has been terminated,
no proceeding to terminate any of such plans has been instituted, and there has
been no complete or partial withdrawal, cessation of facility operations or
occurrence of any other event that would result in the imposition of liability
on Seller under Title-IV of ERISA;
(iv) The market value of assets under each such employee benefit plan which
is an Employee Pension Benefit Plan (other than any Multiemployer Plan) (as such
terms are defined in ERISA) equals or exceeds the present value of all vested
and nonvested liabilities thereunder determined in accordance with Pension
Benefit Guaranty Corporation ("PBGC") methods, factors, and assumptions
applicable to an Employee Pension Benefit Plan terminating on the date for
determination; and
(v) Seller has delivered to 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 such Employee Benefit Plan.
(b) With respect to each employee benefit plan that Seller or any entity
under common control with Seller maintains or ever has maintained or to which
any of them contributes, ever has contributed, or ever has been required to
contribute:
(i) 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.
(ii) There have been no prohibited transactions (as defined in Section 4975
of the Internal Revenue Code of 1986, as amended from time to time (the "Code")
or Section 406 of ERISA) 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.
(iii) Seller has not incurred, or has any reason to expect that Seller 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.
(c) Neither Seller nor any entity under common control with Seller
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.
(d) Neither Seller nor any entity under common control with Seller
maintains or ever has maintained or contributes, ever has contributed, or ever
has been required to contribute to any Employee Welfare Benefit Plan (as defined
in ERISA) providing 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 Sec. 4980B.
(e) Without limiting the generality of the foregoing, prior to and as of
the CIlosing Date, Seller sponsors the Artee Industries, Incorporated Employee
Benefit Plan ("Seller's Health Care Plan"). Seller's Health Care Plan is a
self-insured medical reimbursement plan established to assist Seller in
providing medical benefits ("Benefits") to Seller's employees and their
dependents, who meet the eligibility provisions of Seller's Health Care Plan
("Participants"). Except for the Incurred But Unpaid Health Care Claims referred
to in Section 5.6(b) hereof, as of the Closing Date, Seller has paid, or
provided for the payment of, all health care expenses incurred by Seller's
employees and their dependents that are covered under the Seller's Health Care
Plan in accordance with its terms.
(f) As of the date hereof, seven individuals, who were previously employed
by Seller, are participating in Seller's Health Care Plan under the COBRA
continuation coverage requirements of Section 4980B of the Code and Section 601
et seq. of ERISA, ("COBRA Participants"). Except for COBRA Participants, as of
the Closing Date, the only individuals participating in Seller's Health Care
Plan are the individuals currently employed by Seller, and their dependents, who
meet the eligibility provisions of Seller's Health Care Plan.
(g) The Seller has complied in all respects with the provisions of Section
601 et seq. of ERISA and Section 4980B of the Code, or Proposed Treasury
Regulation Section 1.162-26 (collectively, "COBRA Laws") that govern or apply to
Seller's Health Care Plan or to any other employee benefit plan sponsored by the
Seller at any time.
(h) At all times, the Artee Industries, Incorporated 401(k) Plan (the
"401(k) Plan") has been in compliance with ERISA and the Code.
. (a) Seller and the Shareholders have timely filed or will timely file all
federal, state and local tax returns and reports required to be filed for any
period ending before the Closing Date, or if applicable, any period that
includes the Closing Date. All such tax returns are or will be correct and
complete in all respects. Seller or the Shareholders have properly calculated
and have timely paid or will timely pay or cause to be paid all income taxes and
other taxes of any kind of any taxing authority (whether or not shown on any tax
return) due to any taxing authority ("Taxes") with respect to all such periods.
Except as set forth on Schedule-3.8, none of Seller or the Shareholders has
received written notice that the Internal Revenue Service, or any other taxing
authority has asserted against any of them, any deficiency or claim for
additional Taxes in connection therewith. None of Seller or the Shareholders
have been granted or have given any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment or filing of, any
Tax. All deposits required by law to be made by Seller or the Shareholders with
respect to employees' withholding taxes have been made. Seller or the
Shareholders have withheld and paid all Taxes required to have been withheld and
paid in connection with the amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party. There are no tax liens
on any assets of Seller, except liens for Taxes not yet due. There are no claims
pending against Seller or any Shareholder for past due Taxes, and Seller has no
knowledge of any such threatened claim or the basis for any such claim. There
are not now any matters under discussion with any federal, state, local or other
authority with respect to any additional Taxes relating to Seller or any
Shareholder. This Section 3.11(a) relates only to Taxes arising out of the
operation of the Business and the tax returns related thereto.
(b) Since June-1987, Seller has had in effect a valid election to be taxed
as a "small business corporation" under Section 1361(l) of the Code. In no year
has the Company incurred any tax liability under Section 1374 or 1375 of the
Code. None of Seller or the Shareholders is liable for the tax of any person or
entity under Section 1.1502-6 of the Treasury Regulations, promulgated pursuant
to the Code (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
. Schedule 3.12 lists all licenses, permits and authorizations that are
held by Seller as of the date hereof and are required for the conduct of the
Business, as presently conducted. All such licenses, permits, and authorizations
are in full force and effect, with no violations of any of them having occurred
or, to the knowledge of Seller and each Shareholder, been alleged to have
occurred, and with no proceedings pending or, to the knowledge of Seller and
each Shareholder, threatened, that would have the effect of revoking, limiting
or affecting the transfer or renewal of any such licenses or permits. Except as
set forth in Schedule 3.12 or otherwise disclosed in this Agreement: (a) such
licenses and authorizations are not subject to any restrictions or conditions
that would limit operation of the Business as presently conducted; (b) there are
no applications by Seller for any license, permit or authorization in connection
with the Business; or (c) complaints by others pending or threatened in writing
as of the date hereof before any governmental agency relating to the Business
other than proceedings that affect the industry generally.
. Seller, in the operation of its Business: (i)-possesses all of the
business licenses, permits (including environmental permits) and authorizations
(collectively, "Authorizations") that are necessary for legally conducting its
Business as presently conducted, and has made such filings as may be required by
local, state or federal governments; (ii)-is in compliance with all applicable
laws, rules and regulations, including those relating to the employment of labor
(including OSHA), wages, hours, collective bargaining, immigration,
discrimination and the payment of social security and similar taxes, and
(iii)-is not liable for any arrears of wages or any penalties for failure to
comply with any of the foregoing.
. Seller is, and immediately prior to Closing will be, the owner of all of
the Purchased Assets and will have good and marketable title to all of the
Purchased Assets (including fee simple marketable title with regard to the
Purchased Property and a leasehold estate with regard to the Leased Property)
free and clear of all liens, pledges, security interests, charges, claims,
restrictions or other encumbrances and defects of title of any nature whatsoever
except as listed on Schedule 3.14(a). The Purchased Assets constitute all of the
assets used in connection with the operation of the Business other than the
assets listed on Schedule-3.14(b) (the "Excluded Assets").
. Seller owns or leases all buildings, machinery, equipment, and other
tangible assets necessary for the conduct of the Business as presently conducted
and as presently proposed to be conducted. Each such tangible asset has been
well maintained, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used
and presently is proposed to be used.
. With respect to the Leased Property: (i) the Lease is legal, valid,
binding, enforceable, and in full force and effect; (b) neither Seller nor any
other party is in default, violation or breach in any respect under the Lease,
and no event has occurred and is continuing that constitutes or, with notice or
the passage of time or both, would constitute a default, violation or breach in
any respect under the Lease; and (c) the Lease grants the tenant under the Lease
the exclusive right to use and occupy the demised premises thereunder.
. Schedule 3.17 lists all bank accounts and safe deposit boxes of Seller
used in connection with the Business, all powers of attorney in connection with
such accounts, and the names of all persons authorized to draw thereon or to
have access thereto.
. Except as noted thereon, Schedule 3.18 lists the names and current salary
rates of all the salaried Employees as of the date hereof (complete list to be
provided to Buyer within 30 days of the date hereof). The Business has complied
with all applicable laws and regulations relating to the employment of labor,
including those related to wages, hours, collective bargaining, immigration,
discrimination, and the payment of Social Security or similar taxes. There are
no unfair labor practice claims or charges pending involving Seller relating to
the operation of the Business.
Schedule 3.19 lists all of Seller's insurance policies relating to the
Purchased Assets or the Business in effect as of the date hereof, and indicates
the insurer's name, policy number, expiration date and amount and type of
coverage. With respect to each such insurance policy: (a) the policy is legal,
valid, binding, enforceable, and in full force and effect; (b) neither Seller
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (c)-no party to the policy has repudiated any provision thereof.
Seller has been covered during the past ten years by insurance in scope and
amount customary and reasonable for its Business. Schedule 3.19 describes any
self-insurance arrangements affecting any of Seller.
. Schedule 3.20 attached hereto lists each customer representing billings
by Seller in excess of $100,000 for the 12-month period ended December 31, 1996
and for the nine-month period ended September 30, 1997. Seller has not received
any notice and has no reason to believe that Seller's agreement with any such
customer is being terminated or is being considered for termination or
nonrenewal, whether as a result of the transactions contemplated by this
Agreement or otherwise.
. All inventories reflected in the Financial Statements do not, and the
inventories of the Business at Closing will not, include any items that are
below standard quality, damaged, obsolete or of a quantity or quality not usable
or saleable in the ordinary course of business, subject only to applicable
reserves reflected on the Financial Statements.
. Subject to any reserves on the Closing Date Balance Sheet for doubtful
accounts receivable, all accounts receivable of Seller represent bona fide and
valid claims by Seller and are and will be fully collectible and are not and
will not be subject to any counterclaim, setoff or change of any kind
whatsoever.
. All trademarks, trade names, copyrights or patents owned or used by
Seller in connection with the Business, together with any applicable
registrations, are disclosed in Schedule 3.23. Except as shown in such Schedule,
all such trademarks, trade names, copyrights or patents, and any applicable
registrations are owned by Seller and are not the subject of any proceeding
challenging their use, or seeking to deny, modify or revoke any registration or
application therefor or renewal thereof. Seller is entitled to use all trade
names, trademarks, patents, designs, processes, copyrights and licenses and all
other industrial property or intellectual property rights used by it in
connection with its Business, and Seller has not granted any right, title or
interest in or to any such intellectual property. Seller has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
patents, trademarks, or intellectual property rights of third parties, and
Seller has not ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation or violation
(including any claim that such Seller must license or refrain from using any
patent, copyright, trademark or intellectual property rights of any third
party).
. Except as specified on Schedule 3.24:
(a) To the best of Seller's knowledge and belief, no Hazardous Materials
(as defined in this Section-3.24) are stored or otherwise located on real
property owned, leased or otherwise operated by Seller (the "Realty"), and no
part of the Realty, including the soil and groundwater located thereon and
thereunder, is presently contaminated by any such substance; no Hazardous
Materials have been released, stored, treated or disposed of on, in or bout the
Realty; and no improvement located on the Realty contains any asbestos or
substances containing asbestos;
(b) No portion of the Realty has ever been used as or for a mine, a
landfill, a dump or other disposal facility, a gasoline service station, or a
petroleum products storage facility;
(c) There are no underground storage tanks situated on the Realty, nor have
any been removed from the Realty;
(d) To the best of Seller's knowledge and belief, all activities, and
operations of the Business meet, and have in the past met, the requirements of
all applicable Environmental Laws (as defined in this Section-3.24);
(e) To the best of Seller's knowledge and belief, in connection with or
arising out of the operation of its Business, Seller has never sent any
Hazardous Materials to a site which, pursuant to any Environmental Law, (i) has
been placed on the "National Priorities List," the CERCLIS list, or any other
similar federal or state list, or (ii)-which is subject to a claim, an
administrative order or other request to take any type of response action or to
pay for the costs of response action at such a site;
(f) In connection with or arising out of the operation of its Business, (i)
Seller is not involved in any suit or proceeding, and no Seller has received any
notice or information request from any governmental agency or other party, with
respect to any Hazardous Material or any violation of any Environmental Law, and
(ii) Seller has not received any notice of any claim from any person or entity
relating to personal injury, death or property damage from exposure to any
Hazardous Material or violation of any Environmental Law; and
(g) In connection with or arising out of the operation of its Business,
Seller has timely filed all reports required to be filed, has acquired all
necessary certificates, approvals and permits (none of which shall be lost or
adversely affected as a result of the transaction contemplated herein), and has
generated and maintained all required data, documentation and records under all
applicable Environmental Laws.
As used herein, "Hazardous Materials" means any substances or materials (i)
which are defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law; (ii) which are
toxic, explosive, corrosive, flammable, infectious, radioactive, mutagenic,
dangerous or otherwise hazardous; (iii) the presence of which require
investigation or remediation under any Environmental Law or common law; (iv)
which constitute a danger, a nuisance, a trespass or a health or safety hazard
to persons or property; (v) which include, without limiting the foregoing,
underground storage tanks, whether empty, filled or partially filled with any
substance; and/or (vi) which are or contain, without limiting the foregoing,
asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation,
petroleum hydrocarbons, petroleum derived substances or waste, crude oil or any
fraction thereof, nuclear fuel, natural gas or synthetic gas (excluding
petroleum or natural gas products for on-site use properly stored in accordance
with all Environmental Laws in gas pipelines serving the Realty, vehicles,
machinery or above ground storage tanks).
As used herein, "Environmental Laws" shall mean any and all federal, state
and local laws, statutes, ordinances, rules, regulations, permits, directives,
licenses, approvals, guidances, interpretations, and orders, and all other legal
requirements relating to the protection of human health or the environment,
including, but not limited to, requirements pertaining to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing, permitting, investigation or remediation of
materials that are or may constitute a threat to the environment. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. S-9601 et. seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. S-1801 et. seq.), the Resource
Conservation and Recovery Act (42 U.S.C. S-6901 et. seq.) ("RCRA"), the Federal
Water Pollution Control Act (33 U.S.C. S-1251 et. seq.), the Clean Air Act (42
U.S.C. S-7401 et. seq.), the Toxic Substances Control Act (15 U.S.C. S-2601 et.
seq.), the Safe Drinking Water Act (42 U.S.C. S-300, et. seq.), the
Environmental Protection Agency's regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act
(29 U.S.C. S-651 et. seq.) ("OSHA"), as such laws and regulations have been
amended or supplemented, and applicable state and local statutes, and the rules
and regulations promulgated under such federal, state and local laws.
Seller has previously delivered to Buyer copies of all reports, files,
surveys, records, licenses, certificates, orders and all other documents in its
possession of any type relating to the matters described in this Section 3.24.
. Each product manufactured, sold, leased, or delivered by Seller has been
in conformity with all applicable contractual commitments and all express and
implied warranties, and Seller has no liability (and there is no 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)
for replacement or repair thereof or other damages in connection therewith,
subject only to any reserve for product warranty claims included in the
Financial Statements. No product manufactured, sold, leased, or delivered by
Seller is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Seller has provided
to Buyer copies of the standard terms and conditions of sale or lease for
Seller.
. Seller has no liability (and there is no 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, leased, or delivered by Seller.
. Seller has and will have no liability arising out of sales of products
occurring prior to the Closing Date for any claims, charges or allowances
against, to or in respect of such products.
. The representations and warranties contained in this Article III and all
other information or documents (including the Schedules to this Agreement)
delivered by Seller to Buyer in connection with the transaction described herein
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained therein not misleading. There is no fact known to Seller that
materially adversely affects, or that could in the future materially adversely
affect, the operations, business, assets, properties or condition (financial or
otherwise) of Seller that has not been set forth in this Agreement or the
Schedules hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows: . Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of North Carolina and has the requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
. Buyer has the power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by Buyer and no other proceedings
on the part of Buyer are necessary to authorize this Agreement. This Agreement
has been duly and validly executed and delivered by Buyer and constitutes the
legal, valid and binding agreement of Buyer, enforceable against Buyer in
accordance with its terms.
. Neither the execution, delivery and performance of this Agreement by
Buyer will (a) conflict with or result in any breach of any provision of the
Articles of Incorporation or bylaws of Buyer, (b) result in a default (or give
rise to any right of termination, cancellation or acceleration or creation of
liens) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, agreement, lease or other instrument or obligation to which
Buyer is a party or by which any of its assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration or creation of
liens) as to which requisite waivers or consents have been obtained, or
(c)-violate any law, statute, rule, regulation, order, writ, injunction or
decree of any federal, state or local governmental authority or agency
applicable to Buyer, any of its subsidiaries or any of their respective assets.
IV.4. Litigation. There are no legal, administrative, arbitration or other
proceedings or governmental investigations pending or, to the knowledge of
Buyer, threatened against Buyer or any of its subsidiaries that would give any
third party the right to enjoin or rescind the transactions contemplated
hereunder.
ARTICLE V
COVENANTS OF THE PARTIES
V.1. Conduct of Business. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Closing Date, Seller will
conduct its Business in a manner consistent with prior practice and in the
ordinary and usual course. Without limiting the generality of the foregoing,
except as otherwise expressly provided in or contemplated by this Agreement,
prior to the Closing Date, without the prior written consent of Buyer, Seller
will not and the Shareholders will not cause or permit Seller to:
(a) make any distributions of any kind to shareholders of Seller;
(b) enter into any contract or commitment relating to the operation of its
Business except in the ordinary course of business;
(c) amend, modify or waive any provision of any Contract, except in the
ordinary course of business;
(d) fail to maintain and keep Seller's properties and equipment in good
repair, working order and condition, except for ordinary wear and tear;
(e) fail to keep in full force and effect Seller's insurance comparable in
amount and scope of coverage to that now maintained by Seller;
(f) fail to perform Seller's obligations under all Contracts to which it is
a party;
(g) fail to use Seller's best efforts to maintain and preserve its business
organizations, retain its present employees and maintain its relationship with
suppliers, customers and others having business dealings with such Seller;
(h) fail to maintain Seller's books of account and records in the usual and
regular manner and not make any changes in its accounting practices;
(i) fail to comply with all laws and regulations applicable to Seller and
to the conduct of its Business;
(j) amend Seller's Articles of Incorporation or Bylaws;
(k) take, or agree in writing or otherwise to take, any action that would
make any of the representations of Seller or any Shareholder set forth in this
Agreement untrue or incorrect or would result in any of the conditions set forth
in this Agreement not being satisfied;
(l) create or assume any mortgage, pledge, lien, or other encumbrance with
respect to the Purchased Assets, whether now owned or hereafter acquired; or
(m) sell, assign, lease, transfer, or otherwise dispose of any of the
Purchased Assets, except for sales of finished goods inventory in the ordinary
course of business.
(n) take any action, or fail to take action, that would cause revenues of
Seller to be recorded for accounting purposes in the Measurement Period or
pre-Closing period rather than in any period prior to the Measurement Period or
pre-Closing period for the purpose of increasing the likelihood of receiving or
the amount of any Contingent Payment pursuant to Section 1.7 of this Agreement.
. During the period from the date hereof until the Closing, Seller shall
furnish to Buyer monthly unaudited financial statements relating to the Business
prepared in accordance with Generally Accepted Accounting Principles. Seller
shall deliver to Buyer no later than March-31, 1998 financial statements
(including a balance sheet and income statement) for the year ending and as of
December-28, 1997 reviewed by its independent public accountants.
. V.3. Access to Information; Confidentiality
(a) Prior to Closing, Seller will (i) give Buyer and its authorized
representatives full access to the Purchased Assets and to all books, records,
offices and other facilities and properties relating to the Business, (ii)
permit Buyer to make such inspections thereof as Buyer may reasonably request
(including, without limitation, examinations incident to environmental audits),
and (iii) cause its officers or other appropriate officials to furnish Buyer
with such financial and operating data and other information with respect to the
Business as Buyer may from time to time reasonably request. In connection with
its due diligence relating to the transactions contemplated hereby, Seller
acknowledges that Buyer's independent public accountants will be reviewing and
evaluating Seller's Financial Statements and records and information relating
thereto and, accordingly, Seller will provide full cooperation to such
accountants in such review and evaluation. Notwithstanding the foregoing, this
Section 5.3(a) shall not apply with respect to the matters covered by the
Confidentiality Agreement dated as of August 31, 1994 between Seller and Lantor,
Inc.
(b) Without the prior consent of Buyer, no other party hereto shall issue
any news release or other public announcement or disclosure, or any general
public announcement to its employees, suppliers or customers, regarding this
Agreement or the transactions contemplated hereby, except as may be required by
law, but in which case the disclosing party shall provide Buyer with reasonable
advance notice of the timing and substance of any such disclosure. After
consultation with Seller, Buyer will issue a public press release announcing the
planned transaction and containing certain other related information.
(c) After the Closing, Seller and each Shareholder will hold, and Seller
will use its best efforts to cause its officers, directors, employees, lenders,
counsel, accountants, representatives, agents, consultants and advisors to hold,
in strict confidence all confidential information of the Business, including
without limitation customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans, new personnel
acquisition plans, methods of manufacture, technical processes, designs and
design projects, inventions and research projects of any Business learned by any
employee of Seller heretofore or hereafter, unless the same information: (i) is
currently publicly available or becomes publicly available through no fault of
Seller or any Shareholder, or their agents, advisors or other representatives,
or another person that Seller or the Shareholders know or have reason to know is
subject to confidentiality obligations with respect to such information; or (ii)
such information is required by applicable law to be disclosed, but then only to
the extent (A) disclosure is required and after giving Buyer such notice of such
obligation so that it may seek a protective order or other similar or
appropriate relief and (B) Seller and the Shareholders have undertaken in good
faith to have such confidential information treated confidentially consistent
with the terms of this Agreement.
. On the Closing Date or as soon as practicable thereafter, Seller shall
change its corporate name to a new name, which does not include the words making
up its existing name (or any existing trade names) or the acronym or
abbreviation or any variations, translations or combinations thereof or similar
names and otherwise is not likely to be confused with its present names so as to
make Seller's present name available to Buyer. From and after the Closing,
neither Seller nor any Shareholder shall use the words making up Seller's
existing name (or any existing trade names) or the acronym or abbreviation or
any variations, translations or combinations thereof or similar names in
connection with the Business.
. Buyer and Seller will make or cause to be made all such filings and
submissions under applicable laws and regulations as may be required for the
consummation of the transactions contemplated hereunder, including without
limitation any filings required under the HSR Act. Buyer and Seller will
cooperate and coordinate with one another in connection with any such filings or
submissions. Buyer and Seller will each pay one-half of the HSR Act filing fee.
. V.6. Employees and Employee Benefits
(a) For purposes of employee benefits under Seller's employee benefit
plans, all of the Employees who accept employment with Buyer shall be considered
terminated employees and shall have no further rights to accrue to them under
any of Seller's employee benefit plans after the Closing Date, except as
provided in Section 5.6(b), (c), (d), (e) and (f). While Buyer intends to hire
the employees of Seller as of the Closing Date, it is agreed by the parties that
Buyer is not obligated to hire any of the employees of Seller. The employees
hired by Buyer will be given credit for prior service with Seller for purposes
of eligibility to participate in Buyer's health benefit plan and 401(k)
profit-sharing plan, but will not receive credit for service with Seller for any
other purpose (including but not limited to vacation or severance policies).
(b) Notwithstanding anything herein to the contrary, Seller will pay, or
Seller will maintain an insurance policy that will pay, the following unpaid
claims for medical expenses incurred by Participants under Seller's Health Care
Plan that exist at the Closing Date ("Incurred But Unpaid Claims"): (i) any
unpaid claim for the payment of Benefits for health care expenses incurred by a
participant which was submitted for payment prior to the Closing Date; (ii) any
unpaid claim for the payment of Benefits for health care expenses incurred by a
Participant on or before the Closing Date; and (iii) any claim for payment of
Benefits for an accident or illness suffered or incurred prior to Closing for
which no health care expenses have been incurred; provided, however, that Seller
and the Shareholders shall be responsible or liable only for such claims
resulting in liabilities in excess of any reserves that may appear on the
Closing Balance Sheet.
All Incurred But Unpaid Claims will be paid in accordance with the
provisions of Seller's Health Care Plan. Subject to the next sentence, all
Incurred But Unpaid Claims will be paid within 60 days following Seller's
receipt thereof. If the amount of Benefits payable under any Incurred But Unpaid
Claim cannot be determined within 60 days of Seller's receipt of the Incurred
But Unpaid Claim, Seller will not be required to pay such Claim until the amount
payable is determined, as long as prior to the expiration of such 60-day period,
Seller notifies the Participant who submitted such Incurred But Unpaid Claim
that Benefits will not be paid until the amount of the Benefit payable is
determined. It is agreed that the Culp, Inc. Health Care Plan ("Buyer's Health
Care Plan") and Buyer are not obligated to pay any Incurred But Unpaid Claims.
It is further agreed, however, that if Seller does not comply with the
provisions of this Section 5.6, either Buyer or Buyer's Health Care Plan, at
Buyer's sole and absolute discretion, may pay the entire amount of any Incurred
But Unpaid Claim; and, in such event, Buyer shall be indemnified, pursuant to
Section 7.2, for the entire amount paid by Buyer or Buyer's Health Care Plan for
Incurred But Unpaid Claims. Any Incurred But Unpaid Claim existing under
Seller's Health Care Plan at the Closing Date that are submitted by Participants
to Buyer or to the third party administrator of Buyer's Health Care Plan shall
be forwarded to the following person at the following address:
Robert L. Davis
P.O. Box 1509
Shelby, North Carolina 28151
(c) If a covered employee or qualified beneficiary under Seller's Health
Care Plan incurred a qualifying event prior to the Closing Date, Seller shall
timely notify those individuals of their rights to COBRA continuation coverage
under Seller's Health Care Plan in accordance with the COBRA laws. Neither Buyer
nor Buyer's Health Care Plan, as a successor to Seller's Health Care Plan, is
responsible for providing any notice about COBRA to any covered employee or
qualified beneficiary under Seller's Health Care Plan who incurred a qualifying
event prior to the Closing Date.
(d) Seller and Seller's Health Care Plan shall be responsible for providing
COBRA continuation coverage to the COBRA Participants for the period prescribed
under the COBRA Laws. Furthermore, Seller and Seller's Health Care Plan shall be
responsible for providing COBRA continuation coverage, if any, to any covered
employee or qualified beneficiary under Seller's Health Care Plan who incurred a
qualifying event prior to the Closing Date. Neither Buyer, nor Buyer's Health
Care Plan, as a successor plan to Seller's Health Care Plan, shall be
responsible for providing any COBRA continuation coverage to the COBRA
Participants or to any covered employee or qualified beneficiary under Seller's
Health Care Plan who incurred a qualifying event prior to the Closing Date.
(e) Buyer shall offer health insurance coverage under Buyer's Health Care
Plan to Seller's employees hired by Buyer on the Closing Date as long as those
employees are eligible to participate in Seller's Health Care Plan as of the
Closing Date. Buyer's Health Care Plan shall not exclude from coverage, as a
preexisting condition, any existing health care condition of any of the
aforementioned employees for which Benefits were paid under Seller's Health Care
Plan.
(f) Seller shall terminate its 401(k) Plan prior to Closing. Upon
termination of the 401(k) Plan, Seller shall apply for and use its best efforts
to obtain a favorable determination letter with the Internal Revenue Service
stating that the termination of the 401(k) Plan will not affect its qualified
status under Section 401(a) of the Code.
. For a period of three years following the Closing Date, each of Robert-T.
Davis, Robert L. Davis, Louis W. Davis and J. Marshall Bradley shall not,
directly or indirectly:
(a) (i) engage or invest in, (ii) own, manage, operate, finance, control or
participate in the ownership, management, operation, financing or control of,
(iii) be employed by, associated with, or in any manner connected with, (iv)
lend his name or credit to, or render services or advice to, any business or
venture involved in the manufacturing or marketing of wrapped spun yarns for
uses related to upholstery fabrics anywhere in the State of Georgia, the State
of Pennsylvania, the State of North Carolina, the State of South Carolina, the
State of Tennessee, the State of Mississippi, the State of California, the State
of Illinois, the State of Michigan, the State of New Jersey, or any other State
in the United States, Mexico and Canada, or directly or indirectly acquire any
ownership interest in an entity that engages in such business in any such
location; provided, however, that the ownership of less than two percent (2%) of
the outstanding securities of a class of securities that is registered by the
issuer thereof under the Securities Exchange Act of 1934 shall not constitute a
violation of the provisions of this Section 5.7;
(b) In any way, solicit, induce or attempt to induce any customer to cease
or diminish its dealings or relationship with Buyer; and
(c) In any way, solicit, induce or attempt to induce any employee or
exclusive independent contractor of the Business upon the Closing or any future
time to leave his or her employ or contract with Buyer or any affiliate thereof
to become associated in any way with a business or venture that competes in any
way with Buyer or any affiliate thereof;
provided, however, that upon the termination of any of such person's
employment other than for Cause (as defined below), the foregoing covenants
shall no longer apply.
"Cause" means (i)-the conviction of (or its procedural equivalent) or the
entering of a guilty plea or no contest with respect to a crime involving an act
of moral turpitude; (ii)-chronic or terminal illness, disability or failing
health which prevents any such person from performing the essential duties of
his position; (iii)-any material act of willful dishonesty or malicious action
against Buyer or any affiliate thereof by any of such persons; or (iv)-a failure
to satisfy any of such person's payment obligations under or in connection with
this Agreement.
Seller and each Shareholder will also refrain from using any of the Trade
Names at any time after the Closing Date.
Seller and the Shareholders acknowledge and agree that the provisions
contained in this Section 5.7 are reasonable and valid in geographic scope and
duration and in all other respects. If Seller or any Shareholder shall breach,
or threaten to breach, this Section 5.7, Buyer shall have (i) the right to have
the provisions of this Section 5.7 specifically enforced by a court of competent
jurisdiction, it being agreed that a breach or threatened breach of this Section
5.7 would cause irreparable injury to Buyer and that money damages would not
provide an adequate remedy to Buyer; or (ii)-the right to require Seller and the
Shareholders to account for and pay over to Buyer all compensation, profits,
monies, accruals, increments or other benefits derived or received by any of
them as the result of any actions or transactions constituting a breach of this
Section 5.7; and each such right and remedy shall be independent of the others
and severally enforceable, and each of which is in addition to, and not in lieu
of, any other rights and remedies available to Buyer under law or in equity. If
any court determines that this Section 5.7, or any part thereof, is
unenforceable because of the duration or geographic scope of such provision,
such court shall have the power to reduce the duration or scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable. Seller and the Shareholders agree that the Final Purchase
Price paid to Seller as provided hereby shall serve as consideration, the
adequacy and sufficiency of which is hereby acknowledged, to support the
obligations of Seller and the Shareholders under this Section 5.7.
. Prior to Closing, Seller at its expense shall obtain and deliver Uniform
Commercial Code and tax lien search results covering the Purchased Assets from
each jurisdiction in which Purchased Assets are located. The searches shall be
accurate as of a date not earlier than 20 days prior to the Closing Date.
. Buyer, on the one hand, and Seller and the Shareholders, on the other
hand, hereby agree that (subject to the provisions of Section 9.2 hereof), shall
at its own expense use its best efforts and shall cooperate fully with the other
in preparing, filing, prosecuting, and taking any other actions with respect to
any applications, requests, or actions that are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party or to accomplish the transactions contemplated by this Agreement.
. Seller shall, and the Shareholders shall cause Seller to, take all
corporate action necessary to consummate this Agreement and the transactions
contemplated hereby. Buyer shall take all corporate action necessary to
consummate this Agreement and the transactions contemplated hereby.
. In recognition of the time that will be expended and the expense that
will be incurred by Buyer in connection with the transactions contemplated
hereby, Seller and the Shareholders will not, and Seller will use its best
efforts so that its officers, employees and agents will not, directly or
indirectly or through agents, brokers or otherwise, until this Agreement is
closed or is terminated as provided in this Agreement, encourage, solicit,
engage in negotiations or discussions or provide information with respect to any
inquiries or proposals relating to (a)-the possible direct or indirect
acquisition of all or a portion of Seller's capital stock or its assets or
(b)-any business combination involving Seller. Additionally, Seller and the
Shareholders agree to promptly notify Buyer upon any inquiries by a third person
or entity relating to the foregoing subclauses (a) and (b).
. After Closing, Buyer will use its best efforts, consistent with its
fiduciary duties, to cause Robert T. Davis to be elected as a member of the
Board of Directors of Buyer.
V.13. Resale of Buyer's Stock. Seller and each Shareholder agree not to
transfer, assign or sell any shares of Buyer's Stock received in connection with
this Agreement in violation of the federal and any applicable state securities
laws, including without limitation the limitations imposed by Rule 145
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended. Seller and each Shareholder further agree to effect any
transfer or sale of shares of Buyer's Stock through Wheat First Securities, Inc.
(or its successor).
. Seller and Buyer agree to execute and deliver to each other a secured
equipment lease, substantially in the form attached hereto as Exhibit C,
pursuant to which Seller will lease four (4) chenille machines, which Buyer has
previously ordered for purchase, the terms and conditions of which Buyer and
Seller shall negotiate in good faith. Seller and Buyer agree to execute and
deliver such lease by the time of the delivery from the manufacturer of such
machines.
ARTICLE VI
CLOSING CONDITIONS
VI.1. Conditions to Each Party's Obligations to Effect the Transactions
Contemplated Hereby. The respective obligations of each party to effect the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to Closing (subject to Article VIII hereof) of the following conditions:
(a) Neither Seller nor Buyer shall be subject at Closing to any order,
decree or injunction of a court of competent jurisdiction that enjoins or
prohibits the consummation of this Agreement, nor shall there be pending a suit
or proceeding by any governmental authority that seeks injunctive or other
relief in connection with the transactions contemplated hereby.
(b) The waiting period under the HSR Act, and all extensions thereof, shall
have expired or been terminated by the appropriate regulatory authorities.
VI.2. Conditions to the Obligations of Seller to Effect the Transactions .
The obligations of Seller to effect the transactions contemplated hereby shall
be further subject to the fulfillment at or prior to the Closing Date (subject
to Article VIII hereof) of the following conditions, any one or more of which
may be waived by Seller and the Shareholders:
(a) All representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects as of the Closing as though
made as of such time (except as otherwise expressly contemplated by this
Agreement). Buyer shall have performed and complied in all material respects
with all covenants and agreements contained in this Agreement required to be
performed and complied with by it at or prior to Closing. Seller shall have
received a certificate to the matters set forth in this subparagraph (a) signed
on behalf of Buyer by its duly authorized officer.
(b) All documents required hereunder to have been delivered by Buyer to
Seller, and all actions required hereunder to have been taken by Buyer, at or
prior to the Closing Date, shall have been delivered or taken.
(c) Seller shall have received from Buyer certificates executed by the
Secretary or an Assistant Secretary of Buyer certifying and attaching copies of
the following: (i)-resolutions of the Board of Directors of Buyer authorizing
the execution, delivery and performance of this Agreement and all instruments
and documents to be delivered in connection herewith and the transactions
contemplated hereby by Buyer; (ii)-Articles of Incorporation of Buyer recently
certified by the North Carolina Secretary of State and Bylaws of Buyer;
(iii)-the incumbency and signatures of any of Buyer's officers who will execute
or have executed documents in connection with this Agreement; (iv)-a Certificate
of Existence of Buyer issued as of a recent date by the North Carolina Secretary
of State. Such certificate shall further certify that Buyer's Articles of
Incorporation have not been amended since their certification by such Secretary
of State and that nothing has occurred since the date of issuance of the
Certificate of Existence that would adversely affect Buyer's corporate
existence.
VI.3. Conditions to the Obligations of Buyer to Effect the Transactions .
The obligations of Buyer to effect any transaction contemplated hereby shall be
further subject to the fulfillment at or prior to the Closing Date (subject to
Article VIII hereof) of the following conditions, any one or more of which may
be waived by Buyer:
(a) All representations and warranties of Seller or the Shareholders
contained in this Agreement shall be true and correct in all material respects
as of the Closing as though made as of such time (except as otherwise expressly
contemplated by this Agreement). Seller shall have performed and complied in all
material respects with all covenants and agreements contained in this Agreement
required to be performed and complied with by it at or prior to Closing. Buyer
shall have received a certificate to the matters set forth in this
subparagraph-(a) signed on behalf of each Seller and each Shareholder by its
duly authorized officer.
(b) All required consents from third parties and governmental authorities
to permit the transfer of the Purchased Assets, the assumption of the Contracts
and the Lease, and the operation of the Business by Buyer shall have been
obtained.
(c) All documents required hereunder to have been delivered by Seller or
the Shareholders to Buyer, and all actions required hereunder to have been taken
by Seller or the Shareholders, at or prior to the Closing Date, shall have been
delivered or taken.
(d) Buyer shall have received an opinion from Seller's legal counsel
reasonably satisfactory to Buyer, dated as of the Closing Date and opining to
the matters listed on Exhibit C attached hereto.
(e) Buyer shall have received from Seller certificates executed by the
Secretary or an Assistant Secretary of Seller certifying and attaching copies of
the following: (i)-resolutions of the Board of Directors of Seller authorizing
the execution, delivery and performance of this Agreement and all instruments
and documents to be delivered in connection herewith and the transactions
contemplated hereby by Seller; (ii)-Articles of Incorporation of Seller recently
certified by the North Carolina Secretary of State and Bylaws of Seller;
(iii)-the incumbency and signatures of any of Seller's officers who will execute
or have executed documents in connection with this Agreement; (iv)-a Certificate
of Existence of Seller issued as of a recent date by the North Carolina
Secretary of State. Such certificate shall further certify that Seller's
Articles of Incorporation have not been amended since their certification by
such Secretary of State and that nothing has occurred since the date of issuance
of the Certificate of Existence that would adversely affect Seller's corporate
existence.
(f) Seller shall have delivered to Buyer all financial statements required
by Section 5.2 hereof.
(g) The amount of the debt to be paid by Buyer upon Closing as described on
Schedule 1.8 shall not exceed $9,000,000.
(h) The amount of Stockholders' Equity of Seller, as determined from the
most recent balance sheet of Seller provided under Section 5.2 as of Closing,
shall not be less than $5,500,000.
(i) Buyer shall have completed its due diligence review of Seller and the
Business (which Buyer agrees to complete by March 20, 1998), and the results of
such review shall have been satisfactory to Buyer in its discretion.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
VII.1. Survival of Representations. All representations, warranties and
agreements made by the parties to this Agreement or pursuant hereto shall
survive the Closing, but all claims made by virtue of such representations,
warranties and agreements shall be made under, and subject to the limitations
set forth in, this Article VII.
. VII.2. Seller's Agreement to Indemnify
(a) Subject to the conditions and provisions set forth herein, each of
Seller and the Shareholders will jointly and severally defend, indemnify and
hold harmless Buyer, its directors, officers, employees, agents, subsidiaries
and shareholders (collectively, the "Buyer Affiliates") against and in respect
of:
(i) Any and all loss, damage or deficiency resulting from any
misrepresentation, breach of warranty, or other violation of any of the
covenants, warranties or representations contained in this Agreement or any
documents executed herewith or the transactions contemplated hereby, or
nonfulfillment of any agreement, on the part of Seller under this Agreement or
any documents executed herewith or the transactions contemplated hereby, or from
any misrepresentation in or omission from any certificate or other instrument
furnished to Buyer in connection herewith;
(ii) Any and all liabilities or obligations of Buyer or obligations with
respect to or arising out of the ownership or operation of the Purchased Assets
or the Business on or prior to the Closing Date, whether accrued, unaccrued,
known, unknown, fixed, contingent, absolute or otherwise, and that are not
expressly assumed by Buyer hereunder, including the matters disclosed on
Schedule-3.5;
(iii) all claims (including without limitation claims for personal injury
Ior death, claims for property damages and all other private party claims and
claims by governmental authorities or entities of any type), damages, pending or
threatened actions, administrative proceedings (whether formal or informal
proceedings), investigation costs, monitoring costs, assessment costs, response
costs, remedial costs, removal costs, restoration costs, governmental
requirements, judgments, losses of or damages to natural resources, penalties,
liens, fines, settlements, punitive damages, interest and other losses, costs
and liabilities of any kind (including without limitation attorneys' fees and
court costs, and consultant and expert witness fees) arising in any manner out
of or by reason of (1)-breach of the warranties and representations in Section
3.24, (2)-any violation or alleged violation of any Environmental Law, as
interpreted and in effect on the Closing Date, by Seller or with respect to the
Realty (as defined in Section 3.24) that first occurs or commences prior to
Closing or results from Seller's acts or omissions prior to Closing, (3)-any
contamination or threatened or suspected contamination of the Realty (or any
part thereof including without limitation the soil and groundwater thereunder)
by Hazardous Materials that first occurs or commences prior to Closing or
results from Seller's acts or omissions prior to Closing, or (4) any presence,
generation, treatment, storage, disposal, transport release, suspected release
or threatened releasee of Hazardous Materials on or from the Realty (or any part
thereof including without limitation the soil and groundwater thereunder) that
first occurs or commences prior to Closing or results from Seller's acts or
omissions prior to Closing. Notwithstanding any of the foregoing, Seller and the
Shareholders shall be required to indemnify a Buyer Affiliate under this Section
7.2(a)(iii) (and to the extent related thereto, Section 7.2(a)(v)) only for
claims of which notice has been given to Seller or the Shareholders within 5
years after the Closing Date and only for damages under such claims that do not
exceed in the aggregate $2,500,000 less any amounts paid to a Buyer Affiliate
for or in connection with a breach of the representations and warranties
contained in Section 3.24. Further notwithstanding any of the foregoing, Seller
and the Shareholders shall not be required to indemnify a Buyer Affiliate under
this Section 7.2(a)(iii) (and to the extent related thereto, Section 7.2(a)(v)):
(A) for any costs incurred by a Buyer Affiliate in undertaking work to
remediate Hazardous Materials in, on, under or about any of the Realty, unless
(w) a governmental authority of any kind has issued an order or other directive
requiring that such remediation work be undertaken, (x) such work is necessary
to allow the full and safe use of the Realty for manufacturing and related
purposes, (y) a third party has asserted or threatened a claim against a Buyer
Affiliate that relates to or arises out of the presence of Hazardous Materials
or (z) Buyer reasonably believes that it is in imminent danger of incurring a
liability if such work in not performed; or
(B) for any claims if Seller has caused, prior to Closing, such
environmental testing to be conducted and reports to be prepared to satisfy
Buyer in its reasonable discretion that no further conditions or circumstances
exist that (a) could give rise to any claim or liability in connection with the
presence of Hazardous Materials or a violation or alleged violation of any
Environmental Law, or (b) could be required to be set forth on Schedule 3.24 as
if the representations and warranties in Section 3.24 were being made after the
completion of such tests and reports.
(iv) Any and all claims, losses, liabilities or expenses resulting from
noncompliance with any bulk sale laws resulting from the transactions
contemplated by this Agreement; and
(v) Any and all claims, costs, damages, liabilities, deficiencies, losses
or expenses suffered or incurred by any such party (whether as a result of third
party claims (whether valid or not), demands, suits, causes of action,
proceedings, investigations, judgments, assessments, liabilities or otherwise),
including costs of investigation and defense and attorneys' fees assessed,
incurred or sustained by or against any of them, arising out of or in connection
with any of the foregoing in respect of which indemnification rights exist.
(b) No indemnification shall be required to be made under this Section 7.2
for breaches of representations and warranties until the aggregate amount of
damages incurred by the Buyer Affiliates under this Section 7.2 for such
breaches exceeds $50,000, and if such damages arising from such breaches exceed
such amount then Seller and the Shareholders shall indemnify the Buyer
Affiliates for the full amount of such damages up to and in excess of the
initial $50,000. It is further agreed that the liability of Seller and the
Shareholders pursuant to this Section 7.2 for such breaches of representations
and warranties shall be limited to Claims (as defined below) asserted by the
Buyer Affiliates within two years after the Closing Date. Notwithstanding the
foregoing, this Section 7.2(b) and the limitations contained herein shall not
apply to Claims arising under or in connection with:
(i) Section 7.2(a)(iii) (or Section 7.2(a)(v) to the extent related to a
claim under Section 7.2(a)(iii));
(ii) Section 7.2(d) (relating to product-related claims);
(iii) Section 3.11 (relating to Taxes) or otherwise relating to taxes;
(iv)- Section 3.10 (relating to Employee Benefit Plans; ERISA);
(v)- Section 3.14 (relating to Title to Purchased Assets);
(vi)- Section 3.15 (relating to Tangible Purchased Assets);
(vii)- Section 3.16 (relating to Leased Property); and
(viii) Section 3.24 (relating to Environmental Matters);
provided, however, that with respect to:
(A) Claims covered by the foregoing clauses (iii) and (iv), the liability
of Seller and the Shareholders pursuant to this Section 7.2 shall be limited to
Claims of which a Buyer Affiliate has given notice to Seller or the Shareholders
within the applicable statute of limitation; and
(B) Claims covered by the foregoing clause (viii), the liability of Seller
and the Shareholders pursuant to this Section 7.2 (x) shall be limited to Claims
of which a Buyer Affiliate has given notice to Seller or the Shareholders within
5 years after the Closing Date and (y) shall not exceed in the aggregate
$2,500,000 less any amounts paid to a Buyer Affiliate under Section 7.2(a)(iii)
(and Section 7.2(a)(v) to the extent related to a claim under Section
7.2(a)(iii)).
(c) Claims.
(i) Except as otherwise provided in Section 7.2(d), within 30 days after
receiving written notice thereof, Buyer will give Seller and the Shareholders
notice of any claims, demands, assessments, suits, judgments, proceedings or
other actions (for purposes of this Section and Section-7.3, any "Claims")
asserted against (by third parties, governmental entities, or otherwise) or
incurred by any of the Buyer Affiliates with respect to which Buyer intends to
claim indemnification from Seller and the Shareholders pursuant to Section
7.2(a), and Seller and the Shareholders may undertake the response or defense
thereof by counsel of their own choosing, provided that such counsel shall be
reasonably acceptable to Buyer, but only if the following conditions are met:
(A)-Seller and the Shareholders provide written notice to Buyer that Seller
intends to undertake such defense and agree that (x)-any damages or liabilities
resulting from any Claims are or will be damages incurred by the Buyer
Affiliates and (y)-Seller and the Shareholders will be jointly and severally
liable for and indemnify the Buyer Affiliates against such damages and
liabilities in accordance with this Section 7.2, (B)-Seller and the Shareholders
provide Buyer with evidence acceptable to Buyer that Seller and the Shareholders
have the financial resources to defend against the Claim and fulfill their
indemnification obligations hereunder, (C)-the Claim involves only money damages
and does not seek an injunction or other equitable relief, (D)-settlement of, or
an adverse judgment with respect to, the Claim is not, in the good faith
judgment of Buyer, likely to establish a precedent adverse to the continuing
business interests of Buyer and (E)-Seller and the Shareholders conduct the
defense of the third-party claim actively and diligently. Any Buyer Affiliate
may, by counsel, participate in such proceedings, negotiations or defense at its
own expense (notwithstanding Section 7.2(a)(v)), but Seller and the Shareholders
shall retain control over such proceedings, negotiation or litigation except as
set forth in this Agreement. In all such cases, the Buyer Affiliates shall give
reasonable assistance to Seller and the Shareholders, including making their
employees available without charge as reasonably requested.
(ii) In the event that within 20 days after written notice of any such
Claim, Seller or the Shareholders fail to notify Buyer of their intention to
respond or defend, the Buyer Affiliates will have the right to undertake the
defense, compromise or settlement of such Claim for the accounts of Seller and
the Shareholders, subject to the right of Seller or the Shareholders, so long as
the conditions above in Section 7.2(c)(i) are met, to assume the defense,
compromise or settlement of such Claim at any time prior to final settlement,
compromise or determination thereof.
(d) Product-Related Claims. Any claims, demands, assessments, suits,
judgment proceedings or other actions relating to or brought in connection with
defective, substandard or nonconforming products, other than product-liability
claims involving injury to individuals or damage to property, ("Product-Related
Claims") shall not be subject to the provisions and limitations of
Section-7.2(b) or Section 7.2(c) but instead shall be subject to the provisions
of this Section 7.2(d). Any Buyer Affiliate may settle any Product-Related
Claims on terms as it may determine in its reasonable discretion ("Product
Settlements"), and upon request by such Buyer Affiliate, Seller agrees to make
prompt payment to that Buyer Affiliate in immediately available funds of an
amount equal to any Product Settlements. Notwithstanding the foregoing,
indemnification shall be required to be made under this Section 7.2(d) only for
(i) Product-Related Claims of which any Buyer Affiliate has given notice to
Seller or the Shareholders by or on the Contingent Payment Date (as defined in
Section 1.7) and (ii) damages under Product-Related Claims that are in excess of
$50,000 in the aggregate.
VII.3. Buyer's Agreement to Indemnify.
(a) Subject to the conditions and provisions set forth herein, Buyer will
defend, indemnify and hold harmless Seller, and its directors, officers,
employees and agents, and Ieach of the Shareholders (collectively, the "Seller
Affiliates") against and in respect of:
(i) Any and all loss, damage or deficiency resulting from any
misrepresentation, breach of warranty, or other violation of any of the
covenants, warranties or representations contained in this Agreement or any
documents executed herewith or the transactions contemplated hereby, or
nonfulfillment of any agreement or any documents executed herewith or the
transactions contemplated hereby, on the part of Buyer under this Agreement or
from any misrepresentation in or omission from any certificate furnished to
Seller or the Shareholders required in connection herewith.
(ii) Any and all liabilities and obligations assumed by Buyer as provided
herein as well as those liabilities and obligations of Buyer that arise after
the Closing with respect to the operation of the Business after that date; and
(iii) Any and all claims, costs, damages, liabilities, deficiencies, losses
or expenses suffered or incurred by any such party (whether as a result of third
party claims (whether valid or not), demands, suits, causes of action,
proceedings, investigations, judgments, assessments, liabilities or otherwise),
including costs of investigation and defense and attorneys' fees assessed,
incurred or sustained by or against any of them, with respect to or arising out
of any of the foregoing.
(b) No indemnification shall be required to be made under this Section 7.3
for breaches of representations and warranties until the aggregate amount of
damages incurred by the Seller Affiliates under this Section 7.3 for such
breaches exceeds $35,000, and if such damages arising from such breaches exceed
such amount then Buyer shall indemnify the Seller Affiliates for the full amount
of such damages up to and in excess of the initial $35,000. It is further agreed
that the liability of Buyer pursuant to this Section 7.3 for such breaches of
representations and warranties shall be limited to Claims (as defined below)
asserted by the Seller Affiliates within two years after the Closing Date.
(c) Claims.
(i) Within 30 days after receiving written notice thereof, Seller or the
Shareholders will give Buyer notice of any Claims asserted against (by third
parties, governmental entities, or otherwise) or incurred by the Seller
Affiliates with respect to which any Seller Affiliate intends to claim
indemnification from Buyer, and Buyer may undertake the response or defense
thereof by counsel of its own choosing, provided that such counsel shall be
reasonably acceptable to Seller and the Shareholders, but only if the following
conditions are met: (A)-Buyer provides written notice to Seller or the
Shareholders that Buyer intends to undertake such defense and agrees that
(x)-any damages or liabilities resulting from any Claims are or will be damages
incurred by the Seller Affiliates and (y)-Buyer will be liable for and indemnify
the Seller Affiliates against such damages and liabilities in accordance with
this Section 7.3, (b)-the Claim involves only money damages and does not seek an
injunction or other equitable relief, and (C)-Buyer conducts the defense of the
Claim actively and diligently. Any Seller Affiliate may, by counsel, participate
in such proceedings, negotiations or defense at its own expense (notwithstanding
Section 7.3(a)(iii)), but Buyer shall retain control over such proceedings,
negotiation or litigation except as set forth in this Agreement. In all such
cases, the Seller Affiliates shall give reasonable assistance to Buyer,
including making their employees available without charge as reasonably
requested.
(ii) In the event that within 20 days after written notice of any such
Claim, Buyer fails to notify Seller or the Shareholders of its intention to
respond or defend, the Seller Affiliates will have the right to undertake the
defense, compromise or settlement of such Claim for the account of Buyer,
subject to the right of Buyer, so long as the conditions above in Section
7.3(c)(i) are met, to assume the defense, compromise or settlement of such Claim
at any time prior to final settlement, compromise or determination thereof.
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ARTICLE VIII
TERMINATION
VIII.1.Termination. This Agreement may be terminated:
(a) at any time by mutual consent of Seller and Buyer;
(b) by either party, if Closing hereunder has not taken place on or before
May-4, 1998.
(c) by Seller if all the conditions in Section 6.1 and 6.2 have not been
satisfied or waived by the Closing Date; and
(d) by Buyer if all the conditions set forth in Section 6.1 and 6.3 have
not been satisfied or waived by the Closing Date.
VIII.2.Procedure and Effect of Termination or Failure to Close.
(a) In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby by any or all of the parties pursuant to
Section 8.1, prompt written notice thereof shall be given to the other parties
and this Agreement shall terminate and the transactions contemplated hereby
shall be abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(i) None of the parties hereto nor any of their partners, directors,
officers, members, managers, shareholders, employees, agents, or affiliates
shall have any liability or further obligation to the other party or any of its
partners, directors, officers, members, managers, shareholders, employees,
agents, or affiliates pursuant to this Agreement with respect to which
termination has occurred, except as stated in Article VII or in Section 8.2(b)
and in Sections 9.1 and 9.2 hereof; and
(ii) All filings, applications and other submissions relating to the
transfer of the Purchased Assets shall, to the extent practicable, be withdrawn
from the agency or other person to which made.
(b) Notwithstanding anything to the contrary contained in this Agreement,
including without limitation Article-VII, in the event of termination of this
Agreement, or if pursuant to the terms of this Agreement (i) Seller shall be
obligated to sell the Purchased Assets and Buyer shall be obligated to purchase
the Purchased Assets, (ii) Buyer or Seller, as the case may be, shall have duly
satisfied each of the conditions set forth in Article VI hereof to be satisfied
by it or them (or in the case of any condition that is to be satisfied at the
Closing, shall have demonstrated a willingness and ability to satisfy such
condition if the Closing were to take place), and the conditions set forth in
Section 6.1 have been satisfied, and (iii) Seller or Buyer, as the case may be,
shall nevertheless fail to sell or purchase the Purchased Assets, then and in
that event, Buyer and Seller, as the case may be, shall be entitled to seek any
remedy to which they may be entitled at law or in equity in the event of a
violation or breach of any agreement, representation or warranty contained in
this Agreement (which remedies shall include without limitation with respect to
both Buyer and Seller, an injunction or injunctions to prevent breaches of, or
to obtain specific performance of any obligation hereunder, without limiting any
monetary damages to which Buyer or Seller, as the case may be, shall be
entitled).
ARTICLE IX
MISCELLANEOUS PROVISIONS
IX.1. Commissions. Each of Seller and the Shareholders, on the one hand,
and Buyer, on the other hand, represent and warrant to the other that no broker,
finder or other person is entitled to any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated hereby by reason
of any action taken by the party making such representation. Each of Seller and
the Shareholders, on the one hand, and Buyer, on the other hand, will pay or
otherwise discharge, and will indemnify and hold the other harmless from and
against, any and all claims or liabilities for all brokerage fees, commissions
and finder's fees incurred by reason of any action taken by such party.
. Whether or not the transactions contemplated hereby are consummated,
except as otherwise provided herein, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby will be
paid by the party incurring such costs and expenses; provided, however, that
Buyer and Seller will each bear one-half of the filing fee incurred in complying
with the HSR Act and the rules and regulations promulgated thereunder by the
Federal Trade Commission. With regard to costs associated with transferring the
Purchased Assets to Buyer pursuant to this Agreement, Seller will pay any sales
or use taxes and transfer taxes or fees, and Buyer will pay any recording fees.
. Subject to the terms and conditions of this Agreement, each of the
parties hereto will use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. From time to time after the
Closing Date, without further consideration, Seller will, at its expense,
execute and deliver, or cause to be executed and delivered, such documents to
Buyer as Buyer may reasonably request in order to more effectively vest in Buyer
good title to the Purchased Assets. From time to time after the Closing Date,
without further consideration, Buyer will, at Buyer's expense, execute and
deliver such documents to Seller as Seller may reasonably request in order more
effectively to consummate the transactions contemplated by this Agreement.
. This Agreement may be amended, modified or supplemented only by written
agreement executed by all of the parties hereto.
. Except as otherwise provided in this Agreement, any failure of any of the
parties to comply with any obligation, representation, warranty, covenant,
agreement or condition herein may be waived by the party entitled to the
benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, representation, warranty, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
9.5.
. All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered by hand or by facsimile transmission or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice; provided that notices of a change
of address shall be effective only upon receipt thereof):
(a) If to Buyer, to:
Culp, Inc.
P.O. Box 2686
101 South Main Street
High Point, North Carolina 27261-2686
Attention: Franklin N. Saxon
Facsimile: (910) 887-7089
Copies to:
Robinson, Bradshaw-& Hinson, P.A.
1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246
Attention: Henry H. Ralston
Facsimile: (704) 378-4000
(b) If to Seller, to:
Artee Industries, Incorporated
P.O. Box 1509
Shelby, North Carolina 28151
Attention: Robert L. Davis
Facsimile: (704) 482-0735
Copies to:
Alala Mullen Holland & Cooper P.A.
P.O. Box 488
301 South York Street
Gastonia, North Carolina 28053
Attention: J. Mark Heavner
Facsimile: (704) 861-8394
(c) If to Shareholders, to:
Robert T. Davis
3721 Eaglebrook Drive
Gastonia, North Carolina 28056
. Except as otherwise expressly provided in this Agreement, any act or
decision by the Shareholders hereunder (including without limitation any
decision relating to termination, waiver of conditions and indemnification that
could be applicable) shall require the consent or approval of the Shareholders
who then hold a majority of voting shares of Seller (if prior to Closing) or who
held a majority of such voting shares (if at or subsequent to Closing), and any
act or decision approved or consented to by the Shareholders shall be binding
upon all of the Shareholders.
. The parties agree that Buyer may, at its election, satisfy and set-off
any payments due Buyer from Seller or the Shareholders under this Agreement or
in connection herewith against any payments due from Buyer to Seller or to the
Shareholders under this Agreement or in connection therewith.
. This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
. The execution, interpretation and performance of this Agreement shall be
governed by the internal laws and judicial decisions of the State of North
Carolina.
. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
. The article and section headings contained in this Agreement are solely
for the purpose of reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of this Agreement.
. This Agreement, including the Exhibits and Schedules hereto and the
documents delivered pursuant to this Agreement, embody the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof. The
Exhibits and Schedules hereto are an integral part of this Agreement and are
incorporated by reference herein. This Agreement supersedes all prior agreements
and understandings, whether written, oral, or otherwise, between the parties
with respect to the transactions contemplated by this Agreement.
[Signatures on Following Page]
2
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
signed by their respective duly authorized officers, and each Shareholder has
signed this Agreement, as of the date first above written.
SELLER:
ARTEE INDUSTRIES, INCORPORATED
By: __________________________________
Robert T. Davis, Chairman
SHAREHOLDERS:
_________________________________________
Robert T. Davis
__________________________________________
Robert L Davis, Trustee of Robert T. Davis
Irrevocable Trust under agreement dated
8/25/94
_________________________________________
Robert L. Davis
__________________________________________
Louis W. Davis
__________________________________________
Kelly D. England
__________________________________________
J. Marshall Bradley
_________________________________________
Frankie S. Bradley
__________________________________________
Micky R. Bradley
BUYER:
CULP, INC.
By:
Franklin N. Saxon, Senior Vice President