ASSET PURCHASE AGREEMENT
by and between
CLASS RINGS, INC.,
as Buyer
and
CJC Holdings, Inc.
and
CJC North America, Inc.,
as Seller
May 20, 1996
TABLE OF CONTENTS
ARTICLE I
TRANSFER OF ASSETS AND LIABILITIES
1.1 Purchase of Seller's Assets............................... 1
1.2 Assumed Liabilities....................................... 6
1.3 Excluded Liabilities. .................................... 7
1.4 Purchase Price............................................ 7
1.5 Determination of Adjusted Working Capital. ............... 8
1.6 Payment of Adjusted Purchase Price. ...................... 9
1.7 Allocation of Purchase Price. ............................ 10
1.8 Prorations. .............................................. 10
1.9 Escrow. .................................................. 11
ARTICLE II
CLOSING
2.1 The Closing............................................... 12
2.2 Deliveries by Seller...................................... 12
2.3 Deliveries by Buyer....................................... 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Corporate Organization.................................... 15
3.2 Authorization............................................. 15
3.3 No Violations; No Consents or Approvals Required.......... 16
3.4 Financial Statements...................................... 16
3.5 Absence of Undisclosed Liabilities........................ 17
3.6 Absence of Certain Changes................................ 17
3.7 Title to Properties and Related Matters................... 18
3.8 Intellectual Property..................................... 19
3.9 Litigation................................................ 20
3.10 Compliance with Applicable Law............................ 20
3.11 Brokers and Finders....................................... 20
3.12 Powers of Attorney........................................ 20
3.13 Labor and Employment...................................... 20
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3.14 Employee Benefits......................................... 21
3.15 Asset Maintenance......................................... 21
3.16 Contracts................................................. 22
3.17 Environmental............................................. 22
3.18 Taxes..................................................... 23
3.19 Accounts Payable.......................................... 24
3.20 Customers and Suppliers................................... 24
3.21 Assets Constituting the Business.......................... 24
3.22 Cost Savings Assumptions.................................. 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Corporate Organization.................................... 25
4.2 Authorization............................................. 25
4.3 No Violations; No Consents or Approvals Required.......... 25
4.4 Brokers and Finders....................................... 26
4.5 Financing................................................. 26
4.6 Litigation Affecting Buyer................................ 26
4.7 Fraudulent Conveyance/Fraudulent Transfer Matters......... 27
4.8 T&C Transaction........................................... 27
ARTICLE V
COVENANTS
5.1 Conduct of the Business Pending the Closing............... 27
5.2 Access to Information..................................... 29
5.3 Reasonable Best Efforts................................... 30
5.4 Public Announcements...................................... 31
5.5 Hart-Scott-Rodino Filing.................................. 32
5.6 Mexican Subsidiary........................................ 32
5.7 Post Closing Confidentiality.............................. 32
5.8 Environmental Assessment.................................. 32
5.9 Update of Schedules....................................... 33
5.10 Taxes..................................................... 35
5.11 Audited Financials........................................ 35
5.12 Noncompetition............................................ 35
5.13 T&C Agreement............................................. 36
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ARTICLE VI
PERSONNEL, EMPLOYMENT ARRANGEMENTS
AND EMPLOYEE BENEFITS
6.1 Personnel................................................. 37
6.2 401(k) Plan............................................... 37
6.3 Other Seller Welfare Benefit Plans........................ 38
6.4 Vacation.................................................. 38
6.5 Payroll Issues............................................ 39
6.6 Workers Adjustment and Retraining Notification Act........ 39
6.7 Cooperation of the Parties................................ 39
6.8 Employee Rights........................................... 39
6.9 Employment Agreements..................................... 39
6.10 Limitations. ............................................. 39
ARTICLE VII
CONDITIONS TO CLOSING
7.1 General Conditions........................................ 40
7.2 Conditions to Obligations of Seller....................... 40
7.3 Conditions to Obligations of Buyer........................ 40
ARTICLE VIII
TERMINATION
8.1 Termination............................................... 42
8.2 Notice of Termination..................................... 43
8.3 Effect of Termination..................................... 43
ARTICLE IX
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
9.1 Survival.................................................. 43
9.2 Indemnification by Seller................................. 43
9.3 Indemnification by Buyer.................................. 43
9.4 Limitation of Liability................................... 44
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9.5 Notice and Right to Defend................................ 44
9.6 Remedies Exclusive........................................ 45
ARTICLE X
MISCELLANEOUS
10.1 Expenses, Taxes........................................... 45
10.2 Further Assurances........................................ 46
10.3 Notices................................................... 46
10.4 Headings.................................................. 47
10.5 Applicable Law............................................ 47
10.6 Assignability............................................. 47
10.7 Counterparts.............................................. 47
10.8 Entire Agreement.......................................... 48
10.9 Severability.............................................. 48
10.10 Bulk Sales Laws........................................... 48
10.11 Amendment................................................. 48
10.12 Waiver.................................................... 48
EXHIBITS
Exhibit "A" - Allocation of Purchase Price
Exhibit "B" - Transition Services Agreement
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SCHEDULES
Schedule 1.1(a)(iii) Contracts
Schedule 1.1(a)(iv) Patents, Trademarks, Tradenames,
Service Marks, Etc.
Schedule 1.1(a)(vi) Real Property
Schedule 1.1(a)(vii) Leases
Schedule 1.1(a)(xiii) Capital Stock of Subsidiaries
Schedule 1.4 Base Working Capital Statement
Schedule 1.4(a) Inventory Valuation
Schedule 3.1(b) Subsidiary Capital Stock Liens
Schedule 3.3 Violations, Consents or Approvals
Schedule 3.4(b) Interim Financials - Non-GAAP Presentations
Schedule 3.4(c) Liabilities and Obligations
Schedule 3.5 Liabilities not Otherwise Disclosed
Schedule 3.6 Absence of Certain Changes
Schedule 3.7 Contested Liens
Schedule 3.8 Intellectual Property
Schedule 3.9 Litigation
Schedule 3.10 Compliance
Schedule 3.12 Powers of Attorney
Schedule 3.13 Labor and Employment
Schedule 3.14 Employment Benefits
Schedule 3.15 Asset Maintenance
Schedule 3.17 Environmental Compliance
Schedule 5.3 Cost of Additional Employees
Schedule 6.4 Vacation Policy
Schedule 6.9 Executives
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INDEX OF DEFINITIONS
Definition Page
----
ABC Contract.......................................................... 3
Accountants........................................................... 9
Adjusted Working Capital.............................................. 8
Agreement............................................................. 1
Assets................................................................ 1
Assumed Liabilities................................................... 6
Assumption Agreement.................................................. 14
Balance Sheet......................................................... 17
Base Working Capital Statement........................................ 8
Basket................................................................ 33
Bridal Business....................................................... 4
Business.............................................................. 1
Buyer................................................................. 1
Buyer Agreements...................................................... 25
Buyer Medical Plans................................................... 38
Buyer Welfare Plan.................................................... 38
Buyer's 401(k) Plan................................................... 37
CJCNA................................................................. 1
Closing............................................................... 12
Closing Date.......................................................... 12
Code.................................................................. 21
Consultation Period................................................... 32
Contracts............................................................. 2
Current Assets........................................................ 8
Current Liabilities................................................... 8
Damages............................................................... 43
Economic Impact....................................................... 33
Employees............................................................. 11
Environmental Claim................................................... 22
Environmental Laws.................................................... 22
Environmental Liabilities............................................. 22
ERISA................................................................. 38
ESA................................................................... 32
Escrow Agreement...................................................... 11
Escrow Amount......................................................... 11
Estimated Working Capital............................................. 8
Excluded Assets....................................................... 3
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Excluded Liabilities.................................................. 7
Final Allocation...................................................... 10
Financial Statements.................................................. 17
Hazardous Materials................................................... 22
HSR Act............................................................... 16
Intellectual Property................................................. 2
Interim Changes....................................................... 10
Lease Agreement....................................................... 13
Lease(s).............................................................. 2
License Agreement..................................................... 12
Liens................................................................. 19
Permits............................................................... 3
Permitted Liens....................................................... 19
Pre-Closing Tax Period................................................ 24
Proposal.............................................................. 36
Purchase Price........................................................ 7
Real Property......................................................... 2
Release............................................................... 23
Relevant Group........................................................ 24
Restricted Area....................................................... 36
Restricted Business................................................... 36
Seller................................................................ 1
Seller Agreements..................................................... 15
Seller Plan........................................................... 21
Seller Welfare Plans.................................................. 38
Statement of Net Working Capital...................................... 8
Stock................................................................. 3
Subsidiaries.......................................................... 15
T&C................................................................... 26
T&C Agreement......................................................... 26
Tax................................................................... 24
Tax Returns........................................................... 24
Transferred Employees................................................. 37
Transition Services Agreement......................................... 13
Vacation Policy....................................................... 38
WARN Act.............................................................. 39
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of May 20, 1996 (the "Agreement"),
is by and between CJC Holdings, Inc., a Texas corporation ("Seller"), CJC North
America, Inc., a Delaware corporation and wholly-owned subsidiary of Seller
("CJCNA") and Class Rings, Inc., a Delaware corporation ("Buyer").
Seller is one of the leading manufacturers of commemorative jewelry in the
United States. It manufactures and markets high school and college class rings,
gold and diamond wedding rings and other jewelry products. This Agreement sets
forth the terms and conditions upon which (i) Seller and CJCNA will sell to
Buyer, and Buyer will purchase from Seller and CJCNA, substantially all of the
properties and assets of Seller and CJCNA associated with Seller's Class Ring
Division and substantially all of the rights, claims and contracts constituting
the class ring business of Seller or CJCNA (the "Business"), and (ii) Buyer will
assume certain liabilities of Seller and CJCNA associated with the Business, all
upon the terms and subject to the conditions set forth in this Agreement.
In consideration of the foregoing and the mutual representations,
warranties, covenants and agreements contained herein, intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
TRANSFER OF ASSETS AND LIABILITIES
1.1 Purchase of Seller's Assets.
(a) Except as provided in Section 1.1(c) below and subject to the
terms and conditions of this Agreement, Seller shall sell, transfer, convey,
assign and deliver to Buyer, or cause, as necessary, CJCNA to sell, transfer,
convey, assign and deliver to Buyer, free and clear of all liens, claims and
encumbrances of any kind other than Permitted Liens (as defined below) and Buyer
shall purchase, acquire, assume and accept from Seller or CJCNA, all of the
following properties, assets, rights, claims and contracts associated with or
used or held by Seller or CJCNA for use in the operation of the Business (the
"Assets"):
(i) all machinery, motor vehicles, equipment, molds, dies and all
other tangible personal property used or held for use in the Business including,
without limitation, all such property constituting the Property, Plant and
Equipment line item
on the Balance Sheet (as defined below) plus additions or minus deletions
thereto since the date of the Balance Sheet made in the ordinary course of
business;
(ii) all inventories of gold, silver and other raw materials,
supplies, work in process, packaging supplies, samples, finished goods,
consigned or memo goods and other inventories used or held for use in the
Business including all inventory related to the Business reflected on the
Balance Sheet plus additions or minus deletions thereto since the date of the
Balance Sheet made in the ordinary course of the Business;
(iii) all rights in and under contracts (including any non-
competition agreements), leases of personal property, licenses, or other
arrangements, purchase and sale orders and other agreements related to the
ownership or operation of the Business (the "Contracts"), including, but not
limited to, those Contracts listed on Schedule 1.1(a)(iii), subject to any
required consents;
(iv) all trademarks, tradenames, service marks, copyrights,
patents and all registrations and applications for registrations of any of the
foregoing that are related to or used or held for use in the Business, all of
which are specifically identified in Schedule 1.1(a)(iv) hereto and which
include the ArtCarved(R) and Keepsake(R) names and trademarks, and all
inventions, trade secrets, know-how, formula and designs related to the
Business, including the goodwill associated with the foregoing, and all rights
and remedies against any infringement thereof (all of the foregoing referred to
as the "Intellectual Property");
(v) all accounts and notes receivable arising from the operation
of the Business;
(vi) all real property and interests therein owned by Seller, all
of which are identified in Schedule 1.1(a)(vi) hereto, including all buildings,
structures and improvements located thereon, fixtures located therein or
appurtenant thereto and all of Seller's rights arising out of ownership or use
thereof (the "Real Property");
(vii) all of Seller's right and interest in the lease(s) of real
property in connection with the Business as listed on Schedule 1.1(a)(vii)
hereto or as entered into after the date hereof (with Buyer's consent) (the
"Lease(s)");
(viii) all computer equipment and computer programs (to the
extent transferable) and documentation used in the Business;
(ix) all franchises, licenses, permits or other rights granted by
governmental authorities and all certificates of convenience or necessity,
easements,
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consents, grants, rights to emission credits and other rights of every character
whatsoever that are used for the lawful ownership or operation of the Business
(collectively, the "Permits"), to the extent transferable;
(x) all existing plans or designs for jewelry products at any
time used in or produced or designed for use in or currently in process at or
currently planned in connection with the Business;
(xi) all books of account, records, files and invoices used in or
associated with the Business, including but not limited to all production data,
equipment maintenance data, employee files, accounting records, inventory
records, sales and sales promotional data, advertising materials, customer
lists, cost and pricing information, supplier lists, business plans, reference
catalogs, environmental and engineering reports, plans and specifications, and
any other records and data used in connection with the Business;
(xii) all rights under express or implied warranties from
suppliers of the Business (to the extent transferable in accordance with
applicable law) except to the extent related to Excluded Liabilities (as defined
below);
(xiii) all of the capital stock (the "Stock") owned by Seller in
each of the Subsidiaries listed on Schedule 1.1(a)(xiii) hereto other than
CJCNA;
(xiv) cash received by or for account of Seller whether as cash,
check or lock box deposit or otherwise after the Closing Date attributable to
the purchased Assets; and
(xv) all other assets (other than the Excluded Assets, as defined
below) used or usable in the conduct of the Business, including, without
limitation, the goodwill related to the Business.
(b) Subject to the terms and conditions of this Agreement, CJCNA shall
sell, transfer, convey, assign and deliver to Buyer, and Buyer shall purchase,
acquire, assume and accept from CJCNA, subject to any required consent, all
rights in and under that certain contract dated April 5, 1994, between CJCNA and
the American Bowling Congress, Inc. as amended by letter dated October 19, 1995
(the "ABC Contract"). For all purposes of this Agreement, the defined terms
"Contracts" and "Assets" shall include the ABC Contract.
(c) Notwithstanding anything to the contrary in Section 1.1(a), the
Assets shall exclude the following (the "Excluded Assets"):
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(i) cash and cash equivalents (except cash received by or for
account of Seller whether as cash, check or lock box deposit or otherwise after
the Closing Date attributable to the purchased Assets), bank accounts, lock
boxes and other similar accounts and marketable securities;
(ii) any insurance policies relating to the Assets or the
Business including premium adjustments, retrospective rating adjustments and
prepaid insurance premiums;
(iii) all past, present or future claims, choses in action and
rights or actions by Seller or CJCNA against third parties relating to the
Assets or the operations of the Business prior to the Closing Date except to the
extent related to, or arising out of the same circumstances or events as, an
Assumed Liability and relating to Buyer's ability to perform the Assumed
Liabilities or assert a claim of Buyer with respect to Buyer's operation or
ownership of the Business after Closing;
(iv) the Permits and the Contracts to the extent not lawfully
transferable;
(v) all claims for refunds of taxes and other government charges
or assessments arising from or pertaining to periods, activities, operations or
events occurring on or prior to the Closing Date relating to Seller or CJCNA;
(vi) the $1,500,000 on deposit with Bracewell & Patterson,
L.L.P.;
(vii) all of the issued and outstanding capital stock of CJCNA;
(viii) all employment contracts and all other agreements with
directors and/or executive officers of Seller or of any Subsidiary; and
(ix) all assets, properties, rights, claims, contracts and
agreements of Seller relating exclusively to Seller's Bridal Division and
Seller's business of designing, manufacturing and marketing various bridal
jewelry rings ("Bridal Business"), excluding the Keepsake(R) trademark and any
real property listed on Schedule 1.1(a)(vi), but including:
(1) all of the issued and outstanding capital stock of CJC
Heritage, Inc., a Delaware corporation;
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(2) the machinery, fixtures, equipment, and all other
tangible personal property used exclusively in or identified exclusively
with the Bridal Business and all spare or replacement parts for any of the
foregoing equipment;
(3) all inventories of gold, silver, colored stones,
diamonds and other raw materials, supplies, work in process, packaging
supplies, samples, finished goods, consigned or memo goods and other
inventories sold or held exclusively for use in the Bridal Business;
(4) all rights and benefits of the Seller in and under the
contracts (including any non-competition agreements and equipment
maintenance agreements), leases of personal property, licenses, purchase
and sale orders and other agreements related exclusively to the ownership
and operation of the Bridal Business;
(5) those trademarks, tradenames, service marks, copyrights,
copyright applications, patents, patent applications, service mark
applications, trademark applications, inventions, manufacturing techniques,
trade secrets, logos, slogans, proprietary processes and formulae and all
other proprietary, technical and other information and intellectual
proprietary rights, whether patentable or unpatentable, that relate to, or
have been used exclusively in connection with the Bridal Business and are
not expressly included in the Assets;
(6) all accounts and notes receivable arising exclusively
from the operation of the Bridal Business;
(7) all books of account, records, files and invoices which
relate to or are or were used exclusively in the Bridal Business, including
but not limited to all production data, equipment maintenance data,
accounting records, inventory records, sales and sales promotional data,
advertising materials, customer lists, cost and pricing information,
correspondence, supplier lists, business plans, reference catalogs,
computer records, files and programs and any other records and data used
exclusively in the Bridal Business;
(8) all rights under express or implied warranties from
suppliers of the Bridal Business;
(9) all computer hardware and software and documentation
used exclusively in the Bridal Business, including the IBM AS/400
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Model E45 computer (Serial Number 1030452) used in the Bridal Business and
located at 7211 Circle S Road, Austin, Texas;
(10) all existing plans or designs for bridal jewelry rings,
and all styles, drawings, specifications, samples, tools, dies, molds,
models and hubs for such rings which are or have been used exclusively in
connection with the Bridal Business;
(11) the goodwill related to the Bridal Business;
(12) all stationery, purchase orders, forms, invoices,
labels, shipping material, catalogs, brochures, art work, photographs and
advertising materials of Seller which primarily relate to or are used
exclusively in the Bridal Business; and
(13) the gold "put option" issued by Chemical Bank and held
by Texas Commerce Bank, N.A., as a price hedge, the value of which is
carried on the books of the Bridal Division as a miscellaneous deposit.
(d) The title to, possession of and risk of loss, destruction or
damage with respect to the Assets shall pass to Buyer as of the Closing;
provided, however, that this Section 1.1 shall not diminish, limit or otherwise
impair in any manner Buyer's or Seller's rights under the other provisions of
this Agreement or the instruments, agreements, certificates and documents to be
executed and delivered in connection herewith that apportion liability between
the parties with respect to events, occurrences, omissions or other matters
arising or occurring during specific periods.
1.2 Assumed Liabilities.
As partial consideration for consummation of the transactions contemplated
hereby, at the Closing, Buyer shall assume and agree thereafter to perform when
due and discharge, the following debts, obligations and liabilities of Seller
relating to the Business or the Assets and any obligations and liabilities of
CJCNA under the ABC Contract, in each case whether known, unknown, fixed,
contingent, or otherwise (the "Assumed Liabilities"):
(a) the obligations of Seller to honor cash discounts, dating terms
and prepaid orders to the extent reflected in the accounts receivable of the
Business outstanding as of the Closing Date;
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(b) those liabilities, obligations, costs and expenses arising out of
or relating to the operation or ownership of the Assets or the Business by Buyer
or its assignees after the Closing Date or which relate to or arise out of the
performance by Buyer or its assignees of the Contracts, Leases and Permits
(other than Excluded Assets) after the Closing Date to the extent that such
Contracts, Leases and Permits are assigned to Buyer hereunder in compliance with
any required consents of other parties or consents or approvals of governmental
authorities, or to the extent that Buyer is otherwise obtaining equivalent
benefits thereunder, those liabilities, obligations, costs or expenses
specifically related to the benefits received by Buyer but only to the extent
not otherwise incurred or required to be paid by Buyer;
(c) the accounts payable and all other liabilities of Seller included
in the determination of Adjusted Working Capital pursuant to Section 1.5;
(d) the obligations of Seller incurred in the ordinary course of
business as a bailee to hold, store or retain finished goods located at any
facility of the Business for customers who have previously purchased such goods;
(e) the liabilities and obligations of Seller, if any, relating to
Seller's employees, to be assumed by Buyer as provided in Article VI; and
(f) all obligations and responsibilities of Seller for all production
warranties, repairs and customer returns related to the ownership or operation
of the Assets or the Business prior to and after the Closing Date.
1.3 Excluded Liabilities. Seller shall retain all debts, liabilities,
obligations and commitments arising out of or related to (i) the ownership or
operation of the Assets or the Business by Seller on or prior to the Closing
Date (other than the Assumed Liabilities), (ii) all agreements, including all
employment agreements, with directors and/or officers of Seller or of any
Subsidiary, (iii) any insurance policies relating to the Assets or the Business,
and (iv) all other assets and businesses of Seller, whether prior to or after
Closing, including, without limitation, the assets and operations of Seller's
Bridal Division (the foregoing items (i) through (iv) being collectively
referred to as the "Excluded Liabilities").
1.4 Purchase Price. Subject to adjustment in accordance with Section 1.5
and Section 5.9, the purchase price (the "Purchase Price") payable in
consideration for the Assets (in addition to the assumption of the Assumed
Liabilities) shall be an amount equal to the sum of (a) One Hundred Two Million,
Eight Hundred Thousand Dollars ($102,800,000.00) plus (b) the Adjusted Working
Capital. Buyer will pay to Seller at Closing, by wire transfer in immediately
available funds to an account designated by Seller, an amount equal to the sum
of (x) Seller's good faith estimate of the Adjusted Working Capital, which
estimate shall
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be delivered to Buyer not less than one (1) business day prior to the Closing
Date (the "Estimated Working Capital"), plus (y) One Hundred Two Million, Eight
Hundred Thousand Dollars ($102,800,000.00). "Adjusted Working Capital" shall be
defined as Current Assets of the Business less Current Liabilities of the
Business. "Current Assets" shall include only (i) accounts receivable, (ii)
inventory (valued as set forth in Schedule 1.4(a)), (iii) prepaid expenses (but
excluding prepaid insurance) and (iv) monies on deposit with others except those
deposits that constitute Excluded Assets; in the case of each of items (i)
through (iv) above, such items shall be included in "Current Assets" only to the
extent included in those general ledger accounts on the statement of working
capital as of August 26, 1995, set forth on Schedule 1.4 attached hereto (the
"Base Working Capital Statement"). "Current Liabilities" shall include only (i)
accounts payable and (ii) accrued expenses (other than accrued payroll and
payroll taxes) relating only to the Assets or the Business; in the case of each
of items (i) and (ii) above, such items shall be included in "Current
Liabilities" only to the extent included in those general ledger accounts set
forth on the Base Working Capital Statement. In connection with the foregoing, a
physical count shall be taken of Seller's gold and precious stone inventory on
the Closing Date at which Buyer shall have a representative present. Such
physical inventory shall fix the quantity (by weight, quality and carats, as
applicable) of such items in inventory for purposes of determining a value
thereof and which value shall be precisely calculated for inclusion in the
Statement of Net Working Capital in Section 1.5 below.
1.5 Determination of Adjusted Working Capital.
(a) As promptly as practical after the Closing Date, and in any event
no later than forty-five (45) days thereafter, Seller shall prepare and deliver
to Buyer an unaudited statement of working capital with respect to the Business
as of the Closing Date (the "Statement of Net Working Capital"), showing the
Adjusted Working Capital which shall have been prepared by Seller from its books
and records in accordance with generally accepted accounting principles applied
in a manner consistent with the principles used in the preparation of the Base
Working Capital Statement, except for the valuation of inventory, which will be
in accordance with Schedule 1.4(a). In connection with the foregoing, a physical
inventory of the inventory of the Business will be taken on the Closing Date.
Buyer shall be allowed to have a representative present for the taking of
inventory and to observe the procedures for determining the Statement of Net
Working Capital.
(b) After delivery to Buyer of the Statement of Net Working Capital,
Buyer and its representatives shall be afforded the opportunity to review and
inspect all of the financial records, work papers, schedules and other
supporting papers relating to the preparation of the Statement of Net Working
Capital and to consult with Seller and its representatives, if necessary,
regarding the methods used in the preparation of the Statement of Net Working
Capital.
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(c) The Adjusted Working Capital as shown on the Statement of Net
Working Capital prepared by Seller shall be final, conclusive and binding for
purposes of this Agreement, unless Buyer shall give written notice of
disagreement therewith within twenty (20) business days following its receipt of
the Statement of Net Working Capital, specifying in reasonable detail the nature
and extent of such disagreement. Buyer shall not be permitted to give a notice
of disagreement with respect to the Statement of Net Working Capital prepared by
Seller unless the amount in dispute exceeds Fifty Thousand Dollars ($50,000).
(d) If within twenty (20) business days following receipt by Seller of
a notice of the type referred to in subsection (c) above, Seller and Buyer are
unable to resolve any disagreement with respect to the Statement of Net Working
Capital so that the amount still disputed exceeds Fifty Thousand Dollars
($50,000), the disagreement shall be submitted for resolution to the independent
public accounting firm of Price Waterhouse ("Accountants") which shall act as an
arbitrator to determine and resolve only those issues still in dispute. The
Accountants' resolution shall be made within thirty (30) days of the submission
of the dispute, shall be prepared in accordance with this Agreement and in a
manner which is consistent with the principles used in the preparation of the
Balance Sheet, shall be set forth in a written statement delivered to Seller and
Buyer, and shall be final, conclusive and binding on Seller and Buyer.
(e) The fees and expenses of the Accountants in connection with the
resolution referred to in subsection (d) above shall be shared between Seller
and Buyer as follows: each party shall pay such portion of the fees and expenses
equal to the proportion determined by (1) a numerator equal to the positive
difference between such party's submitted amount and the Accountants' determined
amount and (2) a denominator equal to the sum of such positive difference for
both parties. Otherwise, Buyer and Seller shall each pay its own costs incurred
in connection with this Section 1.5, including the fees and expenses of their
respective accountants, if any.
1.6 Payment of Adjusted Purchase Price. Promptly following the final
resolution of the Adjusted Working Capital as provided in Section 1.5, but in no
event later than ten (10) days after such resolution, either:
(a) Buyer shall wire transfer in immediately available funds to Seller
the amount by which the Adjusted Working Capital exceeds the Estimated Working
Capital; or
(b) Seller shall wire transfer to Buyer in immediately available funds
the amount by which the Estimated Working Capital exceeds the Adjusted Working
Capital.
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Any payment required to be made pursuant to this Section 1.6 shall be made
together with interest thereon from the date immediately after the Closing Date
to the date of payment at the rate of interest per annum equal to the prime rate
in effect on the Closing Date as reported in The Wall Street Journal. All wire
transfers hereunder shall be to such accounts as the recipient thereof may
designate in writing for that purpose.
1.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets based on their fair market value in accordance with Section
1060 of the Code and the Treasury Regulations thereunder. Buyer shall prepare
such an allocation of the Purchase Price and deliver such allocation to Seller
not later than ten (10) days before the Closing Date (the "Pre-closing
Allocation"), a copy of which shall be attached hereto as Exhibit "A." The
Pre-closing Allocation shall be binding and conclusive (with such changes as may
be necessary to reflect changes in current assets between the date of the
financial statements on which the Pre-closing Allocation was based and the
Closing Date (any such changes, the "Interim Changes")) provided that there is a
reasonable basis for such allocation under Section 1060 of the Code and the
Treasury Regulations thereunder. Buyer shall deliver to Seller within 45 days
after the Closing Date a final allocation of the Purchase Price, which shall
reflect the Pre-closing Allocation revised to include the Interim Changes (the
"Final Allocation"). Seller and Buyer agree to complete IRS Form 8594
consistently with the Final Allocation and to furnish each other with a copy of
such form prepared in draft form not later than 45 days prior to the filing due
date of such form. Neither Seller nor Buyer shall file any Tax Return or take a
position with any taxing authority that is inconsistent with the Final
Allocation.
1.8 Prorations.
(a) Utilities; Taxes. On the Closing Date, or as promptly as
practicable following the Closing Date, but in no event later than sixty (60)
days thereafter, to the extent not included in the calculation of Adjusted
Working Capital, the water, gas, electricity and other utilities, local business
or other license fees or taxes, common area expenses charged under the Leases,
and other similar periodic charges shall be prorated between Buyer and Seller
effective as of 8:00 a.m. on the Closing Date. To the extent practicable, and to
the extent not included in the calculation of Adjusted Working Capital, utility
meter readings for any Leases shall be determined as of the Closing Date.
(b) Property Taxes. Notwithstanding anything herein to the contrary
and except to the extent included in the calculation of Adjusted Working
Capital, any taxes (other than payroll taxes) not measured or measurable, in
whole or in part, by net or gross income or receipts (including, but not limited
to, real or personal property or ad valorem taxes) imposed on the Assets that
relate to a tax period beginning before the Closing Date and ending after the
Closing Date shall be apportioned as of the Closing Date such that Seller
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shall be liable for (and shall reimburse Buyer to the extent that Buyer shall
have paid) that portion of such taxes relating to, or arising in respect to,
periods on or prior to the Closing Date and Buyer shall be liable for (and shall
reimburse Seller to the extent Seller shall have paid) that portion of such
taxes relating to, or arising in respect to, periods after the Closing Date.
Should any amounts to be prorated not have been finally determined on the
Closing Date, a mutually satisfactory estimate of such amounts made on the basis
of Seller's records shall be used as a basis for settlement at Closing, and the
amount finally determined will be prorated as of the Closing Date and
appropriate settlement made as soon as practicable after such final
determination.
(c) Rents. Seller shall prepay rental payments due under the Leases
through the end of the calendar month in which the Closing Date occurs, but to
the extent not included in the calculation of Adjusted Working Capital, Buyer
shall reimburse Seller for such rent attributable to the period from and
including the Closing Date through the end of such month as part of the
post-Closing proration procedure described in subsection (a) above.
(d) Payroll and Payroll Taxes. Seller shall be liable for (and shall
reimburse Buyer to the extent that Buyer shall have paid) that portion of such
payroll expenses and payroll taxes related to Seller's employees employed
primarily in Seller's Class Ring Division, administrative or executive offices
("Employees") for the period prior to the Closing Date and Buyer shall be liable
for (and shall reimburse Seller to the extent Seller shall have paid) that
portion of such payroll expenses and payroll taxes relating to, or arising in
respect to, the period on or after the Closing Date, but only to the extent not
included in the calculation of Adjusted Working Capital. Should any amounts to
be prorated not have been finally determined on the Closing Date, a mutually
satisfactory estimate of such amounts made on the basis of Seller's records
shall be used as a basis for settlement at Closing, and the amount finally
determined will be prorated as of the Closing Date and appropriate settlement
made as soon as practicable after such final determination.
(e) Survey Costs and Title Insurance. The following expenses related
to the transfer of the Real Property pursuant to this Agreement shall be paid
one-half by Buyer and one-half by Seller: (1) survey costs, (2) title insurance
premiums, (3) recording fees, (4) title company escrow fees, (5) miscellaneous
title company charges, and (6) tax statements/certificates.
1.9 Escrow. On the Closing Date, Buyer and Seller shall enter into an
Escrow Agreement in form and substance reasonably satisfactory to Seller and
Buyer ("Escrow Agreement") pursuant to which Seller shall deposit Three Million
Dollars ($3,000,000 ) ("Escrow Amount") with a mutually satisfactory escrow
agent to be chosen by the parties solely for purposes of Seller's
indemnification obligations under Section 9.2(c).
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ARTICLE II
CLOSING
2.1 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at 9:00 a.m., at the offices of
Schulte Roth & Zabel, 900 Third Avenue, New York, New York, on a date mutually
agreed to by the parties within twenty days after all conditions to the Closing
have been satisfied pursuant to Article VII hereof on a day mutually agreed by
the parties hereto, or at such other time, at such other place or on such other
date as the parties hereto may agree ("Closing Date").
2.2 Deliveries by Seller. At the Closing, Seller will deliver or cause to
be delivered to Buyer the following:
(a) a duly executed license agreement ("License Agreement") in form
and substance satisfactory to Buyer and Seller whereby Buyer grants Seller a
worldwide royalty-free license to use the ArtCarved(R) trademark and trade name
in connection with the orderly liquidation of Seller's Bridal Division, which
license shall not be assignable and shall be for a limited life sufficient to
allow for the orderly liquidation of Sellers' Bridal Division;
(b) a duly executed bill of sale, in form and substance satisfactory
to Buyer and Seller;
(c) instruments of assignment and transfer with respect to the
Contracts, Leases and Intellectual Property and, to the extent transferable, the
Permits in form and substance reasonably satisfactory to Buyer;
(d) warranty deeds with respect to the Real Property subject to the
Permitted Liens;
(e) all such other endorsements, assignments and other instruments of
transfer as, in the reasonable opinion of Buyer's counsel, are necessary to vest
in Buyer title to the Assets to be transferred to it pursuant to this Agreement;
(f) duly endorsed title certificates to all motor vehicles included in
the Assets;
(g) an opinion of Bracewell & Patterson, L.L.P., counsel to Seller,
usual and customary for commercial transactions of the type contemplated by this
Agreement and in form and substance reasonably satisfactory to Buyer;
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(h) a certificate, dated as of the Closing Date, of an authorized
officer of Seller certifying as to the matters specified in Section 7.3(a);
(i) a duly executed Transition Services Agreement substantially in the
form attached as Exhibit "B" hereto ("Transition Services Agreement") whereby
Buyer agrees for a monthly fee to perform certain administrative and management
services for Seller's Bridal Division;
(j) such lien releases and UCC-3 termination statements necessary to
evidence the release of all liens on the Assets other than Permitted Liens;
(k) copies of all third party and governmental consents received by
Seller in connection with the transfer of the Assets;
(l) a duly executed certificate of non-foreign status consistent with
Section 1.1445-2(b)(2)(iii)(B) of the United States Treasury Regulations;
(m) to the extent that Buyer's offers of employment pursuant to
Section 6.9 below are accepted, termination agreements relating to Seller's
employment agreements with Seller's executives identified in Schedule 6.9
hereto;
(n) a duly executed Escrow Agreement;
(o) an owners title insurance policy with respect to each parcel of
the Real Property, together with a mortgagee title insurance policy with respect
to the Real Property both reasonably satisfactory to Buyer;
(p) landlord consent and estoppel certificates, in form and substance
satisfactory to Buyer, with respect to each of the Leases;
(q) copies of the Leases, certified by Seller to be true, correct and
complete;
(r) a duly executed lease agreement, in form and substance reasonably
satisfactory to Seller and Buyer ("Lease Agreement"), pursuant to which Buyer
will lease to Seller the building in which the Bridal Business is located, with
a monthly rental equal to $100 per month plus utilities and insurance costs
relating to the building and a limited term corresponding to the liquidation of
the Bridal Business, but in no event later than December 31, 1996.
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2.3 Deliveries by Buyer. At the Closing, Buyer will deliver or cause to be
delivered to Seller the following:
(a) immediately available funds in the amount of $102,800,000.00 plus
the Estimated Working Capital plus any amounts payable by Buyer in accordance
with Sections 1.8(a) and 1.8(b) less any amounts payable by Seller in accordance
with Section 1.8(a) and 1.8(b), less any adjustment pursuant to Section 5.9 and
less the Escrow Amount to be deposited with the escrow agent pursuant to the
Escrow Agreement;
(b) a duly executed Assumption Agreement in form and substance
satisfactory to Buyer and Seller (the "Assumption Agreement") and such other
good and sufficient instruments of assumption as shall be reasonably necessary
to vest in Buyer as of the Closing the Assumed Liabilities;
(c) an opinion of Schulte Roth & Zabel, counsel to Buyer, usual and
customary for transactions of the type contemplated by this Agreement and in
form and substance reasonably satisfactory to Seller;
(d) a certificate, dated as of the Closing Date, of an authorized
officer of Buyer certifying as to the matters specified in Section 7.2(a);
(e) a duly executed License Agreement;
(f) a duly executed Transitional Services Agreement;
(g) a duly executed Escrow Agreement and the deposit of the Escrow
Amount with the Escrow Agent, as defined in the Escrow Agreement; and
(h) a duly executed Lease Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and CJCNA, jointly and severally, hereby represent and warrant to
Buyer as follows:
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3.1 Corporate Organization.
(a) Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and is duly qualified or
licensed as a foreign corporation authorized to do business in each jurisdiction
in which the character of the properties and assets now owned or held by it or
the nature of the business now conducted by it requires it to be so licensed or
qualified and where the failure to be so licensed or qualified would have a
material adverse effect on the Business. Seller has full corporate power and
authority to carry on the Business as now being conducted.
(b) Schedule 1.1(a)(xiii) sets forth a complete and accurate list of
all subsidiaries of Seller which hold assets or are engaged in the Business (the
"Subsidiaries" or separately a "Subsidiary"). Each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the respective state or country in which it was incorporated as indicated on
Schedule 1.1(a)(xiii) and is duly qualified or licensed as a foreign corporation
authorized to do business in each jurisdiction in which the character of the
properties and assets now owned or held by it or the nature of the business now
conducted by it requires it to be so licensed or qualified and where the failure
to be so licensed or qualified would have a material adverse effect on the
Business. Each Subsidiary has full corporate power and authority to carry on the
Business as now being conducted. The authorized capital stock of each of the
Subsidiaries is as stated in Schedule 1.1(a)(xiii), all of which shares have
been duly authorized and validly issued and are fully paid and nonassessable.
The capital stock of each Subsidiary is owned beneficially and of record by
Seller, free and clear of all security interests, liens, charges, encumbrances
and rights of others except as set forth in Schedule 3.1(b) hereto. There are no
outstanding subscriptions, options, convertible securities, warrants, calls or
rights of any kind (issued or granted by, or binding upon, the Seller or the
Subsidiary) to purchase or otherwise acquire any assets or security of, or
equity interest in, any Subsidiary the majority of the capital stock of which is
owned by Seller. Except as set forth in Schedule 3.1(b) hereto, Seller has full
legal right, power and authority to sell, assign and transfer the Stock to Buyer
and will, upon delivery of the Stock to Buyer pursuant to the terms hereof,
transfer to the Buyer good and valid title to the Stock free and clear of all
liens, security interests, claims, charges, encumbrances, rights, options to
purchase, voting trusts or other voting agreements and calls and commitments of
every kind affecting the Stock.
3.2 Authorization. Seller and CJCNA have full corporate power and authority
to execute, deliver and perform this Agreement and, to the extent they are
parties thereto, the documents to be delivered by them at the Closing pursuant
to Section 2.2 (collectively, the "Seller Agreements") and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Seller Agreements by Seller and CJCNA and the consummation by
Seller and CJCNA of the transactions contemplated
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hereby and thereby have been duly authorized by all necessary corporate action
and no other corporate action or proceeding on the part of Seller and CJCNA is
necessary to authorize the execution and delivery by Seller and CJCNA of this
Agreement or the Seller Agreements or the consummation by Seller and CJCNA of
the transactions contemplated hereby or thereby or the performance of Seller's
obligations and CJCNA's obligations hereunder and thereunder. This Agreement has
been, and the Seller Agreements on the Closing Date will be, duly executed and
delivered by Seller and CJCNA and this Agreement is, and on the Closing Date
this Agreement and each of the Seller Agreements will be, legal, valid and
binding obligations of Seller and CJCNA, enforceable against them, as
applicable, in accordance with their terms, subject to applicable laws affecting
creditors' rights generally and, as to enforcement, to general principles of
equity, regardless of whether applied in a proceeding at law or in equity.
3.3 No Violations; No Consents or Approvals Required. Except as set forth
in Schedule 3.3, neither the execution and delivery of this Agreement or the
Seller Agreements nor the consummation of the transactions contemplated hereby
or thereby will (a) conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Seller or CJCNA or any other Subsidiary, (b)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to the Business or by which any of the
Assets are bound or affected or (c) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or accelerate the performance required by or maturity of, or
result in the creation of any security interest, lien, charge or encumbrance on
any of the Assets pursuant to any of the terms, conditions or provisions of, any
note, bond, mortgage, indenture, permit, license, franchise, lease, contract, or
other instrument or obligation to which Seller or CJCNA or any other Subsidiary
is a party except, in the case of (b) and (c) above, for such conflicts,
violations, breaches, defaults, terminations, cancellations and accelerations
which in the aggregate will not have a material adverse effect on the Business.
Except for applicable requirements, if any, of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), or as set forth in
Schedule 3.3, no notice, declaration, report or other filing or registration
with, and no waiver, consent, approval or authorization of, any governmental or
regulatory authority or instrumentality or any other person is required to be
submitted, made or obtained by Seller or CJCNA in connection with the execution,
delivery or performance of this Agreement or the Seller Agreements and the
consummation of the transactions contemplated hereby or thereby.
3.4 Financial Statements.
(a) Seller has previously delivered to Buyer audited balance sheet
data of Seller as of the end of each of the fiscal periods ended August 31,
1990, August 31, 1991,
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August 31, 1992, August 31, 1993, August 27, 1994 and August 26, 1995, and
audited related income statement data for the respective fiscal periods then
ended.
(b) Seller has delivered to Buyer (i) the unaudited balance sheet data
and unaudited related income statement data of the Business for the fiscal
periods ended August 31, 1991, August 31, 1992, August 31, 1993, August 27, 1994
and August 26, 1995, and (ii) certain unaudited interim monthly reports on the
Business and financial statements of the Seller through February 24, 1996
(together with the financial statements described in Section 3.4(a) hereof
referred to as the "Financial Statements;" and the unaudited balance sheet of
the Business for the fiscal period ended August 26, 1995, is hereinafter
referred to as the "Balance Sheet"). The Financial Statements fairly present the
financial position of the Seller or the Business, as the case may be, as of the
respective dates set forth therein and the results of operations of the Seller
or the Business, as the case may be, for the respective periods or as of the
respective dates set forth therein, in each case in conformity with general ly
accepted accounting principles applied on a consistent basis throughout the
periods involved, except as otherwise noted therein, and subject (in the case of
interim financial statements referred to above) to normal year end audit
adjustments none of which will be material and except as otherwise noted in
Schedule 3.4(b). Upon delivery, the audited and reviewed financial statements
referenced in Section 5.11 shall not differ in any material respect from the
unaudited and unreviewed financial statements referenced in clauses (b)(i) and
(b)(ii) above.
(c) Except as set forth in Schedule 3.4(c) and except for liabilities
or obligations incurred in the ordinary course of business and consistent with
past practice, since the date of the Balance Sheet to the date of this
Agreement, the Business has not incurred any liabilities or obligations (whether
accrued, absolute, contingent or otherwise) which have not been discharged prior
to the date of this Agreement and which (i) are in excess of $100,000
individually or (ii) when taken together with all other such liabilities and
obligations are in excess of $300,000 in the aggregate.
3.5 Absence of Undisclosed Liabilities. There are no material liabilities
or obligations of the Business (whether absolute or contingent) except for
liabilities and obligations (i) reflected or adequately reserved for on the
Balance Sheet, (ii) that have arisen since the date of the Balance Sheet in the
ordinary course of business for the purchase and sale of supplies, inventory and
advertising consistent with past practice or (iii) as expressly set forth in
Schedule 3.5 hereto.
3.6 Absence of Certain Changes. Since the date of the Balance Sheet, the
Business has been conducted only in the ordinary course, consistent with past
practice. Except as set forth in Schedule 3.6, since the date of the Balance
Sheet there has not been (a) any material adverse change in the condition
(financial or otherwise), properties, assets,
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business, prospects, or results of operations of the Business, (b) any material
damage, destruction or other casualty loss to, or actual or threatened
forfeiture or taking of, any Assets or any property used in the Business
(whether or not covered by insurance), (c) any waiver or modification by Seller
or any of its Subsidiaries of any right or rights of substantial value, or any
payment (direct or indirect) in satisfaction of any liability, which could,
individually or in the aggregate, have a material adverse effect on the
Business, (d) any change in the accounting principles, methods, practices or
procedures followed by Seller or any of its Subsidiaries in connection with the
Business or any change in the depreciation or amortization policies or rates
theretofore adopted by Seller or any of its Subsidiaries in connection with the
Business, (e) any sale, transfer, conveyance of any Asset, or grant to any party
of any license, sublicense, franchise or option or other right of any nature to
sell or distribute the Assets, other than sales of inventory and immaterial or
obsolete Assets in the ordinary course of business consistent with past
practices, (f) any increase in the rate of compensation or in the benefits
payable or to become payable by Seller or any of its Subsidiaries to any
employee or officer of the Business inconsistent with Seller's past practices,
(g) any declaration, setting aside or payment of any dividends, or other
distributions in respect of the outstanding shares of capital stock of Seller or
any of its Subsidiaries or any intracompany loans, advances or guarantees, (h)
any strikes, work stoppages, slowdowns, lockouts, arbitrations or any grievances
or other labor disputes pending or, to Seller's best knowledge, threatened
against or involving Seller or any of its Subsidiaries, having a material
adverse effect on the Business, (i) any unfair labor practice charges,
grievances or complaints pending or, to Seller's best knowledge, threatened by
or on behalf of any employee or group of employees of the Business, (j) any
organizing activity involving Seller or any of its Subsidiaries or, to Seller's
best knowledge, threatened by any labor organization or group of employees of
the Business, (k) any pending or, to Seller's best knowledge, threatened dispute
with any customer or supplier or any occurrence or situation or other event
which, either alone or taken together with all such other events, is reasonably
likely to result in any material reduction in amount of products purchased or
sold or adverse change in terms or conditions of doing business with any
substantial customer or supplier of the Business, or (l) any change to any
business policy which change could be material to the Business, including,
without limitation, advertising, marketing, pricing, purchasing, personnel,
return or product acquisition policies.
3.7 Title to Properties and Related Matters. (a) Except for liens and
encumbrances which shall be removed at Closing, each of Seller and its
Subsidiaries have, and upon consummation of the transactions contemplated by
this Agreement, Buyer will acquire, good and indefeasible title to the Real
Property and the other Assets owned by each of Seller and its Subsidiaries and
Buyer will become the legal and beneficial owner of the Real Property and the
other Assets, free and clear of all mortgages, pledges, liens, security
interests, conditional sales agreements, tenancies (except for the tenancy of
Seller or any of its Subsidiaries, as applicable, under any of the Leases and
the Lease Agreement), rights of
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occupancy of third parties, encumbrances or charges of any kind ("Liens"),
except for (x) Liens created by Buyer, and (y) "Permitted Liens", which shall
mean (i) Liens for taxes not yet due and payable or which are being contested in
good faith through appropriate proceedings, which liens being contested, if any,
are described in Schedule 3.7 hereto, (ii) title exceptions set forth in the
title policies purchased in connection with the transactions contemplated hereby
affecting the Real Property that do not materially adversely affect the
marketability or insurability of title to the property affected or materially
detract from the value of or materially interfere with the present use of the
property affected, and (iii) Liens, if any, related to the Assumed Liabilities
including Liens of lessors under equipment leases to be assumed by Buyer. The
Real Property and the Leases constitute all owned or leased real property,
respectively, used or held for use in connection with the Business. Except as
expressly set forth in this Agreement and the other Seller Agreements, Seller
and CJCNA expressly disclaim any other representation and warranty of any kind
or nature, express or implied, as to the condition, value or quality of the
Assets and SPECIFICALLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO ANY
OF THE ASSETS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE OTHER
SELLER AGREEMENTS, THE ASSETS SHALL BE TRANSFERRED TO BUYER "AS IS" AND "WHERE
IS."
(b) (i) there are no outstanding options, contracts or rights of first
refusal to purchase Seller's or any of its Subsidiaries' interest in any parcel
of or interest in Real Property or any portion thereof or interest therein; (ii)
to the knowledge of Seller, there are no condemnation proceedings or eminent
domain proceedings of any kind pending or threatened against any parcel of or
interest in the Real Property or any portion thereof; (iii) to the extent
required by law, each of Seller and its Subsidiaries have all permits, including
a certificate of occupancy, necessary for the use and/or operation of each
parcel of or interest in the Real Property, (iv) to the knowledge of the Seller,
there is no proposed change in road patterns or grades which may adversely
affect access to roads providing a means of ingress or egress to or from the
Real Property and (v) to Seller's knowledge, there are no special assessments
pending with respect to the Real Property.
(c) Schedule 1.1(a)(vii) contains an accurate and complete list of all
Leases to which Seller or any of its Subsidiaries is a party (as lessee or
lessor) and which relate to the Business. Each Lease is in full force and effect
and there is no existing default under any such Lease on the part of Seller or
any of its Subsidiaries.
3.8 Intellectual Property. Except as set forth in Schedule 3.8, (a) each of
Seller and its Subsidiaries are the sole and exclusive owner of all rights to
the Intellectual Property, the same are fully assignable and Seller and its
Subsidiaries have the right to use the same without the payment of any license,
fee, royalty or similar charge, (b) there is no material
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claim of any other person, firm or corporation or any proceeding pending or, to
Seller's best knowledge, threatened which relates to any of the Intellectual
Property, (c) the Intellectual Property identified in Schedule 3.8 constitutes
all intellectual property used in or necessary for the operation of the Business
and the Intellectual Property does not infringe on the rights of any other
person, (d) neither Seller nor any of its Subsidiaries have granted any license
or sublicense with respect to any Intellectual Property, and (e) to the best
knowledge of Seller, no person or entity is infringing on Seller's or any of its
Subsidiaries' rights to any Intellectual Property.
3.9 Litigation. Except as set forth in Schedule 3.9, there are no claims,
actions, suits, proceedings or investigations by or before any court or
governmental or other regulatory or administrative agency, instrumentality or
authority pending or, to Seller's best knowledge, threatened by or against or
affecting the Business. None of the items set forth on Schedule 3.9, if
adversely determined against Seller or any of its Subsidiaries, are reasonably
expected to have a material adverse effect on the Business after the Closing
Date. There is no claim, action, proceeding or investigation pending or, to the
best knowledge of Seller, threatened, nor is there outstanding any writ, order,
decree or injunction that (a) calls into question Seller's or CJCNA's authority
or right to enter into this Agreement or the Seller Agreements and consummate
the transactions contemplated hereby or thereby, or (b) would otherwise prevent
or delay the transactions contemplated by this Agreement or the Seller
Agreements.
3.10 Compliance with Applicable Law. Except as set forth in Schedule 3.10,
the Seller and its Subsidiaries and the Business are complying in all respects
with all applicable laws, rules, regulations, orders, ordinances, judgments or
decrees of all governmental authorities (federal, state, local or foreign),
except for such failure to comply which in the aggregate could not reasonably be
likely to have a material adverse effect on the Business.
3.11 Brokers and Finders. Other than fees payable by Seller to Goldman,
Sachs & Co. and to Gordian Group, L.P., which fees are to be paid by Seller,
neither Seller nor any of its officers, directors or employees or Subsidiaries,
has incurred any liability for any brokerage fees, commissions, finders' fees or
similar fees or expenses in connection with the sale of the Business or any
transaction contemplated by this Agreement.
3.12 Powers of Attorney. Except as set forth in Schedule 3.12, there is not
currently existing any power of attorney of any type given by Seller or any of
its Subsidiaries and pertaining to the Assets or the Business.
3.13 Labor and Employment. Except as set forth in Schedule 3.13, (a)
neither Seller nor any of its Subsidiaries are party to or subject to any
collective bargaining or other
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agreement with a labor union or similar organization, contingent or otherwise
and (b) there is no written employment or consulting agreement that will remain
in effect after the Closing, which pertains to the Business. Except as described
in Schedule 3.13, there are no controversies, labor disturbances, investigations
or proceedings pending or, to Seller's best knowledge, threatened, between
Seller or any of its Subsidiaries and any of their respective Employees. Seller
and its Subsidiaries have complied in all material respects with all laws and
regulations relating to the employment of labor, including without limitation,
the Occupational Safety and Health Act, all laws and regulations relating to
wages, hours, and collection and payment of social security and withholding
taxes, or both, and similar taxes in respect of the Business. Except as set
forth in Schedule 3.13, there is no unfair labor practice charge or complaint
against Seller or the Business pending against or with the National Labor
Relations Board or any other governmental agency arising out of the activities
or operations of the Business. Neither Seller nor any of its Subsidiaries are
liable for any arrearages of wages or any taxes or penalties for failure to
comply with any of the foregoing. To Seller's best knowledge, there are no
organizational efforts presently being made or threatened by or on behalf of any
labor union, with respect to the Employees. The Business has not experienced a
work stoppage or other material labor disturbance within the past three years.
Neither Seller nor any of its Subsidiaries have incurred any liability under the
Worker Adjustment and Retraining Notification Act or similar state law.
3.14 Employee Benefits. Except for those plans, arrangements or agreements
listed on Schedule 3.14 (each a "Seller Plan"), Seller does not nor does any
other organization which is a member of a controlled group of organizations
within the meaning of Sections 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code"), of which Seller or any of its
Subsidiaries is a member, have any obligation, contingent or otherwise, covering
any employees of the Business under any employment or consulting agreement or
under any executive or employee's compensation plan, agreement or arrangement
including, without limitation, any pension, retirement, profit sharing, stock
option, stock purchase, bonus, savings plan, or any ERISA (as defined below)
plans of Seller or any of its Subsidiaries. There are no liabilities, breaches,
violations, or defaults under any Seller Plan which is an "employee benefit
plan" under Section 3(3) of ERISA which would subject Buyer to any taxes,
penalties or other liabilities. With respect to Employees, except as set forth
in Schedule 3.14, there are no written and filed claims or grievances
outstanding against Seller under any Seller Welfare Plan other than in the
normal course of business.
3.15 Asset Maintenance. Except as set forth in Schedule 3.15, the Assets
have been properly maintained and are (a) in satisfactory operating condition
(except for ordinary wear and tear which would not have a material adverse
effect on the Assets taken as a whole) and (b) are capable of being used in the
Business without present need for repair or replacement except in the ordinary
course of business.
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3.16 Contracts. The Contracts include all the contracts, personal property
leases, agreements, undertakings and commitments related to or constituting any
of the Assets or operations of the Business. Neither Seller nor any of its
Subsidiaries are in default under, nor does any event, circumstance or situation
exist which, with or without the passage of time will cause a default under any
material lease, contract or agreement, undertaking, commitment, judgment, order
or decree of any court or any government agency or instru mentality relating to
or constituting any of the Assets or the Business under which any person, firm,
corporation or other entity is or may be entitled to assert any rights against
any of the Assets or the Business or to terminate any such Contract.
3.17 Environmental.
(a) For purposes of this Section 3.17, the following definitions shall
apply:
"Environmental Claim" refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgement, letter or other communication from any
governmental agency, department, bureau, office or other authority, or any third
party involving violations of Environmental Laws or Releases of Hazardous
Materials.
"Environmental Laws" includes the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended;
the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., as amended;
the Clean Air Act, 42 U.S.C. 7401 et seq., as amended; the Clean Water Act, 33
U.S.C. 1251 et seq., as amended; and any other federal, state, local or
municipal laws, statutes, regulations, rules or ordinances imposing liability or
establishing standards of conduct for protection of the environment.
"Environmental Liabilities" means any monetary obligations, losses,
liabilities (including strict liability), damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable out-of-pocket fees, disbursements and expenses of counsel,
out-of-pocket expert and consulting fees and out-of-pocket costs for
environmental site assessments, remedial investigation and feasibility studies,
and removal or remedial actions), fines, penalties, sanctions and interest
incurred as a result of any Environmental Claim.
"Hazardous Materials" shall include (a) any element, compound, or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous
substance or chemical, hazardous waste, special waste, or solid waste under
Environmental Laws; (b) petroleum or
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petroleum-derived products; (c) polychlorinated biphenyls; (d) any substance
exhibiting a hazardous waste characteristic including but not limited to
corrosivity, ignitability, toxicity or reactivity as well as any radioactive or
explosive materials; and (e) any asbestos- containing materials.
"Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, dumping, or disposing of
Hazardous Materials (including the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Materials) into the
environment.
(b) Except as set forth in Schedule 3.17, (i) the operations of the
Business are in compliance with Environmental Laws except where non-compliance
is not reasonably likely to result in Environmental Liabilities that have a
material adverse effect on the Business or Assets; (ii) there has been no
reportable Release (1) at any of the properties owned or operated by the
Business or, to the best knowledge of Seller, a predecessor in interest, or (2)
at any disposal or treatment facility which received Hazardous Materials
generated by the Business or any predecessor in interest which is reasonably
likely to result in Environmental Liabilities that have a material adverse
effect on the Business; (iii) no Environmental Claims have been asserted against
the Business or, to the best knowledge of the Seller, any predecessor in
interest, nor, to the best knowledge of the Seller, are there any threatened or
pending Environmental Claims against the Business or any predecessor in interest
which are reasonably likely to result in Environmental Liabilities that would
have a material adverse effect on the Business, and (iv) to the best knowledge
of Seller (without any special investigation or inquiries made with respect
thereto), no Environmental Claims have been asserted against any disposal or
treatment facility which received Hazardous Materials generated by the Business
or any predecessor in interest.
3.18 Taxes. (a) Neither Seller, any Subsidiary nor any member of a Relevant
Group has failed to file any Tax Return required to be filed, which failure
could result in the imposition of any Lien on or against the Assets, the
Business or Buyer or in any liability to Buyer, as transferee or otherwise. All
Taxes imposed on Seller, any Subsidiary or any member of a Relevant Group the
non-payment of which could result in a Lien on or against the Assets, the
Business or Buyer or in any liability to Buyer, as transferee or otherwise, have
been or will prior to the Closing Date be paid. All deposits required to be made
by Seller, any Subsidiary or any member of a Relevant Group in respect of any
Tax, including, without limitation, withholding taxes, have been or will be made
in a timely fashion. There are no Tax deficiencies or claims asserted against
Seller, any Subsidiary or any member of a Relevant Group and there is no basis
for any such deficiency or claim which could result in the imposition of any
Lien on the Assets, the Business or Buyer or in any liability to Buyer, as
transferee or otherwise. Neither Seller nor any Subsidiary is a party to any Tax
allocation
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or sharing agreement or understanding that would require any payment by Buyer,
any Subsidiary or any affiliate thereof after the Closing Date.
(b) For purposes of this Agreement:
"Pre-Closing Tax Period" shall mean all taxable periods ending on
or before the Closing Date and the portion ending on the Closing Date of any
taxable period that includes (but does not end on) the Closing Date.
"Relevant Group" means any combined, consolidated, affiliated,
unitary or similar group of which Seller or any subsidiary of Seller is or was a
member.
"Tax" or "Taxes" means all U.S. (federal, state and local) and
foreign net or gross income, gross receipts, net proceeds, estimated, sales,
use, ad valorem, value added, franchise, withholding, payroll, employment,
excise, property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including
any information returns and estimated tax returns) required to be filed for
purposes of a particular Tax.
3.19 Accounts Payable. All accounts payable reflected in the Balance Sheet
and to be reflected in the Statement of Net Working Capital have been or will
have been incurred on or prior to the Closing Date in the ordinary course of
business and all payment terms are consistent with past practices.
3.20 Customers and Suppliers. Seller's relations with the 25 largest
customers and suppliers of the Business are satisfactory and, to the best
knowledge of Seller's executive officers, there is no reason why any such
customer or supplier would cease to do business with Buyer after, or as a result
of, the consummation of the transactions contemplated by this Agreement. The
customer lists last provided to Buyer are true, complete and correct in all
material respects.
3.21 Assets Constituting the Business. The Assets to be transferred to
Buyer pursuant to the Agreement comprise all of the assets, properties, rights
and businesses employed by Seller in, or which are necessary for, the conduct of
the Business and the sale of the Assets to Buyer pursuant to this Agreement will
effectively convey the Business in accordance with the terms of this Agreement
to Buyer, including all tangible and intangible assets and the goodwill relating
thereto.
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3.22 Cost Savings Assumptions. Seller has delivered to Buyer good faith
estimates of the cost savings of the combination of the Seller's and T&C's
respective businesses after the Closing Date prepared jointly by Seller and T&C.
All such projections and the assumptions on which such projections are based, to
the extent prepared by Seller and relating to the Business, have been prepared
by Seller in good faith, based upon information derived from the books and
records of the Business and prepared consistently with the financial statements
of the Business, as consistently prepared. Seller believes such projections and
assumptions, to the extent prepared by Seller and relating to the Business, are
reasonable. However, such projections and assumptions do not constitute a
guarantee, representation or warranty about future performance or results of
operations of the Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1 Corporate Organization. Buyer is a Delaware corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2 Authorization. Buyer has full corporate power and authority to execute
and deliver this Agreement and the documents to be executed and delivered by it
at the Closing pursuant to Section 2.3 (collectively, the "Buyer Agreements")
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Buyer Agreements by Buyer and
the consummation by Buyer of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action and no other
corporate action or proceeding on the part of Buyer is necessary to authorize
the execution and delivery by Buyer of this Agreement or the Buyer Agreements or
the consummation by Buyer of the transactions contemplated hereby or there by.
This Agreement has been, and the Buyer Agreements on the Closing Date will be,
duly executed and delivered by Buyer and this Agreement is, and on the Closing
Date each of the Buyer Agreements will be, legal, valid and binding obligations
of Buyer, enforceable against Buyer in accordance with their terms, subject to
applicable laws affecting creditors' rights generally and, as to enforcement, to
general principles of equity, regardless of whether applied in a proceeding at
law or in equity.
4.3 No Violations; No Consents or Approvals Required. Neither the execution
and delivery of this Agreement or the Buyer Agreements nor the consummation of
the trans actions contemplated hereby or thereby will (a) conflict with or
violate any provision of the Certificate of Incorporation or By-Laws of Buyer,
(b) conflict with or violate any law, rule,
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regulation, ordinance, order, writ, injunction, judgment or decree applicable to
Buyer or by which any of its properties or assets are bound or affected or (c)
conflict with or result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination or cancellation of, or accelerate the
performance required by or maturity of, or result in the creation of, any
security interest, lien, charge or encumbrance on any of its assets or
properties pursuant to any of the terms, conditions or provisions of, any note,
bond, mortgage, indenture, permit, license, franchise agreement, lease,
contract, or other instrument or obligation to which Buyer is a party or by
which Buyer or any of its properties or assets is bound or affected, except, in
the case of (b) and (c) above, for such conflicts, violations, breaches,
defaults, terminations, cancellations and accelerations which in the aggregate
will not have a material adverse effect on the ability of Buyer to consummate
the transactions contemplated by this Agreement and the Buyer Agreements. Except
for applicable requirements, if any, of the HSR Act, no notice, declaration,
report or other filing or registration with, and no waiver, consent, approval or
authorization of, any governmental or regulatory authority or instrumentality or
any other person is required to be submitted, made or obtained by Buyer in
connection with the execution, delivery or performance of this Agreement or the
Buyer Agreements and the consummation of the transactions contemplated hereby or
thereby.
4.4 Brokers and Finders. Neither Buyer nor its officers, directors or
employees has incurred any liability for any brokerage fees, commissions,
finders' fees or similar fees or expenses for which Seller may be liable in
connection with the purchase of the Business or any transaction contemplated by
this Agreement.
4.5 Financing. Buyer has received (a) a commitment letter from a commercial
bank with respect to the provision of bank financing for Buyer, (b) a "highly
confident" letter from an investment banking firm with respect to the provision
of subordinated debt to Buyer, and (c) a letter from Castle Harlan Partners II,
L.P. relating to a capital contribution to be made to Buyer, with respect to the
provision of funds to Buyer to fund the transactions contemplated by this
Agreement and the purchase of certain assets of Town & Country Corporation
("T&C") pursuant to an agreement dated as of May __, 1996 (the "T&C Agreement"),
among Buyer, T&C, L. G. Balfour Company, Inc. and Gold Lance, Inc. Buyer has
delivered to Seller copies of the foregoing letters.
4.6 Litigation Affecting Buyer. There is no claim, action, proceeding or
investigation pending or, to the best knowledge of Buyer, threatened, nor is
there outstanding any writ, order, decree or injunction that (a) calls into
question Buyer's authority or right to enter into this Agreement or the Buyer
Agreements and consummate the transactions contemplated hereby or thereby, or
(b) would otherwise prevent or delay the transactions contemplated by this
Agreement or the Buyer Agreements.
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4.7 Fraudulent Conveyance/Fraudulent Transfer Matters. After giving effect
to any and all financing to be entered into or incurred by Buyer in connection
with its consummation of the transactions contemplated hereby, Buyer will not be
as of the Closing Date (a) "insolvent" nor will it become "insolvent" as a
result of such transactions, (b) engaged in a business or transaction for which
any property or assets remaining with Buyer would be "unreasonably little" or
"unreasonably small in relation to its business" or the transaction, or (c) in a
position where it "intends to incur, or believes that [it] would incur, debts
that would be beyond its ability to pay as such debts mature," in each case as
such quoted terms are used in Section 548 of the United States Bankruptcy Code
of 1978, as amended, the Uniform Fraudulent Conveyances Act and the Uniform
Fraudulent Transfer Act.
4.8 T&C Transaction. Buyer has delivered to Seller an executed copy of the
T&C Agreement.
ARTICLE V
COVENANTS
5.1 Conduct of the Business Pending the Closing. Seller, for itself and on
behalf of its Subsidiaries, hereby covenants that, from the date hereof to and
including the Closing Date, unless Buyer shall otherwise consent (such consent
not to be unreasonably withheld or delayed) or as otherwise contemplated by this
Agreement:
(a) the Business shall be conducted and the Assets repaired and
maintained only in the ordinary and usual course, in a manner consistent with
past practice, including without limitation the Business' policies relating to
promotions, pricing, maintenance of relations with customers and the making of
capital expenditures;
(b) Seller and its Subsidiaries shall not (i) make any commitment to
make any capital expenditures after the Closing Date individually in excess of
$100,000 or in the aggregate in excess of $400,000; (ii) amend or waive any
rights under any of its material contracts; or (iii) enter into (1) any written
employment agreement with any Employee or (2) any new employee benefit plan,
program or arrangement or amend any existing employee benefit plan, program or
arrangement or grant any increases in compensation to the Employees in excess of
increases in compensation consistent with Seller's past practices;
(c) Seller and its Subsidiaries shall not make any change in any
material business policy of the Business;
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(d) except in the ordinary course of business consistent with past
practice, Seller or any of its Subsidiaries shall not (i) dispose of any capital
assets with a book value, individually or in the aggregate, in excess of $20,000
or encumber any of its capital assets or (ii) incur, or guarantee or otherwise
become liable for, any indebtedness for borrowed money;
(e) Seller and its Subsidiaries shall maintain in full force and
effect all insurance policies now in effect or renewals thereof covering the
Assets or the Business and the Employees;
(f) Seller shall promptly notify Buyer of the following of which it
becomes aware: (i) any breach or violation of, default or event of default
under, or actual or threatened termination or cancellation of any material
contract or other material instrument relating to the Business; (ii) any
material loss of, damage to, or disposition of any of the Assets (other than the
sale or use of inventories in the ordinary course of business); and (iii) any
material claim or litigation, threatened or instituted against Seller or any of
its Subsidiaries and affecting the Business;
(g) Seller shall consult with Buyer with respect to any collective
bargaining negotiations affecting the Business;
(h) Seller or any of its Subsidiaries shall not sell, dispose of,
lease, sublease, distribute, encumber or enter into any agreement, arrangement
or commitment, whether oral or written, for the sale, leasing, subleasing,
disposition, distribution or encumbrance of any portion of the Business (other
than the sale or use of inventories in the ordinary course of business or as set
forth in item (c)(i) above) or initiate or participate, through agents,
representatives or otherwise, in any discussions or negotiations with, or
otherwise solicit from, any corporation, business or person any proposals or
offers relating to the disposition of any such portion of the Business;
(i) Seller shall use its reasonable best efforts to preserve its
relations with its and any of its Subsidiaries' customers and suppliers; and
(j) Seller shall use its reasonable best efforts (but not requiring
any additional financial expenditures or accommodations) to (i) extend, as
necessary or practicable, the letter of intent with regard to the property in
Chihuahua, Mexico and (ii) arrange for Pulidos de Juarez, S.A. de C.V., Seller's
wholly-owned Mexican subsidiary, to enter into the lease agreement contemplated
by such letter of intent in accordance with the terms thereof. Seller shall
submit to Buyer any proposed material modification to the form of lease and
shall not agree to any such modification unless Buyer shall have consented
thereto in writing.
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5.2 Access to Information.
(a) Prior to the Closing Date and upon reasonable notice from Buyer,
Seller (i) shall give Buyer and its authorized representatives and
representatives of its financing sources reasonable access, subject to such
limitations or procedures as may be necessary to protect the attorney-client
privilege or the work product doctrine, to all offices, warehouses, plants,
stores and other facilities and to all books and records of the Business, (ii)
will permit Buyer and all such persons to make such inspections as they may
reasonably request provided such inspections cause no undue interruption of the
operations of the Business and (iii) will cause its officers to furnish Buyer
and all such persons with such financial and operating data and other
information with respect to the Assets and the Business as they may from time to
time reasonably request.
(b) Prior to the Closing Date, Buyer shall hold and shall cause its
employees, agents and other representatives to hold in strict confidence all
documents and information concerning the Business to the extent and in
accordance with the terms and con ditions of the Confidentiality Agreement dated
July 21, 1995, between Castle Harlan Partners II, L.P. and Seller and the
Confidentiality Agreement dated August 15, 1995, between T&C and Seller;
provided, however, that Seller acknowledges that Buyer may disclose certain
information regarding the Business, this Agreement and the transactions
contemplated hereby to Buyer's lenders or in connection with the public or
private offering of Buyer's securities to the extent appropriate under federal
or state securities laws, in either case solely in connection with (i) Buyer's
financing of the transactions contemplated by this Agreement and (ii) Buyer's
obtaining a line of credit from Buyer's lenders.
(c) For a period of at least six (6) years following the Closing Date,
Buyer shall retain, at Buyer's sole expense, the books, records and other data
of the Business transferred pursuant to Section 1.1(a). During such period,
Buyer shall afford to Seller, its counsel and accountants, during normal
business hours, reasonable access to such books, records and other data.
Following the expiration of such 6-year period, Buyer may dispose of any such
books, records and other data; provided, however, that before disposing of any
such materials it shall first notify Seller and permit Seller, at its sole
expense, to remove such materials.
(d) After the Closing Date, Buyer shall, at the reasonable request of
Seller, (i) provide reasonable assistance in the collection of information or
documents and (ii) make Buyer's employees available when reasonably requested by
Seller in connection with claims or actions brought by or against third parties
based upon events or circumstances concerning Excluded Liabilities. After the
Closing Date, Buyer agrees to make available to Seller for inspection and
copying at Seller's expense, at reasonable times upon request therefor, any
records and documents relating to the Business and the Assets which, at the
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time of such request, are in Buyer's possession or control. In addition, Buyer
agrees to make available to Seller financial data and other information relating
to the Business and the Assets and will make available such employees of the
Business employed by Buyer as Seller shall from time to time reasonably request
to permit Seller to prepare any tax returns and in connection with any
governmental examination of tax returns relating to the Business or the Assets
for the periods prior to the Closing Date. Buyer's reasonable expenses in
connection therewith shall be reimbursed by Seller.
(e) After the Closing Date, Seller agrees to make available to Buyer
for inspection and copying at Buyer's expense, at reasonable times upon
reasonable request therefor, any records and documents relating to the Business
and the Assets retained by Seller or its agents which, at the time of such
request, are in Seller's or its agents possession or control. In addition,
Seller agrees to make available to Buyer financial data and other information
retained by Seller relating to the Business and the Assets, and will use all
reasonable efforts to make available such former employees of the Business that
at the time shall be employed by Seller, as Buyer shall from time to time
reasonably request, in connection with claims or actions brought by or against
third parties based on events or circumstances concerning the Assets or Assumed
Liabilities and to permit Buyer to prepare any tax returns and in connection
with any governmental examination of tax returns relating to the Business or the
Assets for periods from and after the Closing Date. Seller's reasonable expenses
in connection therewith shall be reimbursed by Buyer.
(f) Prior to the Closing and subject to the provisions of Section
5.2(b), Seller agrees to use all reasonable efforts to (1) provide existing
documents, books and records concerning the Business as may be reasonably
requested by Buyer in writing and (2) make its Employees available for
reasonable periods of time in order to assist Buyer in its efforts to obtain the
financing for the purchase of the Assets; provided, however, that the provision
of such documents, books and records and the assistance provided by such
Employees in Buyer's financing efforts shall not unduly interfere with the
normal duties and responsibilities of such Employees to operate the business of
Seller; and, provided further, that Seller, its affiliates, employees and
representatives shall have no liability to Buyer, except to the extent such
information is applicable to other provisions hereof or to the Seller
Agreements, or others with respect to such information, it being understood and
agreed that the foregoing is merely an accommodation to Buyer.
5.3 Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto agrees to use its reasonable best efforts to take or cause to be
taken all actions and to do or cause to be done all things necessary, proper or
advisable to consummate the transactions contemplated by this Agreement, the
Seller Agreements and the Buyer
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Agreements and shall use its reasonable best efforts to obtain all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings.
(b) In the event Buyer or Seller, as the case may be, is unable to
obtain, prior to the Closing, any consents, approvals, waivers or other
authorizations to transfer to Buyer any Asset, Buyer and Seller shall cooperate
with each other in order to obtain such consents, approvals, waivers or other
authorizations at the earliest practicable date. In each instance where such
consents, approvals, waivers or other authorizations cannot be obtained prior to
the Closing, Seller shall use reasonable efforts to enter into such alternative
arrangements and agreements with Buyer as may be reasonably appropriate in order
to permit Buyer to realize, receive and enjoy substantially similar rights and
benefits and to enable Buyer to conduct operations of the Business until the
consents, approvals, waivers or other authorizations are obtained. If, after the
exercise of diligent effort, any such consents, approvals, waivers or other
authorizations are not obtained, Seller agrees to cooperate with Buyer in any
reasonable arrangements designed to provide, to the extent reasonably
practicable, for the benefit of Buyer any and all rights of Seller in and to
such Asset. In connection with the foregoing, each party acknowledges that the
other party shall be under no obligation to make financial accommodations
(including, but not limited to, the payment of software license fees), directly
or indirectly, to third parties in order to obtain such consents, approvals,
waivers or other authorizations.
(c) Seller agrees to take actions reasonably requested by Buyer prior
to Closing to assist Buyer with the transition and operation of the Business
after Closing in accordance with Buyer's business plan; provided, however, that
no action need be taken if any incremental cost to Seller is required, except as
set forth in the following sentence. With regard to the hiring of additional
employees of Seller (in excess of Seller's customary hiring for such season) to
assist with such transition, Buyer and Seller shall agree as to the number of
employees to be hired and the timing of such hiring. All of the direct and
indirect costs to Seller attributable to the hiring of such employees shall be
paid by Buyer, or promptly reimbursed by Buyer to Seller, including, but not
limited to those costs listed on Schedule 5.3, if the transactions contemplated
hereby are consummated, otherwise, Seller and Buyer shall split such costs.
5.4 Public Announcements. Buyer and Seller shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any national securities
exchange or in connection with Buyer's financing of the transactions
contemplated hereby.
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5.5 Hart-Scott-Rodino Filing. Each of the parties hereto shall use its
reasonable best efforts in good faith to take or cause to be taken all such
steps as shall be necessary or advisable (i) to promptly effectuate the filing
of a Notification and Report Form under the HSR Act in connection with the
transactions contemplated by this Agreement and (ii) to promptly take such
actions as are reasonable and necessary to respond to any requests or to
facilitate the approval of any federal, state, local or foreign governmental
authority with jurisdiction over the enforcement of any applicable antitrust
laws; provided, however, that Buyer shall not be required to agree to take or
refrain from taking any action or to enter into any agreement that in Buyer's
sole judgment could be detrimental to the Business or Buyer's business plan in
any material respect.
5.6 Mexican Subsidiary. Two shares of the capital stock of Pulidos de
Juarez, S.A. de C.V. are held of record by each of four employees of Seller. At
the Closing, Seller covenants to cause these eight shares to be transferred to
nominees selected by Buyer at no additional cost to Buyer or to Buyer's
nominees.
5.7 Post Closing Confidentiality. After the Closing, Seller agrees to
maintain the confidentiality of all confidential or proprietary information of
the Business and agrees not to disclose any confidential or proprietary
information related to the Business except to the extent that the information
becomes generally available to the public other than as a result of a disclosure
by Seller or to the extent that disclosure of any portion thereof is required by
law or determined to be necessary to comply with any legal or regulatory order,
regulation or requirement; provided, however, that Seller shall first notify
Buyer of any such disclosure and, if Buyer desires, shall cooperate with Buyer
to seek approval to prevent or limit such disclosure. In addition, neither
Seller nor any entities affiliated with it shall approach any employee of Buyer
in order to solicit such employee to work for Seller, its affiliates or its
successors.
5.8 Environmental Assessment. As a condition precedent to the Buyer's
obligation to purchase the Assets, the Buyer shall have the right to conduct a
Phase I environmental site assessment (the "ESA") of the Real Property. The ESA
shall satisfy the requirements of 42 U.S.C. 9601(35)B and shall be conducted in
accordance with the standards promulgated by The American Society for Testing
and Materials at Buyer's sole cost and expense within forty-five (45) days from
the execution of this Agreement. Buyer will provide Seller with a copy of the
ESA within three (3) business days of receipt by Buyer from the consulting firm
conducting the ESA. If the ESA reveals the presence of Hazardous Materials
reasonably likely to result in Environmental Liabilities which could have a
material adverse effect on the Business, Buyer may notify the Seller in writing
within ten (10) days of receipt of the ESA and the parties shall have seven (7)
days to discuss a resolution thereto (the "Consultation Period"). If the parties
cannot reach an acceptable resolution thereto upon the expiration of the
Consultation Period, either party may terminate this Agreement as set
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forth in Section 8.1(b). If Buyer fails to object to such presence of Hazardous
Materials specifically disclosed in the ESA within ten (10) days of receiving
the ESA, Buyer shall waive any and all rights it may have to object to such
presence only to the extent specifically disclosed in the ESA, and Seller shall
have no liability to Buyer or indemnification obligations with respect to the
presence or the effects of such specifically disclosed Hazardous Materials under
Section 9.2 hereof or otherwise.
5.9 Update of Schedules. (a) At any time at least fifteen (15) days prior
to the scheduled Closing Date agreed to by the parties but in no event later
than July 16, 1996, Seller shall have the right (and the obligation) to update
or amend in any respect its disclosure of any matter set forth or permitted to
be set forth in the Schedules hereto, including the addition of new Schedules
hereto, to the extent that such matter (i) was unknown to any officer of Seller
on the date hereof after reasonable due diligence with respect thereto or (ii)
arises subsequent to the date hereof, which fact (in the case of either (i) or
(ii) shall be certified by an executive officer of Seller. Thereafter, Buyer
shall review the updated or amended Schedules, after which, on or at any time
prior to the fifth (5th) day prior to the scheduled Closing Date, Buyer shall
either accept such Schedules or shall deliver to Seller in writing its
reasonable, good faith estimate of the cumulative adverse effects on the
Business or Assets of all matters disclosed on such Schedules when compared to
the initial Schedules delivered to Buyer on the date hereof (the "Economic
Impact"). The parties shall cooperate in good faith to provide all information
necessary to calculate and agree to the value of the Economic Impact.
(b) If the agreed value of the Economic Impact is greater than $500,000 or
if the parties cannot agree on the value of the Economic Impact but both parties
agree that such value is in excess of $500,000, Seller shall not have met the
condition to closing in Section 7.3(c) hereof and Buyer shall have the right
either (i) to terminate this Agreement pursuant to Section 8.1(d) hereof, or
(ii) to consummate the transactions contemplated by this Agreement, in which
event the cash portion of the Purchase Price payable at the Closing shall be
reduced, at Seller's election, by either (x) $500,000 or (y) $400,000; provided,
that in the case of clause (y), the $100,000 indemnification basket set forth in
the final sentence of Section 9.4 (the "Basket") shall be permanently reduced to
zero for the duration of this Agreement; provided, further, that in either case
(x) or (y), without further claims against Seller for such amount of the
Economic Impact in excess of $500,000 (if any).
(c) If the agreed value of the Economic Impact is equal to or less than
$500,000 or if the parties cannot agree on the value of the Economic Impact but
both parties agree that such value is equal to or less than $500,000, the
parties shall consummate the transactions contemplated by this Agreement, but
the cash portion of the Purchase Price payable at the Closing shall be reduced,
at Seller's election, by either (x) the amount of the Economic Impact, or (y)
the amount of the Economic Impact less $100,000; provided, that
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in the case of clause (y), the Basket shall be permanently reduced to zero if
the Economic Impact is greater than $100,000 or by the amount of the Economic
Impact if it is less than $100,000 for the duration of this Agreement; provided
further that in either case (x) or (y), without further claims against Seller
for such amount of the Economic Impact.
(d) If the parties cannot agree on the value of the Economic Impact and the
Buyer's value of the Economic Impact is greater than $500,000 and Seller's value
is less than $500,000, Buyer shall have the right to either (1) terminate this
Agreement pursuant to Section 8.1(d) with neither party having any liability to
the other due to such termination, or (ii) require Seller to close the
transactions contemplated by this Agreement, in which event the cash portion of
the Purchase Price payable at Closing shall be reduced, at Seller's election, by
either (x) $500,000 or (y) $400,000; provided that in the case of clause (y),
the Basket shall be permanently reduced to zero for the duration of the
Agreement; provided further that in either case (x) or (y), without further
claims against Seller for such amount of the Economic Impact.
(e) If the parties cannot agree as to the value of the Economic Impact and
the transactions contemplated hereby close pursuant to Section 5.9(c) or (d)
above, Seller and Buyer shall submit such dispute to two nationally recognized
accounting firms (one chosen by each of the parties), which firms' agreement as
to the value of the Economic Impact shall be final and binding on the parties.
If such two firms cannot agree as to such value, such firms shall designate a
third nationally recognized accounting firm whose decision as to such value
shall be final and binding on the parties. Seller and Buyer shall pay the fees
and expenses of the third accounting firm, which fees and expenses shall be
shared between Seller and Buyer as follows: each party shall pay such portion of
the fees and expenses equal to the proportion determined by (1) a numerator
equal to the positive difference between such party's submitted amount and the
third accounting firm's determined amount and (2) a denominator equal to the sum
of such positive difference for both parties. Otherwise, Buyer and Seller shall
each pay its own costs incurred in connection with this Section 1.5, including
the fees and expenses of their respective accountants, if any. If the value of
the Economic Impact determined as set forth above is less than Buyer's value of
the Economic Impact in the case of Section 5.9(c) or less than $500,000 in the
case of Section 5.9(d), Buyer shall pay such difference to Seller promptly after
such determination. If the determined value of the Economic Impact is greater
than Buyer's value of the Economic Impact in the case of Section 5.9(c), Seller
shall pay such difference to Buyer promptly after such determination; provided,
however, that in no event shall Seller pay an amount such that such difference
plus Buyer's value of the Economic Impact is greater than $500,000. If the
determined value of the Economic Impact is greater than $500,000 in the case of
Section 5.9(d), no payment shall be made by either party on the amount in excess
of $500,000 other than the payment of the accountant's fees as specified above.
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(f) The parties acknowledge that an update, amendment or addition to the
Schedules may contain information relating to provisions of this Agreement that
are currently not the subject of exceptions or other disclosures set forth in
the Schedules or otherwise provided to Buyer and that such updates, amendments
or additions shall not evidence or constitute a breach of any representation or
warranty of Seller. Upon Closing, the affected provisions of this Agreement
shall be deemed to be modified by the updated, amended and additional
information contained in the revised Schedules.
5.10 Taxes.Seller covenants that neither Buyer nor any Subsidiary shall
have any liability for any Tax imposed on or with respect to any Subsidiary that
is attributable to the Pre-Closing Tax Period. Buyer covenants that Seller shall
have no liability for any Tax imposed on Buyer or the Subsidiaries that is
attributable to taxable periods beginning after the Closing Date or any portion
of any taxable period that includes a period after (but does not begin on) the
Closing Date. Seller and Buyer agree that for any taxable period included in the
Pre-Closing Tax Period that begins, but does not end on, the Closing Date, Taxes
shall be allocated to the Pre-Closing Tax Period (i) in the case of Taxes based
on the passage of time (e.g., property taxes), on a per-day pro-rata basis and
(ii) in the case of any other Taxes, on an interim closing basis.
5.11 Audited Financials. As soon as reasonably practicable but in no event
later than May 24, 1996, Seller shall deliver to Buyer the audited balance sheet
data and audited related income statement data of the Business for the three
fiscal year periods ended August 31, 1993, August 27, 1994 and August 26, 1995
and the accountants' review of the balance sheet data and income statement data
for the two fiscal years ended August 31, 1991 and 1992 and for the six months
ended February 24, 1996, which upon such delivery, shall be included in the term
"Financial Statements" as defined in Section 3.4(b) above. The cost of such
audit and review shall be borne by Seller; provided, however that upon
consummation of the transactions contemplated by this Agreement, Buyer shall,
upon receipt of written evidence thereof, promptly reimburse Seller for the
incremental costs associated with such audit and review by such accountants to
the extent attributable to the additional procedures required to be performed by
such accountants to perform the audit and review over and above their prior
review of Seller's financial statements for such years. The good faith estimate
of Adjusted Working Capital to be delivered prior to Closing pursuant to Section
1.4, shall be prepared in conformity with generally accepted accounting
principles for those general ledger accounts specified on Schedule 1.4, except
for the valuation of inventory which shall be as specified on Schedule 1.4(a).
5.12 Noncompetition. (a) Neither Seller nor any entity affiliated (within
the meaning of the Securities Act) with Seller shall, for a period of five years
commencing on the Closing Date and ending on the fifth anniversary thereof,
directly or indirectly:
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(i) engage, directly or indirectly, in any managerial,
administrative, advisory, operational or sales activities in a Restricted
Business anywhere in the Restricted Area; or
(ii) organize, establish, operate, own, manage, control or have a
direct or indirect investment or ownership interest in a Restricted Business or
in any corporation, partnership (limited or general), limited liability company,
enterprise or other business entity that engages in a Restricted Business
anywhere in the Restricted Area.
(b) Nothing contained in this Section 5.12 shall prohibit or otherwise
restrict Seller or any entity affiliated with it from acquiring or owning,
directly or indirectly, for investment or other legitimate business purposes not
intended to circumvent this Agreement, securities of any entity engaged,
directly or indirectly, in a Restricted Business if either (i) such entity is a
public entity and such member (A) is not a controlling person of, or a member of
a group that controls, such entity and (B) owns, directly or indirectly, no more
than five percent (5%) of any class of equity securities of such entity or (ii)
such entity is not a public entity and no affiliate of Seller (A) is a
controlling person of, or a member of a group that controls, such entity and (B)
owns, directly and indirectly, no more than ten percent (10%) of any class of
equity securities of such entity.
(c) For purposes of this Section 5.12:
(i) "Restricted Business" means engaging in the manufacture and
sale of class rings.
(ii) "Restricted Area" means the United States.
(d) The parties hereto acknowledge that the covenants and restrictions
contained in this Section 5.12 are reasonable. The parties agree that the Buyer
shall have the right and remedy to have this Section 5.12 specifically enforced,
it being agreed that any breach or threatened breach of this Section 5.12 would
cause irreparable injury to Buyer and that money damages would not provide an
adequate remedy to Buyer.
5.13 T&C Agreement. Buyer shall promptly notify Seller in writing of any
proposed amendment, waiver or other modification of the T&C Agreement or any
proposed action to be taken by Buyer or any other party to the T&C Agreement
that could reasonably be likely to cause a delay in the Closing beyond July 31,
1996, or otherwise affect Buyer's ability to close the transactions contemplated
hereby in accordance with the terms hereof by such date, including, but not
limited to, Buyer's decision to delay the Closing Date pursuant to Section 5.10
of the T&C Agreement (any such amendment, waiver, modification or action, being
a "Proposal"). Seller shall have the right, but not the obligation to terminate
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this Agreement if (i) Seller objects to such Proposal in writing to Buyer within
10 business days of Seller's receipt of Buyer's notice of such Proposal, stating
Seller's reason(s) for such objection, and (ii) such Proposal is effected
despite Seller's objection and Buyer shall notify Seller in writing of such
Proposal being effected. Seller may exercise this termination right by providing
written notice to Buyer no later than 10 business days after Seller is notified
of the Proposal being effected, assuming Seller had previously objected to such
Proposal.
ARTICLE VI
PERSONNEL, EMPLOYMENT ARRANGEMENTS
AND EMPLOYEE BENEFITS
6.1 Personnel. Effective as of the Closing, Buyer shall offer employment to
(a) substantially all active Employees (including those on short-term
disability, temporary leave and temporary lay-off, but excluding Employees hired
on a temporary basis) engaged in plant operations at the plants of the Business
as of the Closing, provided that Employees on short-term disability, temporary
leave and temporary lay-off shall be offered employment in their same status,
and (b) substantially all non-plant staff Employees and corporate staff
Employees, in each case at compensation and benefit levels substantially
equivalent to their present levels. Such offers shall be outstanding for at
least ten days. Employees who accept offers of employment made by Buyer pursuant
to this Section 6.1 shall be referred to herein after as the "Transferred
Employees." The term "Transferred Employees" shall not include any former
employees of Seller who are hired pursuant to an offer made after the expiration
of the offer made by Buyer under this Section 6.1. Seller shall assist Buyer in
effecting the change of employment of the Transferred Employees as of the
Closing in an orderly fashion.
6.2 401(k) Plan.
(a) The Transferred Employees shall be eligible to commence
participation in a defined contribution plan established and maintained by Buyer
(the "Buyer's 401(k) Plan") which shall be effective no later than 60 days after
the Closing Date and which is intended to be qualified under Sections 401(a) and
401(k) of the Code, such eligibility to be effective immediately upon the
effective date of Buyer's 401(k) Plan.
(b) Seller shall cause Transferred Employees who are participants in
Seller's 401(k) Plan to be fully vested as of the Closing Date. As of the
Closing Date, Seller's 401(k) Plan shall be liable for payment of such account
balances in accordance with the terms of Seller's 401(k) Plan.
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(c) Buyer shall cause each Transferred Employee to be given full
credit for service with Seller (as defined in Seller's 401(k) Plan) for purposes
of eligibility and vesting in Buyer's 401(k) Plan.
6.3 Other Seller Welfare Benefit Plans.
(a) As of the Closing Date, (i) all Transferred Employees and their
dependents that participate in any other "employee welfare benefit plan" (as
defined by Section 3(1) of the Employee Retirement Income Securities Act of
1974, as amended ("ERISA")) that is maintained by Seller (collectively the
"Seller Welfare Plans") shall cease to do so and (ii) Buyer shall take such
actions as are necessary so that such Transferred Employees and dependents shall
commence participation in any "employee welfare benefit plan (as defined by
Section 3(1) of ERISA) maintained by Buyer for individuals employed by Buyer
immediately prior to the Closing Date (the "Buyer Welfare Plan").
(b) The Seller Welfare Plans shall not be liable for payment of claims
incurred by eligible Transferred Employees, except as otherwise provided by this
Section 6.3. The Seller Welfare Plans shall be liable for the payment of
benefits to eligible Transferred Employees and their eligible dependents for
expenses incurred under the Seller Welfare Plans prior to the Closing Date.
(c) The Buyer Welfare Plan or Plans which provide medical, health and
dental care benefits to Transferred Employees (the "Buyer Medical Plans") shall
waive any coverage waiting period, pre-existing condition and actively-at-work
requirements, and shall provide that any expenses incurred before the Closing
Date by a Transferred Employee (and his or her dependents) during the calendar
year of the Closing shall be taken into account for purposes of satisfying the
applicable deductible, coinsurance and maximum out-of-pocket provisions, and
applicable annual and/or lifetime maximum benefit limitation of the Buyer
Medical Plans. The Buyer's Medical Plans shall require employee contributions at
a rate that does not exceed the rate in effect for other individuals employed by
Buyer.
(d) The Buyer Welfare Plans shall be liable for the payment of claims
of eligible Transferred Employees and their eligible dependents for expenses
incurred under the Buyer Welfare Plans on or after the Closing Date,
notwithstanding the fact that any such expense may be related to another expense
which was paid or is eligible for payment under the terms of any of the Seller
Welfare Plans or was related to any treatment for any condition diagnosed or
existing prior to the Closing Date.
6.4 Vacation. With respect to Transferred Employees, Buyer shall continue
to apply the vacation policy of the Business that is in effect the day before
the Closing Date ("Vacation Policy") for at least the remainder of the calendar
year in which the Closing
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occurs, so that each Transferred Employee shall be entitled to use any vacation
time or receive any vacation pay to which he or she would otherwise be entitled
for that calendar year under the Vacation Policy. The Vacation Policy is set
forth in Schedule 6.4.
6.5 Payroll Issues. At the request of Seller made any time after Closing,
Buyer shall, in a timely manner, provide Seller with the information in Buyer's
possession that Seller deems necessary for Seller to complete any Internal
Revenue Service filing, including IRS W-2 Forms and insurance premium reports,
with respect to each individual whose employment with the Business terminated
prior to the Closing Date.
6.6 Workers Adjustment and Retraining Notification Act. Buyer shall defend,
indemnify and hold Seller harmless from and against any claims or liabilities in
connection with the Workers Adjustment and Retraining Notification Act (29
U.S.C. Sections 2101, et seq.) ("WARN Act") or any comparable state law
resulting from decisions made, or actions taken, by Buyer after the Closing
Date. Seller shall defend, indemnify and hold Buyer harmless from and against
any claims or liabilities in connection with the WARN Act or any comparable
state law resulting from decisions made, or actions taken, by Seller in
connection with Seller's Bridal Division.
6.7 Cooperation of the Parties. Subject to the proviso in the first
sentence of Section 5.5 above, Seller and Buyer agree to cooperate fully with
respect to each of the filings and calculations necessary to effect the
transactions contemplated by this Article VI and in obtaining any governmental
approvals required hereunder.
6.8 Employee Rights. Nothing herein expressed or implied shall confer upon
any employee of Seller, any Transferred Employee, any other employee or any
legal representative thereof any rights or remedies, including any right to
employment or continued employment for any specified period, of any nature or
kind whatsoever, under or by reason of this Agreement.
6.9 Employment Agreements. On the Closing Date, Buyer shall offer to enter
into employment agreements with each of the executives of Seller listed on
Schedule 6.9 with such agreements to be substantially similar to those currently
in place between Seller and such executives, or as otherwise may be agreed
between Buyer and such executives. On the Closing Date, Seller and each of such
executives accepting such offer to employment by Buyer shall terminate the
applicable employment agreements with Seller.
6.10 Limitations. Nothing contained in Sections 6.2 and 6.3 is intended to
confer any rights to any third party nor limit the ability of Buyer to amend or
terminate any employee benefit plan after the Closing Date.
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ARTICLE VII
CONDITIONS TO CLOSING
7.1 General Conditions. The obligations of each party hereto to effect the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of the following conditions:
(a) No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the transactions
contemplated hereby.
(b) Any waiting period applicable to the transactions contemplated
hereby pursuant to the HSR Act shall have expired or been terminated without any
conditions being imposed on Buyer to which Buyer objects and that would
otherwise allow Buyer to terminate this Agreement pursuant to Section 8.1(g).
7.2 Conditions to Obligations of Seller. The obligations of Seller to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Buyer shall have performed its obligations required under this
Agreement to be performed by it at or prior to the Closing and the
representations and warranties of Buyer contained in this Agreement shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except to the extent that a different time is specifically stated in such
representations and warranties), and Buyer shall have delivered to Seller on the
Closing Date a certificate of an authorized officer of Buyer, dated the Closing
Date, to such effect.
(b) Seller shall have received the amounts referred to in Section
2.3(a) and the documents referred to in Section 2.3.
(c) All necessary approvals, consents or orders of all administrative
agencies or government authorities which have jurisdiction over Buyer or the
Business to the assignment of the Assets shall have been obtained upon terms and
conditions reasonably satisfactory to Seller.
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7.3 Conditions to Obligations of Buyer. The obligation of Buyer to effect
the transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Seller shall have performed its obligations required under this
Agreement to be performed by it at or prior to the Closing and the
representations and warranties of Seller contained in this Agreement, to the
extent timely updated pursuant to Section 5.9, shall be true and correct on and
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except to the extent
that a different time is specifically stated in such representations and
warranties), and Seller shall have delivered to Buyer on the Closing Date a
certificate of an authorized officer of Seller, dated the Closing Date, to such
effect.
(b) Buyer shall have received the documents referred to in Section
2.2.
(c) There shall not have occurred a material adverse change in the
Business since the date of this Agreement, including any changes in any updated,
amended, or additional Schedules pursuant to Section 5.9; provided, however,
that for purposes of this clause (c), a material adverse change shall not have
occurred unless there is an adverse change in the Assets or the Business, in the
aggregate, of more than $500,000.
(d) All necessary approvals, consents or orders of all administrative
agencies or government authorities which have jurisdiction over Seller or the
Business to the assignment of the Assets shall have been obtained upon terms and
conditions reasonably satisfactory to Buyer.
(e) All conditions to the availability of the financing contemplated
by the letters referenced in Section 4.5 shall have been met and such financing
shall be available; provided, however, that Buyer may rely on this condition to
Closing only if it has used its reasonably diligent efforts to obtain the
financing contemplated by such letters and subject to the terms and conditions
set forth therein; provided, however, that such reasonably diligent efforts
shall not require Buyer to increase its equity investment in the transactions
contemplated hereby to more than $35 million, to issue more than a nominal
amount of the equity of Buyer to investment bankers, banks or investors in
connection with such financing, or to agree to any other provisions which Buyer,
in its sole judgment, believes could be detrimental to its business plan or to
the investment of its stockholders in Buyer in any material respect.
(f) The closing of Buyer's transactions pursuant to the T&C Agreement,
or pursuant to substantially the same terms as set forth in such agreement,
shall occur simultaneously with the Closing hereunder.
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ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) By mutual consent of Buyer and Seller;
(b) by either Seller or Buyer, by notice to the other, pursuant to
Section 5.8 above or if the Closing shall not have occurred on or prior to July
31, 1996;
(c) by Seller or by Buyer, by notice to the other, if on the date
scheduled for Closing any order shall have been entered restraining or
prohibiting consummation of the transactions contemplated hereby;
(d) by Buyer, without affecting any of its other rights hereunder at
any time after the Closing Date, if it is prepared to tender full performance of
its obligations hereunder on the Closing Date and any one or more of the
conditions precedent to its obligations herein shall not have been fulfilled or
waived; provided, however, that if Buyer terminates this Agreement pursuant to
Section 5.9, neither party shall have any liability for breaches of this
Agreement to the other due to such termination other than as set forth
specifically in Section 5.9.
(e) by Seller, without affecting any of its other rights hereunder at
any time after the Closing Date, if it is prepared to tender full performance of
its obligations hereunder on the Closing Date and any one or more of the
conditions precedent to its obligations herein shall not have been fulfilled or
waived;
(f) by either Seller or Buyer if Buyer (in the case of Seller) or
Seller (in the case of Buyer) fails to comply with any of its covenants or
agreements contained herein, or breaches any of its representations contained
herein, and such default or breach (i) cannot reasonably be expected to be cured
prior to the Closing, (ii) has not been waived by the relevant party and (iii)
would give Seller or Buyer, as the case may be, the right not to consummate the
transactions contemplated by this Agreement pursuant to Section 8.1;
(g) by Buyer if in order to obtain the approval or clearance of any
governmental authority under the HSR Act, Buyer would be required to agree to
take or refrain from taking any action or enter into any agreement that in
Buyer's sole judgment could be detrimental to the Business or to Buyer's
business plan in any material respect; or
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(h) by Seller pursuant to the terms of Section 5.13.
8.2 Notice of Termination. Written notice of any termination under any
clause other than Section 8.1(a), stating the grounds therefor, shall be given
by the party entitled to give such notice.
8.3 Effect of Termination. Except for Sections 5.2(b) and 10.1 and except
as set forth in Section 8.1(d) above for liability for breaches of this
Agreement, upon the termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become null and void.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
9.1 Survival. The representations and warranties of Seller and Buyer herein
and in the documents and instruments to be delivered by Seller as contemplated
hereby shall survive the Closing until December 31, 1996. The covenants and
agreements of the parties herein and in the other documents and instruments
contemplated hereby shall survive the Closing and shall continue in full force
and effect forever except as otherwise limited by their terms.
9.2 Indemnification by Seller. Seller hereby agrees to indemnify, save and
hold harmless Buyer, its successors and permitted assigns and all of its
officers, directors, stockholders, agents and employees from and against any and
all damages, liabilities, losses, claims, deficiencies, penalties, interest,
expenses, fines, assessments, charges or costs, including reasonable attorney's
fees and expenses and costs of investigation (collectively, the "Damages")
arising from (a) the Excluded Liabilities, (b) the breach of any covenant or
agreement of Seller contained herein and (c) any inaccuracy or breach of any
representation or warranty of Seller under this Agreement subject to the
limitations of Sections 5.8 and 9.1; provided, however that the indemnification
in clause (c) shall be limited to the Escrow Amount.
9.3 Indemnification by Buyer. Buyer hereby agrees to indemnify, save and
hold harmless Seller, its successors and permitted assigns and all of its
officers, directors, shareholders, agents and employees from and against any
Damages arising from (a) the Assumed Liabilities, (b) the breach of any covenant
or agreement of Buyer contained herein, and (c) any inaccuracy or breach of any
representation or warranty of Buyer under this Agreement.
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9.4 Limitation of Liability. For purposes of this Article IX, all Damages
shall be computed net of (a) any insurance proceeds actually received from
insurance for the event or occurrence giving rise to the Damages, and (b) any
amounts actually received, from any third parties based on claims related to the
event or occurrence giving rise to the Damages that the indemnified party has
against such third parties which reduce the Damages that would otherwise be
sustained; provided, however, that, in all cases, the timing of the receipt or
realization of insurance proceeds or recoveries from third parties, the amount
of increased costs of insurance arising from the payment or collection of such
insurance proceeds, and the costs of collection shall be taken into account in
determining the amount of reduction of Damages. If any indemnifying party pays
to the indemnified party any Damages under this Article IX and the indemnified
party subsequently recovers from some other person any sum in respect of any
matter giving rise to the relevant claim, the indemnified party shall repay to
the indemnifying party the lesser of (a) the amount paid by the indemnifying
party to the indemnified party and (b) the sum recovered from such other person.
No indemnified party hereunder shall be entitled to seek indemnification from an
indemnifying party until and unless the aggregate of all claims for
indemnification by the indemnified party exceeds $100,000 and then the
indemnifying party shall only be liable for the excess over such amount;
provided, however, that in the case of Seller, the $100,000 basket referred to
herein is subject to reduction as set forth in Section 5.9.
9.5 Notice and Right to Defend. Each party hereto agrees to give prompt
notice to the other of the assertion of any claim, or the commencement of any
suit, action or proceeding in respect of which indemnity may be sought
hereunder, provided that the failure to give such notice to the indemnifying
party shall not relieve the indemnifying party of any liability that it may have
to an indemnified party except to the extent that the indemnifying party shall
have been materially prejudiced in its ability to defend the claim, suit, action
or proceeding for which such indemnity is sought by reason of such failure. The
indemnifying party shall have the right to assume the defense of any third-party
claim, suit, action or proceeding in respect of which indemnity hereunder is
sought by giving prompt notice to the indemnified party. In the event that the
indemnifying party elects to assume the defense of such claim, suit, action or
proceeding, the indemnifying party shall promptly retain counsel reasonably
satisfactory to the indemnified party. The indemnified party shall have the
right to employ its own counsel in any such claim, suit, action or proceeding,
but the fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment of such counsel shall have been
authorized by the indemnifying party, (ii) the indemnifying party shall not have
promptly retained counsel reasonably satisfactory to the indemnified party to
take charge of the defense of such claim, suit, action or proceeding, (iii) the
indemnified party shall have concluded that there may be one or more legal
defenses available to it which are unavailable to the indemnifying party or
which are in conflict with the position of the indemnifying party or (iv) the
resolution of the matter being contested may, in the reasonable judgment of the
indemnified party have a material adverse effect on
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the indemnified party's business, in any of which events, such fees and expenses
shall be borne by the indemnifying party. If an indemnifying party elects to
assume the defense of any such claim, suit, action or proceeding, (a) no
compromise or settlement thereof may be effected by the indemnifying party
without the indemnified party's written consent if such compromise or settlement
involves anything other than the payment of monetary damages, and (b) the
indemnifying party shall have no liability for any settlement or compromise by
the indemnified party with any third party relating to any such claim, suit,
action or proceeding effected without, to the extent and only to the extent such
settlement involves any monetary damages, the prior written consent of the
indemnifying party. Notwithstanding the foregoing, if an indemnified party
determines that there is a reasonable possibility that any such claim, suit,
action or proceeding may have an adverse effect on the indemnified party's
business or the business of any of its subsidiaries or affiliates, such
indemnified party may, by written notice to the indemnifying party assume the
exclusive right to defend such claim, suit, action or proceeding with counsel
reasonably acceptable to the indemnifying party; provided, however, that no
compromise or settlement may be effected by the indemnified party without the
indemnifying party's written consent to the extent and only to the extent such
compromise or settlement involves monetary damages.
If the indemnifying party fails to give written notice to the
indemnified party of its election to assume the defense of any claim, suit,
action or proceeding for which it is called upon to indemnify an indemnified
party pursuant to this Article IX within thirty (30) days after the indemnified
party gives notice to the indemnifying party of the commencement of such claim,
suit, action or proceeding, the indemnifying party shall be bound by any
determination made in any such claim, suit, action or proceeding or compromise
or settlement thereof effected by the indemnified party.
9.6 Remedies Exclusive. The remedies provided in this Article IX shall be
the sole and exclusive remedy and shall preclude assertion by an indemnified
party of any other rights or the seeking of any and all other remedies against
an indemnifying party for claims based on any breach of any representation or
warranty contained in this Agreement.
ARTICLE X
MISCELLANEOUS
10.1 Expenses, Taxes. Except as otherwise provided in Section 1.8 , each
party shall pay all fees and expenses incurred by it in connection with this
Agreement and the consummation of the transactions contemplated hereby (other
than any excise, sales, use or transfer taxes or any other such taxes which are
payable or arise as a result of execution of
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this Agreement or the transfer of Assets to Buyer pursuant to this Agreement,
which shall be paid by Buyer).
10.2 Further Assurances. From time to time after the Closing and without
further consideration, Seller, upon the request of Buyer and at Buyer's expense,
shall, subject to applicable law, execute and deliver such documents and
instruments of conveyance and transfer as Buyer may reasonably request in order
to consummate more effectively the purchase and sale of the Assets as
contemplated hereby and to vest in Buyer title to the Assets transferred
hereunder.
10.3 Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person or transmitted by facsimile transmission or upon receipt
after dispatch by registered or certified mail, postage prepaid, or overnight
courier services, addressed, as follows:
If to Seller to:
CJC Holdings, Inc.
7211 Circle S Road
Austin, Texas 78745
Attention: Mr. Jeffrey H. Brennan
Telephone: (512) 440-2286
Telecopy: (512) 443-5213
with a required copy to:
Mr. Thomas D. Manford III
Bracewell & Patterson, L.L.P.
711 Louisiana, Suite 2900
Houston, Texas 77002-2781
Telephone: (713) 221-1303
Telecopy: (713) 221-1212
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If to Buyer to:
Mr. David B. Pittaway
Castle Harlan, Inc.
150 East 58th Street
New York, New York 10155
Telephone: (212) 644-8600
Telecopy: (212) 207-8042
with a required copy to:
Ms. Janet C. Walden
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Telephone: (212) 756-2495
Telecopy: (212) 593-5955
or such other address as the person to whom notice is to be given has furnished
in writing to the other party. A notice of change in address shall not be deemed
to have been given until received by the addressee.
10.4 Headings; Interpretation. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement. Unless otherwise specified, references
in this Agreement to Sections, Articles and Schedules are to Sections and
Articles of, and Schedules to, this Agreement.
10.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas regardless of the laws that might
otherwise govern under applicable principles of conflict of laws thereof.
10.6 Assignability. Neither party shall assign this Agreement in whole or
in part without the prior written consent of the other party; provided, however,
that Buyer may assign its rights and obligations hereunder with the respect to
the ABC Contract to a wholly-owned subsidiary of Buyer and after the Closing
Seller may assign its rights and obligations hereunder to a trustee in charge of
the liquidation of Seller. Any assignment made or attempted in violation of this
Section 10.6 shall be void and of no effect.
10.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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10.8 Entire Agreement. This Agreement (including the documents and
instruments referred to herein) (a) constitute the entire agreement and
supersede all other prior agreements and understandings, both written and oral,
among the parties and (b) other than as provided in Sections 9.2 or 9.3, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
10.9 Severability. In the event that any one or more of the provisions or
parts of a provision contained in this Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or any other jurisdiction, but this
Agreement shall be reformed and construed in any such jurisdiction as if such
invalid or illegal or unenforceable provision or part of a provision had never
been contained herein and such provision or part shall be reformed so that it
would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction.
10.10 Bulk Sales Laws. The parties hereby waive compliance with the Bulk
Sales Laws of any state or territory in which the Assets are located or in which
operations relating to the Business are conducted. Seller shall defend,
indemnify and hold Buyer harmless from any liability, damage, cost or expense
relating to such non-compliance.
10.11 Amendment. This Agreement may be amended by the parties at any time
but only by an instrument in writing signed by the parties hereto.
10.12 Waiver. Either party may (a) extend the time for the performance of
any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto or (c) waive compliance by
the other party with any of the agreements, or satisfaction of any of the
conditions, contained herein. Any agreement on the part of the other party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed by such party.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its duly authorized officer, all as of the day and
year first above written.
CJC HOLDINGS, INC.
By: /s/ Jeffrey H. Brennan
-----------------------------
Name: Jeffrey H. Brennan
---------------------------
Title: President
---------------------------
CJC NORTH AMERICA, INC.
By: /s/ Jeffrey H. Brennan
-----------------------------
Name: Jeffrey H. Brennan
---------------------------
Title: Vice President
---------------------------
CLASS RINGS, INC.
By: /s/ David B. Pittaway
-----------------------------
Name: David B. Pittaway
---------------------------
Title: President
---------------------------
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DISCLOSURE SCHEDULE
General Comments to Disclosure Schedule
The inclusion of a matter herein is not an admission by and does not reflect a
judgment on the part of Seller or its officers or directors that such matter is
necessarily material to the Business or that it does or may have a material
adverse effect on the Business, except to the extent that a disclosure is in
response to a specific test of such materiality.
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