Exhibit 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
Dated February 8, 2002
By and Among
C.M. OFFRAY & SON, INC.
LION RIBBON COMPANY, INC.
CVO CORPORATION (DELAWARE)
C.M. OFFRAY LIMITED
C.M. OFFRAY EUROPE
OFFRAY RIBBON CANADA, INC.
C.M. OFFRAY & SON (HONG KONG) LIMITED
as Sellers
CLAUDE V. OFFRAY, JR.
CLAUDE V. OFFRAY III
DENISE A. OFFRAY
as Stockholders
DAYLIGHT ACQUISITION CORP.
as Purchaser
and
BERWICK INDUSTRIES LLC
as Parent
TABLE OF CONTENTS
Page
ARTICLE 1 TERMS OF PURCHASE AND SALE.....................................................................1
1.1 Sale and Purchase of Assets....................................................................1
1.2 The Closing....................................................................................4
1.3 Purchase Price and Payment.....................................................................4
1.4 Assumption of Liabilities and Obligations......................................................5
1.5 Adjustment to Purchase Price; Closing Audit....................................................8
1.6 Allocation of Purchase Price..................................................................11
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS AND MAJOR STOCKHOLDER...........................11
2.1 Organization..................................................................................11
2.2 Corporate Power and Authority; Effect of Agreement............................................11
2.3 Capitalization................................................................................12
2.4 Financial Statements and Reports..............................................................12
2.5 Undisclosed Liabilities.......................................................................13
2.6 Absence of Certain Changes or Events..........................................................13
2.7 Accounts Receivable...........................................................................14
2.8 Inventory.....................................................................................14
2.9 Vehicles......................................................................................15
2.10 Real Property.................................................................................15
2.11 Real Property Leases..........................................................................15
2.12 Title to Assets...............................................................................16
2.13 Condition and Sufficiency of Tangible Purchased Assets........................................16
2.14 Commitments...................................................................................17
2.15 Litigation....................................................................................18
2.16 Compliance with Laws..........................................................................18
2.17 Governmental Licenses.........................................................................18
2.18 Employee Benefit Plans........................................................................19
2.19 Labor Matters.................................................................................21
2.20 Consents......................................................................................22
2.21 Taxes.........................................................................................22
2.22 Intellectual Property.........................................................................24
2.23 Environmental Matters.........................................................................24
2.24 Insurance.....................................................................................26
TABLE OF CONTENTS
(continued)
Page
2.25 Books of Account..............................................................................26
2.26 Additional Information........................................................................26
2.27 Accounts Payable..............................................................................27
2.28 Product Warranties; Product Returns...........................................................27
2.29 Relations with Customers and Suppliers........................................................27
2.30 Transactions with Affiliates..................................................................27
2.31 Consumer Safety Matters.......................................................................27
2.32 Brokers.......................................................................................28
2.33 Full Disclosure...............................................................................28
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER...................................................28
3.1 Organization..................................................................................28
3.2 Corporate Power and Authority; Effect of Agreement............................................28
3.3 Consents......................................................................................29
3.4 Litigation....................................................................................29
ARTICLE 4 ADDITIONAL AGREEMENTS.........................................................................29
4.1 Employees.....................................................................................29
4.2 Third Party Consents..........................................................................33
4.3 Further Assurances............................................................................33
4.4 Post-Closing Access to Information............................................................33
4.5 Non-Competition by the Sellers and the Stockholders; Right of First Refusal...................33
4.6 No Solicitation by the Sellers and the Stockholders...........................................34
4.7 Equitable Relief..............................................................................34
4.8 Certain Taxes.................................................................................35
4.9 Control Rights................................................................................35
4.10 Dissolution of Sellers; Change of Name........................................................36
4.11 License Grant from Purchaser to Offray........................................................36
4.12 Conduct of the Sellers' Business Prior to the Closing Date....................................37
4.13 Confidentiality...............................................................................39
4.14 Collection of Accounts Receivable.............................................................39
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TABLE OF CONTENTS
(continued)
Page
4.15 Sample Books..................................................................................40
4.16 Restriction Regarding Argentina...............................................................41
4.17 Update Schedules..............................................................................41
4.18 Sellers' Bank Accounts........................................................................41
4.19 Reimbursement Payments from Purchaser.........................................................41
ARTICLE 5 CONDITIONS TO PURCHASER'S OBLIGATIONS.........................................................41
5.1 Representations, Warranties and Covenants of Sellers and Stockholders.........................42
5.2 No Prohibition................................................................................42
5.3 Governmental Consents.........................................................................42
5.4 NJ-ISRA.......................................................................................42
5.5 Third Party Consents..........................................................................42
5.6 Real Property Leases..........................................................................43
5.7 Transfer of Real Property.....................................................................43
5.8 Bills of Sale and Assignment..................................................................43
5.9 Release of Liens..............................................................................43
5.10 Mortgage Satisfactions........................................................................43
5.11 Environmental Review..........................................................................43
5.12 Environmental Permits.........................................................................43
5.13 Chester Premises Lease........................................................................44
5.14 Offray's Certificate..........................................................................44
5.15 Form and Content of Documents.................................................................44
5.16 Escrow Agreement..............................................................................44
5.17 Transition Services Agreement.................................................................44
5.18 Opinion of Counsel............................................................................44
5.19 Employment Agreement..........................................................................44
5.20 Material Adverse Changes......................................................................44
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TABLE OF CONTENTS
(continued)
Page
5.21 Tax Clearance Certificate.....................................................................44
5.22 Nonforeign Affidavits.........................................................................44
ARTICLE 6 CONDITIONS TO THE SELLERS' OBLIGATIONS........................................................45
6.1 Representations, Warranties and Covenants of Purchaser and Parent.............................45
6.2 No Prohibition................................................................................45
6.3 Governmental Consents.........................................................................45
6.4 Chester Premises Lease........................................................................45
6.5 Transition Services Agreement.................................................................45
6.6 Assumption Agreement..........................................................................45
6.7 Secretary's Certificate.......................................................................45
6.8 Form and Content of Documents.................................................................45
6.9 Escrow Agreement..............................................................................46
6.10 Opinion of Counsel............................................................................46
ARTICLE 7 INDEMNIFICATION...............................................................................46
7.1 Indemnification by Sellers and Major Stockholder..............................................46
7.2 Indemnification by Purchaser and the Parent...................................................46
7.3 Limitation on Liability.......................................................................47
7.4 Survival of Representations and Covenants.....................................................47
7.5 Exceptions to Limitations.....................................................................47
7.6 Method of Asserting Claims, Etc...............................................................47
7.7 Effect of Investigation.......................................................................49
ARTICLE 8 TERMINATION...................................................................................49
8.1 Termination...................................................................................49
ARTICLE 9 MISCELLANEOUS.................................................................................49
9.1 Arbitration...................................................................................49
9.2 Bulk Sales Law................................................................................50
9.3 Entire Agreement..............................................................................50
9.4 Parties In Interest...........................................................................50
9.5 Headings......................................................................................50
9.6 Modification and Waiver.......................................................................50
iv
TABLE OF CONTENTS
(continued)
Page
9.7 Expenses......................................................................................50
9.8 Notices.......................................................................................50
9.9 Governing Law.................................................................................51
9.10 Public Announcements..........................................................................52
9.11 Counterparts; Facsimile Signatures............................................................52
ARTICLE 10 DEFINITIONS...................................................................................52
10.1 Certain Definitions...........................................................................52
10.2 Additional Definitions........................................................................57
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TABLE OF CONTENTS
(continued)
Schedules
Schedule 1.1(a)(i) Inventory Not Located at a Facility
Schedule 1.1(a)(ii) Accounts Receivable
Schedule 1.1(a)(iii) Tangible Personal Property
Schedule 1.1(a)(v) Real Property
Schedule 1.1(a)(vi) Real Property Leases
Schedule 1.1(a)(ix) Governmental Licenses
Schedule 1.1(a)(x) Vehicles
Schedule 1.1(b)(iii) Chester Premises
Schedule 1.1(b)(iv) Personal Belongings of Major Stockholder
Schedule 1.1(b)(v) Offray's Specialty Products Division
Schedule 1.1(b)(vi) Promatrx Assets, Liabilities and Businesses
Schedule 1.5 Obsolete Supplies
Schedule 2.1 Foreign Qualifications
Schedule 2.3 Capitalization
Schedule 2.6 Certain Changes
Schedule 2.7 Accounts Receivable Exceptions
Schedule 2.10(a) Real Property - Items not in good operating
condition and repair
Schedule 2.12(b) Excluded Tangible Assets
Schedule 2.13(a) Tangible Purchased Assets - Items not in
good operating condition and repair
Schedule 2.13(b) Leased Items
Schedule 2.14 Commitments (including Capital Leases)
Schedule 2.15 Litigation
Schedule 2.17 Governmental Licenses
Schedule 2.18 Employee Benefit Plans
Schedule 2.18(i) Vesting of Benefits
Schedule 2.18(k) Former Employees Currently on COBRA
Schedule 2.19(b) Outstanding Labor Claims
Schedule 2.21 Exceptions as to Taxes
Schedule 2.22 Intellectual Property
Schedule 2.22(b) Licenses
Schedule 2.23(a)(1) Exceptions re: Environmental Permits
Schedule 2.23(a)(2) Environmental Permits
Schedule 2.23(b) Exceptions re: Compliance
Schedule 2.23(c) Exceptions re: Environmental Claims
Schedule 2.23(d) On Site Hazardous Materials
Schedule 2.23(e) Hazardous Waste Disposal Sites
Schedule 2.23(h) Underground Storage Tanks and Asbestos
Schedule 2.24 Insurance
Schedule 2.26 Additional Information
Schedule 2.28 Product Warranties
Schedule 2.30 . Transactions with Affiliates
continued.....
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TABLE OF CONTENTS
(continued)
Schedule 4.1(a) Employees, Compensation and Excluded Employees
Schedule 4.1(g) Determination of Accrued Vacation
Schedule 4.1(h) Commissions Payment Procedure
Schedule 4.16(c) List of Shared Customers
Schedule 5.5 Critical Commitments
Schedule 10.1 Permitted Encumbrances
Schedule 10.2 Separation Payments
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TABLE OF CONTENTS
(continued)
Exhibits
Exhibit A.........Escrow Agreement
Exhibit B.........August 31 Statement
Exhibit C.........Chester Premises Lease
Exhibit D.........Transition Services Agreement
Exhibit E.........Definition of Specialty Business
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, made and entered into as of February 8, 2002,
by and among C.M. Offray & Son, Inc., a New York corporation ("Offray"), Lion
Ribbon Company, Inc., a New York corporation ("Lion"), CVO Corporation
(Delaware), a Delaware corporation ("CVO"), C.M. Offray Limited, a company
organized under the laws of the United Kingdom ("Offray UK"), C.M. Offray
Europe, a company organized under the laws of the Republic of Ireland ("Offray
Ireland"), Offray Ribbon Canada, Inc., a company organized under the laws of
Canada ("Offray Canada"), C.M. Offray & Son (Hong Kong) Limited, a company
organized under the laws of Hong Kong ("Offray Hong Kong" and together with
Offray, Lion, CVO, Offray UK, Offray Ireland, Offray Canada, and Offray Hong
Kong, the "Sellers"), Claude V. Offray, Jr., an individual and the sole or
majority stockholder of each of the Sellers (the "Major Stockholder"), Claude V.
Offray III and Denise A. Offray (together with the Major Stockholder, the
"Stockholders"), on the one hand, and Daylight Acquisition Corp., a Delaware
corporation (the "Purchaser") and Berwick Industries LLC, a Pennsylvania limited
liability company and the sole stockholder of the Purchaser (the "Parent"), on
the other. Terms not otherwise defined herein have the meanings set forth in
Article 10.
BACKGROUND
WHEREAS, the Sellers are engaged principally in the business of
manufacturing, packaging, marketing and distributing ribbons, bows, lace
products, boutique accessories, floral supplies and other ancillary goods (the
"Business"); and
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Sellers desire to sell to the Purchaser, and the Purchaser
desires to buy, substantially all of the assets of the Business.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions hereinafter set forth, the parties, intending to be legally bound, do
hereby agree as follows:
ARTICLE 1
TERMS OF PURCHASE AND SALE
1.1 Sale and Purchase of Assets.
---------------------------
(a) At the Closing, the Sellers will sell, transfer, convey, assign and
deliver to the Purchaser (or the Purchaser's designated Affiliate) and the
Purchaser (or its designated Affiliate) will purchase and acquire from the
Sellers, good and marketable title, free and clear of any Encumbrances or other
defect of title except Permitted Encumbrances, to all of the then existing
assets and business, other than the Excluded Assets, of every type and
description, used in or relating to the Business (collectively, the "Purchased
Assets") including without limitation, the following:
(i) Inventory. All inventory, including without limitation, raw
materials, work-in-process, finished goods, products under research and
development, office and other supplies, parts, packaging materials and other
accessories related thereto, wherever located, which are used or held for use by
the Sellers in the conduct of the Business, together with all rights of the
Sellers against suppliers of such inventory (the "Inventory"), including all
Inventory not located at the Facilities, which Inventory is listed on Schedule
1.1(a)(i);
(ii) Accounts Receivable. All trade accounts receivable and all notes,
bonds and other evidences of rights to receive payments arising out of sales
occurring in the conduct of the Business or otherwise arising in connection with
the Business, including without limitation (A) miscellaneous receivables,
credits, rebates, security deposits and the like, and (B) any rights of the
Sellers with respect to any third party collection procedures or any other
actions or proceedings which have been commenced in connection therewith
(collectively, the "Accounts Receivable"), including the Accounts Receivables
listed on Schedule 1.1(a)(ii), which Schedule includes an aging of such Accounts
Receivables;
(iii) Tangible Personal Property. All furniture, fixtures, equipment,
machinery, and other tangible personal property used or held for use by the
Sellers in the conduct of the Business, including all equipment presently
subject to Capital Leases and the assets listed on Schedule 1.1(a)(iii);
(iv) Commitments. All contracts, agreements or other arrangements,
whether written or oral, including all amendments thereto, to which any Seller
is a party or has rights or by which any Seller is bound relating to the
Business, including the Union Contract (collectively, the "Commitments");
(v) Real Property. All of the land, buildings, and facilities, and the
improvements and fixtures attached or appurtenant thereto and all easements,
licenses, rights and appurtenances relating to the foregoing, located at the
properties listed by address and described on Schedule 1.1(a)(v) (the "Real
Property").
(vi) Real Property Leases. All leases and subleases of the real
property described on Schedule 1.1(a)(vi), together with any options to purchase
the underlying property and leasehold improvements thereon, and in each case,
all other rights, licenses, easements, permits, deposits and profits appurtenant
or related to such leases and subleases (the "Real Property Leases");
(vii) Prepaid Expenses and Goodwill. All prepaid expenses (except
prepaid Taxes) relating to the Business and all goodwill relating to the
Business;
(viii) Intellectual Property. All intellectual property rights used or
otherwise exploited by or in connection with the Business, including the
following (collectively, the "Intellectual Property"): (A) all registered and
unregistered trademarks (including without limitation, the right to use the
names "Offray", "C.M. Offray" and "Lion Ribbon"), service marks, trade names,
trade dress, logos, designs, domain names, URLs or other marks, including the
goodwill associated therewith, and all applications, registrations, and renewals
in connection therewith ("Trademarks"); (B) copyrights, including all
registrations, renewals and application in connection therewith, copyrightable
works, databases, websites, and advertisements ("Copyrights"); (C) software,
including object code and source code, and related manuals used by the Business
("Software"); (D) inventions (whether patentable or unpatentable and whether or
not reduced to practice), and all patents, patent applications and patent
disclosures (and all rights related thereto, including all reissues, divisions,
continuations, continuations-in-part, substitutions, extensions, or renewals of
any of the foregoing) ("Patents"); and (E) formulae, trade secrets, know how,
designs, production methods and techniques, samples, and other proprietary
information including, without limitation, all dye formulations and processes
used in the Business;
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(ix) Governmental Licenses. All governmental permits, licenses,
registrations, and other authorizations ("Governmental Licenses") utilized in
the conduct of the Business, including the Governmental Licenses listed on
Schedule 1.1(a)(ix);
(x) Vehicles. All motor vehicles owned or leased by the Sellers and
used or held for use in the conduct of the Business, including the vehicles
listed on Schedule 1.1(a)(x) (the "Vehicles");
(xi) Books and Records. All books and records used or held for use in
the conduct of the Business or otherwise relating to the Purchased Assets, other
than the financial statements and records and Tax returns and records of the
Sellers (copies of which shall be provided to Purchaser) and the corporate seal,
minute books, stock books and other records having to do with the corporate
organization and capitalization of the Sellers;
(xii) Marketing Materials. All marketing and promotional materials used
in the Business, whether in electronic or paper form, including, without
limitation, advertising materials, product data, price lists, sales materials,
scientific and commercial publications, market research and other materials
associated with the Business;
(xiii) Lists. All customer lists and supplier lists and documentation
of customer history relating to the Business;
(xiv) Other Assets and Properties. All other assets and properties of
the Sellers used or held for use in connection with the Business, except as
otherwise provided in Section 1.1(b);
(xv) Going Concern. The Business as a going concern;
(xvi) Cash. All cash and cash equivalents; and
(xvii) Marketable Securities. All marketable securities.
(b) Notwithstanding anything in this Agreement to the contrary, the
following assets and properties of the Sellers (collectively, the "Excluded
Assets") shall be excluded from and shall not constitute Purchased Assets:
(i) Corporate Records. The financial statements and records and Tax
returns and records of the Sellers and the corporate seal, minute books, stock
books and other records having to do with the corporate organization and
capitalization of the Sellers;
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(ii) This Agreement. All rights of the Sellers under this Agreement,
including the consideration delivered to the Sellers by the Purchaser for the
Purchased Assets;
(iii) Chester Premises. Those certain parcels of real property and the
improvements thereon located at Route 24, Chester, New Jersey (the "Chester
Premises"), as more fully described on Schedule 1.1(b)(iii);
(iv) Personal Belongings of Major Stockholder. Those items belonging to
the Major Stockholder which are listed on Schedule 1.1(b)(iv);
(v) Offray's Specialty Products Division. Those liabilities and
businesses specifically relating to Offray's Specialty Products Division and
those assets relating exclusively to the Specialty Business, as more fully
described on Schedule 1.1(b)(v);
(vi) Argentina Operations. The capital stock of Offray Holdings, Inc.
and of Abrafic, S.A. and all of their assets, liabilities and businesses
specifically relating to the Argentina operations;
(vii) Promatrx. The capital stock of Promatrx and those assets,
liabilities and businesses of Promatrx as more fully described on Schedule
1.1(b)(vii);
(viii) Life Insurance. Any rights under the life insurance policies on
the lives of the Major Stockholder and Timothy Garrity (carried on the Balance
Sheet of Offray at approximately $1,600,000 and $6,000 respectively, together
with obligations related thereto);
(ix) Employee Benefit Plan Assets. All Benefit Plans and all amounts
held or invested by the Sellers in connection therewith;
(x) Capital Stock of Subsidiaries. Any interest of any of the Sellers
in the capital stock of Offray UK, Offray Ireland, Offray Canada and Offray Hong
Kong;
(xi) Taxes. Any deferred, accrued or prepaid income tax assets; and
(xii) Inter-company Receivables. Any inter-company receivables owed to
the Sellers from Promatrx, Offray Holdings, Inc., and Abrafic, S.A.
1.2 The Closing. The closing of the transactions contemplated hereby
(the "Closing") will take place at Morgan, Lewis & Bockius, LLP, 1701 Market
Street, Philadelphia, PA 19103-2921 on the second Business Day following the
date that termination or expiration of the applicable waiting period under HSR
has occurred and all of the other conditions to closing set forth in Articles 5
and 6 have been satisfied, or at such other place, date and time as the
Purchaser and the Sellers mutually agree. The actual date of the Closing is
referred to as the "Closing Date."
1.3 Purchase Price and Payment. The aggregate purchase price to be paid
by the Purchaser to the Sellers for the Purchased Assets (the "Purchase Price")
shall be $52,000,000, which amount is subject to adjustment pursuant to Section
1.5 and shall be payable as follows:
-4-
(a) $41,800,000 at Closing, by wire transfer of immediately available
funds to an account or accounts to be provided by the Sellers prior to Closing;
(b) $3,000,000 at Closing, by wire transfer of immediately available
funds to the Escrow Agent, to be distributed to the Sellers and/or the Purchaser
pursuant to the terms of an escrow agreement to be entered into at Closing
between the Purchaser, the Sellers and the Escrow Agent named therein, which
agreement shall be in substantially the form attached hereto as Exhibit A or as
otherwise modified hereafter, with the consent of the Sellers and the Purchaser
(such consent not to be unreasonably withheld or delayed by either party), to
meet the requirements of the Escrow Agent who shall be designated by the
Purchaser and shall be a reputable banking institution located in the United
States (the "Escrow Agreement"), and which such funds (and all interest thereon)
are being placed in escrow in order to provide (i) a partial source of funds for
Sellers' indemnification obligations hereunder, and (ii) at the Purchaser's
option, a source of funds to pay the Purchaser in the event a negative
adjustment is made to the Purchase Price in accordance with Section 1.5 to the
extent such adjustment exceeds the Holdback Amount (as defined in Section
1.3(c)).
(c) $7,200,000 (the "Holdback Amount") payable in accordance with the
terms of Section 1.5.
1.4 Assumption of Liabilities and Obligations.
(a) Except as otherwise provided in Section 1.4(b), at and effective as
of the Closing, the Purchaser shall assume and agree to pay, discharge and
perform, as appropriate, only the following liabilities and obligations of the
Sellers:
(i) all liabilities and obligations of the Sellers as of the date of
the Balance Sheet (as such term is defined in Section 2.4 hereof) accrued or
reserved against in the Balance Sheet to the extent reflected thereon and not
paid or discharged prior to the Closing;
(ii) all liabilities and obligations of the Sellers arising in the
ordinary course of business between the date of the Balance Sheet and the
Closing which are not paid or discharged prior to the Closing to the extent
accrued or reserved against on the Closing Date Balance Sheet (as such term is
defined in Section 1.5(b) hereof);
(iii) all liabilities and obligations of the Sellers arising after the
Closing in respect of the Commitments (other than the Capital Leases) set forth
on Schedule 2.14 or not required to be disclosed thereon because of the term or
amount involved;
(iv) all liabilities and obligations of the Sellers arising after the
Closing Date in respect of the Real Property Leases;
(v) all liabilities and obligations of the Sellers arising after the
Closing in respect of the Union Contract;
(vi) all accrued vacation attributable to Hired Employees to the extent
accrued for on the Closing Date Balance Sheet and determined in accordance with
Schedule 4.1(g), which schedule describes the amount owed to each Employee as of
December 31, 2001 on an employee-by-employee basis and will be updated through
the Closing Date (which updated Schedule will be delivered by the Sellers to the
Purchaser promptly following the Closing, but in no event later than thirty (30)
days after the Closing Date), and the amounts described in Section 4.1(h) with
respect to commissions in accordance with the procedures described on Schedule
4.1(h); and
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(vii) subject to the limitations and exceptions specified under Section
4.1(k), continuation health coverage as required under Part 6 of Subtitle B of
Title I of ERISA with respect to any individual who is an Employee as of the
Closing Date, or was an employee prior to the Closing Date, but does not become
a Hired Employee (other than an Excluded Employee), provided that either (A)
such continuation coverage was directly affected by the Closing, or (B) the
qualifying event triggering such continuation coverage is the sale of assets
effectuated by this Agreement.
(b) All of the liabilities expressly assumed by the Purchaser pursuant
to Section 1.4(a) are referred to collectively as the "Assumed Liabilities."
Except for the Assumed Liabilities, the Purchaser shall not assume, agree to
pay, discharge or perform, as the case may be, by virtue of this Agreement or
the transactions contemplated hereby, and shall have no liability for, any
obligations or liabilities of any Seller or the Stockholders (including, without
limitation, those related to the Business) of any kind, character or description
whatsoever (the "Retained Liabilities"). Without limiting the foregoing, the
following shall constitute Retained Liabilities:
(i) any bank and long term debt, including (A) the Sellers' obligations
owed to Foothill Capital Corporation, which the Sellers shall satisfy at
Closing, (B) all obligations reflected as long term debt on the Closing Date
Balance Sheet, including the Capital Leases which the Sellers shall satisfy
immediately prior to Closing and, with respect to which, the Sellers shall take
all action necessary to obtain title to the equipment which is the subject of
such Capital Leases;
(ii) any liability or obligation of the Sellers or the Business in
connection with products distributed by the Business prior to the Closing except
to the extent accrued or reserved against in the Closing Date Balance Sheet;
(iii) any liability or obligation of the Sellers or the Business in
respect of any claim, regardless of when made or asserted, which arises out of
or is based upon the failure of any Seller to comply with any applicable
federal, state, local or foreign law, ordinance, code, rule or regulation in
connection with the operations of the Business prior to the Closing;
(iv) any liability or obligation of the Sellers or the Business in
respect of any tort claim, regardless of when made or asserted, to the extent
such liability or obligation relates to acts or omissions occurring prior to the
Closing;
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(v) any liability or obligation arising out of, resulting from or
relating to (a) the presence, Release or threatened Release of any Hazardous
Materials existing as of or prior to the Closing at, from, in, to, on, or under
any Site; (b) the transportation, treatment, storage, handling or disposal, or
the arrangement for the transportation, treatment, storage, handling or disposal
of any Hazardous Materials by or on behalf of the Business or the Sellers in
connection with the Business or the Purchased Assets, any predecessors of the
Business or the Sellers in connection with the Business or the Purchased Assets,
or any entity currently or previously owned or controlled by the Business or the
Sellers in connection with the Business or any Purchased Assets to any off-Site
location prior to the Closing; and (c) any violation or non-compliance with any
Environmental Law or Environmental Permit prior to Closing by the Business or
the Sellers in connection with the Business or the Purchased Assets, any
predecessor of the Business or the Sellers in connection with the Business or
the Purchased Assets, or any entities currently or previously owned or
controlled by the Business or the Sellers in connection with the Business or the
Purchased Assets;
(vi) any liability or obligation of the Sellers or the Stockholders in
respect of any income tax, incident to or arising as a consequence of the
conduct of the Business prior to the Closing or the consummation of this
Agreement and the transaction contemplated hereby, including without limitation,
any deferred or accrued income tax liability;
(vii) any liabilities or obligations of the Sellers or the Business to
the Sellers' current or former employees (except to the extent expressly
included in Sections 1.4(a)(v), (vi) and (vii)), including without limitation
any liabilities or obligations of the Sellers or the Business arising out of or
regarding: (a) contributions due under, and/or any payments, benefits, or other
items payable from, a Benefit Plan attributable to the Sellers' current or
former employees; (b) agreements, contracts, or arrangements entered into with
individual current or former employees of the Sellers (except with respect to
the Foreign Employee Agreements as described in Section 4.1(d)) regarding
continuing streams of payment, provision of benefits, reimbursement obligations,
monthly pension arrangements, or any other item promised under such an
agreement, contract, or arrangement, regardless of whether the affected
employees become Hired Employees; provided that the Sellers shall be entitled to
certain reimbursement for certain severance obligations of Sellers pursuant to
Sections 4.1(i) and 4.1(j); (c) any obligations and responsibilities of the
Sellers or the Business to the Sellers' current or former employees with respect
to the Uniformed Services Employment and Reemployment Rights Act (other than
with respect to Hired Employees), COBRA (other than with respect to Hired
Employees) and The Workers Adjustment Retraining and Notification Act; (d) any
incident or condition occurring prior to the Closing giving rise to a workers
compensation claim or disability claim regardless of when reported; provided
that the Sellers shall be entitled to certain reimbursement pursuant to Section
4.1(g); (e) any medical expense incurred by any employee of the Seller prior the
Closing regardless of when reported; provided that the Sellers shall be entitled
to certain reimbursement pursuant to Section 4.1(g); and (f) the Welch v. Offray
litigation described on Schedule 2.15.
(viii) any liability of the Sellers or the Business arising in
connection with any of the Excluded Assets;
(ix) any liability or obligation (including without limitation
intercompany accounts) of any of the Sellers to any of the other Sellers or to
the Stockholders or to their respective Affiliates;
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(x) any liability or obligation of the Sellers or the Business arising
on or before the Closing Date in connection with the Real Property and the Real
Property Leases; and
(xi) any liability or obligation of the Sellers or the Business in
respect of the claims set forth on Schedule 2.15.
1.5 Adjustment to Purchase Price; Closing Audit.
(a) Prior to the Closing Date, the Sellers shall engage Arthur Andersen
LLP ("Andersen") to perform (i) an audit of Sellers' combined balance sheet (the
"Closing Date Balance Sheet") prepared in accordance with GAAP (excluding
footnote requirements) and (ii) the determination of the Closing Date Acquired
Working Capital (together, the "Closing Financial Statements"). The Closing Date
Balance Sheet shall be prepared as of the actual Closing Date. The Closing Date
Balance Sheet shall give effect to the exclusion of the Excluded Assets and
shall otherwise be prepared in accordance with GAAP in a manner consistent with
the Balance Sheet described in Section 2.4(b). The determination of the Closing
Date Acquired Working Capital shall give effect to the exclusion of the Excluded
Assets and the provisions of Section 1.5(a)(ii) and shall otherwise be prepared
in accordance with GAAP. The fees and costs of Andersen for such audit shall be
borne equally between the Purchaser, on the one hand, and the Sellers, on the
other. In order to complete such audit, the Purchaser and the Sellers shall
provide full cooperation to Andersen, including, without limitation, making
available and providing reasonable access to the premises, books and records and
employees of the Sellers and Purchaser, and executing customary accountant
representation letters. Following the completion of such audit, which the
Sellers and Andersen shall use their respective commercially reasonable efforts
to complete within forty-five (45) calendar days after the Closing Date, the
Sellers shall deliver to the Purchaser a true and complete copy of such Closing
Financial Statements, along with the Sellers' combined statements of profits and
losses for the period commencing on January 1, 2001 through December 31, 2001
and for the period commencing January 1, 2002 and ending on the Closing Date,
which such statements shall give effect to the exclusion of the Excluded Assets
and the exclusion of the operating results attributable to the Excluded Assets
and shall otherwise be prepared in a manner consistent with the statement of
profits and losses described in Section 2.4(b). The Sellers shall permit the
Purchaser to review all work papers and computations used by Andersen in
auditing such Closing Financial Statements. Within fifteen (15) calendar days
following the date of delivery of such Closing Financial Statements to the
Purchaser, the Purchaser shall either accept the Closing Date Balance Sheet and
the Sellers' Closing Date Acquired Working Capital based thereon (in which case
such Closing Date Acquired Working Capital shall constitute a Final
Determination) or propose adjustments thereto. In the event the Purchaser and
the Sellers fail to agree on all of the Purchaser's proposed adjustments within
ten (10) calendar days following the date of delivery by the Purchaser of notice
of such proposed adjustments, the parties shall request either Ernst & Young or
KPMG LLP, as the parties mutually agree (the "Final Auditor"), to prepare and
deliver to the Purchaser and the Sellers (i) a final Closing Date Balance Sheet
in accordance with the terms hereof, adjusting only items in dispute between the
Purchaser and the Sellers and (ii) a final determination of the Closing Date
Acquired Working Capital as reflected in such final Closing Date Balance Sheet,
subject to the provisions of Section 1.5(a)(ii) (the "Final Determination"),
which Final Determination shall be binding upon the Purchaser and the Sellers.
The services of any Final Auditor shall be paid for equally by the Purchaser and
the Sellers. In addition to the foregoing, the following subsections 1.5(a)(i)
and 1.5(a)(ii) shall apply to preparation of the Closing Date Balance Sheet and
the calculation of the Closing Date Acquired Working Capital:
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(i) Subsequent to October 26, 2001 and prior to the Closing Date, the
Sellers shall establish a current liability accrual in the amount of $500,000
for the correction of certain deficiencies (as more fully described in the last
sentence of this paragraph) existing at the Sellers' facilities located in
Batesburg-Leesville, South Carolina; Hagerstown, Maryland; and Anniston,
Alabama. For accounting purposes, the offset to the recordation of such accrual
shall not be reflected on the Closing Date Balance Sheet as a current asset. Any
reduction of the foregoing accrual shall be limited to actual expenditures
incurred by the Sellers subsequent to October 26, 2001 and prior to the Closing
Date in correcting those deficiencies requiring either "immediate" or "short
term" correction, as set forth in the October 26, 2001 draft Property Condition
Assessments prepared by Criterium Engineers with respect to each of the
foregoing properties, copies of which have been furnished to the Sellers.
(ii) For purposes of calculating the Closing Date Acquired Working
Capital:
(A) Notwithstanding any requirement of GAAP to the contrary as it
relates to standard costs, all Inventory shall be valued at cost (determined
prior to giving effect to any reserve for excess or obsolete inventory using the
same standard costs utilized by the Sellers for determining the cost of the
inventory on the Balance Sheet, except that, for items introduced (new SKUs)
since August 31, 2001, cost shall be determined in a manner consistent with the
Sellers' past practices).
(B) Notwithstanding any requirement of GAAP to the contrary, (I) an
excess and obsolete Inventory reserve shall be established in the amount of
$2,950,103 and (II) the $102,970.45 of "supplies" listed on Schedule 1.5 that
are obsolete shall be written off; provided that there shall be no adjustment to
such reserve as a result of such write-off.
(C) In the event that the dollar amount of the vacation accrual or the
reserve for bad debts, returns, allowances and customer programs is either
increased or decreased from the amount on the Balance Sheet, such increase or
decrease shall be given full effect and the Closing Date Acquired Working
Capital shall be either reduced or increased accordingly.
(D) Notwithstanding any requirement of GAAP to the contrary, in the
event that the dollar amount of the medical accrual or workers' compensation
accrual is increased or decreased from the amount on the Balance Sheet, such
increase or decrease shall be disregarded and the Closing Date Acquired Working
Capital shall be neither reduced nor increased.
(E) Notwithstanding any requirement of GAAP to the contrary, there
shall be no specific accrual for future contingent liabilities arising out of
returned products, fixture acquisitions, mark-down allowances, or program
credits in connection with the conversion programs with Jo-Anne Stores, Inc. and
Michaels Stores, Inc. specified on Schedule 2.28(b). Additionally, to the extent
that any transactions relating to such conversion programs for Jo-Anne Stores,
Inc. and Michael's Stores, Inc. (including without limitation sales relating to
the initial "ship-in", returns, fixture acquisitions, mark-down allowances and
program credits) occur prior to the Closing Date, the accounting impact for all
such transactions shall be reversed for purposes of calculating the Closing Date
Acquired Working Capital.
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(b) Upon a Final Determination, the Purchase Price shall be adjusted as
follows:
(i) If the Closing Date Acquired Working Capital is greater than the
Acquired Working Capital on the Balance Sheet (such difference being referred to
as the "Positive Adjustment"), then the Purchase Price shall be increased by an
amount equal to the Positive Adjustment and the Purchaser shall, within five (5)
Business Days of the Final Determination, pay to an account designated by the
Sellers, in immediately available funds, an amount equal to the sum of the
Holdback Amount plus the Positive Adjustment, together with simple interest on
such amount calculated from the Closing Date at a rate equal to the actual rate
of return earned on the funds held under the Escrow Agreement during such
period.
(ii) If the Closing Date Acquired Working Capital is less than the
Acquired Working Capital on the Balance Sheet (such difference being referred to
as the "Negative Adjustment"), then the Purchase Price shall be reduced by an
amount equal to the Negative Adjustment and:
(A) If the Negative Adjustment is less than the Holdback Amount, the
Purchaser shall, within five (5) Business Days of the Final Determination, pay
to an account designated by the Sellers, in immediately available funds, an
amount equal to the Holdback Amount minus the Negative Adjustment, together with
simple interest on such amount calculated from the Closing Date at a rate equal
to the actual rate of return earned on the funds held under the Escrow Agreement
during such period; or
(B) If the Negative Adjustment is greater than the Holdback Amount, the
Purchaser shall retain the Holdback Amount and the Sellers shall, within five
(5) Business Days of the Final Determination, pay to an account designated by
the Purchaser, in immediately available funds, an amount equal to the amount by
which the Negative Adjustment exceeds the Holdback Amount, with simple interest
on such amount calculated from the Closing Date at a rate equal to the actual
rate of return earned on the funds held under the Escrow Agreement during such
period.
(c) In the event that an adjustment to the Purchase Price is required
pursuant to Section 1.5(b)(ii)(B) above and the Sellers fail to deliver the
amounts required to be delivered by such section when due, then the Purchaser
may, in its sole and absolute discretion, withdraw the amount due from the funds
held pursuant to the Escrow Agreement; provided, however, that so long as the
Purchaser has not elected to withdraw such amounts from funds held pursuant to
the Escrow Agreement, the Purchaser shall be entitled to seek payment of such
amounts directly from the Sellers; and provided further that if the Purchaser
does withdraw such amounts from the Escrow Agreement, the Sellers shall be
required to replenish the Escrow Amount (as defined in the Escrow Agreement) by
depositing an equivalent amount with the Escrow Agent (as defined in the Escrow
Agreement) within five (5) Business Days of a request from the Purchaser.
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1.6 Allocation of Purchase Price. Within thirty (30) days after the
Final Determination, the Purchaser shall deliver to the Sellers the Purchaser's
proposal for allocation of the Purchase Price among the Purchased Assets for all
purposes (including financial, accounting and tax purposes) in a manner
consistent with Section 1060 of the Code (the "Allocation Schedule"). In the
event that the Sellers do not object to the Allocation Schedule within thirty
(30) days of the Sellers' receipt of the Allocation Schedule, then the Sellers
shall be deemed to have agreed to the Allocation Schedule and the Sellers and
Purchaser shall each prepare and file on a timely basis with the IRS an Asset
Acquisition Statement (Form 8594) as required by Section 1060 of the Code
consistent with the Allocation Schedule and neither the Sellers nor the
Purchaser shall take a position on any income Tax Return, before any
governmental agency charged with the collection of any Tax, or in any proceeding
that is in any way inconsistent with the Allocation Schedule. In the event that
Sellers do object to the Allocation Schedule the Sellers shall notify the
Purchaser within the thirty (30) day period following the Sellers' receipt of
the Allocation Schedule of such objection and include in such notification a
detailed description of the allocation which the Sellers intend to use. The
Sellers shall notify the Purchaser as soon as reasonably practicable of any
audit adjustment or proposed audit adjustment by any governmental agency charged
with the collection of any Tax which affects the allocation of the Purchase
Price.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
SELLERS AND MAJOR STOCKHOLDER
Each Seller and the Major Stockholder jointly and severally represent
and warrant to the Purchaser as set forth below.
2.1 Organization. Offray is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York; Lion is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York; CVO is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and each of the
other Sellers is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Each Seller has all
requisite corporate power and authority to carry on its business as it is now
being conducted and each is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. Schedule 2.1 sets forth with respect to each
Seller each United States jurisdiction where such Seller is qualified as a
foreign corporation and each country where such Seller conducts the Business. No
Seller has conducted the Business in any country other than those listed on
Schedule 2.1. The Sellers have previously delivered to the Purchaser a true and
complete copy of the Charter and Bylaws of each Seller in effect on the date
hereof.
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2.2 Corporate Power and Authority; Effect of Agreement. Each Seller has
all requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The Stockholders have all requisite power and authority to execute,
deliver and perform their obligations under this Agreement and to consummate the
transactions contemplated hereby and by the exhibits attached hereto. This
Agreement has been duly and validly executed and delivered by the Stockholders
and each Seller and constitutes the valid and binding obligation of the
Stockholders and each Seller, enforceable against each in accordance with its
terms. The execution, delivery and performance by the Stockholders and each
Seller of this Agreement and the consummation by him and it of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time, or both, (a) violate the charter documents or bylaws of any Seller, (b)
violate any provision of law, rule or regulation to which the Business or any
Seller is subject, (c) violate any order, judgment or decree applicable to the
Business or any Seller, or (d) violate any Commitment or other agreement to
which any Sellers or any Stockholder is a party.
2.3 Capitalization. The shares of capital stock of each Seller are
owned of record and beneficially by the persons set forth on Schedule 2.3. There
are outstanding no securities convertible into, exchangeable for or carrying the
right to acquire, equity securities of Sellers, or subscriptions, warrants,
options, rights or other arrangements or commitments obligating Sellers or the
Stockholders to issue or dispose of any of their equity securities or any
ownership interest therein. Except as set forth on Schedule 2.3, Sellers do not
own any shares of any corporation or any ownership or other investment interest,
either of record, beneficially or equitably, in any association, partnership,
joint venture of other legal entity.
2.4 Financial Statements and Reports.
(a) The Sellers have previously furnished the Purchaser with true and
complete copies of (i) the audited combined balance sheets of Sellers as of
December 31, 1999 and 2000 and the related combined statements of operations
(including the related notes thereto) for the twelve-month periods ending
December 31, 1999 and 2000, (ii) unaudited combining balance sheets of the
Sellers by country as of December 31, 1999 and 2000 and the related combining
statements of operations for the twelve-month periods ending December 31, 1999
and 2000, (iii) an unaudited combined balance sheet of Sellers as of August 31,
2001 (which such balance sheet is reflected in the first column of the August 31
Statement attached hereto as Exhibit B under the heading "Balance Sheet as of
August 31, 2001") and related statements of operations for the eight month
period then ending, subject to normal year-end audit adjustments, and (iv) an
unaudited combining balance sheet of the Sellers by country as of August 31,
2001 and related combining statement of operations for the eight month period
ending August 31, 2001, subject to normal year-end audit adjustments. Such
financial statements are in accordance with GAAP and fairly present the
financial position of the Sellers as at the dates thereof and the results of its
operations and changes in financial position for the periods then ended, subject
to in the case of the interim statements (x) normal year-end adjustments and (y)
the absence of notes.
(b) The Sellers have previously furnished to the Purchaser true and
complete copies of the unaudited combined balance sheet of Sellers as of August
31, 2001 and the unaudited statement of profits and losses for the eight month
period then ending, which balance sheet and statement give effect to the
exclusion of the Excluded Assets and the exclusion of the operating results
attributable to the Excluded Assets during such period. Such balance sheet and
statement are in accordance with GAAP and fairly present the financial position
of the Sellers, excluding the Excluded Assets and the operating results
attributable to the Excluded Assets, as at the date thereof. All references in
this Agreement to the "Balance Sheet" shall refer to the unaudited combined
balance sheet of Sellers as of August 31, 2001 delivered pursuant to this
Section 2.4(b) and reflected (after giving effect to the adjustments set forth
in the columns under the headings "Other" and "August 31 Adjustments") in the
far right-hand column of the August 31 Statement attached hereto as Exhibit B
under the heading "Adjusted Balance Sheet as of August 31, 2001."
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(c) The Sellers have previously furnished to the Purchaser true and
complete copies of financial statement forecasts of the Sellers for the period
ending on December 31, 2001 and for the period ending December 31, 2002. Such
forecasts were also submitted to Foothill Capital Corporation, as assignee of
Banc of America Commercial Finance Corporation, f/k/a NationsCredit Commercial
Corporation, acting through its NationsCredit Commercial Funding Division, by
the Sellers in fulfillment of applicable reporting obligations of the Sellers
under the Loan and Security Agreement dated February 16, 1999, as amended. Such
forecasts fairly present the Seller's best estimate of the Seller's financial
position for the periods reflected therein (but such forecasts do not constitute
a representation or warranty as to the actual future financial performance).
(d) The Sellers have previously furnished to the Purchaser true and
complete copies of financial statement forecasts of the Sellers for the periods
ending on December 31, 2001 and December 31, 2002, which forecasts give effect
to the exclusion of the Excluded Assets and the exclusion of the operating
results attributable to the Excluded Assets during the periods reflected
therein. Such forecasts fairly present the Seller's best estimate of the
Seller's financial position, excluding the Excluded Assets and the operating
results attributable to the Excluded Assets for the period reflected therein
(but such forecasts do not constitute a representation or warranty as to the
actual future financial performance).
2.5 Undisclosed Liabilities. In connection with the Business and the
Purchased Assets there is no direct or indirect liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of or by any
person (other than endorsements of notes, bills and checks presented to banks
for collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute, contingent, matured, unmatured or other of the
Business ("Liabilities"), except:
(a) those Liabilities set forth or reserved for on the Balance Sheet
and not heretofore paid or discharged;
(b) those Liabilities arising in the ordinary course of the Business
consistent with past practice under any Commitment specifically disclosed on
Schedule 2.14; and
(c) those Liabilities incurred in the ordinary course of the Business
consistent with past practice since the date of the Balance Sheet and not
heretofore paid or discharged.
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2.6 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.6, since December 31, 2000 (a) the Sellers have not suffered any
damage, destruction or casualty loss, whether covered by insurance or not, which
has had or is reasonably likely to have a Material Adverse Effect, (b) there has
not been any change in the Purchased Assets or the Business which has had or is
reasonably likely to have a Material Adverse Effect, (c) there has not been any
actual or threatened trouble or disruption of the Sellers' relations with its
agents, customers or suppliers relating to the Business, which has had or is
likely to have a Material Adverse Effect, (d) there has not been any sale,
encumbrance, assignment or transfer of any assets or properties which would have
been included in the Purchased Assets if the Closing had been held on the date
of the Balance Sheet or any date since then, except in the ordinary course of
business consistent with past practice, (e) there has not been any amendment or
termination of any Commitment or any cancellation, modification or waiver of any
substantial debts or claims held by it or any waiver by it of any rights of
substantial value whether or not in the ordinary course or business, each as
related to Business or Purchased Assets, (f) no Seller has mortgaged, pledged,
hypothecated or subjected to any other lien, security interest, claim,
restriction or other encumbrance (each, an "Encumbrance") any of the assets or
properties of the Business, except Permitted Encumbrances, (g) the Sellers have
not changed any of the accounting principles followed by them or the methods of
applying such principles, and (h) no Seller has declared, set aside or paid any
dividends or made any other distributions to the Stockholders. Except as set
forth on Schedule 2.6, since December 31, 2000, each Seller has conducted the
Business only in the ordinary course consistent with past practice, and no
Seller has entered into any transaction, contract or arrangement, or made any
payment or distribution except in the ordinary course of business, consistent
with past practice. Except as set forth on Schedule 2.6, since August 31, 2001,
no Seller has declared, set aside or paid any dividends or made any other
distributions to the Stockholders.
2.7 Accounts Receivable. Except as set forth on Schedule 2.7, all
Accounts Receivable as set forth on the Balance Sheet or arising since the date
thereof, except to the extent reserved for on the Balance Sheet, (a) are
recorded accurately, (b) have arisen only in the ordinary course of the Business
consistent with past practice for goods sold and delivered or services
performed, (c) are not subject to any valid counterclaim, set-off or defense
other than normal returns and allowances and customer programs, (d) except for
Accounts Receivable attributable to Jo-Anne Stores, Inc., are collectible in
full at the recorded amounts thereof in the ordinary course of the Business
(without resort to litigation or assignment to a collection agency), but in no
event later than ninety (90) days after the Closing Date, subject to applicable
reserves for bad debt and for returns and allowances and (e) are owned free and
clear of any Encumbrance other than a Permitted Encumbrance.
2.8 Inventory. The Inventory was acquired and has been maintained in
the ordinary course of the Business consistent with past practice. Since
December 31, 2000 (a) all sales of Inventory items have been made by the Sellers
in the ordinary course of business, and (b) all purchases of Inventory items
have been made by the Sellers and valued by the Sellers on its books consistent
with past practice. No items which have previously been written off will be
considered as Inventory. The Inventory, including the Inventory that is the
subject of any purchase Commitment by the Sellers, will not be in excess of
Sellers' reasonable requirements (consistent with Sellers' practices in the
ordinary course of Sellers' Business during the period from December 31, 2000 to
August 31, 2001), and such items of Inventory will be valued on the Closing Date
Balance Sheet in accordance with GAAP (except as it relates to standard costs)
at cost (determined prior to giving effect to any reserve for excess or obsolete
inventory using the same standard costs utilized by the Sellers in determining
the cost of inventory on the Balance Sheet, except that, for items introduced
(new SKUs) since August 31, 2001, cost shall be determined in a manner
consistent with the Sellers' past practices).
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2.9 Vehicles. All motor vehicles owned or leased by the Sellers and
used or held for use in the conduct of the Business are identified on Schedule
1.1(a)(x). Offray, or one of the other Sellers, has good and valid title to, or
has a valid leasehold interest in, each Vehicle, free and clear of all
Encumbrances.
2.10 Real Property.
(a) Schedule 1.1(a)(v) accurately describes (including addresses and
tax parcel numbers) all Real Property used in the operation of the Business. The
Sellers have delivered to the Purchaser correct and complete copies of all
deeds, certificates of occupancy, title reports, surveys and similar documents
with respect to the Real Property. All of the Real Property (including without
limitation all buildings, structures, facilities and improvements): (i) is now
usable in the ordinary course of business as currently operated by the Sellers,
(ii) to the Sellers' Knowledge is in good operating condition and repair and is
structurally safe and sound and without any latent or patent defects, in each
case subject to ordinary wear and maintenance and the items listed on Schedule
2.10(a) and (iii) conforms with any applicable Laws and Governmental Licenses.
The Sellers have obtained all licenses and rights-of-way from governmental
entities or private parties that are necessary to ensure legal and physical,
vehicular and pedestrian, ingress and egress to and from the Real Property. The
use and operation of the Real Property in the conduct of the Business does not
violate any Law in any material respect or instrument or agreement affecting the
Real Property.
(b) All utilities required for the operation of each Real Property are
installed and operating and are adequate to use the Real Property for its
current purpose.
(c) Neither the Major Stockholder nor any Seller has received any
written notice that (i) any condemnation proceeding is pending or threatened
with respect to any Real Property or (ii) any zoning, building or similar law,
code, ordinance, order or regulation is or will be violated by the continued
maintenance, operation or use of any buildings or other improvements on any Real
Property or by the continued maintenance, operation or use of related parking
areas.
2.11 Real Property Leases.
(a) Schedule 1.1(a)(vi) lists and describes accurately (including
address and tax parcel numbers) the Real Property Leases. The Sellers have
delivered to the Purchaser correct and complete copies of the Real Property
Leases and, to the extent reasonably available, all deeds, certificates of
occupancy, title reports, surveys and similar documents with respect to such
Real Property Leases. With respect to each Real Property Lease:
(i) Offray or one of the other Sellers has a valid and subsisting
leasehold estate in and the right of quiet enjoyment of the real properties
subject to the lease or sublease;
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(ii) the lease or sublease is legal, valid and binding against the
Seller which is a party thereto and, to Sellers' Knowledge, against any third
parties thereto, and is in full force and effect;
(iii) no Seller, nor, to the Sellers' Knowledge, any other party to the
lease or sublease is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or default or permit
termination, modification or acceleration thereunder;
(iv) no Seller, nor, to the Sellers' Knowledge, any other party to the
lease or sublease has repudiated or waived any provision thereof;
(v) there are no disputes, oral agreements or forbearance programs in
effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and warranties
set forth in subsections (i) through (v) above are true and correct with respect
to the underlying lease;
(vii) except for the liens in favor of Foothill Capital Corporation
which are to be released at the Closing, no Seller has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold
or subleasehold; and
(viii) no Seller has prepaid any rent due under any Real Property
Leases in excess of one month's rent.
2.12 Title to Assets.
(a) Offray or one of the other Sellers have, and at the Closing will
convey to the Purchaser or its designated Affiliate, good and marketable title,
insurable as such at regular rates by a nationally recognized title insurance
company, to all of the Purchased Assets, free and clear of any Encumbrance or
other defect of title, except Permitted Encumbrances. There are no existing
agreements, options, commitments or rights with, of or to any person to acquire
any of the Purchased Assets or any interest therein, except for those contracts
for the sale of Inventory entered into in the ordinary course of the Business
consistent with past practice.
(b) There are no facilities used by the Business, or necessary for the
operation of the Business, other than the Chester Premises and the facilities
listed on Schedules 1.1(a)(v) and 1.1(a)(vi) (collectively, including the
Chester Premises, the "Facilities"). All of the tangible Purchased Assets are
located at the Facilities, other than (i) the Inventory listed on Schedule
1.1(a)(i), (ii) certain equipment located at the Mexico Location, (iii) that
certain stay put machine and hot knife machine leased to Universal Converting,
Inc., and (iv) certain spooling equipment and a finishing range leased to
Shanghai Pudong Gang Li Hua Knitting Co., Ltd. located in Pudong, Shanghai,
China. All of the tangible assets located at the Facilities constitute Purchased
Assets, except as set forth on Schedule 2.12(b).
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2.13 Condition and Sufficiency of Tangible Purchased Assets. All
equipment and other items of tangible property and assets owned or used by the
Business (other than equipment and other items of tangible property and assets
which have not been used by the Business in the last eighteen (18) months and
except for the items listed on Schedule 2.12(b)) are now useable in the ordinary
course of business as currently conducted by the Sellers, and are in good
operating condition and repair, subject to normal wear and maintenance and the
items listed on Schedule 2.13(a). All equipment and other items of tangible
property and assets and all buildings, structures, facilities and improvements
conform in all material respects to all applicable Laws and Governmental
Licenses relating to their construction, use and operation. No person other than
a Seller owns any equipment or other tangible assets or properties situated on
the premises of the Sellers or utilized in the operation of the Business, except
for leased items disclosed on Schedule 2.13(b) and nominal amounts of inventory
identified and tagged as being owned by third parties. The Purchased Assets and
the Chester Premises constitute all assets used or necessary for the continued
operation of the Business by Purchaser as the Business is currently operated by
the Sellers. Except for those items of Inventory moved or relocated in the
ordinary course of business to a location set forth on Schedule 1.1(a)(i), since
August 31, 2001, no tangible Purchased Assets have been moved or relocated from
a Facility either to the Watsontown Facility or to a portion of the Chester
Premises not covered by the Chester Premises Lease.
2.14 Commitments. Schedule 2.14 contains a list, as of the date hereof,
of each Commitment described below:
(a) Commitment with any employee or consultant;
(b) Commitment for the future purchase of, or payment for, supplies or
products or services in any single instance exceeding $25,000, or in the
aggregate $100,000, or of a duration of more than twelve months;
(c) Commitment to sell or supply products or to perform services in
excess of $25,000, or of a duration of more than twelve months;
(d) Commitment to sell or supply products to the United States
Government or any agency thereof;
(e) representative or sales agency Commitment;
(f) Commitment limiting or restraining it from engaging or competing in
any lines of business with any person, firm, corporation or other entity;
(g) Commitment with any customer providing for a volume refund,
retrospective price adjustment, price guarantee or rebate program;
(h) Commitment to guarantee the obligations of others;
(i) Real property lease or sublease;
(j) Equipment lease, including each Capital Lease;
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(k) Mortgage, indenture, note debenture, bond, letter of credit
agreement, surety agreement, loan agreement or other Commitment for the
borrowing or lending of money relating to the Business or agreement for a line
of credit;
(l) License, franchise, distributorship or other agreement, including
those in which any material portion thereof relates in whole or in part to any
software, intellectual property, technical assistance or other know-how of or
used by the Business;
(m) Commitment for any capital expenditure or leasehold improvement in
excess of $25,000 relating to the Business;
(n) Options to purchase all or any portion of the Real Property;
(o) Options to Sublease and/or assign any of the Real Property Leases;
(p) Contract, agreement or commitment not otherwise disclosed herein;
or
(q) Union Contract.
True and complete copies of such Commitments have been delivered to Purchaser
prior to the date hereof. Each Commitment is in full force and effect and is a
valid and binding obligation of the Seller which is a party thereto and, to the
Sellers' Knowledge, of each third party which is a party thereto. Except as
disclosed on Schedule 2.14, no Seller is in default under any of the
Commitments, and, to the Sellers' Knowledge, no third party is in default under
any of the Commitments. Schedule 2.14 identifies each Commitment (i) which
requires the consent or approval to the assignment of such Commitment to
Purchaser or (ii) the assignment of which would give any party thereto the right
to terminate such Commitment. Each of the Commitments contained on Schedule 2.14
under the heading "Representative or Sales Agency Commitments" is terminable by
the Sellers at will upon not more than thirty (30) days' notice.
2.15 Litigation. Except as set forth on Schedule 2.15, there is no
action or proceeding in any court, before any governmental authority or official
or any arbitrator ("Litigation") pending or, to the Sellers' Knowledge,
threatened against the Major Stockholder or any Seller relating to the Business
or the Purchased Assets or which seeks to enjoin or obtain damages in respect of
the consummation of the transactions contemplated hereby, nor do the Sellers
know of any facts reasonably likely to be the basis for any such Litigation. No
Seller is a party to, and the Purchased Assets are not subject to, the
provisions of any judgment, order, writ, injunction, decree or award of any
court, governmental authority or official or any arbitrator.
2.16 Compliance with Laws. The Business has been and is being operated
in compliance with all federal, state, local and foreign laws, ordinances,
codes, rules and regulations applicable to the Business currently in effect.
Without limiting the generality of the foregoing sentence, to the Sellers'
Knowledge, neither the Sellers nor any director or officer, employee or agent
of, or any consultant to, any Seller has unlawfully offered, paid or agreed to
pay directly or indirectly, any money or anything of value to or for the benefit
of any individual who is or was an official or employee or candidate for office
of the government of any country or any political subdivision, agency or
instrumentality thereof or any employee or agent of any customers or vendors of
the Sellers.
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2.17 Governmental Licenses. The Sellers have among them, as a group,
all Governmental Licenses necessary for the conduct of the Business as presently
conducted by them. All Governmental Licenses are set forth on Schedule 2.17. The
Sellers have delivered to the Purchaser correct and complete copies of all
Governmental Licenses, and the originals of such Governmental Licenses are on
the respective premises to which it relates. Each Governmental License is in
full force and effect and the Sellers are in compliance in all material respects
with the terms and requirements thereof. No Seller is in default, nor has any
Seller or the Major Stockholder received any notice of any claim of default,
with respect to any such Governmental License. All such Governmental Licenses
are renewable by their terms or in the ordinary course of the Business without
the need to comply with any special qualification procedures or to pay any
amounts other than routine filing fees and will not be adversely affected by the
execution, delivery or performance by the Sellers of this Agreement or the
Transaction Documents. Schedule 2.17 identifies each Governmental License which
requires the consent or approval to the assignment of such Governmental License
to Purchaser.
2.18 Employee Benefit Plans.
(a) Schedule 2.18 contains a complete and accurate list of all Benefit
Plans. True, correct, and complete copies of all the following documents with
respect to each Benefit Plan, to the extent applicable, have been delivered to
the Purchaser: (A) all documents constituting the Benefit Plan, including but
not limited to, trust agreements, insurance policies, service agreements, and
formal and informal amendments thereto; (B) the three most recently filed Forms
5500 or 5500C/R and any financial statements attached thereto; (C) all IRS
determination letters for the Benefit Plan; (D) the most recent summary plan
description and any amendments or modifications thereof; (E) written
descriptions of all non-written agreements relating to the Benefit Plan; (F) all
reports submitted within the preceding three years by third-party
administrators, actuaries, investment managers, consultants, or other
independent contractors; (G) all notices that were issued within the preceding
three years by the IRS, Department of Labor, or any other governmental entity
with respect to the Benefit Plan; (H) all memoranda, minutes, resolutions, and
similar documents describing the manner in which the Benefit Plan is or has been
administered or describing corrections to the administration of a Benefit Plan;
and (I) all employee manuals or handbooks containing personnel or employee
relations policies.
(b) For purposes of the following provisions of this Section 2.18, the
term "Seller" includes any ERISA Affiliate.
(c) The plans marked on Schedule 2.18 as "Qualified Plans" are the only
Benefit Plans that are intended to meet the requirements of section 401(a) of
the Code. No Seller has ever maintained or contributed to any other Qualified
Plan. Each of the Qualified Plans has been determined by the IRS to be qualified
under section 401(a) of the Code and exempt from tax under section 501(a) of the
Code, and each such determination remains in effect and has not been revoked.
Nothing has occurred with respect to the design or operation of any Qualified
Plan that could cause the loss of such qualification or exemption or the
imposition of any liability, lien, penalty, or tax under ERISA or the Code, and
the Qualified Plans have been timely amended to comply with current law.
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(d) No Seller sponsors, maintains, or contributes to, nor has ever
sponsored, maintained, or contributed to, or had any liability with respect to,
any employee benefit plan subject to section 302 of ERISA, section 412 of the
Code, or Title IV of ERISA. None of the Benefit Plans is a multiemployer plan
(as defined in section 3(37) of ERISA). No Seller contributes to, nor has ever
contributed to or had any other liability with respect to, a multiemployer plan.
(e) No Seller has any liability with respect to any benefit plan or
arrangement other than the Benefit Plans. All Benefit Plans conform (and have at
all times conformed) in all material respects to the requirements of ERISA, the
Code, and all applicable laws. Each Benefit Plan has been maintained in all
material respects in accordance with its documents and with all applicable
provisions of the Code, ERISA, and other applicable laws, including federal and
state securities laws; and all reporting, disclosure, and notice requirements of
ERISA, the Code, and other applicable laws have been fully and completely
satisfied with respect to each Benefit Plan.
(f) With respect to each Benefit Plan, there has occurred no non-exempt
"prohibited transaction" (within the meaning of section 4975 of the Code or
section 406 of ERISA) or breach of any fiduciary duty described in section 404
of ERISA that could, if successful, result in any liability, direct or indirect,
for a Seller or any stockholder, officer, director, or employee of a Seller.
(g) The Sellers have paid all amounts that the Sellers are required to
pay as contributions to the Benefit Plans as of the last day of the most recent
fiscal year of each of the Plans; all benefits accrued under any funded or
unfunded Benefit Plan will have been paid, accrued, or otherwise adequately
reserved in accordance with GAAP as of the Balance Sheet Date; and all monies
withheld from employee paychecks with respect to Benefit Plans have been
transferred to the appropriate Plan in a timely manner as required by applicable
law.
(h) No Seller has incurred any liability for any excise, income, or
other taxes or penalties with respect to any Benefit Plan, and no event has
occurred and no circumstance exists or has existed that could give rise to any
such liability. There are no pending or, to the Sellers' Knowledge, threatened
claims by or on behalf of any Benefit Plans, or by or on behalf of any
participants or beneficiaries of any Benefit Plans or other persons, alleging
any breach of contract or breach of fiduciary duty on the part of any Seller or
any of a Seller's officers, directors or employees under ERISA or any applicable
law, or claiming benefit payments other than those made in the ordinary
operation of such plans, nor is there any basis for any such claim. All Benefit
Plans have been operated in a manner that would not provide any basis for a
claim of damage by any active or former participant, beneficiary, or employee.
No Benefit Plan is presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of
Labor, or any other governmental entity, and no matters are pending with respect
to any Benefit Plan under any IRS program.
(i) No Benefit Plan contains any provision or is subject to any law
that would prohibit the transactions contemplated by this Agreement or, except
as set forth on Schedule 2.18(i), would give rise to any vesting of benefits,
severance, termination or other payments or liabilities as a result of the
transactions contemplated by this Agreement, and no payments or benefits under
any Benefit Plan or other agreement of the Seller will be considered "excess
parachute payments" under section 280G of the Code. No Seller has declared or
paid any bonus compensation in contemplation of the transactions contemplated by
this Agreement. No payments or benefits under any Benefit Plan or other
agreement of any Seller are, or are expected to be, subject to the disallowance
of a deduction under section 162(m) of the Code.
(j) No Seller has made any plan or commitment, whether or not legally
binding, to create any additional Benefit Plan or to modify or change any
existing Benefit Plan. No statement, either written or oral, has been made by
the Sellers to any person with regard to any Benefit Plan that was not in
accordance with the Benefit Plan and that could have an adverse economic
consequence to a Seller. All Benefit Plans may be amended or terminated without
penalty by the Sellers at any time on or after the Closing.
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(k) With respect to any Benefit Plan that is an employee welfare
benefit plan (within the meaning of section 3(1) of ERISA), (i) each welfare
plan for which contributions are claimed as deductions under any provision of
the Code is in compliance with all applicable requirements pertaining to such
deduction, (ii) with respect to any welfare benefit fund (within the meaning of
section 419 of the Code) related to a welfare plan, there is no disqualified
benefit (within the meaning of section 4976(b) of the Code) that would result in
the imposition of a tax under section 4976(a) of the Code, (iii) any Benefit
Plan that is a group health plan (within the meaning of section 4980B(g)(2) of
the Code) complies, and in each and every case has complied, in all material
respects, with all of the requirements of section 4980B of the Code, ERISA,
Title XXII of the Public Health Service Act, the applicable provisions of the
Social Security Act, the Health Insurance Portability and Accountability Act of
1996, and other applicable laws, (iv) no welfare plan provides health or other
benefits after an employee's or former employee's retirement or other
termination of employment except as required by section 4980B of the Code, (v)
Sellers have provided or will provide all applicable notices required by Section
4980B of the Code and the Treasury regulations thereunder to any and all of its
Employees, or former employees (and their dependents) who have experienced, or
will experience, a COBRA qualifying event (within the meaning of Section 4980B
of the Code) on or before the Closing Date, and (vi) set forth on Schedule
2.18(k) is a list of all former employees of the Sellers with respect to whom
continuation coverage required by Section 4980B of the Code and the Treasury
regulations issued thereunder is currently being provided by the Sellers.
(l) All persons classified by the Seller as independent contractors
satisfy and have at all times satisfied the requirements of applicable law to be
so classified; the Seller has fully and accurately reported their compensation
on IRS Forms 1099 when required to do so; and the Seller has no obligations to
provide benefits with respect to such persons under Benefit Plans or otherwise.
No individuals are currently providing, or have ever provided, services to the
Company pursuant to a leasing agreement or similar type of arrangement, nor has
the Company entered into any arrangement whereby services will be provided by
such individuals.
2.19 Labor Matters.
(a) Except for the Union Contract, no Seller is a party to any
contract, collective bargaining agreement or other agreement with any labor
union or organization. No Seller has suffered any strike, slowdown, picketing or
work stoppage by any union or other group of employees affecting the Business or
any secondary boycott with respect to any of its products, and, to the Sellers'
Knowledge, none is currently or has been threatened. There are no unfair labor
practice charges or complaints against any Seller pending before the National
Labor Relations Board or any other federal, state or local or foreign court or
agency. There is no pending demand for recognition by any labor union or other
organization claiming to represent any employees of any Seller, and there is no
pending union organizing campaign with respect to any of the employees of any
Seller.
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(b) Except as set forth on Schedule 2.19(b), there are no outstanding
claims against any Seller (whether under federal, state, local or foreign law,
under any employment agreement or policy, or otherwise) asserted by or on behalf
of any present or former employee or job applicant of any Seller on account of
or for (i) overtime pay, other than overtime pay for work done in the current
payroll period, (ii) wages or salary for any period other than the current
payroll period, (iii) any amount of vacation pay or pay in lieu of vacation time
off, other than vacation time off or pay in lieu thereof earned in or in respect
of the current fiscal year, (iv) any amount of severance pay or similar
benefits, (v) unemployment insurance benefits, (vi) workers' compensation or
disability benefits, (vii) any violation of any statute, ordinance, order, rule
or regulation relating to plant closings, employment terminations or layoffs,
including but not limited to The Workers Adjustment Retraining and Notification
Act, (viii) any violation of any statute, ordinance, order, rule or regulations
relating to employee "whistleblower" or "right-to-know" rights and protection,
(ix) any violation of any statute, ordinance, order, rule or regulations
relating to the employment obligations of federal contractors or subcontractors
or (x) any violation of any statute, ordinance, order, rule or regulation
relating to minimum wages or maximum hours of work, and neither the Sellers nor
the Stockholder is aware of any such claims which have not been asserted. No
person (including any governmental agency of any kind) has asserted or, to the
Sellers' Knowledge, threatened any claims against any Seller under or arising
out of any statute, ordinance, order, rule or regulation relating to
discrimination or occupational safety in employment or employment practices.
2.20 Consents. No consent, approval or authorization of, or exemption
by, or filing with, any governmental or regulatory authority or third party is
required in connection with the execution, delivery and performance by it of
this Agreement or the taking of any other action contemplated hereby, except for
(i) filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended ("HSR"), (ii) consents of the landlords under the Real Estate Leases,
(iii) consent of the Maryland Department of Business and Economic Development
with respect to (A) that certain Mortgage and Loan Agreement dated as of August
15, 1997 in the original principal amount of $1,000,000, (B) that certain Grant
Agreement dated as of July 1, 1999 in the amount of $50,000 and (C) that certain
Grant Agreement dated as of July 1, 2000 in the amount of $100,000, each of
which is by and between the Maryland Department of Business and Economic
Development and Offray, (iv) the consents or approvals with respect to certain
Commitments identified on Schedule 2.14 (which Schedule specifically indicates
which Commitments so require consent or approval), and (iv) the consents or
approvals with respect to certain Governmental Licenses identified on Schedule
2.17 (which Schedule specifically indicates which Governmental Licenses so
require consent or approval).
-22-
2.21 Taxes. Except as set forth on Schedule 2.21:
(a) Each Seller has filed all Tax Returns that it was required to file.
All such Tax Returns were correct and complete. All Taxes owed by the Sellers
(whether or not shown on any Tax Return) have been paid or properly accrued. No
Seller is currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where any Seller does not file Tax Returns that such Seller is or
may be subject to taxation by that jurisdiction. There are no Encumbrances on
any of the assets of the Sellers that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) Each Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor or other party.
(c) There is no audit, examination, investigation, dispute or claim
concerning any Tax Liability of any Seller either (i) claimed or raised by any
authority in writing or (ii) pending or, to the Sellers' Knowledge, threatened.
No Tax Returns filed with respect to the Sellers have been audited in the last
ten (10) years or currently are the subject of audit. The Sellers have delivered
to the Purchaser correct and complete copies of all Tax Returns filed by the
Sellers since December 31, 1997 and all related examination reports and
statements of deficiencies, if any.
(d) No Seller has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) None of the Assumed Liabilities is an obligation to make a payment
that will not be deductible under Code section 280G. Each Seller has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code.
(f) The unpaid Taxes of the Sellers (i) did not, as of December 31,
2000, exceed the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Closing Financial Statements (rather than in any notes
thereto) and (ii) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Sellers in filing its Tax Returns.
(g) No Seller is a party to any Tax allocation or sharing agreement. No
Seller (i) has been a member of any consolidated, combined or affiliated group
of corporations filing a consolidated federal income Tax Return (other than a
group which consists solely of the Sellers) or (ii) has any Liability for the
Taxes of any person (other than for the Sellers) under Reg. ss.1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.
(h) Safe Harbor Lease Property. None of the Purchased Assets is
property that is required to be treated as being owned by any other person
pursuant to the safe harbor lease provisions of former Section 168(f)(8) of the
Code.
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(i) Security for Tax-Exempt Obligations. None of the Purchased Assets
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
(j) Tax-Exempt Use Property. None of the Purchased Assets is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(k) Foreign Person. No Seller (other than Offray UK, Offray Ireland,
Offray Canada and Offray Hong Kong) is a person other than a United States
person within the meaning of the Code.
(l) No Withholding. The transaction contemplated herein is not subject
to the tax withholding provisions of Section 3406 of the Code, or of Subchapter
A of Chapter 3 of the Code or of any other provision of law.
2.22 Intellectual Property.
(a) Set forth on Schedule 2.22 is a list of all of the Sellers' United
States and foreign (i) issued and pending Trademark registrations (including
domain name registrations) and applications; (ii) Copyright registrations and
applications; (iii) issued and pending Patents; and (iv) material Software
(other than commercially available software subject to "shrink-wrap",
"click-through" or other standard form license agreements), used in or related
to the Business. All such registrations and applications have been properly
registered, filed and/or issued in or by the appropriate registry for the
benefit of Seller, and all payments and filings necessary to maintain such
registrations and applications have been properly made as of the date of the
Closing. Any relevant deadlines with respect to any of the foregoing occurring
within ninety (90) days after the date of the Closing are specifically
identified on Schedule 2.22.
(b) Any Intellectual Property not owned by the Sellers is the subject
of enforceable, transferable licenses or similar agreements, correct and
complete copies of which have been provided to Purchaser. Except as set forth on
Schedule 2.22(b) no Seller has any obligation to pay royalties in connection
with the sale of any Products. A correct and complete listing of all such
licenses is set forth in Schedule 2.22(b).
(c) No Seller has entered into any prior licenses, agreements,
commitments or understandings granting to any third party any rights to use,
license or sublicense or otherwise exploit the Intellectual Property, including
but not limited to any covenant not to sue, concurrent use agreement or other
consent with respect to the Intellectual Property;
(d) The Intellectual Property does not infringe upon or conflict with
the rights of any third party, and there are no claims pending or, to the
Sellers' Knowledge, threatened, which allege that any Seller has engaged in any
actual or potential infringement, dilution or misappropriation of any third
party intellectual property rights;
(e) There are no claims pending or threatened regarding any actual or
potential infringement, dilution, or misappropriation of the Intellectual
Property, nor are the Sellers aware of any basis in fact for such a claim.
-24-
2.23 Environmental Matters.
(a) Except as set forth on Schedule 2.23(a)(1), either Offray or one of
the other Sellers has obtained and, as a group, the Sellers hold all
Environmental Permits that are required by Environmental Laws with respect to
the Business and the Purchased Assets, all of which are listed on Schedule
2.23(a)(2). At Closing, either Offray or one of the other Sellers will transfer
to the Purchaser the Environmental Permits listed on Schedule 2.23(a)(2), which
Environmental Permits can be transferred to Purchaser as a matter of law without
filing any notification with, or obtaining the consent, of any Person. Schedule
2.23(a)(2) identifies all Environmental Permits that cannot be transferred to
Purchaser as a matter of law or that require the filing of notification with, or
the consent of, any Person to be transferred to Purchaser. Neither any of the
Sellers nor the Major Stockholder has Knowledge of any circumstance that could
reasonably be expected to result in any such Environmental Permits identified
not being transferred or reissued to the Purchaser or issued prior to the
Closing Date.
(b) Except as set forth on Schedule 2.23(b), each Seller is in
compliance with all terms, conditions and provisions of all applicable (i)
Environmental Permits and (ii) Environmental Laws.
(c) Except as set forth on Schedule 2.23(c), there are no past, pending
or, to the Sellers' Knowledge, threatened Environmental Claims against any
Seller in connection with the Business or the Purchased Assets, and the Seller
has no Knowledge of any facts or circumstances which could reasonably be
expected to form the basis for any Environmental Claim against any Seller.
(d) Except as set forth on Schedule 2.23(d) to the Sellers' Knowledge,
no Releases of Hazardous Materials have occurred at, from, in, to, on or under
any Site and no Hazardous Materials are present in, on, under, about or
migrating to or from any Site that could give rise to an Environmental Claim
against any Seller.
(e) Except as set forth on Schedule 2.23(e) neither any of the Sellers
nor, to the Sellers' Knowledge, any predecessor of any Seller nor any entity
previously owned by any Seller in connection with the Business or the Purchased
Assets, has transported or arranged for the treatment, storage, handling,
disposal or transportation of any Hazardous Material to any off-Site location
which could result in an Environmental Claim against any Seller.
(f) No Site is a current or, to the Sellers' Knowledge, a proposed
Environmental Clean-up Site.
(g) There are no liens (other than Permitted Encumbrances) arising
under or pursuant to any Environmental Law on any Site, and, to the Sellers'
Knowledge, there are no facts, circumstances or conditions that could reasonably
be expected to restrict, encumber or result in the imposition of special
conditions under any Environmental Law with respect to the ownership, occupancy,
development, use or transferability of any Site.
(h) Except as set forth on Schedule 2.23(h), there are no (i)
underground storage tanks, active or abandoned; (ii) polychlorinated biphenyl
containing equipment; or (iii) asbestos-containing material at any Site.
-25-
(i) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, on behalf of, or which are in the
possession of any Seller with respect to any Site which have not been delivered
to the Purchaser prior to execution of this Agreement.
2.24 Insurance. Schedule 2.24 accurately sets forth all current
policies of insurance held by or on behalf of each of the Sellers including
policy numbers and each outstanding claim thereunder. All such policies of
insurance are in full force and effect, no notice of cancellation has been
received except as set forth on Schedule 2.24, and all premiums to date have
been paid in full. In the reasonable judgment of the Major Stockholder, such
policies are in amounts which are adequate in relation to the Business and
properties of the Sellers. Schedule 2.24 also sets forth a list of all past
product liability insurance and general liability insurance policies (primary
and excess) including policy numbers, policy limits and whether such policy was
a claims-made or occurrence policy for the last five years.
2.25 Books of Account. The books, records and accounts of each Seller
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Business. Neither the Stockholders nor any Seller
has engaged in any transaction with respect to the Business, maintained any bank
account for the Business or used any of the funds of any Sellers in the conduct
of the Business except for transactions, bank accounts and funds which have been
and are reflected in the normally maintained books and records of the business.
2.26 Additional Information. Except as noted as to previously delivered
information, Schedule 2.26 contains accurate lists and summary descriptions of
the following:
(a) a list of all accounts receivable reflected on the Balance Sheet,
specifying in each case the account debtor, the face amount of each receivable,
an aging of each receivable and reconciling the aggregate value of all accounts
receivable as of the date of the Balance Sheet to the amount of such category
set forth on the Balance Sheet that has been previously delivered by the Sellers
to the Purchaser. Furthermore, such list identifies each receivable listed
thereon that relates exclusively to the Excluded Assets.
(b) a list of all accounts payable and accrued expenses reflected on
the Balance Sheet, specifying in each case the payee, the face amount of each
payable, the age of each payable regardless of classification on the balance
sheet account, any defenses, setoffs or counterclaims that may exist with
respect thereto, and reconciling the aggregate value of all accounts payable as
of the date of the Balance Sheet to the amount of such category set forth on the
Balance Sheet that has been previously delivered by the Sellers to the
Purchaser;
(c) a list of all customers and all suppliers;
(d) the names of all present officers and directors of each of the
Sellers;
(e) the names and addresses of every bank and other financial
institution in which each Seller maintains an account (whether checking, savings
or otherwise), lock box or safe deposit box, and the account numbers and names
of persons having signing authority or other access thereto;
-26-
(f) the names of all persons authorized to borrow money or incur or
guarantee indebtedness on behalf of each Seller;
(g) the names of all persons holding powers of attorney from any Seller
and a summary statement of the terms thereof;
(h) all names under which any Seller has conducted the Business or
which it has otherwise used during the five years preceding the Closing Date in
connection with the Business; and
(i) a statement of all compensation, reimbursement of expenses,
dividends and other payments of any nature whatsoever from the Sellers to the
Stockholders since the date of the Balance Sheet.
2.27 Accounts Payable. The Balance Sheet includes all accounts payable
arising out of the Business as of the date of the Balance Sheet and the Closing
Date Balance Sheet shall include all accounts payable arising out of the
Business as of the Closing Date. All accounts payable as set forth on the
Balance Sheet or arising since the date thereof have been incurred in the
ordinary course of the Business and, since the date of the Balance Sheet, all
such accounts payable have been paid in a timely manner by the applicable
Sellers in accordance with past practice.
2.28 Product Warranties; Product Returns. Schedule 2.28 sets forth all
express product warranties made by any Seller and all return policies of the
Sellers. Except as set forth on Schedule 2.28, the Sellers have no Knowledge of
any anticipated product returns for any reason including, without limitation,
returns due to product defects, changes in plan-o-grams or guaranteed sales.
Except as set forth on Schedule 2.28, the Sellers have no Knowledge of any
credits, allowances or rebates granted by Sellers or claimed by its customers.
2.29 Relations with Customers and Suppliers. Neither the Sellers nor
the Major Stockholder have reason to believe that any customer or supplier of
the Business intends to cease its relationship with the Business and, since
January 1, 2001, no customer or supplier of the Business has indicated to the
Major Stockholder or any Seller that it intends to cease or substantially
curtail its relationship with the Business either before, after or because of
the consummation of the transactions contemplated hereby.
2.30 Transactions with Affiliates. Except as disclosed on Schedule
2.30, neither the Major Stockholder, any director or officer of any Seller or
any member of his or her immediate family, owns or has a controlling ownership
interest in any corporation or other entity that is a party to any Commitment or
material business arrangement or relationship with respect to the Business. All
transactions between Stockholders and each of the Sellers with respect to the
Business have been on substantially the same terms and conditions as similar
transactions between non-affiliated parties and are properly recorded on the
books and records of the Sellers.
2.31 Consumer Safety Matters. With respect to products (including all
of the components thereof) manufactured or distributed by the Sellers, each
Seller has complied with all applicable requirements relating to materials,
design, manufacture, testing, performance, labeling, packing, holding,
marketing, or promotion of such products, and such products are otherwise not in
violation of the laws as set forth in the Consumer Product Safety Act, Federal
Hazardous Substances Act, Flammable Fabrics Acts, Poison Prevention Packaging
Act, Federal Trade Commission Act, or Textile Fiber Products Identification Act
and all comparable state laws (the "Consumer Acts") or any applicable
regulations, standards, policies, or guidelines promulgated or issued pursuant
to such Consumer Acts, and any similar applicable state or local laws,
regulations, policies or guidelines.
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2.32 Brokers. No broker, finder or investment banker other than J.P.
Morgan Chase (the "Offray Broker") is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by the
Transaction Documents. The fee arrangement with the Offray Broker in the form
delivered previously to the Purchaser shall not be modified or amended prior to
the Closing Date without the consent of the Purchaser and the Sellers
acknowledge and agree that the payment of all fees and commissions of the Offray
Broker are the sole responsibility of the Major Stockholder.
2.33 Full Disclosure. There are and will be no materially misleading
misstatements in any of the representations and warranties made by the Sellers
and the Major Stockholder in this Agreement, Schedules, Exhibits or in the
Escrow Agreement or any of the documents, certificates and instruments delivered
or to be delivered by the Sellers or the Stockholders pursuant to this Agreement
(the "Transaction Documents") and neither the Stockholders nor the Sellers have
omitted to state any fact necessary to make such representations and warranties
in the Transaction Documents not materially misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and the Parent jointly and severally represent and warrant to
the Sellers as follows:
3.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to carry on its business as it is
now being conducted. The Parent is a limited liability company duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania.
3.2 Corporate Power and Authority; Effect of Agreement. The Purchaser
and the Parent have all requisite corporate power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby and by the exhibits attached hereto. This Agreement has been
duly and validly executed and delivered by the Purchaser and the Parent and
constitutes the valid and binding obligation of the Purchaser and the Parent,
enforceable against each in accordance with its terms. The execution, delivery
and performance by Purchaser and the Parent of this Agreement and the
consummation by Purchaser and the Parent of the transactions contemplated hereby
will not, with or without the giving of notice or the lapse of time, or both,
(a) violate any provision of the Certificate of Incorporation or the By-laws of
Purchaser or the Certificate of Formation or Operating Agreement of the Parent,
(b) violate any provision of law, rule or regulation to which Purchaser or the
Parent is subject, (c) violate any order, judgment or decree applicable to
Purchaser or the Parent, or (d) violate any agreement to which Purchaser or the
Parent is a party.
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3.3 Consents. No consent, approval or authorization of, or exemption
by, or filing with, any governmental authority is required in connection with
the execution, delivery and performance by Purchaser and the Parent of this
Agreement, or the taking of any other action contemplated hereby, except for
filing under HSR.
3.4 Litigation. There is no Litigation pending or, to the Purchaser's
Knowledge, threatened, which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby, nor does Purchaser know of
any reasonably likely basis for any such Litigation. The Purchaser is not
subject to any outstanding orders, rulings, judgments or decrees which would
affect the ability of the Purchaser to perform its obligations under this
Agreement.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Employees.
(a) Schedule 4.1(a) sets forth an accurate and complete list of all
employees of the Sellers ("Employees") engaged in the conduct of the Business
together with their current annual base salary (and any incentive compensation
paid during the past year), years of service and job title. Schedule 4.1(a) also
sets forth all proposed salary increases for 2002, as well as any salary
increases that have been granted since August 31, 2001. Except as set forth on
Schedule 4.1(a), there are no Employees who are on disability or not actively at
work in performing services on the Closing Date. Prior to the Closing, the
Purchaser may interview and offer employment to, as new employees of the
Purchaser, any Employees who satisfy Purchaser's employment criteria, other than
those listed on Schedule 4.1(a) as "Excluded Employees." Any Employee who is
offered Comparable Employment by the Purchaser but does not become a Hired
Employee and who accepts employment with any Seller within six months following
the Closing Date shall be deemed to be an "Excluded Employee" and the Sellers
shall be required to reimburse the Purchaser for any amounts paid by Purchaser
on account of any such Employee pursuant to Section 4.1(j). Those Employees who
accept and commence employment with the Purchaser are referred to herein as
"Hired Employees". The offer of employment to the Employees (other than Russell
G. Hager) by the Purchaser shall be for employment at will (except as otherwise
required by applicable law) and shall not be construed to limit the ability of
the Purchaser to terminate any Hired Employees for any reason and each Hired
Employee will be required to execute the Purchaser's standard form of
confidentiality agreement for its employees. The Sellers shall provide the
Purchaser and its representatives with access to its Employees and the personnel
files and other records and files maintained by the Sellers with respect to its
Employees and a reasonable opportunity to communicate with the Employees during
the period between the signing of this Agreement and the Closing Date, and use
commercially reasonable efforts to assist the Purchaser in hiring any Employees.
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(b) The Sellers shall retain all liability for contributions due under
a Benefit Plan and/or any payments, benefits, or other items payable from, a
Benefit Plan attributable to Employees and Sellers' former employees, and the
Purchaser shall assume no liability therefor. Such contributions shall include,
but shall not be limited to, the contribution to any cash or deferred
arrangement maintained by a Seller of elective deferral contributions and
matching contributions with respect thereto which are attributable to deferred
compensation relating to services performed by the Employees and Sellers' former
employees through the Closing Date. No portion of the assets of any Benefit
Plan, other plan, fund, program, agreement, or arrangement, written or
unwritten, sponsored or maintained by the Sellers (and no amount attributable to
any such plan, fund, program or arrangement) shall be transferred to the
Purchaser, and the Purchaser shall not be required to continue any such Benefits
Plan, other plan, fund, program or arrangement after the Closing Date. The
amounts payable on account of all Benefit Plans, other plans, funds, programs,
agreements, or arrangements, written or unwritten, sponsored or maintained by
the Sellers shall be determined with reference to the date of the event by
reason of which such amounts become payable, without regard to conditions
subsequent. The Purchaser shall not be liable for any claim for insurance,
reimbursement, or other benefits relating to a Benefit Plan, other plan, fund,
program, agreement, or arrangement, written or unwritten, sponsored or
maintained by the Sellers, except for (i) accrued vacation attributable to Hired
Employees to the extent accrued for on the Closing Date Balance Sheet and
determined in accordance with Schedule 4.1(g) and (ii) the reimbursement
obligations of Purchaser set forth in Sections 4.1(g), 4.1(i) and 4.1(j), and
the obligations of Purchaser under Section 4.1(k). The Purchaser shall not be
liable for any claims for damages relating to a Benefit Plan, other plan, fund,
program, agreement, or arrangement, written or unwritten, sponsored or
maintained by the Sellers.
(c) Effective as of the Closing Date, the Sellers shall take all such
action as necessary to cause all Hired Employees to cease to participate in all
Benefit Plans, and the Purchaser shall neither adopt nor become a sponsoring
employer of, or have any obligations with respect to such Benefit Plans. The
Sellers shall be solely responsible for, and shall indemnify the Purchaser
against, any and all costs, expenses, and liabilities which have arisen or may
arise in connection with any Benefit Plan, including but not limited to, costs,
expenses and liabilities arising from income or excise tax assessments,
participant benefit claims, fiduciary conduct, or under Title IV of ERISA,
including attorney's fees and related costs incurred in defending such
assessments and claims.
(d) The Sellers shall retain all liability with respect to agreements,
contracts, or arrangements entered into with individual Employees and Sellers'
former employees regarding continuing streams of payment, provision of benefits,
reimbursement obligations, monthly pension arrangements, or any other item
promised under such an agreement, contract, or arrangement, regardless of
whether the affected Employees become Hired Employees. The Purchaser shall
neither become a party to, nor have any obligations with respect to any such
agreement, contract, or arrangement. The Sellers shall be solely responsible
for, and shall indemnify the Purchaser against, any and all costs, expenses, and
liabilities which have arisen or may arise in connection with any such
agreement, contract, or arrangement, including but not limited to, costs,
expenses, and liabilities arising from income or excise tax assessments, claims
for damages relating to contract or fiduciary breach, claims relating to
discrimination under any federal, state, or local employment related law, or
attorney's fees and related costs incurred in defending such assessments and
claims. Notwithstanding the provisions of this Section 4.1(d), the Sellers shall
have no obligations regarding the payment of salary, commissions, benefits or
separation payments for any period after the Closing Date with respect to the
Foreign Employee Agreements.
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(e) Prior to the Closing Date, the Sellers shall deliver to the
Purchaser a copy of the most recent IRS favorable determination letters obtained
with regard to each of its Qualified Plans.
(f) At the Purchaser's request, but only if and to the extent
transferable, the Sellers shall (i) assign to the Purchaser any policies of
insurance for the provision of health or welfare benefits to Hired Employees and
administrative contracts relating thereto, including, without limitation, the
arrangements referred to under items 18 through 24 on Schedule 2.18, and (ii)
use commercially reasonable efforts to obtain any necessary consents to or
approvals required to give effect to such assignments; provided, that the
assignment of any such policy shall not be construed as an assumption by the
Purchaser of any plan of the Sellers, or any liability thereunder if not
otherwise payable pursuant to the terms of the policy.
(g) The Purchaser shall not be responsible for (i) any obligations with
respect to any individual who is or was an Employee, other than (A) accrued
vacation attributable to Hired Employees to the extent accrued on the Closing
Date Balance Sheet and determined in accordance with Schedule 4.1(g), which
schedule describes the amount owed to each Employee as of December 31, 2001 on
an employee-by-employee basis and will be updated through the Closing Date
(which updated Schedule will be delivered by the Sellers to the Purchaser
promptly following the Closing, but in no event later than thirty (30) days
after the Closing Date), and (B) the amounts described in Sections 4.1(h),
4.1(i) and 4.1(j), (ii) any claims (including without limitation workers
compensation and disability claims) regarding all injuries or illnesses
occurring prior to the Closing Date regardless of when reported, or (iii)
providing continuation health coverage as required under Part 6 of Subtitle B of
Title I of ERISA with respect to any individual who is or was an Employee, other
than continued health coverage obligations relating to (x) Hired Employees with
respect to benefit plans of the Purchaser in which a Hired Employee commences
participation after the Closing Date and (y) the Employees referred to in
Section 4.1(k). Notwithstanding the foregoing, the Purchaser shall, upon
reasonable request of the Sellers, reimburse the Sellers for properly documented
payments actually made by Sellers after the Closing Date to, or on behalf of,
Hired Employees in connection with workers compensation claims, disability
claims and medical expenses, in each case arising out of events occurring prior
to the Closing Date regardless of when reported and only to the extent accrued
or reserved against on the Closing Date Balance Sheet, but in no event more than
(i) $800,000 for workers compensation claims, (ii) $0 for disability claims and
(iii) $800,000 for medical expenses. With respect to medical expenses only, in
the event that actual claims are less than $800,000, then, at any time after
August 31, 2002, the Sellers may provide written notice to Purchaser stating
that all medical expenses of Hired Employees arising out of events occurring
prior to the Closing Date have been satisfied and request that the Purchaser
remit to the Sellers an amount equal to $800,000 minus the amount which the
Purchaser shall have previously reimbursed Sellers for medical expenses pursuant
to this Section 4.1(g). Purchaser shall pay such amount to the Sellers within
five (5) Business Days after Purchaser's receipt of such notice and thereafter
shall have no obligation to reimburse the Sellers for medical expenses under
this Section 4.1(g).
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(h) The Purchaser shall pay to any Hired Employee any commission
arising out of sales made prior to the Closing to the extent such commissions
are accrued on the Closing Date Balance Sheet; provided that in no event shall
the Purchaser make any such payments in connection with any Benefit Plan.
(i) Within five (5) Business Days after the Purchaser's receipt of a
written request of the Sellers, the Purchaser shall reimburse the Sellers for
properly documented payments actually made to individuals who were Employees as
of the Closing Date who are not offered Comparable Employment by the Purchaser
(other than Excluded Employees) and who sign an appropriate release (a copy of
which shall be delivered to the Purchaser as a condition precedent to
reimbursement) for (A) Separation Payments and (B) accrued vacation to the
extent accrued on the Closing Date Balance Sheet and determined in accordance
with Schedule 4.1(g). The Sellers shall use commercially reasonable efforts to
include the Purchaser and its affiliates as released parties under the
above-referenced release.
(j) Within five (5) Business Days after the Purchaser's receipt of a
written request of the Sellers, with respect to individuals who were Employees
as of the Closing Date who are offered Comparable Employment by the Purchaser
and who do not become Hired Employees (other than Excluded Employees) and who
sign an appropriate release (a copy of which shall be delivered to the Purchaser
as a condition precedent to reimbursement) (A) the Purchaser shall reimburse
Sellers for fifty percent (50%) of all properly documented payments actually
made by Sellers for Separation Payments and (B) the Purchaser shall reimburse
Sellers for all properly documented payments actually made by Sellers for
accrued vacation to the extent accrued on the Closing Date Balance Sheet and
determined in accordance with Schedule 4.1(g). The Sellers shall use
commercially reasonable efforts to include the Purchaser and its affiliates as
released parties under the above-referenced release.
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(k) The Purchaser shall provide continuation health coverage as
required under Part 6 of Subtitle B of Title I of ERISA with respect to any
individual who is an Employee as of the Closing Date, or was an employee prior
to the Closing Date, but does not become a Hired Employee (other than an
Excluded Employee), provided that either (A) such continuation coverage was
directly affected by the Closing, or (B) the qualifying event triggering such
continuation coverage is the sale of assets effectuated by this Agreement. In no
event, however, shall the Purchaser be responsible for the administration,
sponsorship, or funding of the Seller's health programs. The Purchaser shall
administer such continuation health coverage with respect to collection of
premiums and the termination of coverage on account of non-receipt of premiums
in a manner consistent with the manner in which the Purchaser administers COBRA
coverage for its employees generally. The Purchaser shall establish premiums for
such coverage in a reasonable and nondiscriminating manner. Within five (5)
Business Days after the Sellers' receipt of a written request of the Purchaser,
the Sellers shall reimburse the Purchaser for all properly documented payments
actually made by Purchaser in connection with Purchaser's obligation to provide
health coverage under this Section 4.1(k) to those persons listed on Schedule
2.18(k) and any other employees of the Sellers who have a COBRA qualifying event
between the date hereof and the Closing Date, (other than those for whom the
qualifying event triggering such continuation coverage is the sale of assets
effectuated by this Agreement), in excess of the premiums actually received by
Purchaser.
(l) The Purchaser shall have the right, using counsel of Purchaser's
choosing at Purchaser's cost, to initiate negotiations and reach a settlement
with counsel for Sylvie-Jolle Roche with regard to her employment status after
the Closing. Offray shall cooperate in all reasonable respects in the execution
of any necessary separation and release documents, including having prepared and
delivered to counsel for Ms. Roche a letter of withdrawal from Offray's counsel
in France who has engaged in previous discussions with counsel to Ms. Roche
concerning her employment status.
(m) Within five (5) Business Days after the Purchaser's receipt of a
written request of the Sellers, the Purchaser shall reimburse the Sellers for
all properly documented payments actually made by Sellers for that portion of
the payroll account accrual relating to 401(k) contributions and payroll taxes,
in each case, to the extent accrued on the Closing Date Balance Sheet.
4.2 Third Party Consents. The Sellers shall use commercially reasonable
efforts to obtain all consents and approvals necessary to assign the Commitments
to the Purchaser. To the extent that any of the Sellers' rights under any
Commitment (including the Real Estate Leases) may not be assigned without the
consent of another person which has not been obtained, this Agreement shall not
constitute an agreement to assign the same if an attempted assignment would
constitute a breach thereof or be unlawful. If any such consent shall not be
obtained or if any attempted assignment would be ineffective or would impair the
Purchaser's rights under the Commitment in question so that the Purchaser would
not in effect acquire the benefit of all such applicable Commitment, the
appropriate Sellers shall use commercially reasonable efforts to obtain for the
Purchaser the benefits thereunder and shall cooperate, to the maximum extent
permitted by law and such Commitment, with Purchaser in any other reasonable
commercial arrangement (which may be a subcontract, sublease, or other
arrangement) designed to provide such benefits to Purchaser and, in such event,
Purchaser shall perform under the applicable terms thereof. Upon receipt of such
required consent the applicable Sellers and the Purchaser shall execute and
deliver an Assignment and Assumption Agreement, covering the subject Commitment.
Until the Commitment shall be so assigned, the Sellers shall not amend the
Commitment or waive any right thereunder without the prior written consent of
the Purchaser. The condition set forth in Section 5.5 shall not be deemed
satisfied unless, on the Closing Date, all consents for Critical Commitments
shall have been obtained.
4.3 Further Assurances. At any time or from time to time after the
Closing, the Purchaser and each Seller shall, at the request of the other and at
the requesting party's expense, execute and deliver any further instruments or
documents and take all such further action as such party may reasonably request
in order to evidence the consummation of the transactions contemplated hereby.
4.4 Post-Closing Access to Information. At all times after the Closing
Date, each party will permit the others and their respective representatives
(including their counsel and auditors) during normal business hours, to have
reasonable access to and examine and make copies, at the expense of the copying
party, of all books, records, files, documents and insurance policies in its
possession which relate to the conduct of the Business prior to the Closing
Date.
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4.5 Non-Competition by the Sellers and the Stockholders; Right of First
Refusal.
(a) For a period of five (5) years from the Closing Date, none of the
Stockholders nor any Seller will, without the prior written consent of the board
of directors of the Purchaser, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as an officer, director, employee,
partner, principal, agent, representative, consultant or otherwise with or use
or permit his name to be used in connection with, any business or enterprise
anywhere in the world that is competitive with the Business as now conducted by
the Sellers or which may be conducted by Purchaser at that time, provided that,
the Stockholders shall be entitled to continue to be engaged in the business of
Promatrx, Inc. as now conducted and the Specialty Business. It is recognized by
the Sellers and the Stockholders that the Business is or will be involved in
activity throughout the entire world, and that more limited geographical
limitations on this non-competition covenant (and the non-solicitation covenant
set forth in Section 4.6 hereof) are therefore not appropriate.
(b) The foregoing restriction shall not be construed to prohibit the
ownership by any Stockholder of not more than five percent (5%) of any class of
securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934, provided that such ownership represents a passive
investment and that neither such Stockholder nor any group of persons including
such Stockholder in any way, either directly or indirectly, manages or exercises
control of any such corporation, guarantees any of its financial obligations,
otherwise takes any part in its business, other than exercising his rights as a
shareholder, or seeks to do any of the foregoing.
4.6 No Solicitation by the Sellers and the Stockholders.
(a) For a period of five (5) years from the Closing Date, no
Stockholder nor any Seller will, either directly or indirectly, call on or
solicit with respect to the Business any person, firm, corporation or other
entity who or which, as of the Closing Date, was, or within five (5) years prior
thereto had been, a customer of any Seller or Purchaser or any of their
affiliates.
(b) For a period of two (2) years from the Closing Date, no Stockholder
nor any Seller will, either directly or indirectly, solicit the employment or
services of any person who was employed by any Seller prior to the Closing or by
the Purchaser or its Affiliates subsequent to the Closing on a full or part-time
basis or an independent contractor (including entities engaged as such) engaged
by the Sellers prior to the Closing or by the Purchaser subsequent to the
Closing to provide sales or marketing functions, unless such person prior to
such solicitation (i) was involuntarily discharged by Purchaser or such
affiliate, (ii) voluntarily terminated his or her relationship with Purchaser or
such affiliate, or (iii) was not a Hired Employee.
4.7 Equitable Relief.
(a) The Stockholders acknowledge that the restrictions contained in
Sections 4.5 and 4.6 hereof are reasonable and necessary to protect the
legitimate interests of Purchaser and its affiliates, that Purchaser would not
have entered into this Agreement in the absence of such restrictions, and that
any violation of any provision of those Sections will result in irreparable
injury to Purchaser.
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(b) The Stockholders and each Seller agree that Purchaser shall be
entitled to preliminary and permanent injunctive relief, without the necessity
of proving actual damages, which rights shall be cumulative and in addition to
any other rights or remedies to which Purchaser may be entitled. In the event
that any of the provisions of Sections 4.5 or 4.6 hereof should ever be
adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law.
(c) If any Stockholder or any Seller breaches the provisions set forth
in Sections 4.5 or 4.6 of this Agreement, the time period for compliance with
such breached provision shall be extended for an additional time period equal to
the duration of the breach. Furthermore, if any Stockholder or any Seller
breaches the provisions set forth in Section 4.5 (Non-Competition), the
Purchaser shall have the right upon written notice to Offray to terminate the
license described in Section 4.13 of this Agreement, in addition to such other
rights and remedies as may be available to Purchaser pursuant to this Agreement
or otherwise.
(d) Each Seller and each Stockholder agree that Purchaser may provide a
copy of Sections 4.5 and 4.6 of this Agreement to any business or enterprise (i)
which he, she or it may directly or indirectly own, manage, operate, finance,
join, participate in the ownership, management, operation, financing, control or
control of, or (ii) with which he, she or it may be connected with as an
officer, director, employee, partner, principal, agent, representative,
consultant or otherwise, or in connection with which he, she or it may use or
permit his, her or its name to be used; provided, however, that this provision
shall not apply after expiration of the time periods set forth therein.
4.8 Certain Taxes. Each Seller shall be jointly and severally
responsible for and shall timely pay all transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including, without
limitation, any penalties and interest) incurred in connection with this
Agreement (including, without limitation, any Transfer Tax) and the Sellers
will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, the
Purchaser will, and will cause its affiliates to, join in the execution of any
such Tax Returns and other documentation. Purchaser shall provide Sellers with
resale exemption certificates as is appropriate.
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4.9 Control Rights. It is understood that each party to this Agreement
will be making filings with respect to Taxes in connection with this Agreement.
In the event of any audits, disputes, administrative, judicial or other
proceedings related to Taxes with respect to which any party may incur liability
hereunder, the party making the filing shall have the right to control such
proceedings. Subject to the preceding sentence, in the event an adverse
determination may result in each party having responsibility for an amount of
Taxes under this Agreement, each party shall be entitled to fully participate in
that portion of the proceedings relating to the Taxes with respect to which it
may incur liability hereunder. For purposes of this section, the term
"participation" shall include (i) participation in conferences, meetings or
proceedings with any tax authority, the subject matter of which includes an item
for which such party may have liability hereunder, (ii) participation in
appearances before any court or tribunal, the subject matter of which includes
an item for which a party may have liability hereunder, and (iii) with respect
to the matters described in the preceding clauses (i) and (ii), participation in
the submission and determination of the content of the documentation, protests,
memorandum of fact and law, briefs and the conduct of oral arguments and
presentations.
4.10 Dissolution of Sellers; Change of Name. Each Seller agrees that
following the Closing it shall refrain from carrying on any business, except (a)
subject to the provisions of Section 4.11, Offray may continue to engage in the
Specialty Business under the name "Offray Specialty Narrow Fabrics, Inc." and
(b) each Seller other than Offray may proceed with its orderly dissolution and
liquidation. Promptly following the Closing, each Seller other than Offray shall
change its name to a new name bearing no resemblance to its present name. Each
Seller agrees to execute any document necessary to allow the Purchaser to use
the "Offray," "C.M. Offray" and "Lion Ribbon" names immediately after the
Closing. After the dissolution of any Sellers, the Major Stockholder shall be
liable for any obligations of such Seller hereunder.
4.11 License Grant from Purchaser to Offray.
(a) Effective upon the Closing and continuing indefinitely, unless and
until any of the Stockholders or Sellers engage in any of the competitive
activities prohibited by Section 4.5, whether or not such activities are
conducted during the five (5) year restriction period or thereafter, the
Purchaser hereby grants to Offray a non-exclusive, royalty-free, worldwide
license, with no right to sublicense, to use the names "Offray" and "C.M.
Offray" (together, the "Marks") solely in connection with the continuation of
the Specialty Business (the "License"). Neither the Stockholders, nor any
Seller, nor any affiliate thereof, may use the words "Offray," "C.M. Offray" or
"Lion Ribbon" in any service mark, trademark, trade name, fictitious name or
similar name or in any corporate or other legal entity name, except (i) that
Offray may use the Marks pursuant to the License, (ii) the Stockholders may use
the Marks for all non-commercial purposes, and (iii) as otherwise agreed to by
the Purchaser. The License is personal to Offray, and except as permitted in
Section 4.11(c), such License may not be sold, assigned or otherwise transferred
to any third party without the prior written consent of the Purchaser, to be
granted or withheld in the Purchaser's sole and unfettered discretion. For
purposes of this paragraph, a merger or consolidation involving Offray or any
transaction resulting in fifty percent (50%) or more of the capital stock of
Offray being owned by any person who is not a Stockholder, or a child or
grandchild of the Major Stockholder shall be deemed to be an attempted transfer
with respect to the License. The License shall terminate upon the occurrence of
any attempted transfer unless the Purchaser has first furnished its written
consent to the continuation of the License notwithstanding the occurrence of
such event.
(b) Offray shall use commercially reasonable efforts to maintain the
quality of the goods offered in connection with the Marks and adhere to such
other reasonable quality control standards that Purchaser may, from time to
time, communicate to Offray with respect to the Marks. Purchaser shall have the
right to require that Offray submit to Purchaser representative samples of any
promotional materials for the goods or related materials bearing the Marks.
Offray will render all reasonable assistance to Purchaser in protecting
Purchaser's ownership in the Marks. Each Stockholder agrees to indemnify the
Purchaser for any damage, loss, liability or deficiency, including reasonable
attorneys' fees, arising out of or due to acts or omissions of such Stockholder
in connection with the use of the Marks pursuant to the License.
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(c) At any time following the second anniversary of the Closing Date,
Offray may transfer the License to a third party, provided that the transferee
(i) agrees to be bound by a non-competition covenant no less favorable to the
Purchaser than that contained in Section 4.5, as evidenced by a written
instrument in form and substance reasonably satisfactory to the Purchaser and
(ii) may only have rights to the License for so long as such transferee remains
bound by and is in compliance with such non-competition covenant, but in no
event shall the transferee's right to the License extend for a period longer
than five (5) years from the date of the transfer of the License to the
transferee. It is agreed and understood that the License is solely for use in
connection with the continuation of the Specialty Business and any permitted
transferee of the License may only use it for such purposes.
(d) The Purchaser agrees that, for a period of five (5) years after the
Closing Date, it will not license or sublicense the "Offray" name to any other
Person engaged in a business similar to the Specialty Business; provided that in
no event shall this provision (i) restrict the ability of the Purchaser or any
affiliate of the Purchaser from using the "Offray" name in any way or (ii)
prevent the Purchaser from transferring the "Offray" name to a purchaser of all
or substantially all of the assets of the Purchaser.
4.12 Conduct of the Sellers' Business Prior to the Closing Date.
(a) Operation in Ordinary Course. Between the date of this Agreement
and the Closing Date, the Sellers shall conduct the Business in all material
respects in the ordinary course and shall use commercially reasonable efforts to
maintain all current business relationships.
(b) Business Organization. Between the date of this Agreement and the
Closing Date, the Sellers shall use commercially reasonable efforts to (a)
preserve substantially intact the business organization of the Business and keep
available the services of the present officers and employees of the Business,
and (b) preserve in all material respects the present business relationships and
goodwill of the Business.
(c) Corporate Organization. Between the date of this Agreement and the
Closing Date, no Seller shall cause or permit any amendment of the certificate
of incorporation (or other governing instrument) of such Seller, and, as such
actions relate to the Business or the Purchased Assets, shall not:
(i) except as to (i) year-end bonuses and wage increases effective
January 1, 2002 for union employees required under the Union Contract; (ii)
year-end bonuses and wage increases effective January 1, 2002 for non-union
hourly employees consistent with past practice, which increases are set forth on
Schedule 4.1(a), and (iii) with Purchaser's prior approval, year-end bonuses for
salaried employees consistent with past practice and described on Schedule
4.1(a), grant any general increase in the rates of pay of any of its hourly-paid
employees, grant any increase in the salary or other compensation of any of its
officers or other salaried employees or grant any bonuses of any kind to any of
its employees;
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(ii) be party to any merger, consolidation or other business
combination or enter into any discussions with any third party, either agent or
principal, concerning a possible investment, merger acquisition, or other
business combination or provide confidential information regarding the Seller to
any third party;
(iii) sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(iv) organize any new subsidiary or acquire any equity securities of
any person or any equity or ownership interest in any business;
(v) distribute any Purchased Assets to its stockholders;
(vi) except as permitted in the Loan and Security Agreement with
Foothill Capital Corporation, declare or pay any dividend or make any other
distribution to its Stockholders; provided that in no event may any Seller
declare or pay any dividend payable other than in cash; or
(vii) move or relocate any of the tangible Purchased Assets from a
Facility other than (A) to the Mexico Location or another Facility, (except the
Watsontown Facility and any portion of the Chester Premises that is not subject
to the Chester Premises Lease), (B) sales of Inventory in the ordinary course of
business and (C) Inventory moved or relocated in the ordinary course of business
to a location set forth on Schedule 1.1(a)(i).
(d) Other Restrictions. Without the consent of the Purchaser, between
the date of this Agreement and the Closing Date, no Seller shall, as such
actions relate to the Business or the Purchased Assets:
(i) except for revolving credit borrowings under the Loan and Security
Agreement with Foothill Capital Corporation, borrow any funds or otherwise
become subject to, whether directly or by way of guarantee or otherwise, any
indebtedness for borrowed money;
(ii) create any encumbrance on any of its properties or Purchased
Assets;
(iii) create or modify, except as noted in the Schedules to this
Agreement, any bonus, deferred compensation, pension, profit sharing,
retirement, insurance, stock purchase, stock option, or other fringe benefit
plan, arrangement or practice or any other employee benefit plan (as defined in
section 3(3) of ERISA);
(iv) (A) terminate or change the employment of any of its salespersons,
managerial personnel or clerical personnel for any reason without the prior
consent of the Purchaser or (B) permit any of its salespersons, managerial
personnel or clerical personnel to resign without giving notice to the Purchaser
within one Business Day after receiving notice of such resignation or such
person's intention to resign;
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(v) except for hourly union and non-union employees necessary for the
operation of the Business in the ordinary course, hire or agree to hire any new
employee;
(vi) make or commit to make any capital expenditure in excess of
$25,000 in a single instance or $100,000 in the aggregate;
(vii) enter into any agreement that restricts it or any of its
subsidiaries from carrying on its business;
(viii) pay, discharge or satisfy any claim, liability or obligation,
absolute, accrued, contingent or otherwise, other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities or obligations
incurred in the ordinary course of business and consistent with past practice;
(ix) cancel any debts or waive any claims or rights;
(x) enter into any agreement which, if it were entered into prior to
the signing of this Agreement, would constitute a Commitment and be required to
be scheduled on Schedule 2.14; or
(xi) deliver merchandise to a customer on an accelerated schedule or in
a manner not in the normal course, except where the customer's purchase order
specifically indicates that the merchandise is to be delivered prior to the
Closing Date.
(e) Accounting Procedures. Without the consent of the Purchaser, the
Sellers shall not change, alter or deviate from the accounting procedures used
in the preparation of the Balance Sheet.
4.13 Confidentiality. Each of the Sellers and each Stockholder
recognizes and acknowledges that it has had access to confidential information
relating to the Purchased Assets and the Business and the transactions
contemplated by this Agreement, including without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, advertising, distribution
and sales methods and systems, sales and profit figures, customer and client
lists, and relationships with dealers, distributors, wholesalers, customers,
clients, suppliers and others who have business dealings with the Business
("Confidential Information"). Each of the Sellers and each Stockholder
acknowledges that such Confidential Information is a valuable and unique asset
and covenants that he, she or it will not disclose any such Confidential
Information for any reason whatsoever, without the consent of the Purchaser,
unless such information (a) is in the public domain through no wrongful act of
the Sellers or the Stockholders, or (b) except as may be required by law. The
obligations of the Sellers and the Stockholders under this Section 4.15 shall
survive the Closing.
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4.14 Collection of Accounts Receivable.
(a) Notwithstanding anything to the contrary in this Agreement, all
cash or checks received by any of the Sellers or the Stockholders in respect of
the Purchased Assets or the Business after the Closing Date shall be for the
benefit of the Purchaser, and within seven (7) Business Days after receipt, paid
to the Purchaser; provided, however, such receipts shall exclude cash or checks
received related to any Excluded Assets. All cash or checks received from a
particular third party by the Purchaser after the Closing Date in respect of
payment of any Accounts Receivable included in the Purchased Assets shall,
unless otherwise identified to a specific invoice, be assumed to be in payment
of invoices in the order of their respective issuance dates (with the oldest
invoice being paid first).
(b) Notwithstanding anything to the contrary in this Agreement, all
cash or checks received by the Purchaser in respect of the Excluded Assets after
the Closing Date shall be for the benefit of the Sellers, and within seven (7)
Business Days after receipt, paid to the Sellers; provided, however, such
receipts shall exclude cash or checks received related to any Purchased Assets.
(c) Attached as Schedule 4.14(c) is a list of all customers that are
customers of both the Specialty Products Division and the Business.
(d) During the period commencing on the Closing Date and ending on
October 31, 2002, the Purchaser shall (i) use commercially reasonable efforts to
collect the Accounts Receivable, and (ii) use commercially reasonable practices
with respect to granting credits relating to the Accounts Receivable. During
such period, the Purchaser shall, within fifteen (15) Business Days after the
end of each month, provide to the Sellers a report containing information
regarding the collection of the Accounts Receivable for such month and credits
granted for such month. As soon as reasonably practicable following October 31,
2002, the Purchaser shall send the Sellers a notice of the amount (the
"Uncollected Amount") of the Accounts Receivable which have not been collected
as of October 31, 2002, along with a breakdown of the individual uncollected
Accounts Receivable. If the Uncollected Amount is less than the bad debt reserve
and the reserve for returns and allowances and customer programs for Accounts
Receivable reflected on the Closing Date Balance Sheet, then the Purchaser shall
pay to the Sellers an amount equal to such difference. If the Uncollected Amount
is greater than the sum of (x) the bad debt reserve and the reserve for returns
and allowances and customer programs for Accounts Receivable reflected on the
Closing Date Balance Sheet, plus (y) the portion of the Uncollected Amount
attributable to Jo-Anne Stores, Inc. (to the extent such amount exceeds any
reserve reflected on the Closing Date Balance Sheet specifically related to
Jo-Anne Stores, Inc.), then the Sellers shall pay to the Purchaser an amount
equal to such difference. Any amounts to be paid under this Section 4.14(d),
unless otherwise mutually agreed to by the Purchaser and the Sellers, shall be
paid by wire transfer of immediately available funds to the account specified by
the Party to be paid, within ten (10) Business Days of the Sellers' receipt of
the notice specifying the Uncollected Amount.
4.15 Sample Books. With respect to all ribbon sample books located on
the Chester Premises or any other Facility, the parties agree as follows:
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(a) The Major Stockholder shall maintain ownership and possession of
one copy (and, if only one copy exists for a particular book, such only copy) of
the actual physical ribbon sample books;
(b) The Major Stockholder shall provide to the Purchaser the duplicate
copy (if any) of all ribbon sample books;
(c) If no duplicate copy exists, the Major Stockholder will, upon
reasonable notice and during normal business hours, permit the Purchaser to have
access, for a period of five (5) years following the Closing Date, to the only
copy of such ribbon sample books; and
(d) Notwithstanding possession of the physical ribbon sample books, all
copyright and other intellectual property rights which may exist (whether in the
design of such samples or otherwise) in and to the ribbon samples contained in
such books shall belong solely to the Purchaser.
4.16 Restriction Regarding Argentina. For so long as any
non-competition provisions contained in that certain Amended and Restated Stock
Purchase Agreement dated December 18, 2001 among Carlos Alberto Fernandez,
Offray Holdings, Inc. and the Major Stockholder related to the sale of stock of
Abrafic S.A. and that certain Amended and Restated Debt Restructuring Agreement
dated December 18, 2001, remain in full force and effect, but in no event after
the fifth (5th) anniversary of the Closing Date, the Purchaser shall not sell
directly into Argentina any products labeled or branded with the "Offray" name.
4.17 Update Schedules. Between the date hereof and the Closing Date,
the Sellers will promptly disclose to Purchaser in writing any information set
forth in the Schedules to this Agreement which is no longer applicable and any
information of the nature of that set forth in the Schedules to this Agreement
which arises after the date hereof and which would have been required to be
included in the Schedules to this Agreement if such information had been
obtained on the date of delivery thereof. Immediately prior to the Closing, any
Schedule which addresses matters only as of a particular date shall be updated
through the end of the calendar month immediately preceding the Closing (except
for Schedule 4.1(g), which need only address accrued vacation through December
31, 2001, but which must be updated through the Closing Date pursuant to Section
4.1(g)).
4.18 Sellers' Bank Accounts. Prior to the Closing, the Purchaser will
designate, from among the accounts described in Section (e) of Schedule 2.26,
which accounts the Purchaser will take assignment of, and after the Closing,
Sellers will use commercially reasonable efforts to assist Purchaser in having
such accounts assigned to the Purchaser. With respect to all other accounts
described in Section (e) of Schedule 2.26, on the Closing Date, the Sellers
shall execute and deliver to the Purchaser a statement certifying the amount
contained in each such account and the aggregate amount contained in all such
accounts shall be credited against the Purchase Price.
4.19 Reimbursement Payments from Purchaser. The parties agree that any
obligation of the Purchaser to make a payment to the Sellers under this
Agreement may be satisfied by the delivery by the Purchaser to Offray of the
amount to be paid.
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ARTICLE 5
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of the Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction (or waiver) on or prior
to the Closing Date of all of the following conditions:
5.1 Representations, Warranties and Covenants of Sellers and
Stockholders. Each Seller and each Stockholder shall have complied in all
respects with each of the agreements, covenants and conditions contained herein
to be performed by it on or prior to the Closing Date, and all of the
representations and warranties of the Sellers and the Major Stockholder
contained herein shall be true on and as of the Closing Date with the same
effect as though made on and as of the Closing Date without giving effect to any
Schedule updates after the date hereof; it being agreed to and understood that
for purposes of this Section 5.1, changes, events or developments resulting from
general economic conditions or affecting in general persons engaged in the
Business may constitute a Material Adverse Effect. Purchaser shall have received
a certificate of each Seller and the Major Stockholder, dated as of the Closing
Date and signed by an officer of such Seller and by the Major Stockholder,
certifying as to the fulfillment of the condition set forth in this Section 5.1.
5.2 No Prohibition. No statute, rule or regulation or order of any
court or administrative agency shall be in effect which prohibits the Purchaser
from consummating the transactions contemplated hereby. No Litigation shall be
pending or, to the Sellers' or the Purchaser's Knowledge, threatened with
respect to the consummation of the transactions contemplated hereby.
5.3 Governmental Consents. All consents, approvals, authorizations,
exemptions and waivers from governmental agencies that shall be required in
order to enable the Purchaser to consummate the transactions contemplated hereby
shall have been obtained, including, without limitation, (i) the termination or
expiration of the applicable waiting period under HSR and (ii) the consents of
the Maryland Department of Business and Economic Development referred to in
Section 2.20.
5.4 NJ-ISRA. Prior to Closing, Sellers shall obtain and provide to
Purchaser either: (i) a letter from the New Jersey Department of Environmental
Protection ("NJDEP") stating that the New Jersey Industrial Site Recovery Act,
N.J.S.A. 13:1K-6 et. seq. and the regulations promulgated thereunder
(collectively "ISRA") are not applicable to the transaction contemplated by this
Agreement; or (ii) an approved Negative Declaration (as defined by ISRA) or No
Further Action Letter (as defined by ISRA) (the Negative Declaration or No
Further Action Letter, as the case may be, are hereinafter referred to
collectively as the "ISRA Clearance") with respect to the Chester Premises. If
Sellers are unable to obtain ISRA Clearance by the Closing for the Chester
Premises, then Sellers shall apply for and, prior to Closing, enter into a
Remediation Agreement (as defined by ISRA) with NJDEP or an amendment to an
existing Remediation Agreement with NJDEP for the Chester Premises. In any such
Remediation Agreement, Seller shall pay for and be identified as the sole party
responsible for: (i) compliance with the Remediation Agreement after Closing;
and (ii) obtaining ISRA Clearance after the Closing. In addition, Seller shall
provide all necessary financial assurance required by NJDEP under any such
Remediation Agreement.
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5.5 Third Party Consents. All consents and approvals by any third
parties to the transfer and assignment of the Purchased Assets required pursuant
to the terms of the Commitments listed on Schedule 5.5 (the "Critical
Commitments") shall have been obtained and delivered to the Purchaser; provided
that in the event that the Purchaser determines that any Commitment which is not
identified on Schedule 2.14 as requiring consent or approval for assignment in
fact does require consent or approval for assignment, the Purchaser shall have
the right, without the consent of the Sellers or the Stockholders, to add such
Commitment to Schedule 5.5.
5.6 Real Property Leases. For each Real Property Lease, the Sellers
shall have delivered to the Purchaser an estoppel certificate, consent of
assignment from the applicable lessor thereunder and an assignment agreement,
each in form and substance reasonably satisfactory to the Purchaser.
5.7 Transfer of Real Property. The Sellers shall have sold to Purchaser
all right, title and interest in all of the Real Property, paid all applicable
transfer taxes with respect thereto, and (a) delivered, for each parcel of Real
Property, a duly executed deed in form and substance reasonably satisfactory to
the Purchaser and including a warranty against Sellers' acts (special warranty
deed) subject only to Permitted Encumbrances, and (b) delivered a duly executed
indemnity agreement in form and substance reasonably satisfactory to the
Purchaser for encroachments and other defects in title of the Real Property.
5.8 Bills of Sale and Assignment. Each Seller shall have delivered to
Purchaser bills of sale, patent and trademark assignments and such other
assignments, endorsements and other good and sufficient instruments and
documents of conveyance and transfer as shall be necessary to transfer and
assign the Purchased Assets to the Purchaser or its designated Affiliate.
5.9 Release of Liens. The Sellers shall have delivered to the Purchaser
appropriate instruments of release, including, without limitation, UCC-3
Termination Statements, reflecting the release of all security interests in the
Purchased Assets, it being agreed to and understood that UCC-1 Financing
Statements filed as notice filings on leased equipment under those Commitments
assumed by the Purchaser do not constitute security interests.
5.10 Mortgage Satisfactions. The Sellers shall have delivered to the
Purchaser all mortgage satisfaction agreements to be recorded in the applicable
public records reflecting the release of all mortgages and deeds of trust
securing interests in the Real Property.
5.11 Environmental Review. The Purchaser shall be satisfied in its sole
discretion with the results of an environmental review and facility
investigation, including any subsurface sampling, to be conducted by Purchaser
or consultants retained by Purchaser at its expense.
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5.12 Environmental Permits.
(a) The Sellers shall have obtained, assigned and transferred to the
Purchaser all Environmental Permits that are required by Environmental Laws with
respect to the Business and the Purchased Assets and any and all consents,
approvals, authorizations or waivers required in connection with such assignment
and transfer shall have been obtained.
(b) The Sellers shall have either (i) obtained a determination from the
Alabama Department of Environmental Management to the effect that air permits
are not required for the Anniston, Alabama Facility, or (ii) obtained any
necessary air permits for such Facility.
5.13 Chester Premises Lease. The Purchaser and Offray shall have
entered into a lease relating to a portion of the Chester Premises in
substantially the form attached hereto as Exhibit C.
5.14 Offray's Certificate. Each Seller shall have delivered to the
Purchaser a certificate signed by an authorized officer certifying as to (i) the
incumbency of the officers of such Seller executing documents or instruments on
its behalf and (ii) resolutions of the board of directors and consent of
stockholders authorizing the transactions contemplated herein; and attaching a
good standing certificate of each Seller as of a date within thirty (30) days of
the Closing Date.
5.15 Form and Content of Documents. The form and content of all
documents, certificates and other instruments to be delivered by the Sellers and
the Major Stockholder shall be reasonably satisfactory to the Purchaser and its
counsel.
5.16 Escrow Agreement. The Purchaser and the Sellers shall have entered
into the Escrow Agreement.
5.17 Transition Services Agreement. The Purchaser and Offray shall have
entered into a Transition Services Agreement (the "Transition Services
Agreement") relating to the provision by the Purchaser to Offray of certain
bookkeeping and other administrative services and the provision of
administrative services by Offray to the Purchaser for a period not to exceed
four (4) months from the Closing Date in substantially the form attached hereto
as Exhibit D.
5.18 Opinion of Counsel. The Purchaser shall have received the written
opinion dated the Closing Date of Drinker Biddle & Shanley LLP, counsel to the
Sellers and the Major Stockholder, in form and substance reasonably satisfactory
to the Purchaser and its counsel.
5.19 Employment Agreement. The Purchaser and Russell G. Hager shall
have entered into an employment agreement in form and substance reasonably
satisfactory to the Purchaser.
5.20 Material Adverse Changes. From the date of the Balance Sheet to
the Closing Date, neither the Business nor the Purchased Assets shall have been
Materially Adversely Affected in any way, including, without limitation, by
fire, casualty, act of God or otherwise. There shall be no conditions existing
or, to the Sellers' or the Purchaser's Knowledge, threatened with respect to the
Business or the Purchased Assets that might be expected to have a Material
Adverse Effect. It is agreed to and understood that for purposes of this Section
5.20, changes, events or developments resulting from general economic conditions
or affecting in general persons engaged in the Business may constitute a
Material Adverse Effect.
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5.21 Tax Clearance Certificate. Each Seller shall provide Purchaser
with any clearance certificate or similar document(s), if any, that may be
required by any state taxing or other Governmental or Regulatory Authority in
order to relieve Purchaser of any obligation to withhold any portion of the
Purchase Price.
5.22 Nonforeign Affidavits. Offray, Lion and CVO shall furnish
Purchaser with a FIRPTA affidavit, stating, under penalties of perjury, the
transferor's United States taxpayer identification number and that the
transferor is not a foreign person, pursuant to Section 1445(b)(2) of the Code.
ARTICLE 6
CONDITIONS TO THE sellerS' OBLIGATIONS
The obligations of the Sellers to consummate the transactions
contemplated hereby shall be subject to the satisfaction (or waiver) on or prior
to the Closing Date of all of the following conditions:
6.1 Representations, Warranties and Covenants of Purchaser and Parent.
The Purchaser and the Parent each shall have complied in all respects with each
of the agreements and covenants contained herein to be performed by it on or
prior to the Closing Date, and all of its representations and warranties
contained herein shall be true on and as of the Closing Date with the same
effect as though made on and as of the Closing Date. The Sellers shall have
received a certificate of each of the Purchaser and the Parent, dated as of the
Closing Date and signed by its officer, certifying as to the fulfillment of the
condition set forth in this Section 6.1.
6.2 No Prohibition. No statute, rule or regulation or order of any
court or administrative agency shall be in effect which prohibits the Sellers
from consummating the transactions contemplated hereby. No Litigation shall be
pending or threatened with respect to the consummation of the transactions
contemplated hereby.
6.3 Governmental Consents. All consents, approvals, authorizations,
exemptions and waivers from governmental agencies that shall be required in
order to enable the Sellers to consummate the transactions contemplated hereby
shall have been obtained including, without limitation, the termination or
expiration of the applicable waiting period under HSR.
6.4 Chester Premises Lease. The Purchaser and Offray shall have entered
into a lease relating to a portion of the Chester Premises in substantially the
form attached hereto as Exhibit C.
6.5 Transition Services Agreement. The Purchaser and Offray shall have
entered into the Transition Services Agreement.
6.6 Assumption Agreement. The Purchaser shall have delivered to the
Sellers an Assumption Agreement sufficient to assign and assume the Assumed
Liabilities.
6.7 Secretary's Certificate. The Purchaser and the Parent each shall
have delivered to the Sellers a certificate certifying as to (i) the incumbency
of its officers executing documents or instruments on its behalf and (ii)
resolutions of its board of directors authorizing the transactions contemplated
herein; and attaching a good standing certificate as to it as of a date within
ten days of the Closing Date.
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6.8 Form and Content of Documents. The form and content of all
documents, certificates and other instruments to be delivered by the Purchaser
and the Parent shall be reasonably satisfactory to the Sellers, Stockholders and
their counsel.
6.9 Escrow Agreement. The Purchaser and the Sellers shall have entered
into the Escrow Agreement.
6.10 Opinion of Counsel. The Sellers shall have received the written
opinion dated the Closing Date of Morgan Lewis & Bockius LLP, counsel to the
Purchaser, in form and substance reasonably satisfactory to the Sellers and
their counsel.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by Sellers and Major Stockholder. From and after
the Closing, each Seller and the Major Stockholder shall jointly and severally
reimburse and indemnify and hold Purchaser and the Parent harmless against any
and all actions, suits, claims, proceedings, investigations, audits, demands,
damages, losses, liabilities, deficiencies, assessments, fines, judgments, costs
and other expenses (including, without limitation and subject to Section 7.6,
reasonable audit, consultant and legal fees) (collectively, subject to the
limitations specified in Section 7.3, "Losses") to Purchaser or the Parent
(which, for purposes of this Article 7, shall include any director, officer or
employee of Purchaser and the Parent or any affiliate of Purchaser) arising out
of or by reason of (a) any misrepresentation, breach of warranty or
nonfulfillment of any covenant or agreement on the part of any Seller or the
Stockholders under this Agreement not waived in writing by the Purchaser or from
any misrepresentation in or omission from any written statement, list,
certificate or other instrument furnished to the Purchaser by the Sellers or
Stockholders pursuant to this Agreement (without consideration of any
materiality standard set forth therein); (b) any liability or obligation of the
Sellers or the Stockholders which is not an Assumed Liability; (c) (i) the
presence, Release or threatened Release of any Hazardous Materials existing as
of or prior to the Closing at, from, in, to, on, or under any Site, (ii) the
transportation, treatment, storage, handling or disposal, or the arrangement for
the transportation, treatment, storage, handling or disposal of any Hazardous
Materials by or on behalf of the Business or any of the Sellers, any
predecessors of the Business or any of the Sellers, or any entity currently or
previously owned or controlled by the Business or any of the Sellers to any
off-Site location prior to the Closing, and (iii) any violation or
non-compliance with any Environmental Law or Environmental Permit prior to
Closing by the Business or any of the Sellers, any predecessors of the Business
or any of the Sellers, or any entities currently or previously owned or
controlled by the Business or any of the Sellers; (d) any medical insurance
claims for the period prior to the Closing in excess of reserves on the Closing
Balance Sheet; (e) any action or inaction prior to the Closing Date of any of
the Sellers or any of the Stockholders or of any director, officer, employee,
agent, representative or subcontractor of any of the Sellers; and (f) any costs
associated with the failure to obtain consent to the assignment of a Commitment.
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7.2 Indemnification by Purchaser and the Parent. From and after the
Closing, the Purchaser and the Parent shall jointly and severally reimburse and
indemnify and hold each Seller and the Major Stockholder harmless against any
and all Losses to a Seller or Stockholder (which, for purposes of this Article
7, shall include any director, officer or employee of a Seller) resulting from
(a) any misrepresentation, breach of warranty or nonfulfillment of any covenant
or agreement on the part of Purchaser or the Parent under this Agreement not
waived in writing by the Major Stockholder or from any misrepresentation in or
omission from any written statement, list, certificate or other instrument
furnished to the Sellers or Major Stockholder by the Purchaser pursuant to this
Agreement (without consideration of any materiality standard set forth therein)
with respect to matters relating to the Purchaser or the Parent existing on or
prior to the Closing Date, (b) any Assumed Liability, and (c) any action or
inaction after the Closing Date of Purchaser or any director, officer, employee,
agent, representative or subcontractor of the Purchaser, other than the claims
in Section 7.1.
7.3 Limitation on Liability.
(a) No amounts of indemnity shall be payable as a result of claims
arising under Section 7.1(a) (other than amounts for claims with respect to
breaches of representations, warranties and covenants contained in Sections 2.7,
2.12, 2.18(k), 2.21, 2.23, 4.1(k) and 4.11(b)) or Section 7.2(a) (i) which
involve Losses of less than $15,000 individually and (ii) unless and until all
Losses in excess of $15,000 for which indemnification has been claimed pursuant
to such section exceeds $250,000 in the aggregate, in which event (x) such
Indemnified Parties shall be entitled to seek indemnity from the applicable
Indemnifying Parties for the aggregate amount of all Losses in excess of
$250,000 previously incurred and (y) all Losses incurred thereafter without
regard to amount.
(b) The maximum aggregate liability of the Sellers on the one hand and
the Purchaser on the other under this Article 7 shall not exceed $8,000,000 (the
"Cap"), except for claims for indemnification made by Purchaser described in
Section 4.11(b), Section 7.1(a) (with respect to breaches of representations,
warranties and covenants contained in Sections 2.7, 2.12, 2.18(k), 2.21, 2.23
and 4.1(k)) and Section 7.1(c), to which such Cap shall not apply. In the event
any amounts held under the Escrow Agreement are released to the Sellers, then
the Cap shall be reduced by an amount equal to the amount so released.
7.4 Survival of Representations and Covenants. The representations and
warranties given by the Sellers and the Major Stockholder or the Purchaser and
the Parent under this Agreement shall survive the Closing for a period of two
(2) years after the Closing Date, except for the representations and warranties
in Sections 2.1, 2.2, 2.3, 2.5, 2.12, 2.16, 2.17, 2.21, 2.23, 2.31, 3.1 and 3.2
which shall survive for the applicable statute of limitations for Purchaser to
be liable for the claims underlying the misrepresentation or breach of warranty.
All covenants made under this Agreement which are not specifically limited by
the provisions of this Agreement shall survive for the applicable statute of
limitations.
7.5 Exceptions to Limitations. Nothing herein shall be deemed to limit
or restrict in any manner any rights or remedies which Purchaser or the Parent
has, or might have, at law, in equity or otherwise, against the Sellers or the
Major Stockholder based on the willful breach of a representation, warranty or
covenant or willful breach of warranty by the Sellers or the Major Stockholder
hereunder.
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7.6 Method of Asserting Claims, Etc. All claims for indemnification
under this Article 7 shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which a party or parties
(the "Indemnifying Party") would be liable to another party or parties (the
"Indemnified Party") hereunder is asserted against or sought to be collected
from the Indemnified Party by a third party, the Indemnified Party shall
promptly notify the Indemnifying Party of such claim or demand, specifying the
nature of such claim or demand and the amount or the estimated amount thereof to
the extent then feasible (which estimate shall not be conclusive of the final
amount of such claim and demand) (the "Claim Notice"); provided that failure to
promptly deliver a Claim Notice shall release the Indemnifying Party of its
obligations hereunder only to the extent that it is prejudiced by reason of such
delay or failure. The Indemnifying Party shall have thirty (30) days from the
receipt of the Claim Notice (the "Notice Period") to notify the Indemnified
Party (i) whether or not it disputes the liability of the Indemnifying Party to
the Indemnified Party hereunder with respect to such claim or demand and (ii)
whether or not it desires, at the sole cost and expense of the Indemnifying
Party, to defend the Indemnified Party against such claim or demand. In the
event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against such claim
or demand and except as hereinafter provided, the Indemnifying Party shall have
the right to defend such claim or demand by appropriate proceedings, which
proceedings shall be settled or prosecuted by it to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement, it may do so at its sole cost and expense. If the Indemnifying
Party elects not to defend the Indemnified Party against such claim or demand
(whether by not giving the Indemnified Party timely notice as provided above or
otherwise), then (i) the amount of any such claim or demand, or (ii) if the same
be contested by the Indemnified Party (but the Indemnified Party shall have no
obligation to contest any such claim or demand), that portion thereof as to
which such defense is finally unsuccessful, shall be conclusively deemed to be a
liability of the Indemnifying Party hereunder, except that if the Indemnifying
Party has disputed the liability of the Indemnifying Party to the Indemnified
Party hereunder, as provided above, such dispute shall be resolved as provided
in Section 9.1.
(b) If, in the reasonable opinion of the Purchaser, notice of which
shall be given in writing to the Sellers, any such claim or demand seeks
prospective relief (excluding relief where monetary damages is the sole relief
sought) which could have a Material Adverse Effect on the Purchased Assets or
the Business, the Purchaser shall have the right to control the defense of any
such claim or demand at its sole cost and expense but the amount of such cost
and expense and any judgment or settlement shall be included as part of the
indemnification obligations of the Sellers hereunder. If the Purchaser should
elect to exercise such right, the Sellers shall have the right to participate
in, but not control, the defense of such claim or demand at the sole cost and
expense of the Sellers. If the Sellers have disputed their liability to the
Purchaser hereunder, as provided above, such dispute shall be resolved as
provided in Section 9.1.
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(c) In the event the Indemnified Party should have a claim against the
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from the Indemnified Party by a third
party, the Indemnified Party shall promptly send a Claim Notice with respect to
such claim to the Indemnifying Party. If the Indemnifying Party does not notify
the Indemnified Party within twenty (20) days from the receipt of the Claim
Notice that it disputes such claim, the amount of such claim shall be
conclusively deemed a liability of the Indemnifying Party hereunder. If the
Indemnifying Party has disputed such claim, as provided above, such dispute
shall be resolved as provided in Section 9.1.
(d) Nothing herein shall be deemed to prevent a party from making a
claim hereunder for potential or contingent claims or demands, provided the
Claim Notice sets forth in reasonable detail the specific basis for and the then
estimated amount of any such potential or contingent claim or demand to the
extent then feasible and such party has reasonable grounds to believe that such
a claim or demand may be made.
7.7 Effect of Investigation. Any claim for indemnification under this
Agreement shall not be invalid as a result of any investigation by or
opportunity to investigate afforded to the Purchaser.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated before the Closing
occurs only as follows:
(a) By written agreement of the parties hereto at any time.
(b) By the Sellers by notice to the Purchaser at any time, if one or
more of the conditions specified in Article 6 hereof is not satisfied at the
time at which the Closing Date would otherwise occur or if satisfaction of such
a condition is or becomes impossible.
(c) By the Purchaser, by notice to the Sellers at any time, if one or
more of the conditions specified in Article 5 hereof is not satisfied at the
time at which the Closing Date would otherwise occur of if satisfaction of such
a condition is or becomes impossible.
(d) By either the Purchaser or the Sellers in the event the Closing
shall not have occurred on or prior to March 31, 2002.
Nothing in this Article 8 shall be deemed to excuse any party for a breach of
any of its obligations or agreements undertaken or made in this Agreement.
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ARTICLE 9
MISCELLANEOUS
9.1 Arbitration. Except (a) as otherwise provided in Section 1.5 with
respect to the Closing Audit (b) as otherwise provided in Section 4.7 with
respect to injunctive relief and (c) with respect to any provision that relates
to the Purchased Assets of Offray Canada, all disputes among the parties
hereunder shall be settled by arbitration before one arbitrator pursuant to the
Expedited Procedures of the Commercial Arbitration Rules of the American
Arbitration Association in Philadelphia, Pennsylvania; provided, however, that
any award pursuant to such arbitration shall be accompanied by a written opinion
of the arbitrator giving the reasons for the award. The award rendered by the
arbitrator shall be conclusive and binding upon the parties hereto. Nothing
herein shall prevent the Purchaser and the Sellers from settling any dispute by
mutual agreement at any time. Each party shall pay its own expenses of
arbitration and the expenses of the arbitrator shall be equally shared.
9.2 Bulk Sales Law. The Sellers and the Major Stockholder shall
cooperate with the Purchaser to ensure that all action is taken as may be
necessary or appropriate in order to fully comply with the bulk transfer
notification provisions of (i) Section 22(c) of the New Jersey Sales and Use Tax
Act, and (ii) the similar provisions of bulk sales laws for any state taxing or
other Governmental or Regulatory Authority which may apply to the transactions
relating to this Agreement, including Hong Kong.
9.3 Entire Agreement. This Agreement constitutes the sole understanding
of the parties with respect to the subject matter hereof.
9.4 Parties In Interest. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto; provided, however, that this Agreement may not be
assigned by either party without the prior written consent of the other parties,
except that the Purchaser may assign this Agreement in whole or in part to any
affiliate of the Purchaser or the Parent. This Agreement is intended for the
sole benefit of, and is only enforceable by, the parties hereto and their
respective successors and permitted assigns, and no right, benefit or remedy of
any nature whatsoever is intended to be conferred upon any other person by
reason of this Agreement.
9.5 Headings. The headings of the Articles and Sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
9.6 Modification and Waiver. No amendment, modification or alteration
of the terms or provisions of this Agreement shall be binding unless the same
shall be in writing and duly executed by the parties hereto, except that any of
the terms or provisions of this Agreement may be waived in writing at any time
by the party which is entitled to the benefits of such waived terms or
provisions of this Agreement and the same shall not be deemed to or constitute a
waiver of any other provision hereof (whether or not similar). No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, subject to Section 7.6 hereof.
9.7 Expenses. Except as otherwise provided herein, the Sellers, Major
Stockholder, the Parent and Purchaser shall each pay all costs and expenses
incurred by it or on its behalf in connection with this Agreement and the
transactions contemplated hereby, including, without limiting the generality of
the foregoing, fees and expenses of its own financial consultants, accountants
and counsel. For purposes hereof, all expenses of the Sellers and the Major
Stockholder incurred at any time in connection with the transactions
contemplated herein, including fees of legal counsel and accountants and the
payments to the Offray Broker, shall be deemed to be expenses of Major
Stockholder and shall be paid by the Major Stockholder.
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9.8 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be in writing and
shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, cable, telegram, telex
or other standard forms of written telecommunications, by overnight courier or
by registered or certified mail, postage prepaid,
if to Sellers or the Stockholders to:
C.M. Offray & Son, Inc.
Route 24, Box 601
Chester, NJ 07930-0601
Attention: Claude V. Offray, Jr.
Chairman and President
Telecopy: 908-879-8850
with a copy to:
Drinker Biddle & Shanley LLP
500 Campus Drive
Florham Park, NJ 07932-1047
Attention: John Kandravy, Esq.
Telecopy: (973) 360-9831
if to the Purchaser or the Parent to:
Berwick Industries, LLC
c/o CSS Industries, Inc.
1845 Walnut Street
Suite 800
Philadelphia, PA 19103-4755
Attention: Stephen V. Dubin, Esq.
Executive Vice President and General Counsel
Telecopy: (215) 569-9979
with a copy to:
Morgan, Lewis & Bockius LLP
502 Carnegie Center
Princeton, NJ 08540
Attention: Steven M. Cohen, Esq.
Telecopy: (609) 919-6639
or at such other address for a party as shall be specified by like notice.
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9.9 Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of New Jersey applicable to agreements
made and to be performed wholly within such jurisdiction; except that as any
such provision relates to the Purchased Assets of Offray Canada, such provisions
shall be governed by the applicable laws of Canada.
9.10 Public Announcements. Neither the Sellers, the Stockholders nor
the Purchaser shall make any public statements, including, without limitation,
any press releases, with respect to this Agreement and the transactions
contemplated hereby without the prior written consent of the other party (which
consent shall not be unreasonably withheld) except as may be required by law or
by any stock exchange. If a public statement is required to be made by law or by
any stock exchange, the parties shall use reasonable efforts to consult with
each other in advance as to the contents and timing thereof.
9.11 Counterparts; Facsimile Signatures. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed to
be an original and all of which shall constitute the same instrument. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts. This Agreement may be
executed by facsimile signatures which signatures shall have the same force and
effect as original signatures.
ARTICLE 10
DEFINITIONS
10.1 Certain Definitions. As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Acquired Working Capital" means current assets (including cash and
marketable securities) minus accounts payable and accrued expenses.
"Acquired Working Capital on the Balance Sheet" equals $42,352,044.
"Affiliate" means any Person that directly, or indirectly through one
of more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning ten
percent (10%) or more of the voting securities of a second Person shall be
deemed to control that second Person.
"Agreement" means this Asset Purchase Agreement and all
exhibits, schedules and other attachments hereto, as the same shall be amended
from time to time in accordance with the terms hereof.
"August 31 Adjustments" means collectively those items listed in the
third column of Exhibit B under the heading "August 31 Adjustments."
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"Benefit Plan" means (a) any pension plan, 401(k) plan,
profit-sharing plan, health or welfare plan, and any other employee benefit plan
(within the meaning of section 3(3) of ERISA) that is maintained or sponsored by
a Seller or to which a Seller contributes or for which a Seller otherwise has or
may have any liability, contingent or otherwise, either directly or as a result
of an ERISA Affiliate, and (b) any other benefit arrangement, obligation, or
practice, whether or not legally enforceable, to provide benefits to one or more
present or former employees, directors, agents, or independent contractors, that
is maintained or sponsored by a Seller or to which a Seller contributes or for
which a Seller otherwise has or may have any liability, contingent or otherwise,
either directly or as a result of an ERISA Affiliate, including, without
limitation, employment agreements, severance policies or agreements, executive
compensation arrangements, incentive arrangements, sick leave, vacation pay,
salary continuation, consulting or other compensation arrangements, workers'
compensation, bonus plans, stock option, stock grant or stock purchase plans,
insured or uninsured medical coverage arrangement, life insurance, tuition
reimbursement programs or scholarship programs, any plans subject to section 125
of the Code, agreements providing post retirement or post employment payments,
benefits, or items of value, or and any plans providing benefits or payments in
the event of a change of ownership or control.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Capital Leases" means those leases identified as capital leases on
Schedule 2.14.
"Closing Date Acquired Working Capital" means the Acquired Working
Capital reflected on the Closing Date Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Comparable Employment" means, with respect to an Employee, employment
by the Purchaser with a salary, bonus level, commission level and benefits that
are in the aggregate comparable to those in effect for the Employee immediately
prior to the Closing.
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violation,
investigations, complaints, requests for information, proceedings, or other
communications (written or oral), whether criminal or civil, (collectively,
"Claims") pursuant to or relating to any applicable Environmental Law by any
person (including but not limited to any Governmental or Regulatory Authority,
private person and citizens' group) based upon, alleging, asserting, or claiming
any actual or potential (i) violation of or non-compliance with or liability
under any Environmental Law, (ii) violation of or non-compliance with any
Environmental Permit, or (iii) liability for investigatory costs, cleanup costs,
removal costs, remedial costs, response costs, natural resource damages,
property damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to the presence, Release, or threatened Release into
the Environment, of any Hazardous Materials at any location, including but not
limited to any off-Site location to which Hazardous Materials or materials
containing Hazardous Materials were sent for handling, storage, treatment, or
disposal.
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"Environmental Clean-up Site" means any location which is
listed or proposed for listing on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability Information
System, or on any similar state list of sites requiring investigation or
cleanup, or which is the subject of any pending or threatened action, suit,
proceeding, or investigation related to or arising from any alleged violation of
any Environmental Law, or at which there has been a Release, threatened or
suspected Release of a Hazardous Material.
"Environmental Law" means any and all federal, state, local, provincial
and foreign, civil and criminal laws, statutes, ordinances, orders, codes,
rules, regulations, Environmental Permits, policies, guidance documents,
judgments, decrees, injunctions, or agreements with any Governmental or
Regulatory Authority, relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Materials, whether now
existing or subsequently amended or enacted, including but not limited to: the
Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq.;
the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq.; the
Hazardous Material Transportation Act 49 U.S.C. ss. 1801 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act 7 U.S.C. ss.136 et seq.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss. 6901 et seq.; the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.; the Occupational
Safety & Health Act of 1970, 29 U.S.C. ss. 651 et seq.; the Oil Pollution Act of
1990, 33 U.S.C. ss. 2701 et seq.; and the state analogies thereto, all as
amended or superseded from time to time; and any common law doctrine, including
but not limited to, negligence, nuisance, trespass, personal injury, or property
damage related to or arising out of the presence, Release, or exposure to a
Hazardous Material.
"Environmental Permit" means any federal, state, local, provincial, or
foreign permits, licenses, approvals, consents or authorizations required by any
Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any person that, together with a Seller, is or
was at any time treated as a single employer under section 414 of the Code or
section 4001 of ERISA and any general partnership of which the Seller is or has
been a general partner.
"Escrow Agreement" has the meaning ascribed to it in the Escrow
Agreement.
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"Foreign Employee Agreements" means the employment agreements with N.A.
Sutton and Sylvie-Joelle Roche, each as described in Section (a) of Schedule
2.14, and, to the extent assignment is required by law, the arrangements listed
under items 18 through 24 on Schedule 2.18.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied throughout the specified period and in the
immediately prior comparable period.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision, and shall include, without limitation, any
stock exchange, quotation service and the National Association of Securities
Dealers.
"Hazardous Material" means (A) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs);
(B) any chemicals, materials, substances or wastes which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar import,
under any Environmental Law; and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated by any
Governmental or Regulatory Authority.
"Indemnified Party" means any Person claiming indemnification under any
provision of Article 7.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article 7.
"IRS" means the Internal Revenue Service.
"Knowledge" shall mean, with respect to the Sellers, the collective
actual Knowledge, after due inquiry, of Claude V. Offray, Jr. and the officers
of each Seller.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
jurisdiction of any Governmental or Regulatory Authority.
"Material Adverse Effect" means any change, event, condition or
development, or group of changes, events, conditions or developments, that
either individually or when considered together have had or may reasonably be
expected to have a material adverse effect on the Business, the financial
condition or combined operating results of the Sellers or the assets and
liabilities of the Sellers taken as a whole, but shall exclude any change, event
or development resulting from general economic conditions (including, without
limitation, changes in interest rates, the equity marked or the bond market) or
affecting in general persons engaged in the Business, provided that such
exclusion shall not apply for purposes of Sections 5.1 and 5.20.
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"Mexico Location" means that certain facility operated by El Paso
Electro Assembly at 650 Henequen Avenue, Juarez, Chihuahua, Mexico.
"Permitted Encumbrances" means liens for Taxes not yet due and payable
and, in addition, with respect to each Real Property, easements, restrictions,
covenants and agreements as listed on Schedule 10.1.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"Product" or "Products" means the products sold by the Business prior
to the Closing and those included as Inventory.
"Promatrx" means Promatrx, Inc., a New Jersey corporation,
substantially all of the capital stock of which is owned by the Major
Stockholder which is engaged in the business of developing breast implants
composed of narrow fabrics.
"Qualified Plan" means a Benefit Plan intended to meet the requirements
of section 401(a) of the Code.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Separation Payments" means, with respect to any salaried Employee,
monetary payments in an amount equal to one week's salary for each year of
service of such Employee with the Sellers. "Year of service" shall be calculated
as set forth on Schedule 10.2.
"Site" means any of the real properties currently or previously owned,
leased or operated by the Sellers, any predecessors of the Sellers or any
entities previously owned by the Sellers, in each case in connection with the
Purchased Assets or the Business, including all soil, subsoil, surface waters
and groundwater thereat.
"Specialty Business" has the meaning set forth on Exhibit E.
"Specialty Products Division" means the division of Offray which is
engaged in the Specialty Business.
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"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, or additional amounts
with respect thereto due with respect to the Sellers which could result in any
lien or encumbrance on the Purchased Assets.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Union Contract" means the Agreement dated as of January 1, 1998
between Offray and the Union of Needle Trades and Industrial Textile Employees
and its Local No. 844 covering the production and maintenance employees of
Offray employed at its Facility located in Hagerstown, Maryland.
10.2 Additional Definitions. Each of the following terms is defined in
the section of the Agreement indicated below:
Term Section
---- -------
Accounts Receivable Section 1.1(a)(ii)
Allocation Schedule Section 1.6
Andersen Section 1.5(a)
Assumed Liabilities Section 1.4(b)
Balance Sheet Section 2.4(b)
Business Background
Cap Section 7.3(b)
Chester Premises Section 1.1(b)(iii)
Claim Notice Section 7.6(a)
Closing Section 1.2
Closing Date Section 1.2
Closing Date Balance Sheet Section 1.5(a)
Closing Financial Statements Section 1.5(a)
Commitments Section 1.1(a)(iv)
Confidential Information Section 4.13
Consumer Acts Section 2.31
Copyrights Section 1.1(a)(viii)
Critical Commitments Section 5.5
CVO Introduction
Employees Section 4.1(a)
Encumbrance Section 2.6
Escrow Agreement Section 1.3(b)
Excluded Assets Section 1.1(b)
Excluded Employees Section 4.1(a)
Facilities Section 2.12(b)
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Final Auditor Section 1.5(a)
Final Determination Section 1.5(a)
Governmental Licenses Section 1.1(a)(ix)
Hired Employees Section 4.1(a)
Holdback Amount Section 1.3(c)
HSR Section 2.20
Indemnified Party Section 7.6(a)
Indemnifying Party Section 7.6(a)
Intellectual Property Section 1.1(a)(viii)
ISRA Section 5.4
ISRA Clearance Section 5.4
Inventory Section 1.1(a)(i)
Liabilities Section 2.5
License Section 4.11
Lion Introduction
Litigation Section 2.15
Losses Section 7.1
Major Stockholder Introduction
Marks Section 4.11(a)
Negative Adjustment Section 1.5(b)(ii)
Notice Period Section 7.6(a)
NJDEP Section 5.4
Offray Introduction
Offray Broker Section 2.32
Offray Canada Introduction
Offray Hong Kong Introduction
Offray Ireland Introduction
Offray UK Introduction
Parent Introduction
Patents Section 1.1(a)(viii)
Positive Adjustment Section 1.5(b)(i)
Purchase Price Section 1.3
Purchased Assets Section 1.1(a)
Purchaser Introduction
Real Property Section 1.1(a)(v)
Real Property Leases Section 1.1(a)(vi)
Retained Liabilities Section 1.4(b)
Sellers Introduction
Software Section 1.1(a)(viii)
Specialty Product Channels Exhibit E
Stockholders Introduction
Trademarks Section 1.1(a)(viii)
Transaction Documents Section 2.33
Transition Services Agreement Section 5.18
Uncollected Amount Section 4.14(d)
Vehicles Section 1.1(a)(x)
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
C.M. OFFRAY & SON, INC.
By: /s/ Daniel P. Barron
----------------------------------------
Name: Daniel P. Barron
Title: Vice President, Finance
LION RIBBON COMPANY, INC.
By: /s/Daniel P. Barron
----------------------------------------
Name: Daniel P. Barron
Title: Vice President, Finance
CVO CORPORATION (DELAWARE)
By: /s/Daniel P. Barron
----------------------------------------
Name: Daniel P. Barron
Title: Vice President, Finance
C.M. OFFRAY LIMITED
By: /s/ Daniel P. Barron
----------------------------------------
Name: Daniel P. Barron
Title: Vice President, Finance
C.M. OFFRAY EUROPE
By: /s/ Daniel P. Barron
----------------------------------------
Name: Daniel P. Barron
Title: Vice President, Finance
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
OFFRAY RIBBON CANADA, INC.
By: /s/ Daniel P. Barron
----------------------------------------
Name: Daniel P. Barron
Title: Vice President, Finance
C.M. OFFRAY & SON (HONG KONG) LIMITED
By: /s/ Daniel P. Barron
----------------------------------------
Name: Daniel P. Barron
Title: Vice President, Finance
/s/Claude V. Offray, Jr.
----------------------------------------
CLAUDE V. OFFRAY, JR., Major Stockholder
/s/Claude V. Offray, III
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CLAUDE V. OFFRAY, III, Stockholder
/s/Denise A. Offray
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DENISE A. OFFRAY, Stockholder
DAYLIGHT ACQUISITION CORP.
By: /s/Christopher J. Munyan
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Name: Christopher J. Munyan
Title: President
BERWICK INDUSTRIES LLC
By: /s/ Christopher J. Munyan
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Name: Christopher J. Munyan
Title: President
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT