Exhibit 10.1
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ASSET PURCHASE AGREEMENT
by and among
NEW TEXTILE HOLDING CO.
NEW TEXTILE CO.
WESTPOINT STEVENS INC.,
AND
THE OTHER SELLERS NAMED HEREIN
Dated as of February 28, 2005
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TABLE OF CONTENTS
PAGE
Article I DEFINITIONS..........................................................................................2
1.1 Certain Definitions..................................................................................2
1.2 Terms Defined Elsewhere in this Agreement...........................................................10
1.3 Other Definitional and Interpretive Matters.........................................................11
Article II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES..............................................12
2.1 Purchase and Sale of Assets.........................................................................12
2.2 Excluded Assets.....................................................................................14
2.3 Assumption of Liabilities...........................................................................15
2.4 Excluded Liabilities................................................................................16
2.5 Cure Amounts........................................................................................16
2.6 Non-Assignment of Assets............................................................................16
2.7 Further Conveyances and Assumptions.................................................................17
Article III CONSIDERATION; ADJUSTMENT...........................................................................17
3.1 Consideration.......................................................................................17
3.2 Purchase Price Deposit..............................................................................18
3.3 Working Capital.....................................................................................18
3.3 Payment of Purchase Price...........................................................................19
Article IV CLOSING AND TERMINATION.............................................................................19
4.1 Closing Date........................................................................................19
4.2 Deliveries by Sellers...............................................................................19
4.3 Deliveries by Purchaser.............................................................................20
4.4 Termination of Agreement............................................................................20
4.5 Procedure Upon Termination..........................................................................21
4.6 Effect of Termination...............................................................................21
Article V REPRESENTATIONS AND WARRANTIES OF SELLERS...........................................................22
5.1 Organization and Good Standing......................................................................22
5.2 Authorization of Agreement..........................................................................22
5.3 Conflicts; Consents of Third Parties................................................................22
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.4 Reports; Financial Statements.......................................................................23
5.5 Letters of Credit...................................................................................24
5.6 Events Subsequent to September 30, 2004.............................................................24
5.7 Real Property.......................................................................................24
5.8 Necessary Property and Transfer of Assets...........................................................24
5.9 Title to Purchased Assets...........................................................................24
5.10 Taxes...............................................................................................24
5.11 Intellectual Property...............................................................................24
5.12 Contracts and Commitments...........................................................................25
5.13 Validity of Contracts...............................................................................25
5.14 Customers and Suppliers.............................................................................25
5.15 Affiliated Transactions.............................................................................25
5.16 Employee Benefits...................................................................................26
5.17 Litigation..........................................................................................26
5.18 Compliance with Laws; Permits.......................................................................27
5.19 Environmental Matters...............................................................................27
5.20 Financial Advisors..................................................................................27
5.21 Excluded Subsidiaries...............................................................................27
5.22 No Other Representations or Warranties; Schedules...................................................27
Article VI REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................................................28
6.1 Organization and Good Standing......................................................................28
6.2 Authorization of Agreement and Stock................................................................28
6.3 Conflicts; Consents of Third Parties................................................................28
6.4 Litigation..........................................................................................29
6.5 Financial Advisors..................................................................................29
6.6 Financial Capability................................................................................29
6.7 Ownership; Direction to Trustee.....................................................................29
6.8 Condition of the Business...........................................................................30
6.9 Capitalization......................................................................................30
Article VII BANKRUPTCY COURT MATTERS............................................................................30
7.1 Competing Transaction...............................................................................30
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TABLE OF CONTENTS
(CONTINUED)
PAGE
7.2 Break-Up Fee........................................................................................30
7.3 Bankruptcy Court Filings. ..........................................................................31
Article VIII COVENANTS...........................................................................................31
8.1 Access to Information...............................................................................31
8.2 Conduct of the Business Pending the Closing.........................................................31
8.3 Consents............................................................................................33
8.4 Regulatory Approvals................................................................................33
8.5 Further Assurances..................................................................................35
8.6 Equity Commitments and Rights Offering; Trustee Noncompliance.......................................35
8.7 Preservation of Records.............................................................................35
8.8 Publicity...........................................................................................35
8.9 Supplementation and Amendment of Schedules..........................................................36
8.10 Parent Guarantee....................................................................................36
8.11 Post-Closing Wind-Up................................................................................36
8.12 Letters of Credit...................................................................................36
8.13 Registration Rights.................................................................................36
Article IX EMPLOYEES AND EMPLOYEE BENEFITS.....................................................................37
9.1 Transferred Employees...............................................................................37
9.2 Employment Tax Reporting............................................................................37
9.3 Compensation and Benefits...........................................................................37
9.4 No Obligations......................................................................................37
Article X CONDITIONS TO CLOSING...............................................................................37
10.1 Conditions Precedent to Obligations of Parent and Purchaser.........................................37
10.2 Conditions Precedent to Obligations of Sellers......................................................38
10.3 Conditions Precedent to Obligations of Parent, Purchaser and Sellers................................39
10.4 Frustration of Closing Conditions...................................................................39
Article XI TAXES...............................................................................................39
11.1 Transfer Taxes......................................................................................39
11.2 Purchase Price Allocation...........................................................................39
11.3 Tax Reporting.......................................................................................40
11.4 Cooperation and Audits..............................................................................40
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Article XII MISCELLANEOUS.......................................................................................40
12.1 No Survival of Representations and Warranties.......................................................40
12.2 Expenses............................................................................................40
12.3 Injunctive Relief...................................................................................41
12.4 Submission to Jurisdiction; Consent to Service of Process...........................................41
12.5 Waiver of Right to Trial by Jury....................................................................41
12.6 Entire Agreement; Amendments and Waivers............................................................41
12.7 Governing Law.......................................................................................42
12.8 Notices.............................................................................................42
12.9 Severability........................................................................................43
12.10 Assignment..........................................................................................43
12.11 Non-Recourse........................................................................................43
12.12 Counterparts........................................................................................43
Schedules
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I. List of Subsidiaries
1.1(a) Assumed Employment Agreements
1.1(b) Working Capital Definitions
1.1(c) Excluded Subsidiaries
1.1(d) Knowledge of Sellers
2.2(g) Excluded Assets
5.3(a) Conflicts
5.3(b) Third Party Consents
5.4 Reports; Financial Statements
5.5 Letters of Credit
5.6 Events Subsequent to September 30, 2004
5.7 Real Property
5.9 Title to Purchased Assets
5.10(a) Taxes
5.11 Intellectual Property
5.12 Contracts and Commitments
5.13 Validity of Contracts
5.14 Customers and Suppliers
5.15 Affiliated Transactions
5.16(a) Employee Benefits - General
5.16(c) Employee Benefits - Exceptions
5.16(f) Employee Benefits - Effect of Transaction
5.17 Litigation
5.18 Compliance with Laws; Permits
iv
5.19 Environmental Matters
5.20 Financial Advisors
8.2(a) Conduct of Business
8.2(b) Conduct of Business
Exhibits
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A Bidding Procedures Order
B Escrow Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of February 28, 2005 (this
"Agreement"), by and among New Textile Holding Co., a Delaware corporation
("Parent"), New Textile Co., a Delaware corporation and wholly-owned subsidiary
of Parent ("Purchaser"), WestPoint Stevens Inc., a Delaware corporation (the
"Company"), and each of the Company's subsidiaries listed on Schedule I attached
hereto (individually a "Subsidiary" and, together with the Company, each a
"Seller" and, collectively, the "Sellers").
W I T N E S S E T H:
WHEREAS, Sellers are debtors and debtors in possession under title 11
of the United States Code, 11 U.S.C. ss.ss. 101, et seq. (the "Bankruptcy
Code"), and filed voluntary petitions for relief under chapter 11 of the
Bankruptcy Code on June 1, 2003 (the "Petition Date") in the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court")
(Case No. 03-13532) (the "Bankruptcy Case");
WHEREAS, certain terms used in this Agreement are defined in Section
1.1;
WHEREAS, Sellers are engaged in the business of manufacturing,
marketing and distributing bed and bath home fashions products (the "Business");
WHEREAS, subject to the terms and conditions set forth herein,
Sellers are agreeing to sell the Purchased Assets in accordance with sections
363 and 365 of the Bankruptcy Code;
WHEREAS, the holders of a majority of the First Lien Indebtedness
have entered into the Funding Commitment, pursuant to which, among other things,
they have agreed to provide the First Lien Direction to the Trustee;
WHEREAS, the Trustee, in consideration of the Purchased Assets and in
satisfaction of its lien thereon, as holder of a first priority lien securing
Sellers' obligations under the First Lien Lender Agreement, will be instructed
in the First Lien Direction to credit bid up to 100% of the First Lien
Indebtedness pursuant to the First Lien Direction and the terms and conditions
contained herein;
WHEREAS, pursuant to the First Lien Direction, the Trustee will be
instructed to assign to Purchaser at the Closing its right to receive the
Purchased Assets (subject to the Assumed Liabilities), and Purchaser will accept
such assignment from the Trustee and acquire the Purchased Assets (subject to
the Assumed Liabilities), in exchange for which Purchaser will pay the Trustee
the consideration herein and therein provided;
WHEREAS, immediately upon such assignment from the Trustee, Purchaser
will purchase the Purchased Assets and assume the Assumed Liabilities, all on
the terms and conditions set forth herein; and
WHEREAS, in the event that the Trustee does not credit bid the First
Lien Indebtedness pursuant to the First Lien Direction, Purchaser will pay to
Sellers shares of Parent Common Stock and Purchaser Preferred Stock and rights
to acquire additional shares of Parent Common Stock and Purchaser Preferred
Stock in consideration of the Purchased Assets (subject to the Assumed
Liabilities), all as more specifically provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, and intending to be bound
hereby, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions.
For purposes of this Agreement, the following terms shall have the
meanings specified in this Section 1.1 or in other Sections of this Agreement,
as identified in the chart in Section 1.2:
"Accounts Receivable" means, with respect to a Seller, all accounts
receivable and rights to payment from customers of such Seller and the full
benefit of all security for such accounts or debts, consisting of all accounts
receivable in respect of goods shipped or products sold or services rendered to
customers, and any other miscellaneous accounts receivable, in each case as such
rights would be reflected in a consolidated balance sheet of Seller as of the
relevant date prepared in accordance with GAAP, including being reduced by
adequate reserves under GAAP for purposes of calculating WC Assets.
"Adequate Protection Escrow" means any amounts held in escrow on
account of the Adequate Protection Order that may be payable either to the First
Lien Lenders or the Second Lien Lenders pursuant to the terms thereof.
"Adequate Protection Order" means that certain Final Order Pursuant
to Sections 361, 363 and 364(d)(1) of the Bankruptcy Code and Rule 4001 of the
Federal Rules of Bankruptcy Procedure Providing the Pre-Petition Secured Lenders
Adequate Protection, dated as of June 18, 2003, and includes the Stipulation and
Order (i) Providing for Deposit into Escrow of Second Lien Adequate Protection
Payments, (ii) Withdrawal of Adequate Protection Motion, and (iii) Reservation
of Rights and Remedies dated as of August 18, 2004 and approved by the
Bankruptcy Court on August 23, 2004.
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, and the term
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
"Assumed Employment Agreements" means any employment agreements
listed on Schedule 1.1(a).
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"Bidding Procedures Order" means an order of the Bankruptcy Court,
substantially in the form attached hereto as Exhibit A.
"Business Day" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and are
not required or authorized to close.
"Closing WC" and "Closing WC Threshold Amount" have the meanings
specified in Schedule 1.1(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Trust Agreement" means that certain Second Amended and
Restated Collateral Trust Agreement, dated as of June 9, 1998, as amended, by
and among the Company, its subsidiaries parties thereto, the Trustee, IBJ
Schroder Bank & Trust Company, and each of the banks parties thereto.
"Contract" means any contract, indenture, note, bond, lease or other
agreement.
"Credit Bid" means the credit bid provided for in the First Lien
Direction.
"DIP Credit Agreement" means that certain debtor in possession
financing agreement, dated as of June 5, 2003, as amended, among Sellers, Bank
of America, N.A. as Administrative Agent, Wachovia Bank, National Association as
Syndication Agent and the other lenders parties thereto.
"Documents" means all files, documents, instruments, papers, books,
reports, records, tapes, microfilms, photographs, letters, budgets, forecasts,
ledgers, journals, title policies, customer lists, regulatory filings, operating
data and plans, technical documentation (design specifications, functional
requirements, operating instructions, logic manuals, flow charts, etc.), user
documentation (installation guides, user manuals, training materials, release
notes, working papers, etc.), marketing documentation (sales brochures, flyers,
pamphlets, web pages, etc.), and other similar materials related directly to the
Business and the Purchased Assets in each case whether or not in electronic
form.
"Employees" means all individuals, as of the date hereof, whether or
not actively at work as of the date hereof, who are employed by Sellers in
connection with the Business, together with individuals who are hired in respect
of the Business after the date hereof and prior to the Closing.
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance or rule of common law in effect at the relevant
date or for the relevant period in the ordinary course thereof and not in breach
of this Agreement relating to the protection of human health and safety or the
environment or natural resources including the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss.ss. 9601, et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. ss.ss. 1801, et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. ss.ss. 6901, et seq.), the
Clean Water Act (33 U.S.C. ss.ss. 1251, et seq.), the Clean Air Act (42 U.S.C.
ss.ss. 7401, et seq.) the Toxic Substances Control Act (15 U.S.C. ss.ss. 2601,
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
3
ss.ss. 136, et seq.), and the Occupational Safety and Health Act (29 U.S.C.
ss.ss. 651, et seq.), and the regulations promulgated pursuant thereto.
"Environmental Liability" means the Liabilities resulting from under
any Environmental Law, including any failure to comply therewith, or to obtain
or comply with any required Environmental Permit.
"Environmental Permit" shall mean a permit, license, certificate,
approval or authorization issued by a Governmental Body pursuant to an
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Matter" means the effect of: (i) any change in the United
States or foreign economies or financial markets in general; (ii) any change
that generally affects the businesses in which Sellers generally compete; (iii)
any change arising in connection with earthquakes, hostilities, acts of war,
sabotage or terrorism or military actions or any escalation or material
worsening of any such hostilities, acts of war, sabotage or terrorism or
military actions existing or underway as of the date hereof; (iv) any change in
applicable Laws or accounting rules; (v) any actions taken or proposed to be
taken by Purchaser or any of its Affiliates; (vi) any effect resulting from the
public announcement of this Agreement, compliance with terms of this Agreement
or the consummation of the transactions contemplated by this Agreement; (vii)
any effect resulting from the filing of the Bankruptcy Case and reasonably
anticipated effects thereof; (viii) any matter disclosed on the Schedules, in
the Company SEC Documents or in any filings by the Sellers with the Bankruptcy
Court, or (ix) any matter approved by the Bankruptcy Court.
"Excluded Subsidiaries" means the subsidiaries of the Company listed
on Schedule 1.1(c).
"First Lien Direction" means a written direction by the Required
Banks (as that term is defined in the Collateral Trust Agreement) to the Trustee
to, among other things, (i) credit bid up to 100% of the First Lien Indebtedness
toward the purchase of the Purchased Assets (subject to the Assumed Liabilities)
on the terms and subject to the conditions contained herein, (ii) accept the
Purchased Assets (subject to the Assumed Liabilities) on the terms and subject
to the conditions contained herein in exchange for the First Lien Indebtedness,
and (iii) assign its right to receive the Purchased Assets (subject to the
Assumed Liabilities) on the terms and subject to the conditions contained herein
to Purchaser in exchange for the issuance of the Purchaser Equity Consideration,
all as described in the Funding Commitment. The First Lien Direction will
instruct the Trustee to credit bid 100% of the First Lien Indebtedness less the
amount contained in the Adequate Protection Escrow at the time of credit
bidding, provided that the First Lien Direction will also instruct the Trustee,
if directed by Purchaser, to increase such credit bid as necessary to top
competing bids in accordance with the Bidding Procedures Order.
"First Lien Indebtedness" means the Indebtedness outstanding under
the First Lien Lender Agreement, including therein all pre- and post-petition
interest due and owing thereunder and all unpaid fees and expenses.
"First Lien Lender Agreement" means that certain Second Amended and
Restated Credit Agreement dated as of June 9, 1998 among the Company as
Borrower, WestPoint Stevens (U.K.) Limited and WestPoint Stevens (Europe)
4
Limited, as Foreign Borrowers, Bank of America, N.A., as Issuing Lender,
Swingline Lender and Administrative Agent and the banks and other financial
institutions at any time parties thereto, as subsequently amended.
"First Lien Lenders" means the financial institutions from time to
time party to the First Lien Lender Agreement, together with their successors
and assigns permitted by the First Lien Lender Agreement.
"Funding Commitment" means the commitment letter agreement, dated the
date hereof, among WLR, the Majority Holders, Parent and Purchaser pursuant to
which, on the terms and subject to the conditions thereof: (i) the Majority
Holders have committed to purchase in the aggregate approximately 25.5% of
Parent Common Stock and approximately 25.5% of the Purchaser Preferred Stock on
a fully-diluted basis; and (ii) WLR and the Majority Holders have committed to
purchase all the shares of Parent Common Stock and Purchaser Preferred Stock
that are not purchased by the Holders in the Rights Offering.
"Furniture and Equipment" means all furniture, fixtures, furnishings,
equipment, vehicles, leasehold improvements and other tangible personal property
owned or used by Sellers in the conduct of the Business, including all such
artwork, desks, chairs, tables, Hardware, copiers, telephone lines and numbers,
telecopy machines and other telecommunication equipment, cubicles and
miscellaneous office furnishings and supplies.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied throughout the specified period and the immediately
prior comparable period.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether foreign,
federal, state, or local, or any agency, instrumentality or authority thereof,
or any court or arbitrator (public or private).
"Hardware" means any and all computer and computer-related hardware,
including, but not limited to, computers, file servers, facsimile servers,
scanners, color printers, laser printers and networks.
"Hazardous Material" means any substance, material or waste which is
regulated by any Government Body including, without limitation, petroleum and
its by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of Environmental Law.
"Holders" means the Persons to which the Rights Offering is made.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Income Taxes" means Taxes payable in respect of or measured by a
Seller's net income (whether determined or assessed individually or on a
consolidated basis).
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"Indebtedness" of any Person means, without duplication, (i) the
principal of and premium (if any) in respect of (A) indebtedness of such Person
for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities arising
in the Ordinary Course of Business); (iii) all obligations of such Person under
leases required to be capitalized in accordance with GAAP; (iv) all obligations
of such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (v) all obligations of the
type referred to in clauses (i) through (iv) of any Persons for the payment of
which such Person is responsible or liable, directly or indirectly, as obligor,
guarantor, surety or otherwise, including guarantees of such obligations; and
(vi) all obligations of the type referred to in clauses (i) through (v) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person).
"IRS" means the Internal Revenue Service.
"KERP Program" means the key employee retention and severance program
(including the severance program and the existing separation plan for salaried
employees) as set forth in the Motion of Debtors for Order Pursuant to 11 U.S.C.
ss.ss. 105(a) and 363(b)(1) Authorizing the Establishment of a Key Employee
Retention Plan and the Motion of Debtors pursuant to 11 U.S.C. ss.ss. 105(a) and
363(b)(1) Approving the Extension of the Debtors' Key Employee Retention Plan,
as modified, both of which were approved by separate order of the Bankruptcy
Court on October 23, 2003 and August 12, 2004, respectively.
"Knowledge of Sellers" means the actual knowledge of those officers
of Sellers identified on Schedule 1.1(d).
"Law" means any federal, state, local or foreign law, statute, code,
ordinance, rule or regulation or common law requirement.
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private) or claims or any proceedings by
or before a Governmental Body.
"Liability" means any debt, liability or obligation (whether direct
or indirect, known or unknown, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, or due or to become due), and including all costs
and expenses relating thereto.
"License Agreements" mean the Agreements marked with double asterisks
on Schedule 5.12.
"Lien" as applied to any Person means any lien, encumbrance, pledge,
mortgage, deed of trust, security interest, claim, lease, charge, option, right
of first refusal, easement, servitude, proxy, voting trust or agreement,
transfer restriction under any shareholder or similar agreement or encumbrance
or any other right of a third party in respect of an asset of such Person.
"Majority Holders" means the First Lien Lenders party to the Funding
Commitment.
6
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, which (a) is maintained for employees of a Seller
and at least one Person other than a Seller or (b) was so maintained and in
respect of which a Seller could have liability under Section 4064 or 4069 of
ERISA in the event such plan has been or were to be terminated.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award of a Governmental Body.
"Ordinary Course of Business" means the ordinary and usual course of
normal day-to-day operations of the Business through the date hereof consistent
with past practice.
"Parent Common Stock" means the common stock of Parent.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates of a Governmental Body.
"Permitted Exceptions" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of
title insurance which have been made available to Purchaser; (ii) statutory
liens for current Taxes, assessments or other governmental charges not yet
delinquent or the amount or validity of which is being contested in good faith
by appropriate proceedings provided an appropriate reserve is established
therefor; (iii) mechanics', carriers', workers', repairers' and similar Liens
arising or incurred in the Ordinary Course of Business; (iv) zoning, entitlement
and other land use and environmental regulations by any Governmental Body
provided that such regulations have not been violated; (v) liens securing
indebtedness for borrowed money as disclosed in the Financial Statements filed
with the SEC prior to the date hereof; (vi) title of a lessor under a capital or
operating lease; (vii) any other imperfections in title, charges, easements,
restrictions and encumbrances that do not materially affect the value or use of
the affected asset; and (viii) liens for Taxes that constitute Assumed
Liabilities.
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
"Priority Claims" means Liabilities that constitute priority expenses
or claims under section 507(a) of the Bankruptcy Code and which are required to
be paid in cash or cash equivalents at Closing in order for a subsequent plan to
be confirmed pursuant to section 1129(a)(9)(A) of Bankruptcy Code.
Notwithstanding the foregoing, Priority Claims shall specifically exclude: (a)
any claims for breach of contract, tort or other actionable conduct; (b) any
obligations incurred under executory Contracts (including unexpired leases)
which have been rejected in the Bankruptcy Case; (c) all intercompany
obligations, including all intercompany Accounts Receivable, notes receivable
and other intercompany items, owing or payable to any debtor or its estate; and
(d) any claims arising under, pursuant to or relating in any way to any draw
under or against or any call upon letters of credit, surety bonds, performance
bonds or similar bonds posted by Sellers or their Affiliates, or renewals
thereof, or any other similar nonexecutory document entered into by Sellers or
their Affiliates, or renewals thereof.
"Products" means any and all products developed, manufactured,
marketed or sold by Sellers.
7
"Purchased Contracts" means all Contracts of Sellers that are
unexpired as of the Closing Date and have not been rejected (or the subject of a
pending rejection motion) by Sellers or excluded by Purchaser as of the Closing
Date pursuant to Section 2.1(c).
"Purchased Intellectual Property" means all intellectual property
rights used by Sellers in connection with the Business and arising from or in
respect of the following: (i) all patents and applications therefor, including
continuations, divisionals, continuations-in-part, or reissues of patent
applications and patents issuing thereon, (ii) all trademarks, service marks,
trade names, service names, brand names, all trade dress rights, logos, Internet
domain names and corporate names and general intangibles of a like nature,
together with the goodwill associated with any of the foregoing, and all
applications, registrations and renewals thereof, (iii) copyrights and
registrations and applications therefor and works of authorship, and mask work
rights, in each case used primarily in connection with the Business, and (iv)
all Software of Sellers used in connection with the Business.
"Purchaser Equity Consideration" means the Rights and the First-Lien
Holder Units (as defined in the Funding Commitment) contemplated by the Funding
Commitment to be issued to the Trustee, for further distribution to the Holders,
or to Sellers pursuant to Section 8.6(b), as the case may be.
"Purchaser Material Adverse Effect" means a material adverse effect
on the ability of Parent or Purchaser to consummate the transactions
contemplated by this Agreement or perform its respective obligations under this
Agreement.
"Purchaser Preferred Stock" means the Series A Preferred Stock of
Purchaser, which will be non-voting, will have an aggregate liquidation
preference of at least $30,000,000, will pay cumulative dividends at a rate
specified by Purchaser prior to Closing (which in no event will be less than 1%
of liquidation preference), will not be redeemable prior to the fifth year after
the date of issuance and will be convertible into common stock of Purchaser in
the event Purchaser consummates an initial public offering.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, or leaching into the indoor
or outdoor environment, or into or out of any property.
"Remedial Action" means all actions to (i) clean up, remove, treat or
in any other way address any Hazardous Material; (ii) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; (iii) perform pre-remedial
studies and investigations or post-remedial monitoring and care; or (iv) to
correct a condition of noncompliance with Environmental Laws.
"Rights" means the right to subscribe in the Rights Offering.
"Rights Offering" means the offering of shares of Parent Common Stock
and Purchaser Preferred Stock on the terms set forth in the Funding Commitment.
"Sale Order" shall be a final, non-appealable order (or orders) of
the Bankruptcy Court which is not subject to a stay pending appeal, in form and
substance reasonably acceptable to Purchaser and Sellers approving this
8
Agreement and all of the terms and conditions hereof, and approving and
authorizing Sellers to consummate the transactions contemplated hereby. Without
limiting the generality of the foregoing, such order shall find and provide,
among other things, that (i) the Purchased Assets sold to Purchaser pursuant to
this Agreement shall be transferred to Purchaser free and clear of all Liens
(other than Liens created by Purchaser and other than Permitted Exceptions) and
claims, such Liens and claims to attach to the Purchase Price; (ii) the Trustee
and Purchaser have acted in "good faith" within the meaning of section 363(m) of
the Bankruptcy Code; (iii) this Agreement was negotiated, proposed and entered
into by the parties without collusion, in good faith and from arm's length
bargaining positions; (iv) the Bankruptcy Court shall retain jurisdiction to
resolve any controversy or claim arising out of or relating to this Agreement,
or the breach hereof as provided in Section 12.4 hereof; and (v) this Agreement
and the transactions contemplated hereby may be specifically enforced against
and binding upon, and not subject to rejection or avoidance by, Sellers or any
chapter 7 or chapter 11 trustee of Sellers.
"Second Lien Lender Agreement" means that certain $165 million
Second-Lien Credit Facility, dated as of June 29, 2001, among the Company, as
Borrower, the banks and other financial institutions from time to time parties
thereto, and Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company),
as Administrative Agent, as subsequently amended.
"Second Lien Lenders" means the financial institutions from time to
time party to the Second Lien Lender Agreement, together with their successors
and assigns permitted by the Second Lien Lender Agreement.
"Seller Material Adverse Effect" means any event or occurrence
(regardless of whether such event or occurrence constitutes a breach of any
representation, warranty or covenant of Sellers hereunder) which has had or
would reasonably be expected to have, individually or when considered together
with any other events or occurrences, (i) a material adverse effect on or a
material adverse change in or to the business, assets, properties, results of
operations or financial condition of Sellers (taken as a whole), or (ii) a
material adverse effect on or a material adverse change in or to the ability of
Sellers to consummate the transactions contemplated by this Agreement or perform
their obligations under this Agreement, other than an effect or change resulting
from an Excluded Matter.
"September Balance Sheet" means the unaudited condensed consolidated
balance sheet of the Company and its subsidiaries included in the Company's Form
10-Q for the quarter ended September 30, 2004 filed with the SEC by the Company.
"Software" means, except to the extent generally available for
purchase from a third Person, any and all (i) computer programs, including any
and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (iii) descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, (iv) screens, user
interfaces, report formats, firmware, development tools, templates, menus,
buttons and icons, and (v) all documentation including user manuals and other
training documentation related to any of the foregoing.
9
"Tax Authority" means any government, or agency, instrumentality or
employee thereof, charged with the administration of any law or regulation
relating to Taxes.
"Taxes" means (i) all federal, state, local or foreign taxes, charges
or other assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, (ii) any item described in clause (i) for which a taxpayer
is liable as a transferee or successor, by reason of the regulations under
Section 1502 of the Code, or by contract, indemnity or otherwise, and (iii) all
interest, penalties, fines, additions to tax or additional amounts imposed by
any Tax Authority in connection with any item described in clause (i) or (ii).
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes
(including any attachments thereto or amendments thereof).
"Trustee" means Bank of America, N.A. (as successor to NationsBank,
N.A.) or any successor thereto, as Trustee under the Collateral Trust Agreement.
"WC Assets" has the meaning set forth on Schedule 1.1(b).
"WC Liabilities" has the meaning set forth on Schedule 1.1(b).
"WLR" means WL Ross & Co. LLC.
---
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
---- -------
Allocation Statement 11.2
Antitrust Division 8.4(a)
Antitrust Laws 8.4(b)
Assumed Liabilities 2.3
Auction Date 7.1
Avoidance Actions 2.2(c)
Bankruptcy Case Recitals
Bankruptcy Code Recitals
Bankruptcy Court Recitals
Break-Up Fee 7.2
Business Recitals
Closing 4.1
Closing Cash Liabilities 3.4(a)
Closing Date 4.1
Company Recitals
Company SEC Documents 5.4
Competing Transaction 7.1
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Term Section
---- -------
Deposit Amount 3.2
Employee Benefit Plans 5.16(a)
Escrow Agent 3.2
Escrow Agreement 3.2
Exchange Act 5.4
Excluded Assets 2.2
Excluded Liabilities 2.4
Financial Statements 5.4(a)
FTC 8.4(a)
Parent Recitals
Petition Date Recitals
Purchased Assets 2.1(b)
Purchase Price 3.1
Purchaser Recitals
Referee 11.3(a)
SEC 5.4(a)
Securities Act 5.4(a)
Seller or Sellers Recitals
Subsidiaries Recitals
Termination Date 4.4(a)
Title IV Plans 5.16(a)
Transfer Taxes 11.1
WC Resolution Period 3.3(b)
Wind-Up 8.11
1.3 Other Definitional and Interpretive Matters.
(a) Unless otherwise expressly provided, for purposes of
this Agreement, the following rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of time
before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Dollars. Any reference in this Agreement to $ shall mean U.S.
dollars.
Exhibits/Schedules. All Exhibits and Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Schedule or
Exhibit but not otherwise defined therein shall be defined as set forth in this
Agreement.
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.
11
Headings. The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
(b) The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as jointly drafted by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets.
(a) On the terms and subject to the conditions set forth in
this Agreement, at the Closing, immediately upon the consummation of the
transactions provided in Section 3.4(b) Purchaser shall purchase, acquire and
accept from Sellers, and Sellers shall sell, transfer, convey and deliver to
Purchaser all of Sellers' right, title and interest in, to and under the
Purchased Assets, free and clear of all Liens other than those created by
Purchaser and other than Permitted Exceptions.
(b) For all purposes of and under this Agreement, the term
"Purchased Assets" shall mean all of the properties, assets and rights of
Sellers (other than the Excluded Assets) existing as of the Closing, real or
personal, tangible or intangible and whether or not related to the Business,
including:
(i) all cash, cash equivalents, bank deposits or similar
cash items and Accounts Receivable of Sellers;
(ii) all inventory;
(iii) all deposits (including customer deposits and
security deposits for rent, electricity, telephone or otherwise) and
prepaid charges and expenses of Sellers other than any deposits or
prepaid charges and expenses paid in connection with or relating to
any Excluded Assets;
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(iv) all rights of Sellers with respect to its owned real
property and under real property leases, together in each case with
all improvements, fixtures and other appurtenances thereto and rights
in respect thereof;
(v) the Furniture and Equipment;
(vi) the Purchased Intellectual Property;
(vii) the Purchased Contracts;
(viii) all Documents that are used in, held for use in or
intended to be used in, or that arise primarily out of, the Business,
including Documents relating to Products, services, marketing,
advertising, promotional materials, Purchased Intellectual Property,
personnel files for Transferred Employees and all files, customer
files and documents (including credit information), supplier lists,
records, literature and correspondence, whether or not physically
located on any of the premises referred to in clause (iv) above, but
excluding any Documents exclusively related to an Excluded Asset;
(ix) all Permits used by Sellers in the Business to the
extent assignable;
(x) all supplies owned by Sellers and used in connection
with the Business;
(xi) all rights of Sellers under non-disclosure or
confidentiality, non-compete, or non-solicitation agreements with
Employees and agents of Sellers or with third parties to the extent
relating to the Business or the Purchased Assets (or any portion
thereof);
(xii) all insurance policies or rights to proceeds thereof
relating to the assets, properties, business or operations of
Sellers;
(xiii) any rights, claims or causes of action of Sellers
(other than Avoidance Actions) against third parties relating to
assets, properties, business or operations of Sellers arising out of
events occurring on or prior to the Closing Date;
(xiv) all rights of Sellers under or pursuant to all
warranties, representations and guarantees made by suppliers,
manufacturers and contractors to the extent relating to Products
sold, or services provided, to Sellers or to the extent affecting any
Purchased Assets other than any warranties, representations and
guarantees pertaining to any Excluded Assets;
(xv) all goodwill and other intangible assets associated
with the Business, including customer and supplier lists and the
goodwill associated with the Purchased Intellectual Property; and
(xvi) all other tangible or intangible assets other than
Excluded Assets.
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(c) At any time prior to and including three Business Days
prior to the date of the auction provided for in the Bidding Procedures Order
(the "Auction Date"), Purchaser may designate any of the Purchased Assets (other
than the Assumed Employment Agreements) as additional Excluded Assets by giving
written notice to Purchaser setting forth in reasonable detail the Purchased
Assets so designated. Purchaser acknowledges and agrees that there shall be no
reduction in the Purchase Price if it elects to designate any Purchased Assets
as Excluded Assets. If Purchaser excludes the License Agreements, Purchaser will
be deemed to have assumed and will pay when due all Wind-Up costs and expenses
incurred by Sellers as a result of such exclusion. Notwithstanding any other
provision hereof, except as provided in the preceding sentence, the Liabilities
of Sellers under or related to any Purchased Asset excluded under this Section
2.1(c) will constitute Excluded Liabilities.
2.2 Excluded Assets. Nothing herein contained shall be deemed to
sell, transfer, assign or convey the Excluded Assets to Purchaser, and Sellers
shall retain all right, title and interest to, in and under the Excluded Assets.
For all purposes of and under this Agreement, the term "Excluded Assets" shall
mean:
(a) any shares of capital stock or other equity interest of
any Seller or any Excluded Subsidiary or any securities convertible into,
exchangeable or exercisable for shares of capital stock or other equity interest
of any Seller or any Excluded Subsidiary;
(b) any minute books, stock ledgers, corporate seals and
stock certificates of Sellers, and other similar books and records that Sellers
are required by Law to retain or that Sellers determine are necessary or
advisable to retain including Tax Returns, financial statements and corporate or
other entity filings; provided, however, that Purchaser shall have the right to
make copies of any portions of such retained books and records that relate to
the Business or any of the Purchased Assets and Sellers agree to preserve such
records in accordance with Section 8.7 hereof;
(c) all avoidance actions or similar causes of action
arising under sections 544 through 553 of the Bankruptcy Code, including any
proceeds thereof (collectively, the "Avoidance Actions");
(d) the Adequate Protection Escrow;
(e) any assets of Sellers designated by Purchaser as
Excluded Assets pursuant to Section 2.1(c) hereof;
(f) all Title IV Plans, and all trust funds and contracts
relating thereto;
(g) the assets of Sellers, if any, set forth on Schedule
2.2(g);
(h) subject to Section 2.6, any Purchased Contract or
Permit that requires the consent of a third party to be assumed and assigned
hereunder as to which, by the Closing Date, such consent has not been obtained;
and
(i) refunds, credits and rebates of Taxes that are not
Assumed Liabilities.
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2.3 Assumption of Liabilities. On the terms and subject to the
conditions and limitations set forth in this Agreement, at the Closing,
immediately upon the consummation of the transactions provided in Section
3.4(b), Purchaser shall assume, effective as of the Closing, and shall timely
perform and discharge in accordance with their respective terms, the following
Liabilities (without duplication) existing as of immediately prior to the
Closing (collectively, the "Assumed Liabilities") and no others:
(a) all Liabilities of Sellers under the Purchased
Contracts that arise on or after the Closing Date or arise prior to the Closing
Date to the extent requiring performance after the Closing Date;
(b) any cure amounts that Purchaser is required to pay
pursuant to Section 2.5;
(c) all Liabilities arising from the sale of Products in
the Ordinary Course of Business pursuant to product warranties, products
returns, customer programs and rebates, including Liabilities arising in the
Ordinary Course of Business that would have been recorded as "Customer
Accommodations" in the line item "Accrued Liabilities" in a consolidated balance
sheet of the Business prepared in accordance with GAAP and using the same
accounting principles, policies and practices used in the preparation of the
September Balance Sheet;
(d) all Liabilities arising in the Ordinary Course of
Business on or after the Petition Date and existing as of immediately prior to
the Closing that do not constitute Excluded Liabilities and would be included in
the line item for "Accounts Payable" in a consolidated balance sheet of the
Business as of immediately prior to the Closing prepared in accordance with GAAP
and using the same accounting policies, principles and practices as were used in
preparing the September Balance Sheet;
(e) all Liabilities of Sellers for pre-petition sales and
use, gross receipts, payroll and similar Taxes which, if not paid by a Seller,
would constitute a Liability for any current director, officer or employee of a
Seller;
(f) all Transfer Taxes;
(g) all Liabilities of Sellers arising under the
Consolidated Omnibus Budget Reconciliation Act (COBRA) in respect of employees
of a Seller terminated post-petition;
(h) any payments for accrued but unused vacation of any
Employees;
(i) any Assumed Employment Agreements;
(j) all Priority Claims arising from the Wind-Up;
(k) all professional fees that constitute Priority Claims;
(l) all Liabilities pursuant to the KERP Program;
15
(m) all Liabilities for pre-petition property Taxes to the
extent allowed in the Bankruptcy Case with priority over the lien of the First
Lien Lenders or the Second Lien Lenders; and
(n) subject to Section 2.4, to the extent not included in
the foregoing Sections 2.3(a) through (m), all Priority Claims.
2.4 Excluded Liabilities. Purchaser shall not assume and shall be
deemed not to have assumed, and Sellers shall be solely and exclusively liable
with respect to, any Liabilities of Sellers other than the Assumed Liabilities
(collectively, the "Excluded Liabilities"). For the avoidance of doubt, the
Excluded Liabilities include the following:
(a) Liabilities existing prior to the Petition Date that
are subject to compromise in the Bankruptcy Case, other than any Liabilities
assumed by Purchaser pursuant to Section 2.3;
(b) all obligations of Sellers under the DIP Credit
Agreement;
(c) all Liabilities of Sellers under the Title IV Plans, or
under Title IV of ERISA;
(d) all Liabilities relating to or arising out of the
ownership or operation of an Excluded Asset;
(e) Liability for any Income Taxes due or payable by
Sellers for any Tax period (or portion thereof) prior to the Closing Date or
arising out of the ownership or operation of the Businesses or the Purchased
Assets on or before the Closing Date; and
(f) all Liabilities relating to amounts required to be paid
by Sellers hereunder.
2.5 Cure Amounts. At Closing and pursuant to section 365 of the
Bankruptcy Code, Sellers shall assume and assign to Purchaser and Purchaser
shall assume from Sellers, the Purchased Contracts. The cure amounts necessary
to cure all defaults, if any, and to pay all actual or pecuniary losses that
have resulted from such defaults under the Purchased Contracts shall be paid by
Purchaser, as and when finally determined by the Bankruptcy Court pursuant to
the procedures set forth in the Sale Order, and not by Sellers and Sellers shall
have no liability therefor.
2.6 Non-Assignment of Assets.
Notwithstanding any other provision of this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign or transfer
and shall not effect the assignment or transfer of any Purchased Asset if (a) an
attempted assignment thereof, without the approval, authorization or consent of,
or granting or issuance of any license or permit by, any third party thereto
(each such action, a "Necessary Consent"), would constitute a breach thereof or
in any way adversely affect the rights of Purchaser thereunder and (b) the
Bankruptcy Court shall not have entered an Order providing that such Necessary
Consent is not required. In such event, Sellers and Purchaser will use their
commercially reasonable efforts to obtain the Necessary Consents with respect to
16
any such Purchased Asset or any claim or right or any benefit arising thereunder
for the assignment thereof to Purchaser as Purchaser may reasonably request;
provided, however, that Sellers shall not be obligated to pay any consideration
therefor to any third party from whom consent or approval is requested or to
initiate any litigation or legal proceedings to obtain any such consent or
approval. If such Necessary Consent is not obtained, or if an attempted
assignment thereof would be ineffective or would adversely affect the rights of
any Seller thereunder so that Purchaser would not in fact receive all such
rights, such Seller and Purchaser will cooperate in a mutually agreeable
arrangement, to the extent feasible and at no expense to such Seller, under
which Purchaser would obtain the benefits and assume the obligations thereunder
in accordance with this Agreement, including subcontracting, sub-licensing, or
sub-leasing to Purchaser, or under which such Seller would enforce for the
benefit of Purchaser with Purchaser assuming such Seller's obligations and any
and all rights of such Seller against a third party thereto.
2.7 Further Conveyances and Assumptions.
(a) From time to time following the Closing, Sellers shall,
or shall cause their Affiliates to, make available to Purchaser such
non-confidential data in personnel records of Transferred Employees as is
reasonably necessary for Purchaser to transition such employees into Purchaser's
records.
(b) From time to time following the Closing, Sellers and
Purchaser shall, and shall cause their respective Affiliates to, execute,
acknowledge and deliver all such further conveyances, notices, assumptions,
releases and other instruments, and shall take such further actions, as may be
reasonably necessary or appropriate to assure fully to Purchaser and its
respective successors or assigns, all of the properties, rights, titles,
interests, estates, remedies, powers and privileges intended to be conveyed to
Purchaser under this Agreement and to assure fully to each Seller and its
Affiliates and their successors and assigns, the assumption of the liabilities
and obligations intended to be assumed by Purchaser under this Agreement, and to
otherwise make effective the transactions contemplated hereby.
ARTICLE III
CONSIDERATION; ADJUSTMENT
3.1 Consideration. The aggregate consideration for the Purchased
Assets (the "Purchase Price") shall be:
(a) cash in an amount necessary to pay the Closing Cash
Liabilities, including the indebtedness outstanding under the DIP Credit
Agreement in full, including all outstanding principal, accrued and unpaid
interest, fees, expenses or other amounts owing thereunder at the time of
Closing (the "Closing DIP Amount");
(b) the Credit Bid or the delivery of the Purchaser Equity
Consideration as provided by Section 8.6(b); and
(c) the assumption of the Assumed Liabilities, to the
extent not paid at the Closing.
17
3.2 Purchase Price Deposit. Upon the execution of this Agreement,
pursuant to the terms of an escrow agreement in the form attached hereto as
Exhibit B (the "Escrow Agreement"), Purchaser shall deposit with the escrow
agent under the Escrow Agreement (the "Escrow Agent") by 5:00 p.m., New York
City time, on March 1, 2005, the sum of $20.75 million by wire transfer of
immediately available funds (the "Deposit Amount"), to be released by the Escrow
Agent and delivered to either Purchaser or the Company, in accordance with the
provisions of the Escrow Agreement. Pursuant to the Escrow Agreement, the
Deposit Amount (together with all accrued investment income thereon) shall be
distributed as follows:
(a) if the Closing shall occur, the Deposit Amount and all
accrued investment income thereon shall be applied towards the Closing DIP
Amount payable by Purchaser under Section 3.3 hereof;
(b) if this Agreement is terminated by Sellers pursuant to
Section 4.4(f), the Deposit Amount, together with all accrued investment income
thereon, shall be delivered to the Company; or
(c) if this Agreement is terminated for any reason other
than by Sellers pursuant to Section 4.4(f), the Deposit Amount, together with
all accrued investment income thereon, shall in each case be returned to
Purchaser.
3.3 Working Capital.
(a) Sellers shall deliver to Purchaser, no later than the
tenth Business Day prior to the Closing Date, (i) Sellers' written calculation
of Closing WC, which calculation shall be (A) an estimate of Closing WC as of
the Closing Date, (B) in accordance with GAAP, (C) prepared in good faith and
based upon reasonable assumptions, and (D) consistent with Sellers' past
accounting practices, and (ii) all of Sellers' work papers and other relevant
data created or used in connection with the preparation of such calculation.
Notwithstanding any provision of this Agreement to the contrary, the Closing WC
shall be calculated by only including the assets and liabilities specified in
the definition of Closing WC on Schedule 1.1(b).
(b) If Sellers and Purchaser agree on the Closing WC by
five Business Days prior to the Closing Date, the amount thereof will be rolled
forward day-to-day to reflect any deviations from the agreed estimate, and will
be, if agreed by Sellers and Purchaser, the Closing WC for all purposes under
this Agreement. If Sellers and Purchaser are unable to so agree by five Business
Days prior to the Closing, they will use good faith efforts during the five
Business Day period thereafter (the "WC Resolution Period") to seek to resolve
any differences they may have. If Sellers and Purchaser cannot reach written
agreement during the WC Resolution Period, their disagreements, limited to those
issues still in dispute, will be submitted by the parties for determination by
the Bankruptcy Court.
(c) During the period beginning on the date of delivery of
Sellers' calculation of Closing WC and ending on the Closing Date (including the
WC Resolution Period, if necessary), Sellers will provide to Purchaser such
reasonable access to financial and other information of the Business as it may
request in good faith to assess the Closing WC in accordance with Section 8.1.
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3.4 Payment of Purchase Price.
(a) No later than three Business Days prior to the Closing
Date, the Company will deliver to Purchaser a written statement setting forth
the Closing DIP Amount and the amount of Assumed Liabilities that will be, as of
the Closing Date, finally determined, due and payable (the "Closing Cash
Liabilities").
(b) On the Closing Date, (i) Purchaser shall, and Parent
shall cause Purchaser to (A) deliver the Purchaser Equity Consideration to the
Trustee (for distribution to the First Lien Lenders) or, if Section 8.6(b)
applies, to the Company on behalf of Sellers, (B) pay the Closing DIP Amount
(less the Deposit Amount) to the Administrative Agent under the DIP Credit
Agreement in immediately available funds to an account designated by such
Administrative Agent and (C) pay an amount in cash equal to each Assumed
Liability to the extent then due to each Person so owed such amount, and (ii)
Purchaser and the Company shall cause the Deposit Amount to be paid to the
Administrative Agent as provided in (b)(i)(B) above.
ARTICLE IV
CLOSING AND TERMINATION
4.1 Closing Date. Subject to the satisfaction of the conditions set
forth in Sections 10.1, 10.2 and 10.3 hereof (or the waiver thereof by the party
entitled to waive that condition), the closing of the purchase and sale of the
Purchased Assets and the assumption of the Assumed Liabilities provided for in
Article II hereof (the "Closing") shall take place at the offices of Jones Day
located at 222 East 41st Street, New York, New York (or at such other place as
the parties may designate in writing) at 10:00 a.m. (New York City time) on the
date that is two Business Days following the satisfaction or waiver of the
conditions set forth in Article XI (other than conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or waiver of
such conditions), unless another time or date, or both, are agreed to in writing
by the parties hereto. The date on which the Closing shall be held is referred
to in this Agreement as the "Closing Date."
4.2 Deliveries by Sellers. At the Closing, Sellers shall deliver to
Purchaser:
(a) one or more duly executed bills of sale in a form to be
agreed upon the parties hereto;
(b) one or more duly executed assignment and assumption
agreements in a form to be agreed upon the parties hereto and duly executed
assignments of the U.S. trademark registrations and applications included in the
Purchased Intellectual Property, in a form suitable for recording in the U.S.
trademark office, and general assignments of all other Purchased Intellectual
Property;
(c) the officer's certificate required to be delivered
pursuant to Sections 10.1(a) and 10.1(b);
(d) affidavits executed by each Seller that such Seller is
not a foreign person within the meaning of Section 1445(f)(3) of the Code; and
19
(e) all other instruments of conveyance and transfer, in
form and substance reasonably acceptable to Purchaser, as may be necessary to
convey the Purchased Assets to Purchaser.
4.3 Deliveries by Purchaser. At the Closing, Purchaser shall, and
Parent shall cause Purchaser to, deliver:
(a) the consideration specified in Section 3.4 hereof to
the Persons specified therein;
(b) to the Company, on behalf of Sellers, one or more duly
executed assignment and assumption agreements in a form to be agreed upon the
parties hereto;
(c) to the Company, on behalf of Sellers, the officer's
certificate required to be delivered pursuant to Sections 10.2(a) and 10.2(b);
and
(d) to the Company, on behalf of Sellers, such other
documents, instruments and certificates as Sellers may reasonably request.
4.4 Termination of Agreement. This Agreement may be terminated prior
to the Closing as follows:
(a) by Purchaser or Seller, if the Closing shall not have
occurred by the close of business on July 31, 2005 (the "Termination Date");
provided, however, that, if the Closing shall not have occurred due to the
failure of the Bankruptcy Court to enter the Sale Order or the condition to
Closing set forth in Section 10.3(d) remains unsatisfied or not waived and if
all other conditions to the respective obligations of the parties to close
hereunder that are capable of being fulfilled by the Termination Date shall have
been so fulfilled or waived, then no party may terminate this Agreement prior to
October 31, 2005; provided, further, that if the Closing shall not have occurred
on or before the Termination Date due to a material breach of any
representations, warranties, covenants or agreements contained in this Agreement
by Purchaser or a Seller, then the breaching party may not terminate this
Agreement pursuant to this Section 4.4(a);
(b) by mutual written consent of Sellers and Purchaser;
(c) by Purchaser, if any condition to the obligations of
Purchaser set forth in Sections 10.1 and 10.3 shall have become incapable of
fulfillment other than as a result of a breach by Purchaser of any covenant or
agreement contained in this Agreement, and such condition is not waived by
Purchaser;
(d) by Sellers, if any condition to the obligations of
Sellers set forth in Sections 10.2 and 10.3 shall have become incapable of
fulfillment other than as a result of a breach by Sellers of any covenant or
agreement contained in this Agreement, and such condition is not waived by
Sellers;
(e) by Purchaser, if there shall be a breach by Sellers of
any representation or warranty, or any covenant or agreement contained in this
Agreement which would result in a failure of a condition set forth in Sections
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10.1 or 10.3 and which breach has not been cured by the earlier of (i) 20
Business Days after the giving of written notice by Purchaser to Sellers of such
breach and (ii) the Termination Date;
(f) by Sellers, if there shall be a breach by Purchaser of
any representation or warranty, or any covenant or agreement contained in this
Agreement which would result in a failure of a condition set forth in Sections
10.2 or 10.3 and which breach has not been cured by the earlier of (i) 20
Business Days after the giving of written notice by Sellers to Purchaser of such
breach and (ii) the Termination Date;
(g) by Sellers or Purchaser if there shall be in effect a
final non-appealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the parties hereto shall
promptly appeal any adverse determination which is not non-appealable (and
pursue such appeal with reasonable diligence);
(h) by Purchaser or Sellers, if Sellers shall enter into a
Contract with respect to a Competing Transaction or if the Bankruptcy Court
shall enter an order approving a Competing Transaction, subject to Purchaser's
right to payment of the Break-Up Fee in accordance with the provisions of
Section 7.2;
(i) automatically, if Sellers consummate a Competing
Transaction subject to Purchaser's right to payment of the Break-Up Fee in
accordance with the provisions of Section 7.2;
(j) by Purchaser, if (i) the Bidding Procedures Order is
not entered by April 15, 2005, or (ii) Sellers have not selected a winning
bidder at the auction contemplated by the Bidding Procedures Order by June 15,
2005; or
(k) by Sellers, if the Deposit Amount is not deposited with
the Escrow Agent by 5 p.m. New York City time on March 1, 2005.
4.5 Procedure Upon Termination. In the event of termination pursuant
to Section 4.4 hereof, written notice thereof shall forthwith be given to the
other party or parties, and this Agreement shall terminate, and the purchase of
the Purchased Assets hereunder shall be abandoned, without further action by
Purchaser or Sellers. If this Agreement is terminated as provided herein, each
party shall redeliver all documents, work papers and other material of any other
party relating to the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the party furnishing the same.
4.6 Effect of Termination. In the event that this Agreement is
validly terminated as provided herein, then each of the parties shall be
relieved of its duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to
Parent, Purchaser or Sellers; provided, however, that the obligations of the
parties set forth in Section 7.2 and the provisions of Article XII hereof shall
survive any such termination and shall be enforceable hereunder; provided
further, however, that nothing in this Section 4.6 shall be deemed to release
any party from liability for any breach of its obligations under this Agreement
in any material respect.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby jointly and severally represents and warrants to
Parent and Purchaser that:
5.1 Organization and Good Standing. Each Seller is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and, subject to the limitations imposed on such
Seller as a resulted of having filed a petition for relief under the Bankruptcy
Code, has the requisite power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
5.2 Authorization of Agreement. Subject to entry of the Bidding
Procedures Order and the Sale Order and such other authorization as is required
by the Bankruptcy Court, each Seller has the requisite power and authority to
execute and deliver this Agreement and each other agreement, document or
instrument contemplated hereby or thereby to which it is a party and to perform
its respective obligations hereunder and thereunder. The execution and delivery
of this Agreement and each other agreement, document or instrument contemplated
hereby or thereby to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of each Seller. This Agreement and each
other agreement, document or instrument contemplated hereby or thereby to which
it is a party has been duly and validly executed and delivered by each Seller
and (assuming the due authorization, execution and delivery by the other parties
hereto, the entry of the Sale Order, and, with respect to Sellers' obligations
under Section 7.2, the entry of the Bidding Procedures Order) this Agreement and
each other agreement, document or instrument contemplated hereby or thereby to
which it is a party constitutes legal, valid and binding obligations of each
Seller enforceable against such Seller in accordance with its respective terms,
subject to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
5.3 Conflicts; Consents of Third Parties.
(a) Except as set forth on Schedule 5.3(a), the execution
and delivery by each Seller of this Agreement and each other agreement, document
or instrument contemplated hereby or thereby to which it is a party, the
consummation of the transactions contemplated hereby and thereby, or compliance
by such Seller with any of the provisions hereof do not conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination or cancellation under any
provision of (i) the certificate of incorporation and by-laws or comparable
organizational documents of such Seller; (ii) subject to entry of the Sale
Order, any Contract or Permit to which such Seller is a party or by which any of
the properties or assets of such Seller are bound; (iii) subject to entry of the
Sale Order, any Order of any Governmental Body applicable to such Seller or any
of the properties or assets of such Seller as of the date hereof; or (iv)
subject to entry of the Sale Order, any applicable Law, other than, in the case
of clauses (ii), (iii) and (iv), such conflicts, violations, defaults,
22
terminations or cancellations that would not reasonably be expected to have,
individually or in the aggregate, a Seller Material Adverse Effect.
(b) Except as set forth on Schedule 5.3(b) and except to
the extent not required if the Sale Order is entered, no consent, waiver,
approval, Order, Permit or authorization of, or declaration or filing with, or
notification to, any Person or Governmental Body is required on the part of
Sellers in connection with the execution and delivery of this Agreement or any
other agreement, document or instrument contemplated hereby or thereby to which
it is a party, the compliance by Sellers with any of the provisions hereof or
thereof, the consummation of the transactions contemplated hereby or thereby or
the taking by Sellers of any other action contemplated hereby or thereby, except
for (i) compliance with the applicable requirements of the HSR Act, (ii) the
entry of the Sale Order, (iii) the entry of the Bidding Procedures Order with
respect to Sellers' obligations under Section 7.2, and (iv) such other consents,
waivers, approvals, Orders, Permits, authorizations, declarations, filings and
notifications, the failure of which to obtain or make would not reasonably be
expected to have, individually or in the aggregate, a Seller Material Adverse
Effect.
5.4 Reports; Financial Statements.
(a) Except as set forth on Schedule 5.4, since January 1,
2004, the Company has filed all reports, schedules, forms, statements and other
documents (including exhibits and other information incorporated therein) with
the Securities and Exchange Commission (the "SEC") required to be filed by the
Company (such documents, the "Company SEC Documents"). Except as set forth on
Schedule 5.4, as of their respective dates, the Company SEC Documents complied
in all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Company SEC Documents, and,
as of their respective dates, none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except as
set forth on Schedule 5.4, the financial statements of the Company included in
the Company SEC Documents (the "Financial Statements") complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as of their respective
dates, were prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and present fairly in all material respects the financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(b) Sellers have furnished Purchaser and Parent true and
correct copies of all material written correspondence with representatives of
the SEC since January 1, 2003 and have complied in all material respects with
all undertakings therein relating to SEC requirements or GAAP.
23
5.5 Letters of Credit. Schedule 5.5 sets forth a true, correct and
complete list of any letter of credit (or any reimbursement obligation relating
to any such instrument) outstanding with respect to any Seller as of the date of
this Agreement.
5.6 Events Subsequent to September 30, 2004. Except as set forth on
Schedule 5.6, since September 30, 2004, no Seller has, as of the date hereof,
taken any action that required the approval of the Bankruptcy Court without
having obtained such approval.
5.7 Real Property. No Seller owns or leases any material real
property other than that identified on Schedule 5.7. Schedule 5.7 lists all
material real property included in the Purchased Assets or leased pursuant to
leases included in the Purchased Contracts (the "Real Property"). Except as
would not reasonably be expected to have, individually or in the aggregate, a
Seller Material Adverse Effect or as otherwise described on Schedule 5.7: (a)
there is no pending or, to the Knowledge of Sellers, threatened condemnation
proceeding, administrative action or judicial proceeding of any type relating to
the Real Property or other matters affecting adversely the current use,
occupancy or value of the Real Property; (b) the Real Property does not serve
any adjoining property for any purpose inconsistent with the use of the Real
Property, and the Real Property is not located within any flood plain or subject
to any similar type of restriction for which any permits or licenses necessary
to the use thereof have not been obtained; and (c) neither the current use of
the Real Property nor the operation of the Business violates any instrument of
record or agreement affecting the Real Property or any applicable legal
requirements.
5.8 Necessary Property and Transfer of Assets. The Purchased Assets
and the Excluded Assets taken as a whole are sufficient for the continued
conduct of the Business in the manner and to the extent presently conducted by
Sellers.
5.9 Title to Purchased Assets. Except as set forth on Schedule
5.9(a), Sellers own the Purchased Assets, and, subject to the entry of the Sale
Order, Purchaser will be vested with good title to such Purchased Assets, free
and clear of all Liens, other than Permitted Exceptions, to the fullest extent
permissible under Section 363(f) of the Bankruptcy Code.
5.10 Taxes.
(a) Except as set forth on Schedule 5.10(a), and except for
matters that would not reasonably be expected to have, individually or in the
aggregate, a Seller Material Adverse Effect, (i) Sellers have timely filed all
Tax Returns required to be filed with the appropriate Tax Authorities in all
jurisdictions in which such Tax Returns are required to be filed (taking into
account any extension of time to file granted or to be obtained on behalf of
Sellers), and all such Tax Returns are correct and complete in all respects; and
(ii) except as to Taxes of Sellers the payment of which is prohibited or stayed
by the Bankruptcy Code, each Seller has paid all Taxes due and payable by it
(whether or not such Taxes are shown on any Tax Return).
(b) None of Sellers is a foreign person within the meaning
of Section 1445(f)(3) of the Code.
5.11 Intellectual Property. Except as set forth on Schedule 5.11, to
the Knowledge of Sellers, Sellers own or have valid licenses to use all material
Purchased Intellectual Property used by them in the Ordinary Course of Business.
24
Except as set forth on Schedule 5.11, as of the date hereof, no claims are
pending against Sellers before a Governmental Body or, to the Knowledge of
Sellers, threatened with regard to the ownership by Sellers of any material
Purchased Intellectual Property.
5.12 Contracts and Commitments. Except as set forth on Schedule 5.12,
the Purchased Contracts do not include and no Seller is a party to or otherwise
obligated under any of the following, whether written or oral:
(a) Any single contract or purchase order providing for an
expenditure or aggregate expenditures by one or more Sellers in excess of
$250,000, excluding purchase orders entered into in the Ordinary Course of
Business.
(b) Any contract, agreement or other arrangement binding on
a Seller providing for the payment of any cash or other benefits to an officer
of any Seller upon the sale or change of control of a Seller or a substantial
portion of its assets.
(c) Any contract prohibiting competition, prohibiting a
Seller from freely engaging in any business anywhere in the world.
5.13 Validity of Contracts. Except as set forth on Schedule 5.13,
each Contract to which a Seller is a party or is otherwise obligated is a valid
and binding obligation of such Seller and, to the Knowledge of Sellers, the
other parties thereto in accordance with its terms and conditions, except as
such enforceability may be limited by (a) bankruptcy, insolvency, or other
similar laws affecting the enforcement of creditors' rights generally and (b)
equitable principles of general applicability (whether considered in a
proceeding at law or in equity). No event has occurred which, with the passage
of time or the giving of notice, or both, would constitute a default under or a
violation of any such Contract or would cause the acceleration of any obligation
of any Seller or, to the Knowledge of Sellers, any other party thereto or the
creation of a Lien upon any Purchased Asset, except for such events that would
not reasonably be expected to have, individually or in the aggregate, a Seller
Material Adverse Effect.
5.14 Customers and Suppliers. Schedule 5.14 sets forth a true,
complete and correct list of the Business's 10 largest customers and 20 largest
vendors for the period beginning July 1, 2004 and ending on the date hereof. As
of the date hereof, Seller has not received any written indication from any
supplier listed on Schedule 5.14 to the effect that such supplier will stop, or
materially decrease the rate of, supplying materials, products or services to
the Business. As of the date hereof, Seller has not received any written
indication from any customer listed on Schedule 5.14 to the effect that such
customer will stop, or materially decrease the rate of, buying materials,
products or services from the Business.
5.15 Affiliated Transactions. Except as disclosed on Schedule 5.15,
no director, officer, employee or Affiliate of a Seller or any individual
related by blood, marriage or adoption to any such individual or any entity in
which any such individual or entity owns any beneficial interest, is a party to
any agreement, contract, commitment or other form of transaction or arrangement
with a Seller or has any interest in any property used by or in connection with
the Business, except as specifically disclosed in a Schedule to this Agreement.
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5.16 Employee Benefits.
(a) Schedule 5.16(a) lists: (i) all "employee benefit
plans", as defined in Section 3(3) of ERISA, (ii) all employment, consulting or
other individual compensation agreements, and (iii) all bonus or other
incentive, equity or equity-based compensation, deferred compensation, severance
pay, sick leave, vacation pay, salary continuation, disability, hospitalization,
medical, life insurance, scholarship programs, plans or arrangements as to which
Sellers have any obligation or liability, contingent or otherwise, for current
or former employees of Sellers (collectively, the "Employee Benefit Plans").
Employee Benefit Plans subject to Title IV of ERISA (the "Title IV Plans") are
separately identified on Schedule 5.16(a). None of the Employee Benefit Plans is
a multiemployer plan as defined in Section 3(37) of ERISA or a Multiple Employer
Plan or has been subject to Sections 4063 or 4064 of ERISA.
(b) True, correct and complete copies of the following
documents, with respect to each of the Employee Benefit Plans (as applicable),
have been made available to Purchaser (A) any plans and related trust documents,
and all amendments thereto, (B) the most recent Forms 5500 and schedules
thereto, (C) the most recent financial statements and actuarial valuations, (D)
the most recent IRS determination letter, and (E) the most recent summary plan
descriptions (including letters or other documents updating such descriptions).
(c) Each of the Employee Benefit Plans intended to qualify
under Section 401 of the Code ("Qualified Plans") has been determined by the IRS
to be so qualified, and, except as disclosed on Schedule 5.16(c), to the
Knowledge of Sellers, nothing has occurred with respect to the operation of any
such plan which could reasonably be expected to result in the revocation of such
favorable determination.
(d) Except with respect to the Title IV Plans, all
contributions and premiums required by law or by the terms of any Employee
Benefit Plan or any agreement relating thereto have been timely made to any
funds or trusts established thereunder or in connection therewith in all
material respects.
(e) Each of the Employee Benefit Plans has been maintained
in accordance with its terms and all provisions of applicable Law, except for
such non-compliance that would not reasonably be expected to have, individually
or in the aggregate, a Seller Material Adverse Effect.
(f) Except as set forth on Schedule 5.16(f), neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any employee of Sellers; (ii) increase any benefits otherwise payable under any
Employee Benefit Plan; or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
5.17 Litigation. Except as set forth on Schedule 5.17 or disclosed in
the Company SEC Documents filed as of the date of this Agreement, as of the date
hereof, there are no Legal Proceedings pending or, to the Knowledge of Sellers,
threatened against any Seller before any Governmental Body, which, if adversely
determined, would reasonably be expected to have, individually or in the
aggregate, a Seller Material Adverse Effect.
26
5.18 Compliance with Laws; Permits. Except with respect to
Environmental Laws (which are addressed in Section 5.19), except as set forth on
Schedule 5.18 and except as disclosed in the Company SEC Reports filed as of the
date of this Agreement, each Seller (i) is in compliance with all Laws
applicable to its respective operations or assets or the Business, except where
the failure to be in compliance would not reasonably be expected to have,
individually or in the aggregate, a Seller Material Adverse Effect and (ii) has
all Permits which are required for the operation of the Business as presently
conducted, except where the absence of which would not reasonably be expected to
have, individually or in the aggregate, a Seller Material Adverse Effect.
5.19 Environmental Matters. Except as set forth on Schedule 5.19 and
except for facts, circumstances or conditions that would not reasonably be
expected to have, individually or in the aggregate, a Seller Material Adverse
Effect, (a) the operations of Sellers are in compliance with all applicable
Environmental Laws, (b) none of Sellers is the subject of any outstanding Order
with any Governmental Body respecting (i) Environmental Laws or (ii) a Remedial
Action, and (c) there is no investigation, action or proceeding pending, or, to
the Knowledge of Sellers, threatened that could reasonably be expected to result
in Sellers incurring any material liability pursuant to any applicable
Environmental Law. This Section 5.19 represents the sole and exclusive
representation and warranty of Sellers regarding environmental matters.
5.20 Financial Advisors. Except as set forth on Schedule 5.20, no
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for Sellers in connection with the transactions contemplated by this
Agreement and no Person is entitled to any fee or commission or like payment
from Parent or Purchaser in respect thereof. For any Person listed on Schedule
5.20, the Schedule sets forth the amount payable to such Person as a result of
the transactions contemplated herein.
5.21 Excluded Subsidiaries. The Excluded Subsidiaries are dormant
companies that do not own any assets or that own insignificant assets that are
not currently used in the Business.
5.22 No Other Representations or Warranties; Schedules. Except for
the representations and warranties contained in this Article V (as modified by
the Schedules hereto), none of Sellers nor any other Person makes any other
express or implied representation or warranty with respect to Sellers, the
Business, the Purchased Assets, the Assumed Liabilities or the transactions
contemplated by this Agreement, and each Seller disclaims any other
representations or warranties, whether made by Sellers, any Affiliate of
Sellers, or any of Sellers' or their Affiliates respective officers, directors,
employees, agents or representatives. Except for the representations and
warranties contained in Article V hereof (as modified by the Schedules hereto),
each Seller (i) expressly disclaims and negates any representation or warranty,
expressed or implied, at common law, by statute, or otherwise, relating to the
condition of the Purchased Assets (including any implied or expressed warranty
of merchantability or fitness for a particular purpose, or of conformity to
models or samples of materials) and (ii) disclaims all liability and
responsibility for any representation, warranty, projection, forecast,
statement, or information made, communicated, or furnished (orally or in
writing) to Purchaser or its Affiliates or representatives (including any
opinion, information, projection, or advice that may have been or may be
provided to Parent or Purchaser by any director, officer, employee, agent,
consultant, or representative of Sellers or any of its Affiliates). Sellers
makes no representations or warranties to Parent or Purchaser regarding the
27
probable success or profitability of the Business. The disclosure of any matter
or item in any schedule hereto shall not be deemed to constitute an
acknowledgment that any such matter is required to be disclosed or is material
or that such matter would result in a Seller Material Adverse Effect.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Parent and Purchaser each hereby jointly and severally represents and
warrants to Sellers that:
6.1 Organization and Good Standing. Each of Parent and Purchaser is
an entity duly organized, validly existing and in good standing under the laws
of the state of Delaware and has the requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now
conducted.
6.2 Authorization of Agreement and Stock. Each of Parent and
Purchaser has the requisite corporate power and authority to execute and deliver
this Agreement and each other agreement, document or instrument contemplated
hereby or thereby to which it is a party and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and each
other agreement, document or instrument contemplated hereby or thereby to which
Parent and Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of each of Parent and Purchaser. This Agreement and
each other agreement, document or instrument contemplated hereby or thereby to
which Parent and Purchaser is a party has been duly and validly executed and
delivered by Parent and Purchaser and (assuming the due authorization, execution
and delivery by the other parties hereto) this Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which Parent
and Purchaser is a party constitutes legal, valid and binding obligations of
each of Parent and Purchaser enforceable against each such entity in accordance
with its respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity). The shares of Parent Common Stock and Preferred Stock to be issued
pursuant to the terms of the Funding Commitment will, as of the Closing, be duly
authorized and, upon issuance pursuant to the terms hereof or upon payment of
the purchase price therefor pursuant to the Rights Offering, validly issued,
fully paid and non-assessable.
6.3 Conflicts; Consents of Third Parties.
(a) The execution and delivery by Parent and Purchaser of
this Agreement and each other agreement, document or instrument contemplated
hereby or thereby to which Parent and Purchaser is a party, the consummation of
the transactions contemplated hereby and thereby, or compliance by Parent and
Purchaser with any of the provisions hereof or thereof do not conflict with, or
result in any violation of or default (with or without notice or lapse of time,
28
or both) under, or give rise to a right of termination or cancellation under any
provision of (i) the certificate of incorporation and by-laws or comparable
organizational documents of Parent and Purchaser; (ii) any Contract or Permit to
which Parent or Purchaser is a party or by which any of the properties or assets
of Parent or Purchaser are bound; (iii) any Order of any Governmental Body
applicable to Parent or Purchaser or any of the properties or assets of Parent
or Purchaser as of the date hereof; or (iv) any applicable Law, other than, in
the case of clauses (ii), (iii) and (iv), such conflicts, violations, defaults,
terminations or cancellations that would not reasonably be expected to have,
individually or in the aggregate, a Purchaser Material Adverse Effect.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of Parent or Purchaser in
connection with the execution and delivery of this Agreement and each other
agreement, document or instrument contemplated hereby or thereby to which Parent
or Purchaser is a party, the compliance by Parent or Purchaser with any of the
provisions hereof or thereof, the consummation of the transactions contemplated
hereby or thereby, the taking by Parent or Purchaser of any other action
contemplated hereby or thereby, except for (i) compliance with the applicable
requirements of the HSR Act and (ii) such other consents, waivers, approvals,
Orders, Permits, authorizations, declarations, filings and notifications, the
failure of which to obtain or make, would not reasonably be expected to have,
individually or in the aggregate, a Purchaser Material Adverse Effect.
6.4 Litigation. There are no Legal Proceedings pending or, to the
knowledge of each of Parent and Purchaser, threatened against Parent or
Purchaser, or to which Parent or Purchaser is otherwise a party before any
Governmental Body, which, if adversely determined, would reasonably be expected
to have, individually or in the aggregate, a Purchaser Material Adverse Effect.
Neither Parent nor Purchaser is subject to any Order of any Governmental Body
except to the extent the same would not reasonably be expected to have,
individually or in the aggregate, a Purchaser Material Adverse Effect.
6.5 Financial Advisors. No Person has acted, directly or indirectly,
as a broker, finder or financial advisor for Parent or Purchaser in connection
with the transactions contemplated by this Agreement and no Person is entitled
to any fee or commission or like payment in respect thereof.
6.6 Financial Capability. Purchaser will have, and Parent will cause
Purchaser to have, at the Closing sufficient funds available to pay up to the
amount of the Closing Cash Liabilities and any expenses incurred by Parent and
Purchaser in connection with the transactions contemplated by this Agreement.
Purchaser has delivered to the Company copies of the fully executed Funding
Commitment pursuant to which it will obtain such funds.
6.7 Ownership; Direction to Trustee. The Majority Holders hold the
requisite authority to cause the Credit Bid and the other actions contemplated
by the First Lien Direction. On or before the date hereof, the Majority Holders
shall have irrevocably directed the Trustee to take all of the actions
contemplated to be taken by the Trustee under this Agreement, and copies thereof
have been delivered to the Company.
29
6.8 Condition of the Business. Notwithstanding anything contained in
this Agreement to the contrary, Purchaser acknowledges and agrees that Sellers
are not making any representations or warranties whatsoever, express or implied,
beyond those expressly given by Sellers in Article V hereof (as modified by the
Schedules hereto), and Purchaser acknowledges and agrees that, except for the
representations and warranties contained therein, the Purchased Assets and the
Business are being transferred on a "where is" and, as to condition, "as is"
basis. Each of Parent and Purchaser acknowledges that it has conducted to its
satisfaction its own independent investigation of the Business and, in making
the determination to proceed with the transactions contemplated by this
Agreement, each of Parent and Purchaser has relied on the results of its own
independent investigation.
6.9 Capitalization. As of the Closing, the authorized capital of
Parent shall consist of 1,000,000,000 shares of Parent Common Stock, of which
100,000,000 shares will be issued and outstanding or subject to issuance
pursuant to the WLR Warrant contemplated by the Funding Commitment, including
the shares issued pursuant to the Rights Offering. As of the Closing, the
authorized capital of Purchaser shall consist of 1,000,000,000 shares of common
stock, of which 100 shares will be issued and outstanding and held by Parent,
and 1,000,000,000 shares of Purchaser Preferred Stock, of which 100,000,000
shares will be issued and outstanding or subject to issuance pursuant to the WLR
Warrant contemplated by the Funding Commitment, including the shares issued
pursuant to the Rights Offering. As of the Closing, no other shares of capital
stock of Parent or Purchaser will be issued or issuable pursuant to outstanding
options, agreements, exchangeable securities or otherwise.
ARTICLE VII
BANKRUPTCY COURT MATTERS
7.1 Competing Transaction. This Agreement is subject to approval by
the Bankruptcy Court and the consideration by Sellers and the Bankruptcy Court
of higher or better competing bids. From and after the date hereof until the
Auction Date, Sellers are permitted to cause their respective representatives
and Affiliates to initiate contact with, or solicit or encourage submission of
any inquiries, proposals or offers by, any Person (in addition to Parent,
Purchaser and their Affiliates, agents and representatives) with respect to any
transaction (or series of transactions) involving the direct or indirect sale,
transfer or other disposition of a material portion of the Purchased Assets to a
purchaser or purchasers other than Purchaser or effecting any other transaction
(including a plan of reorganization or liquidation) the consummation of which
would be substantially inconsistent with the transactions herein contemplated (a
"Competing Transaction") to the extent, but only to the extent, that the Company
determines in good faith that so doing is permitted or required by the Bidding
Procedures Order. Following the Auction Date, Sellers will not participate in
any discussions with, or furnish any information to, any Person with respect to
any Competing Transaction regardless of the terms thereof.
7.2 Break-Up Fee. In the event that this Agreement is terminated by
Sellers or Purchaser pursuant to Section 4.4(h) or Section 4.4(i), Sellers shall
pay to Purchaser a cash amount equal to the Break-Up Fee. The Break-Up Fee will
equal: (a) if the Competing Transaction involves the purchase of substantially
all the Purchased Assets by an Affiliate of Carl Icahn, up to $3.5 million of
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the reasonable, documented, out-of-pocket expenses of Purchaser incurred in
connection with this Agreement and the transactions contemplated hereby, and (b)
in any other case, $5.0 million plus up to $1 million of the reasonable,
documented, out-of-pocket expenses of Purchaser incurred in connection with this
Agreement and the transactions contemplated hereby (collectively, the "Break-Up
Fee"). If this Agreement is terminated by Sellers or Purchaser pursuant to
Section 4.4(h) or Section 4.4(i), the Break-Up Fee will be due and payable upon
the consummation of a Competing Transaction or, if earlier, December 31, 2005.
Notwithstanding anything to the contrary contained herein, upon payment of the
Break-Up Fee, Sellers and their respective representatives and Affiliates shall
be fully released and discharged from any Liability under or resulting from this
Agreement and neither Purchaser nor any other Person shall have any other remedy
or cause of action under or relating to this Agreement or any applicable Law,
including for reimbursement of expenses.
7.3 Bankruptcy Court Filings. As promptly as practicable following
the execution of this Agreement, Sellers shall file with the Bankruptcy Court a
motion seeking entry of the Sale Order and the Bidding Procedures Order, and,
subject to Section 7.1, Sellers shall thereafter pursue diligently the entry of
the Sale Order and the Bidding Procedures Order. Purchaser agrees that it will
promptly take such actions as are reasonably requested by Sellers to assist in
obtaining entry of the Sale Order and the Bidding Procedures Order and a finding
of adequate assurance of future performance by Purchaser, including furnishing
affidavits or other documents or information for filing with the Bankruptcy
Court for the purposes, among others, of providing necessary assurances of
performance by Purchaser under this Agreement and demonstrating that Purchaser
is a "good faith" purchaser under section 363(m) of the Bankruptcy Code. In the
event the entry of the Sale Order or the Bidding Procedures Order shall be
appealed, Sellers and Purchaser shall use their respective reasonable efforts to
defend such appeal.
ARTICLE VIII
COVENANTS
8.1 Access to Information. Sellers agree that, prior to the Closing
Date, Purchaser shall be entitled, through its officers, employees, consultants
and representatives (including, without limitation, its legal advisors and
accountants), to make such investigation of the properties, businesses and
operations of Sellers and the Business and such examination of the books and
records of Sellers and the Business, the Purchased Assets and the Assumed
Liabilities as it reasonably requests and to make extracts and copies of such
books and records. Any such investigation and examination shall be conducted
upon reasonable advance notice and under reasonable circumstances and shall be
subject to restrictions under applicable Law. Sellers shall cause their
respective officers, employees, consultants, agents, accountants, attorneys and
other representatives to cooperate with Purchaser and Purchaser's
representatives in connection with such investigation and examination, and
Purchaser and its representatives shall cooperate with Sellers and their
representatives and shall use their reasonable efforts to minimize any
disruption to the Business. Notwithstanding anything herein to the contrary, no
such investigation or examination shall be permitted to the extent that it would
require Sellers to disclose information subject to attorney-client privilege.
8.2 Conduct of the Business Pending the Closing.
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(a) Except (i) as set forth on Schedule 8.2(a), (ii) as
required by applicable Law, (iii) as otherwise expressly contemplated by this
Agreement, (iv) for payments pursuant to the KERP Program, or (v) with the prior
written consent of Purchaser or the approval of the Bankruptcy Court, during the
period from the date of this Agreement to and through the Closing Date, Sellers
shall:
1. conduct the Business only in the Ordinary Course of
Business; and
2. use their commercially reasonable efforts to (A)
preserve the present business operations, organization and goodwill
of the Business, and (B) preserve the present relationships with
customers and suppliers of the Business.
(b) Except (i) as set forth on Schedule 8.2(b), (ii) as
required by applicable Law, (iii) as otherwise contemplated by this Agreement,
(iv) for payments pursuant to the KERP Program, or (v) with the prior written
consent of Purchaser or the approval of the Bankruptcy Court, Sellers shall not:
(i) (A) increase the annual level of compensation payable
or to become payable by Sellers to any of their respective directors
or executive officers, (B) grant any bonus, benefit or other direct
or indirect compensation to any director or executive officer, (C)
increase the coverage or benefits available under any (or create any
new) Employee Benefit Plan or (D) enter into any employment, deferred
compensation, severance, consulting, non-competition or similar
agreement (or amend any such agreement) to which any Seller is a
party or involving a director or executive officer of such Seller,
except, in each case, as required by any of the Employee Benefit
Plans;
(ii) make or rescind any material election relating to
Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or, except as may be required by the
Code or GAAP, make any material change to any of its methods of
accounting or methods of reporting income or deductions for Tax or
accounting practice or policy from those employed in the preparation
of its most recent audited financial statements or Tax Returns, as
applicable;
(iii) subject any of the Purchased Assets to any Lien,
except for existing Liens and Permitted Exceptions;
(iv) other than in the Ordinary Course of Business,
acquire any material properties or assets that would be Purchased
Assets or sell, assign, license, transfer, convey, lease or otherwise
dispose of any of the Purchased Assets (except pursuant to an
existing Contract for fair consideration or for the purpose of
disposing of obsolete or worthless assets);
(v) cancel or compromise any material debt or claim or
waive or release any material right of Sellers that constitutes a
Purchased Asset other than customer accounts receivable compromised
in the Ordinary Course of Business not to exceed, in the case of any
given customer, $750,000;
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(vi) enter into any commitment for capital expenditures in
excess of $500,000 for any individual commitment and $14,000,000 for
all commitments in the aggregate;
(vii) enter into, modify or terminate any labor or
collective bargaining agreement or, through negotiation or otherwise,
make any commitment or incur any liability to any labor organization;
(viii) engage in any transaction with any officer,
director or Affiliate of any Seller or any such individual;
(ix) agree to, settle or pay any material disputed
Priority Claim;
(x) modify, terminate or enter into any sales, license or
similar Contract involving $25 million in the aggregate, including
without limitation Contracts with Disney Enterprises Inc., Official
Pillowtex LLC or Polo Ralph Lauren Corporation; or
(xi) agree to do anything prohibited by this Section 8.2
or do or agree to do anything that would cause Sellers'
representations and warranties herein to be false in any material
respect.
8.3 Consents. Sellers shall use their commercially reasonable
efforts, and Purchaser shall, and Parent shall cause Purchaser to, cooperate
with Sellers, to obtain at the earliest practicable date all consents and
approvals required to consummate the transactions contemplated by this
Agreement, including, without limitation, the consents and approvals referred to
in Section 5.3(b) hereof; provided, however, that Sellers shall not be obligated
to pay any consideration therefor to any third party from whom consent or
approval is requested or to initiate any litigation or legal proceedings to
obtain any such consent or approval.
8.4 Regulatory Approvals.
(a) If necessary, Parent, Purchaser and Sellers shall (i)
make or cause to be made all filings required of each of them or any of their
respective Affiliates under the HSR Act or other Antitrust Laws with respect to
the transactions contemplated hereby as promptly as practicable and, in any
event, within 10 Business Days after the entry of the Bidding Procedures Order
in the case of all filings required under the HSR Act and within four weeks in
the case of all other filings required by other Antitrust Laws, (ii) comply at
the earliest practicable date with any request under the HSR Act or other
Antitrust Laws for additional information, documents, or other materials
received by each of them or any of their respective subsidiaries from Federal
Trade Commission (the "FTC"), the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") or any other Governmental Body
in respect of such filings or such transactions, and (iii) cooperate with each
other in connection with any such filing (including, to the extent permitted by
applicable Law, providing copies of all such documents to the non-filing parties
prior to filing and considering all reasonable additions, deletions or changes
suggested in connection therewith) and in connection with resolving any
investigation or other inquiry of any of the FTC, the Antitrust Division or
other Governmental Body under any Antitrust Laws with respect to any such filing
or any such transaction. Each such party shall use commercially reasonable
33
efforts to furnish to each other all information required for any application or
other filing to be made pursuant to any applicable Law in connection with the
transactions contemplated by this Agreement. Each such party shall promptly
inform the other parties hereto of any oral communication with, and provide
copies of written communications with, any Governmental Body regarding any such
filings or any such transaction. No party hereto shall independently participate
in any formal meeting with any Governmental Body in respect of any such filings,
investigation, or other inquiry without giving the other parties hereto prior
notice of the meeting and, to the extent permitted by such Governmental Body,
the opportunity to attend and/or participate. Subject to applicable law, the
parties hereto will consult and cooperate with one another in connection with
any analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto relating to
proceedings under the HSR Act or other Antitrust Laws. Sellers and Purchaser
may, as each deems advisable and necessary, reasonably designate any
competitively sensitive material provided to the other under this Section 8.4 as
"outside counsel only." Such materials and the information contained therein
shall be given only to the outside legal counsel of the recipient and will not
be disclosed by such outside counsel to employees, officers, or directors of the
recipient, unless express written permission is obtained in advance from the
source of the materials (Sellers or Purchaser, as the case may be).
(b) Each of Parent, Purchaser and Sellers shall use its
commercially reasonable efforts to resolve such objections, if any, as may be
asserted by any Governmental Body with respect to the transactions contemplated
by this Agreement under the HSR Act, the Sherman Act, as amended, the Clayton
Act, as amended, the Federal Trade Commission Act, as amended, and any other
United States federal or state or foreign statutes, rules, regulations, orders,
decrees, administrative or judicial doctrines or other laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, the "Antitrust Laws"). In
connection therewith, if any Legal Proceeding is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement is in
violation of any Antitrust Law, each of Parent, Purchaser and Sellers shall
cooperate and use its commercially reasonable efforts to contest and resist any
such Legal Proceeding, and to have vacated, lifted, reversed, or overturned any
decree, judgment, injunction or other order whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents, or restricts
consummation of the transactions contemplated by this Agreement, including by
pursuing all available avenues of administrative and judicial appeal and all
available legislative action, unless, by mutual agreement, Parent, Purchaser and
Sellers decide that litigation is not in their respective best interests. Each
of Parent, Purchaser and Sellers shall use its commercially reasonable efforts
to take such action as may be required to cause the expiration of the notice
periods under the HSR Act or other Antitrust Laws with respect to such
transactions as promptly as possible after the execution of this Agreement. In
connection with and without limiting the foregoing, each of Parent, Purchaser
and Sellers agrees to use its commercially reasonable efforts to take promptly
any and all steps necessary to avoid or eliminate each and every impediment
under any Antitrust Laws that may be asserted by any Federal, state and local
and non-United States antitrust or competition authority, so as to enable the
parties to close the transactions contemplated by this Agreement as
expeditiously as possible.
(c) Notwithstanding the foregoing provisions of this
Section 8.4 or any other provisions of this Agreement, in no event shall Parent,
Purchaser, WLR or any of the Majority Holders be required to agree to any of the
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following actions: (i) any prohibition of or limitation on the ownership or
operation of any portion of its or one of its Affiliate's business or assets
other than the Purchased Assets, (ii) any requirement that it or one of its
Affiliates divest, hold separate or otherwise dispose of any portion of its or
its Affiliate's business or assets other than the Purchased Assets, (iii) any
material limitation on its ability to acquire or hold, or exercise full rights
of ownership of the material portion of the Purchased Assets or the Business, or
(iv) any other limitation on its or one of its Affiliate's ability to
effectively control its business or operations other than the Purchased Assets.
8.5 Further Assurances. Subject to the other provisions of this
Agreement, each of Parent, Purchaser and each Seller shall use its commercially
reasonable efforts to (i) take all actions necessary or appropriate to
consummate the transactions contemplated by this Agreement and (ii) cause the
fulfillment at the earliest practicable date of all of the conditions to their
respective obligations to consummate the transactions contemplated by this
Agreement.
8.6 Equity Commitments and Rights Offering; Trustee Noncompliance.
(a) Simultaneously with the execution of this Agreement,
Purchaser has delivered to the Company an executed copy of the Funding
Commitment. Each of Parent and Purchaser shall fulfill its obligations under the
Funding Commitment and, if necessary, enforce its rights under the Funding
Commitment to cause the other parties thereto to perform their respective
duties, obligations and covenants thereunder. Neither Parent nor Purchaser will
amend the Funding Commitment in any material respect without the Company's prior
written consent.
(b) If, by the end of the fifteenth full Business Day
preceding the Closing Date, the Trustee fails to acknowledge in writing its
intent to comply with, or otherwise fails to comply with, the First Lien
Direction at the Closing, Purchaser shall, at the Closing as part of the
Purchase Price, deliver the Purchaser Equity Consideration to the Company or the
Company's designee on behalf of Sellers instead of to the Trustee for further
distribution to the First Lien Lenders, all as contemplated by the terms hereof
and the Funding Commitment.
8.7 Preservation of Records. Sellers, Parent and Purchaser agree that
each of them shall preserve and keep the records held by it or their Affiliates
relating to the Business for a period of seven years from the Closing Date
(except as provided below) and shall make such records and personnel available
to the other as may be reasonably required by such party in connection with,
among other things, any insurance claims by, Legal Proceedings or tax audits
against or governmental investigations of Sellers or Purchaser or any of their
Affiliates or in order to enable Sellers or Purchaser to comply with their
respective obligations under this Agreement and each other agreement, document
or instrument contemplated hereby. In the event Sellers or Purchaser wishes to
destroy such records before or after that time, such party shall first give 90
days prior written notice to the other and such other party shall have the right
at its option and expense, upon prior written notice given to such party within
such 90 day period, to take possession of the records within 180 days after the
date of such notice.
8.8 Publicity. None of the parties hereto shall issue any press
release concerning this Agreement or the transactions contemplated hereby
without obtaining the prior written approval of the other party hereto, which
35
approval will not be unreasonably withheld or delayed, unless, in the sole
judgment of Parent or Sellers, disclosure is otherwise required by applicable
Law or by the Bankruptcy Court with respect to filings to be made with the
Bankruptcy Court in connection with this Agreement, provided that the party
intending to make such release shall use its commercially reasonable efforts
consistent with such applicable Law or Bankruptcy Court requirement to consult
with the other party with respect to the text thereof.
8.9 Supplementation and Amendment of Schedules. Sellers may, at their
option, include in the Schedules items that are not material in order to avoid
any misunderstanding, and such inclusion, or any references to dollar amounts,
shall not be deemed to be an acknowledgement or representation that such items
are material, to establish any standard of materiality or to define further the
meaning of such terms for purposes of this Agreement. Information provided in
one Schedule will suffice, without repetition or cross reference, as a
disclosure of such information in any other Schedule to which its relevance is
reasonably apparent on its face. From time to time prior to the Closing, Sellers
shall have the right to supplement or amend the Schedules with respect to any
matter hereafter arising or discovered after the delivery of the Schedules
pursuant to this Agreement. No such supplement or amendment shall have any
effect on the satisfaction of the condition to closing set forth in Section
10.1(a); provided, however, if the Closing shall occur, then Parent and
Purchaser shall be deemed to have waived any right or claim pursuant to the
terms of this Agreement or otherwise with respect to any and all matters
disclosed pursuant to any such supplement or amendment at or prior to the
Closing.
8.10 Parent Guarantee. Parent hereby guarantees the full and timely
performance of all of Purchaser's agreements and covenants made in this
Agreement and each other document executed and delivered by or on behalf of
Parent or Purchaser to Sellers at Closing with respect to the transactions
contemplated by this Agreement.
8.11 Post-Closing Wind-Up. After the Closing, Sellers shall
accomplish the liquidation and winding-up of their estates (the "Wind-Up") as
expeditiously and as efficiently as reasonably possible. The Company will keep
Purchaser apprised of all material developments in the course of the Wind-Up and
will promptly comply with any reasonable requests by Purchaser for information
relating thereto. No Seller will compromise or otherwise settle any material
disputed Priority Claim or otherwise incur any material expense in connection
with the Wind-Up without Purchaser's prior written consent, which will not be
unreasonably withheld, or upon order of the Bankruptcy Court. Sellers will
incorporate the provisions of this Section 8.11 into their plan(s) of
liquidation under chapter 11 of the Bankruptcy Code, if any. Upon the reasonable
request of Sellers, Purchaser will make the Transferred Employees reasonably
available to assist Sellers with the Wind-Up.
8.12 Letters of Credit. At the Closing, Purchaser shall cause all
letters of credit, surety bonds, performance bonds and similar bonds posted by
the Sellers or their Affiliates with respect to the Purchased Assets or the
Businesses to be terminated and released or cash collateralized, supported by a
backstop letter of credit or otherwise.
8.13 Registration Rights. As contemplated by the Funding Commitment,
at the Closing, Purchaser and Parent will enter into a registration rights
agreement with WLR and a registration rights agreement with Persons holding more
36
than 5% of the Units (as defined in the Funding Commitment) as of the Closing.
ARTICLE IX
EMPLOYEES AND EMPLOYEE BENEFITS
9.1 Transferred Employees. Prior to the Closing, Purchaser may offer
employment to each of the Employees who remain employed immediately prior to the
Closing on such terms as Purchaser deems appropriate. Such individuals who
accept such offer by the Closing Date are hereinafter referred to as the
"Transferred Employees."
9.2 Employment Tax Reporting. With respect to Transferred Employees,
Purchaser and Sellers shall use the standard procedure set forth in Revenue
Procedure 2004-53, 2004-34 I.R.B. 320, for purposes of employment tax reporting.
9.3 Compensation and Benefits. Purchaser shall either maintain the
current compensation and benefit arrangements of the Transferred Employees or
provide compensation and benefits to such employees that Purchaser determines in
good faith are, in the aggregate, at least as favorable as the prevailing
industry standard. For purposes of eligibility, vesting and the calculation of
the amount of vacation or severance benefits (but not benefit accrual otherwise)
under the employee benefit plans of Purchaser providing benefits to Transferred
Employees, Purchaser shall credit each Transferred Employee with his or her
years of service with Sellers to the same extent as such Transferred Employee
was entitled immediately prior to the Closing to credit for such service under
any similar Employee Benefit Plan.
9.4 No Obligations. Other than as set forth in Section 9.3, nothing
contained in this Agreement shall be construed to require, or prevent the
termination of, employment of any individual, require minimum benefit or
compensation levels or prevent any change in the employee benefits provided to
any individual Transferred Employee.
ARTICLE X
CONDITIONS TO CLOSING
10.1 Conditions Precedent to Obligations of Parent and Purchaser. The
obligation of Parent and Purchaser to consummate the transactions contemplated
by this Agreement is subject to the fulfillment, on or prior to the Closing
Date, of each of the following conditions (any or all of which may be waived by
Purchaser in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of Sellers contained
in this Agreement that are not qualified by materiality or Seller Material
Adverse Effect shall be true and correct in all material respects on and as of
the Closing, except to the extent expressly made as of an earlier date, in which
case as of such earlier date, and the representations and warranties of Sellers
contained in this Agreement that are qualified by materiality or Seller Material
Adverse Effect shall be true and correct in all respects on and as of the
Closing, except to the extent expressly made as of an earlier date, in which
case as of such earlier date, and Purchaser shall have received a certificate
37
signed by an authorized officer of Sellers, dated the Closing Date, to the
foregoing effect;
(b) Sellers shall have performed and complied in all
material respects with all obligations and agreements required in this Agreement
to be performed or complied with by it prior to the Closing Date, and Purchaser
shall have received a certificate signed by an authorized officer of Sellers,
dated the Closing Date, to the forgoing effect;
(c) Phase I Environmental Site Assessments of the real
property included within the Purchased Assets, performed in substantial
conformance with ASTM E: 1527-00, shall have been completed, the results of
which shall not have disclosed any Environmental Liabilities not disclosed
hereunder or in the schedules hereto, except for any Environmental Liabilities
that would not reasonably be expected to have, individually or in the aggregate,
a Seller Material Adverse Effect;
(d) Sellers shall have delivered, or caused to be
delivered, to Purchaser all of the items set forth in Section 4.2;
(e) the Closing WC shall have been finally determined and
shall not be less than the Closing WC Threshold Amount; and
(f) between June 30, 2004 and the Closing Date, except as
disclosed on the Schedules hereto, there shall not have occurred any Seller
Material Adverse Effect.
10.2 Conditions Precedent to Obligations of Sellers. The obligations
of Sellers to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions (any or all of which may be waived by Sellers in whole or
in part to the extent permitted by applicable Law):
(a) the representations and warranties of Parent and
Purchaser contained in this Agreement that are not qualified by materiality or
Purchaser Material Adverse Effect shall be true and correct in all material
respects on and as of the Closing, except to the extent expressly made as of an
earlier date, in which case as of such earlier date, and the representations and
warranties of Parent and Purchaser contained in this Agreement that are
qualified by materiality or Purchaser Material Adverse Effect shall be true and
correct in all respects on and as of the Closing, except to the extent expressly
made as of an earlier date, in which case as of such earlier date and Sellers
shall have received a certificate signed by an authorized officer of each of
Parent and Purchaser, dated the Closing Date, to the foregoing effect;
(b) Purchaser shall have performed and complied in all
material respects with all obligations and agreements required by this Agreement
to be performed or complied with by Parent or Purchaser on or prior to the
Closing Date, and Sellers shall have received a certificate signed by an
authorized officer of Parent and Purchaser, dated the Closing Date, to the
foregoing effect; and
(c) Purchaser shall have delivered, or Parent shall have
caused to be delivered, to Sellers all of the items set forth in Section 4.3.
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10.3 Conditions Precedent to Obligations of Parent, Purchaser and
Sellers. The respective obligations of Parent, Purchaser and Sellers to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment, on or prior to the Closing Date, of each of the following
conditions (any or all of which may be waived by Purchaser and Sellers in whole
or in part to the extent permitted by applicable Law):
(a) there shall not be in effect any Order by a
Governmental Body of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby;
(b) the Bankruptcy Court shall have entered the Bidding
Procedures Order, in substantially the form attached hereto as Exhibit A;
(c) the Bankruptcy Court shall have entered the Sale Order,
in form and substance reasonably acceptable to Sellers and Purchaser, and such
Sale Order shall have become a final, non-appealable Order; and
(d) the waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act shall have expired or early
termination shall have been granted.
10.4 Frustration of Closing Conditions. No party may rely on the
failure of any condition set forth in Sections 10.1, 10.2 or 10.3, as the case
may be, if such failure was caused by such party's failure to comply with any
provision of this Agreement.
ARTICLE XI
TAXES
11.1 Transfer Taxes. Sellers shall use its reasonable best efforts to
include in the Sales Order a provision that provides that the transfer of the
Purchased Assets shall be free and clear of any stamp or similar taxes under
section 1146(c) of the Bankruptcy Code. To the extent that the transactions
proposed by this Agreement are not otherwise exempt under Section 1146(c) of the
Bankruptcy Code, Purchaser shall be liable for all sales, use and other transfer
Taxes and all filing and recording fees (and any penalties and interest
associated with such Taxes and fees) arising from or relating to the
consummation of the transactions contemplated by this Agreement (collectively,
"Transfer Taxes"). Sellers and Purchaser shall cooperate and consult with each
other prior to filing any Tax Returns in respect of Transfer Taxes and shall
cooperate and otherwise take commercially reasonable efforts to obtain any
available refunds for Transfer Taxes.
11.2 Purchase Price Allocation. Sellers and Purchaser shall allocate
the Purchase Price among Sellers and among the Purchased Assets of each Seller
in accordance with a statement (the "Allocation Statement") provided by
Purchaser to Sellers as soon as practicable after the Closing, which statement
shall be prepared in accordance with Section 1060 of the Code. The Purchase
Price allocated to each Seller shall be comprised first of the Assumed
Liabilities of each Seller and then a pro rata portion of each other item
comprising the Purchase Price. Purchaser and Sellers shall file all Tax Returns
(including Form 8594) consistent with, and shall take no tax position
39
inconsistent with the Allocation Statement provided that the Allocation
Statement is reasonable.
11.3 Tax Reporting. Purchaser shall prepare and file (or cause to be
prepared and filed) on behalf of Sellers all Tax Returns, whether related to
income taxes or non-income taxes, required to be filed or that Purchaser
otherwise deems appropriate, including the filing of amended Tax Returns, for
all Tax Periods through and including any Tax Period that includes the Closing
Date. Purchaser shall furnish a completed copy of any such Tax Return (including
any supporting workpapers) to be filed by Purchaser to Sellers for Sellers'
review at least 30 days prior to the due date for filing such returns. Sellers
shall have the right to raise reasonable objections to such Tax Returns. In the
event that the parties are unable to resolve in good faith any dispute prior to
15 days before the due date, the parties shall jointly request that an
independent accountant mutually agreed upon by Sellers and Purchaser (the
"Referee") to resolve any dispute as promptly as possible; provided, however,
that Purchaser's position shall prevail provided such position is reasonable. If
the Referee is unable to make a determination with respect to a disputed issue
prior to the date which is five days prior to the due date for the filing of the
Tax Return in question, then Purchaser may file such Tax Return on the due date
therefor without such determination having been made and without Sellers'
consent. Notwithstanding the filing of such Tax Return, the Referee shall make a
determination with respect to the disputed issue in accordance with this Section
11.3.
11.4 Cooperation and Audits. Purchaser, its Affiliates and Sellers
shall cooperate fully with each other regarding tax matters (including the
execution of appropriate powers of attorney) and shall make available to the
other as reasonably requested all information, records and documents relating to
taxes governed by this Agreement until the expiration of the applicable statute
of limitations or extension thereof or the conclusion of all audits, appeals or
litigation with respect to such taxes. Without limiting the generality of the
foregoing, Sellers shall execute on or prior to the Closing Date a power of
attorney authorizing Purchaser to correspond, sign, collect, negotiate, settle
and administer all tax payments and Tax Returns.
ARTICLE XII
MISCELLANEOUS
12.1 No Survival of Representations and Warranties. The parties
hereto agree that the representations and warranties contained in this Agreement
shall not survive the Closing hereunder, and none of the parties shall have any
liability to each other after the Closing for any breach thereof. The parties
hereto agree that the covenants contained in this Agreement to be performed at
or after the Closing shall survive the Closing hereunder, and each party hereto
shall be liable to the other after the Closing for any breach thereof.
12.2 Expenses. Except as otherwise provided in this Agreement, each
of Sellers, Parent and Purchaser shall bear its own expenses incurred in
connection with the negotiation and execution of this Agreement and each other
agreement, document and instrument contemplated by this Agreement and the
consummation of the transactions contemplated hereby. Purchaser and Parent shall
pay the filing fee required in connection with the HSR Act filing contemplated
by Section 8.4(a).
40
12.3 Injunctive Relief. Damages at law may be an inadequate remedy
for the breach of any of the covenants, promises and agreements contained in
this Agreement, and, accordingly, any party hereto shall be entitled to
injunctive relief with respect to any such breach, including without limitation
specific performance of such covenants, promises or agreements or an order
enjoining a party from any threatened, or from the continuation of any actual,
breach of the covenants, promises or agreements contained in this Agreement. The
rights set forth in this Section 12.3 shall be in addition to any other rights
which a party hereto may have at law or in equity pursuant to this Agreement.
12.4 Submission to Jurisdiction; Consent to Service of Process.
(a) Without limiting any party's right to appeal any order
of the Bankruptcy Court, (i) the Bankruptcy Court shall retain exclusive
jurisdiction to enforce the terms of this Agreement and to decide any claims or
disputes which may arise or result from, or be connected with, this Agreement,
any breach or default hereunder, or the transactions contemplated hereby, and
(ii) any and all proceedings related to the foregoing shall be filed and
maintained only in the Bankruptcy Court, and the parties hereby consent to and
submit to the jurisdiction and venue of the Bankruptcy Court and shall receive
notices at such locations as indicated in Section 12.8 hereof; provided,
however, that if the Bankruptcy Case has closed, the parties agree to
unconditionally and irrevocably submit to the exclusive jurisdiction of the
United States District Court for the Southern District of New York sitting in
New York County or the Commercial Division, Civil Branch of the Supreme Court of
the State of New York sitting in New York County and any appellate court from
any thereof, for the resolution of any such claim or dispute. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
delivery of a copy thereof in accordance with the provisions of Section 12.8.
12.5 Waiver of Right to Trial by Jury. Each party to this Agreement
waives any right to trial by jury in any action, matter or proceeding regarding
this Agreement or any provision hereof.
12.6 Entire Agreement; Amendments and Waivers. This Agreement
(including the schedules and exhibits hereto) represent the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof. This Agreement can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
41
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
12.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and performed in such State.
12.8 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand, (ii) when sent by facsimile (with written confirmation of
transmission) or (iii) one business day following the day sent by overnight
courier (with written confirmation of receipt), in each case at the following
addresses and facsimile numbers (or to such other address or facsimile number as
a party may have specified by notice given to the other party pursuant to this
provision):
If to Sellers, to:
WestPoint Stevens Inc.
507 W. 10th Street
West Point, Georgia 31833
Facsimile.: (706) 645-4396
Attention: General Counsel
With a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Facsimile: (212) 310-8007
Attention: Ted S. Waksman, Esq.
Michael F. Walsh, Esq.
If to Purchaser or Parent, to:
New Textile Co.
c/o WL Ross & Co. LLC
Manhattan Tower
101 East 52nd Street
New York, New York 10022
Facsimile: (212) 317-4891
Attention: Mr. Wilbur L. Ross, Chairman
42
With copies (which shall not constitute notice) to:
Jones Day
222 East 41st Street
New York, NY 10017
Facsimile: (212) 755-7306
Attention: Robert A. Profusek, Esq.
Hennigan Bennett & Dorman LLP
601 South Figueroa Street
Suite 3300
Los Angeles, CA 90017
Facsimile: (213) 694-1234
Attention: Bruce Bennett, Esq.
12.9 Severability. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
12.10 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns. Nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any Person or entity not a party to this Agreement.
No assignment of this Agreement or of any rights or obligations hereunder may be
made by either Sellers, Parent or Purchaser (by operation of law or otherwise)
without the prior written consent of the other parties hereto and any attempted
assignment without the required consents shall be void, provided that Purchaser
may assign some or all of its obligations hereunder to one or more subsidiaries
formed by it prior to the Closing. No assignment of any obligations hereunder
shall relieve the parties hereto of any such obligations. Upon any such
permitted assignment, the references in this Agreement to Sellers, Parent or
Purchaser shall also apply to any such assignee unless the context otherwise
requires.
12.11 Non-Recourse. No past, present or future director, officer,
employee, incorporator, member, partner or equityholder of Sellers shall have
any liability for any obligations or liabilities of Sellers under this Agreement
or any agreement entered into in connection herewith of or for any claim based
on, in respect of, or by reason of, the transactions contemplated hereby and
thereby.
12.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first written above.
NEW TEXTILE HOLDING CO.
By: /s/ Wilbur R. Ross, Jr.
------------------------------------
Name: Wilbur R. Ross, Jr.
Title: Chairman
NEW TEXTILE CO.
By: /s/ Wilbur R. Ross, Jr.
------------------------------------
Name: Wilbur R. Ross, Jr.
Title: Chairman
SELLERS:
WESTPOINT STEVENS INC.
By: /s/ M.L. Fontenot
------------------------------------
Name: M.L. "Chip" Fontenot
Title: President and Chief
Executive Officer
WESTPOINT STEVENS INC. I
By: /s/ Lester D. Sears
------------------------------------
Name: Lester D. Sears
Title: President
WESTPOINT STEVENS STORES INC.
By: /s/ Lester D. Sears
------------------------------------
Name: Lester D. Sears
Title: Vice President
44
J.P. STEVENS & CO., INC.
By: /s/ Lester D. Sears
------------------------------------
Name: Lester D. Sears
Title: President
J.P. STEVENS ENTERPRISES, INC.
By: /s/ Lester D. Sears
------------------------------------
Name: Lester D. Sears
Title: President
45
Schedule 1.1(b)
WC-RELATED DEFINITIONS
1. "CLOSING WC" means (a) WC Assets, determined as of the close of
business on the last Business Day immediately prior to the Closing
Date, less (b) WC Liabilities, determined as of the close of business
on the last Business Day immediately prior to the Closing Date.
2. "WC ASSETS" means the sum of the amounts of the following Purchased
Assets, each as would be included as line items (including
sub-accounts, if applicable) on a balance sheet of the Business
prepared in accordance with GAAP and using the same accounting
policies, principles and practices as were used in preparing the
September Balance Sheet: (1) cash and cash equivalents, plus (2)
inventories, net of reserves, plus (3) accounts receivable, net of
reserves, and plus (4) prepaid expenses and other current assets that
are utilizable by Purchaser within 12 months after the date of
determination.(1)
3. "WC LIABILITIES" means the sum of the amounts of the following
liabilities (to the extent they are Assumed Liabilities), each as
would be included as line items (including sub-accounts, if
applicable) on a balance sheet of the Business prepared in accordance
with GAAP and using the same accounting policies, principles and
practices as were used in preparing the September Balance Sheet: (1)
accounts payable, (2) customer accomodations, (3) current
environmental liabilities, (4) vacation pay, (5) restructuring
reserves, (6) group insurance claims, (7) accrued salary and wages,
(8) property taxes, (9) royalties, (10) payroll taxes & fringes, (11)
auditing, (12) advertising - Canada, (13) sales tax, (14) accrued
rent - Mill Stores, (15) manager incentive - Stores Div., (16) Canada
payables, (17) bath water agreement, (18) salesmen's incentive, (19)
workers compensation, (20) other miscellaneous items, (21)
reclamation claims, (22) executory contracts, (23) tax claims, (24)
professional fees, (25) KERP and (26) Closing DIP Amount.
4. "CLOSING WC THRESHOLD AMOUNT" is $184 million.
Attached for example purposes only is a calculation of Closing WC based on
estimated WC Assets and WC Liabilities as of June 30, 2005.
- -------------------
(1) For the avoidance of doubt, the cash portion of the Purchase Price
will not be considered a WC Asset.
WESTPOINT STEVENS
- --------------------------------------------------------------------------------
Working Capital Threshold Schedule
(Dollars in Thousands)
COMPANY
ESTIMATE
6/30/05E
--------
WC ASSETS
- ---------
Cash & Cash Equivalents $6,500
Inventories, Net of Reserves 292,784
Accounts Receivable, Net of Reserves 179,467
Prepaid Expenses & Other Current Assets 18,178
---------
TOTAL WC ASSETS 496,929
WC LIABILITIES
- --------------
Accounts Payable (Post-Petition) 41,994
Customer Accomodations 24,737
Current Environmental Liabilities 6,000
Vacation Pay 6,500
Restructuring Reserves 24,664
Group Insurance 6,200
Accrued Salary & Wages 13,275
Property Taxes 3,743
Royalties 5,730
Payroll Taxes & Fringes 1,800
Auditing 780
Advertising - Canada 691
Sales Tax 645
Accrued Rent - Mill Stores 205
Manager Incentive - Mill Stores 175
Accounts Payable - Canada 344
Bath Water Agreement 677
Salesmens' Incentive 263
Workers Compensation 13,782
Other Miscellaneous Items 3,273
DIP 94,599
Reclamation Claims 1,225
Executory Contracts 3,372
Tax Claims 1,896
Professional Fees 9,393
KERP 14,515
---------
TOTAL WC LIABILITIES 280,478
CLOSING WC AT 6/30/05E $216,451
Closing WC Threshold Amount 184,000
---------
Cushion $ $32,451
Cushion % 15.0%
Exhibit A
BIDDING PROCEDURES(1)
The following procedures will govern the submission and acceptance of competing
bids for the sale of the WestPoint Stevens Inc. Debtors' assets pursuant to
sections 363(b) and 105(a) of the Bankruptcy Code:
Marketing Efforts. As promptly as practicable and, in any event,
within 3 business days after the date on which the order approving these Bidding
Procedures is entered, Rothschild will distribute to all persons that have
expressed an interest in a transaction and all other strategic and financial
investors it determines may have an interest in a possible transaction
(collectively, the "Interested Parties") a due diligence package consisting of
an informational memorandum containing various financial data and other relevant
information in connection with the Assets, as well as a copy of the Asset
Purchase Agreement.
Break-Up Fee. The Break-Up Fee set forth in the Asset Purchase
Agreement is approved.
Potential Bidders. In order to conduct due diligence for the purpose
of submitting a bid, a person interested in acquiring the Assets (a "Potential
Bidder") must deliver (unless previously delivered) to the Debtors (i) an
executed confidentiality agreement in form and substance satisfactory to the
Debtors, (ii) a non-binding expression of interest in a form reasonably
acceptable to Rothschild and that Rothschild in its discretion determines to be
reasonably likely (based on availability of financing, experience and other
considerations it deems to be appropriate) to be consummated if selected as the
Successful Bidder within a time frame acceptable to the Debtors, and (iii) the
most current audited and latest unaudited financial statements (collectively,
the "Financials") of the Potential Bidder, or, if the Potential Bidder is an
entity formed for the purpose of acquiring the Assets (a "Sale Transaction"),
(x) Financials of the equity holder(s) of the Potential Bidder or such other
form of financial disclosure acceptable to the Debtors, and (y) the written
commitment acceptable to the Debtors of the equity holder(s) of the Potential
Bidder to be responsible for the Potential Bidder's obligations in connection
with a Sale Transaction.
Qualified Bidder. A "Qualified Bidder" is a Potential Bidder whose
Financials demonstrate the financial capability to consummate a Sale Transaction
and who the Debtors determine is likely to consummate a Sale Transaction, if
selected as the successful bidder, after taking into account all relevant legal,
regulatory, and business considerations. Within two (2) business days after the
Debtors receive from a Potential Bidder all the materials required in the
preceding paragraph, the Debtors shall determine, in consultation with their
advisors, and shall notify the Potential Bidder in writing whether the Potential
Bidder is a Qualified Bidder. For purposes of determining who is a Qualified
Bidder, New Textile will be deemed a Qualified Bidder. The Debtors will advise
New Textile of the identity of each Qualified Bidder promptly upon its
designation as such.
Due Diligence Requests. To obtain due diligence access or additional
information regarding the Assets or the Debtors, a Qualified Bidder must first
provide the Debtors with a written non-binding expression of interest
("Expression of Interest") regarding (i) a Sale Transaction, (ii) the purchase
price composition and range, (iii) the structure and financing of the Sale
Transaction (including the amount of cash to be committed and sources of
financing), (iv) any conditions to closing that it may wish to impose, and (v)
- ----------------
1 Capitalized terms not otherwise defined herein shall have the meaning
ascribed to them in the sale motion.
the nature and extent of additional due diligence it may wish to conduct. If the
Debtors, in their business judgment, determine that a Qualified Bidder that has
submitted an Expression of Interest is reasonably likely to make a bona fide
offer that would result in greater value being received for the benefit of the
Debtors' creditors than under the Asset Purchase Agreement, then the Debtors
shall afford such Qualified Bidder reasonable due diligence. Neither the Debtors
nor any of their affiliates (or any of their respective representatives) are
obligated to furnish any information relating to the Debtors, the Assets, and/or
a Sale Transaction to any person except to a Qualified Bidder who makes an
Expression of Interest. The Debtors shall coordinate all reasonable requests for
additional information and due diligence access from Qualified Bidders. No
conditions relating to the completion of due diligence shall be permitted to
exist after the Bidding Deadline (as defined below). The Debtors shall not allow
a Qualified Bidder who operates or is affiliated with a competitive business to
conduct highly sensitive due diligence, such as (i) product line margins, (ii)
specific customer pricing arrangements, (iii) junior management or employee
interviews, (iv) customer interviews, or (v) other highly confidential areas
unless and until such Qualified Bidder has submitted a definitive asset purchase
agreement acceptable to the Debtors at a value that the Debtors determine is
higher and better than the existing offer of New Textile.
Debtors' Entitlement to Due Diligence. The Debtors and their advisors
shall be entitled to due diligence from a Qualified Bidder, upon execution of a
confidentiality agreement. Each Qualified Bidder shall comply with all
reasonable requests for additional information and due diligence access by the
Debtors or their advisors. Failure by the Qualified Bidder to fully comply with
requests for additional information and due diligence access will be a basis for
the Debtors to determine that a bid made by the Qualified Bidder is not a
Qualified Bid (as defined below).
Bid Requirements. Bids must be a written irrevocable offer from a
Qualified Bidder not contingent upon any event, including, without limitation,
any due diligence investigation, the receipt of financing and further bidding
approval, including from any board of directors, shareholders or otherwise (i)
stating that the Qualified Bidder offers to consummate a Sale Transaction
pursuant to an agreement that has been marked to show amendments and
modifications to the Asset Purchase Agreement, including price and terms, that
are being proposed by the Qualified Bidder (the "Marked Agreement"); (ii)
confirming that the offer shall remain open until the closing of a Sale
Transaction to the Successful Bidder (as defined below); and (iii) enclosing a
copy of the proposed Marked Agreement. While bidders may suggest modifications
to the Asset Purchase Agreement, any such modifications deemed by the Debtors to
increase the obligations or burdens upon the Debtors (such as additional
conditions) will be considered by the Debtors in determining whether to accept
such bid. Except as provided below, bids will not be shared among bidders. Bids
must be accompanied by a deposit in an amount equal to 10% of the cash bid
amount or, if greater, 110% of the amount of New Textile's most recent deposit
(in the case of bidders other than New Textile), in the form of a certified
check or wire transfer payable to WestPoint Stevens Inc. and be received by the
Debtors at least two days prior to the Auction. If any bid is conditioned upon
the assumption and assignment of executory contracts or unexpired leases, then
such bidder shall be required to identify such contracts and/or leases to be
assumed and assigned and provide evidence of its ability to provide adequate
assurance of future performance of such contracts or leases along with the bid
(an "Adequate Assurance Package").
2
Bidding Deadline. Bids and Adequate Assurance Packages must be
submitted so that they are actually received by no later than 12:00 noon
prevailing Eastern Time on _______ __, 2005 (the "Bidding Deadline") by
WestPoint Stevens Inc., P.O. Box 71, 507 West Tenth Street, West Point, Georgia
31833 (Attn: Clay Humphries, Esq.), with copies to (i) Weil, Gotshal & Manges
LLP, 767 Fifth Avenue, New York, New York, 10153-0119 (Attn: Michael F. Walsh,
Esq. and John J. Rapisardi, Esq.), and (ii) Rothschild Inc., 1251 Avenue of the
Americas, 51st Floor, New York, New York 10020 (Attn: Neil Augustine). The
Debtors will provide New Textile with a summary of the material terms of any
bids received by the Debtors within two business days after each such bid is
received. The Debtors may, at their discretion, extend the Bidding Deadline for
certain bidders, but are under no obligation to do so and will not be required
to review or consider bids that are submitted after the Bidding Deadline.
Qualified Bid. A bid received from a Qualified Bidder that meets the
requirements set forth in the preceding two paragraphs will be considered a
"Qualified Bid" if the Debtors reasonably believe that such bid would be
consummated if selected as the Successful Bid (as defined below). For all
purposes hereof, New Textile's offer to acquire the Assets pursuant to the Asset
Purchase Agreement shall constitute a Qualified Bid. The Debtors will notify New
Textile of their designation of any bids as Qualified Bids on the same day such
designation is made and will advise New Textile of any material changes in any
bids on the same day such changes are proposed.
Baseline Bid. Unless otherwise ordered by the Court for cause shown,
only a Qualified Bidder that has submitted a Qualified Bid is eligible to
participate in the Auction. At least three (3) business days prior to the
Auction, the Debtors will select the highest or best Qualified Bid (the
"Baseline Bid") to serve as the starting point for the Auction. The Baseline Bid
will be either (i) the bid set forth in the Asset Purchase Agreement, or (ii)
one or more Qualified Bids that in the aggregate involve the purchase of
substantially all the assets and the assumption of substantially all the
liabilities contemplated to be purchased and assumed pursuant to the Asset
Purchase Agreement and are determined to be (collectively, if applicable) a
higher or better bid than that set forth in the Asset Purchase Agreement and
that proposes (collectively, if applicable) a purchase price that is at least
$5,000,000 greater than the sum of (a) the Debtors' determination of the value
to its estates of the aggregate consideration provided pursuant the Asset
Purchase Agreement, and (b) the Break-Up Fee set forth in the Asset Purchase
Agreement. If the Baseline Bid is other than the bid set forth in the Asset
Purchase Agreement, the Debtors will provide New Textile with a copy of all
documentation evidencing such bid on the same day such bid is selected as the
Baseline Bid. All interested bidders should contact the Debtors for more
information on how the Debtors value various forms of consideration for the
Assets.
The Auction. Subject to the provisions below, if at least two
Qualified Bids have been received, the Debtors shall conduct an Auction (the
"Auction"). The Auction will be conducted at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York 10153 on ______ __, 2005 at
11:00 a.m, or such later time or other place as the Debtors shall notify all
Qualified Bidders. Only Qualified Bidders will be eligible to participate in the
Auction. Only the authorized representatives of each of the Qualified Bidders,
the agent for the First Lien Lenders and Second Lien Lenders, the Creditors'
Committee, New Textile, and the Debtors shall be permitted to attend the
Auction. For purposes of bidding at the Auction, the collateral trustee under
the Collateral Trust Agreement (as such term is defined in the Asset Purchase
Agreement), will be authorized to credit bid at the Auction on behalf of the
First Lien Lenders and New Textile up to the full amount of the obligations
3
owing to the First Lien Lenders under the First Lien Credit Agreement. At least
two business days prior to the Auction, each Qualified Bidder who has submitted
a Qualified Bid must inform the Debtors and New Textile whether it intends to
participate in the Auction. If no Qualified Bids (other than New Textile's) are
received by the Bidding Deadline or indicate an intent to participate in the
Auction, then the Auction will not be held, New Textile will be the Successful
Bidder (as defined below), the Asset Purchase Agreement will be the Successful
Bid (as defined below), and at the Sale Hearing (as defined below), the Debtors
will seek approval of and authority to consummate the Sale Transaction
contemplated by the Asset Purchase Agreement.
Auction Procedures. Based upon the terms of the Qualified Bids
received, the number of Qualified Bidders participating in the Auction, and such
other information as the Debtors' determine is relevant, the Debtors, in their
sole discretion, may conduct the Auction in the manner they determine, in their
judgment, will promote the goals of the bidding process, achieve the maximum
value for all parties in interest, and are not inconsistent with any of the
provisions of the Bidding Procedures Order, the Bankruptcy Code or any order of
the Bankruptcy Court entered in connection herewith. Such rules will provide
that: (a) the procedures must be fair and open, with no participating Qualified
Bidder disadvantaged in any material way as compared to any other Qualified
Bidder; (b) all bids will be made and received in one room, on an open basis,
and all other bidders will be entitled to be present for all bidding with the
understanding that the true identify of each bidder will be fully disclosed to
all other bidders and that all material terms of each Qualified Bid will be
fully disclosed to all other bidders throughout the entire Auction; and (c) each
Qualified Bidder will be permitted a fair, but limited, amount of time to
respond to the previous bid at the Auction. Bidding at the Auction will continue
until such time as the highest or otherwise best offer is determined. The
Debtors will, from time to time, in an open forum, advise Qualified Bidders
participating in the Auction of their determination as to the terms of the then
highest or otherwise best bid. For purposes of comparing any bids by New Textile
at the Auction that are higher than the bid set forth in the Asset Purchase
Agreement (a "Higher New Textile Bid") against any other bids that are made by a
Qualified Bidder (other than New Textile) pursuant to these bidding procedures,
each Higher New Textile Bid shall include the amount of the Break-Up Fee (the
"Break-Up Fee Increment"). In the event that a Higher New Textile Bid is the
Successful Bid (defined herein) at the Auction, the purchase price amount
finally payable by New Textile in respect of the Successful Bid will be reduced
by the Break-Up Fee Increment.
Successful Bid. As soon as is practicable after the conclusion of the
Auction, the Debtors, in consultation with their advisors, shall (i) review each
Qualified Bid on the basis of financial and contractual terms and the factors
relevant to the investment process, including those factors affecting the speed
and certainty of consummating the Qualified Bid and (ii) identify the highest or
otherwise best offer (the "Successful Bid") and the bidder making such proposal
(the "Successful Bidder"). The winning bidder(s) will be required to enter into
a definitive agreement (as modified by the Bids submitted at the Auction) before
the Auction is adjourned. Upon conclusion of the Auction, the Debtors will file
a notice with the Court identifying the winning bidder(s). The Debtors shall
have accepted a bid only when the bid is declared the Successful Bid, the
Successful Bid has been approved by the Court and definitive documentation has
been executed in respect of the Successful Bid. Within two (2) business days of
the conclusion of the Auction, the Debtors will file a report of the results of
4
the Auction (the "Auction Report") and serve the Auction Report on the master
service list maintained in these chapter 11 cases and each Qualified Bidder.
Additional Deposits. Within 24 hours after the Auction, any
Successful Bidder and any party submitting the second highest or otherwise best
bid must supplement the Good Faith Deposit (through certified check or wire
transfer), so that the total deposit equals 10% of the cash portion of its
winning or second highest bid or, if greater, 110% of the amount of New
Textile's most recent deposit (in the case of bidders other than New Textile).
Such deposit will be held by the Debtors, without interest, until the earlier to
occur of (i) the time such bid is officially rejected by the Debtors and (ii)
seven (7) days after the Sale Hearing. Such deposit will be forfeited in the
event that any bidder for an accepted bid defaults.
Sale Hearing. The Sale Hearing will be held before the Honorable
Robert D. Drain, United States Bankruptcy Judge, at the United States Bankruptcy
Court for the Southern District of New York, One Bowling Green, New York, New
York 10001, on ______ __, 2005 at 10:00 a.m. or such other date and time that
the Court establishes. Objections to any relief requested by this Motion shall
be in writing and filed so as to be actually received by 12:00 Noon on ________
__, 2005.
Reservation of Rights. The Debtors reserve the right to (i) extend
the deadlines set forth in the Bidding Procedures and/or adjourn the Auction
and/or the Sale Hearing without further notice, and (ii) reject any or all Bids
(other than New Textile's) if, in the Debtors' reasonable judgment, no bid is
for a fair and adequate price.
Failure to Consummate. If for any reason the entity or entities that
submit(s) the highest or otherwise best bid(s) fails to consummate the purchase
of the Assets, or any part thereof, the offeror of the second highest or
otherwise best bid will automatically be deemed to have submitted the highest or
otherwise best bid and to the extent such offeror and the Debtors consent, the
Debtors and such offeror are authorized to effect the sale of the assets, or any
part thereof, to such offeror(s) as soon as is commercially reasonable without
further order of the Bankruptcy Court. If such failure to consummate the
purchase is the result of a breach by the winning bidder, the Good Faith Deposit
shall be forfeited to the Debtors and the Debtors specifically reserve the right
to seek all available damages from the defaulting bidder.
THE BID OF ANY BIDDER FAILING TO COMPLY WITH THESE REQUIREMENTS MAY
NOT BE CONSIDERED BY THE DEBTORS IN THEIR SOLE AND ABSOLUTE DISCRETION.
5