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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SLEEPMASTER L.L.C.,
(BUYER)
CRESCENT ACQUISITION CORP.
(BUYER SUBSIDIARY)
AND
CRESCENT SLEEP PRODUCTS COMPANY
(COMPANY)
DATED AS OF JUNE 29, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.01 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03 Certificate of Incorporation and By-Laws of the Surviving Corporation . . . . . . . . . . . . . 2
1.04 Board of Directors and Officers of the Surviving Corporation. . . . . . . . . . . . . . . . . . 2
1.05 Conversion of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.06 Dissenters' Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.07 Company Stock Appreciation Rights and Purchased Options. . . . . . . . . . . . . . . . . . . . . 5
1.08 Company Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.09 Rollover Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.10 Payment of Cash for Company Securities and Other Rights. . . . . . . . . . . . . . . . . . . . . 7
1.11 No Further Rights or Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.12 Working Capital Purchase Price Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.13 Determination of Closing Net Working Capital. . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.14 Closing Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.15 Dixie Bedding Escrow Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.01 Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.02 Deliveries at the Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.01 Organization, Standing, Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.02 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.03 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.04 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.05 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.06 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.07 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.08 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.09 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.10 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.11 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.13 Permits, Licenses, Authorizations; Compliance with Laws. . . . . . . . . . . . . . . . . . . . 21
3.14 Retirement and Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.15 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16 No Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.17 Affiliate Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.18 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.19 Sole Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER SUBSIDIARY . . . . . . . . . . . . . . . . . . . 25
4.01 Organization, Good Standing, Equity Ownership. . . . . . . . . . . . . . . . . . . . . . . . . 25
4.02 Authorization and Execution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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4.03 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.04 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.05 No Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.06 Financing Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.07 Interim Operations of Buyer Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.08 Sole Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . 26
5.01 Operation of Business of the Company Until Effective Time. . . . . . . . . . . . . . . . . . . 26
5.02 Section 280G Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.03 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.04 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.05 Hart-Scott-Rodino Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.06 Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.07 Deposit of Escrow Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.08 Income Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.09 Payment of Borrowed Money Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10 Reasonable Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.11 Amendment of Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Nonsolicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.14 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.01 Conditions to the Obligations of Buyer and Buyer Subsidiary. . . . . . . . . . . . . . . . . . 31
6.02 Conditions to the Obligations of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . 34
7.01 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.02 Directors and Officers Liability Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VIII TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.01 Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.02 Procedure and Effect of Termination and Abandonment. . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX TAX REFUND CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.01 Tax Refunds Arising From Current Year Losses. . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.02 Payment of Tax Refund(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.03 No Amendments of Returns Affecting NOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.01 Indemnification by the Company or Selling Parties. . . . . . . . . . . . . . . . . . . . . . . 37
10.02 Indemnification by Buyer and Buyer Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . 37
10.03 Notice of Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.04 Defense of Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.05 Notice of Other Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.06 Access and Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.07 Term of Indemnities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.08 Limitations on Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.09 Escrow Amount and Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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ARTICLE XI MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.01 Survival of Representations and Warranties of the Company, Buyer and Buyer Subsidiary. . . . . 41
11.02 Amendment and Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.03 Waiver of Compliance; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.04 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.05 Press Releases and Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.06 Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.07 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.08 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.09 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.12 Headings; Internal References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.13 Number; Gender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.14 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.15 Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.16 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.17 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.18 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
EXHIBITS
Exhibit A-1 - Company Stockholders
Exhibit A-2 - Company Stock Appreciation Rights
Exhibit A-3 - Company Warrants
Exhibit A-4 - Company Stock Options
Exhibit B - Option and SAR Cancellation Agreement
Exhibit C - Commitment Letters
Exhibit D - Opinion of Counsel to the Company
Exhibit E - Opinion of Counsel to Buyer and Buyer Subsidiary
Exhibit F - Escrow Agreement
Schedules
Schedule 1.03 Amended and Restated Certificate of Incorporation
Schedule 3.02(a) Capitalization
Schedule 3.02(b) Other Equity Interests
Schedule 3.02(c) Repurchase Agreements, Voting Agreements, Etc.
Schedule 3.02(d) Company Stock Ownership
Schedule 3.04 No Conflicts
Schedule 3.05 Financial Statements
Schedule 3.06 Certain Changes
Schedule 3.07 Taxes
Schedule 3.08(a) Owned Real Property; Encumbrances
Schedule 3.08(b) Leases/Leased Real Property; Encumbrances
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Schedule 3.09 Permitted Liens
Schedule 3.10 Material Contracts
Schedule 3.11 Intellectual Property
Schedule 3.12 Litigation
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Environmental Matters
Schedule 3.17 Affiliate Transactions
Schedule 3.18 Indebtedness
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of June 29, 2000, among Sleepmaster L.L.C., a New Jersey limited liability
company ("Buyer"), Crescent Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Buyer ("Buyer Subsidiary"), and Crescent Sleep
Products Company, a Delaware corporation (the "Company") and, for purposes of
Sections 5.03, 5.12 and 5.13 only, Marathon Fund Limited Partnership III, a
Minnesota limited partnership ("Marathon Fund III") and, for purposes of
Sections 1.13, 1.14, 1.15, 9.01, 9.02, 9.03 and 10.09 only, Michael D. Goldner
and Michael S. Israel, acting as Selling Parties' Representative for and on
behalf of the Selling Parties (as hereinafter defined).
RECITALS
A. The Boards of Directors of Buyer, Buyer Subsidiary and the
Company have approved this Agreement and the merger of Buyer Subsidiary with
and into the Company (the "Merger") in accordance with this Agreement and the
applicable provisions of the Delaware General Corporation Law ("DGCL"). In
addition, this Agreement and the Merger have been approved by Buyer, as the
sole stockholder of Buyer Subsidiary, and by the stockholders of the Company
listed on Exhibit A-1 (the "Stockholders") pursuant to the requirements of the
DGCL.
B. The authorized capital stock of the Company consists of
2,300,000 shares ("Company Stock"), of which 2,000,000 shares are voting Class
A Common Stock, $.01 par value per share (the "Class A Common Stock"), and
300,000 shares are non-voting Class B Common Stock, $.01 par value per share
(the "Class B Common Stock").
C. Buyer desires to acquire the Company by effecting the Merger
pursuant to the terms hereof whereby the Stockholders will receive cash for
their shares of Company Stock.
D. The controlling Stockholders of the Company acquired the
business of the Company pursuant to the terms of an Asset Purchase Agreement
(the "Dixie Purchase Agreement") between the Company and Dixie Bedding Company,
a North Carolina corporation (n/k/a DBC Holdings Company) ("Dixie Bedding"),
dated as of March 17, 1998 (the "Company Acquisition Date").
E. Reference is made to Section 11.18 hereof, which includes
certain definitions and also lists the Sections within this Agreement where
capitalized terms used herein are defined.
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AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements in this Agreement, the
parties agree as follows:
ARTICLE I
THE MERGER
1.01 MERGER. At the Effective Time (as hereinafter
defined) and in accordance with the terms of this Agreement and the DGCL, Buyer
Subsidiary shall be merged with and into the Company, the separate corporate
existence of Buyer Subsidiary shall thereupon cease, and the Company shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"). At the Effective Time, the Merger shall have the
other effects provided in the applicable provisions of the DGCL.
1.02 EFFECTIVE TIME OF THE MERGER. Concurrently with
the Closing (as hereinafter defined), the parties hereto shall file a
certificate of merger (the "Certificate of Merger"), executed in accordance
with the applicable provisions of the DGCL, and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective upon the
filing of the Certificate of Merger with the Delaware Secretary of State in
accordance with the DGCL or such later time as may be specified in the
Certificate of Merger. The term "Effective Time" shall mean the date and time
when the Merger becomes effective.
1.03 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
SURVIVING CORPORATION. The Certificate of Incorporation of the Company
in effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, and shall be amended and restated
in its entirety at the Effective Time so as to conform to Schedule 1.03 hereof,
until further amended in accordance with the laws of the State of Delaware and
such Certificate of Incorporation. The By-laws of Buyer Subsidiary in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation, until further amended in accordance with the laws of the State of
Delaware, the Certificate of Incorporation of the Surviving Corporation and
such By-laws.
1.04 BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION. The directors of Buyer Subsidiary immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each of
such directors to hold office, subject to the applicable provisions of the
Certificate of Incorporation and By-Laws of the Surviving Corporation, until
the expiration of the term for which such director was elected and until his or
her successor is elected and has qualified or as otherwise provided in the
Certificate of Incorporation or By-Laws of the Surviving Corporation. The
officers of Buyer Subsidiary immediately prior to the Effective Time shall be
the officers of the Surviving Corporation until their respective successors are
chosen and have qualified or as otherwise provided in the By-Laws of the
Surviving Corporation.
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1.05 CONVERSION OF SECURITIES. Subject to Section 1.10,
at the Effective Time, by virtue of the Merger and without any action on the
part of the Buyer or the Surviving Corporation, or the holders of any of the
following securities:
(a) Each share of Company Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares (as
hereinafter defined) and shares of Company Stock held of record by Buyer or
Buyer Subsidiary immediately prior to the Effective Time), shall be converted
into and represent the right to receive the Cash Consideration (as defined
below) and the Escrow Consideration (as defined below) and the Tax Refund
Consideration (as defined below):
(i) Cash Consideration. In addition to
being converted into the right to receive the Escrow
Consideration and the Tax Refund Consideration, each such
issued and outstanding share of Company Stock (other than
Dissenting Shares) shall also be converted into the right to
receive the following amount in cash, without interest (the
"Cash Consideration"):
(x) (A) one hundred eighteen
million dollars ($118,000,000), minus (B) the amount
of Borrowed Money Debt immediately prior to the
Effective Time (after giving effect to any
application of Cash to reduce such Borrowed Money
Debt on the Closing Date prior to the Effective
Time), minus (C) the amount of Company Transaction
Expenses (pursuant to Section 11.04 hereof), and plus
(D) the aggregate exercise prices of Company Stock
Options outstanding as of the Effective Time, divided
by
(y) (A) the number of shares of
Company Stock issued and outstanding as of the
Effective Time (including without limitation shares
of Company Stock held of record by Buyer or Buyer
Subsidiary as of the Effective Time and all
Dissenting Shares), plus (B) the aggregate number of
shares of Company Stock issuable upon exercise of
Company Warrants and Company Stock Options
outstanding as of the Effective Time, plus (c) the
aggregate number of Reference Shares covered by the
Company Stock Appreciation Rights outstanding as of
the Effective Time (the result of this clause (y),
the "Fully Diluted Equity Number").
(ii) Escrow Consideration. In addition
to being converted into the right to receive the Cash
Consideration and the Tax Refund Consideration, each such
issued and outstanding share of Company Stock shall also be
converted into a 0.00005328002% interest in the Escrow Funds
(the "Escrow Consideration").
(iii) Tax Refund Consideration. In
addition to being converted into the right to receive the Cash
Consideration and the Escrow Consideration, each such issued
and outstanding share of Company Stock shall also be converted
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into a fractional interest in any Available Tax Refund (as
defined below) (the "Tax Refund Consideration"), such fraction
to be determined by dividing one (1) by the difference
obtained by reducing the Fully Diluted Equity Number by the
number of shares subject to Rollover Options. For purposes of
this Agreement, "Available Tax Refund" shall mean any tax
refund payable to the Selling Parties as determined pursuant
to Article IX and Section 1.14 hereof and as paid pursuant to
Section 9.02(b) hereof, with the understanding that any Tax
Benefit Bonus (as defined in the Option and SAR Cancellation
Agreement) payable to holders of Company Stock Appreciation
Rights pursuant to the Option and SAR Cancellation Agreement
and Article IX and Section 9.02(a) hereof shall not be
considered part of the Available Tax Refund.
The sum of the Cash Consideration, the Escrow Consideration
and the Tax Refund Consideration as determined pursuant to this Section 1.05(a)
is referred to herein as the "Per Share Merger Consideration."
At the Closing, the chief financial officer of the Company
shall deliver to the Buyer a certificate in form and substance reasonably
satisfactory to the Buyer and the Selling Parties' Representative, setting
forth in reasonable detail the calculations of (x) the Cash Consideration
pursuant to Section 1.05(a)(i) above, (y) the percentages representing the
respective interests of the Selling Parties in the Escrow Funds, and (z) the
fraction to be utilized in calculating the respective interests of the Selling
Parties in the Tax Refund Consideration pursuant to Section 1.05(a)(iii) above.
(b) Each Dissenting Share shall be converted into the
right to receive an amount equal to the fair value thereof determined in
accordance with Section 262 of the DGCL.
(c) Each share of common stock of Buyer Subsidiary issued
and outstanding as of the Effective Time shall be converted into and exchanged
for one fully paid and nonassessable share of common stock of the Surviving
Corporation ("Surviving Corporation Common Stock"), which shall constitute the
only issued and outstanding shares of capital stock of the Surviving
Corporation as of the Effective Time. From and after the Effective Time, each
outstanding certificate previously representing shares of common stock of Buyer
Subsidiary shall be deemed for all purposes to evidence ownership and to
represent the same number of shares of Surviving Corporation Common Stock.
(d) Each share of Company Stock held of record by Buyer,
Buyer Subsidiary or any other direct or indirect wholly-owned subsidiary of
Buyer or the Company as of the Effective Time shall automatically be canceled
and cease to exist, and no payment shall be made with respect thereto.
(e) Each share of Company Stock that is owned by the
Company as treasury stock shall automatically be canceled and retired and shall
cease to exist, and no payment shall be made with respect thereto.
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1.06 DISSENTERS' RIGHTS. Notwithstanding anything in this
Agreement to the contrary, each share (if any) of Company Stock issued and
outstanding immediately before the Effective Time for which the holder has the
right to demand, and has made a demand for, appraisal of such share under
Section 262 of the DGCL (each a "Dissenting Share") shall not be converted into
the right to receive its Per Share Merger Consideration at or after the
Effective Time, and the Company shall therefore have no obligation to pay the
Per Share Merger Consideration in respect of any such Dissenting Share, unless
and until the holder of such shares withdraws his demand for dissenters' rights
or becomes ineligible for dissenters' rights. If, after the Effective Time,
any such holder fails to perfect (or otherwise loses) any such right to
appraisal, then each such share of such holder shall be treated as a share that
had been converted as of the Effective Time into the right to receive the Per
Share Merger Consideration, without interest. The Company shall give prompt
notice to Buyer of each demand received by the Company for appraisal of Company
Stock, and Buyer shall have the right to participate in negotiations and
proceedings regarding each such demand. The Company shall not, except with the
prior written consent of Buyer, settle or make any payment regarding any such
demand. Each person holding of record or beneficially owning Dissenting Shares
who becomes entitled under Section 262 of the DGCL and this Section 1.06 to
payment of the fair value of such Dissenting Shares (and any other payments
required by Section 262 of the DGCL) shall receive payment therefor from the
Surviving Corporation.
1.07 COMPANY STOCK APPRECIATION RIGHTS AND PURCHASED
OPTIONS.
(a) Prior to the Effective Time, pursuant to the terms of
the applicable Option and SAR Cancellation Agreement (as hereinafter defined)
with respect to each of the Company Stock Appreciation Rights each Company
Stock Appreciation Right shall be cancelled by the Company as provided therein
and in this Agreement. If approved by the holder(s) of more than 75% of the
shares of the Company's capital stock entitled to vote on the Merger, Company
Stock Appreciation Right will be settled by the Company at the Effective Time
by (x) the payment to each holder thereof of the Cash Consideration for each
Reference Share covered by his Company Stock Appreciation Rights (reduced by
any applicable withholding taxes) in accordance with the terms of this
Agreement and the applicable Option and SAR Cancellation Agreement, (y) an
acknowledgement, contained in the Option and SAR Cancellation Agreement, that
such holders have a right to receive (i) amounts equal to the following
percentages of the Escrow Consideration: Dale R. Whitfield, 9.92638832%;
Hampton H. Culler, 8.42639578%; Charles W. Johnson, 8.42639578%; and Thomas P.
Sanfilippo, 8.42639578% (reduced by any applicable withholding taxes) as a
contingent bonus if, as and when received by the Selling Parties pursuant to
the Escrow Agreement and (ii) an amount equal to the Tax Refund Consideration,
for each Reference Share covered by his Company Stock Appreciation Rights as a
contingent bonus if, as and when received and paid by the Company for the
benefit of the Selling Parties pursuant to Section 9.02(b) hereof, and (z) an
acknowledgment, contained in the Option and SAR Cancellation Agreement, that
such holder has a right to receive the Tax Benefit Bonus as contemplated by the
Option and SAR Cancellation Agreement and Article IX hereof as a contingent
bonus if, as and when paid by the Company to the holders of Company Stock
Appreciation Rights pursuant to Section 9.02(a) hereof.
(b) Prior to the Effective Time, pursuant to the terms of
the applicable Option and SAR Cancellation Agreement, each Purchased Option
shall be cancelled by the Company as
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provided therein and in this Agreement. If approved by the holder(s) of more
than 75% of the shares of the Company's capital stock entitled to vote on the
Merger, each Purchased Option will be settled by the Company at the Effective
Time by (x) the payment to each holder thereof of the Cash Consideration for
each share of Class A Common Stock covered by his Purchased Options, less the
exercise price per share of his Purchased Options (reduced by any applicable
withholding taxes) in accordance with the terms of this Agreement and the
Option and SAR Cancellation Agreement, (y) an acknowledgement, contained in the
Option and SAR Cancellation Agreement, that such holder has a right to receive
an amount equal to the Tax Refund Consideration for each share of Class A
Common Stock covered by his Purchased Options as a contingent bonus if, as and
when received and paid by the Company for the benefit of the Selling Parties
pursuant to Section 9.02(b) hereof. The Purchased Options will not receive any
part of the Escrow Consideration.
(c) For purposes of this Agreement, the following
definitions shall apply:
"Option and SAR Cancellation Agreement(s)" means the Option
and SAR Cancellation Agreement(s), substantially in the form of Exhibit B
hereto, signed by the Company and each holder of Company Stock Appreciation
Rights and Company Stock Options (as hereinafter defined);
"Company Stock Appreciation Rights" means those Stock
Appreciation Right Agreements covering 520,000 Reference Shares listed in
Exhibit A-2 hereto;
"Reference Shares" means the 520,000 Reference Shares covered
by the Company Stock Appreciation Rights listed in Exhibit A-2 hereto;
"Company Stock Options" means the 140,675 options listed in
Exhibit A-4 hereto; and
"Purchased Options" means that portion of any Company Stock
Option listed as such in Exhibit A-4 hereto.
As of the date hereof, there are outstanding Company Stock
Appreciation Rights covering 520,000 Reference Shares. Further, as of the date
hereof, there are outstanding Company Stock Options to purchase 140,675 shares
of Class A Common Stock, of which the Purchased Options represent 81,018.002
shares.
1.08 COMPANY WARRANTS. Pursuant to the terms of each
Company Warrant (as hereinafter defined), each Company Warrant outstanding at
the Effective Time shall, with respect to each share of Company Stock covered
thereby, become the right to purchase the Per Share Merger Consideration at the
Exercise Price set forth to the right of the name of the holder of such Company
Warrant on Exhibit A-3 hereto. The Company shall have received from each
holder of Company Warrants a written release and termination of the Company
Warrants effective upon such holder's receipt of a cash payment equal to the
Cash Consideration for each share of Company Stock issuable under such Company
Warrant and a right to receive (x) the Escrow Consideration for each share of
Company Stock issuable under such Company Warrant if, as and
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when received by the Selling Parties pursuant to the Escrow Agreement and (y)
the Tax Refund Consideration for each share of Company Stock issuable under such
Company Warrant if, as and when received and paid by the Company for the benefit
of the Selling Parties pursuant to Section 9.02(b) hereof. For purposes of this
Agreement, "Company Warrant(s)" means those warrants to purchase 108,888.80
shares of Class B Common Stock listed in Exhibit A-3 hereto.
1.09 ROLLOVER STOCK OPTIONS. At the Effective Time, as
contemplated by the Option and SAR Cancellation Agreement, the outstanding
Rollover Options (as hereinafter defined) shall be converted into options to
purchase an aggregate of 287.52 Class C Common Units of Sleepmaster Holdings
L.L.C. and an aggregate of 1,439.22 Preferred Units of Sleepmaster Holdings
L.L.C. pursuant to separate agreements with the Company. For purposes of this
Agreement, "Rollover Option(s)" means that portion of any Company Stock Option
listed as such in Exhibit A-4 hereto. As of the date hereof, there are
outstanding Company Stock Options to purchase 140,675 shares of Class A Common
Stock, of which the Rollover Options represent 59,746.998 shares. The Rollover
Options shall not receive any part of the Cash Consideration, the Escrow
Consideration or the Tax Refund Consideration.
1.10 PAYMENT OF CASH FOR COMPANY SECURITIES AND OTHER
RIGHTS.
(a) (i) At and after the Effective Time, each holder
of a certificate or certificates representing shares of Company Stock canceled
and extinguished at the Effective Time may surrender such certificate or
certificates to the Company, to effect the exchange of such certificate or
certificates on such holder's behalf. Until so surrendered and exchanged, each
outstanding certificate which, prior to the Effective Time, represented shares
of Company Stock shall be deemed to represent and evidence only the right to
receive the Per Share Merger Consideration to be paid therefor as set forth in
this Section 1.10 and until such surrender and exchange, no cash shall be paid
to the holder of such outstanding certificate in respect thereof.
(ii) After surrender to the Company of any
certificate which, prior to the Effective Time, shall have represented shares
of Company Stock, the Company shall distribute to the person in whose name the
certificate shall have been registered, a check or wire transfer in an amount
equal to the product of (x) the Cash Consideration multiplied by (y) the number
of shares of Company Stock represented by the certificate.
(b) (i) With respect to the Company Stock
Appreciation Rights, at the Effective Time, the Company shall distribute to the
person in whose name a Company Stock Appreciation Right shall have been
registered a check or wire transfer in an amount equal to the aggregate Cash
Consideration attributable to such holder's Company Stock Appreciation Rights
(reduced by any applicable withholding taxes). Payment of this aggregate Cash
Consideration in this manner and execution of the Option and SAR Cancellation
Agreement and fulfillment of the obligations contained therein by the Surviving
Corporation and the Company shall be in full satisfaction of all other rights
pertaining to each such Company Stock Appreciation Right, except the right of
each holder to receive his specified percentage of the Escrow Consideration if,
as and when received by the Selling Parties pursuant to the Escrow Agreement
and the right to receive the Tax Refund Consideration if, as and when received
and paid by the Company for the benefit of the Selling Parties pursuant to
Section 9.02(b) hereof.
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(ii) With respect to the Purchased Options, at the
Effective Time, the Company shall distribute to the person in whose name a
Purchased Option shall have been registered a check or wire transfer in an
amount equal to the aggregate Cash Consideration attributable to such holder's
Purchased Options, less the aggregate exercise price of such Purchased Options
(reduced by any applicable withholding taxes). Payment of this aggregate Cash
Consideration in this manner and execution of the Option and SAR Cancellation
Agreement and fulfillment of the obligations contained herein by the Surviving
Corporation and the Company shall be in full satisfaction of all other rights
pertaining to each such Purchased Option, except the right to receive the Tax
Refund Consideration if, as and when received and paid by the Company for the
benefit of the Selling Parties pursuant to Section 9.02(b) hereof.
(c) With respect to each Company Warrant, at the
Effective Time, the Company shall distribute to the person in whose name each
Company Warrant shall have been registered a check or wire transfer in an
amount equal to the aggregate Cash Consideration attributable to such Company
Warrant. Payment of this aggregate Cash Consideration in this manner shall be
in full satisfaction of all other rights pertaining respectively to each such
Company Warrant, except the right to receive the Escrow Consideration if, as
and when received by the Selling Parties pursuant to the Escrow Agreement and
the right to receive the Tax Refund Consideration if, as and when received and
paid by the Company for the benefit of the Selling Parties pursuant to Section
9.02(b) hereof.
(d) If payment of cash is to be made to a person other
than the person in whose name the certificate surrendered in exchange therefor
is registered, it shall be a condition to such payment that the certificate so
surrendered shall be properly endorsed and otherwise in proper form for
transfer, and that the person requesting such payment shall pay to the Company
any transfer and other taxes required by reason of such payment in any name
other than that of the registered holder of the certificate surrendered or
shall have established to the satisfaction of the Company that such tax either
has been paid or is not payable.
(e) No interest shall accrue or be payable with respect
to any amounts which a holder of shares of Company Stock, Company Stock
Appreciation Rights, Purchased Options or Company Warrants shall be so entitled
to receive. The Company shall be authorized to pay the cash attributable to
any certificate previously issued which has been lost or destroyed, upon
receipt of satisfactory evidence of ownership of the shares of Company Stock
represented thereby and of appropriate indemnification.
1.11 NO FURTHER RIGHTS OR TRANSFERS. At the Effective
Time, all shares of Company Stock issued and outstanding immediately prior to
the Effective Time shall be canceled and cease to exist, and each holder of a
certificate or certificates that represented shares of Company Stock issued and
outstanding immediately prior to the Effective Time shall cease to have any
rights as a Stockholder with respect to the shares of Company Stock represented
by such certificate or certificates, except for the right to surrender such
certificate or certificates in exchange for the payment provided pursuant to
Section 1.05(a) hereof or to preserve and perfect such holder's right to
receive payment for such holder's shares pursuant to Section 262 of the DGCL
and Section 1.06 hereof if such holder has validly exercised and not withdrawn
or lost such right, and no transfer of
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shares of Company Stock issued and outstanding immediately prior to the
Effective Time shall be made on the stock transfer books of the Surviving
Corporation.
1.12 WORKING CAPITAL PURCHASE PRICE ADJUSTMENT. If the
Target Net Working Capital exceeds the Closing Net Working Capital (defined
below) then not later than the third business day after the Closing Net Working
Capital is finally determined pursuant to Section 1.13 below, Buyer shall be
entitled to collect from the Escrow Fund an amount equal to the amount by which
the Target Net Working Capital exceeds the Closing Net Working Capital. Any
amount to be paid pursuant to this Section 1.12 will be treated as an
adjustment to the merger consideration hereunder for all purposes and shall be
solely satisfied out of the Escrow Fund.
1.13 DETERMINATION OF CLOSING NET WORKING CAPITAL.
(a) The "Closing Net Working Capital" means the Net
Working Capital as of the opening of business on the Closing Date, as
determined in accordance with Sections 1.13(b), (c) and (d) below.
(b) On the close of business on the day immediately
preceding the Closing Date the Company will complete a full physical inventory
of the Company. The Buyer and the Buyer's Accountant (as defined below) shall
be entitled to be present while the inventory review is being conducted. On or
before the 60th day after the Closing Date, the Selling Parties'
Representative, on behalf of the Selling Parties will cause to be prepared a
balance sheet as of the opening of business on the Closing Date (without giving
effect to any of the transactions contemplated hereby), which shall be audited
by Arthur Andersen LLP (the "Sellers' Accountant") (together with the related
audit report of such firm, the "Closing Balance Sheet"), and which shall set
forth a calculation of the Closing Net Working Capital, and the Selling
Parties' Representative will promptly deliver a copy of the Closing Balance
Sheet to the Buyer. To the extent not previously paid at Closing as a
Transaction Expense, all fees and expenses in connection with the preparation
of the Closing Balance Sheet, including the fees of the Sellers' Accountant,
shall be for the Selling Parties' account and shall be paid from interest
earned on the Escrow Fund, as provided in the Escrow Agreement. The Closing
Balance Sheet shall (x) be prepared in accordance with GAAP consistent with the
preparation of the historical financial statements of the Company and (y)
fairly present in all material respects the financial position of the Company
as of the Closing Date. During such 60-day period, the Buyer will cause the
Company to provide the Selling Parties' Representative and the Sellers'
Accountant reasonable access to the Company's records. During the 30-day
period immediately following the Selling Parties' Representative's delivery of
the Closing Balance Sheet, the Selling Parties' Representative will use
commercially reasonable best efforts to provide the Buyer and
PricewaterhouseCoopers LLP (the "Buyer's Accountant") reasonable access to the
Sellers' Accountant, and the work papers related to the preparation of the
Closing Balance Sheet and the calculation of the Closing Net Working Capital.
On or prior to the 30th day following delivery of the Closing Balance Sheet by
the Selling Parties' Representative, the Buyer may give the Selling Parties'
Representative a written notice stating in reasonable detail the Buyer's
objections (an "Objection Notice") to the Closing Balance Sheet. Any Objection
Notice shall specify in reasonable detail the dollar amount of any objection
and the basis therefor. Any determination
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expressly set forth on the Closing Balance Sheet which is not specifically
objected to in the Objection Notice shall be deemed final and binding upon the
parties upon delivery of the Objection Notice. If the Buyer does not give the
Selling Parties' Representative an Objection Notice within such 30-day period,
then the Closing Balance Sheet will be conclusive and binding upon the parties
and the Closing Net Working Capital set forth in the Closing Balance Sheet will
constitute the Closing Net Working Capital for purposes of Section 1.13(a)
above.
(c) If the Buyer gives a timely Objection Notice as
described in Section 1.13(b) above, then the Buyer and the Selling Parties'
Representative shall negotiate in good faith to resolve their disputes
regarding the Closing Balance Sheet.
(d) If the Buyer and the Selling Parties' Representative
are unable to resolve all disputes regarding the Closing Net Working Capital on
or prior to the 45th day after the Objection Notice is given, then the Buyer
and the Selling Parties' Representative will retain a firm of certified public
accountants chosen randomly by lot from among the "big five" accounting firms
other than the Sellers' Accountant and the Buyer's Accountant (the "Independent
Accounting Firm") to determine the Closing Net Working Capital as soon as
practicable. The Independent Accounting Firm shall only decide the specific
items under dispute by the Parties and shall be instructed to determine the
Closing Net Working Capital in accordance with the principles set forth in this
Agreement. The Closing Net Working Capital determined by the Independent
Accounting Firm will be conclusive and binding upon the parties and will
constitute the Closing Net Working Capital for purposes of Section 1.12 above.
The fees and expenses of the Independent Accounting Firm in connection with its
determination of the Closing Net Working Capital will be paid one-half by the
Buyer and one-half by the Selling Parties from the interest earned on the
Escrow Fund, as provided in the Escrow Agreement.
(e) Upon the final determination of the Closing Net
Working Capital, the Buyer and the Selling Parties' Representative agree to
prepare, execute and deliver joint written instructions to the Escrow Agent
(pursuant to the terms of the Escrow Agreement) with respect to the
distribution a portion of the Escrow Fund to Buyer, if necessary under the
terms of Sections 1.12 and 1.13 hereof.
1.14 CLOSING TAX RETURNS.
(a) On or before the 30th day after final determination
of the Closing Balance Sheet (including the related audit report) as
contemplated by Section 1.13 above, the Selling Parties' Representative, on
behalf of the Selling Parties, will cause to be prepared the Company's federal
income tax return(s) (along with any state and/or local income tax returns) for
any taxable periods ending on or prior to the Closing Date with respect to
which the Company has not filed its federal income tax return (or state and/or
local income tax returns) prior to the Closing Date (collectively, the "Closing
Tax Returns"). The Selling Parties' Representative will promptly deliver
copies of the Closing Tax Returns to the Buyer for filing by Buyer. To the
extent not previously paid at Closing as a Transaction Expense, all fees and
expenses of the Sellers' Accountant in connection with the preparation of the
Closing Tax Returns shall be for the Selling Parties' account and shall be paid
from interest earned on the Escrow Fund, as provided in the Escrow Agreement.
The Closing Tax Returns shall be prepared in accordance
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with applicable law and in keeping with the past custom and practice of the
Company. During the period required for preparing the Closing Tax Returns, the
Buyer will cause the Company to provide the Selling Parties' Representative and
the Sellers' Accountant reasonable access to the Company's records and
reasonable assistance in providing information for the preparation of the
Closing Tax Returns. During the 30-day period immediately following the
Selling Parties' Representative's delivery of the Closing Tax Returns, the
Selling Parties' Representative will use commercially reasonable best efforts
to provide the Buyer and the Buyer's Accountant reasonable access to the
Sellers' Accountant, and the work papers related to the preparation of the
Closing Tax Returns.
(b) If Buyer objects to the content of the Closing Tax
Returns, Buyer may give the Selling Parties' Representative a written notice
stating in reasonable detail the dollar amount of any objection and the basis
therefor, with the same effect and requirements as if the Closing Tax Returns
were the Closing Date Balance Sheet under Section 1.13(b) above. Similarly,
any dispute regarding the Closing Tax Returns shall be resolved under Sections
1.13(c) and (d) utilizing the same procedures as if such dispute involved the
determination of Closing Net Working Capital.
(c) Upon the final determination of the content of the
Closing Tax Returns (and the amount, if any, of income tax owed by the Company
with respect to the taxable periods covered by the Closing Tax Returns), the
Selling Parties shall pay to the Company the aggregate amount of income taxes
owed by the Company (as shown on the Closing Tax Returns), reduced by the
amount of any timely estimated tax payments made by the Company with respect to
the taxable periods covered by the Closing Tax Returns.
(d) Buyer hereby represents that Buyer is a member of an
Affiliated Group entitled to file consolidated tax returns with members of such
Affiliated Group for federal income tax purposes and has properly elected to be
classified as an association taxed as a corporation for income tax purposes.
Buyer agrees to include the Company in the consolidated federal income tax
return of its Affiliated Group for the year 2000 beginning the day after the
Closing Date and ending December 31, 2000. Buyer agrees that the Closing Tax
Returns described in Section 1.14(a) shall be filed for the period beginning
January 1, 2000 and ending on the Closing Date.
1.15 DIXIE BEDDING ESCROW ACCOUNT. Reference is made to
the Dixie Purchase Agreement and the related Escrow Agreement dated March 17,
1998 by and among Dixie Bedding, the Company and North Carolina Trust Company
(the "Dixie Escrow Agreement"). The Dixie Purchase Agreement provides for,
among other things, certain potential indemnification claims against Dixie
Bedding by the Company (the "Potential Dixie Indemnification Claims"). The
Dixie Escrow Agreement creates an escrow fund (the "Dixie Escrow Fund") that is
a source of payment for such potential indemnification claims. The potential
indemnification claims against Dixie Bedding generally expired on September 17,
1999, but certain potential claims continue beyond such date and will extend
beyond the Closing Date. Subject to pending claims, if any, the Dixie Escrow
Agreement and the related Dixie Escrow Fund will terminate on September 17,
2000. On the Closing Date, the Company will assign the Potential Dixie
Indemnification Claims and the Company's related rights under the
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Escrow Agreement to the Selling Parties' Representative, acting on behalf of
and for the benefit of the Selling Parties. Such assignment agreement shall be
in form and substance reasonably satisfactory to the Company, Buyer and Selling
Parties' Representative. As of the date hereof, the Company represents and
warrants to Buyer that there are no pending indemnification claims against
Dixie Bedding under the Dixie Purchase Agreement or the Dixie Escrow Agreement.
ARTICLE II
CLOSING
2.01 GENERALLY. Subject to the fulfillment or waiver of
the conditions precedent set forth in Article VI hereof and the termination
provisions set forth in Article VIII hereof, the closing (the "Closing") of the
transactions contemplated hereby shall occur on June 29, 2000, or at such other
time as Buyer and the Company may mutually agree (the "Closing Date"). The
Closing shall be held at the offices of Moore & Van Allen, 100 North Tryon,
47th Floor, Charlotte, North Carolina, or at such other place as Buyer and the
Company may mutually agree.
2.02 DELIVERIES AT THE CLOSING. Subject to the provisions
of Articles VI and VIII hereof, at the Closing:
(a) there shall be delivered to Buyer and Buyer
Subsidiary (i) the certificates and other documents and instruments as
contemplated under Article V hereof; (ii) a certificate of an officer of the
Company, dated as of the Closing Date, stating that the conditions specified in
Sections 6.01(a), (b), (d), (g), (h), and (m) have been fully satisfied; (iii)
all existing minute books, stock transfer records, corporate seals and other
materials relating to the Company's respective corporate administration which
are in the possession of the Company, the Stockholders or any Affiliate of the
Stockholders; (iv) good standing certificates of the Company from its
jurisdiction of incorporation and each jurisdiction in which the Company is
qualified to do business as a foreign corporation, in each case dated within 5
days prior to the Closing Date; (v) copies of all Consents (including any
unanimous written consent of Company stockholders); and (vi) such other
documents relating to the transactions contemplated by this Agreement as the
Buyer or its special counsel may reasonably request;
(b) there shall be delivered to the Company (i) the
certificates and other documents and instruments as contemplated under Article
VI hereof and (ii) a certificate of an officer of the Buyer and Buyer
Subsidiary stating that the conditions specified in Section 6.02(a) shall have
been fully satisfied; and
(c) the Company and Buyer Subsidiary shall cause the
Certificate of Merger to be filed as provided in Section 1.02 hereof and shall
take any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company represents and warrants to Buyer and Buyer
Subsidiary that, except as otherwise set forth in the disclosure schedules
delivered to Buyer by the Company at the time of execution of this Agreement
(the "Schedules" and each a "Schedule"), the statements in this Article III are
true and correct as of the date of this Agreement and will be true and correct
as of the Closing Date as though the Closing Date were substituted for the date
of this Agreement throughout this Article III.
3.01 ORGANIZATION, STANDING, QUALIFICATION. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has the requisite corporate power and
authority to own, lease and operate all of its properties and assets and to
carry on its business as it is now being conducted and as presently proposed to
be conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned, operated or leased, or the nature of its activities,
makes such qualification necessary, except such jurisdictions where failure to
be so qualified would not, individually or in the aggregate, have a material
adverse effect upon the business, operations, properties, cash flow or
financial condition of the Company (a "Material Adverse Effect"). The Company
is currently qualified as a foreign corporation to do business in North
Carolina, Georgia, Iowa and North Dakota. The copies of the Certificate of
Incorporation and By-laws of the Company that have been made available to Buyer
are complete and correct as of the date of this Agreement, and the minute books
of the Company that have been made available to Buyer are complete in all
material respects and accurately reflect all material actions taken prior to
the date of this Agreement by the Company's Board of Directors and the
Stockholders.
3.02 CAPITALIZATION.
(a) The authorized capital stock of the Company consists
of 2,300,000 shares, of which 2,000,000 shares are voting Class A Common Stock
and 300,000 shares are nonvoting Class B Common Stock. The issued and
outstanding capital stock of the Company consists of 955,000 shares of Class A
Common Stock, and 152,222.20 shares of Class B Common Stock, and such shares
will be the only issued and outstanding shares of capital stock at Closing,
except for any shares that may be issued (i) upon exercise of the Company Stock
Options or (ii) upon conversion of shares of Class B Common Stock. Schedule
3.02(a) contains a complete and correct list of all beneficial and record
owners of shares of Class A Common Stock and Class B Common Stock and the
number of shares owned by each such person, in each case at the date hereof.
All of the outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable. At the date hereof, the Company has no
other issued or outstanding shares of capital stock.
(b) Except for the Company Stock Appreciation Rights, the
Company Stock Options and the Company Warrants and as otherwise set forth on
Schedule 3.02(b), there are no
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outstanding subscriptions, options, warrants, calls, stock appreciation rights,
profits interests, or other agreements or commitments by which the Company is
bound in respect of the capital stock of the Company, whether issued or
unissued, and no outstanding securities convertible into or exchangeable for
any such capital stock.
(c) Except as set forth on Schedule 3.02(c), the Company
is not subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any warrants,
options or other rights to acquire its capital stock. Except as set forth on
Schedule 3.02(c), there are no voting trusts, proxies, or other agreements or
understandings among the Company's Stockholders or any other person with
respect to the voting, transfer or registration of the Company's capital stock
or with respect to any other aspect of the Company's affairs.
(d) The Company has no subsidiaries. Except for the
ownership interests listed in Schedule 3.02(d), the Company does not own,
directly or indirectly, any capital stock or other equity interest in (or any
rights to acquire any capital stock of or other equity interest in) any
corporation, partnership, joint venture or other entity.
3.03 AUTHORIZATION AND EXECUTION. The Company has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement have been duly and effectively authorized by the
Company's Board of Directors and the Stockholders, and no further corporate
action of the Company is necessary to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity). All other agreements and
instruments contemplated hereby to which the Company is a party, when executed
and delivered by the Company, shall each constitute a valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally, and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a court of law or
equity).
3.04 NO CONFLICTS. Except as set forth in Schedule 3.04,
neither the execution and delivery of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby, will (i)
conflict with or result in a breach of the Certificate of Incorporation or
By-laws, as currently in effect, of the Company, or (ii) except for the
requirements under the Hart-Scott-Rodino Act, the filing of the Certificate of
Merger as required by the DGCL, require any filing with, or consent or approval
of, any governmental authority having jurisdiction over any of the business or
assets of the Company, or (iii) violate any statute, regulation, injunction,
judgment or order to which the Company is subject, or (iv) conflict with or
result in a breach of, or constitute a default or an event which, with the
passage of time or the giving of notice or both would constitute a default,
give rise to a right of termination,
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cancellation or acceleration, create any entitlement to any payment or benefit,
require the consent of any third party, or give any third party the right to
modify, terminate or accelerate any obligation under, or result in the creation
of any lien on the assets of the Company under any Material Contract (as
defined in Section 3.10).
3.05 FINANCIAL STATEMENTS. The Company has previously
delivered to Buyer its (i) audited financial statements for each of the fiscal
years ended as of December 31, 1998 and 1999, inclusive, and (ii) unaudited
monthly financial statements for each of the months ended May 31, 2000,
inclusive. All of the foregoing financial statements are hereinafter
collectively referred to as the "Company Financial Statements." Each of the
audited Company Financial Statements is correct and complete and was prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and each is consistent with the books and records of the
Company and fairly presents, in all material respects, the financial position
of the Company as of the respective dates thereof and the results of operations
and cash flows of the Company for the periods indicated. Each of the unaudited
monthly Company Financial Statements was prepared by the Company in accordance
with generally accepted accounting principles and consistent with the past
practices of the Company and each is consistent with the books and records of
the Company and fairly presents, in all material respects, the financial
position of the Company as of the respective dates thereof and the results of
operations for the periods indicated, and further except that all the unaudited
monthly Company Financial Statements are subject to normal year-end adjustments
and do not contain all footnote disclosures required by generally accepted
accounting principles.
Other than as and to the extent (w) disclosed or reserved
against in the balance sheet (the "Base Balance Sheet") dated as of May 31,
2000 (the "Base Balance Sheet Date"), (x) set forth in Schedule 3.05, (y)
incurred under, or required or permitted to be incurred under, this Agreement,
or (z) incurred in the ordinary course of business consistent with past custom
and practice since the Base Balance Sheet Date excluding any liabilities
resulting from breach of contract, breach of warranty, tort, infringement and
none of which is material, either individually or in the aggregate, the Company
has no material liabilities or obligations required to be disclosed or reserved
against on a balance sheet prepared in accordance with generally accepted
accounting principles. Notwithstanding the foregoing sentence, (i) the amount
included in the Base Balance Sheet related to the item for "Stock Appreciation
Rights" has not been adjusted to reflect the transaction contemplated by this
Agreement and (ii) no accrual has been made in the Company Financial Statements
for any amounts that may be payable by the Company under the Serta CEO Deferred
Compensation Plan.
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in Schedule 3.06 or as permitted by Section 5.01 hereof, since the Base
Balance Sheet Date and to and including the date of this Agreement:
(a) there has not been (i) any incident, occurrence or
event which has had or would reasonably be expected to have a Material Adverse
Effect, (ii) any damage, destruction, loss or casualty to property or assets of
the Company exceeding $100,000 in the aggregate, (iii) any declaration, setting
aside or payment of any dividend or distribution or any redemption
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or other acquisition by the Company of any of the capital stock of the Company
or any split, combination or reclassification of shares of capital stock
declared or made by the Company, (iv) any increase in compensation payable or
benefits to directors, executive officers or key employees of the Company, or
(v) any commitment or agreement to do any of the foregoing; and
(b) there has not been (i) any extraordinary losses
suffered, (ii) any material assets mortgaged, pledged or made subject to any
lien, charge or other encumbrance, (iii) any liability or obligation (absolute,
accrued or contingent) incurred or any bad debt, contingency or other reserve
increase suffered, except, in each such case, in the ordinary course of
business and consistent with past custom and practice, (iv) any claims,
liabilities or obligations (absolute, accrued or contingent) paid, discharged
or satisfied, other than the payment, discharge or satisfaction, in the
ordinary course of business and consistent with past custom and practice, of
claims, liabilities and obligations reflected or reserved against in the
Company Financial Statements or incurred in the ordinary course of business and
consistent with past custom and practice since the Base Balance Sheet Date, (v)
written off as uncollectible any notes or accounts receivable, except
write-offs in the ordinary course of business and consistent with past custom
and practice, (vi) any write down in the value of any asset or investment on
the Company's books or records, except for depreciation and amortization taken
in the ordinary course of business and consistent with past custom and
practice, (vii) any material change in any method of accounting or accounting
practice by the Company (including delaying, postponing or canceling the
payment of accounts payable or accelerating the collection of any notes or
accounts receivable), except for such changes required by reason of changes in
generally accepted accounting principles, (viii) cancellation of any debts or
waiver of any claims or rights in excess of $20,000, or sale, transfer or other
disposition of any properties or assets (real, personal or mixed, tangible or
intangible) in excess of $20,000, except, in each such case, in transactions in
the ordinary course of business and consistent with past practice, (ix) any
single capital expenditure or commitment in excess of $150,000 for additions to
property or equipment, or aggregate capital expenditures and commitments in
excess of $300,000 for additions to property or equipment, (x) any loans or
advances to, guarantees for the benefit of, or any investments in, any Persons
(except routine expense advances to employees in the ordinary course of
business consistent with past practice), (xi) any loan to or arrangement with
an officer, director, partner, stockholder, employee or other Affiliate of the
Company, except loans by the Company to hourly employees not exceeding $4,000
in the aggregate outstanding at any time and not exceeding $500 to any
individual at any time, (xii) any transaction entered into other than in the
ordinary course of business consistent with past custom and practice, or (xiii)
any agreement to do any of the foregoing.
3.07 TAX MATTERS.
(a) The Company has timely filed all Federal, state,
local and foreign tax returns ("Tax Returns") required to be filed by it with
respect to income, withholding, social security, unemployment, franchise,
property, excise, sales and use taxes or other tax, together with any interest
or penalty imposed with respect to a tax ("Tax(es)") and has paid all Taxes
shown on such Tax Returns and all assessments made against it to the extent
such have become due. In addition, with respect to income Taxes, the Company
has paid or made adequate provision for the payment of all such Taxes which are
due and payable with respect to the
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periods covered by such returns, whether or not shown on such returns or
otherwise due or payable on or before the Closing Date. The liability for
Taxes reflected in the Base Balance Sheet (i) is sufficient for the payment of
all unpaid Taxes, whether or not disputed, that are accrued or applicable for
the period ended on the Base Balance Sheet Date and for all years and periods
ended prior thereto, and (ii) such liability will be adjusted for the passage
of time in a manner consistent with the past practice of the Company, and will
be sufficient for the payment of all unpaid Taxes, whether or not disputed,
that are accrued or applicable for all years or periods ending on or prior to
the Closing Date.
(b) All Tax Returns filed by the Company were complete
and accurate in all material respects. Except as set forth in Schedule 3.07,
no Tax Returns filed by the Company have been audited and no claims for
additional Taxes for any taxable period have been made by any taxing authority
and are pending. The Company has not received a notice of deficiency or
assessment of additional Taxes, which notice or assessment remains unresolved.
The Company has not extended the period for assessment or payment of any Tax,
which period has not since expired. No claim has been made by a jurisdiction
where the Company does not file Tax Returns that the Company may be subject to
Tax or a Tax Return filing obligation in that jurisdiction.
(c) The Company has not been a member of an affiliated
group (as such term is defined in Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code")) filing a consolidated federal income tax return
for any tax year. The Company has no liability for the taxes of any person
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), by contract or otherwise.
(d) There are no liens for Taxes (other than current
Taxes not yet due and payable) upon the assets of the Company.
(e) The Company has not filed a consent under Code
Section 341(f) concerning collapsible corporations.
(f) The Company has not been a United States real
property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii).
(g) The Company is not a party to any Tax allocation or
sharing agreement.
(h) Assuming that the shareholder approval contemplated
by Section 6.01(r) hereof is obtained, there is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G or 162 of the Code.
3.08 REAL PROPERTY.
(a) Schedule 3.08(a) contains a complete and accurate
list of all real property owned by the Company (the "Owned Real Property").
The Company has delivered or made available to Buyer copies of the deeds (as
recorded) by which the Company acquired such
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Owned Real Property, and copies of all title insurance policies, abstracts, and
surveys prepared in connection with the Company's acquisition of the Owned Real
Property and in the possession of the Company and relating to the Owned Real
Property. The Company has good and marketable fee simple title, subject only
to the matters permitted by the following sentence, to all the Owned Real
Property free and clear of all liens, pledges, encumbrances claims, mortgage
and security interests (collectively, "Encumbrances") other than Permitted
Encumbrances. "Permitted Encumbrances" shall mean: (i) Encumbrances listed on
Schedule 3.08(a) hereto; (ii) liens which may arise for current Taxes not yet
due and payable or which are being contested in good faith and in respect of
which adequate reserves have been established, and (iii) minor imperfections of
title, if any, none of which would cause a Material Adverse Effect, (iv) zoning
laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto, and (v) matters set forth on
the title insurance commitments listed on Schedule 3.08(a).
(b) Schedule 3.08(b) sets forth a list of all leases,
subleases and other occupancy agreements, including all amendments, extensions
and other modifications thereto (the "Leases") for certain premises described
therein (the "Leased Real Property", and collective with the Owned Real
Property, the "Real Property") to which the Company is a party. The Company
has a good and valid leasehold interest in and to all of the Leased Real
Property, subject to no Encumbrances except as described on such Schedule.
Each Lease is in full force and effect and is enforceable in accordance with
its terms. There exists no default or condition which with the giving of
notice, the passage of time or both could become a default by the Company under
any Lease, or (to the knowledge of the Company) default by any other party
under any Lease. The Company has previously delivered to Buyer true and
complete copies of all the Leases. Except as described on Schedule 3.08(b), no
consent, waiver, approval or authorization is required from the landlord under
any Lease as a result of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
(c) The Real Property constitutes all of the real
property owned, leased, occupied or otherwise utilized in connection with the
business of the Company. There is no pending or, to the knowledge of the
Company, any threatened condemnation proceeding affecting any portion of the
Real Property. To the knowledge of the Company, the Real Property is in good
operating condition and repair (normal wear and tear excepted, considering the
age of the Real Property).
3.09 PERSONAL PROPERTY. The Company owns or holds by
valid lease or license or has good and valid title to all of its personal
property and assets, tangible and intangible, used by it and located on its
premises or reflected in the Base Balance Sheet or acquired after the Base
Balance Sheet Date (except for any assets sold in accordance with Section
3.06(b)(viii), and assets sold after the Base Balance Sheet Date in the
ordinary course of business and consistent with past custom and practice), free
and clear of all Encumbrances, except (i) liens which may arise for current
Taxes and assessments not yet due and payable or which are being contested in
good faith and in respect of which adequate reserves have been established, and
(ii) Encumbrances which are disclosed in Schedule 3.09 ("Permitted Liens").
Each such tangible asset that is significant in the Company's business has been
maintained in accordance with
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normal industry practices, is in good operating condition and repair (subject
to normal wear and tear), and is suitable for the purposes for which it
presently is used.
3.10 MATERIAL CONTRACTS. Except as set forth in Schedule
3.10, the Company is not a party to or bound by any:
(a) contract with any labor union or any collective
bargaining agreement;
(b) bonus, pension, profit sharing, retirement, deferred
compensation, savings, stock purchase, stock option, hospitalization, insurance
or other plan providing similar employee benefits or compensation;
(c) written or, to the knowledge of the Company, oral
employment, agency, consulting or similar service contract;
(d) written or, to the knowledge of the Company, oral
sales representative, distributorship, or similar agreement;
(e) lease or license (whether written or oral), whether
as lessor, lessee, licensor or licensee with respect to any real property;
(f) contract as licensor or licensee for the license of
any patent, know-how, trademark, trade name, service mark, copyright or other
intangible asset (other than non-negotiated licenses of commercially available
computer software);
(g) loan or guaranty agreement, indenture or other
instrument, contract or agreement under which any money has been borrowed or
loaned or any note, bond or other evidence of indebtedness has been issued
(other than trade accounts payable or receivable and other indebtedness
incurred in the ordinary course of business and not for money borrowed);
(h) mortgage, security agreement, sale-leaseback
agreement or other agreement which effectively creates a lien on any assets of
the Company;
(i) written or, to the knowledge of the Company, oral
contract restricting the Company in any material respect from engaging in
business or from competing with any other parties;
(j) purchase or sale order for merchandise or supplies
which (i) was not entered into in the ordinary course of business, involves
payments of $75,000 or more, and is not terminable by the Company without cost
or penalty upon sixty (60) days' or less notice, or (ii) is a standing or
similar order with a remaining term of more than one (1) year and is not
terminable by the Company without cost or penalty upon sixty (60) days' or less
notice;
(k) plan of reorganization;
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(l) contract or option involving the acquisition or
disposition of $20,000 or more in assets, other than contracts involving the
sale of inventory or products in the ordinary course of business;
(m) partnership, limited liability company or joint
venture agreement;
(n) contract or commitment to loan money to any person,
to guarantee indebtedness of any person, or to make an equity investment in any
person; or
(o) management agreement or contract for the employment
of any officer, individual employee or other Person on a full-time, part-time,
consulting or other basis (i) providing annual cash or other compensation in
excess of $60,000 (ii) providing for the payment of any cash or other
compensation or benefits upon the consummation of the transactions contemplated
hereby or (iii) otherwise restricting its ability to terminate the employment
of any employee at anytime for any lawful reason or for no reason without
penalty or liability;
(p) contract or agreement involving any Governmental
Entity;
(q) contract relating to the marketing, sale, advertising
or promotion of its products;
(r) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world, including any
nondisclosure or confidentiality agreements; or
(s) any other written or, to the knowledge of the
Company, oral contract (excluding purchase and sale orders not required by the
terms in clause (j) above to be set forth in Schedule 3.10) that is not
otherwise set forth in Schedule 3.10, except such contracts as involve payments
of $50,000 or less a year.
All of the items listed in Schedule 3.10 are hereinafter
collectively called "Material Contracts." To the extent Material Contracts are
evidenced by documents, true and correct copies thereof have been delivered or
made available to the Buyer unless otherwise noted in Schedule 3.10. Except as
set forth in Schedule 3.10, (i) the Material Contracts are valid and
enforceable in accordance with their respective terms with respect to the
Company and, to the knowledge of the Company, are valid and enforceable in
accordance with their respective terms with respect to any other party thereto,
and (ii) there is not under any of the Material Contracts any existing breach,
default or event of default by the Company or, to the knowledge of the Company,
any other party thereto.
3.11 INTELLECTUAL PROPERTY. Schedule 3.11 contains a
complete and correct list of (i) all patents, patent applications, trademarks,
service marks, trade names, trade dress, corporate names, logos, slogans,
domain names and registered and material unregistered copyrights owned by the
Company (collectively, with the Company's trade secrets, confidential
information, know-how and inventions, the "Proprietary Intellectual Property")
and (ii) all third
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party patents, trademarks, trade names, copyrights, technology, computer
software (other than non-negotiated licenses of commercially available
software), processes or other intellectual property rights used by the Company
in its business (collectively, the "Licensed Intellectual Property", and
together with the Proprietary Intellectual Property, hereinafter referred to as
"Intellectual Property"). Except for the Company's license agreements with
Serta, Inc. (collectively, the "Serta Agreements") and the Licensed
Intellectual Property licensed to Company therein, the Company owns, or has the
right to use pursuant to valid and effective agreements, all Intellectual
Property, and, except as listed in Schedule 3.11, the consummation of the
transactions contemplated hereby will not alter or impair any such rights. The
Serta Agreements are valid and enforceable in accordance with their respective
terms with respect to the Company and, to the knowledge of the Company, are
valid and enforceable in accordance with their respective terms with respect to
any other party thereto, and there is not under any of the Serta Agreements any
existing breach, default or event of default by the Company or, to the
knowledge of the Company, any other party thereto. Except as listed on
Schedule 3.11, the consummation of the transaction contemplated hereby will not
alter or impair the Company's right to use the Licensed Intellectual Property
licensed in the Serta Agreements. Except as set forth in Section 3.11, the
Proprietary Intellectual Property is not subject to any liens, security
interest or other encumbrances. No claims are pending or, to the knowledge of
the Company, (i) threatened against the Company by any person with respect to
the use of any Intellectual Property or (ii) challenging or questioning the
validity or effectiveness of any license or agreement relating to the same. To
the knowledge of the Company, the current use by the Company of the
Intellectual Property does not infringe on, misappropriate or otherwise
conflict with the rights of any person. Except as set forth in Schedule 3.11,
there are no pending claims or charges brought by the Company against any
person with respect to the use of any Intellectual Property or the enforcement
of any of the Company's rights relating to the Intellectual Property and the
Company has taken all necessary and desirable actions to maintain and protect
all of the Proprietary Intellectual Property.
3.12 LITIGATION. Except as set forth in Schedule 3.12, no
litigation, arbitration, or administrative proceeding or investigation is
pending or, to the knowledge of the Company, threatened by or against the
Company or against any of its officers, employees or directors in connection
with the business or affairs of the Company.
3.13 PERMITS, LICENSES, AUTHORIZATIONS; COMPLIANCE WITH
LAWS. The Company has all material licenses, franchises, permits and other
governmental authorizations necessary to conduct its business, and the Company
is not in violation of any such license, franchise, permit or other
governmental authorization, or any statute, law, ordinance, rule, regulation,
judgment, order or decree applicable to it or any of its properties.
3.14 RETIREMENT AND BENEFIT PLANS.
(a) Schedule 3.14 lists each material employee pension,
retirement, profit sharing, stock bonus, stock option, stock purchase, bonus,
incentive, deferred compensation, hospitalization, medical, dental, vision,
vacation, insurance, sick pay, disability, severance, or other employee benefit
plans, funds, programs, policies, contracts or arrangements, including without
limitation any Employee Benefit Plan (as hereinafter defined), that the Company
maintains or to
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which the Company contributes or in which any current or former employee of the
Company has accrued any benefits which they remain entitled to receive. Except
as set forth in Schedule 3.14:
(i) To the knowledge of the Company, each such
Employee Benefit Plan (and each related trust, insurance contract, or fund)
complies in form and in operation with its terms and the applicable
requirements of ERISA, the Code, and other applicable laws.
(ii) All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan (as hereinafter defined) and all contributions for any period
ending on or before the Closing Date which are not yet due will have been paid
to each such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of the Company. All premiums or other payments for
all periods ending on or before the time of Closing have been paid or accrued
with respect to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan (as hereinafter defined).
(iii) Each Employee Pension Benefit Plan which is
intended to be a "qualified plan" under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service, but such
Plans have not been resubmitted to the Internal Revenue Service with respect to
any amendments reflecting changes in the applicable law or other changes for
which the remedial amendment period has not expired as of the Effective Time.
(iv) The market value of assets under each such
Employee Benefit Plan which is an Employee Pension Benefit Plan and which is
subject to Title IV of ERISA (other than any Multiemployer Plan (as hereinafter
defined)) equals or exceeds the present value of all vested and nonvested
liabilities thereunder determined in accordance with PBGC methods, factors and
assumptions applicable to an Employee Pension Benefit Plan terminating on the
Closing Date.
(v) The Company has delivered or otherwise made
available to Buyer correct and complete copies of all plan documents and
summary plan descriptions, the most recent determination letter received from
the Internal Revenue Service, if any, the most recent Form 5500 Annual Report,
if any, and all related trust agreements, insurance contracts and other funding
agreements which implement each Employee Benefit Plan.
(b) Except as set forth in Schedule 3.14, with respect to
each Employee Benefit Plan that the Company currently maintains or has
maintained since the Company Acquisition Date or to which it currently
contributes, or has contributed or been required to contribute since the
Company Acquisition Date:
(i) No such Employee Benefit Plan which is an
Employee Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a Reportable Event
(as defined in ERISA Section 4043) as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any such Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been instituted
or, to the knowledge of the Company, threatened.
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(ii) To the knowledge of the Company, there have
been no material Prohibited Transactions (as defined in ERISA Section 406 or
Code Section 4975) for which the Company would be liable with respect to any
Employee Benefit Plan. The Company has no material liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any plan (other than routine
claims for benefits) is pending or, to the knowledge of the Company,
threatened.
(c) The Company has not incurred, and the Company has no
reasonable basis to expect that the Company will incur, any liability to the
PBGC (other than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability) or under the Code with respect to any
Employee Benefit Plan which is an Employee Pension Benefit Plan.
(d) Except as set forth in Schedule 3.14, the Company
does not currently contribute to any Multiemployer Plan or have any liability
(including withdrawal liability) under any Multiemployer Plan.
(e) Except as set forth in Schedule 3.14, the Company
does not maintain and has not since the Company Acquisition Date maintained or
contributed to, or since the Company Acquisition Date been required to
contribute to, any Employee Welfare Benefit Plan providing medical, health or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses or their dependents (other than in
accordance with Code Section 4980B).
(f) There currently is no entity that is aggregated with
the Company pursuant to Code Sections 414(b), (c), (m) or (o), and no entity
has been so aggregated with the Company since the Company Acquisition Date.
3.15 ENVIRONMENTAL MATTERS. Except as set forth in
Schedule 3.15 or the matters specifically described in the environmental
assessments listed therein:
(a) The Company complies in all material respects with,
and has since the Acquisition Date complied in all material respects with, all
Environmental Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or commenced against
the Company and is now pending alleging any such failure to comply;
(b) The Company possesses (or has timely filed
applications pending for) all material licenses and permits required by all
Environmental Laws, and the Company complies in all material respects with the
terms and conditions of such licenses and permits;
(c) The Company has not treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or Released
any Hazardous Substance, in such a manner so as to give rise to any material
liability for the Company for investigation, cleanup,
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monitoring or other response costs, injuries to persons or property, natural
resource damages or attorneys fees pursuant to Environmental Laws.
(d) No underground storage tanks are located on the Real
Property, and, to the knowledge of the Company, no asbestos, landfills or open
dumps or polychlorinated biphenyls are located on the Real Property in any case
that could result in material liability for the company or that could have a
material adverse effect on the value or marketability of such parcel of Owned
Real Property.
(e) The Company has delivered to Buyer true and complete
copies of the environmental assessments listed on Schedule 3.15.
3.16 NO BROKERS OR FINDERS. Except for Harris Williams &
Co. which has been retained by this Company pursuant to that certain engagement
letter dated November 1, 1999, the Company has not engaged any investment
banker, broker or finder in connection with the transactions contemplated
hereby. The Company and Buyer acknowledge and agree that all fees payable by
the Company under such engagement letter shall be treated as Company
Transaction Expenses pursuant to Section 11.04 and the Surviving Corporation
and Buyer shall have no liability for the payment of any such fees.
3.17 AFFILIATE TRANSACTIONS. Except as set forth on
Schedule 3.17, no officer, director, employee, shareholder or Affiliate of the
Company or any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company or has any material interest in any material
property used by the Company.
3.18 INDEBTEDNESS. On May 31, 2000, all Borrowed Money
Debt of the Company was $54,938,000 and is described on Schedule 3.18. None of
such Borrowed Money Debt (other than pursuant to the North Carolina Bond
Documents and the Iowa Bond Documents) shall exist following the Effective
Time.
3.19 SOLE REPRESENTATIONS AND WARRANTIES. Neither the
Company nor any of the Stockholders shall be deemed to have made to Buyer or
Buyer Subsidiary any representation or warranty other than as expressly made in
this Article III. In particular, without limiting the generality of this
Section 3.19, neither the Company nor any of the Stockholders makes any
representation or warranty with respect to (a) any projections, estimates or
budgets previously delivered or made available to Buyer or Buyer Subsidiary
concerning future revenues, expenses, expenditures or results of operations or
(b) any other information or documents made available to Buyer or Buyer
Subsidiary or their respective representatives with respect to the Company,
except as expressly covered in this Article III.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
BUYER AND BUYER SUBSIDIARY
Buyer and Buyer Subsidiary represent and warrant to the
Company as follows:
4.01 ORGANIZATION, GOOD STANDING, EQUITY OWNERSHIP. Each
of Buyer and Buyer Subsidiary is an entity duly formed, validly existing and in
good standing under the laws of its state of organization. Buyer owns all of
the issued and outstanding capital stock of Buyer Subsidiary. Buyer Subsidiary
does not own capital stock of any corporation. Buyer has delivered to the
Company a certified copy of the respective articles or certificate of
incorporation and by-laws of Buyer and Buyer Subsidiary. Each such copy is
complete and correct as of the date hereof.
4.02 AUTHORIZATION AND EXECUTION. Each of Buyer and Buyer
Subsidiary has the requisite power and authority to execute and deliver this
Agreement and consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by each of Buyer and Buyer
Subsidiary have been duly and effectively authorized by the respective Boards
of Directors and shareholders of Buyer and Buyer Subsidiary, and no further
corporate action is necessary on the part of Buyer or Buyer Subsidiary to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each of Buyer and Buyer Subsidiary and constitutes a
legal, valid and binding obligation of each of Buyer and Buyer Subsidiary,
enforceable against each of them in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a court of law or equity). All other
agreements and instruments contemplated hereby to which Buyer or Buyer
Subsidiary is a party, when executed and delivered by Buyer or Buyer
Subsidiary, as the case may be, shall each constitute a valid and binding
obligation of Buyer or Buyer Subsidiary, as the case may be, enforceable
against it in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
4.03 NO CONFLICTS. Neither the execution and delivery of
this Agreement by Buyer and Buyer Subsidiary, nor the consummation of the
transactions contemplated hereby, will (i) conflict with or result in a breach
of the charter documents, by-laws, operating agreement, or similar governing
agreements or documents, as currently in effect, of Buyer or Buyer Subsidiary,
or, (ii) except for the requirements under the Hart-Scott-Rodino Act and the
filing of the Certificate of Merger as required by the DGCL, require any filing
with, or the consent or approval of, any governmental authority having
jurisdiction over any of the business or assets of Buyer or Buyer Subsidiary,
or (iii) violate any statute, regulation, injunction, judgment or order to
which Buyer or Buyer Subsidiary is subject, or (iv) result in a breach of, or
constitute a default or an event which, with the passage of time or the giving
of notice, or both,
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would constitute a default, give rise to a right of termination, cancellation
or acceleration, create any entitlement to any payment or benefit, require the
consent of any third party or result in the creation of any lien on the assets
of Buyer or Buyer Subsidiary under any material instrument, contract or
agreement to which either of Buyer or Buyer Subsidiary is a party or by which
either of them is bound.
4.04 LITIGATION. No litigation, arbitration or
administrative proceeding is pending or, to the knowledge of Buyer or Buyer
Subsidiary, threatened against Buyer or Buyer Subsidiary as of the date of this
Agreement that seeks to enjoin or otherwise challenges the consummation of the
transactions contemplated by this Agreement.
4.05 NO BROKERS OR FINDERS. Neither Buyer nor Buyer
Subsidiary has engaged any investment banker, broker or finder in connection
with the transactions contemplated hereby.
4.06 FINANCING COMMITMENTS. Attached hereto as Exhibit C
are copies of Commitment Letters from First Union National Bank and Citicorp
Capital Investors, Ltd. (the "Commitment Letters"). The attached copies of the
Commitment Letters (i) are true, correct and complete copies of such letters,
(ii) have not been amended since the date of their issuance, and (iii) remain
in full force and effect. At the date hereof, to the actual knowledge of
Buyer, Buyer is not aware of any term or condition in the Commitment Letters
which cannot be satisfied, subject to completion of customary due diligence
investigation on the part of the lenders; provided, however, that Buyer makes
no representation herein regarding matters relating to the Company.
4.07 INTERIM OPERATIONS OF BUYER SUBSIDIARY. Buyer
Subsidiary was formed on June 16, 2000, solely for the purpose of engaging in
the transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
4.08 SOLE REPRESENTATIONS AND WARRANTIES. Neither Buyer
nor Buyer Subsidiary nor any of their respective stockholders shall be deemed
to have made to the Company or its stockholders any representation or warranty
other than as expressly made in this Article IV.
ARTICLE V
CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME
5.01 OPERATION OF BUSINESS OF THE COMPANY UNTIL EFFECTIVE
TIME. From the date hereof to the Effective Time, the Company will, except as
required in connection with the Merger and the other transactions contemplated
by this Agreement, and except as otherwise set forth in, or expressly permitted
or contemplated by, this Agreement, disclosed in the Exhibits or Schedules
hereto, or consented to in writing by Buyer:
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(a) Carry on its businesses in the ordinary and regular
course, consistent with past custom and practice;
(b) Not amend its Certificate of Incorporation or
By-laws;
(c) Not issue, sell or grant options, warrants or rights
to purchase or subscribe to, or enter into any arrangement or contract with
respect to the issuance or sale of, any of the capital stock of the Company or
rights or obligations convertible into or exchangeable for any shares of the
capital stock of the Company or make any changes (by split-up, combination,
reorganization or otherwise) in the capital structure of the Company (other
than issuances of shares of Company Stock due to the exercise of rights
inherent in the Company Warrants and Company Stock Options by the holders
thereof);
(d) Not declare, pay or set aside for payment any
dividend or other distribution in respect of the capital stock of the Company
and not redeem, purchase or otherwise acquire any shares of the capital stock
or other securities of the Company or rights or obligations convertible into or
exchangeable for any shares of the capital stock or other securities of the
Company or obligations convertible into such, or any options, warrants or other
rights to purchase or subscribe to any of the foregoing;
(e) Not acquire or enter into an agreement to acquire, by
merger, consolidation or purchase of stock or assets, any business or entity;
(f) Not (i) create, incur or assume any long-term debt
(including obligations in respect of capital leases which individually involve
annual payments in excess of $150,000 or $500,000 in the aggregate) or create,
incur or assume any short-term debt for borrowed money (except (A) in the
ordinary course of business under existing lines of credit, or (B) as provided
for in the Company's fiscal 2000 annual budget, a copy of which has been made
available to Buyer), (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, (iii) make any loans or advances to any other
person, or (iv) make any capital contributions to, or investments in, any
person;
(g) Not enter into, modify or extend in any manner the
terms of any employment, severance or similar agreements with officers and
directors nor grant any increase in the compensation of officers, directors or
employees, whether now or hereafter payable (except for compensation increases
in the ordinary course of business and consistent with past practice with
respect to employees other than executive officers and directors), including
any such increase pursuant to any option, bonus, stock purchase, pension,
profit-sharing, deferred compensation, retirement or other plan, arrangement,
contract or commitment;
(h) Not permit a change in its methods of maintaining its
books, accounts or business records or, except as required by generally
accepted accounting principles (in which event prior notice shall be given to
Buyer), change any of its accounting principles or the methods by which such
principles are applied for Tax or financial reporting purposes;
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(i) Not make any material election with respect to Taxes
or consent to any waiver or extension of time to assess or collect any material
Taxes;
(j) Prepare and file all federal, state, local and
foreign returns for Taxes and other tax reports, filings and amendments thereto
required to be filed by it, on a timely basis and in a manner consistent with
past practice; and
(k) Not take any action required to be disclosed under
Section 3.06 hereof, except that the Company may increase by not more than
$10,000 each the compensation of two non-executive employees who currently earn
less than $75,000 per year.
5.02 SECTION 280G STOCKHOLDER APPROVAL. Prior to the
Effective Time, the Company shall either (i) cause a special meeting of the
Stockholders to be duly called and held, or (ii) send to each Stockholder a
Written Consent in Lieu of Meeting, in either case for the purpose of voting on
the matters described in Section 6.01(r) hereof. The Company will, through its
Board of Directors, recommend to its stockholders approval of the transactions
contemplated by this Agreement.
5.03 EXCLUSIVITY. None of the Company or Marathon Fund
III or any of their respective representatives, officers, directors, agents or
Affiliates (all such persons and entities, the "Company Group") shall directly
or indirectly initiate, solicit, entertain, negotiate, accept or discuss any
proposal or offer (an "Acquisition Proposal") to acquire all or any significant
part of the Company, whether by merger, purchase of stock, purchase of assets,
tender offer or otherwise (a "Third Party Acquisition"), or provide any
nonpublic information to any third party in connection with an Acquisition
Proposal or a Third Party Acquisition, or enter into any agreement, arrangement
or understanding requiring the Company to abandon, terminate or fail to
consummate the transactions contemplated under this Agreement. The Company
shall (i) immediately notify the Buyer if any member of the Company Group
receives any indication of interest, request for information or offer in
respect of an Acquisition Proposal, and (ii) provide the Buyer with written
assurance that no member of the Company Group has engaged (since the date
hereof) or will be engaging in any activities in violation of this Section
5.03. The Company and Marathon Fund III represent that no member of the
Company Group is party to or bound by any agreement with respect to an
Acquisition Proposal or a Third Party Acquisition other than under this
Agreement and the members of the Company Group have terminated all discussions
with third parties (other than the Buyer) regarding Acquisition Proposals or
Third Party Acquisitions. The Company and Marathon Fund III shall use their
commercially reasonable best efforts to cause each other member of the Company
Group to comply with the provisions of this Section 5.03.
5.04 ACCESS TO INFORMATION. From the date hereof until
the Effective Time, the Company will give Buyer and its counsel, financial
advisors, auditors and other authorized representatives and its financing
sources full access to the offices, properties, books and records of the
Company at all reasonable times and upon reasonable notice, and will instruct
the employees, counsel, financial advisors and auditors of the Company to
cooperate with Buyer and each such representative and financing source in all
reasonable respects in its investigation of the
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business of the Company. Buyer and each such representative and financing
source will conduct such investigation in a manner as not to unreasonably
interfere with the operations of the Company and will take all necessary
precautions (including obtaining the written agreement of its respective
employees or representatives involved in such investigation) to protect the
confidentiality of any information of the Company disclosed to such persons
during such investigation.
5.05 HART-SCOTT-RODINO ACT. Within five business days
after the date hereof, each of the Company, Buyer and Buyer Subsidiary will
file any Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice under the Hart-Scott-Rodino Act,
will exercise reasonable efforts to obtain an early termination of the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary or advisable.
5.06 CONFIDENTIALITY AGREEMENT. The Confidentiality
Agreement between the Company and Buyer dated February 17, 2000 shall remain in
full force and effect until the Effective Time. Until the Effective Time, the
Company and Buyer agree to comply with the terms of such Confidentiality
Agreement.
5.07 DEPOSIT OF ESCROW FUNDS. At the Effective Time, the
Escrow Agreement shall be executed and delivered by the parties thereto, and
Buyer shall deposit with the Escrow Agent, by wire transfer of same day funds,
the Escrow Funds. The Escrow Funds shall remain deposited with the Escrow
Agent and shall be subject to and payable in accordance with the terms of the
Escrow Agreement and this Agreement.
5.08 INCOME TAX WITHHOLDING. The Company shall comply
with all applicable requirements regarding income tax withholding in connection
with (x) the payment with respect to the Company Stock Appreciation Rights as
contemplated by Section 1.07 and (y) the cancellation of the Company Stock
Options as contemplated in Section 1.09 hereof.
5.09 PAYMENT OF BORROWED MONEY DEBT. On the Closing Date,
the Company will provide to Buyer customary pay-off letters from all holders of
Borrowed Money Debt outstanding immediately prior to the Effective Time (other
than with respect to outstanding debt under the North Carolina Bond Documents).
At or immediately following the Effective Time, Buyer and/or the Company (as
determined by Buyer) shall deliver to all holders of Borrowed Money Debt an
amount sufficient to repay all of the Borrowed Money Debt outstanding
immediately prior to the Effective Time, with the result that immediately
following the Effective Time there will be no further monetary obligation of
the Company with respect to any of the Borrowed Money Debt outstanding
immediately prior to the Effective Time.
5.10 REASONABLE EFFORTS. Subject to the other provisions
of this Agreement, the parties hereto shall each use their reasonable best
efforts to perform their obligations herein and to take, or cause to be taken
or do, or cause to be done, all things necessary, proper or advisable under
applicable law to obtain all regulatory approvals and satisfy all conditions to
the obligations of the parties under this Agreement and to cause the Merger and
the other transactions contemplated herein to be carried out promptly in
accordance with the terms hereof
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and shall cooperate fully with each other and their respective officers,
directors, employees, agents, counsel, accountants and other designees in
connection with any steps required to be taken as part of their respective
obligations under this Agreement.
5.11 AMENDMENT OF SCHEDULES. From time to time prior to
the Effective Time, the Company may supplement or amend the Schedules in order
to make the information set forth therein timely, complete and accurate. For
purposes of determining the fulfillment of the condition set forth in Section
6.01(a) as of the Closing, the Schedules shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude any information contained in any subsequent supplement or amendment
thereto. For purposes of determining the accuracy of the representations and
warranties contained in Article III and the liability of the Company with
respect thereto under Article X, the Schedules shall be deemed to include all
information contained in any supplement or amendment thereto made on or before
the Closing.
5.12 CONFIDENTIALITY. In consideration of the mutual
covenants contained herein, Marathon Fund III agrees that, for all times after
the Closing Date, except as required by law or court order, it shall not,
directly or indirectly, disclose to any unauthorized Person or use for its own
account any Confidential Information unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of Marathon Fund III's acts or omissions to act.
Marathon Fund III further agrees to use its commercially reasonable best
efforts and diligence to safeguard the Confidential Information and to protect
it against disclosure, misuse, espionage, loss or theft.
5.13 NONSOLICITATION.
(i) For a period of 5 years following the Closing Date,
neither Marathon Fund III nor any of its Affiliates shall directly or
indirectly (x) induce or attempt to induce any employee of the Company or any
Subsidiary to leave the employ of the Company or any Subsidiary, or in any way
interfere with the relationship between the Company or any Subsidiary and any
employee thereof, including, inducing or attempting to induce any union,
employee or group of employees to interfere with the business or operations of
the Company or its Subsidiaries, (y) hire any person who was a key employee of
the Company or any Subsidiary unless at least six months has elapsed since the
termination of such key employee's employment with the Company or any
Subsidiary, as the case may be, or (z) induce or attempt to induce any
customer, supplier, distributor, franchisee, licensee or other business
relation of the Company or any Subsidiary to cease doing business with the
Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, distributor, franchisee, licensee or
business relation and the Company or any Subsidiary.
(ii) Marathon Fund III agrees and acknowledges that: (a)
the covenants set forth in this Section 5.13 are reasonably limited in time and
in all other respects; (b) the covenants set forth in this Section 5.13 are
reasonably necessary for the protection of the Surviving Corporation; (c) the
Buyer would not have entered into this Agreement but for the covenants of
Marathon Fund III contained herein; and (d) the covenants contained herein have
been made in order to induce the Buyer to enter into this Agreement.
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(iii) If, at the time of enforcement of this Section 5.13,
a court shall hold that the duration or scope restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum duration or scope reasonable under such circumstances shall be
substituted for the stated duration or scope and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period
and scope permitted by law.
(iv) Marathon Fund III recognizes and affirms that in the
event of its breach of any provision of this Section 5.13, money damages would
be inadequate and the Buyer and the Surviving Corporation would have no
adequate remedy at law. Accordingly, Marathon Fund III agrees that in the
event of a breach or a threatened breach by Marathon Fund III or any of its
Affiliates of any of the provisions of this Section 5.13, the Buyer and the
Surviving Corporation, in addition and supplementary to other rights and
remedies existing in their favor, may apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof
(without posting a bond or other security).
5.14 FINANCING. Buyer will use its commercially
reasonable best efforts to obtain the financing as contemplated by the
Commitment Letters (without giving effect to any lender's ability to utilize
"market flex" provisions) or otherwise obtain financing on terms at least as
favorable to Buyer.
ARTICLE VI
CONDITIONS PRECEDENT
6.01 CONDITIONS TO THE OBLIGATIONS OF BUYER AND BUYER
SUBSIDIARY. The obligations of Buyer and Buyer Subsidiary to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions, any one or more of which may be waived by Buyer and Buyer
Subsidiary:
(a) The representations and warranties of the Company
contained in Article III of this Agreement shall be true and correct (except
for representations and warranties which are not qualified by materiality,
which representations and warranties shall be true and correct in all material
respects) as of the Closing Date as though then made and as though the Closing
Date were substituted for the date of this Agreement (except with respect to
representations and warranties that refer to or speak as of a specified date,
which shall only need to have been true on and as of such date); the Company
shall have performed and complied in all material respects with the agreements
and obligations contained in this Agreement required to be performed and
complied with by it immediately prior to the Effective Time; and Buyer and
Buyer Subsidiary shall have received a certificate signed by the Company to the
effects set forth in this Section 6.01(a).
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(b) There shall not be pending any litigation or
administrative proceeding brought by any governmental or other regulatory or
administrative agency or commission requesting or looking toward an injunction,
writ, order, judgment or decree which, in the reasonable judgment of Buyer, is
reasonably likely, if issued, to restrain or prohibit the consummation of any
of the transactions contemplated hereby or require rescission of this Agreement
or any such transactions or result in material damages to Buyer, Buyer
Subsidiary or the Surviving Corporation or their respective officers or
directors if the transactions contemplated hereby are consummated, nor shall
there be in effect any injunction, writ, judgment, preliminary restraining
order or other order or decree of any nature issued by a court or governmental
agency of competent jurisdiction directing that any of the transactions
provided for herein not be consummated as so provided.
(c) All other corporate action on the part of the Company
necessary to authorize the execution, delivery and consummation of this
Agreement or any agreement or instrument contemplated hereby to which the
Company is or is to be a party or the transactions contemplated hereby or
thereby shall have been duly and validly taken.
(d) From the date hereof until the Effective Time, there
shall not have been a change in the property or assets of the Company which has
had, or could reasonably be expected to have, a Material Adverse Effect.
(e) Buyer shall have received from Faegre & Benson LLP,
counsel to the Company, an opinion dated the Closing Date and reasonably
satisfactory in form and substance to Buyer and its counsel, as to the matters
set forth in Exhibit D. In rendering such opinion, such counsel may rely, to
the extent such counsel deems such reliance necessary or appropriate, as to
matters of fact, upon certificates of government officials and of any officer
or officers of the Company.
(f) All applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated.
(g) All material consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental commission,
board or other regulatory body (domestic or foreign) required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained or made, except for filing of the Certificate of Merger and any other
documents required to be filed after the Effective Time. All consents that are
required from third parties in order for the Company to consummate the Merger
and are marked with an asterisk on Schedule 3.04 shall have been obtained.
(h) The Escrow Agreement shall have been executed and
delivered by the Company, the Selling Parties, the Selling Parties'
Representative and the Escrow Agent.
(i) Buyer shall have received the resignation of all
directors of the Company or such directors shall have otherwise been removed in
accordance with applicable law.
(j) [Intentionally Omitted.]
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(k) Buyer or Buyer Subsidiary shall have received
assurance reasonably satisfactory to Buyer that all consents and approvals
required under the Company Bond Documents have been obtained.
(l) Buyer shall have received the cash proceeds of the
financing described in the Commitment Letters sufficient to consummate the
Merger contemplated hereby on terms and conditions satisfactory to Buyer.
(m) Except as set forth on Schedule 3.17, all
transactions, agreements, or other arrangements between the Company and any of
its Affiliates or any of the Stockholders, other than this Agreement, shall
have been terminated.
(n) The Company shall have obtained releases of all liens
(other than Permitted Liens) relating to the assets and properties of the
company and shall have delivered satisfactory evidence as determined by the
Buyer, of such releases to the Buyer.
(o) [Intentionally Omitted.]
(p) Chicago Title Insurance Company (the "Title Company")
shall be willing to insure at standard rates the Company's marketable title in
and to the Owned Real Property in fee simple, free and clear of Encumbrances
(other than Permitted Encumbrances) and including such endorsements and
affirmative coverages as Buyer shall reasonably require (including, without
limitation, non-imputation endorsements). The Company shall use commercially
reasonable efforts to provide all such affidavits and indemnities as the Title
Company reasonably shall require in order to afford such coverages. Buyer
shall bear all of the cost of obtaining such title insurance. The Company
shall have timely paid any and all real property transfer, transfer gains,
stamp and other similar taxes, if any, assessed in connection with the
transactions contemplated by this agreement and shall have delivered evidence
satisfactory to Purchaser and the Title Company of the payment of such taxes.
(q) The Company shall deliver to Buyer an affidavit dated
as of the Closing Date and in form and substance required under Section 1445 of
the Internal Revenue Code as that Buyer is not required to withhold any portion
of the consideration hereunder.
(r) The Company shall have satisfied the shareholder
approval requirements under Section 280G(b)(5) of the Code with respect to
payments required under this Agreement that might otherwise be classified as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code.
6.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions, any
one or more of which may be waived by the Company:
(a) The representations and warranties of Buyer and Buyer
Subsidiary contained in Article IV of this Agreement shall be true and correct
in all material respects as of
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the date of this Agreement and immediately prior to the Effective Time as if
such representations and warranties had been made on and as of the Effective
Time; each of Buyer and Buyer Subsidiary shall have performed and complied in
all material respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by it immediately prior to
the Effective Time; and the Company shall have received a certificate signed by
Buyer and Buyer Subsidiary to the effects set forth in this Section 6.02(a).
(b) There shall not be pending any litigation or
administrative proceeding brought by any governmental or other regulatory or
administrative agency or commission requesting or looking toward an injunction,
writ, order, judgment or decree which, in the reasonable judgment of the
Company, is reasonably likely, if issued, to restrain or prohibit the
consummation of any of the transactions contemplated hereby or require
rescission of this Agreement or any such transactions or result in material
damages to the officers, directors or Selling Parties (as hereinafter defined)
if the transactions contemplated hereby are consummated, nor shall there be in
effect any injunction, writ, judgment, preliminary restraining order or other
order or decree of any nature issued by a court or governmental agency of
competent jurisdiction directing that any of the transactions provided for
herein not be consummated as so provided.
(c) All other corporate action on the part of Buyer and
Buyer Subsidiary necessary to authorize the execution, delivery and
consummation of this Agreement or any agreement or instrument contemplated
hereby to which Buyer or Buyer Subsidiary is or is to be a party or the
transactions contemplated hereby or thereby shall have been duly and validly
taken.
(d) The Company shall have received from Kirkland &
Ellis, counsel to Buyer and Buyer Subsidiary, an opinion dated the Closing Date
and reasonably satisfactory in form and substance to the Company and its
counsel, as to the matters set forth in Exhibit E. In rendering such opinion,
such counsel may rely, to the extent such counsel deems such reliance necessary
or appropriate, as to matters of fact, upon certificates of government
officials and of any officer or officers of Buyer or Buyer Subsidiary.
(e) All applicable waiting periods (and any extension
thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated.
(f) All material consents required from third parties in
order for the Company to consummate the Merger shall have been obtained.
(g) The Escrow Agreement shall have been executed and
delivered by Buyer, Buyer Subsidiary and the Escrow Agent.
ARTICLE VII
CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME
7.01 INDEMNIFICATION. All rights to indemnification,
expense advancement and exculpation existing in favor of any present or former
director, officer or employee of the
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Company as provided in the Certificate of Incorporation, By-laws or similar
organizational documents of the Company or By-law substantially similar to
those in effect on the date hereof shall survive the Merger for a period of at
least six (6) years after the Effective Time (or, in the event any relevant
claim is asserted or made within such six-year period, until final disposition
of such claim) with respect to matters occurring at or prior to the Effective
Time, and no action taken during such period shall be deemed to diminish the
obligations set forth in this Section 7.01. Buyer hereby guarantees, effective
at the Effective Time, all obligations of the Surviving Corporation in respect
of such indemnification and expense advancement.
7.02 DIRECTORS AND OFFICERS LIABILITY INSURANCE. For a
period of at least six (6) years after the Effective Time, Buyer shall cause
the Surviving Corporation to maintain in effect either (i) the current policy
of directors' and officers' liability insurance maintained by the Company
(provided that Buyer or the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in any material respect to the
insured parties thereunder) with respect to claims arising from facts or events
which occurred at or before the Effective Time (including consummation of the
transactions contemplated by this Agreement), or (ii) a run-off (i.e., "tail")
policy or endorsement with respect to the current policy of directors' and
officers' liability insurance covering claims asserted within six (6) years
after the Effective Time arising from facts or events which occurred at or
before the Effective Time (including consummation of the transactions
contemplated by this Agreement); and such policies or endorsements shall name
as insureds thereunder all present and former directors and officers of the
Company.
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.01 GENERALLY. This Agreement may be terminated and
abandoned at any time prior to the Effective Time:
(a) by mutual consent of Buyer and the Company (in the
case of the Company, as approved by its Board of Directors);
(b) by Buyer or the Company (in the case of the Company,
as approved by its Board of Directors) if the transactions contemplated hereby
shall not have been consummated on or before July 31, 2000 (which date may be
extended by mutual agreement of Buyer and the Company (in the case of the
Company, as approved by its Board of Directors)), provided that such failure is
not due to the failure of the party seeking to terminate this Agreement (or, in
the event Buyer is seeking to terminate this Agreement, of Buyer Subsidiary) to
comply with its obligations under this Agreement;
(c) by Buyer, if any of the conditions set forth in
Section 6.01 hereof shall become impossible to fulfill other than for reasons
within the control of Buyer or Buyer Subsidiary, and such conditions shall not
have been waived pursuant to Section 11.03 hereof; or
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(d) by the Company (as approved by its Board of
Directors), if any of the conditions set forth in Section 6.02 hereof shall
become impossible to fulfill other than for reasons within the control of the
Company, and such conditions shall not have been waived pursuant to Section
11.03 hereof.
8.02 PROCEDURE AND EFFECT OF TERMINATION AND ABANDONMENT.
Upon termination of this Agreement by the Company or Buyer pursuant to Section
8.01 hereof, written notice thereof shall immediately be given to the other
such party and this Agreement shall terminate and the Merger shall be abandoned
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party to this Agreement, except to the extent
the termination is a direct result of a willful and material breach or
violation by such party of a representation, warranty or covenant contained in
this Agreement and except for continuing obligations under Section 5.06.
ARTICLE IX
TAX REFUND CONSIDERATION
9.01 TAX REFUNDS ARISING FROM CURRENT YEAR LOSSES. The
Company anticipates that it will realize a net operating loss for the tax year
ending on the Closing Date (the "NOL"). Such NOL may entitle the Company to
refunds of certain taxes paid with respect to the year ended as of the Closing
Date, and any unused NOL can be carried back to prior years and will create
refunds of taxes paid with respect to those years. Buyer agrees that any
income tax refunds resulting directly from the carryback of the NOL received
with respect to tax years ending on or before the Closing Date shall be for the
account of the Selling Parties. As promptly as practicable, Buyer shall cause
the Company to file for and obtain any refunds or credits to which the Selling
Parties are entitled under this Section 9.01. Buyer shall permit the Selling
Parties' Representative, on behalf of the Selling Parties, to control the
prosecution of any such refund claim and, where deemed appropriate by the
Selling Parties' Representative, shall cause Buyer to authorize by appropriate
powers of attorney such person as the Selling Parties' Representative shall
designate to represent the Company with respect to such refund claim.
9.02 PAYMENT OF TAX REFUND(s). Any tax refund(s) received
by the Company pursuant to Section 9.01 shall be paid as follows within ten
(10) days after any such refund is received by the Company:
(a) first, an amount equal to the Tax Benefit Bonus (as
defined in the Option and SAR Cancellation Agreement) shall be paid, subject to
any applicable withholding taxes, to each former holder of Company Stock
Appreciation Rights, pursuant to and in the manner required by the Option and
SAR Cancellation Agreement; and
(b) next, any remaining amount of any such refund shall
be paid, subject to any applicable withholding taxes, to the Selling Parties'
Representative, as representative of the Selling Parties, for distribution to
the Selling Parties pursuant to the terms of this Agreement;
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provided that any amount to be distributed to this Section 9.02(b) with respect
to a Company Stock Appreciation Right or a Purchased Option shall be delivered
by the Selling Parties' Representative to the Company with instructions as to
the amount distributable to each former holder of Company Stock Appreciation
Rights and Purchased Options. The amounts so delivered to the Company shall be
distributed to the individuals identified in the instructions provided to the
Company according to the normal payroll and withholding practices of the
Company. The Company shall be entitled to rely completely on the instructions
provided to it by the Selling Parties' Representative with respect to the
amount payable and the identity of the recipient(s) of all payments to be made
by the Company.
The Company's only responsibility under this Section 9.02 is
to pay any such tax refund in the manner described above if, as and when
received by the Company.
9.03 NO AMENDMENTS OF RETURNS AFFECTING NOL. Except as
required by law, Buyer shall not amend any income Tax Return or election made
in connection with such return for any period(s) ending on or before the
Closing Date without the approval of the Selling Parties' Representative if
such amendment would have the effect of reducing the Company's NOL reported on
such income Tax Returns or the anticipated refunds to be received from the
carryback of such NOL.
ARTICLE X
INDEMNIFICATION
10.01 INDEMNIFICATION BY THE COMPANY OR SELLING PARTIES.
The Company and its successors and assigns, if the Closing shall not occur, and
the Selling Parties and each of their successors and assigns (solely through
the Escrow Funds as set forth in Section 10.09), if the Closing shall occur,
shall indemnify, defend, reimburse and hold harmless Buyer from and against any
and all Losses resulting from or relating to (a) any breach of any
representation or warranty of the Company contained in this Agreement, or (b)
the breach or failure to perform by the Company of any of its covenants or
agreements set forth in this Agreement required to be performed before the
Effective Time; in the case of each of (a) and (b) however, excluding those
breaches or failures (if any) with respect to which any Selling Party can
establish that Buyer or Buyer Subsidiary had actual knowledge at the time of
Closing. For purposes of this Section 10.01, in determining whether a breach
of any representation or warranty has occurred and the amount of any Losses,
any materiality qualification in any such representation or warranty shall be
ignored and given no effect.
10.02 INDEMNIFICATION BY BUYER AND BUYER SUBSIDIARY. Buyer
and Buyer Subsidiary shall indemnify, defend, reimburse and hold harmless the
Company and its successors and assigns, if the Closing shall not occur, and the
Selling Parties and their successors and assigns, if the Closing shall occur,
from and against any and all Losses resulting from or relating to (a) any
breach of any representation or warranty of Buyer or Buyer Subsidiary contained
in this Agreement or (b) the breach or failure to perform by Buyer or Buyer
Subsidiary of any of Buyer's or Buyer Subsidiary's covenants or agreements set
forth in this Agreement; in the case
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of both (a) and (b), however, excluding those breaches or failures (if any)
with respect to which the Buyer can establish that the Company had actual
knowledge at the time of Closing.
10.03 NOTICE OF THIRD-PARTY CLAIMS. In no case shall any
Indemnitor under this Agreement be liable with respect to any Third-Party Claim
against any Indemnitee unless the Indemnitee shall have delivered to the
Indemnitor a Claim Notice and the following conditions are satisfied:
(a) TIMELY DELIVERY OF CLAIM NOTICE. Except as provided
in paragraphs (b) and (c) of this Section 10.03, and subject to Section 10.07
below, no right to indemnification under this Article X shall be available to
the Indemnitee with respect to a Third-Party Claim unless the Indemnitee shall
have delivered to the Indemnitor, with a copy to the Escrow Agent, promptly
upon receiving notice of any action, lawsuit, proceeding or claim against it a
notice ("Claim Notice") describing in reasonable detail the facts giving rise
to such Third-Party Claim and stating that the Indemnitee intends to seek
indemnification for such Third-Party Claim from the Indemnitor pursuant to this
Article X.
(b) LATE DELIVERY OF CLAIM NOTICE. If, in the case of a
Third-Party Claim, a Claim Notice is not given promptly to the Indemnitor, the
Indemnitee shall nevertheless be entitled to be indemnified under this Article
X except to the extent (but only to the extent) that the Indemnitor has been
actually prejudiced by such time elapsed.
(c) PAID OR SETTLED CLAIMS. If a Claim Notice is not
given by the Indemnitee prior to the payment or settlement by the Indemnitee of
a Third-Party Claim, the Indemnitee shall only be entitled to be indemnified
under this Article X to the extent (and only to the extent) that the Indemnitee
can establish that the Indemnitor has not been prejudiced by such payment or
settlement.
10.04 DEFENSE OF THIRD-PARTY CLAIMS. Upon receipt of a
Claim Notice from an Indemnitee with respect to any Third-Party Claim, the
Indemnitor may assume the defense thereof with counsel reasonably satisfactory
to such Indemnitee and the Indemnitee shall cooperate in all reasonable
respects in such defense. The Indemnitee shall at all times have the right to
employ separate counsel in any action or claim and to participate in or
undertake and control the defense thereof, provided that the fees and expenses
of counsel employed by the Indemnitee shall be at the expense of the Indemnitor
only if such counsel is retained pursuant to the following sentence or if the
employment of such counsel has been specifically authorized by the Indemnitor.
The Indemnitee shall have the right to control the defense at the expense of
the Indemnitor the claim with counsel of its choosing reasonably satisfactory
to the Indemnitor, if (i) the Indemnitor does not notify the Indemnitee within
thirty (30) days after receipt of the Claim Notice that the Indemnitor elects
to undertake the defense thereof; (ii) the claim for indemnification relates to
or arises in connection with any criminal proceeding, action, indictment,
allegation or investigation; (iii) the claim seeks an injunction or equitable
relief against the Indemnitee that would be reasonably likely to have a
material effect on business; (iv) the Indemnitor failed or is failing to
prosecute or defend vigorously such claim. If the Indemnitor has assumed
control over the defense of a claim from the Indemnitee, the Indemnitee shall
have the right to settle any such claim over the objection of the Indemnitor
only if the
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Indemnitee waives any right to indemnity therefor. So long as the Indemnitor
is controlling the defense of any Third-Party Claim in accordance with the
terms hereof, the Indemnitee agrees that Indemnitor shall have full and
complete control over the conduct of such proceeding, except that the
Indemnitor shall obtain the prior written consent of the Indemnitee (such
consent not to be unreasonably withheld) before entering into any settlement of
a claim or ceasing to defend such claim if, pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief will be imposed
against the Indemnitee or if such settlement does not expressly and
unconditionally release the Indemnitee from all liabilities and obligations
with respect to such claim, without prejudice.
10.05 NOTICE OF OTHER CLAIMS. In the event any Indemnitee
should have a claim against any Indemnitor hereunder that does not involve a
Third-Party Claim being asserted against or sought to be collected from the
Indemnitee, the Indemnitee shall notify the Indemnitor, with a copy to the
Escrow Agent, with reasonable promptness of such claim by the Indemnitee,
specifying the nature of and specific basis for such claim and the amount or
the estimated amount of such claim. The Indemnitor shall remit payment for the
amount of such claim upon receipt of an invoice therefor, or in the event of a
dispute, the Indemnitee and the Indemnitor shall proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations, such dispute shall be resolved in accordance with Section 11.15
hereof.
10.06 ACCESS AND COOPERATION. After the Closing Date,
Buyer and the Surviving Corporation, on the one hand, and the Selling Parties,
on the other hand, shall each cooperate fully with the other as to all claims
for indemnification hereunder, shall make available to the other as reasonably
requested all information, books, records and documents that may be potentially
relevant to any and all claims and shall preserve all such information, books,
records and documents until the termination of any claim. Buyer and the
Surviving Corporation, on the one hand, and the Selling Parties, on the other
hand, shall each also make available to the other, as reasonably requested, its
personnel, agents and other representatives who are responsible for preparing
or maintaining information, books, records or other documents, or who may have
particular knowledge with respect to any claim.
10.07 TERM OF INDEMNITIES. Except as hereinafter expressly
provided, the right to indemnification under Section 10.01 shall expire twenty
(20) months following the Closing Date; provided, however, that such limitation
shall not be applicable to an indemnification claim for which a Claim Notice
was given within the twenty (20)-month period following the Closing Date. Any
such pending claim shall survive in respect of that claim until the final
determination or settlement of that claim.
10.08 LIMITATIONS ON LIABILITY.
(a) REMEDIES EXCLUSIVE. Except as specifically provided
for in the last sentence of this Section 10.08(a), each of the Buyer, Buyer
Subsidiary and the Selling Parties acknowledge and agree that, should the
Closing occur, the sole and exclusive remedy of each party hereto against any
other party hereto with respect to any and all claims arising out of this
Agreement shall be pursuant to the indemnification provisions set forth in this
Article X. Without limiting the generality of the foregoing, and except for
common law fraud, (i) Buyer,
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Buyer Subsidiary and the Surviving Corporation shall have no recourse against
the Company's officers, directors or agents with respect to any claims arising
out of this Agreement other than in their capacities as Selling Parties
otherwise entitled to receive distributions from the Escrow Funds under the
Escrow Agreement, and (ii) indemnification owing from any Selling Party who is
or was an officer or director of the Company shall not be deemed for any
purpose to be a claim covered by indemnification owing to such by the Company
under any law, by-law or agreement whatsoever. This Section 10.08(a) shall not
apply to limit any of the following claims: (x) claims based upon common law
fraud; (y) claims against Marathon Fund III under Section 5.12 or 5.13 hereof;
(z) any claims based upon individual representations regarding title, authority
and ownership as provided in the Option and SAR Cancellation Agreement, in any
letter of transmittal signed by any of the Selling Parties, or in any separate
cancellation agreement with the holders of Company Warrants; or (xx) claims for
specific performance.
(b) DEDUCTIBLE. Except as hereinafter expressly
provided,
(i) Except as provided in paragraph (b)(iii)
below, no claim for indemnification under Section 10.01 shall be made by Buyer
or the Surviving Corporation with respect to any breach resulting in an
individual item of Loss, or related items of Losses arising out of
substantially similar facts and circumstances, unless and until the amount of
such Loss(es) suffered by the Surviving Corporation and/or the Buyer exceeds
$10,000, at which point a claim can be made for the entire amount of such
Loss(es); and
(ii) Except as provided in paragraph (b)(iii)
below, no claim for indemnification under Section 10.01 shall be made by Buyer
or the Surviving Corporation unless and until the aggregate amount of all
Losses for which claims are allowed under Section 10.08(b)(i) suffered by the
Surviving Corporation and/or the Buyer exceeds $750,000 (the "Aggregate
Deductible"), and then only to the extent the aggregate amount of all such
Losses exceeds the Aggregate Deductible.
(iii) Paragraphs (b)(i) and (b)(ii) above shall not
apply to limit any indemnification claim by Buyer or the Surviving Corporation
in respect of any breach of any representation or warranty included in any of
Sections 3.02 (Capitalization), 3.03 (Authorization and Execution), 3.07
(Taxes), 3.16 (No Brokers or Finders), 3.17 (Affiliate Transactions) or 3.18
(Indebtedness). In addition, in determining whether a breach of any
representation or warranty in any of these sections has occurred for purposes
of paragraphs (b)(i) and (b)(ii) above and for purposes of determining the
amount of any Losses, any materiality qualification in any such representation
or warranty shall be ignored and given no effect.
(c) LIABILITY LIMITED TO ESCROW FUNDS. Buyer and the
Surviving Corporation shall have recourse only against the undisbursed Escrow
Funds with respect to any Losses, in accordance with the terms of the Escrow
Agreement. The Selling Parties shall have no liability separate from, or in
addition to, the Escrow Funds, except as to the parties and matters described
in the last sentence of Section 10.08(a).
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10.09 ESCROW AMOUNT AND TERM.
(a) At the Effective Time, the Buyer shall deposit eight
million five hundred thousand dollars ($8,500,000) (the "Escrow Funds") with an
escrow agent mutually acceptable to the Selling Parties' Representative and the
Buyer (the "Escrow Agent") under an Escrow Agreement in substantially the form
attached hereto as Exhibit F, but such Escrow Agreement shall include such
additional changes as shall be requested by the Escrow Agent with respect to
the Escrow Agent's obligations, liabilities and responsibilities and shall be
approved by the Company and Buyer (such approval to be conclusively established
by the execution and delivery thereof by an authorized corporate officer of
each of the Company and Buyer) (the "Escrow Agreement"). The Escrow Funds
shall remain deposited with the Escrow Agent and shall be subject to and
payable in accordance with the terms of the Escrow Agreement and this
Agreement.
(b) Except as provided in Section 10.09(c) below, the
Escrow Agreement will provide that, on the date that is twelve (12) months from
the Closing Date (the "First Scheduled Release Date"), the Escrow Agent shall
release from escrow and deliver to the Selling Parties an aggregate amount
equal to four million two hundred fifty thousand dollars ($4,250,000) of the
Escrow Funds. Such aggregate amount shall be distributed to the respective
members of the Selling Group in proportion to the respective amounts of the
Escrow Consideration payable to each of them. Except as provided in Section
10.09(c) below, the remaining Escrow Funds shall be released from escrow on the
date that is twenty (20) months from the Closing Date (the "Second Scheduled
Release Date") and the Escrow Agreement shall terminate on such date.
(c) If there are outstanding indemnification claims on
the First Scheduled Release Date, and the remaining Escrow Funds would not
cover the amount of such pending claims, then an additional amount adequate to
cover such pending claims shall be withheld by the Escrow Agent from the Escrow
Funds to be distributed on the First Scheduled Release Date for as long as
required to cover such pending claims. If there are outstanding
indemnification claims on the Second Scheduled Release Date, an amount adequate
to cover such pending claims shall be withheld by the Escrow Agent from the
Escrow Funds, and the Escrow Agreement shall continue, for as long as required
to cover such pending claims.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE
COMPANY, BUYER AND BUYER SUBSIDIARY.
(a) Except as provided in paragraph (c) below, the
representations and warranties of the Company set forth in this Agreement and
in any related closing certificate or Schedule furnished in connection herewith
shall survive the Closing Date but shall expire on the date which is twenty
(20) months following the Closing Date.
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(b) Except as provided in paragraph (c) below, the
representations and warranties of Buyer and Buyer Subsidiary set forth in this
Agreement and in any related agreement, or in any certificate, schedule,
statement or certificate or other document furnished in connection herewith
shall survive until the date which is twenty (20) months following the Closing
Date.
(c) Notwithstanding paragraphs (a) and (b) above, any
representation or warranty in respect of which indemnity may be sought under
Section 10, and the indemnity with respect thereto, shall survive the time at
which it would otherwise terminate pursuant to this Section 11.01 if notice of
the inaccuracy or breach or potential inaccuracy or breach thereof giving rise
to such right or potential right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such time. The
representations and warranties in this Agreement and the Schedules and Exhibits
attached hereto or in any writing delivered by any party to another party in
connection with this Agreement shall survive for the periods set forth in this
Section 11.01 and shall in no event be affected by any investigation, inquiry
or examination made for or on behalf of any party, or the knowledge of any
party's officers, directors, shareholders, employees or agents or the
acceptance by any party of any certificate or opinion hereunder, except to the
extent specifically provided in Section 10.01 with respect to Buyer's actual
knowledge of any such inaccuracy or breach and in Section 10.02 with respect to
the Company's actual knowledge of any such inaccuracy or breach.
11.02 AMENDMENT AND MODIFICATION. To the extent permitted
by applicable law, this Agreement may be amended, modified or supplemented only
by written agreement of the parties hereto (in the case of the Company, as
approved by its Board of Directors) at any time prior to the Effective Time
with respect to any of the terms contained herein.
11.03 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Buyer
or Buyer Subsidiary, on the one hand, or the Company, on the other hand, to
comply with any obligation, covenant, agreement or condition herein (except the
conditions in Sections 6.01(b) and 6.02(b) of this Agreement) may be waived in
writing by the Company, or by Buyer and Buyer Subsidiary, respectively, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 11.03.
11.04 EXPENSES. All expenses incurred in connection with
this Agreement and the consummation of the transactions contemplated hereby
shall be paid by the party incurring such expenses. In no event shall any of
the assets of the Company be utilized for or reduced by the payment of any such
fees or expenses at or after the Closing, except that the Company may pay or
establish a reasonable reserve for the future payment of such expenses, but in
either case only to the extent such expenses are paid or such reserves are
established at Closing and such expenses or reserves are applied to reduce the
aggregate Per Share Merger Consideration pursuant to Section 1.05(a) hereof
(any such expenses or reserves therefor being herein referred to as the
"Company Transaction Expenses").
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Without limiting the generality of the foregoing, the parties
acknowledge and agree that the following shall be considered "Transaction
Expenses" for purposes of this Section 11.04: (i) any lump-sum cash payments
made to Dale R. Whitfield at Closing pursuant to the Separation Agreement (as
hereinafter defined); (ii) any payments made at Closing to the Sellers'
Accountant for preparing the Closing Date Balance Sheet (and issuing the
related audit report) as contemplated by Section 1.13 hereof and for preparing
the Closing Tax Returns as contemplated by Section 1.14 hereof; (iii) any
incentive compensation bonus payments made at Closing to Hampton H. Culler,
Charles W. Johnson, and Thomas P. Sanfilippo; and (iv) any employer payroll
taxes payable by the Company in respect of any cash compensation payments made
to Company management at Closing.
11.05 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party to
this Agreement shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without prior written approval
of the other parties; provided, however, that each of the Company and Buyer may
make any public disclosure it reasonably believes in good faith (based upon
written opinion of counsel) is required by applicable law (in which case the
disclosing party will advise the other parties to this Agreement prior to
making the disclosure).
11.06 ADDITIONAL AGREEMENTS. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
intents and purposes of this Agreement, the proper officers and directors of
each corporation which is a party to this Agreement shall take all such
necessary action.
11.07 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, effective when delivered, or if delivered by express delivery
service, effective when delivered, or if mailed by registered or certified mail
(return receipt requested), effective three business days after mailing, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Buyer or Buyer Subsidiary, to it at or c/o:
Sleepmaster L.L.C.
2001 Lower Road
Linden, New Jersey 07036-6520
Attention: Mr. Charles Schweitzer
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Attention: Kimberly P. Taylor, Esq.
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(b) If to the Company, to it at:
Crescent Sleep Products Company
4510 Weybridge Lane
Suite 200
Greensboro, North Carolina 27407
Attention: Chief Executive Officer
with a copy to:
Goldner Hawn Johnson & Morrison Incorporated
5250 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4116
Attention: Michael S. Israel
and with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Bruce M. Engler
(c) If to Marathon Fund III or a Selling Parties'
Representative, to it/him at:
Goldner Hawn Johnson & Morrison Incorporated
5250 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4116
Attention: Michael S. Israel
with a copy to:
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Bruce M. Engler
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11.08 ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
parties. Except for the provisions of Article I and Sections 7.01 and 7.02
hereof, this Agreement is not intended to confer upon any other person except
the parties hereto any rights or remedies hereunder. Notwithstanding the
foregoing, (i) Buyer may assign this Agreement and its rights hereunder to any
Affiliate (but Buyer shall not in any such case be relieved of its obligations
hereunder), and (ii) Buyer may assign its rights hereunder as collateral for
any lender to Buyer and/or the Company.
11.09 INTERPRETATION. As used in this Agreement, unless
otherwise expressly defined herein, (i) the term "including" shall mean
"including without limitation"; (ii) the term "person" shall mean and include
an individual, a partnership, a limited liability company, a joint venture, a
corporation, a trust, an incorporated organization and a government or any
department or agency thereof; (iii) the term "Affiliate" shall mean, with
respect to any specified Person, any Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Person specified; (iv) the phrase "business day" shall
mean any day other than a Saturday, Sunday or a day which is a statutory
holiday under the laws of the United States or the State of Delaware; (v) all
dollar amounts are expressed in United States funds; and (vi) the phrase "to
the knowledge of the Company" or any similar phrase shall mean the actual
knowledge of one or more of the following executive officers of the Company:
Timothy D. Johnson (Chairman), Dale R. Whitfield (President and CEO), Hampton
H. Culler (Vice President - Sales), Charles W. Johnson (Chief Financial
Officer, Treasurer and Secretary), and Thomas P. Sanfilippo (Vice President -
Manufacturing).
11.10 GOVERNING LAW. This Agreement shall be governed by
the laws of the State of Delaware without giving effect to conflict or choice
of laws principles that may be applicable.
11.11 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.12 HEADINGS; INTERNAL REFERENCES. The Article and
Section headings contained in this Agreement are solely for the purpose of
reference, and are not part of the agreement of the parties and shall not
affect in any way the meaning or interpretation of this Agreement.
11.13 NUMBER; GENDER. Whenever the context so requires,
the singular shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
11.14 ENTIRE AGREEMENT. This Agreement, including the
Exhibits and the Schedules hereto and the Confidentiality Agreement described
in Section 5.06 hereof, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter
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contained herein, and supersede all prior agreements and understandings among
the parties with respect to such subject matter. There are no restrictions,
promises, representations, warranties (express or implied), covenants or
undertakings of the parties, other than those expressly set forth or referred
to in this Agreement or such Confidentiality Agreement.
11.15 ENFORCEMENT.
(a) The parties hereto agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with its terms or were otherwise breached. Each party shall be entitled to
injunctive relief to prevent any breach of this Agreement and to enforce this
Agreement specifically (i) in any court of the State of Minnesota or any court
of the United States located in the State of Minnesota (in the case of any
claims asserted in a lawsuit initially filed against the Company or any of the
Selling Parties), and (ii) in any court of the State of New York or any court
of the United States located in the State of New York (in the case of any
claims asserted in a lawsuit initially filed against Buyer, Buyer Subsidiary or
the Surviving Corporation) (in each case in addition to any other remedy to
which such party is entitled at law or in equity).
(b) In addition, each party hereby:
(i) with respect to any claims asserted in a
lawsuit initially filed against the Company or any of the Selling Parties,
submits itself to the personal jurisdiction of (A) the courts of the State of
Minnesota; and (B) the United States District Court for the District of
Minnesota with respect to any dispute arising out of this Agreement or any
transaction contemplated hereby to the extent such courts would have subject
matter jurisdiction with respect to such dispute;
(ii) with respect to any claims asserted in a
lawsuit initially filed against Buyer, Buyer Subsidiary or the Surviving
Corporation, submits itself to the personal jurisdiction of (A) the courts of
the State of New York; and (B) the United States District Court for the
Southern District of New York with respect to any dispute arising out of this
Agreement or any transaction contemplated hereby to the extent such courts
would have subject matter jurisdiction with respect to such dispute;
(iii) agrees that it will not attempt to deny or
defeat such personal jurisdiction or venue by motion or other request for leave
from any such court; and
(iv) agrees that it will not bring any action
relating to this Agreement (or any transactions contemplated by this Agreement)
in any court other than (A) in the case of Buyer or Buyer Subsidiary (and the
Surviving Corporation), the courts referred to in Section 11.15(b)(i) above,
and (B) in the case of the Selling Parties, the courts referred to in Section
11.15(b)(ii) above.
11.16 SEVERABILITY. If any term, provision, covenant,
agreement or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants, agreements and restrictions of
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this Agreement will continue in full force and effect and will in no way be
affected, impaired or invalidated.
11.17 SCHEDULES.
(a) Matters reflected in the Schedules are not
necessarily limited to matters required by this Agreement to be reflected in
the Schedules. Such additional matters are set forth for informational
purposes and do not necessarily include other matters of a similar nature.
(b) A disclosure made by the Company in any Section of
this Agreement or any Schedule that is sufficient on its face to reasonably
inform the Buyer of information required to be disclosed in another Section of
this Agreement or another Schedule in order to avoid a misrepresentation
thereunder shall be deemed, for all purposes of this Agreement, to have been
made with respect to such other Section of this Agreement or such Schedule. In
no event shall the mere listing in a Schedule (or the mere provision by the
Company to the Buyer of a copy) of a document or other item be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself, or unless the listing of a document or item in a Schedule
otherwise reasonably informs the Buyer of an exception to such representation
or warranty).
11.18 DEFINITIONS. The following capitalized terms used in
this Agreement shall have the following meanings:
"Acknowledgment Agreement" shall have the meaning set forth in Section
9.02.
"Acquisition Proposal" shall have the meaning set forth in Section
5.03.
"Affiliate" shall have the meaning set forth in Section 11.09.
"Affiliated Group" shall mean an affiliated group of corporations as
defined in Section 1504 of the Code.
"Aggregate Deductible" shall have the meaning set forth in Section
10.08(b).
"Agreement" shall have the meaning set forth in the Preamble.
"Available Tax Refund" shall have the meaning set forth in Section
1.05(a)(iii).
"Base Balance Sheet" shall have the meaning set forth in Section 3.05.
"Base Balance Sheet Date" shall have the meaning set forth in Section
3.05.
"Borrowed Money Debt" shall mean the sum of the following:
(i) the outstanding principal and accrued interest, as
well as prepayment, breakage and similar charges payable thereunder,
under that certain Credit Agreement
47
<PAGE> 53
dated March 17, 1998 between the Company, the Banks which are from
time to time parties thereto, U.S. Bank National Association, a
national banking association and one of the Banks, as agent for the
Banks, and Antares Leveraged Capital Corp., a Delaware corporation;
(ii) the outstanding principal and accrued interest, as
well as prepayment, breakage and similar charges payable thereunder,
under that certain Senior Subordinated Note and Warrant Purchase
Agreement dated as of March 17, 1998 between the Company and Bank of
America NT & SA (f/k/a Bank of America National Trust and Savings
Association), a national trust and savings association;
(iii) the outstanding principal amount and accrued interest
under the North Carolina Bond Documents and the Iowa Bond Documents;
and
(iv) any other indebtedness for money borrowed by the
Company, or any guarantees by the Company of indebtedness for money
borrowed by any third party, or any indebtedness for money borrowed
that is secured by Company assets, or any deferred purchase price for
properties or services (other than accounts payable incurred in the
ordinary course of business consistent with past custom and practice
and $35,000 owing to Thornel Associates, Inc.).
"business day" shall have the meaning set forth in Section 11.09.
"Buyer" shall have the meaning set forth in the Preamble.
"Buyer's Accountant" shall have the meaning set forth in Section
1.13(b).
"Buyer Subsidiary" shall have the meaning set forth in the Preamble.
"Cash" shall mean cash and cash equivalents (including marketable
securities and short-term investments), calculated in accordance with generally
accepted accounting principles applied on a basis consistent with preparation
of the Company Financial Statements.
"Cash Consideration" shall have the meaning set forth in Section
1.05(a).
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. 6901, et seq.
"Certificate of Merger" shall have the meaning set forth in Section
1.02.
"Claim Notice" shall have the meaning set forth in Section 10.03(a).
"Class A Common Stock" shall have the meaning set forth in the
Recitals.
"Class B Common Stock" shall have the meaning set forth in the
Recitals.
48
<PAGE> 54
"Closing" shall have the meaning set forth in Section 2.01.
"Closing Balance Sheet" shall have the meaning set forth in Section
1.13(b).
"Closing Date" shall have the meaning set forth in Section 2.01.
"Closing Net Working Capital" shall have the meaning set forth in
Section 1.13(a).
"Closing Tax Returns" shall have the meaning set forth in Section
1.14(a).
"Code" shall have the meaning set forth in Section 3.07(c).
"Commitment Letters" shall have the meaning set forth in Section 4.06.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Preamble.
"Company Acquisition Date" shall have the meaning set forth in the
Recitals.
"Company Bond Documents" shall mean the Iowa Bond Documents and the
North Carolina Bond Documents.
"Company Financial Statements" shall have the meaning set forth in
Section 3.05.
"Company Group" shall have the meaning set forth in Section 5.03.
"Company Stock" shall have the meaning set forth in the Recitals.
"Company Stock Appreciation Rights" shall have the meaning set forth
in Section 1.07.
"Company Stock Option(s)" shall have the meaning set forth in Section
1.07.
"Company Transaction Expenses" shall have the meaning set forth in
Section 11.04.
"Company Warrant(s)" shall have the meaning set forth in Section 1.08.
"Company Warrant Spread" shall have the meaning set forth in Section
1.08.
"Confidential Information" shall mean the information and data of the
Company concerning the business or affairs of the Company (including the
Company's technology, computer programs, know-how, designs, inventions, any
business plans, pricing information, sales figures, profit or loss figures,
information relating to customers, clients, suppliers, sources of supply and
customer lists and methods of doing business) (i) which is material nonpublic
information, (ii) which is proprietary to the Company, (iii) the disclosure of
which could reasonably be expected to be detrimental or adverse to the Company,
or (iv) is the property of the
49
<PAGE> 55
Company and that the continued success of the Company depends in large part on
keeping this information from becoming known to competitors of the Company.
"DGCL" shall have the meaning set forth in the Recitals.
"Dissenting Share" shall have the meaning set forth in Section 1.06.
"Dixie Bedding" shall mean DBC Holdings Company (f/k/a Dixie Bedding
Company), a North Carolina corporation.
"Dixie Escrow Agreement" shall have the meaning set forth in Section
1.15.
"Dixie Escrow Fund" shall have the meaning set forth in Section 1.15.
"Dixie Purchase Agreement" shall mean the Asset Purchase Agreement
dated as of March 17, 1998 between the Company and Dixie Bedding.
"Effective Time" shall have the meaning set forth in Section 1.02.
"Employee Benefit Plan" shall mean any plan maintained by the Company
for its employees which is (a) a nonqualified deferred compensation or
retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) a
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) a qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) an Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"Encumbrances" shall have the meaning set forth in Section 3.08.
"Environmental Law" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. Section 1201 et seq., the Clean
Water Act, 33 U.S.C. Section 1321 et seq., the Clean Air Act, 42 U.S.C. Section
7401 et seq., and any other federal, state, local or other governmental
statute, regulation, law (including common law) or ordinance dealing with
pollution prevention and the effects of pollution on human health or natural
resources, waste disposal or protection of the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" shall have the meaning set forth in Section 10.09(a).
"Escrow Agreement" shall have the meaning set forth in Section
10.09(a).
50
<PAGE> 56
"Escrow Funds" shall have the meaning set forth in Section 10.09(a).
"Escrow Consideration" shall have the meaning set forth in Section
1.05(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"First Scheduled Release Date" shall have the meaning set forth in
Section 10.09(b).
"Fully Diluted Equity Number" shall have the meaning set forth in
Section 1.05(a)(i)(y).
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Substance" shall mean any pollutant, contaminant, hazardous
substance or waste, solid waste, petroleum or any fraction thereof, or any
other chemical, substance or material listed or identified in or regulated by
any Environmental Law.
"including" shall have the meaning set forth in Section 11.09.
"including without limitation" shall have the meaning set forth in
Section 11.09.
"Indemnitee" shall mean any person who may be entitled to seek
indemnification pursuant to the provisions of Sections 10.01 or 10.02 hereof
(or, for purposes of notice and administration only, the Selling Parties'
Representative (or its designee) in the case of indemnification owing to the
Selling Parties).
"Indemnitor" shall mean any person who may be obligated to provide
indemnification pursuant to Sections 10.01 or 10.02 hereof (or, for purposes of
notice and administration only, the Selling Parties' Representative (or its
designee) in the case of indemnification to be provided by the Selling
Parties).
"Independent Accounting Firm" shall have the meaning set forth in
Section 1.13(d).
"Intellectual Property" shall have the meaning set forth in Section
3.11.
"Iowa Bond Documents" shall mean those certain $3,000,000 Tax-Exempt
Adjustable Mode Industrial Development Revenue Bonds (Dixie Bedding Company
Project) issued by the Iowa Finance Authority on or about March 1, 1995
relating to the Company's facilities located in Clear Lake, Iowa and all
documents related thereto to which the Company is a party.
"Leased Real Property" shall have the meaning set forth in Section
3.08(b).
"Licensed Intellectual Property" shall have the meaning set forth in
Section 3.11.
"Loss(es)" shall mean any and all demands, claims, payments,
obligations, actions or causes of action, assessments, losses, liabilities,
damages (but excluding incidental, special,
51
<PAGE> 57
consequential, exemplary, punitive and similar damages), costs and expenses
paid or incurred, including without limitation any legal or other expenses
reasonably incurred in connection with investigating or defending any claims or
actions and all amounts paid in settlement of claims or actions in accordance
with Section 10.04 hereof. The amount of any Losses for which indemnification
is provided under Article X shall be net of any amounts recovered or
recoverable (net of any retrospective premium adjustment paid or payable as a
result of such Loss) by the Indemnitee under insurance policies with respect
thereto (and thus any such amounts shall not be included in calculating the
deductible set forth in Section 10.08(b)) and shall be (i) increased to take
account of any net tax costs actually recognized by the Indemnitee arising from
the receipt of indemnity payments hereunder (grossed up for such increase) and
(ii) reduced to take the then present value of any net tax benefit (including
as a result of any basis adjustment) to the Indemnitee arising from or relating
to any such Loss. In computing the amount of any such tax cost or tax benefit,
the Indemnitee shall be deemed to recognize all other items of income, gain,
loss, deduction or credit before recognizing any item arising from the receipt
of any indemnity payment hereunder or the incurrence or payment of any Loss.
"Management Interest" shall have the meaning set forth in Section
1.07.
"Marathon Fund III" shall have the meaning set forth in the Preamble.
"Material Adverse Effect" shall have the meaning set forth in Section
3.01.
"Material Contracts" shall have the meaning set forth in Section 3.10.
"Merger" shall have the meaning set forth in the Recitals.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).
"Net Working Capital" means the excess of the current assets of the
Company as of the opening of business on the date of determination over the
current liabilities of the Company as of the opening of business on the date of
determination determined in accordance with GAAP, except as otherwise specified
below. In determining consolidated current assets and liabilities hereunder,
the following shall apply: (i) all accounting entries shall be taken into
account regardless of their amount and all known errors and omissions shall be
corrected; (ii) all known proper adjustments shall be made; (iii) appropriate
reserves for all known and quantifiable liabilities and obligations for which
reserves are appropriate in accordance with GAAP shall be included; (iv)
inventory shall be accounted for on a first-in-first-out basis; (v) no accruals
shall be made for income tax liability or deferred tax assets (including
without limitation any items attributable to an NOL carryback or carryforward);
(vi) any current maturities of Borrowed Money Debt and any accrued interest on
Borrowed Money Debt shall be excluded; (vii) no accrual shall be made for (aa)
any liability under the Serta CEO Deferred Compensation Plan, (bb) deposits or
liabilities associated with promotional trips, (cc) any prepaid management fees
to Goldner Hawn Johnson & Morrison Incorporated, or (dd) any item deducted as a
Transaction Expense pursuant to Sections 11.04 and 1.05 hereof; and (viii) an
appropriate accrual shall be made for (aa) amounts to be paid under the
Company's Profit Sharing Plan, (bb) advertising allowances and (cc) $35,000
owing to Thornel Associates, Inc.; (ix) an appropriate accrual shall
52
<PAGE> 58
be made for any drafts issued by the Company which had not cleared prior to
the opening of business on the date of determination, offset to the extent of
any previous deposits made by the Company to its operating accounts which did
not constitute immediately available funds as of the opening of business on the
date of determination, but which subsequently became immediately available
funds.
"NOL" shall have the meaning set forth in Section 9.01.
"North Carolina Bond Documents" shall mean those certain $5,900,000
Industrial Development Revenue Bonds (Crescent Sleep Products Company Project)
Series 1999 issued by the Guilford County Industrial Facilities and Pollution
Control Financing Authority on or about September 1, 1999 relating to the
Company's facilities located in Guilford County, North Carolina and all
documents related thereto to which the Company is a party.
"Objection Notice" shall have the meaning set forth in Section
1.13(b).
"Option and SAR Cancellation Agreement(s)" shall have the meaning set
forth in Section 1.07.
"Owned Real Property" shall have the meaning set forth in Section
3.08(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Liens" shall have the meaning set forth in Section 3.09.
"Per Share Merger Consideration" shall have the meaning set forth in
Section 1.05(a).
"person" shall have the meaning set forth in Section 11.09.
"Potential Dixie Indemnification Claims" shall have the meaning set
forth in Section 1.15.
"Prohibited Transactions" shall have the meaning set forth in Section
3.14(b)(ii).
"Proprietary Intellectual Property" shall have the meaning set forth
in Section 3.11.
"Purchased Option(s)" shall have the meaning set forth in Section
1.09.
"Real Property Interests" shall have the meaning set forth in Section
3.08.
"Reference Shares" shall have the meaning set forth in Section 1.07.
"Reportable Event" shall have the meaning set forth in Section
3.14(b)(i).
"Rollover Option(s)" shall have the meaning set forth in Section 1.09.
53
<PAGE> 59
"Schedules" shall have the meaning set forth in the introduction in
Article 3.
"Second Scheduled Release Date" shall have the meaning set forth in
Section 10.09(b).
"Seller's Accountant" shall have the meaning set forth in Section
1.13(b).
"Selling Parties" shall mean the Stockholders, the holders of the
Company Warrants, the holders of the Company Stock Appreciation Rights, and the
holders of the Company Stock Options.
"Selling Parties' Representative" means either of Michael D. Goldner
and Michael S. Israel, and each of them acting alone, with full power of
substitution and re-substitution, acting on behalf of the Selling Parties under
this Agreement as and to the extent contemplated by the Selling Parties
Agreement dated this date by and among the Selling Parties and Messrs. Goldner
and Israel. "Selling Parties' Representative" shall also include any person
appointed to succeed or replace either of Messrs. Goldner or Israel pursuant to
such Selling Parties Agreement.
"Separation Agreement" means the Separation Agreement dated June 29,
2000 between Dale R. Whitfield and the Company.
"Serta" shall mean Serta, Inc., a Delaware corporation.
"Serta Agreements" shall mean (i) that certain Standard License
Agreement and Memorandum of Agreement dated March 17, 1998 between the Company
and Serta regarding Grovetown, Georgia, (ii) that certain Standard License
Agreement and Memorandum of Agreement dated March 17, 1998 between the Company
and Serta regarding Greensboro, North Carolina, and (iii) that certain Standard
License Agreement and Memorandum of Agreement dated March 17, 1998 between the
Company and Serta regarding Clear Lake, Iowa.
"Serta CEO Deferred Compensation Plan" means the defined compensation
plan for the Chief Executive Officer of Serta, Inc. described in Footnote 11
(Commitments and Contingencies) to the Company's audited financial statements
as of December 31, 1999 and 1998.
"Serta Stock" shall mean those certain stock certificates numbered 85,
86 and 87 of Serta issued in the name of the Company, each for 50 shares of
class A common stock of Serta.
"Specified Officer" shall have the meaning included within the
definition of Notice Period.
"Stockholders" shall have the meaning set forth in the Recitals.
"Surviving Corporation" shall have the meaning set forth in Section
1.01.
"Surviving Corporation Common Stock" shall have the meaning set forth
in Section 1.05(c).
54
<PAGE> 60
"Target Net Working Capital" means any amount of Closing Net Working
equal to or exceeding $5,914,750.
"Tax(es)" shall have the meaning set forth in Section 3.07.
"Tax Benefit Bonus" shall have the meaning set forth in the Option and
SAR Cancellation Agreement.
"Tax Refund Consideration" shall have the meaning set forth in Section
1.05(a)(iii).
"Tax Returns" shall have the meaning set forth in Section 3.07.
"Third Party Acquisition" shall have the meaning set forth in Section
5.03.
"Third Party Acquisition Offer" shall have the meaning set forth in
Section 5.03.
"Third Party Claims" shall mean any and all Losses which arise out of
or result from (i) any claims or actions asserted against an Indemnitee by a
third party, (ii) any rights of a third party asserted against an Indemnitee,
or (iii) any liabilities of, or amounts payable by an Indemnitee to a third
party arising in respect of, claims, actions and rights referred to in the
foregoing clauses (i) or (ii).
"Title Company" shall have the meaning set forth in Section 6.01(p).
"to the knowledge of the Company" shall have the meaning set forth in
Section 11.09.
[Remainder of Page Intentionally Left Blank]
55
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto do execute and deliver
this Agreement as of the date first above written.
COMPANY:
CRESCENT SLEEP PRODUCTS COMPANY
By /s/ Hampton H. Culler
---------------------------
Its President
--------------------------
BUYER:
SLEEPMASTER L.L.C.
By /s/ James P. Koscica
---------------------------
Its Executive V.P.
--------------------------
BUYER SUBSIDIARY:
CRESCENT ACQUISITION CORP.
By /s/ James P. Koscica
---------------------------
Its Executive V.P.
--------------------------
56
<PAGE> 62
FOR PURPOSES OF SECTIONS 5.03, 5.12 AND
5.13 ONLY:
MARATHON FUND III:
MARATHON FUND LIMITED
PARTNERSHIP III
By /s/ Timothy D. Johnson
----------------------------------
Title General Partner
----------------------------------
FOR PURPOSES OF SECTIONS 1.13, 1.14, 1.15, 9.01,
9.02, 9.03 AND 10.09 ONLY:
SELLING PARTIES' REPRESENTATIVE:
/s/ Michael D. Goldner
------------------------------------------
Michael D. Goldner
/s/ Michael S. Israel
------------------------------------------
Michael S. Israel
57
<PAGE> 63
EXHIBIT A-1
COMPANY STOCKHOLDERS
<TABLE>
<CAPTION>
STOCKHOLDER NUMBER OF SHARES
<S> <C> <C>
Marathon Fund Limited Partnership III 955,000 (Class A)
BankAmerica Investment Corporation 100,000 (Class B)
MIG Partners VI 46,146.2 (Class B)
Allstate Insurance Company 6,076 (Class B)
-------
Total 1,107,222.2
===========
</TABLE>
<PAGE> 64
EXHIBIT A-2
COMPANY STOCK APPRECIATION RIGHTS
<TABLE>
<CAPTION>
AGREEMENT NUMBER OF
REFERENCE
SHARES
<S> <C>
Stock Appreciation Right Agreement dated 130,000
March 17, 1998 between the Company and Dale
R. Whitfield
Stock Appreciation Right Agreement dated 130,000
March 17, 1998 between the Company and
Hampton H. Culler
Stock Appreciation Right Agreement dated 130,000
March 17, 1998 between the Company and
Charles W. Johnson
Stock Appreciation Right Agreement dated 130,000
March 17, 1998 between the Company and
Thomas P. Sanfilippo
------
Total 520,000
=======
</TABLE>
<PAGE> 65
EXHIBIT A-2
COMPANY WARRANTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF CLASS B EXERCISE PRICE
HOLDER COMMON STOCK ISSUABLE PER SHARE*
<S> <C> <C>
Bank of America, N.A. (f/k/a Bank of 84,582.80 $.00
America National Trust and Savings
Association)
Allstate Insurance Company 24,306.00 $.00
--------- --------
Total 108,888.80 $0.00
========== ========
</TABLE>
* Company Warrants state an exercise price of $.01 per share which has
already been paid to the Company pursuant to the terms of the Company Warrants.
<PAGE> 66
EXHIBIT A-4
COMPANY STOCK OPTIONS
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OF CLASS A EXERCISE
COMMON STOCK PRICE PURCHASED ROLLOVER
HOLDER ISSUABLE PER SHARE OPTIONS OPTIONS
<S> <C> <C> <C> <C>
Dale R. Whitfield 56,306 $10.00 56,306 shares None
Hampton H. Culler 28,153 $10.00 8,237.334 shares 19,915.666 shares
Charles W. Johnson 28,153 $10.00 8,237.334 shares 19,915.666 shares
Thomas P. Sanfilippo 28,153 $10.00 8,237.334 shares 19,915.666 shares
------- --------- ---------- ----------
Total 140,765 $1,407,650 81,018.002 shares 59,746.998 shares
======= ========= ========== ==========
</TABLE>
<PAGE> 67
EXHIBIT B
OPTION AND SAR CANCELLATION AGREEMENT
*[To follow after being finalized with management personnel.]*
<PAGE> 68
EXHIBIT B
COMMITMENT LETTERS
**[To follow.]
<PAGE> 69
EXHIBIT D
FORM OF OPINION OF COUNSEL TO THE COMPANY
1. The Company is a corporation validly existing and in
good standing under the laws of the State of Delaware.
2. The authorized capital stock of the Company consists
of 2,300,000 shares, of which 2,000,000 shares are voting Class A Common Stock,
$.01 par value per share (the "Class A Common Stock") and 300,000 shares are
non-voting Class B Common Stock, $.01 par value per share (the "Class B Common
Stock"). The issued and outstanding capital stock of the Company consists of
955,000 shares of Class A Common Stock, and 152,222.20 shares of Class B Common
Stock. All of such issued shares have been duly authorized and validly issued
and are fully paid and nonassessable. There are no outstanding subscriptions,
options, warrants, calls or other agreements or commitments by which the
Company is bound in respect of the capital stock of the Company, whether issued
or unissued, and no outstanding securities convertible into or exchangeable for
any such capital stock, except as follows: (i) rights to obtain 520,000 shares
of Class A Common Stock pursuant to the Company Stock Appreciation Rights; (ii)
options to purchase 140,765 shares of Class A Common Stock pursuant to the
Company Stock Options; (iii) rights to purchase 108,888.80 shares of Class B
Common Stock pursuant to the Company Warrants; and (iv) as otherwise disclosed
in Schedule 3.02(b).
3. The Company has the requisite corporate power and
authority to execute and deliver the Agreement and to consummate the
transactions contemplated thereby (including, without limitation, the Merger).
The execution, delivery and performance of the Agreement (including, without
limitation, the Merger) by the Company have been duly authorized by all
necessary corporate action on the part of the Company. The Agreement has been
duly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company and is enforceable against the Company in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally, and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a court of law or equity).
4. Except as set forth in Schedule 3.04, neither the
execution and delivery of this Agreement by the Company, nor the consummation
by the Company of the Merger, will (i) conflict with or result in a breach of
the Certificate of Incorporation or By-laws, as currently in effect, of the
Company, or (ii) except for the requirements under the Hart-Scott-Rodino Act,
and the filing of the Certificate of Merger as required by the DGCL, require
any filing with, or consent or approval of, (x) any federal or State of
Minnesota governmental authority having jurisdiction over any of the business
or assets of the Company or (y) the Secretary of State of Delaware pursuant to
the DGCL, or (iii) violate any federal or Minnesota statute or regulation, or
(iv) violate any injunction, judgment or order which is directly applicable to
the Company, or (v) result in a breach of, or constitute a default or an event
which, with the passage of time or the giving of notice or both would
constitute a default, give rise to a right of termination, cancellation or
acceleration, create any entitlement to any payment or benefit, require the
consent of any third party or result in the creation of any lien on the assets
of the Company under any Material Contract, except, in the case of clauses
(ii), (iii), (iv) and (v) above, where such
<PAGE> 70
violation, failure or other circumstances would not, individually or in the
aggregate, have a Material Adverse Effect.
5. Upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, the Merger will be effective in
accordance with the terms and provisions of the Certificate of Merger, the
Agreement, and the laws of the State of Delaware.
<PAGE> 71
EXHIBIT E
FORM OF OPINION OF COUNSEL TO BUYER AND BUYER SUBSIDIARY
1. Buyer is a limited liability company validly existing and in
good standing under the laws of the State of New Jersey.
2. Buyer Subsidiary is a corporation validly existing and in good
standing under the laws of the State of Delaware.
3. Each of Buyer and Buyer Subsidiary has the requisite power and
authority to execute and deliver the Agreement and to consummate the
transactions contemplated thereby (including, without limitation, the Merger).
The execution, delivery and performance of the Agreement (including, without
limitation, the Merger) by each of Buyer and Buyer Subsidiary have been duly
authorized by all necessary corporate action on the part of Buyer and Buyer
Subsidiary. The Agreement has been duly executed and delivered by each of
Buyer and Buyer Subsidiary and constitutes the valid and binding obligation of
Buyer and Buyer Subsidiary and is enforceable against Buyer and Buyer
Subsidiary in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
4. Neither the execution and delivery of this Agreement by Buyer
and Buyer Subsidiary, nor the consummation by Buyer or Buyer Subsidiary of the
Merger, will (i) conflict with or result in a breach of the charter documents,
by-laws, or limited liability company operating agreement, or similar governing
agreements or documents, as currently in effect, of Buyer or Buyer Subsidiary,
or (ii) except for the requirements under the Hart-Scott-Rodino Act and the
filing of the Certificate of Merger as required by the DGCL, require any filing
with, or consent or approval of, (x) any federal or New York governmental
authority having jurisdiction over any of the business or assets of Buyer or
Buyer Subsidiary or (y) the Secretary of State of Delaware pursuant to the
DGCL, or (iii) violate any federal or New York statute or regulation, or (iv)
violate any injunction, judgment or order which is directly applicable to Buyer
or Buyer Subsidiary is subject, in the case of clauses (ii), (iii), and (iv)
above, where such violation, failure or other circumstances would not,
individually or in the aggregate, have a material adverse effect on the ability
of Buyer or Buyer Subsidiary to consummate the Merger.
5. Upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, the Merger will be effective in
accordance with the terms and provisions of the Certificate of Merger, the
Agreement, and the laws of the State of Delaware.
