<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) December 29, 1995
-----------------------------
LADD FURNITURE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
North Carolina 0-11577 56-1311320
==========================================================================================================================
<S> <C> <C>
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
==========================================================================================================================
</TABLE>
One Plaza Center, Box HP-3, High Point, North Carolina 27261-1500
===============================================================================
(Address of principal executive offices) (Zip Code)
===============================================================================
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (910) 889-0333
--------------------------
N/A
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not Applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 29, 1995, LADD Furniture, Inc. ("LADD") sold 100%
of the stock of its wholly-owned subsidiary, Brown Jordan Company ("Brown
Jordan"), to BJCL, Inc. (the "Purchaser") for $14,000,000 in cash and an equity
interest, on a fully diluted basis, of approximately 12% in the Purchaser. The
Purchaser is controlled by Hancock Park Associates, an investment firm based
in California. Prior to the transaction, LADD had no affiliation with the
Purchaser or Hancock Park Associates.
As a condition to the sale of the stock of Brown Jordan,
Cherry Grove, Inc., a subsidiary of LADD, sold intellectual property assets
related to the business of Brown Jordan for $10,000,000 in cash to BJIP, Inc.
The sale of intellectual property assets was consummated on December 29, 1995,
concurrent with the sale of the stock of Brown Jordan. BJIP, Inc. is an
affiliate of the Purchaser and Hancock Park Associates. Prior to the
transaction, LADD and Cherry Grove, Inc. had no affiliation with BJIP, Inc.
On December 29, 1995, LADD sold substantially all of the
assets of its Lea Lumber & Plywood division to Lea Lumber & Plywood, LLC (the
"Purchaser") for approximately $4,000,000 in cash and a $1,000,000 Term Note
(the "Note"). The Note is payable in quarterly installments of interest only
with the remaining unpaid principal and interest due in two years. The Note
bears interest at 12%. The Purchaser is affiliated with The Springfield Group, a
manufacturer of wood products, based in Oregon. Prior to the transaction, LADD
had no affiliation with the Purchaser or The Springfield Group.
See pro forma financial statements reflecting the dispositions
as referenced from Item 7.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not Applicable.
ITEM 5. OTHER EVENTS.
Not Applicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not Applicable.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
a) Pro Forma Financial Information
Unaudited Pro Forma Condensed Financial Information
Unaudited Pro Forma Condensed Statement of
Operations--For The Year Ended December 31, 1994
Unaudited Pro Forma Condensed Statement of
Operations--For The Nine Months Ended
September 30, 1995
Unaudited Pro Forma Condensed Balance Sheet--
September 30, 1995
Notes to Unaudited Pro Forma Condensed Statement of
Operations--For The Year Ended December 31, 1994
Notes to Unaudited Pro Forma Condensed Statement of
Operations--For The Nine Months Ended
September 30, 1995
Notes to Unaudited Pro Forma Condensed Balance
Sheet--September 30, 1995
b) Exhibits
2.1 Stock Purchase Agreement dated November 7,
1995 between LADD Furniture, Inc. and BJCL,
Inc.
2.2 First Amendment to Stock Purchase Agreement
dated December 29, 1995
2.3 Agreement of Sale by and between BJIP, Inc.
and Cherry Grove, Inc. dated December 29,
1995
2.4 Asset Purchase Agreement dated November 6,
1995 between LADD Furniture, Inc. and Lea
Lumber & Plywood, LLC
2.5 First Amendment to Asset Purchase Agreement
dated December 29, 1995
ITEM 8. CHANGE IN FISCAL YEAR.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
LADD FURNITURE, INC.
Date: January 16, 1996 By: /s/William S. Creekmuir
-----------------------
William S. Creekmuir
Title: Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
<PAGE>
UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION
The following unaudited pro forma condensed statements of operations for the
year ended December 31, 1994 and the nine months ended September 30, 1995 and
the unaudited pro forma condensed balance sheet as of September 30, 1995 give
effect to the sale of 100% of the stock of Brown Jordan Company (Brown Jordan)
and related intellectual property owned by Cherry Grove, Inc., the sale of
certain assets of Lea Lumber and Plywood, a division of LADD (Lea Lumber)
(together, the "divested companies"), and other adjustments and assumptions
described in the notes to such condensed statements, as if the transactions
had occurred at the beginning of the year ended December 31, 1994, in
the case of the Statements of Operations, and at September 30, 1995, in
the case of the Balance Sheet.
The unaudited pro forma condensed financial information relating to the divested
companies is based on the audited historical consolidated financial statements
of LADD for the year ended December 31, 1994, the unaudited historical financial
statements of the divested companies for the year ended December 31, 1994, the
unaudited historical consolidated financial statements of LADD as of and for the
nine months ended September 30, 1995, and the unaudited historical financial
statements of the divested companies as of and for the nine months ended
September 30, 1995. The unaudited pro forma condensed financial information
gives effect to the sale price of $14,000,000 cash and a 12% interest, on a
fully diluted basis, in BJCL, Inc., the purchaser of Brown Jordan, for the
common stock of Brown Jordan, and $10,000,000 cash for related intellectual
property of Cherry Grove, Inc. licensed to Brown Jordan, less
transaction expenses and cash required to repurchase leased intellectual
property of approximately $2,040,000. BJCL, Inc. also owns Casual Living
Worldwide, an importer and marketer of casual outdoor furniture.
Additionally, the unaudited pro forma condensed financial information gives
effect to the sale of inventories, property, plant and equipment and timber
tracts of Lea Lumber for cash of approximately $4,000,000 and a $1,000,000
subordinated note, less transaction expenses, to Lea Lumber & Plywood, LLC, an
affiliate of The Springfield Group.
The net cash proceeds from the sales of the divested companies has been applied
to reduce LADD's long-term debt. Any gains or losses resulting from the sales of
the divested companies are excluded from the unaudited pro forma condensed
statements of operations.
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the year ended December 31, 1994
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------------------------- -----------------------------
Divested
LADD Furniture, Inc. Companies Sale Pro Forma
and Subsidiaries and Subsidiaries (1) Adjustments Results
------------------ ------------------ ---------- -------------
<S> <C> <C> <C> <C>
Net sales $591,575 49,361 542,214
Cost of sales 481,994 35,519 446,475
------------------ ------------------ ---------- -------------
Gross profit 109,581 13,842 0 95,739
------------------ ------------------ ---------- -------------
Selling, general, and administrative expenses 93,911 8,977 84,934
------------------ ------------------ ---------- -------------
Operating income 15,670 4,865 0 10,805
------------------ ------------------ ---------- -------------
Other (income) deductions:
Interest expense 8,939 866 (708) (2) 7,365
Other, net 1,714 (225) (120) (3) 1,819
------------------ ------------------ ---------- -------------
10,653 641 (828) 9,184
------------------ ------------------ ---------- -------------
Earnings before income taxes 5,017 4,224 828 1,621
Income tax expense 709 597 117 (4) 229
------------------ ------------------ ---------- -------------
Net earnings $4,308 3,627 711 1,392
================== ================== ========== =============
Net earnings per common share $0.56 0.18
================== =============
Weighted average common shares outstanding 7,696,689 7,696,689
================== =============
</TABLE>
See notes to unaudited pro forma condensed statement of operations for the year
ended December 31, 1994.
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the nine months ended September 30, 1995
(Dollar amounts in thousands, except share data)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------ -----------------------------
Divested
LADD Furniture, Inc. Companies Sale Pro Forma
and Subsidiaries and Subsidiaries (1) Adjustments Results
------------------ ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales $461,521 41,471 420,050
Cost of sales 390,601 30,726 359,875
------------------ ------------------ ----------- ------------
Gross profit 70,920 10,745 0 60,175
------------------ ------------------ ----------- ------------
Selling, general, and administrative expenses 75,553 7,155 (359) (2) 68,039
Restructuring expense 25,696 (3) 25,696
------------------ ------------------ ----------- ------------
Operating income (loss) (30,329) 3,590 359 (33,560)
------------------ ------------------ ----------- ------------
Other (income) deductions:
Interest expense 8,646 1,006 (569) (4) 7,071
Other, net 3,024 (238) (90) (5) 3,172
------------------ ------------------ ----------- ------------
11,670 768 (659) 10,243
------------------ ------------------ ----------- ------------
Earnings (loss) before income taxes (41,999) 2,822 1,018 (43,803)
Income tax expense (benefit) (16,591) 1,115 402 (6) (17,304)
------------------ ------------------ ----------- ------------
Net earnings (loss) ($25,408) 1,707 616 (26,499)
================== ================== =========== ============
Net loss per common share ($3.29) (3.43)
================== ============
Weighted average common shares outstanding 7,718,722 7,718,722
================== ============
</TABLE>
See notes to unaudited pro forma condensed statement of operations for the nine
months ended September 30, 1995.
<PAGE>
LADD FURNITURE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
September 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------------------------- --------------------------------
Divested
LADD Furniture, Inc. Companies Sale Pro Forma
and Subsidiaries and Subsidiaries (1) Adjustments Results
--------------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash $2,913 2,913
Trade accounts receivable, net 45,337 45,337
Inventories 86,313 86,313
Prepaid expenses and other current assets 10,520 (177)(5) 10,343
--------------- ---------------- -------------- ------------
Total current assets 145,083 0 (177) 144,906
--------------- ---------------- -------------- ------------
Property, plant, and equipment, net 82,567 82,567
Businesses held for sale, net 32,587 21,123 690 (3) 12,154
Intangible and other assets, net 76,631 3,200 (2) 79,831
=============== ================ ============== ============
Total assets $336,868 21,123 3,713 319,458
=============== ================ ============== ============
Current liabilities:
Current installments of long-term debt $558 558
Short-term bank note 2,450 2,450
Trade accounts payable 26,517 250 (3) 26,767
Accrued expenses and other current liabilities 30,629 2,395 (3) 33,024
--------------- ---------------- -------------- ------------
Total current liabilities 60,154 0 2,645 62,799
--------------- ---------------- -------------- ------------
Long-term debt, excluding current installments 140,182 21,123 (6,877)(4) 112,182
Deferred items and other liabilities 11,308 1,179 (5) 11,944
(543)(6)
--------------- ---------------- -------------- ------------
Total liabilities 211,644 21,123 (3,596) 186,925
--------------- ---------------- -------------- ------------
Shareholders' equity 125,224 7,309 (7) 132,533
--------------- ---------------- -------------- ------------
Total liabilities and shareholders' equity $336,868 21,123 3,713 319,458
=============== ================ ============== ============
</TABLE>
See notes to unaudited pro forma condensed balance sheet at September 30, 1995.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(1) Divested companies include Brown Jordan Company and subsidiaries,
intellectual property owned by Cherry Grove, Inc. and licensed to Brown
Jordan, and Lea Lumber & Plywood, a division of LADD Furniture, Inc.
(2) To adjust interest expense to reflect the repayment of long-term debt
utilizing the net cash proceeds from the sales of the divested companies,
less interest assessed to the divested companies.
(3) To record interest income on the note receivable recorded in connection
with the sales of the divested companies.
(4) To record the income tax effect of pro forma sale adjustments based on
LADD's effective income tax rate.
(5) Any gain (loss) resulting from the sales of the divested companies is not
included in the unaudited pro forma condensed statement of operations.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(1) Divested companies include Brown Jordan Company and subsidiaries,
intellectual property owned by Cherry Grove, Inc. and licensed to Brown
Jordan, and Lea Lumber & Plywood, a division of LADD Furniture, Inc.
(2) To reverse the lease expense related to patents licensed to Brown Jordan
Company by Cherry Grove, Inc. and sold by Cherry Grove, Inc. on December
28, 1994 and leased back.
(3) The provision for restructuring expense relating to the divested
companies that were recorded in LADD's historical consolidated financial
statements are considered to be nonrecurring and therefore not reflected
as a pro forma sale adjustment.
(4) To adjust interest expense to reflect the repayment of long-term debt
utilizing the net cash proceeds from the sales of the divested companies,
less interest assessed to the divested companies.
(5) To record interest income on the note receivable recorded in connection
with the sales of the divested companies.
(6) To record the income tax effect of pro forma sale adjustments based on
LADD's effective income tax rate.
(7) Any gain (loss) resulting from the sales of the divested companies is not
included in the unaudited pro forma condensed statement of operations.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
BALANCE SHEET
SEPTEMBER 30, 1995
(1) Divested companies include Brown Jordan Company and subsidiaries,
intellectual property owned by Cherry Grove, Inc. and licensed to Brown
Jordan, and Lea Lumber & Plywood, a division of LADD Furniture, Inc.
(2) To record the investment in BJCL, Inc. and the note receivable resulting
from the sales of the divested companies.
(3) To provide for current and future costs associated with the sales of the
divested companies including transaction expenses, environmental costs,
pension benefits, and other miscellaneous expenses; and to reclassify
accounts payable and accrued liabilities retained in connection with the
sales of divested companies included on LADD's historical balance sheet
in businesses held for sale, net.
(4) To repay long-term debt from the net cash proceeds from the sales of the
divested companies.
(5) To adjust deferred tax balances as a result of the sales of the divested
companies.
(6) To reverse the deferred gain related to patents licensed to Brown Jordan
Company by Cherry Grove, Inc. and sold by Cherry Grove, Inc. on December
28, 1994 and leased back.
(7) To adjust retained earnings as a result of the sales of the divested
companies.
<PAGE>
STOCK PURCHASE AGREEMENT
between
LADD FURNITURE, INC.,
and
BJCL, INC.
Dated as of November 7, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1: SALE AND PURCHASE OF SHARES................................................................ 1
1.1 Sale and Purchase of Shares.......................................................... 1
1.2 Closing.............................................................................. 2
1.3 Delivery of Shares................................................................... 2
1.4 Payment of Purchase Price............................................................ 2
ARTICLE 2: REPRESENTATIONS AND WARRANTIES............................................................. 4
2.1 Representations and Warranties as to the Company..................................... 4
2.1.1 Corporate Status............................................................ 4
2.1.2 Capitalization.............................................................. 5
2.1.3 Conflicts, Consents......................................................... 5
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities..................................................... 6
2.1.5 No Liens.................................................................... 7
2.1.6 Accounts Receivable......................................................... 8
2.1.7 Inventories................................................................. 8
2.1.8 Real Property............................................................... 8
2.1.9 Insurance................................................................... 10
2.1.10 Litigation................................................................... 10
2.1.11 Compliance with Laws, Permits................................................ 10
2.1.12 Tax Matters.................................................................. 11
2.1.13 Brokers, Finders............................................................. 12
2.1.14 Absence of Certain Changes................................................... 12
2.1.15 Material Agreements.......................................................... 14
2.1.16 Compliance with ERISA........................................................ 16
2.1.17 Intellectual Property........................................................ 22
2.1.18 Labor Matters................................................................ 22
2.1.19 No Material Liabilities...................................................... 23
2.1.20 No Judgments or Orders....................................................... 23
2.1.21 Bank Accounts................................................................ 23
2.1.22 Affiliate Transactions....................................................... 23
2.1.23 Disclosure................................................................... 24
2.1.24 Assets Necessary for Operations/Condition of Properties...................... 24
2.1.25 Questionable Payments........................................................ 24
2.1.26 Principal Customers and Suppliers............................................ 25
2.1.27 Product Returns.............................................................. 25
2.1.28 Product Warranty............................................................. 25
i
<PAGE>
2.2 Representations and Warranties of LADD............................................... 26
2.2.1 Authorization, etc.......................................................... 26
2.2.2 Conflicts and Consents...................................................... 26
2.2.3 Title to Shares, etc........................................................ 27
2.2.4 Litigation.................................................................. 27
2.2.5 Brokers, Finders............................................................ 27
2.3 Representations and Warranties of Purchaser.......................................... 28
2.3.1 Purchaser's Corporate Status................................................ 28
2.3.2 Authorization, etc.......................................................... 28
2.3.3 Conflicts, Consents......................................................... 28
2.3.4 Brokers, Finders............................................................ 29
2.3.5 Purchase for Investment..................................................... 29
2.3.6 Financing................................................................... 29
ARTICLE 3: CERTAIN COVENANTS.......................................................................... 29
3.1 Access and Information............................................................... 29
3.2 Conduct of Business of the Company................................................... 30
3.3 Efforts to Consummate Transaction.................................................... 31
3.4 Employee Matters..................................................................... 31
3.5 Consents and Approvals; Releases..................................................... 36
3.6 Purchase of Intellectual Property.................................................... 37
3.7 Tax Matters................................................................................... 37
3.8 Intercompany Debt.................................................................... 39
3.9 Non-Solicitation..................................................................... 39
3.10 Evidence of Insurance. ............................................................. 39
3.11 Noncompetition....................................................................... 39
3.12 Nondisclosure........................................................................ 40
3.13 Liquidation.......................................................................... 41
ARTICLE 4: CONDITIONS PRECEDENT....................................................................... 41
4.1 Conditions to Obligations of Purchaser............................................... 41
4.1.1 Representations, Performance, etc........................................... 41
4.1.2 Opinion of Counsel.......................................................... 42
4.1.3 Resignation of Directors and Officers....................................... 42
4.1.4 Certain Approvals, etc...................................................... 42
4.1.5 No Injunction............................................................... 42
4.1.6 No Liens.................................................................... 42
4.1.7 No Material Adverse Changes................................................. 43
ii
<PAGE>
4.1.8 Transfer of Cherry Grove Intellectual Property.............................. 43
4.1.9 Intercompany Debt........................................................... 43
4.1.10 Notification of Maytag Corporation............................................ 43
4.1.11 Corporate Action.............................................................. 43
4.1.12 Delivery of Audit Opinion. .................................................. 43
4.1.13 Title Policies................................................................ 44
4.2 Conditions to Obligations of Sellers................................................. 44
4.2.1 Representations, Performance, etc........................................... 44
4.2.2 Opinion of Counsel.......................................................... 45
4.2.3 Certain Approvals, etc...................................................... 45
4.2.4 No Injunction............................................................... 45
4.2.5 Purchase Price.............................................................. 45
4.2.6 Guaranties.................................................................. 45
4.2.7 Transfer of Cherry Grove Intellectual Property.............................. 45
4.2.8 Notification of Maytag Corporation.......................................... 46
4.2.9 Intercompany Debt........................................................... 46
4.2.10 Corporate Action............................................................ 46
ARTICLE 5: TERMINATION................................................................................ 46
5.1 Grounds for Termination.............................................................. 46
5.1.1 Termination by LADD......................................................... 46
5.1.2 Termination by Purchaser.................................................... 46
5.2 Effect of Termination................................................................ 47
ARTICLE 6: INDEMNIFICATION............................................................................ 47
6.1 Indemnification by LADD.............................................................. 47
6.2 Indemnification by Purchaser................................................ 49
6.3 Notice of Claims............................................................ 50
6.4 Third Party Claims.......................................................... 51
6.5 Environmental Matters....................................................... 53
ARTICLE 7: MISCELLANEOUS
7.1 Survival............................................................................. 59
7.2 Expenses............................................................................. 59
7.3 Assignment; Successors; Parties in Interest.......................................... 60
7.4 Amendment and Modification........................................................... 60
iii
<PAGE>
7.5 Access After Closing................................................................. 60
7.6 Best Efforts......................................................................... 61
7.7 Knowledge............................................................................ 61
7.8 Notices.............................................................................. 61
7.9 Public Announcement.................................................................. 62
7.10 Captions............................................................................. 62
7.11 Entire Agreement..................................................................... 62
7.12 Counterparts......................................................................... 63
7.13 Severability......................................................................... 63
7.14 Arbitration.......................................................................... 63
7.15 Confidential Nature of Information................................................... 63
7.16 Schedules and Exhibits............................................................... 64
7.17 Definitions.......................................................................... 64
7.18 Governing Law........................................................................ 70
iv
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 2.1.1 Subsidiaries
Schedule 2.1.2 Capitalization
Schedule 2.1.3 Required Consents
Schedule 2.1.4 Financial Statements/Material Changes/Undisclosed Liabilities
Schedule 2.1.5 Liens
Schedule 2.1.6 Accounts Receivable Aging
Schedule 2.1.8 Real Property (Owned and Leased)
Schedule 2.1.9 Insurance
Schedule 2.1.10 Litigation
Schedule 2.1.11 Noncompliance with Laws
Schedule 2.1.12 Tax Matters
Schedule 2.1.14 Absence of Certain Changes
Schedule 2.1.15 Material Agreements
Schedule 2.1.16 Employee Benefit Plans
Schedule 2.1.17 Intellectual Property
Schedule 2.1.18 Labor Matters
Schedule 2.1.21 Bank Accounts
Schedule 2.1.22 Affiliate Transactions
Schedule 2.1.24 Fixed Assets
Schedule 2.1.26 Principal Customers and Suppliers
Schedule 2.1.27 Product Returns
Schedule 2.1.28 Product Warranty
Schedule 3.2 Conduct of Business
Schedule 3.5 Guaranties
Schedule 3.6 Cherry Grove Intellectual Property
Schedule 6.5 Environmental
Schedule 7.7 Knowledge
Schedule 7.17 Permitted Liens
Exhibit A Form of Opinion of LADD's Counsel
Exhibit B Form of Opinion of Purchaser's Counsel
Exhibit C Agreement of Sale (Cherry Grove Intellectual Property)
Exhibit D Maytag Agreement
Exhibit E Assignment and Assumption Agreement
</TABLE>
v
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 7, 1995 (the
"Agreement"), between LADD Furniture, Inc., a North Carolina corporation
("LADD") and BJCL, Inc., a Delaware corporation (the "Purchaser").
W I T N E S S E T H
WHEREAS, LADD owns all of the issued and outstanding capital
stock of Brown Jordan Company, a North Carolina corporation and a wholly owned
subsidiary of LADD (together with its Subsidiaries unless the context requires
in Section 2.1.1 and 2.1.2, the "Company"), consisting of 10,000 shares of
Common Stock, par value $1.00 per share (the "Shares");
WHEREAS, LADD wishes to sell the Shares to the Purchaser, and
the Purchaser wishes to purchase the Shares from LADD, on the terms and
conditions and for the consideration set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made
herein and of the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Subject to all of the terms
and conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Closing provided for in Section 1.2, (a)
LADD will sell to the Purchaser the Shares, and (b) the Purchaser will purchase
from LADD the Shares for the Purchase Price, free and clear of all Liens (as
defined in Section 7.17). The Shares shall be delivered by LADD as provided in
Section 1.3, and such Purchase Price shall be paid by the Purchaser as provided
in Section 1.4.
<PAGE>
1.2 Closing. The closing of the purchase and sale of the
Shares contemplated hereby (the "Closing") will take place at the offices of
Petree Stockton, L.L.P., Winston-Salem, North Carolina at 9:00 a.m., on December
15, 1995 or at such other place, time or date as the parties hereto may agree in
writing (the "Closing Date"), subject to Section 5.1.
1.3 Delivery of Shares. At the Closing, LADD will transfer to
the Purchaser, against payment of the Purchase Price therefor as provided in
Section 1.4, good, marketable and valid title to the Shares, free and clear of
any Liens, by delivering to the Purchaser certificate(s) for such Shares, duly
endorsed in blank or accompanied by a stock power or other proper instrument of
assignment duly executed in blank, and having all requisite stock transfer
stamps attached.
1.4 Payment of Purchase Price.
(a) Estimated Purchase Price. At the Closing, Purchaser shall
pay $16,600,000 (the "Estimated Purchase Price") to LADD in cash or other
immediately available funds.
(b) Purchase Price Adjustment. (x) Delivery and Review of
Effective Date Balance Sheet. As promptly as practicable, but not later than 10
days after the Effective Date, the Company will cause to be prepared and
delivered to LADD and the Purchaser (i) the Effective Date Balance Sheet and
(ii) a certificate of the vice president/controller of the Company, setting
forth the Effective Date Working Capital, together with supporting calculations
in reasonable detail (the "Adjustment Certificate"). The Purchaser and LADD
shall be given an opportunity to discuss with the Company matters relating to
the determination of Effective Date Working Capital. LADD and Purchaser shall
have 30 days from the date on which the Effective Date Balance Sheet and the
Adjustment Certificate are delivered to review such documents (the "Review
Period"). LADD and Purchaser shall be provided with full access to the work
papers of the Company in connection with such review. If LADD or the Purchaser
asserts that the Effective Date Balance Sheet or the Adjustment Certificate are
not materially
2
<PAGE>
correct or that the determination of Effective Date Working Capital was arrived
at other than in accordance with GAAP applied on a basis consistent with
accounting principles used in the preparation of the Audited Balance Sheet, the
objecting party may, on or prior to the last day of the Review Period, deliver a
notice to the other party setting forth, in reasonable detail, the basis for the
disagreement therewith, together with supporting calculations (the "Dispute
Notice"). If no Dispute Notice is received by either party on or prior to the
last day of the Review Period, the Effective Date Balance Sheet and the
Adjustment Certificate shall be deemed accepted by both parties.
(y) Disputes. Within 30 days after delivery of the Dispute
Notice, if the Purchaser and LADD shall be unable, despite their reasonable
efforts to resolve the dispute set forth in the Dispute Notice, the Purchaser
and LADD shall jointly retain a nationally recognized firm of independent public
accountants mutually acceptable to them. Such independent firm shall review the
Effective Date Balance Sheet (and, if necessary or appropriate in their
judgment, any related Company work papers), the Adjustment Certificate and the
Dispute Notice, and shall, as promptly as practicable and in no event later than
45 days following the date of their engagement, deliver to LADD and the
Purchaser a report (the "Adjustment Report") setting forth, in reasonable
detail, their determination with respect to the issues specified in the Dispute
Notice, and the revisions, if any, to be made to the Effective Date Balance
Sheet, the Adjustment Certificate and the calculation of Effective Date Working
Capital to reflect such determination, together with supporting calculations.
The Adjustment Report shall be final and binding upon the Purchaser and LADD.
LADD shall pay one-half, and the Purchaser shall pay one-half, of the fees and
expenses of such independent firm incurred in preparing and delivering such
Adjustment Report.
(z) Adjustment and Payment. To the extent Effective Date
Working Capital is less than Audited Working Capital minus $100,000, LADD shall
pay to Purchaser such deficit amount as a reduction in Purchase Price. To the
extent Effective Date Working Capital is greater than Audited Working Capital
plus $100,000, Purchaser shall pay such excess to LADD as additional Purchase
Price. Any adjustment to the Purchase Price pursuant to this Section 1.4 shall
be paid two business days after the date on which the Adjustment Report is
delivered to
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LADD and the Purchaser or, if no Dispute Notice is received by either party on
or prior to the last day of the Review Period, then on the business day
following the last day of the Review Period. Any such payment shall be made in
cash or by wire transfer of immediately available funds to an account designated
by the party to receive such payment. The Estimated Purchase Price as reduced or
increased, if at all, pursuant to this Section 1.4(b) shall be deemed to be the
Purchase Price of the Shares (the "Purchase Price").
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to the Company. LADD
represents and warrants to the Purchaser as of the date hereof as follows:
2.1.1 Corporate Status. (a) Corporate existence. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of North Carolina and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. The Company is duly qualified and in good standing as a
foreign corporation duly authorized to do business in all jurisdictions in which
the failure to be so qualified would have a Material Adverse Effect (as defined
in Section 7.17 hereof, along with other capitalized terms not otherwise defined
herein).
(b) Each of the subsidiaries of the Company listed on Schedule
2.1.1 (the "Subsidiaries") is a corporation duly organized, validly existing and
in good standing under the laws of the state of its organization set forth on
Schedule 2.1.1 with the corporate power and authority to own, lease and operate
its properties and conduct its business as now being conducted. Except as set
forth on Schedule 2.1.1, the Company has no subsidiaries and owns no interest in
any other entities for purposes of consolidated financial reporting. Each of the
Subsidiaries is duly qualified and in goodstanding as a foreign corporation duly
authorized to do business in all jurisdictions in which the failure to be so
qualified would have a Material Adverse Effect. The mergers of BJ Mexico I,
Inc., BJ Mexico II, Inc. and BJ Mexico III, Inc. into BJ
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Mexico V, Inc. effective May 25, 1993 were accomplished in compliance with all
applicable laws and resulted in BJ Mexico V, Inc. assuming all of the rights and
liabilities of BJ Mexico I, Inc., BJ Mexico II, Inc. and BJ Mexico III, Inc.
(c) Corporate Records. LADD has delivered to the Purchaser
complete and correct copies, as in effect on the date hereof, of the Articles of
Incorporation and Bylaws of the Company and the Subsidiaries and all amendments
to each thereof. The Purchaser has been given the opportunity to inspect the
corporate minute and stock transfer books of the Company.
2.1.2 Capitalization. (a) Capital Stock. The authorized
capital stock of the Company consists of 100,000 shares of Common Stock, par
value $1.00 per share (the "Common Stock"), of which 10,000 shares are issued
and outstanding, and the Company has no authority to issue any other capital
stock. The authorized capital stock of each of the Subsidiaries, the number of
shares issued and outstanding, and the beneficial owner of such shares are
listed on Schedule 2.1.2 hereto. The Shares, constituting all of the issued and
outstanding capital stock of the Company, have been duly authorized and validly
issued, and are fully paid and nonassessable, are held of record by LADD, have
not been issued in violation of any preemptive rights, rights of first refusal
or similar rights, and were offered and sold in compliance with all applicable
securities laws.
(b) Agreements with Respect to Common Stock. There are no
preemptive or similar rights on the part of any holder of any Shares. No
options, warrants, conversion or other rights, agreements, commitments,
arrangements or understandings of any kind obligating the Company, contingently
or otherwise, to issue or sell any shares of its Common Stock or any securities
convertible into or exchangeable for any such shares or any other securities,
are outstanding, and no authorization therefor has been given.
2.1.3 Conflicts, Consents. (a) Conflicts. Except as set forth
on Schedule 2.1.3, the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby in the manner contemplated
hereby, will not (x) result in the creation of
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any Lien upon any assets or properties of the Company; or (y) conflict with or
result in any violation of or default under (or any event that, with notice or
lapse of time or both, would constitute a default under), require any consent,
notice or other action under, or result in the acceleration or required
prepayment of any indebtedness pursuant to the terms of, any provision of (i)
the Articles of Incorporation or Bylaws of the Company (ii) any mortgage,
indenture, loan agreement, note, bond, deed of trust, other agreement,
commitment or obligation for the borrowing of money or the obtaining of credit,
material lease or other material agreement, contract, license, franchise, permit
or instrument to which the Company is a party or by which the Company or its
properties may be bound, or (iii) any judgment, order, decree, law, statute,
rule or regulation applicable to the Company, which failure to receive such
consent would have a Material Adverse Effect on the Company.
(b) Consents. Other than filings required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and except
as set forth in Schedule 2.1.3, no material consent, approval, authorization,
permit, order, filing, registration or qualification of or with any court,
governmental authority or third person is required to be obtained by the Company
or LADD (whether under applicable law, pursuant to agreements to which the
Company is a party, or otherwise) in connection with the execution and delivery
of this Agreement or the consummation by LADD of the transactions contemplated
hereby in the manner contemplated hereby.
2.1.4 Financial Information, Material Adverse Change,
Undisclosed Liabilities. (a) Financial Statements. LADD has delivered to the
Purchaser unaudited statements of operations, retained earnings (deficit) and
cash flows of the Company for the fiscal years ended January 1, 1994 and
December 31, 1994 and unaudited balance sheets of the Company as of such dates
(the "Annual Financials") in each case prepared from and in accordance with the
books and records of the Company as of, and for the period ended on, such date
and representing only bona fide transactions. LADD also has delivered to the
Purchaser an unaudited statement of operations for the nine (9) month period
ended September 30, 1995 and an unaudited balance sheet of the Company as of
September 30, 1995 (the "Interim Financials"),
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prepared from and in accordance with the books and records of the Company as of,
and for the period ended on, such date and representing only bona fide
transactions. The Annual Financials and Interim Financials are set forth in
Schedule 2.1.4. The Annual Financials and the Interim Financials have been
prepared in accordance with generally accepted accounting principles ("GAAP")
and accounting practices utilized by subsidiaries and divisions of LADD
disclosed in the footnotes to the Annual Financials and the Interim Financials,
consistently applied throughout the periods indicated and present fairly the
financial condition of the Company at the respective dates indicated and the
results of operations and (in the case of the Annual Financials) cash flows of
the Company for the respective periods indicated, except that the Interim
Financials are subject to year-end audit adjustments.
(b) Material Adverse Effect. Except as disclosed on Schedule
2.1.4, since September 30, 1995, there has been no change in the business,
financial condition, properties, liabilities, operations or prospects of the
Company that has had or could reasonably be expected to have a Material Adverse
Effect on the Company.
(c) Undisclosed Liabilities. Except (i) as and to the extent
reflected in the unaudited balance sheet of the Company as of December 31, 1994
included in the Annual Financials or in the notes to the Annual Financials for
the year then ended, and (ii) as disclosed in Schedule 2.1.4, as of December 31,
1994, there were no other liabilities or obligations, secured or unsecured
(whether absolute, accrued, known or unknown, contingent or otherwise, and
whether due or to become due) that has had or could reasonably be expected to
have a Material Adverse Effect on the Company. Since December 31, 1994, the
Company has not incurred any liabilities or obligations of any nature (whether
accrued, absolute, known or unknown, contingent or otherwise, and whether due or
to become due) except (x) as and to the extent reflected in the Interim
Financials, (y) as disclosed in Schedule 2.1.4, or (z) nonmaterial current
liabilities incurred in the ordinary course of business consistent with past
practice.
2.1.5 No Liens. The Company has good and marketable title to,
and owns free and clear of any Liens, except for Permitted Liens, all of the
personal property reflected in the
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Annual Financials and the Interim Financials, and all personal property acquired
by the Company since September 30, 1995, except such personal property as has
been disposed of between such date and the date hereof in the ordinary course of
business, it being understood that a disposition of any asset, other than
inventory or marketable products, carried on the books of the Company at more
than $37,500 shall not be deemed to be a disposition in the ordinary course of
business.
2.1.6 Accounts Receivable. The accounts receivable of the
Company reflected on the Annual Financials and the Interim Financials, and those
that have arisen since September 30, 1995, have arisen from bona fide sales
transactions in the ordinary course of business, and are valid claims
enforceable against the account debtor. Schedule 2.1.6 contains a true and
complete aging of the Company's accounts receivable as of September 30, 1995.
2.1.7 Inventories. The inventories of the Company are fit and
sufficient in all material respects for the purposes for which they were
purchased or manufactured, except for inventories for which adequate reserves
have been provided and reflected in the Annual Financials and the Interim
Financials. The amounts shown for inventories on the Annual Financials and the
Interim Financials reflect valuations at the lower of cost or market and are not
in excess of the value of such inventories computed in accordance with GAAP and
accounting practices utilized by subsidiaries and divisions of LADD disclosed in
the footnotes to the Annual Financials and the Interim Financials applied on a
consistent basis. The Company owns its inventories free and clear of any Liens.
LADD has no reason to believe that the Company will experience in the
foreseeable future any material difficulties in obtaining, in the desired
quantity and quality, the inventory necessary to conduct its business as it is
currently being conducted.
2.1.8 Real Property. (a) The Company has good and marketable
title in fee simple to the real property, including the plants, buildings and
other improvements thereon, set forth and described in Schedule 2.1.8 hereto
(the "Owned Real Property"), free and clear of any Liens, except for Permitted
Liens.The Owned Real Property constitutes all of the real property
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reflected in the Annual Financials and the Interim Financials and all real
property acquired by the Company since September 30, 1995. LADD has heretofore
furnished Purchaser with true and complete copies of all deeds, other
instruments of title and policies of insurance describing the Company's
ownership of the Owned Real Property, and copies of environmental reports
relating to any real property owned or operated by the Company. Schedule 2.1.8
sets forth all leasehold interests in real property held by the Company at the
Closing Date. The Owned Real Property, including the buildings and operations of
the Company conducted thereon, are in substantial compliance with all applicable
ordinances, regulations and zoning laws and do not encroach on property of
others.
(b) Except as set forth in Schedule 2.1.8:
(i) The Company is not in violation of, or default
under, any legal requirement pertaining to any of the Owned Real Property or
leased real property. No notice of violation of any legal requirement, or of any
covenant, condition, restriction or easement affecting any Owned Real Property
or leased real property or with respect to the use or occupancy thereof, has
been given by any Person;
(ii) All of the structures located on Owned Real
Property and leased real property are supplied with utilities and other services
necessary for the operation of such structures, and the business conducted by
the Company therein, including gas, electricity, water, telephone, sanitary
sewer and storm sewer;
(iii) No condemnation proceeding is pending or, to
the knowledge of LADD, threatened which would impair the occupancy, use or value
of any Owned Real Property or leased real property; and
(iv) There are no (a) leases, subleases, licenses,
concessions or other agreements, written or oral, granting to any other Person
the right to acquire, use or occupy any portion of, any Owned Real Property or
leased real property, (b) outstanding options or rights
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of first refusal to purchase all or any portion of Owned Real Property or
interest therein, and (c) persons (other than the Company) in possession of any
Owned Real Property or leased real property;
2.1.9 Insurance. The assets, properties and business of the
Company are insured under the various policies of general liability and other
forms of insurance, as set forth on Schedule 2.1.9 hereof. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policies has been received by the Company. To the best knowledge of
LADD, such insurance policies provide such coverage against risk of loss in such
amounts as are customary for corporations of established reputation engaged in
similar business as the Company and similarly situated.
2.1.10 Litigation. Except as set forth in Schedule 2.1.10,
there are no actions, suits or proceedings pending or, to the knowledge of LADD,
threatened or any basis for any such actions, suits or proceedings against or
affecting the Company or its respective properties, assets or business.
2.1.11 Compliance with Laws, Permits. (a) Compliance with
Laws. Except as set forth on Schedule 2.1.11, the Company is not, nor previously
has it been, in violation of any applicable laws or regulations or any
applicable orders, rules, writs, judgments, injunctions, decrees or ordinances
applicable to the business or operations of the Company, the violation of which
would have a Material Adverse Effect on the Company.
(b) Permits. All necessary material licenses, permits or
orders with respect to the conduct of the business of the Company have been
obtained by the Company and are in effect as of the date hereof. All material
permits, licenses, orders, registrations, or other approvals of all federal,
state, local or foreign governmental or regulatory bodies, have been obtained,
are set forth on Schedule 2.1.11 hereto, are in full force and effect, and,
there has been neither any violation, suspension or cancellation thereof nor any
basis for any such claim. The consummation of the transactions contemplated by
this Agreement will not result in the
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revocation, suspension or limitation of any material license or permit, nor will
there be required any consent of its respective issuing authority as a result of
the consummation of the transactions contemplated hereby.
2.1.12 Tax Matters. The Company or LADD has timely filed, on
behalf of the Company, all federal, foreign, state and local tax returns and
other tax reports required to be filed by the Company and has paid, or, with
respect to current taxes not yet due and payable, set up an adequate reserve on
the books of the Company for the payment of, all federal, foreign, state and
local income taxes and all other taxes (including, without limitation, all
franchise, gross receipts, license, property, sales, use, excise, intangible,
severance, stamp, occupation, environmental, social security, withholding,
employment, unemployment or payroll taxes, and interest or penalties thereon,
and all such other taxes along with all federal, foreign, state and local income
taxes being defined collectively as "Taxes") required to be paid in respect of
the periods covered by such returns, and has set up an adequate reserve on the
books of the Company for the payment of all Taxes payable by the Company in
respect of the period subsequent to the last of such periods. As of the Closing
Date, such reserve as reflected on the balance sheet included as part of the
Interim Financials will be sufficient for the then-unpaid Taxes of or with
respect to the Company through and including the Closing Date, except as
increased or decreased for normal operational Tax liabilities and consistent
with prior practices for the period between September 30, 1995 and the Closing
Date. All such returns are true, complete and correct. The Company or LADD is
not delinquent in the payment of any Taxes, has not waived any statute of
limitations in respect of Taxes, and has not requested or agreed to any
extension of time within which to file any tax return or report or with respect
to a tax assessment or deficiency. No deficiencies for Taxes have been assessed
or asserted, and except as set forth on Schedule 2.1.12, the Company and LADD
know of no unresolved questions or claims concerning the Tax liability of the
Company. LADD has delivered to Purchaser a true and correct copy of all foreign,
state (except California) and local Tax returns (including amended returns) and
tax audit reports (if any). No transfer taxes will be payable by the Company as
a result of the transactions contemplated hereby other than New York realty
transfer gains tax attributable to the Company's New York showroom lease. Except
as set forth on
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Schedule 2.1.12, there is no pending or, to the knowledge of LADD, threatened
examination or audit by the Internal Revenue Service or any state taxing
authorities of such returns. All proper amounts have been collected or withheld
by the Company for all Taxes payable or anticipated to be payable. Except as set
forth on Schedule 2.1.12, (i) the Company has not been audited by any taxing
authority, (ii) the Company is not and has not previously been a party to a tax
allocation or sharing agreement and has not otherwise assumed any liability for
Taxes of any third party, including as a transferee or successor, whether under
section 1.1502-6 of the Treasury regulations or otherwise, or (iii) the Company
has never been (nor does it have any liability for unpaid taxes because it was)
a member of an affiliated group within the meaning of Internal Revenue Code
Section 1504(a) or any unitary, affiliated or similar group for state, local or
foreign tax purposes.
2.1.13 Brokers, Finders. The Company and LADD have not
retained any broker or finder in connection with the transactions contemplated
hereby so as to give rise to any claim against the Purchaser or the Company for
any brokerage or finder's commission, fee or similar compensation, except that
Dillon, Read & Co. Inc. has acted as financial advisor to LADD and its fees and
expenses will be paid by LADD.
2.1.14 Absence of Certain Changes. Except as set forth in
Schedule 2.1.14, since September 30, 1995, the Company has not:
(a) issued, sold or delivered or agreed to issue, sell or
deliver any additional shares of its capital stock or any options, warrants or
rights to acquire any such capital stock, or securities convertible into or
exchangeable for such capital stock;
(b) mortgaged, pledged or subjected to any lien, lease,
security interest or other charge or encumbrance any of its assets, tangible or
intangible, except in the ordinary course of business;
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(c) acquired or disposed of any material assets or properties,
or entered into any agreement or other arrangements for any such acquisition or
disposition, or entered into or amended or terminated any Material Agreement,
except inventory in the ordinary course of business consistent with past
practice;
(d) declared, made, paid or set apart any sum for any dividend
or other distribution to its shareholders or purchased or redeemed any shares of
its capital stock or any option, warrant or right to purchase any of its capital
stock, or reclassified its capital stock;
(e) increased the wages, salaries, compensation, pension or
other benefits payable to any employee other than in accordance with the normal
compensation and benefits policies of the Company consistent with past practice,
or granted any severance or termination pay, or entered into any employment,
severance or consulting agreement or arrangement with any officer or salaried
employee that is not terminable by the employer without cause and without
penalty or changed any benefit plan or labor agreement except to comply with
applicable law;
(f) forgiven or cancelled any material debts or claims or
waived any material rights of value other than intercompany debts, claims or
rights and other than in the ordinary course of business consistent with past
practice;
(g) suffered any damage, destruction or loss (whether or not
covered by insurance) affecting its properties or assets that could reasonably
be expected to have a Material Adverse Effect on the Company;
(h) suffered any strike or other labor trouble materially
affecting its business or operations;
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(i) suffered or experienced any change in relations with or
loss of any employees or customers that could reasonably be expected to have a
Material Adverse Effect on the Company;
(j) incurred any indebtedness for borrowed money other than
trade indebtedness incurred in the ordinary course of business consistent with
past practice;
(k) changed any pricing practices (other than in the ordinary
course consistent with past practices) or any method of accounting or accounting
practice or policy of the Company;
(l) conducted its business other than in the ordinary course
consistent with past practice, except as required by this Agreement;
(m) settled or compromised any claim, suit or cause of action
involving more than $37,500;
(n) materially altered its collection practices with respect
to accounts receivable;
(o) materially altered its payment practices with respect to
accounts payable;
(p) made any capital expenditures or commitments therefor
outside the ordinary course of business in excess of $37,500 or
(q) agreed to do any of the foregoing.
2.1.15 Material Agreements. Except for the contracts,
franchises, agreements, plans, leases and licenses described in Schedule 2.1.15
hereto, the Company is not a party to or subject to:
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(a) any written employment contract or any other agreement or
arrangement relating to compensation or severance payments with any officer,
consultant, director or employee;
(b) any plan or contract or arrangement providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing or
other benefits for employees;
(c) any contract or agreement with any labor union;
(d) any lease (other than leases of real property described in
Schedule 2.1.8 hereto) involving payment of annual rentals in excess of $37,500;
(e) any contract or agreement for the purchase of any
materials, services, or supplies involving annual payments in excess of $37,500
and of more than one year in duration;
(f) any contract or agreement for the purchase of equipment or
any construction or other contract or agreement, not otherwise covered by this
Section 2.1.15, involving annual payments in excess of $37,500 and of more than
one year in duration;
(g) any contract or agreement for the sale of its products,
exceeding $37,500 on an annual basis and of more than one year in duration;
(h) any contract or agreement with an agent, sales
representative, dealer or other distributor of products of the Company;
(i) any instrument evidencing or related to indebtedness for
money loaned or borrowed by the Company or indebtedness guaranteed by the
Company, in any case in excess of $37,500;
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(j) any contract or agreement, not otherwise covered by this
Section 2.1.15, containing covenants materially limiting the freedom of the
Company (or, to the knowledge of LADD, any key employee of the Company) to
compete in any line of business or with any person;
(k) any license or franchise agreement in which the Company is
the licensor, licensee or franchisor;
(l) any license or franchise agreement in which the Company is
the licensee or franchisee;
(m) any contract or agreement, not of the type covered by any
of the other items of this Section 2.1.15, which involves the payment or receipt
by the Company of $37,500 or more in any one year and which by its terms is
either (i) not to be performed by the Company prior to one year from the date
hereof, or (ii) does not terminate, or is not terminable, by and without penalty
to the Company prior to one year from the date hereof.
LADD has delivered to Purchaser correct and complete copies of
all contracts, franchises, agreements, plans, leases and licenses described in
Schedules 2.1.8 and 2.1.15 (the "Material Agreements"), and all such Material
Agreements are valid and in full force and effect and the Company (or, to the
knowledge of LADD, any other party to such Material Agreements) has not breached
any material provision of, and is not in default in any material respect under
the terms of, any such Material Agreement. Schedules 2.1.8 and 2.1.15 correctly
identifies each Material Agreement which is or might be terminable by any other
party upon the change of control of the Company.
2.1.16 Compliance with ERISA. (a) The term "Plan" shall
include each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or other
medical, life or other insurance pension or retirement, profit sharing, stock
appreciation rights, supplemental unemployment, layoff, consulting, fringe
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benefit (including, but not limited to, vacation, paid holidays, personal leave,
or any similar plan, program, agreement, arrangement, policy or understanding
(other than arrangements involving the payment of wages) sponsored, maintained
or contributed to by the Company or by any trade or business, whether or not
incorporated, that together with the Company or LADD would be deemed a "single
employer" within the meaning of section 4001(a)(14) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder ("ERISA") (an "ERISA Affiliate"), whether or not subject
to the laws of a country or jurisdiction other than the United States, for the
benefit of any current or former employee, director, or independent contractor
of the Company, whether foreign or domestic and whether formal or informal and
whether legally binding or not with respect to which the Company, LADD or any
ERISA Affiliate has or may in the future have any liability or obligation to
contribute or make payments of any kind.
(b) Schedule 2.1.16 contains a true and complete list of each
Plan.
(c) Neither the Company nor any ERISA Affiliate has any formal
plan or commitment, whether legally binding or not, to create any additional
Plan or modify or change any existing Plan that would affect any current or
former employee, director or independent contractor of the Company.
(d) With respect to each of the Plans, the Company has
heretofore delivered to the Purchaser (or will deliver to the Purchaser no later
than 30 days prior to the Closing) true, correct and complete copies of each of
the following documents: (i) the Plans (including all amendments thereto) or, in
the case of unwritten Plans, descriptions thereof, (ii) the three most recent
Form 5500 annual reports, if required under ERISA, including all attachments
thereto, filed with the Internal Revenue Service with respect to each such Plan,
(iii) if the Plan is funded through a trust or any third party funding vehicle,
such as an insurance contract, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements and trust
reports thereof, (iv) the most recent determination letter received from the
Internal Revenue Service with respect to each such Plan that is intended to be
qualified under
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section 401 of the Internal Revenue Code of 1986, as amended (the "Code") as
well as any pending application for a determination letter,(v) the most recent
summary plan descriptions, together with each summary of material modifications,
required under ERISA with respect to such Plan or as otherwise provided to Plan
participants or beneficiaries, and all material employee communications relating
to each Plan, (vi) a copy of the actuarial report, if required under ERISA, with
respect to each such Plan for the last three years, (vii) all contracts relating
to the Plans with respect to which the Company or any ERISA Affiliate may have
any liability, including, without limitation, insurance contracts, investment
management agreements, subscription and participation agreements and record
keeping agreements, and (viii) a copy of all material documents and
correspondence relating to the Plans received from or provided to the Department
of Labor ("DOL"), the IRS, and the Pension Benefit Guaranty Corporation (the
"PBGC") during the past three years.
(e) Each Plan has been administered and operated in all
material respects in accordance with its terms and all applicable laws,
including but not limited to ERISA and the Code.
(f) All reports, returns and similar documents with respect to
the Plans required to be filed with any governmental agency or distributed to
any Plan participant have been duly and timely filed or distributed and, to the
knowledge of LADD, all reports, returns and similar documents actually filed or
distributed were true, complete and correct in all material respects.
(g) No liability under Title IV of ERISA has been incurred by
the Company or any ERISA Affiliate since the effective date of ERISA that has
not been satisfied in full, and no condition exists that presents a material
risk to the Company of incurring a liability under such Title, other than
liability for premiums due the PBGC, which payments have been or will be made
when due. To the extent this representation applies to sections 4064, 4069 or
4204 of Title IV of ERISA, it is made not only with respect to the Plans but
also with respect to any employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to
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which the Company or an ERISA Affiliate made, or was required to make,
contributions during the six year period ending on the Closing Date.
(h) Neither the Company, any ERISA Affiliate, Plan, trust
thereunder, nor any trustee or administrator thereof has engaged in any
transaction in connection with which the Company or any ERISA Affiliate, any of
the Plans, any such trust, or any trustee or administrator thereof, or any party
dealing with the Plans or any such trust could be subject to either civil
liability or a penalty pursuant to section 409, 502(i) or 502(1) of ERISA or a
tax imposed pursuant to Chapter 43 of the Code.
(i) The PBGC has not instituted proceedings to terminate any
of the Plans, no condition exists that presents a material risk that such
proceedings will be instituted and no reportable event (within the meaning of
Section 4043 of ERISA) has occurred or will occur as a result of the
transactions contemplated by this Agreement with respect to any Plan.
(j) No Plan is a "multi-employer plan" (within the meaning of
Section 3(37) of ERISA) or a "multiple employer" plan (within the meaning of
Section 4063 or 4064 of ERISA) and the Company has not and will not incur any
withdrawal liability on account of any ERISA Affiliate. Each Plan that is
intended to be qualified under Section 401(a) of the Code is so qualified, has
received a favorable determination letter from the Internal Revenue Service to
that effect or has a timely application pending for such a determination letter
with the Internal Revenue Service, no such determination letter has been
revoked, and, to the knowledge of LADD, revocation has not been threatened, no
event has occurred and no circumstances exist that would adversely affect the
tax-qualification of such Plan; and such Plan has not been amended since the
effective date of its most recent determination letter in any respect that might
adversely affect its qualification, materially increase its cost or require
security under section 307 of ERISA. The Company has also provided to Purchaser
a list of all amendments to each Plan which is intended to be qualified as to
which a favorable determination letter has not yet been received.
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(k) Except as set forth on Schedule 2.1.10, there are no
pending or, to the knowledge of LADD, threatened claims, investigations by any
governmental agency or other claims against any Plan, the Company, LADD, any
ERISA Affiliate, trustee of any Plan, or administrator of any Plan or otherwise
involving any of the Plans (other than routine claims for benefits) or asserting
any rights to or claims for benefits under any Plan that could give rise to any
material liability and there are not any facts that could give rise to any
material liability in the event of any such investigation, claim, suit or
proceeding.
(l) All contributions required to have been made by the
Company, LADD or any ERISA Affiliate to any Plan pursuant to the terms of each
of the Plans, any applicable collective bargaining agreement, and when
applicable, Section 412 of the Code or Section 302 of ERISA, have been made
within the time prescribed by such terms or provisions. All such amounts
properly accrued through the Closing Date with respect to the current plan year
thereof will be paid by the Company on or prior to the Closing Date or will be
properly recorded on the balance sheet. None of the Plans or any trust
established thereunder had an "accumulated funding deficiency" (as defined in
section 412 of the Code), whether or not waived, as of the last day of its most
recent fiscal year ended prior to the date of this Agreement.
(m) No employee of the Company will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any Plan as a result of the transactions contemplated by this
Agreement, except as provided below in Section 3.4 of this Agreement.
(n) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of Company
or any of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation section 1.280G-1) under any employment
severance or termination agreement, other compensation arrangement or Plan
currently in effect would not be characterized as an "excess parachute payment"
as such term is defined in section 280G(b)(1) of the Code.
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(o) No compensation payable by the Company to any of their
employees under any existing contract, Plan or other employment arrangement
(including by reason of the transactions contemplated hereby) will be subject to
disallowance under section 162(m) of the Code.
(p) No Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company upon retirement or other termination of service
(other than (i) coverage mandated by applicable law, (ii) death benefits or
retirement benefits under any "employee pension plan," as that term is defined
in section 3(2) of ERISA, (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or the ERISA Affiliates or (iv) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary)). The Accumulated Post-Retirement Benefit Obligation (as defined
in Statement of Financial Accounting Standards No. 106) as of December 31, 1994
in respect of post-retirement health and life benefits for the Company's
employees is estimated by the Company's independent actuary to be $0 calculated
using the actuarial assumptions used for the Company's last available annual
report.
(q) Schedule 2.1.16 lists each Plan that is subject to laws of
a country or jurisdiction other than the United States (the "Foreign Plans").
Except as provided in Schedule 2.1.16, all contributions required to be made to
each Foreign Plan for all prior plan years in order for each of the Foreign
Plans which are pension plans (the "Foreign Pension Plans") to comply with the
minimum funding standards imposed by applicable law have been made or properly
accrued. All employee contributions to the Foreign Plans for all prior plan
years have been properly withheld by the Company and have been fully paid into
the applicable funding arrangements. There has been no withdrawal by the Company
of assets from the Foreign Pension Plans and no application for approval of a
withdrawal of assets has been made to any regulatory authority. Each of the
Foreign Pension Plans is registered or qualified within the meaning of
applicable law and nothing has occurred which would result in the revocation of
the registration or qualification of such Foreign Pension Plans. The
representation and warranties
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contained in this Section 2.1.16(q) are in addition to each of the other
representations and warranties contained in Section 2.1.16 that are applicable
to the Foreign Plans.
(r) Other than current or contingent liabilities previously
disclosed on Schedule 2.1.4, the Company, LADD and each ERISA Affiliate has, and
will have, no material current or contingent liability with respect to any Plan.
2.1.17 Intellectual Property. Schedule 2.1.17 contains a list
of all trademarks, patents and patent applications, trade names and copyrights,
whether registered or not, owned or used by the Company or in which it has an
interest by license, agreement, shop right, common law, or otherwise and which
are material to the conduct of its business (the "Intellectual Property"). To
the knowledge of LADD, no third party is engaged in any activity not duly
authorized by the Company or LADD which would constitute an infringement of the
Intellectual Property of the Company. There are no claims or proceedings pending
or, to the knowledge of LADD, threatened against the Company asserting that the
Company has or is infringing the valid patents, copyrights, trademarks or trade
names of any third party. LADD is unaware of any claim by any third party that
the Company does now own or have the right to use all patents (including patents
pending), trademarks, trade names, copyrighted material, processes, designs,
formulas, inventions, trade secrets, know-how, ideas, concepts or other
proprietary or confidential information which are presently used in and are
material to the operation of the Company's business. Except as set forth in
Schedules 2.1.3 and 2.1.17, all of the Intellectual Property listed in Schedule
2.1.17 are fully assignable to the extent permitted by applicable law and, to
the knowledge of LADD, are free and clear of any attachments or Liens.
2.1.18 Labor Matters. Except as set forth on Schedule 2.1.18,
there has been no material work stoppage or slowdown or other material labor
difficulties relating to the Company. Except as set forth on Schedule 2.1.18,
the Company is not a party to any collective bargaining agreement with any labor
union or similar organization, nor does LADD know of any such organization which
represents or claims to represent any of the Company's employees or
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is currently seeking to represent or organize the employees at any of the
principal facilities of the Company.
2.1.19 No Material Liabilities. There are no liabilities of
the Company, other than:
(a) liabilities disclosed or provided for in the Annual
Financials or the Interim Financials;
(b) liabilities incurred or recorded in the ordinary course of
business since September 30, 1995, none of which has been materially adverse to
the business, assets or operations of the Company.
2.1.20 No Judgments or Orders. The Company is not a party to
or subject to any judgment, order or decree entered in any action or proceeding
brought by any governmental agency or any other party either enjoining it in
respect of any business practice or the conduct of business in any area or the
acquisition of any property or which otherwise materially adversely affects the
Company.
2.1.21 Bank Accounts. Schedule 2.1.21 sets forth a list of all
bank accounts, petty cash or imprest funds maintained by the Company, with the
persons authorized to sign thereon. Also included on Schedule 2.1.21 is a list
of safe deposit boxes in the Company's name and the persons authorized to enter
such boxes.
2.1.22 Affiliate Transactions. Except as reflected in the
Annual Financials, the Interim Financials or otherwise set forth in Schedule
2.1.22, there are no transactions involving the Company or LADD or any of their
respective affiliates (which includes officers, directors and key employees)
arising out of any transaction with the Company (other than for services as
employees, officers and directors), and the Company is not subject to any
liability that will survive Closing with respect to any transactions involving
LADD or any of its affiliates
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including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from LADD
or any affiliate of LADD.
2.1.23 Disclosure. To LADD's knowledge, this Agreement, the
Schedules hereto and the certificates and other documents furnished by the
Company or LADD to the Purchaser pursuant hereto, taken as a whole, do not as of
their respective dates contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements contained herein and
therein not misleading.
2.1.24 Assets Necessary for Operations/Condition of
Properties. The real and personal properties of the Company described in
Sections 2.1.6, 2.1.7, 2.1.8 and 2.1.17 and the real property and personal
property held by the Company pursuant to the leases and licenses described in
Schedules 2.1.8, 2.1.17 and 2.1.24 hereto constitute all of the material assets
and properties utilized by the Company in connection with its business and
operations as presently conducted. All material facilities, machinery,
equipment, fixtures, vehicles and other tangible property owned, leased or
utilized by the Company are in good operating condition and repair, normal wear
and tear excepted, are reasonably fit and useable for the purposes for which
they are being used, and, to the knowledge of LADD, will not likely require a
major overhaul or repair in the foreseeable future except in the ordinary course
of business; provided, however, Purchaser acknowledges that the Company's
Newport, Arkansas leased warehouse facility may require repairs.
2.1.25 Questionable Payments. Neither the Company nor, to
LADD's knowledge, any of its directors, officers, agents, employees or other
person associated with or acting on behalf of the Company has (a) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any direct or
indirect unlawful payments to government officials or employees, or foreign
government officials or employees, from corporate funds, (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets,
(d) made any false or fictitious entries on
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the books of account of the Company, (e) made or received any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment, or (f) made any
other material payment, favor or gift not fully deductible for federal income
tax purposes.
2.1.26 Principal Customers and Suppliers.
(a) Schedule 2.1.26 contains a true and complete
list of the ten largest customers of the Company during each of fiscal 1994 and
during the nine months ended September 30, 1995, indicating the amount of
revenues attributable to each such customer, and since that date no such
customer listed for 1995 has terminated its relationship with or adversely
curtailed its purchases from the Company or indicated (for any reason) its
intention so to terminate its relationship or curtail its purchases.
(b) Schedule 2.1.26 also contains a true and
complete list of the ten largest suppliers from whom the Company purchased goods
or services during fiscal 1994 and during the nine months ended on September 30,
1995, indicating the amount purchased from such supplier, and since that date no
such supplier listed for 1995 has terminated its relationship with or adversely
curtailed its accommodations, sales or services to the Company or indicated (for
any reason) its intention to terminate such relationship or curtail its
accommodations, sales or services.
2.1.27 Product Returns. Schedule 2.1.27 contains a true
summary of the product return experience of the Company for the fiscal years
1993 and 1994 and the nine month period ended September 30, 1995. The Company
has not experienced any product returns which have had or may have a Material
Adverse Effect.
2.1.28 Product Warranty. Schedule 2.1.28 contains a true and
complete description of all warranties granted or made with respect to products
sold, or services rendered, by the Company. The Company has not suffered any
product liability or product warranty claims which have had or may have a
Material Adverse Effect.
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2.2 Representations and Warranties of LADD. LADD represents
and warrants to the Purchaser as follows:
2.2.1 Authorization, etc. LADD is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina. LADD has all requisite corporate power and authority to execute
and deliver this Agreement and each of the other agreements, instruments and
documents required to be executed, delivered and performed by LADD hereunder and
to perform fully its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and each such other agreement,
instrument and document and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of LADD. This Agreement has been duly executed and delivered by LADD
and constitutes the legal, valid and binding obligation of LADD enforceable
against LADD in accordance with its terms.
2.2.2 Conflicts and Consents. (a) Conflicts. Except as set
forth in Schedule 2.1.3, the execution, delivery and performance by LADD of this
Agreement and each other agreement, instrument or document required to be
executed and delivered by LADD hereunder, and the consummation by LADD of the
transactions contemplated hereby and thereby, in the manner contemplated hereby
and thereby, do not and will not conflict with or result in the breach of any of
the terms or provisions of, or constitute a default under (or an event that,
with notice or lapse of time or both, would constitute a default under), require
any consent under, or result in the acceleration or required prepayment of any
indebtedness pursuant to the terms of, any provision of (i) the Articles of
Incorporation or Bylaws of LADD, (ii) any material mortgage, indenture, loan
agreement, note, other agreement for the borrowing of money or the obtaining of
credit, deed of trust, will, lease or other material agreement or instrument to
which LADD is a party or by which LADD or the Shares owned by LADD may be bound,
or (iii) any judgment, order, decree, law, statute, rule or regulation
applicable to LADD or to the Shares to be sold by LADD.
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(b) Consents. Other than filings required under the HSR Act
and except as set forth in Schedule 2.1.3, no consent, approval, authorization,
order, filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by LADD in connection with
the execution, delivery and performance by LADD of this Agreement or any other
agreement, instrument or document required to be executed and delivered by LADD
hereunder or consummation by LADD of the transactions contemplated herein or
therein in the manner contemplated hereby or thereby.
2.2.3 Title to Shares, etc. LADD is the record and beneficial
owner of and has good, valid and marketable title to the Shares, free and clear
of any Lien. Upon the delivery of and payment for the Shares at Closing, as
provided for in this Agreement, LADD will transfer to the Purchaser good,
marketable and valid title to the Shares, free and clear of any Lien.
2.2.4 Litigation. There is no action, claim, suit or
proceeding pending or, to the knowledge of LADD, threatened by or against or
affecting LADD and, to the knowledge of LADD, there is no investigation pending
or threatened against or affecting LADD, in each case before any court or
governmental or regulatory authority or body, that could reasonably be expected
to have a material adverse effect on the consummation of the transactions
contemplated by this Agreement or on the ability of LADD to perform its
obligations under this Agreement and each of the other agreements, instruments
and documents required to be executed and delivered by LADD hereunder.
2.2.5 Brokers, Finders. LADD has not retained any broker or
finder in connection with the transactions contemplated hereby so as to give
rise to any claim against the Purchaser or the Company for any brokerage or
finder's commission, fee or similar compensation, except that Dillon, Read & Co.
Inc. has acted as financial advisor to LADD and its fees and expenses will be
paid by LADD at the Closing.
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2.3 Representations and Warranties of Purchaser. The Purchaser
represents and warrants to LADD as of the date hereof as follows:
2.3.1 Purchaser's Corporate Status. The Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.
2.3.2 Authorization, etc. The Purchaser has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of the Purchaser. This Agreement has been duly
executed and delivered by the Purchaser and constitutes the legal, valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms.
2.3.3 Conflicts, Consents. (a) Conflicts. The execution and
delivery of this Agreement by the Purchaser, and the consummation by the
Purchaser of the transactions contemplated hereby in the manner contemplated
hereby, do not and will not conflict with or result in any violation of, or
default under (or any event that, with notice or lapse of time or both, would
constitute a default under), any provision of (i) the Certificate of
Incorporation or Bylaws of the Purchaser, (ii) any mortgage, indenture, loan
agreement, note, bond, deed of trust, other agreement, commitment or obligation
for the borrowing of money or the obtaining of credit, material lease or other
material agreement, contract, license, franchise, permit or instrument to which
the Purchaser is a party or by which it may be bound, or (iii) any judgment,
order, decree, law, statute, rule or regulation applicable to the Purchaser.
(b) Consents. Other than filings required under the HSR Act,
no consent, approval, authorization, permit, order, filing, registration or
qualification of or with any court, governmental authority or third person is
required to be obtained by the Purchaser in connection with the execution and
delivery by the Purchaser of this Agreement or the consummation by the Purchaser
of the transactions contemplated hereby in the manner contemplated hereby.
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2.3.4 Brokers, Finders. The Purchaser has not retained any
broker or finder in connection with the transactions contemplated hereby so as
to give rise to any valid claim against LADD or the Company for any brokerage or
finder's commission, fee or similar compensation.
2.3.5 Purchase for Investment. The Purchaser is acquiring the
Shares for its own account for investment and not with a view to any
distribution thereof. The Purchaser acknowledges receipt of advice from the
Company to the effect that the Shares have not been registered under the
Securities Act of 1933 or any state securities laws.
2.3.6 Financing. Purchaser has furnished or will furnish to
LADD within one business day of receipt true and complete copies of all
commitment or proposal letters received from the lending and equity sources
setting forth the amount of funds necessary for Purchaser to purchase the Shares
and the Cherry Grove Assets as provided in this Agreement. All fees required to
be paid by Purchaser to such financing sources as of the date hereof have been
paid by Purchaser and such commitment letters are subject only to normal
conditions. Purchaser is not in default with respect to any requirements or
conditions contained in such commitment or proposal letters and knows of no
conditions, events or circumstances that would cause such financing sources not
to fund such commitments in connection with the transactions contemplated
hereby.
ARTICLE 3
CERTAIN COVENANTS
3.1 Access and Information. Prior to the Closing, LADD will
cause the Company (a) to give to the Purchaser and its representatives full and
free access to the Company's properties, books, records, contracts and
commitments upon reasonable notice during normal business hours, (b) to furnish
all such information and documents relating to its properties and business as
the Purchaser may reasonably request, and (c) to allow the Purchaser to discuss
matters relating to the Company with the outside auditors, attorneys and such
other representatives for the Company as are reasonably requested by the
Purchaser.
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3.2 Conduct of Business of the Company. (A) Except as set
forth in Schedule 3.2 and in Section 3.2(B) below, from the date hereof to the
Closing, LADD will cause the Company (a) to conduct its business only in the
ordinary course in substantially the same manner as heretofore conducted, (b) to
maintain and keep its properties and equipment in such repair, working order and
condition as is sufficient for the operation of its business in the ordinary
course, (c) to keep in full force and effect insurance comparable in amount and
scope of coverage to that now maintained by it (to the extent available on
commercially reasonable terms in the case of any renewal or replacement
policies), (d) to perform in all material respects all of its obligations under
all contracts and commitments applicable to its business or properties, (e) to
use its best efforts to maintain and preserve the Company's business
organization intact, and maintain satisfactory relationships with officers,
employees, suppliers, distributors and customers so that they will be preserved
after the Closing, (f) to maintain its books of account and records in the usual
and regular manner, (g) to comply in all material respects with all laws and
regulations applicable to it and to the conduct of its business, (h) not to
amend its Articles of Incorporation or Bylaws, (i) not to merge or consolidate
with, or agree to merge or consolidate with, or to purchase substantially all of
the assets of, or otherwise acquire, any business or any business organization
or division thereof, (j) not to make any material commitments or expenditures,
other than those previously disclosed to Purchaser, and not to enter into any
transaction with LADD or any affiliate of LADD or the Company not consistent
with past practice, (k) promptly to advise the Purchaser in writing of any
emergency or other change in the normal course of business or in the operations
of its properties and of any governmental or any other third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), (l) promptly advise the Purchaser of any material adverse change
in its business, operations or financial condition, (m) to collect its accounts
receivable in the ordinary course of business consistent with past practice, (n)
to pay its accounts payable in the ordinary course of business consistent with
past practice, (o) to use its best efforts to insure that the representations
and warranties contained in Section 2 hereof or elsewhere in this Agreement
shall be true and correct as of the Closing Date and (p) not to take any action
described in section 2.1.14 hereof.
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(B) Notwithstanding the foregoing provisions of Section
3.2(A), following the Effective Date, LADD will cease withdrawing all cash
balances from the Company and the Company shall retain for its own account all
cash from collections, including, without limitation, the collection of accounts
receivable and customer deposits, and shall utilize such cash proceeds to fund
the working capital needs of the Company from the Effective Date until the
Closing Date. To the extent that LADD is required to contribute additional cash
to the Company on or after the Effective Date, such amount shall not be treated
as an intercompany account, and Purchaser shall, or shall cause the Company, to
reimburse LADD for all amounts so advanced on or after the Effective Date.
Further, from the Effective Date until the Closing Date, all intercompany
accounts, including, without limitation, interest payable to LFI Capital
Management, Inc. and royalties payable to Cherry Grove, Inc., shall be treated
as third party accounts and all amounts owing to LADD pursuant to such accounts
shall be paid to LADD. Such reimbursement and payment shall occur within two
business days of the Closing Date and shall be made in cash or other immediately
available funds. Purchaser shall be responsible for and agrees to protect, save
and hold LADD harmless from and against any and all Taxes attributable to the
ordinary course operations of the Company after the Effective Date (specifically
excluding therefrom those matters for which LADD indemnifies Purchaser
Indemnified Parties pursuant to Sections 3.7(b) and 3.13).
3.3 Efforts to Consummate Transaction. Subject to the terms
and conditions herein provided, each of the parties agrees to use its best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby in accordance with the terms of this Agreement.
3.4 Employee Matters. (a) Purchaser shall use its reasonable
best efforts to, or shall cause the Company to use its reasonable best efforts
to, maintain employee benefit plans, programs, policies and arrangements for
employees of the Company who are employees of the Company as of the Closing Date
("Affected Employees") which provide benefits that are of substantially similar
value in the aggregate as those provided under the employee benefit
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plans, programs, policies and arrangements of the Company in effect as of the
date of this Agreement. To the extent Purchaser establishes comparable plans,
programs or policies, Affected Employees shall be given credit for all service
with the Company, LADD, any ERISA Affiliates and predecessor employers to the
same extent as such service was credited for such purpose by the Company, LADD
or any ERISA Affiliates under each employee benefit plan, program, policy or
arrangement of the Company, LADD, or any ERISA Affiliates in which the employees
are eligible to participate for purposes of eligibility and vesting.
(b) LADD's Obligations. LADD shall retain, and neither
Purchaser nor the Company shall assume, any liabilities or obligations of LADD
or the Company or any of their affiliates relating to the Plans or current or
former employees of the Company with respect to claims incurred and employment
prior to the Closing Date. As of the Closing Date, the Company shall cease to be
a participating employer under the Plans maintained by LADD and LADD shall take
all action as may be necessary to effect such cessation of participation. LADD
shall indemnify and hold Purchaser harmless for any liabilities or obligations
of the Company or LADD relating to employees, employee benefit plans or Plans
arising at or before, or by reason of, the Closing Date, or otherwise in respect
of any period at or before the Closing Date.
(c) Purchaser's Obligations. Except as provided in Section
3.4(n), nothing in this Agreement shall be construed to obligate Purchaser to
offer any particular benefit at any particular level with respect to any
Affected Employee, and nothing in this Agreement shall be construed to entitle
any Affected Employee to any specific compensation.
(d) Savings Plans. As soon as practicable after the Closing,
the Choice Plus Plan of Pennsylvania House, Inc. and any other savings plan
sponsored or maintained by LADD or any of its ERISA Affiliates for the benefit
of Affected Employees (hereinafter referred to collectively as the "Savings
Plans"), shall be amended to provide that (i) all account balances of Affected
Employees shall become fully vested as of the Closing and (ii) all Affected
Employees who are participants in the Savings Plans shall have the right to
elect to receive a distribution or direct rollover of their respective account
balances, subject to, and in accordance
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with, the provisions of applicable law. Purchaser shall establish or maintain,
or cause the Company to establish or maintain, a defined contribution plan for
the benefit of some or all of the Affected Employees, which shall permit
Affected Employees to roll their benefits under the Savings Plans over into
Purchaser's defined contribution plan.
(e) Welfare Plans. Effective as of the Closing Date, all
Affected Employees shall cease to be covered by all employee welfare benefit
plans (as such term is defined in Section 3(i) of ERISA) sponsored or maintained
by LADD or its ERISA Affiliates on behalf of the Affected Employers and their
dependents (the "Welfare Plans"), other than those Welfare Plans maintained
exclusively by the Company. LADD shall retain liability for all claims for
benefits under the Welfare Plans, in accordance with the terms of the Welfare
Plans, incurred by employees or former employees of the Company (and their
dependents) under LADD's employee welfare benefit plans prior to the Closing
Date. Purchaser shall, or shall cause the Company to, be liable for all Welfare
Plan claims incurred by Affected Employees (and their dependents) to the extent
covered under any employee welfare benefit plans of Purchaser or its affiliates
after the Closing. For purposes of this paragraph, a claim shall be deemed to
have been incurred on the date on which each medical or other treatment or
service was rendered and not the date of the inception of the related illness or
injury or the date of submission of a claim related thereto.
(f) Medical and Dental Plans. If Affected Employees become
eligible to participate in 1995 in a medical and dental plan of Purchaser or its
affiliates, Purchaser shall use its reasonable best efforts to, or shall cause
the Company to use its reasonable best efforts to cause such plan to (i) waive
any preexisting condition limitations for conditions covered under the
applicable medical or dental plans of the Company (the "Company Medical Plans")
and (ii) honor any deductible and out of pocket expenses incurred by the
employees and their beneficiaries under the Company Medical Plans during the
portion of 1995 preceding the Closing. If Affected Employees become eligible to
participate in 1995 in a group term life insurance plan maintained by Purchaser
or its affiliates, Purchaser shall use its reasonable best efforts to cause such
plan to waive any medical certification for such employees up to the
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amount of coverage the employees had under the life insurance plan of the
Company (but subject to any limits on the maximum amount of coverage under
Purchaser's life insurance plan).
(g) Disability Benefits. LADD shall be responsible, or cause
its insurance carriers to be responsible, for payment of any and all short and
long-term disability benefits, regardless of whether payment is required to be
made after the Closing for: (i) any individual who is currently receiving such
benefits as of the Closing; (ii) any individual who becomes disabled prior to
the Closing and who remains disabled for the length of any qualifying disability
period; and (iii) any individual described in (i) and (ii) above whose
disability ceases and who returns to active employment immediately after the
Closing and who subsequently becomes disabled prior to the expiration of ninety
(90) days of active employment with the Company where such subsequent disability
is a continuation of such prior disability for which benefits were due under any
of LADD's or its ERISA Affiliates' disability plans.
(h) COBRA. LADD shall be responsible for complying with the
continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") under Section 4980B(f) of the Code with
respect to any individual who incurs a "qualifying event" prior to the Closing
Date; provided, however, that Purchaser shall assume such responsibility with
respect to all individuals covered under insured medical plans maintained by the
Company, regardless of when a "qualifying event" occurs, for so long as it is
able to provide COBRA coverage under such insured plans or successor insured
plans established by the Purchaser. Purchaser shall be responsible for complying
with the continuation health care coverage requirements of COBRA with respect to
any Affected Employee (or eligible dependent of such Affected Employee) whose
employment is terminated on or after the Closing Date.
(i) Severance. LADD shall pay any severance costs payable
pursuant to any severance policies that are incurred with respect to any
Affected Employee due solely to the change of control of the Company resulting
from the sale of the Shares contemplated by this Agreement.
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(j) Incentive and Supplemental Retirement Plans. Neither
Purchaser nor the Company shall assume or have any liability under any bonus,
incentive, or supplemental retirement plans maintained by LADD, including,
without limitation, phantom stock plans, long term cash and incentive
compensation plans, covering any Affected Employee or persons employed by or who
at any time prior to the Closing were employed by LADD. LADD shall take such
actions as are necessary to insure the preservation and delivery of all benefits
accrued through the Closing, whether payable presently or at some future date,
to such employees in respect of any such bonus, incentive, or supplemental
retirement plans. If such benefits do not accrue ratably, this provision shall
apply to a pro rata portion of the benefits, calculated as of the Closing Date,
that would have been earned had the Affected Employee remained employed through
the applicable accrual date.
(k) Workers' Compensation. LADD shall retain liability for all
workers' compensation claims made by employees or former employees of the
Company filed on or before the Closing Date. LADD shall also retain liability
for all workers' compensation claims filed by such employees within 30 days
after the Closing Date to the extent that such claims relate in any manner to
any events occurring prior to the Closing Date or events otherwise occurring
while such employees were employed by LADD or any of its affiliates.
(l) Vacation Pay. Accrual for vacation pay as of September 30,
1995 attributable to the Affected Employees is accurately reflected as a
liability in the Interim Financials.
(m) Pension Plans. As of the Closing, the Company shall cease
to be a participating employer under the Retirement Plan for Employees of
Pennsylvania House, Inc., the Retirement Plan for Hourly Employees of the
Divisions and Subsidiaries of LADD Furniture, Inc., and any other defined
benefit pension plan sponsored or maintained by LADD or its ERISA Affiliates for
the benefit of the Affected Employees (hereinafter referred to collectively as
the "Pension Plans"), and LADD shall take all such action as may be necessary to
effect such cessation of participation. As of the Closing, LADD shall cause the
sponsor(s)
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of the Pension Plans to assume or retain all liabilities under the Pension Plans
for benefits accrued by the Affected Employees under the Pension Plans, through
the Closing Date. LADD shall cause the Pension Plans to be amended to provide
that the accrued benefits of all Affected Employees shall be nonforfeitable.
Purchaser shall establish or maintain, or cause the Company to establish or
maintain, a defined benefit pension plan for the benefit of some or all of the
Affected Employees. Purchaser shall not be obligated to cause its defined
benefit pension plan to provide past service credits for benefit accrual
purposes, but past service credit shall be given for vesting purposes. There
shall be no transfer of assets or liabilities of the Pension Plans to the
Purchaser's retirement plan.
(n) Notwithstanding anything in this Section 3.4 to the
contrary, following the Closing Date, Purchaser shall cause the Company to
comply with the requirements of the labor union contracts with the Aluminum,
Brick and Glass Works International Union AFL-CIO, Local 231 and United
Paperworkers International Union, Local 7600 set forth on Schedule 2.1.18
hereto.
3.5 Consents and Approvals; Releases. LADD shall use its best
efforts (without the obligation to make any payment or concession to any third
party) promptly to obtain all consents and amendments from parties to the
Material Agreements and from governmental authorities, which are required by the
terms thereof, this Agreement or otherwise for the due and punctual consummation
of the transactions contemplated by this Agreement. Purchaser will cooperate
(without the obligation to make any payment or concession to any third party)
with LADD in obtaining such consents and approvals. Purchaser and LADD shall use
their best efforts to cause Purchaser to be substituted in all respects for LADD
or any of its affiliates, effective as of the Closing, in respect of all
obligations of LADD under each of the guaranties, severance agreements and
letters of credit set forth in Schedule 3.5 (the "Guaranty" or "Guaranties"). If
Purchaser and LADD are unable to effect such a substitution with respect to any
Guaranty after using their best efforts to do so, Purchaser shall fully
indemnify LADD and its affiliates with respect to the obligations covered by
each of the Guaranties for which
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Purchaser does not effect such substitution, with such indemnification secured
by a letter of credit acceptable to LADD. LADD shall also cooperate with and
assist Purchaser and its authorized representatives in order to provide an
efficient transfer of the control and management of the Company and to avoid any
undue interruption in the activities and operations of the Company following the
Closing Date.
3.6 Purchase of Intellectual Property. Cherry Grove, Inc. has
agreed to sell and otherwise transfer to Purchaser or an affiliate of Purchaser
the intellectual property listed on Schedule 3.6 hereto, being all of the
intellectual property owned or licensed by Cherry Grove, Inc. ("Cherry Grove")
and licensed or sublicensed to the Company (the "Cherry Grove Intellectual
Property"), for a purchase price of $12,000,000, less the purchase price of that
portion of the Cherry Grove Intellectual Property currently owned by Meridian
Leasing, Inc. ("Meridian") and listed on Exhibit C to Schedule 2.1.17 (the
"Meridian Intellectual Property") in the event Cherry Grove does not purchase
the Meridian Intellectual Property, pursuant to the terms and conditions of the
Cherry Grove Agreement of Sale in substantially the form attached hereto as
Exhibit C; provided, however if Cherry Grove does purchase the Meridian
Intellectual Property, the purchase price for the Cherry Grove Intellectual
Property shall be $12,000,000. Such transfer shall occur on the Closing Date
simultaneously with the closing of the sale of the Shares. The purchase price
for the Cherry Grove Intellectual Property shall be in addition to the Purchase
Price for the Shares.
3.7 Tax Matters. (a) Purchaser agrees that following the
Closing Date it will permit and cooperate fully with LADD regarding any
assistance needed in LADD's determination of any Federal income tax refund
claims for the years 1992 through 1995 and the carry back of any net operating
losses, capital losses or tax credits that have arisen prior to the Closing Date
to be applied to reduce LADD's federal or California tax liability or the
Company's other state tax liabilities attributable to earnings prior to Closing
in all situations where such carrybacks are allowed by law.
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(b) LADD and Purchaser shall jointly make an election under
Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code")
and the Treasury Regulations promulgated thereunder and under any similar state
tax law (collectively, a "Section 338(h)(10) Election") with respect to the
purchase and sale of the Shares hereunder. LADD and the Purchaser covenant and
agree that they will join in the filing of Internal Revenue Service Form 8023,
and such other forms or schedules as are necessary or required to make the
Section 338(h)(10) Election and any similar state forms and shall perform all
such other acts as are necessary to timely make or perfect such election. LADD
and Purchaser agree to negotiate in good faith on an allocation of the Purchase
Price among the assets of the Company that are deemed to have been acquired
pursuant to Section 338(h)(10) of the Code or any similar state law. If LADD and
Purchaser have not agreed to such allocation within sixty (60) days after the
Closing Date, the matter shall be submitted to a nationally recognized
accounting firm for its binding decision. LADD and Purchaser shall use the asset
values determined from such agreed allocation for purposes of filing all reports
and returns with respect to federal and state income taxes, including Internal
Revenue Service Form 8594 or any equivalent statement. LADD shall indemnify any
Purchaser Indemnified Party (as defined herein) and agrees to protect, save and
hold harmless each Purchaser Indemnified Party from and against any increase in
Taxes resulting from the sale of the Shares by LADD to Purchaser that is
attributable to the making of the Section 338(h)(10) Election or any similar
state election or any election under section 338(g) of the Code or any similar
state election made by LADD in connection therewith; provided, however, that no
amount shall be payable under this Section 3.7(b) by LADD to any Purchaser
Indemnified Party with respect to any additional Taxes resulting from a decrease
in the historic tax basis of the assets of the Company.
(c) After the Closing Date, each of LADD and Purchaser shall
cooperate (and shall cause their respective affiliates to cooperate) with each
other and with each other's respective agents, including accounting firms and
legal counsel, in connection with the preparation or audit of any Tax return,
amended return or report, claim for refund and any tax claim or litigation in
respect of the Company or its activities, which cooperation shall include, but
not be limited to making available to the other all information, records and
documents in
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their possession relating to the liabilities for Taxes associated with the
Company. LADD and Purchaser shall also make available to the other, as
reasonably requested and available, personnel responsible for preparing,
maintaining and interpreting information, records and documents in connection
with Taxes as well as related litigation. Any information provided or obtained
under this Section 3.7 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or reports, refund claims,
audits, tax claims and litigation.
3.8 Intercompany Debt. All forms of intercompany obligations
of or to the Company with respect to LADD or any LADD affiliate shall be
extinguished on or before the Effective Date.
3.9 Non-Solicitation. LADD covenants that from the date hereof
through the Closing Date, it shall not, directly or indirectly, and will not
permit any employee, representative, financial or legal advisor or agent of the
Company or LADD to, make, solicit, assist or encourage the initiation of any
inquiries or proposals or participate in any negotiations with any party or
furnish any confidential information to any party (other than the Purchaser and
its employees, representatives, advisors and agents) concerning the acquisition
of the Shares or all or any portion of the assets, properties or business of the
Company, other than dispositions of inventories and other assets in the ordinary
course of business consistent with past practice and in accordance with Section
3.2.
3.10 Evidence of Insurance. Purchaser shall deliver to LADD at
least five business days prior to the Closing Date evidence of insurance
coverage in amounts and coverage sufficient to satisfy the requirements of
Purchaser's lenders contained in Purchaser's financing commitment letters and
loan documentation.
3.11 Noncompetition. For a period of two years following the
Closing (the "Noncompetition Period"), LADD will not (i) (a) in any county or
subdivision of the United States (including the 58 counties of the State of
California); or (b) in any foreign country where
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the Company or any of its subsidiaries conducts business during the
Noncompetition Period, in either case engage or participate in directly or
indirectly (whether as holder of an equity or debt investment, lender or in any
other manner or capacity, including through a subsidiary), or lend its name (or
any part or variant thereof) to, any business which is, or as a result of LADD's
engagement or participation would be, a business which derives a substantial
portion of its revenues from the patio furniture (whether indoor or outdoor)
segment of the furniture industry ("Patio Furniture Products"); (ii) deal,
directly or indirectly, in a competitive manner with respect to Patio Furniture
Products with any customers doing business with the Company or any of its
subsidiaries during the Noncompetition Period; (iii) solicit any officer,
director, employee, or agent of the Company or any of its subsidiaries to become
an officer, director, employee, or agent of LADD, its affiliates or anyone else;
and (iv) engage in or participate in, directly or indirectly, any business
conducted under any name that shall be the same as or similar to the name of the
Company or any of its subsidiaries or any trade name used by them; provided,
however, neither (a) ownership by LADD for investment of less than five percent
of the outstanding shares of capital stock of any corporation listed on a
national securities exchange or actively traded in the over-the-counter market
nor (b) the manufacture, marketing and sale of lines of Patio Furniture Products
currently manufactured, marketed and sold by LADD or any of its affiliates
(other than the Company) or lines of Patio Furniture Products reasonably similar
to such current lines of Patio Furniture Products, whether or not such lines of
Patio Furniture Products compete directly or indirectly with the Company or are
sold to any of the Company's current or future customers, shall not constitute a
breach of the foregoing covenant.
3.12 Nondisclosure. LADD will not at any time after the date
of this Agreement divulge, furnish to or make accessible to any nonaffiliate of
LADD any knowledge or information with respect to confidential or secret
processes, inventions, discoveries, improvements, formulae, plans, material,
devices or ideas or know-how, whether patentable or not, with respect to any
confidential or secret aspects of the business of the Company or its
Subsidiaries (including without limitation, customer lists, supplier lists and
pricing arrangements with customers or suppliers); provided, however, that
nothing herein shall prohibit LADD from complying with any order or decree of
any court of competent jurisdiction or governmental
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authority, but LADD will give Purchaser timely notice of the receipt of any such
order or decree, and the foregoing provision shall not apply to any information
which is or becomes generally available to the public through no breach of this
Agreement.
3.13 Liquidation. On November 3, 1995, the Company's Board of
Directors and LADD, as the Company's sole shareholder, adopted a Plan of
Liquidation and Dissolution of the Company. Pursuant to this Plan of Liquidation
and Dissolution, and simultaneously with the sale of the Shares to the
Purchaser, effective the Effective Date, the Company will distribute all of the
stock of Cherry Grove, Inc., which it owns, to LADD as a liquidating
distribution. The parties hereto agree that for tax purposes, the distribution
of the stock of Cherry Grove, Inc., pursuant to the Plan of Liquidation and
Dissolution is being made pursuant to Section 332 of the Code. Pursuant to the
Section 338(h)(10) Election as provided by Section 3.7(b) and the related
Treasury Regulations, the Company will be deemed to have sold all of its
remaining assets to the Purchaser and distributed the proceeds of the sale to
LADD pursuant to Section 332 of the Code. The adoption of the Plan of
Liquidation and Dissolution is not intended by the parties to affect the
continued existence of the Company. LADD shall indemnify any Purchaser
Indemnified Party and agrees to protect, save and hold harmless each Purchaser
Indemnified Party from and against any Taxes that are attributable to, or arise
from, the distribution of the stock of Cherry Grove, Inc., contemplated by this
Section 3.13.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser. The obligations of
the Purchaser under this Agreement are subject to the fulfillment, at or prior
to the Closing, of the following conditions, any one or more of which may be
waived by the Purchaser at its sole discretion:
4.1.1 Representations, Performance, etc. The representations
and warranties of LADD contained in this Agreement or in any certificate or
document delivered in connection herewith that are not conditioned as to
materiality shall be true and correct when made and true
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and correct in all material respects at and as of the Closing Date with the same
effect as though made at and as of the Closing Date, except as modified by
transactions permitted by this Agreement, and all representations and warranties
of the Company and LADD that are so qualified as to materiality shall be true
and correct when made and at and as of the Closing Date with the same effect as
though made at and as of the Closing Date. The Company and LADD shall have duly
performed and complied with all agreements, covenants and conditions required by
this Agreement or in any other agreement, instrument or document contemplated
hereby to be performed or complied with by them prior to or at the Closing Date.
LADD shall have delivered to the Purchaser a certificate of LADD signed by an
officer of LADD familiar with the transactions contemplated by this Agreement,
to the effect set forth above in this Section 4.1.1.
4.1.2 Opinion of Counsel. The Purchaser shall have received a
favorable opinion, addressed to the Purchaser and dated the Closing Date, of
Petree Stockton, L.L.P., counsel to the Company and LADD, in substantially the
form attached hereto as Exhibit A.
4.1.3 Resignation of Directors and Officers. Each Director and
officer of the Company and the Subsidiaries shall have submitted his resignation
effective as of the Closing.
4.1.4 Certain Approvals, etc. All material consents and
approvals from governmental authorities, including under the HSR Act, and third
parties required to be obtained by the Company and LADD to consummate the
transactions contemplated hereby shall have been obtained, including all such
consents set forth on Schedule 2.1.3.
4.1.5 No Injunction. No injunction or other order issued by a
court of competent jurisdiction restraining or prohibiting the consummation of
the transactions contemplated by this Agreement shall be in effect.
4.1.6 No Liens. The Shares shall be free and clear of all
Liens. The Purchaser shall receive the stock certificates representing the
Shares duly endorsed for transfer and the
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stock certificates in the name of the Company representing the outstanding
capital stock of each Subsidiary. All contingent security interests of
NationsBank, N.A. (Carolinas) with respect to the assets of the Company and the
Shares and the guarantee of the Company of LADD's obligations to NationsBank,
N.A. (Carolinas) shall have been cancelled in writing.
4.1.7 No Material Adverse Changes. From the date hereof to the
Closing Date, there shall have been no material adverse change in the business,
assets, prospects, operations, or financial condition of the Company; provided,
however, that an event, change or effect that arises from general economic
conditions or that otherwise affects the furniture industry generally shall not
be considered a material adverse change with respect to the Company.
4.1.8 Transfer of Cherry Grove Intellectual Property. The
transfer of the Cherry Grove Intellectual Property to Purchaser shall have been
completed, all as more specifically provided in Section 3.6.
4.1.9 Intercompany Debt. All forms of intercompany obligations
owed by or to the Company shall have been extinguished as provided in Section
3.8 in a manner that will not result in a Tax to the Company.
4.1.10 Notification of Maytag Corporation. LADD shall have
given written notification to Maytag Corporation of the sale of the Shares and
the assignment of all indemnification rights under the Maytag Agreement to
Purchaser.
4.1.11 Corporate Action. Each of LADD and the Company shall
have taken all corporate action necessary to approve the transactions
contemplated by this Agreement and shall have furnished Purchaser with certified
copies of the resolutions adopted by their respective boards of directors.
4.1.12 Delivery of Audit Opinion. Purchaser shall have
received from KPMG Peat Marwick LLP the audit opinion with respect to the
September 30, 1995 balance
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sheet of the Company stating that the September 30, 1995 balance sheet included
in the Interim Financials presents fairly, in all material respects, the
financial condition of the Company as of September 30, 1995, in conformity with
GAAP consistently applied and Purchaser shall be satisfied with the results
thereof. Such audit opinion shall be deemed satisfactory to Purchaser if the net
adjustments to the audited balance sheet prepared in accordance with the
foregoing standards do not have a negative pretax impact to the income statement
contained in the Interim Financials in excess of $250,000 in the aggregate.
4.1.13 Title Policies. Purchaser shall have received the
preliminary title reports and owners title policies with respect to the Owned
Real Property containing only those exceptions reasonably acceptable to
Purchaser set forth on the preliminary title reports and Permitted Liens.
4.2 Conditions to Obligations of Sellers. The obligations of
LADD under this Agreement are subject to the fulfillment, at or prior to the
Closing, of the following conditions, any one or more of which may be waived by
LADD in its sole discretion:
4.2.1 Representations, Performance, etc. The representations
and warranties of the Purchaser contained in Section 2.3 that are not
conditioned as to materiality shall be true and correct when made and true and
correct in all material respects at and as of the Closing Date with the same
effect as though made at and as of the Closing Date, except as modified by
transactions permitted by this Agreement, and all representations and warranties
of the Purchaser that are so qualified as to materiality shall be true and
correct when made and at and as of the Closing Date with the same effect as
though made at and as of the Closing Date. The Purchaser shall have duly
performed and complied with all agreements, covenants and conditions required by
this Agreement to be performed or complied with by it prior to or at the Closing
Date. The Purchaser shall have delivered to LADD a certificate of the Purchaser
signed by an officer of the Purchaser familiar with the transactions
contemplated by this Agreement, dated the Closing Date, to the effect set forth
above in this Section 4.2.1.
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4.2.2 Opinion of Counsel. LADD shall have received a favorable
opinion, addressed to it and dated the Closing Date, of Paul, Hastings, Janofsky
& Walker, counsel for the Purchaser, in substantially the form attached hereto
as Exhibit B.
4.2.3 Certain Approvals, etc. All consents and approvals from
governmental authorities and third parties required to be obtained by the
Purchaser to consummate the transactions contemplated hereby shall have been
obtained, other than any consents and approvals of third parties in respect of
any contract or agreement of the Purchaser (not involving the borrowing of
money) in respect of which the failure to obtain such consent or approval,
either in any case or in the aggregate, could not reasonably be expected to have
a material adverse effect on the transactions contemplated hereby.
4.2.4 No Injunction. No injunction or other order issued by a
court of competent jurisdiction restraining or prohibiting the consummation of
the transactions contemplated by this Agreement shall be in effect.
4.2.5 Purchase Price. LADD shall have received from Purchaser
the Purchase Price.
4.2.6 Guaranties. Purchaser shall have been substituted in all
respects for LADD and its respective affiliates in respect of each of the
Guaranties, or Purchaser shall have entered into indemnification agreements
satisfactory to LADD with respect to such Guaranties, all as more specifically
provided in Section 3.5.
4.2.7 Transfer of Cherry Grove Intellectual Property. The
transfer of the Cherry Grove Intellectual Property to Purchaser shall have been
completed, all as more specifically provided in Section 3.6.
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4.2.8 Notification of Maytag Corporation. LADD shall give
written notification to Maytag Corporation of the sale of the Shares and the
assignment of all indemnification rights under the Maytag Agreement to
Purchaser.
4.2.9 Intercompany Debt. All forms of intercompany obligations
owed by or to the Company with respect to LADD or any LADD affiliate shall have
been extinguished as provided in Section 3.8 in a manner that will not result in
a Tax to the Company.
4.2.10 Corporate Action. Purchaser shall have taken all
corporate action necessary to approve the transactions contemplated by this
Agreement and shall have furnished LADD with certified copies of the resolutions
adopted by its Board of Directors.
ARTICLE 5
TERMINATION
5.1 Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing Date in the circumstances set forth in this
Section 5.1, by delivery of written notice of such termination by the
terminating party to the other party hereto.
5.1.1 Termination by LADD. This Agreement may be terminated by
LADD upon the happening of an occurrence or circumstance which will result in a
failure to satisfy any of the conditions set forth in Section 4.2 and the
Purchaser shall have failed to satisfy such a condition within 20 days after
notice by LADD.
5.1.2 Termination by Purchaser. This Agreement may be
terminated by the Purchaser upon the happening of an occurrence or circumstance
which will result in the failure to satisfy any of the conditions set forth in
Section 4.1 and LADD shall have failed to satisfy such a condition within 20
days after notice by the Purchaser.
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5.1.3 Termination by Either Party. This Agreement may be
terminated by either the Purchaser or LADD if (i) the representations and
warranties of the other party shall prove not to have been true in all material
respects as of the date when made or if any representation or warranty qualified
as to materiality shall prove not to be true and correct as of the date when
made, (ii) events shall have occurred subsequent to the date hereof as a result
of which the representations and warranties of the other party could not be true
in all material respects as of the Closing Date or if any representation or
warranty qualified as to materiality shall prove not to be true and correct as
of the date when made, unless the occurrence of such events shall be due to the
failure of the party seeking to terminate this Agreement to perform or comply
with any of the covenants, agreements or conditions hereof to be performed or
complied with by such party prior to the Closing, or (iii) the Closing shall not
have occurred prior to December 15, 1995 (or such other date as may be mutually
agreed to by the parties) through no fault of the terminating party.
5.2 Effect of Termination. If this Agreement is terminated as
permitted under Section 5.1, such termination shall be without liability of or
to any party to this Agreement or any shareholder, partner, director, officer,
employee or agent of such party, except that the provisions of Sections 5.2, 7.2
and 7.15 shall survive any such termination.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by LADD. LADD agrees to indemnify and hold
harmless Purchaser and its affiliates (including the Company) and its and their
respective officers, directors, shareholders, agents, employees and other
representatives and their respective, successors and assigns (collectively, the
"Purchaser Indemnified Parties") from and against any and all (a) liabilities,
losses, claims, costs or damages ("Loss") and (b) reasonable attorneys' and
accountants' fees and expenses, court costs and all other reasonable
out-of-pocket expenses ("Expense") suffered or incurred by any
PurchaserIndemnified Parties in connection with or arising from:
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(i) any breach by LADD of any warranty or the
inaccuracy of any representation of LADD contained in this Agreement or in
any agreement or instrument contemplated hereby;
(ii) any breach by the LADD of any of its covenants
in this Agreement or in any agreement or instrument contemplated hereby;
(iii) any failure of LADD to perform any of its
obligations in this Agreement or any agreement or instrument contemplated
hereby; and
(iv) any breach by Cherry Grove, Inc. of any of its
representations, warranties or covenants contained in the Cherry Grove
Agreement of Sale;
provided, however, that LADD shall be required to indemnify and hold harmless
under this Section 6.1 with respect to Loss and Expense suffered or incurred by
the Purchaser Indemnified Parties only to the extent that the aggregate amount
of such Loss and Expense, together with the aggregate amount of Loss and Expense
indemnifiable pursuant to Section 6.5(b), exceeds $400,000, at which time claims
hereunder may be asserted for all such claims in excess of the initial $400,000;
provided, however, if the Closing does not occur on or before December 30, 1995
for any reason other than the fault of LADD, the $400,000 threshold amount shall
increase to $1,000,000. The indemnification provided for in this Section 6.1
shall terminate 18 months after the Closing Date (and no claims shall be made by
any party indemnified under this Section 6.1 thereafter), except that the
indemnification by LADD shall continue as to:
(a) the obligations, covenants, representations and warranties
of LADD under Sections 2.1.1, 2.1.2, 2.2.1, 2.2.3 and 2.2.5 of this Agreement
and the instruments delivered pursuant thereto, as to all of which no time
limitation shall apply;
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(b) the obligations, covenants, representations and warrants
of LADD set forth in Sections 2.1.12, 2.1.16, 3.7 and 3.13 shall survive for 30
days following the expiration of the applicable statutes of limitation; and
(c) any Loss or Expense of which any Purchaser Indemnified
Party has notified LADD in accordance with the requirements of Section 6.3 on or
prior to the date such indemnification would otherwise terminate in accordance
with this Section 6.1, as to which the obligation of LADD shall continue until
the liability of LADD shall have been determined pursuant to this Article 6, and
LADD shall have reimbursed, indemnified and held harmless such Purchaser
Indemnified Parties for the full amount of such Loss and Expense in accordance
with this Article 6.
6.2 Indemnification by Purchaser. Purchaser agrees to
indemnify and hold harmless LADD and its affiliates and its and their respective
officers, directors, shareholders, agents, employees and other representatives
and their respective successors and assigns (collectively, "LADD Indemnified
Parties") from and against any and all Loss and Expense suffered or incurred by
any LADD Indemnified Party in connection with or arising from:
(i) any breach by Purchaser of any warranty or the
inaccuracy of any representation of Purchaser contained in this Agreement
or in any agreement or instrument contemplated hereby;
(ii) any breach by Purchaser of any of its covenants
or agreements in this Agreement or any agreement or instrument contemplated
hereby;
(iii) any failure by the Company to perform any of
its obligations pursuant to Sections 3 and 4 of the Assignment and
Assumption Agreement; and
(iv) any liability, Loss or Expense associated with
the conduct of the business and operations of the Company arising after
Closing if such liability,
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Loss or Expense is not a liability, Loss or Expense for which
a Purchaser Indemnified Party may be indemnified under this
Agreement (without regard to any limitations or restrictions
on a Purchaser Indemnified Party's right to such
indemnification);
The foregoing indemnification shall terminate 18 months after the Closing Date
(and no claims shall be made by any party indemnified under this Section 6.2
thereafter) except that (w) the foregoing indemnification contained in Section
6.2(iii) shall survive until the termination of the obligation to which it
relates in accordance with its terms, (x) the foregoing indemnification
contained in Section 6.2(iv) shall survive without termination, (y) the
obligations, covenants and representations of Purchaser set forth in Section
3.2(B) shall survive for 30 days following the expiration of the applicable
statutes of limitation, and (z) the indemnification by Purchaser shall continue
as to any Loss or Expense of which a party indemnified pursuant to this Section
6.2 has notified Purchaser in accordance with the requirements of Section 6.3 on
or prior to the date such indemnification would otherwise terminate in
accordance with this Section 6.2, as to which the obligation of Purchaser shall
continue until the liability of Purchaser shall have been determined pursuant to
this Article 6, and Purchaser shall have reimbursed such party for the full
amount of such Loss and Expense in accordance with this Article 6.
6.3 Notice of Claims. (a) If Purchaser or LADD believes that
any of the persons indemnified under this Article 6 has suffered or incurred any
Loss or incurred any Expense, Purchaser or LADD shall so notify the other
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or other agreement, instrument or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred, except that
the failure to so notify shall not relieve a party of its obligations to
indemnify, except to the extent its rights are thereby materially prejudiced. If
any action at law or suit in equity is instituted by or against a third party
with respect to which any of the indemnified persons intends to claim any
liability or
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expense as Loss or Expense under this Article 6, any such indemnified person
shall promptly notify the indemnifying party of such action or suit.
(b) In calculating any Loss or Expense there shall be deducted
any insurance recovery in respect thereof to the extent such insurance recovery
was not taken into account in assessing the amount of liability, Loss or Expense
suffered or incurred by any person indemnified under this Article 6.
(c) The amount to which an indemnified person shall be
entitled under this Article 6 shall be determined by the written agreement
between the indemnified person and the indemnifying party. If the parties are
unable to agree upon such amount within 30 days of the claim for indemnification
hereunder, the indemnifying party shall pay that amount agreed upon between the
parties and the remainder shall be determined as provided in Section 7.14
hereto.
6.4 Third Party Claims. (a) Subject to Section 6.4(b), the
persons indemnified under Sections 6.1 and 6.2 shall have the right to conduct
and control, through counsel of their choosing, any third party claim, action or
suit at the expense of the indemnifying party. The persons indemnified may
compromise or settle the same, provided that any of the indemnified persons
shall give the indemnifying party advance notice of any proposed compromise or
settlement. The indemnified persons shall permit the indemnifying party to
participate in the defense of any such action or suit through counsel chosen by
it, provided that the fees and expenses of such counsel shall be borne by the
indemnifying party. Subject to Section 6.4(b), any compromise or settlement with
respect to a claim for money damages proposed by the indemnifying party which is
disapproved in writing by the indemnified party shall discharge the indemnifying
party from liability with respect to the subject matter thereof, and no amount
in respect thereof shall be claimed as Loss or Expense under this Article 6.
(b) If the remedy sought in any action or suit referred to in
Section 6.4(a) is solely money damages and will have no continuing effect on the
business of any indemnified person, the indemnifying party shall have 30 days
after receipt of the notice referred to in the
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first sentence of Section 6.4(a) to notify the indemnified persons that it
elects to conduct and control such action or suit. If the indemnifying party
does not give the foregoing notice, or, following the giving of such notice, one
of the following occurs: (i) the indemnifying party authorizes the indemnified
party in writing to employ its own counsel in such defense or (ii) the
indemnified party shall have reasonably and in good faith concluded that there
may be defenses available to it that are different from or additional to
defenses available to the indemnifying party, then the indemnified persons shall
have the right to defend, contest, settle or compromise such action or suit in
the exercise of their exclusive discretion and through counsel of their own
choosing, and the indemnifying party shall, upon request from any of the
indemnified persons, promptly pay to such indemnified persons in accordance with
the other terms of this Article 6 the amount of any Loss resulting from its
liability to the third party claimant and all related Expense. If the
indemnifying party gives the foregoing notice, the indemnifying party shall have
the right, subject to the preceding sentence, to undertake, conduct and control,
through counsel of its own choosing and at the sole expense of the indemnifying
party, the conduct and settlement of such action or suit, and the indemnified
persons shall cooperate with the indemnifying party in connection therewith;
provided that (w) the indemnifying party shall not settle or compromise any such
action or suit without the indemnified party's prior written consent, unless the
terms of such settlement or compromise release the indemnified party from any
and all liability with respect to such action or suit, (x) the indemnifying
party shall not thereby permit to exist any Lien upon any asset of any
indemnified person; (y) the indemnifying party shall permit the indemnified
persons to participate in such conduct or settlement through counsel chosen by
the indemnified persons, but the fees and expenses of such counsel shall be
borne by the indemnified persons except as provided in clause (z) below and in
the immediately preceding sentence; and (z) the indemnifying party shall agree
promptly to reimburse to the extent required under this Article 6 the
indemnified persons for the full amount of any Loss resulting from such action
or suit and all related Expense incurred by the indemnified persons, except fees
and expenses of counsel for the indemnified persons incurred after the
assumption of the conduct and control of such action or suit by the indemnifying
party (subject, however, to the preceding sentence). So long as the indemnifying
party is contesting any such action or suit in good faith, the indemnified
persons shall not pay or settle any such action or suit.
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Notwithstanding the foregoing, the indemnified persons shall have the right to
pay or settle any such action or suit, provided that in such event the
indemnified persons shall waive the right to indemnity therefor by the
indemnifying party, and no amount in respect thereof shall be claimed as Loss or
Expense under this Article 6.
6.5 Environmental Matters. (a) Pursuant to the provisions of
the Assignment and Assumption Agreement and the Maytag Agreement, the Company
obtained certain rights to indemnification by Maytag with respect to
environmental matters under Section 8.5 and other related sections of Article
VIII of the Maytag Agreement (the "Maytag Indemnification") and the Company
assumed certain obligations thereunder. The parties to this Agreement have
agreed that the following provisions set forth in this Section 6.5 are the
exclusive provisions of this Agreement applicable to the liabilities of the
parties with respect to Environmental Laws and to any claim for indemnification
in respect thereof (such claim being referred to herein as an "Environmental
Claim"). To the extent any of the provisions of this Section 6.5 conflict with
any other provisions of this Agreement, this Section 6.5 shall govern.
(b) Subject to the provisions of this Section 6.5, LADD agrees
to hold harmless and indemnify the Purchaser Indemnified Parties from and
against any and all Loss and Expense arising from:
(i) the breach of any of LADD's representations and
warranties contained in this Section 6.5;
(ii) Off-site Liabilities or On-site Liabilities, as
those terms are defined in Section 7.17 herein; or
(iii) the violation of any Environmental Law by the
Company or the Company's predecessors prior to the Closing
Date;
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provided, however, the indemnifications set forth above in Section 6.5(b) shall
be subject to the following conditions and limitations:
(x) With respect to any claim pursuant to Section 6.5(b), LADD
shall be required to indemnify and hold harmless with respect to Loss and
Expense incurred by the Purchaser Indemnified Parties only to the extent that
the aggregate amount of such Loss and Expense so incurred, together with other
Loss and Expense similarly incurred but not subject to indemnification due to
the $400,000 (or $1,000,000 as the case may be) threshold amount set forth in
Section 6.1, exceeds $400,000 (or $1,000,000 as the case may be) at which time
claims hereunder may be asserted for all claims in excess of such initial
$400,000 (or $1,000,000 as the case may be);
(y) With respect to claims brought pursuant to Section
6.5(b)(ii) or (iii) that are or may be covered by Section 8.5 of the Maytag
Agreement, Purchaser shall look first to Maytag (with contemporaneous written
notice to LADD) to be held harmless and to be indemnified under the Maytag
Agreement. However, in the event that Maytag denies or disputes any obligation
to indemnify or hold harmless the Purchaser Indemnified Parties under such
Section 8.5 of the Maytag Agreement, or is unable or unwilling to hold harmless
and indemnify the Purchaser Indemnified Parties under Section 8.5 of the Maytag
Agreement (including, without limitation, because the applicable indemnification
deductible amounts contained in the Maytag Agreement have not been met, which
shall remain the obligation of LADD after the $400,000 (or $1,000,000 as the
case may be) referenced in Section 6.5(b)(x) above has been met), LADD shall
hold harmless and indemnify the Purchaser Indemnified Parties for any claims
made by Purchaser against Maytag, and Purchaser shall then have no further
obligations to pursue or negotiate with Maytag on that issue. LADD shall not be
required to indemnify and hold the Purchaser Indemnified Parties harmless if it
is determined that Maytag is contractually required to do so pursuant to the
Maytag Indemnification but for post-Closing Date conduct of the Purchaser
Indemnified Parties, including, but not limited to failure to give proper or
timely notice to Maytag regarding the existence of a claim (including the giving
of notice to Maytag
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prior to the expiration of any limitations period of the existence of claim of
which Purchaser or the Company has notice).
(z) The indemnifications provided by this Section 6.5 shall
terminate upon the 30 days following the expiration of the applicable statute of
limitations (and no claims shall be made by any party indemnified under this
Section 6.5 thereafter), except that the indemnification shall continue as to
any Loss or Expense of which the Purchaser Indemnified Parties have notified
LADD in accordance with the provisions of Section 6.5(e) on or prior to the date
such indemnification would otherwise terminate in accordance with this Section
6.5, as to which obligation of LADD shall continue until the liability of LADD
shall have been determined pursuant to this Section 6.5, and LADD shall have
reimbursed the Purchaser Indemnified Parties for the full amount of such Loss or
Expense in accordance with this Section 6.5.
(c) LADD represents and warrants that:
(i) the Facilities as operated prior to the Closing
Date complied in all material respects with all Environmental
Laws, except as disclosed in Schedule 6.5;
(ii) there are not and will not be any Hazardous
Substances present or located on, or migrating from, or
generated at or by any of the Facilities prior to and on the
Closing Date with respect to which any past or present owner,
operator or occupant may be required by any applicable
Environmental Law to take, cause to take or pay for any
investigative response, cleanup or remedial action or with
respect to which any investigation by any government agency
would reasonably be expected, based on the Environmental Laws
in effect, applicable and enforceable prior to the Closing
Date, except as disclosed in Schedule 6.5;
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(iii) The Company has not received in respect of the
Company any notice from any person alleging noncompliance with
any Environmental Law or alleging discharges or releases of
Hazardous Substances into the environment for which LADD or
Purchaser may be liable, and as of the date of this Agreement
there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the knowledge of LADD,
threatened against the Company or LADD in respect thereof,
except as disclosed in Schedule 6.5; and
(iv) The Company has given proper and timely notice
to Maytag of any and all claims of which the Company or LADD
has knowledge arising prior to or on the Closing Date that are
or may be covered by Section 8.5 of the Maytag Agreement,
including any such claims relating to those matters disclosed
in Schedule 6.5, thereby perfecting all such claims, and
Maytag is not in breach as of the Closing Date of any of its
obligations under Section 8.5 of the Maytag Agreement.
(d) Purchaser and the Company shall be solely and wholly
responsible for, and shall indemnify and hold harmless the LADD Indemnified
Parties from and against any and all Loss and Expense to the extent directly
caused by Purchaser's or the Company's post-Closing Date conduct with respect to
Hazardous Substances on the Facilities on or after the Closing Date.
(e) If Purchaser or LADD believes that any of the persons
indemnified under this Section 6.5 has suffered or incurred any Loss or incurred
any Expense, the party claiming a right to indemnification hereunder (the
"Indemnified Party") shall provide the party against whom such claim is
asserted, including without limitation Maytag (the "Indemnifying Party"), prompt
written notice of any claim or facts that have given or may give rise to a
claim, including any inquiry or investigation by a governmental agency or any
investigation undertaken voluntarily by the Indemnified Party and which the
Indemnified Party believes may give rise to a claim, and the Indemnified Party
shall provide supplemental written notice as may be
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necessary to keep the Indemnifying Party fully informed, provided that
reasonable delays in providing notice shall not invalidate the rights of the
Indemnified Party hereunder by the extent that such delay does not materially
prejudice any rights of the Indemnifying Party hereunder. As between Purchaser
and LADD, the provisions of Sections 6.3(b) and 6.3(c) shall apply to all
Environmental Claims.
(f) After reasonable notice to Purchaser, Purchaser, as the
Indemnified Party shall provide reasonable access to the premises of such of the
Facilities as may be necessary or appropriate to enable the Indemnified Party
and its employees, agents, attorneys, consultants and contractors to evaluate
the claim and take remedial or other appropriate action;
(g) The Indemnified Party shall make available to the
Indemnifying Party or its representatives all information, records and other
materials in the possession or control of the Indemnified Party which are
reasonably required by the Indemnifying Party for its use in connection with any
claim, investigation or remedial action (it being understood that any such
materials that constitute confidential information will be subject to the same
confidentiality provisions of Section 7.15) and shall otherwise cooperate and
assist the Indemnifying Party in connection with such claim, investigation or
remedial action (including, where appropriate, providing testimony in connection
with any litigation);
(h) Purchaser or LADD, as the Indemnifying Party, shall have
the right and responsibility of defending, remedying, compromising and settling
any Environmental Claim and shall have the right to employ and control its own
counsel, consultants and contractors in connection therewith. As between LADD
and Purchaser, the Indemnifying Party shall have full control over any actions
(including, without limitation, any remedial action, negotiation or litigation)
in connection with any such Environmental Claim; provided, that (i) if a
remedial or other action proposed to be taken by the Indemnifying Party in
settlement of the Environmental Claim could materially and adversely affect the
Indemnified Party's operations at a facility, such action shall not be taken
without the prior written consent of the Indemnified Party (which consent shall
not unreasonably be withheld); (ii) the Indemnifying Party shall not compromise
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or settle any Environmental Claim without the consent of the Indemnified Party
(which consent shall not unreasonably be withheld); and (iii) in the event the
Indemnified Party shall refuse to consent to the taking of any remedial or other
action approved by applicable regulatory agencies in respect of, or the
compromise or settlement of, any Environmental Claim, the Indemnified Party may
elect to take over the defense of such Environmental Claim, and in any case, the
liability of the Indemnifying Party shall not exceed the amount for which the
Environmental Claim could have been settled plus the amount of Expense incurred
by the Indemnified Party prior to the time of the proposed settlement to which
it is entitled to indemnification;
(i) The obligations of LADD or Purchaser as the Indemnifying
Party in respect of an Environmental Claim shall be limited to the taking of
such reasonable actions as are necessary under the circumstances giving rise to
such Environmental Claim, and LADD (i) shall not be liable for any unavoidable
effect upon the business operations of any of the Facilities (including, without
limitation, business interruption or loss of profits) caused by or resulting
from remedial or other action taken by LADD in furtherance of its obligations
hereunder, unless resulting from LADD's willful misconduct or gross negligence;
and (ii) shall not be liable for any Loss or Expense resulting from actions
taken or omitted by Purchaser or the Company on or after the Closing Date. Any
Loss and Expense in respect of a violation of Environmental Law occurring both
before and after the Closing Date shall be allocated between LADD and Purchaser
on a fair and equitable basis;
(j) Effective upon being indemnified as provided in Section
6.5, the Indemnified Party hereunder agrees to (A) transfer and assign to the
Indemnifying Party all rights and claims the Indemnified Party has or may have
against third parties for reimbursement or contribution; (B) execute such
instruments and take such other actions as may be necessary or appropriate to
transfer and assign the foregoing rights or claims to the Indemnifying Party;
and (C) take such reasonable actions when and as necessary or appropriate to
assist the Indemnifying Party to obtain reimbursement or contribution from third
parties; and
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(k) The parties to this Agreement shall use reasonable efforts
and shall cooperate with each other to obtain any necessary consent, transfer or
reissuance of any governmentally issued environmental permits, licenses and
registrations necessary to operate the Company as it was operated as of the
Closing Date. LADD makes no representations or warranties with respect to
whether or when such consent, transfer or reissuance will occur or whether such
consent, transfer or reissuance will be conditioned upon new or additional
requirements. LADD shall not be required to incur any liability or make any
payment or concession to any third party in order to obtain such consent,
transfer or reissuance.
ARTICLE 7
MISCELLANEOUS
7.1 Survival. Notwithstanding any otherwise applicable statute
of limitations, all agreements, covenants, representations and warranties of
Purchaser and LADD in this Agreement and in any other agreement, instrument or
document delivered in connection herewith shall survive the Closing in
accordance with their terms. LADD and Purchaser agree that the indemnification
provisions set forth in Article 6 are the exclusive post closing remedies with
respect to the liability of LADD or the Purchaser for the breach or inaccuracy
of a representation or warranty or the breach of any covenant in this Agreement
or in any agreement or instrument contemplated hereby; provided, that nothing
herein shall preclude either party from seeking an equitable remedy, to which
the parties hereto agree each other is entitled (including, without limitation,
under Section 3.11 hereof) for any such breach or the bringing of an action for
fraud.
7.2 Expenses. Each of LADD and the Purchaser shall assume and
bear their own expenses, costs and fees incurred in the preparation and
execution of this Agreement and compliance herewith, including attorneys' and
accountants' fees, whether or not the purchase and sale provided for herein
shall be consummated; provided, however, the fees and expenses relating to the
HSR filing, the audit performed by KPMG Peat Marwick LLP required by Section
4.1.12, the cost of title opinions and premiums for title policies required by
Section
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4.1.13, and the New York transfer gains tax attributable to the Company's New
York showroom lease shall be borne by Purchaser. LADD shall pay the fees and
expenses of Dillon, Read & Co. Inc.
7.3 Assignment; Successors; Parties in Interest. This
Agreement shall not be assignable by any party hereto without the prior written
consent of all of the other parties (which consent shall not be unreasonably
withheld) and any attempt to assign this Agreement without such consent shall be
void and of no effect. This Agreement shall inure to the benefit of, and be
binding on and enforceable against, each party hereto and such permitted
successors and assigns of the respective parties hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under this Agreement.
7.4 Amendment and Modification. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated orally, but only
with the written consent signed by the party against which such change, waiver,
discharge or termination is sought to be enforced. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent or other breach, whether similar or not.
7.5 Access After Closing. Each party shall retain for a period
of six years following Closing all books and records within its possession or
control which relate to the operation and conduct of the business of the Company
prior to Closing. Each party shall provide to the other party and its
representatives reasonable access during normal business hours to copies of all
such books and records upon request by the other party hereto. LADD will
cooperate with Purchaser and the Company with respect to continuation or
transfer of payroll, telephone and fixed asset systems upon mutually agreeable
terms at market rates.
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7.6 Best Efforts. Each party agrees to use its best efforts to
satisfy the conditions to the Closing set forth in this Agreement and otherwise
to consummate the transactions contemplated by this Agreement.
7.7 Knowledge. For the purposes of the representations and
warranties of LADD contained in this Agreement which are qualified to knowledge,
the knowledge of LADD in such instances shall be deemed to consist solely of the
actual knowledge of those individuals listed on Schedule 7.7 after such persons
have conducted an inquiry sufficient to express an informed view. LADD
represents to Purchaser that those individuals listed on Schedule 7.7 have
reviewed this Agreement, are familiar with the terms of the Company's Material
Contracts and the matters set forth herein, and either have personal knowledge
or have obtained information from officers or employees of LADD or the Company
in whom they have confidence and whose duties require them to have personal
knowledge thereof.
7.8 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal processes
in regard hereto shall be validly given, made or served, if in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by commercial courier or by telecopy (promptly confirmed in writing) to the
following addresses (or at such other addresses for such party as shall be
specified by like notice):
To LADD:
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, NC 27261-1500
Attention: Richard R. Allen
Chairman and Chief Executive Officer
Telecopy: 910/888-6344
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With a copy to:
(which copy shall not constitute notice)
Petree Stockton, L.L.P.
1001 West Fourth Street
Winston-Salem, North Carolina 27101
Attention: Robert E. Esleeck, Esq.
Telecopy: 910/607-7505
To the Purchaser:
c/o Hancock Park Associates
1925 Century Park East
Suite 810
Los Angeles, California 90067
Attention: Michael J. Fourticq
Telecopy: 310/201-0403
With a copy to:
(which copy shall not constitute notice)
Paul, Hastings, Janofsky & Walker
555 South Flower Street, 23rd Floor
Los Angeles, California 90067
Attention: Robert A. Miller, Jr., Esq.
Telecopy: 213/627-0705
7.9 Public Announcement. During the period through the Closing
Date, neither LADD, the Company nor Purchaser will make, directly or indirectly,
any public announcement with respect to this transaction without the prior
written approval of the other party, except as required by law.
7.10 Captions. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.11 Entire Agreement. This Agreement (including the Schedules
and Exhibits) and any further agreements entered into by Purchaser, LADD and/or
the Company at the
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Closing constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
7.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute one and the same instrument.
7.13 Severability. If any term or provision of this Agreement
(including Section 3.11) is held by a court or other authority of competent
jurisdiction to be invalid, void or unenforceable, the remaining terms and
provisions of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
7.14 Arbitration. Except for (i) matters relating to specific
performance, injunctive relief or other equitable remedies, (ii) indemnifiable
third party claims pursuant to Article 6 hereof or (iii) disputes relating to
the determination of Effective Date Working Capital as provided in Section 1.4
hereof, the parties hereto agree to submit to arbitration any and all matters in
dispute or in controversy among them concerning the terms and provisions of this
Agreement. All such disputes and controversies shall be determined and adjudged
by the arbitrators, and the hearing shall be held in Greensboro, North Carolina.
The selection of arbitrators and the procedure shall be in accordance with the
commercial arbitration rules then in effect of the American Arbitration
Association. Any award rendered shall be final and conclusive upon the parties
and a judgment thereon may be entered in the highest court of the forum, state
or federal, having jurisdiction. The expenses of the arbitration shall be borne
equally by the parties to the arbitration, provided that each party shall pay
for and bear the costs of their own experts, evidence and counsel's fees, except
that in the discretion of the arbitrator, any award may include the costs of a
party's counsel if the arbitrator expressly determines that the party against
whom such award is entered has caused the dispute, controversy or claim to be
submitted to arbitration as a dilatory tactic.
7.15 Confidential Nature of Information. Each party agrees
that it will treat in confidence all documents, materials and other information
which it shall have obtained regarding
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the other party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether obtained before or
after the date of this Agreement), the investigation provided for herein and the
preparation of this Agreement and other related documents, and, in the event the
transactions contemplated hereby shall not be consummated, each party will
return to the other party all copies of nonpublic documents and materials which
have been furnished in connection therewith. The obligation of each party to
treat such documents, materials and other information in confidence shall not
apply to any information which (i) such party can demonstrate was already
lawfully in its possession prior to the disclosure thereof by the other party,
(ii) is known to the public and did not become so known through any violation of
a legal obligation, (iii) became known to the public through no fault of such
party or (iv) is later lawfully acquired by such party from other sources, and
following the Closing, Purchaser shall have no obligation to treat documents,
materials and other information concerning the Company in confidence.
7.16 Schedules and Exhibits. The Schedules and Exhibits are a
part of this Agreement as if fully set forth herein. All references to Sections,
subsections, Schedules and Exhibits shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require. Disclosure of any
fact in any Schedule hereto referenced by a particular section in this Agreement
shall, should the existence of the fact be relevant to any other section, be
deemed to be disclosed with respect to that other section whether or not an
explicit cross-reference appears.
7.17 Definitions. Used in this Agreement, the following terms
have the meanings specified or referred to in this Section 7.17:
(a) "Affected Employees" shall have the meaning set forth in
Section 3.4(a).
(b) "Agreement" shall have the meaning set forth on Page 1 of
this Agreement.
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(c) "Annual Financials" shall have the meaning set forth in
Section 2.1.4(a).
(d) "Assignment and Assumption Agreement" shall mean that
Assignment and Assumption Agreement dated on or before the Closing between LADD
and the Company in the form attached as Exhibit E hereto.
(e) "Audited Balance Sheet" shall mean the audited balance
sheet of the Company as of September 30, 1995 prepared as provided in Section
4.1.12.
(f) "Audited Working Capital" shall mean the excess of current
assets over current liabilities (exclusive of cash, the current portion of
long-term indebtedness, current deferred tax assets or liabilities, and
intercompany indebtedness or receivables) of the Company as shown on the Audited
Balance Sheet.
(g) "Cherry Grove Agreement of Sale" shall be that Agreement
of Sale between Cherry Grove, Inc. and Purchaser substantially in the form of
Exhibit C hereto.
(h) "Closing" shall have the meaning set forth in Section 1.2.
(i) "Closing Date" shall have the meaning set forth in Section
1.2.
(j) "COBRA" shall have the meaning set forth in Section
3.4(h).
(k) "Code" shall have the meaning set forth in Section
2.1.16(d).
(l) "Common Stock" shall have the meaning set forth in Section
2.1.2(a).
(m) "Company" shall have the meaning set forth on Page 1 of
this Agreement.
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(n) "Company Medical Plans" shall have the meaning set forth
in Section 3.4(f).
(o) "Effective Date Balance Sheet:" the balance sheet of the
Company as of the Effective Date, which shall be prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the Audited Balance Sheet.
(p) "Effective Date Working Capital:" the excess of current
assets over current liabilities (exclusive of cash, the current portion of
long-term indebtedness, current deferred tax assets or liabilities, and
intercompany indebtedness or receivables) of the Company as shown on the
Effective Date Balance Sheet.
(q) "Effective Date" shall mean the end of business on
November 25, 1995.
(r) "Effective Date Balance Sheet" shall mean the balance
sheet of the Company as of November 25, 1995 prepared as provided in Section
1.4.
(s) "Environmental Claim" shall mean any claim with respect to
indemnification or being held harmless relating to any toxic or environmental
matters.
(t) "Environmental Laws" means all federal, state or local
laws, rules, regulations, governmental permits or other binding determinations
of any governmental authority relating to or addressing the environment,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, and the Resource Conservation and Recovery Act.
(u) "ERISA" shall have the meaning set forth in Section
2.1.16(a).
(v) "ERISA Affiliate" shall have the meaning set forth in
Section 2.1.16(a).
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(w) "Facilities" shall mean the Company's El Monte, California
facility, the Company's Newport Arkansas facility, and the Company's Juarez,
Mexico facility.
(x) "GAAP" shall have the meaning set forth in Section
2.1.4(a).
(y) "Guaranties" shall have the meaning set forth in Section
3.5.
(z) "Hazardous Substances" means any hazardous substance,
hazardous wastes, pollutants or contaminants as such terms are defined and used
in Environmental Laws.
(aa) "HSR Act" shall have the meaning set forth in Section
2.1.3(b).
(ab) "Intellectual Property" shall have the meaning set forth
in Section 2.1.17.
(ac) "Interim Financials" shall have the meaning set forth in
Section 2.1.4(a).
(ad) "LADD" shall have the meaning set forth on Page 1 of this
Agreement.
(ae) "LADD Indemnified Parties" shall have the meaning set
forth in Section 6.2.
(af) "Liens" means, with respect to any assets or properties
(whether real, personal or mixed or tangible or intangible), any mortgage,
pledge, option, escrow, hypothecation, lien, security interest, financing
statement, lease, charge, preemptive subscription, encumbrance, easement,
conditional sale or other title retention or security agreement or any other
similar restriction, claim or right of others, on, in, or with respect to such
assets or properties, whether arising by contract, operation of law or
otherwise.
(ag) "Loss and Expense" shall have the meaning set forth in
Section 6.1.
67
<PAGE>
(ah) "Material Adverse Effect" shall mean a material adverse
effect on the business, properties, assets (tangible and intangible), prospects,
liabilities or financial condition or results of operations of the Company;
provided that an event, change or effect that arises from general economic
conditions or that otherwise affects the furniture industry generally shall not
be considered material or to have a material adverse effect on the Company.
(ai) "Material Agreements" shall have the meaning set forth in
Section 2.1.15.
(aj) "Maytag" shall mean Maytag Corporation, a Delaware
corporation.
(ak) "Maytag Agreement" shall mean the Asset Purchase
Agreement dated as of June 1, 1989 among LADD, Maytag Corporation, the BJC
Company and The Gunlocke Company, as amended by the First Amendment and Waiver
to Asset Purchase Agreement dated as of July 7, 1989 by and among LADD, Maytag
Corporation, The BJC Company, The Gunlocke Company (a Delaware corporation),
Pennsylvania House, Inc., The McGuire Furniture Company, The Kittinger Company,
Charter Furniture, Inc., Brown Jordan Company and The Gunlocke Company (a North
Carolina corporation), as further amended by the Amendment to First Amendment
and Waiver to Asset Purchase Agreement dated as of August 1, 1989, as further
amended by the Agreement and Release between LADD and Maytag dated August 6,
1992, as further amended by the Agreement and Release as to Environmental Claims
dated as of March 31, 1994 between LADD and Maytag.
(al) "Meridian Intellectual Property" shall have the meaning
set forth in Section 3.6.
(am) "Off-site Liabilities" shall mean any and all liabilities
associated with the alleged and actual disposal or release of Hazardous
Substances by the Company (or its predecessors in interest) in respect of the
business of the Company prior to the Closing Date off-site from the Facilities.
68
<PAGE>
(an) "On-site Liabilities" shall mean any and all liabilities
associated with the alleged and actual presence or location of any Hazardous
Substances prior to the Closing Date at the Facilities.
(ao) "Owned Real Property" shall have the meaning set forth in
Section 2.1.8.
(ap) "Patio Furniture Products" shall have the meaning set
forth in Section 3.11.
(aq) "PBGC" shall have the meaning set forth in Section
2.1.16(d).
(ar) "Pension Plans" shall have the meaning set forth in
Section 3.4(m).
(as) "Permitted Liens" means (i) Liens for taxes not yet due
or which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with generally accepted accounting principles; (ii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of the business of the Company which are
not overdue for a period of more than 30 days or which are being contested in
good faith and by appropriate proceedings, if adequate reserves with respect
thereto are maintained on the books of the Company in accordance with generally
accepted accounting principles; (iii) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social security
legislation; (iv) deposits, which in the aggregate are not material, to secure
the performance of any or all of the following: bids, trade contracts (other
than for borrowed money), leases (other than financing leases), statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of the business of the Company
consistent with past practice; (v) with respect to real property easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of the business of the Company consistent with past practice
which, in the aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject thereto
69
<PAGE>
or interfere with the ordinary conduct of the business of the Company; (vi) such
imperfections or irregularities of title and encumbrances, if any, as are not
substantial in character, amount or extent so as to materially detract from the
value or interfere with the present use of the properties affected thereby or
otherwise materially impair present business operations, and (vii) those liens
or encumbrances described on Schedule 7.17 attached hereto.
(at) "Plans" shall have the meaning set forth in Section
2.1.16(a).
(au) "Purchase Price" shall have the meaning set forth in
Section 1.4.
(av) "Purchaser" shall have the meaning set forth on Page 1 of
this Agreement.
(aw) "Purchaser Indemnified Parties" shall have the meaning
set forth in Section 6.1.
(ax) "Savings Plans" shall have the meaning set forth in
Section 3.4(d).
(ay) "Shares" shall have the meaning set forth in the recitals
to this Agreement.
(az) "Subsidiaries" shall have the meaning set forth in
Section 2.1.1(b).
(ba) "Taxes" shall have the meaning set forth in Section
2.1.12.
7.18 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of North Carolina, without giving effect to the conflict of laws rules
thereof.
70
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
LADD:
LADD FURNITURE, INC.
By: (Signature of Richard R. Allen)
Chairman and Chief Executive
Officer
PURCHASER:
BJCL, INC.
By: (Signature of M. Fourtieq)
Title:
71
<PAGE>
FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
THE FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT dated as of December 29,
1995 to the Stock Purchase Agreement dated as of November 7, 1995 (the
"Agreement"), by and between LADD Furniture, Inc., a North Carolina corporation
("LADD") and BJCL, Inc., a Delaware Corporation ("Purchaser" or "BJCL"), is
made and entered into by and among LADD, BJCL and BJ Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of BJCL ("BJAC"). Capitalized
terms used herein without definition shall have the meanings respectively
ascribed to them in the Agreement.
WHEREAS, LADD, BJCL and BJAC desire to amend the Agreement as set forth
below, and desire that, except for such Amendment, the Agreement shall remain in
full force and effect;
NOW, THEREFORE, the parties hereto agree as follows:
1. BJCL does hereby sell, convey, transfer and assign to BJAC its rights
under the Agreement and BJAC does hereby expressly assume all the obligations
of BJCL contained in the Agreement and agrees to fully, faithfully and timely
without default, comply with, keep and perform all the terms, covenants,
provisions and conditions contained therein. LADD does hereby consent to such
assignment and assumption; provided, however, BJCL is not released from any of
its obligations under the Agreement by reason of such assignment.
2. Section 1.2 of the Agreement shall be deleted in its entirety and replaced
by the following:
1.2 Closing. The Closing of the purchase and sale of the Shares
contemplated hereby (the "Closing") shall take place at the
<PAGE>
offices of Paul, Hastings, Janofsky & Walker, Los Angeles, California at
9:00 a.m., on December 29, 1995 or at such other place, time or date as the
parties hereto may agree (the "Closing Dates"), subject to Section 5.1.
3. Section 1.4 of the Agreement shall be deleted in its entirety and replaced
by the following:
1.4 Payment of Purchase Price.
(a) At the Closing, the cash purchase price of the Shares in the amount
of $14,000,000 (the "Cash Purchase Price") shall be paid by delivery of a
$14,000,000 demand note of BJAC in form and substance satisfactory to LADD,
which note shall be payable in cash or other immediately available funds
immediately upon the merger of the company into BJAC. In addition to the
Cash Purchase Price, BJAC shall deliver, or cause to be delivered at
Closing 808,890 shares of the common stock, $0.01 par value, of Purchaser
(the "BJCL Shares"), free and clear of any Liens, by delivering to LADD
certificate(s) for the BJCL Shares. In the event the merger of the Company
into BJAC does not become effective and the payment of the note to LADD is
not made on the Closing Date, LADD shall not be deemed to have delivered
the Share to BJAC, the BJCL Shares shall not be deemed to have been
delivered to LADD, and no interest in the Shares or the BJCL Shares shall
have been transferred. The Cash Purchase Price and the BJCL Shares together
shall be the Purchase Price for the Shares.
(b) It is the intention of the parties that 315.53 of the Shares shall
be deemed contributed to Purchaser in exchange for the BJCL Shares, followed
by
<PAGE>
an immediate contribution of such Shares by Purchaser to BJAC, all pursuant
to Section 351 of the Code.
4. The last sentence of Section 2.1.12 of the Agreement is amended by
deletion of the words "whether under section 1.1502-6 of the Treasury
regulations or otherwise," from clause (ii) thereof and the insertion of the
words "whether under section 1.1502-6 of the Treasury regulations or
otherwise," between the words "taxes" and "because" of clause (iii) thereof.
5. Article 2 of the Agreement is amended by the addition of Section
2.2.6 as follows:
2.2.6 Purchase for Investment. LADD is acquiring the BJCL Shares for
its own account for investment and not with a view to any distribution
thereof. LADD acknowledges receipt of advice from Purchaser to the effect
that the BJCL Shares have not been registered under the Securities Act of
1933 or any state securities laws.
6. The last sentence of Section 2.1.8 of the Agreement is deleted in
its entirety and replaced by the following:
The Owned Real Property, including the buildings and operations of
the Company conducted thereon, are in substantial compliance with all
applicable ordinances, regulations and zoning laws and, except as previously
disclosed to Purchaser, do not encroach on the property of others; provided,
however, that LADD shall indemnify and hold harmless the Purchaser
indemnified Parties for Loss and Expenses arising from the encroachment of
the Company's buildings
<PAGE>
and facilities in El Monte, California, which indemnification shall survive
the Closing and any expiration dates otherwise provided for in this
Agreement.
7. Article 2 of the Agreement shall be amended by the addition
of Section 2.3.7 as follows:
2.3.7 Capitalization of Purchaser; BJCL Shares.
(a) Capitalization. The authorized capital stock of Purchaser consists
of (i) 10,000,000 shares of Common Stock, par value $0.01 per share (the
"BJCL Common Stock"), of which 5,000,000 shares shall be issued and
outstanding immediately following the Closing and giving effect to all of
the transactions contemplated or required in connection with the purchase
of the Shares by Purchaser (the "BJCL Outstanding Common Stock"), and (ii)
147,634 shares of preferred stock, all of which have been designated Series
A Redeemable Preferred Stock, $0.01 par value per share, and 59,000 of which
will be outstanding on the Closing Date, and Purchaser has no authority to
issue any other capital stock. The authorized capital stock of Purchaser,
the number of shares outstanding, and the beneficial owner of such shares
is listed on Schedule 2.3.7 hereto. The BJCL Outstanding Common Stock,
constituting all of the issued and outstanding common stock of Purchaser,
have been duly authorized and validly issued, and, upon delivery of the
Shares, are fully paid and nonassessable, have not been issued in violation
of any preemptive rights, rights of first refusal or similar rights, and
were offered and sold in compliance with all applicable securities laws.
Except as set forth on Schedule
<PAGE>
2.3.7, (y) there are no preemptive or similar rights on part of any holder
of any BJCL Outstanding Common Stock, and (z), no options, warrants,
conversion or other rights, agreements, commitments, arrangements or
understandings of any kind obligating Purchaser, contingently or otherwise,
to issue or sell any shares of its BJCL Common Stock or any securities
convertible into or exchanged for any such shares or any other securities,
are outstanding, and no authorization thereof has been given.
(b) Title to BJCL Shares. Upon delivery of the Shares in payment for
the BJCL Shares at Closing, as provided for in this Agreement, LADD shall
receive good, marketable, and valid title to the BJCL Shares, free and clear
of any Lien.
8. Section 3.2 of the Agreement shall be amended by the deletion of
Section 3.2(B) in its entirety and all references thereto.
9. The first sentence of Section 3.4(e) shall be amended by deletion
of the word "Employers" from the fourth line thereof and replacing it with
the word "Employees." Further, the words "under LADD's employee welfare
benefit plans" shall be deleted from the second sentence of Section 3.4(e).
Further, the words "to the extent covered under any employee welfare benefit
plans of Purchaser or its affiliates" shall be deleted from the third
sentence of Section 3.4(e).
10. The last sentence of Section 3.4(h) shall be amended by deleting
the words "whose employment is terminated" and replacing them with the words
"who incurs a "qualifying event"".
<PAGE>
11. Section 3.4(j) shall be amended by insertion of the words "Except
for the Company's obligations under the LADD Management Incentive Plan
relating to benefits earned for the period prior to the Closing Date
to the extent accrued on the Company's books as of the Closing Date," at the
beginning of the first sentence thereof.
12. The first sentence of Section 3.4(m) shall be amended by insertion
of the word "Date" after the word "Closing."
13. The fourth sentence of Section 3.5 of the Agreement is deleted in
its entirety and replaced by the following:
If Purchaser and LADD are unable to effect such a substitution with
respect to any Guaranty after using their best efforts to do so, Purchaser
hereby covenants and agrees to, and shall cause the Company to, fully
indemnify and hold harmless the LADD Indemnified Parties from and against
any and all claims for, or Loss and Expense incurred by the LADD
Indemnified Parties in connection with or arising from each of the
Guaranties for which Purchaser does not effect such substitution,
including without limitation, (i) the Lease Agreement dated July 1, 1987
between Pacific Design Center and the Company and the Guaranty of Lease
dated December 18, 1995 between LADD and the Pacific Design Center, (ii)
the Lease Guaranty between Winthrop Resources Corporation and LADD dated
December 18, 1995 with respect
<PAGE>
to the Lease Agreement between Winthrop Resources Corporation and the
Company dated September 30, 1994, (iii) the Lease Agreement dated February
17, 1988 between Southern Furniture Exposition Building, Inc. and LADD
with respect to the Company's High Point, North Carolina Showroom, and
(iv) the Severance Agreements dated July 21, 1995 between LADD and each of
James Mueller, Richard Frinier and William Markowitz. Purchaser and LADD
agree that LADD and the Company will enter into a sublease agreement with
respect to the High Point showroom lease as of Closing. Purchaser agrees
that it will use its best efforts to cause the Company within 30 days of
Closing Date to enter into a direct lease with respect to the High Point
showroom and obtain the release of LADD from its lease obligations as to
the sublease agreement.
14. Section 3.6 of the Agreement is amended by deletion in both places
of the dollar amount "$12,000,000" and the replacement thereof with the dollar
amount "$10,000,000."
15. The proviso of Section 3.11 of the Agreement shall be deleted in its
entirety and replaced by the following:
provided, however, neither (a) ownership by LADD for investment of less
than five percent of the outstanding shares of capital stock of any
corporation listed on a national securities exchange or
<PAGE>
actively traded in the over-the-counter market, (b) the manufacture,
marketing and sale of lines of Patio Furniture Products currently
manufactured, marketed and sold by LADD or any of its affiliates (other
than the Company) or lines of Patio Furniture Products reasonably similar
to such current lines of Patio Furniture Products, whether or not such
lines of Patio Furniture Products compete directly or indirectly with the
Company or are sold to any of the Company's current or future customers,
nor, (c) ownership by LADD of the BJCL Shares, shall constitute a breach
of the foregoing covenant.
16. Section 5.1.3 of the Agreement shall be amended by deletion of the
date "December 15, 1995" from clause (iii) thereof and replacing it with the
date "December 29, 1995."
17. The third line of the first sentence of Section 6.5(b) is amended by
the insertion of the following words after the words "Loss and Expense":
(for the purposes of this Section 6.5, the terms "Loss" and "Expense"
shall be deemed to include the reasonable costs and expenses, including
reasonable attorneys' and consultants' fees and expenses, incurred in
connection with the monitoring of Environmental Claims which are proper
matters of indemnification under this Agreement)
18. Section 6.1(b) of the Agreement is amended by deletion of the word
"warrants" and the replacement thereof with the word "warranties."
<PAGE>
19. Clause (ii) of Section 6.2 of the Agreement is hereby amended by
addition of the words, "including, without limitation, Purchaser's
indemnification obligations set forth in Section 3.5 hereof."
20. Section 6.2(iii) of the Agreement is amended by deleting "Section
3 and 4" and substituting "Section 3" thereof.
21. Clause (x) of Section 6.2 of the Agreement is hereby amended by
deletion of the words "Section (iv)" and the replacement thereof with the words
"Section (ii) and (iv)."
22. Clause (y) of the last sentence of Section 6.2 of the Agreement
shall be deleted.
23. The first two sentences of section 6.5(b)(y) of the Agreement
shall be amended by the insertion of the words "Indemnified Parties" after the
word "Purchaser" wherever the reference to "Purchaser" appears.
24. Section 7.3 of the Agreement shall be deleted in its entirety and
shall be replaced by the following:
7.3 Assignment; Successors; Parties in Interest. This Agreement shall be
assignable by either party hereto provided that no such assignment shall
operate as to release the assignor from any of its obligations hereunder.
This agreement shall inure to the benefit of and be binding on and
enforceable against, each party hereto, Seller Indemnified Parties,
Purchaser Indemnified Parties, and successors and assigns of the respective
parties hereto, and nothing in this Agreement, express or implied, is
intended to
<PAGE>
confer upon any other person any rights or remedies of any nature whatsoever
under this Agreement.
25. Section 7.17 of this Agreement shall be amended by deletion of
the definitions contained in subsections (e) ("Audited Balance Sheet"), (f)
("Audited Working Capital"), (O) ("Effective Date Balance Sheet"), (P)
("Effective Date Working Capital"), (q) ("Effective Date"), and (r)
("Effective Date Balance Sheet"). Further, Section 7.17 of the Agreement shall
be amended by the addition of the following definitions:
"Cash Purchase Price" shall have the meaning set forth in Section 1.4.
"BJCL Common Stock" shall have the meaning set forth in Section 2.3.7.
"BJCL Outstanding Stock" shall have the meaning set forth in Section
2.3.7.
"BJCL Shares" shall have the meaning set forth in Section 1.4.
26. Item 2 of Exhibit C to Schedule 2.1.8 of the Agreement is amended
by deletion of the phrase "Term: expires April 30, 2000" and replacing it with
"Term: expires April 30, 1998 or 2000."
27. The certificates of insurance comprising Exhibit D to Schedule
2.1.9 of the Agreement shall be deleted and replaced by the certificates
attached hereto as Schedule A.
<PAGE>
28. Item (2) of Schedule 2.1.10 of the Agreement is amended by
deletion of the last two sentences and replacing them with the following:
The settlement agreement has been executed by all parties, and the
settlement amount has been paid.
29. Item (3) of Schedule 2.1.10 of the Agreement is amended by
deletion of the next to last sentence and replacing it with the following:
The most recent settlement offer from plaintiff, dated December 7, 1995,
is in the amount of $14,258.95.
30. Item (5)(b) of Schedule 2.1.10 of the Agreement is amended by
deleting the last sentence thereof and by adding the following sentence:
The liability insurance company has established a reserve of $30,000
for this claim.
31. Schedule 2.1.12 of the Agreement is amended by addition of the
following:
Texas:
The Company received a status report request from the Tax Department
of the Texas Employment Commission. LADD's corporate tax department will
file this report as soon as possible. No monetary liability will result from
this request.
<PAGE>
32. Schedule 2.1.17 of the Agreement is amended as follows:
(a) the following is added to Exhibit A of Schedule 2.1.17:
U.S. Patents
Country Patent/Application Title Issued/Filed
Number
Australia 525590 Adjustment and 4/28/83
Collapsible seating
piece (Nomad)
(b) the following is added to Exhibit B of Schedule 2.1.17:
U.S. Patents
Patent Number Title Issued/Filed
(Serial Number)
(08/527,528)* Chair (Aegean) (9/13/95)
(29/043,862)* Chair (Aegean) (9/13/95)
*Recordation of Assignment to Cherry Grove, Inc. pending.
(c) Exhibit E is added to Schedule 2.1.17 and attached hereto as Schedule B.
33. Schedule 3.5 is hereby amended by deleting therefrom any requirement
that Purchaser provide LADD with a letter of credit to secure Purchaser's
indemnification obligations, and by adding the following:
In order to obtain the consent of the Pacific Design Center to the change
of control of Brown Jordan, LADD is required to guarantee the continuing
performance of the Company under the
<PAGE>
Lease Agreement dated July 1, 1987 with the Pacific Design Center. Purchaser
is required to indemnify LADD against loss pursuant to such guarantee.
By Lease Guarantee dated November 14, 1994, LADD guaranteed the Lease
Agreement between Brown Jordan and Winthrop Resources Corporation dated
September 30, 1994. Purchaser is required to indemnify LADD against loss
pursuant to such Lease Guarantee.
34. Schedule 2.3.7 is attached hereto as Schedule C.
35. This First Amendment may be executed in two or more counterparts which
together shall constitute a single agreement.
<PAGE>
IN WITNESS WHEREOF, LADD, BJCL, and BJAC have caused this First Amendment
to be signed by the respective officers thereunto duly authorized all as of the
date first above written.
LADD FURNITURE, INC.
By: /s/ (Signature of William S. Creekmore)
Title: Senior VP & CFO
BJCL, INC.
By: /s/ (Signature of M. Fourtieq)
Title: President
BJ ACQUISITION CORP.
By: /s/ (Signature of M. Fourtieq)
Title: President
<PAGE>
<PAGE>
AGREEMENT OF SALE
BY AND BETWEEN
BJIP, INC.
AND
CHERRY GROVE, INC.
<PAGE>
AGREEMENT
THIS AGREEMENT dated and to be effective as of the 29th day of
December, 1995, although executed and delivered on the date of the latest
execution at the end hereof, by and between the Seller (defined in Section 1.9
hereof) and the Buyer (defined in Section 1.3 hereof).
WITNESSETH:
WHEREAS, Buyer desires to acquire from Seller the Purchased Assets
(defined in section 1.8 hereof) and Seller is willing to sell and convey the
Purchased Assets to Buyer, all on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, other good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto agree as follows:
Article 1. Definitions.
As used herein, the following defined terms shall have the following
meanings, unless the context specifically requires otherwise:
1.1 "Affiliate" shall mean each Person (defined in Section 1.6 hereof)
controlling, controlled by or under common control with, any other Person.
1.2 "Agreement" shall mean this Agreement and all Exhibits,
amendments, extensions, revisions and supplements thereto.
1.3 "Buyer" shall mean BJIP, Inc., a Delaware corporation, with its
principal business office at 1925 Century Park East, Suite
<PAGE>
810, Los Angeles, CA 90067, and every Affiliate of BJIP, Inc. to which this
Agreement may be assigned, regardless of whether any or all of such Affiliates
are in existence on the effective date of this Agreement.
1.4 "Closing" shall mean the consummation of the transactions
contemplated by Section 5.1 of this Agreement which shall be as of December 29,
1995.
1.5 "Closing Date" shall mean December 29, 1995 or such later date as
the parties shall agree to hold the Closing.
1.6 "Person" shall mean an individual, unincorporated association,
partnership, trust, joint venture, fiduciary, corporation and every other form
of legal entity.
1.7 "Purchase Price" shall mean the aggregate amount to be paid for the
Purchased Assets in accordance with Section 2.2 of this Agreement.
1.8 "Purchased Assets" shall mean (a) all trademarks, service marks,
designs, logos, trade names and business names, and all variations and
derivations thereof, together with the goodwill of the business associated
therewith, (b) all patents and patent applications, and the reissues, divisions,
continuations and extensions thereof, (c) all copyrights, and (d) other
intellectual property rights, whether registered or unregistered (collectively,
the "Intellectual Property") used by, or in connection with the business of,
Brown Jordan company, or in which Brown Jordan Company has an interest by
license, agreement, shop right, common law or otherwise, together with all
marketing and manufacturing rights associ-
2
<PAGE>
ated with the Intellectual Property; the applications therefor; the
registrations thereof; the renewals, licenses, and royalty, income and payment
rights therefor; and all rights of recovery and of legal action for past
infringement. Purchased Assets shall include without limitation those patents,
trademarks and designs set forth on the attached Schedule 4.1.4.
1.9 "Seller" shall mean Cherry Grove, Inc., a Delaware corporation,
with its sole place of business located at 2500 West Fourth Street, Wilmington,
Delaware, 19805.
Article 2. Assets Sale and Purchase; Purchase Price
2.1 Seller agrees to sell and deliver to Buyer, and Buyer agrees to
purchase from Seller, at the Closing and pursuant to the terms and conditions of
this Agreement, all of the right, title and interest of Seller in and to the
Purchased Assets.
2.2 Purchase Price payable by Buyer to Seller for the Pur-
chased Assets shall be the sum of Twelve Million Dollars
($12,000,000);
2.3 This Agreement does not pertain to the sale or purchase of any
assets of Seller not specifically set forth herein or on the Exhibits attached
hereto.
Article 3. Closing
3.1 The Closing shall take place by facsimile transmission on the
Closing Date. Whenever reference is made herein to a state of acts in existence
on the Closing Date, or to the taking place of events before or on the Closing
Date, such reference shall be taken to refer to the opening of business on such
Closing Date.
3
<PAGE>
Article 4. Representations and Warranties
4.1 Representations and Warranties as to the Seller. Seller
represents and warrants to the Buyer as of the date hereof as fol-
lows:
4.1.1 Corporate Status.
(a) Corporate existence. Seller is a duly organ-
ized and validly existing corporation in good standing under the laws of the
State of Delaware. Seller operates in no other states, and has no material
federal, state or local tax liabilities which are past due.
(b) Authorization, etc. Seller has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Seller.
4.1.2 Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of the Seller, threatened or any basis for any such
actions, suits or proceedings against or affecting Seller or its respective
properties, assets or business with respect to the Purchased Assets.
4.1.3 Consents. No material consent, approval, authorization, permit,
order, filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by the Seller in connection
with the execution and
4
<PAGE>
delivery of this Agreement or the consummation by the Seller of the transactions
contemplated hereby in the manner contemplated hereby.
4.1.4 Purchased Assets. Schedule 4.1.4 contains a list of all
trademarks, patents and patent applications, service marks, trade names and
copyrights, whether registered or not, owned by Seller and used by Brown Jordan
Company in which Brown Jordan Company has an interest by license, agreement,
shop right, common law, or otherwise. Seller owns all of the Purchased Assets
free and clear of any liens, claims, charges, options or encumbrances.
4.1.6 Disclosure. This Agreement, the Schedules hereto and the
certificates and other documents furnished by Seller to the Buyer pursuant
hereto, taken as a whole, do not as of their respective dates contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained herein and therein not misleading.
4.2 As an inducement to Seller to sell the Purchased Assets, Buyer
represents, warrants and covenants to Seller as follows:
4.2.1 Corporate existence. Buyer is a duly organized and validly
existing corporation in good standing under the laws of the State of Delaware.
Buyer is duly qualified or registered as a foreign corporation in each other
state or jurisdiction in which its ownership of properties or the conduct of its
business requires such registration or qualification.
4.2.2 Authorization, etc. Buyer has full corporate power
and authority to execute and deliver this Agreement and to consum-
mate the transactions contemplated hereby and to perform its obli-
5
<PAGE>
gations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action on the part of Buyer.
Article 5. Closing Documents.
5.1 At the Closing:
a. Seller shall deliver to Buyer:
i. Bills of sale with covenants of warranty,
endorsements, assignments and other good and
sufficient instruments of transfer,
conveyance and assignment, in form
satisfactory to Buyer, effective to vest in
Buyer good and marketable title, free and
clear of all liens, charges and encumbrance,
to the Purchased Assets;
ii. All of the documents, contracts, agreements,
records, books, materials, insurance policies,
trade secrets, and all other data relating to
the Purchased Assets, including any documents,
records and materials necessary to vest all
right, title and interest in and to the Pur-
chased Assets to Buyer, with good and suffi-
cient assignments of all of the foregoing in
form satisfactory to Buyer;
iii. Certificate of an officer of Seller that each
of the representations, warranties and cove-
nants set forth in Section 4.1 of this Agree-
6
<PAGE>
ment is true and correct as though made again
as of the Closing Date;
iv. An opinion of counsel to Seller, dated the
Closing Date, reflecting the statements of
Section 4.1 of this Agreement;
v. Evidence, in form satisfactory to Buyer, of
the approval by the directors of Seller of the
execution and delivery of this Agreement and
the consummation of the transactions contem-
plated by this Agreement;
vi. Such other documents and instruments as Buyer
may deem necessary or desirable to consummate
the transactions contemplated by this Agree-
ment.
b. Buyer shall deliver to Seller:
i. An amount of actual cash consideration total-
ing in the aggregate $12,000,000.
ii. Certificate of an officer of Buyer that each
of the representations, warranties and
covenants set forth in Section 4.2 of this
Agreement is true and correct as though made
again as of the Closing Date.
Article 6. Termination.
In the event that on or prior to the Closing Date Buyer has not
consummated the stock purchase transaction contemplated by that certain Stock
Purchase Agreement between LADD Furniture, Inc. and
7
<PAGE>
BJCL, Inc. dated as of November 7, 1995, as amended (the "Stock Purchase
Agreement"). This Agreement will terminate and neither Seller nor Buyer will
have any liability to the other as a result of this Agreement only.
Article 7. Survival; Arbitration
7.1 Survival. The representations, warranties and covenants of Seller
and Buyer shall survive the Closing, the delivery of all documents and
instruments required hereunder and the consummation of the transactions
contemplated by this Agreement, notwithstanding any investigation which may be
or have been conducted by or on behalf of any of the parties.
7.2 Arbitration. Any dispute between the parties arising out of this
Agreement shall be tried by arbitration pursuant to the Rules of the American
Arbitration Association in effect at the time of such arbitration, all as set
forth in Section 7.14 of the Stock Purchase Agreement.
Article 8. Notices; Additional Documents;
Entire Agreement; Amendments
8.1 All notices, demands, requests, offers, consents, acceptances and
other communications which may be required or otherwise given pursuant to this
Agreement shall be in writing, sent by prepaid telegram or United State
certified mail, return receipt requested, postage prepaid, addressed as follows:
To Seller:
Cherry Grove, Inc.
Attention: David C. Eppes, President Suite 16D
2500 West Fourth Street
Wilmington, DE 19805
8
<PAGE>
With a copy to:
Petree Stockton, L.L.P.
Attention: Robert E. Esleeck, Esq.
1001 West Fourth Street
Winston-Salem, NC 27101-2400
With an additional copy to:
Tucci & Tannenbaum
Attention: Allen C. Tucci, Esq.
Suite 206
Three Mill Road
Wilmington, DE 19806
To Buyer:
BJIP, Inc.
c/o Hancock Park Associates
Attention: Michael J. Fourtieq
1925 Century Park East
Suite 810
Los Angeles, CA 90067
With a copy to:
Paul, Hastings, Janofsky & Walker
Attention: Robert A. Miller, Jr., Esq.
555 South Flower Street, 23rd Floor
Los Angeles, CA 90067
or to such other address or addresses as a party hereto may notify the other
party hereto in the manner provided in this Section 8.1. All such communications
which shall be served upon the parties in the manner aforesaid shall be deemed
sufficiently served or given for all purposes hereunder, and shall be deemed to
have been served or given as of the time of the receipt thereof.
8.2 From and after the Closing Date upon request of Buyer, Seller shall
duly execute, acknowledge and deliver all such further documents as may be
reasonably required to convey to and vest in Buyer all right, in and to the
Purchased Assets intended to be assigned, transferred and conveyed pursuant this
Agreement.
9
<PAGE>
8.3 This Agreement, together with the Exhibits annexed hereto, and any
documents that may be delivered at the Closing in conjunction with the Stock
Purchase Agreement, contain all the agreements, representations, warranties and
covenants by the parties with respect to the transactions contemplated by the
parties with respect to the transactions contemplated by this Agreement. This
Agreement and the Stock Purchase Agreement constitute the entire agreement
between the parties and shall be deemed to supersede and cancel any other oral
or written agreement between the parties hereto relating to the transactions
herein contemplated.
8.4 This Agreement may be amended, extended or supplemented only by a
written instrument executed on behalf of each of the parties hereto; provided,
however, that any party may at any time and from time to time waive in writing
compliance by any other party with any provision hereof.
Article 9. Miscellaneous
9.1 Seller represents, warrants and covenants with Buyer, and Buyer
represents, warrants and covenants with Seller, that no brokerage fees or
commissions or finders' fees have been incurred by any of them or are payable
other than to Dillon, Read & Co., Inc. to the best of their respective
knowledge, in connection with the transactions contemplated by this Agreement,
whose fee will be paid by LADD Furniture, Inc.
9.2 This Agreement shall be binding upon, and inure to the benefit of,
and be enforceable by, each of the parties hereto and their respective
successors, but shall not be otherwise assignable
10
<PAGE>
by any party without the written consent of the others, except that Buyer may
assign this agreement to an Affiliate or Affiliates of Buyer.
9.3 This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
9.4 The headings of the Articles and Sections of this Agreement are for
convenience of reference only and are not to be used to interpret or construe
any provisions of this Agreement.
9.5 This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Delaware without reference to the
conflict of laws provisions thereof.
11
<PAGE>
This Agreement is hereby executed and delivered on the date of the
latest execution set forth below.
CHERRY GROVE, INC.
- -----------------------------------
David C. Eppes, President
Date Signed:
BJIP, INC.
- -----------------------------------
________________________, President
Date signed:
12
<PAGE>
<PAGE>
ASSET PURCHASE AGREEMENT
between
LADD FURNITURE, INC.,
and
LEA LUMBER & PLYWOOD, LLC
Dated as of November 6, 1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1: SALE AND PURCHASE OF PROPERTIES...................................................... 1
1.1 Sale and Purchase of Properties...................................................... 1
1.2 Closing Date......................................................................... 3
1.3 Purchase Price....................................................................... 3
1.4 Assumption of Liabilities............................................................ 3
1.5 Closing Date Deliveries.............................................................. 4
1.6 Further Assurances................................................................... 5
ARTICLE 2: REPRESENTATIONS AND WARRANTIES....................................................... 5
2.1 Representations and Warranties as to the Company..................................... 5
2.1.1 Corporate Status............................................................ 6
(a) Corporate existence................................................. 6
(b) Authorization, etc.................................................. 6
2.1.2 Conflicts, Consents......................................................... 6
(a) Conflicts........................................................... 6
(b) Consents............................................................ 7
2.1.3 Financial Information, Material Adverse Change.............................. 7
(a) Financial Statements................................................ 7
(b) Material Adverse Change............................................. 7
2.1.4 No Liens.................................................................... 8
2.1.5 Inventories................................................................. 8
2.1.6 Real Property............................................................... 8
2.1.7 Insurance................................................................... 8
2.1.8 Litigation.................................................................... 9
2.1.9 Compliance with Laws, Permits................................................. 9
(a) Compliance with Laws................................................ 9
(b) Permits............................................................. 9
2.1.10 Tax Matters.................................................................. 9
2.1.11 Brokers, Finders............................................................. 10
2.1.12 Absence of Certain Changes................................................... 10
2.1.13 Material Agreements.......................................................... 12
2.1.14 Intellectual Property........................................................ 13
2.1.15 Labor Matters................................................................ 14
2.1.16 No Judgments or Orders....................................................... 14
2.1.17 Affiliate Transactions....................................................... 14
2.1.18 Environmental................................................................ 15
i
<PAGE>
2.1.19 Suppliers and Customers...................................................... 17
2.1.20 Disclosure................................................................... 17
2.2 Representations and Warranties of Purchaser.......................................... 17
2.2.1 Purchaser's Status.......................................................... 17
2.2.2 Authorization, etc.......................................................... 17
2.2.3 Conflicts, Consents......................................................... 18
(a) Conflicts........................................................... 18
(b) Consents............................................................ 18
2.2.4 Brokers, Finders............................................................ 18
ARTICLE 3: CERTAIN COVENANTS PENDING AND FOLLOWING THE
CLOSING....................................................................................... 18
3.1 Access and Information; Confidentiality.............................................. 18
3.2 Conduct of Business of the Company................................................... 19
3.3 Efforts to Consummate Transaction.................................................... 20
3.4 Employee Matters..................................................................... 20
3.5 Consents and Approvals; Releases..................................................... 21
3.6 Collection of Receivables............................................................ 21
3.7 Non-Competition...................................................................... 21
ARTICLE 4: CONDITIONS PRECEDENT................................................................. 23
4.1 Conditions to Obligations of Purchaser............................................... 23
4.1.1 Representations, Performance, etc........................................... 23
4.1.2 Opinion of Counsel.......................................................... 23
4.1.3 Certain Approvals, etc...................................................... 23
4.1.4 No Injunction; Other Litigation............................................. 24
4.1.5 No Material Adverse Changes................................................. 24
4.1.6 Title Insurance; Survey..................................................... 24
4.1.7 Environmental Remediation................................................... 24
4.2 Conditions to Obligations of LADD.................................................... 25
4.2.1 Representations, Performance, etc........................................... 25
4.2.2 Opinion of Counsel.......................................................... 25
4.2.3 Certain Approvals, etc...................................................... 25
4.2.4 No Injunction............................................................... 26
4.2.5 Purchase Price.............................................................. 26
ii
<PAGE>
ARTICLE 5: TERMINATION.......................................................................... 26
5.1 Grounds for Termination.............................................................. 26
5.1.1 Termination by LADD......................................................... 26
5.1.2 Termination by Purchaser.................................................... 26
5.2 Effect of Termination................................................................ 27
ARTICLE 6: INDEMNIFICATION...................................................................... 27
6.1 Indemnification by LADD.............................................................. 27
6.2 Indemnification by Purchaser......................................................... 31
6.3 Notice of Claims..................................................................... 32
6.4 Third Party Claims................................................................... 33
ARTICLE 7: MISCELLANEOUS........................................................................ 35
7.1 Survival............................................................................. 35
7.2 Expenses............................................................................. 35
7.3 Assignment; Successors; Parties in Interest.......................................... 35
7.4 Amendment, Waiver and Modification................................................... 36
7.5 Notices.............................................................................. 36
7.6 Access After Closing................................................................. 37
7.7 Best Efforts......................................................................... 38
7.8 Knowledge............................................................................ 38
7.9 Sales and Transfer Taxes............................................................. 38
7.10 Severability......................................................................... 38
7.11 Arbitration.......................................................................... 38
7.12 Schedules and Exhibits............................................................... 39
7.13 Bulk Sales Law....................................................................... 39
7.14 Allocation of Purchase Price......................................................... 39
7.15 Definitions.......................................................................... 39
7.16 Confidential Nature of Information................................................... 43
7.17 Public Announcement.................................................................. 43
7.18 Captions............................................................................. 43
7.19 Entire Agreement..................................................................... 44
7.20 Counterparts......................................................................... 44
7.21 Governing Law........................................................................ 44
iii
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1.1 Asset List
Schedule 2.1.2 Required Consents
Schedule 2.1.3 Financial Statements/Material Changes
Schedule 2.1.4 Liens
Schedule 2.1.6 Real Property (Owned and Leased)
Schedule 2.1.7 Insurance
Schedule 2.1.8 Litigation
Schedule 2.1.9 Noncompliance with Laws
Schedule 2.1.10 Tax Matters
Schedule 2.1.12 Absence of Certain Changes
Schedule 2.1.13 Material Agreements
Schedule 2.1.14 Intellectual Property
Schedule 2.1.15 Labor Matters
Schedule 2.1.17 Affiliate Transactions
Schedule 2.1.18 Environmental
Schedule 2.1.19 Suppliers and Customers
Schedule 3.2 Conduct of Business
Schedule 3.7(b) Current Customer List
Schedule 7.8 Knowledge
Schedule 7.15 Permitted Liens
Exhibit A Bill of Sale, Assignment and Assumption Agreement
</TABLE>
iv
<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of November 6, 1995 (the
"Agreement"), by and among LADD Furniture, Inc., a North Carolina corporation
("LADD"), and Lea Lumber & Plywood, LLC, a Delaware limited liability company
(the "Purchaser").
W I T N E S S E T H
WHEREAS, LADD is engaged in the business of manufacturing and
selling cut-to-size plywood, veneer, and wood laminated parts through its
division, Lea Lumber & Plywood (the "Company" and the business conducted by the
Company being referred to herein as the "Business"); and
WHEREAS, LADD desires to sell to Purchaser, and Purchaser
desires to purchase from LADD, on a going concern basis, substantially all of
the assets, properties and business of the Business, all on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made
herein and of the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
ARTICLE 1
SALE AND PURCHASE OF PROPERTIES
1.1 Sale and Purchase of Properties. Upon the terms and
subject to the conditions of this Agreement, on the Closing Date, LADD shall
sell, transfer, assign, convey and deliver to Purchaser, and Purchaser shall
purchase from LADD, on a going concern basis, free and clear of all Liens
(except for Permitted Liens), all tangible and intangible assets, real and
personal properties and business owned or held or used primarily in the conduct
of the Business by the Company as the same shall exist on the Closing Date
(herein collectively called the "Properties" and individually called a
"Property"), including, without limitation, all right, title and interest of
LADD and the Company in, to and under:
<PAGE>
(a) All raw materials, supplies, work-in-process,
finished products and other materials included in the
inventory of the Company;
(b) The real property, together with the buildings
and improvements erected thereon and appurtenant rights,
listed or described in Schedule 2.1.6;
(c) The real property leases and leasehold
improvements listed or described in Schedule 2.1.6;
(d) Timber tracts listed or described in Schedule
2.1.13;
(e) The machinery, equipment, vehicles, furniture and
other personal property of the Company as more particularly
described in Schedule 1.1;
(f) The personal property leases listed in Schedule
2.1.13;
(g) The contracts, agreements or understandings
listed or described in Schedule 2.1.13 or assumed by Purchaser
pursuant to Section 1.4(a);
(h) All mailing lists, customer lists, subscriber
lists, patents, patent applications, processes, trade secrets,
know-how, trade names, trademarks, service marks, copyrights
and other proprietary or confidential information or
intellectual property used in or relating exclusively to the
Business, including, without limitation, the name "Lea Lumber
& Plywood" and all variants thereof;
(i) All assignable or transferrable permits,
licenses, authorizations, registrations, consents and
approvals relating to the Business or any Property, whether
governmental or otherwise; and
2
<PAGE>
(j) All books and records of the Company relating
exclusively to the Business or any of the Properties.
1.2 Closing Date. Subject to the satisfaction or waiver of all
of the conditions to each party's obligation to close, the purchase and sale of
the Properties provided for in Section 1.1 (the "Closing") shall be consummated
at 10:00 A.M., local time, on December 17, 1995 or such later date no later than
the date set forth in Section 5.1.3 which is the third business day after the
date on which the conditions set forth in Article 4 have been satisfied, at the
offices of Petree Stockton, L.L.P., 1001 West Fourth Street, Winston-Salem North
Carolina 27101, or such other place or other time as shall be agreed upon by
Purchaser and LADD (such date and time being hereinafter called the "Closing
Date").
1.3 Purchase Price. The purchase price for the Properties (the
"Purchase Price") shall be $4,200,000 plus an amount equal to the then currently
saleable and useable inventory (raw materials, work-in-process and finished
goods) of the Company on hand as of the Closing Date, valued at the lower of
cost (FIFO) or market, based upon a physical inventory and valuation to be
conducted by selected officers of LADD and Purchaser immediately prior to
Closing and decreased by the fair market value of any Property destroyed and any
timber cut from the Company's land or timber tracts between September 30, 1995
and the Closing Date. In the event LADD and Purchaser are unable to agree upon
such inventory valuation or such fair market value, such amount will be
determined by KPMG Peat Marwick, LLP or another nationally recognized firm of
independent certified public accountants acceptable to LADD and Purchaser, whose
determination will be final and binding upon the parties.
1.4 Assumption of Liabilities. (a) On the Closing Date,
Purchaser shall deliver to LADD an undertaking and assumption, in the form of
Exhibit A, pursuant to which Purchaser shall assume and agree to discharge all
liabilities and obligations of the Company arising after the Closing Date under
or in connection with (i) the Material Agreements, (ii) the other leases,
contracts and other agreements of LADD relating to the Company not required by
the terms of Section 2.1.13 to be listed in a Schedule to this Agreement and
entered into in the ordinary
3
<PAGE>
course of the Business, (iii) the leases, contracts and other agreements entered
into by LADD with respect to the Company after the date hereof consistent with
the terms of this Agreement and approved by Purchaser, except in each case, to
the extent such liabilities and obligations would have been paid, performed or
discharged on or prior to the Closing Date had LADD performed strictly in
accordance with the terms thereof, or to the extent that the same arise out of
any breach or default thereof by LADD, (iv) the Permitted Liens, (v) the
Severance Agreement dated July 21, 1995, between LADD and Bradly A. Upfield, as
more fully described in Schedule 2.1.13 attached hereto, and (vi) all
liabilities and obligations arising from the operation of the Business by
Purchaser after Closing. All of the foregoing to be assumed by Purchaser
hereunder (excepting any Excluded Liabilities) are referred to herein as the
"Assumed Liabilities."
(b) Purchaser shall not assume or be obligated for any
liability or obligation of LADD relating to the Company, direct or indirect,
known or unknown, absolute or contingent, not expressly assumed by Purchaser
under Section 1.4(a) (all of such liabilities and obligations not being assumed
being herein called the "Excluded Liabilities").
1.5 Closing Date Deliveries. (a) On the Closing Date, LADD
shall deliver to Purchaser (i) a bill of sale, assignment and assumption
agreement, in the form of Exhibit A, collectively covering all of the non real
estate Properties, (ii) deeds conveying to Purchaser the parcels of real estate
identified in Schedule 2.1.6 in form reasonably satisfactory to Purchaser and
(iii) all of the documents, instruments and opinions required to be delivered by
LADD pursuant to Article 4.
(b) On the Closing Date, Purchaser shall deliver to LADD (i)
by bank wire transfer of immediately available funds to LADD's account, account
number 101-074-664 at NationsBank, N.A. (Carolinas), High Point, North Carolina,
an amount equal to the Purchase Price, and (ii) all of the documents,
instruments and opinions required to be delivered by Purchaser pursuant to
Section 1.3 and Article 4.
4
<PAGE>
(c) All ad valorem taxes and utilities related to the
Properties will be prorated as of Closing.
1.6 Further Assurances. On the Closing Date, LADD shall (i)
deliver to Purchaser such other bills of sale, deeds, endorsements, assignments
and other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to Purchaser and its counsel, as Purchaser may
reasonably request or as may be otherwise reasonably necessary to vest in
Purchaser all the right, title and interest of LADD in, to or under any or all
of the Properties, and (ii) take all steps as may be reasonably necessary to put
Purchaser in actual possession and control of all the Properties. From time to
time following the Closing, LADD shall execute and deliver, or cause to be
executed and delivered, to Purchaser such other instruments of conveyance and
transfer as Purchaser may reasonably request or as may be otherwise necessary to
more effectively convey and transfer to, and vest in, Purchaser and put
Purchaser in possession of, any part of the Properties, and, in the case of
approvals, agreements, contracts, leases, easements and other commitments
included in the Properties which cannot be transferred or assigned effectively
without the consent of third parties which consent has not been obtained prior
to the Closing, to use its best efforts (without any obligation to make any
payment or concession to any third party) to obtain such consent.
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
not constitute an agreement to assign any approval, agreement, contract, lease,
easement or other commitment included in the Properties if an attempted
assignment thereof without the consent of a third party thereto would constitute
a breach thereof.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties as to the Company and LADD.
LADD represents and warrants to the Purchaser as of the date hereof (and to the
extent provided for by Section 4.1.1 as of the Closing Date) as follows:
5
<PAGE>
2.1.1 Corporate Status. (a) Corporate existence. LADD is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of North Carolina and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. LADD is duly qualified and in good standing as a foreign
corporation duly authorized to do business in all jurisdictions in which the
failure to be so qualified would have a Material Adverse Effect on the Business.
(b) Authorization, etc. LADD has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate and shareholder action on the part of LADD and its shareholders. This
Agreement has been duly executed and delivered by LADD and constitutes the
legal, valid and binding obligation of LADD, enforceable against it in
accordance with its terms.
2.1.2 Conflicts, Consents. (a) Conflicts. Except as set forth
on Schedule 2.1.2, the execution and delivery of this Agreement by LADD, and the
consummation by LADD of the transactions contemplated hereby in the manner
contemplated hereby, will not conflict with or result in any violation of or
default under (or any event that, with notice or lapse of time or both, would
constitute a default under), require any consent under, or result in the
acceleration or required prepayment of any indebtedness pursuant to the terms
of, any provision of (i) the Articles of Incorporation or Bylaws of LADD, (ii)
any mortgage, indenture, loan agreement, note, bond, deed of trust, other
agreement, commitment or obligation for the borrowing of money or the obtaining
of credit, material lease or other material agreement, contract, license,
franchise, permit or instrument to which LADD is a party or by which LADD or any
of the Property may be bound, or (iii) any judgment, order, decree, law,
statute, rule or regulation applicable to LADD with respect to the Company or
the Property which conflict, breach, or failure to receive such consent would
have a Material Adverse Effect on the Business or any of the Property.
6
<PAGE>
(b) Consents. Except as set forth in Schedule 2.1.2, no
consent, approval, authorization, permit, order, filing, registration or
qualification of or with any court, governmental authority or third person is
required to be obtained by LADD in connection with the execution and delivery of
this Agreement or the consummation by LADD of the transactions contemplated
hereby in the manner contemplated hereby, which failure of LADD to make or
obtain would have a Material Adverse Effect on the Business or any of the
Property.
2.1.3 Financial Information, Material Adverse Change. (a)
Financial Statements. LADD has delivered to the Purchaser unaudited statements
of earnings before interest and income taxes of the Company for the fiscal years
ended January 1, 1994 and December 31, 1994 and unaudited balance sheets of the
Company as of such dates (the "Annual Financials"), in each case prepared from
and in accordance with the books and records of the Company as of, and for the
period ended on, such date. LADD also has delivered to the Purchaser an
unaudited statement of earnings before interest and income taxes for the nine
(9) month period ended September 30, 1995 and an unaudited balance sheet of the
Company as of September 30, 1995 (the "Interim Financials"), prepared from and
in accordance with the books and records of the Company as of, and for the
period ended on, such date. The Annual Financials and Interim Financials are set
forth in Schedule 2.1.3. The Annual Financials and the Interim Financials have
been prepared in accordance with generally accepted accounting principles
("GAAP") and accounting practices utilized by subsidiaries and divisions of LADD
consistently applied throughout the periods indicated and present fairly the
financial condition of the Company at the respective dates indicated and (in the
case of the Annual Financials) the results of operations of the Company for the
respective periods indicated, except that the Interim Financials are subject to
year-end audit adjustments.
(b) Material Adverse Change. Except as disclosed on Schedule
2.1.3, since September 30, 1995, there has been no change in the business,
financial condition or prospects of the Company that could reasonably be
expected to have a Material Adverse Effect on the Business.
7
<PAGE>
2.1.4 No Liens. Except for Permitted Liens, the Company owns
free and clear of any liens, claims, charges, options or encumbrances all of the
personal property reflected in the Annual Financials and the Interim Financials,
and all personal property acquired by the Company since September 30, 1995,
except such personal property as has been disposed of between such date and the
date hereof in the ordinary course of business and without violation of this
Agreement. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SPECIFICALLY PROVIDED
FOR HEREIN, ALL OF THE TANGIBLE ASSETS INCLUDED IN THE PROPERTIES ARE SOLD TO
PURCHASER "AS IS" WITHOUT IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR
INTENDED USE OR OTHERWISE.
2.1.5 Inventories. The inventories of the Company were
acquired in the ordinary course of business and are free and clear of any liens,
claims, charges, options, or encumbrances and are of a quality useable and
salable in the ordinary course of business.
2.1.6 Real Property. The Company has good and marketable title
in fee simple to the real property, including the plants, buildings and other
improvements thereon, set forth and described in Schedule 2.1.6 hereto (the
"Owned Real Property"), free and clear of any liens, claims, charges, options,
encumbrances or encroachments, except for Permitted Liens. The Owned Real
Property constitutes all of the real property reflected in the Annual Financials
and the Interim Financials and all real property acquired by the Company since
September 30, 1995. Schedule 2.1.6 sets forth all leasehold interests in real
property and interests in timber tracts held by the Company at the Closing Date.
Except for matters which individually and in the aggregate will not have a
Material Adverse Effect, the buildings and operations of the Company are in
compliance with all applicable ordinances, regulations and zoning laws and do
not encroach on property of others.
2.1.7 Insurance. The assets, properties and business of the
Company are insured under the various policies of general liability and other
forms of insurance, as set forth on Schedule 2.1.7 hereof. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policy has been received by the Company.
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2.1.8 Litigation. Except as set forth in Schedule 2.1.8, there
are no actions, suits or proceedings pending or, to the knowledge of LADD,
threatened or any basis for any such actions, suits or proceedings against or
affecting the Company or its respective properties, assets or business which
would, individually or in the aggregate, if adversely decided against LADD, have
a Material Adverse Effect on the Business or any of the Property or which would
prevent or hinder the consummation of the transactions contemplated hereby.
2.1.9 Compliance with Laws, Permits. (a) Compliance with Laws.
Except as set forth on Schedule 2.1.9, LADD is not, nor previously has it been,
in violation of any applicable laws or regulations or any applicable orders,
rules, writs, judgments, injunctions, decrees or ordinances applicable to the
business or operations of the Company, the violation of which individually or in
the aggregate would have a Material Adverse Effect on the Company.
(b) Permits. All necessary licenses, permits or orders with
respect to the conduct of the Business, the absence of which would individually
or in the aggregate have a Material Adverse Effect on the Business, have been
obtained by LADD and are in effect as of the date hereof. All permits, licenses,
orders, registrations, or other approvals of all federal, state, local or
foreign governmental or regulatory bodies, the failure to obtain which would
individually or in the aggregate have Material Adverse Effect on the Business,
have been obtained, are set forth on Schedule 2.1.9 hereto, are in full force
and effect, and, there has been neither any violation, suspension or
cancellation thereof nor any basis for any such claim.
2.1.10 Tax Matters. LADD has timely filed all federal,
foreign, state and local tax returns and other tax reports required to be filed
and has paid, or set up an adequate reserve for the payment of, all federal,
foreign, state and local income taxes and other taxes with respect to the
Business (including, without limitation, all franchise, property, sales, use,
excise, intangible, employment taxes, and all such other taxes along with all
federal, foreign, state and local income taxes with respect to the Business
being defined collectively as "Taxes") required to be paid in respect of the
periods covered by such returns, has set up an adequate reserve for the payment
of all Taxes anticipated to be payable in respect of the period subsequent to
the last
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of such periods. LADD is not delinquent in the payment of any Taxes, has not
waived any statute of limitations in respect of Taxes, and has not requested or
agreed to any extension of time within which to file any tax return or report or
with respect to a tax assessment or deficiency. No deficiencies for Taxes have
been assessed or asserted, and LADD knows of no unresolved questions or claims
concerning the Tax liability relating to the Company.
2.1.11 Brokers, Finders. The Company and LADD have not
retained any broker or finder in connection with the transactions contemplated
hereby so as to give rise to any claim against the Purchaser for any brokerage
or finder's commission, fee or similar compensation, except that Stump Financial
Corporation and Stump & Company have acted as financial advisor to LADD and
their fees and expenses will be paid by LADD.
2.1.12 Absence of Certain Changes. Except as set forth in
Schedule 2.1.12, since September 30, 1995, LADD has not with respect to the
Company:
(a) mortgaged, pledged or subjected to any lien, lease,
security interest or other charge or encumbrance any of the Properties, except
in the ordinary course of business and the same shall nevertheless be discharged
on or before the Closing Date;
(b) acquired or disposed of any assets or properties, or
entered into any agreement or other arrangements for any such acquisition or
disposition, which individually or collectively are material;
(c) increased the wages, salaries, compensation, pension or
other benefits payable to any employee other than in accordance with the normal
compensation and benefits policies of the Company, or granted any severance or
termination pay, or entered into any employment, severance or consulting
agreement or arrangement with any officer or salaried employee that is not
terminable by the employer without cause and without penalty;
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(d) forgiven or cancelled any material debts or claims or
waived any material rights of value other than intercompany debts, claims or
rights and other than in the ordinary course of business and regular course
intercompany dividends and transfers;
(e) suffered any damage, destruction or loss (whether or not
covered by insurance) affecting the Properties that could reasonably be expected
to have a Material Adverse Effect on the Business;
(f) suffered any strike or other labor trouble affecting its
business or operations that could reasonably be expected to have a Material
Adverse Effect on the Business;
(g) suffered or experienced any change in relations with or
loss of any employees or customers that could reasonably be expected to have a
Material Adverse Effect on the Business;
(h) changed any method of accounting or accounting practice or
policy of the Company;
(i) conducted its business other than in the ordinary course,
except as required by this Agreement;
(j) settled or compromised any claim, suit or cause of action
involving more than $35,000;
(k) materially altered its collection practices with respect
to accounts receivable;
(l) materially altered its payment practices with respect to
accounts payable; or
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(m) made any capital expenditures or commitments therefor
outside the ordinary course of business in excess of $35,000.
2.1.13 Material Agreements. Except for the contracts,
franchises, agreements, plans, leases and licenses described in Schedule 2.1.13
hereto, the Company is not a party to or subject to:
(a) any written employment contract or any other agreement
relating to compensation or severance payments with any officer, consultant, or
employee;
(b) any plan or contract or arrangement providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit sharing or
health or other benefits for employees, and none of these listed in Schedule
2.1.13 is a "multi-employer plan" within the meaning of ERISA section
4001(a)(3);
(c) any contract or agreement with any labor union;
(d) any lease (other than leases of real property described in
Schedule 2.1.6 hereto) involving payment of annual rentals in excess of $35,000;
(e) any contract or agreement for the purchase of any
materials, services, or supplies involving annual payments in excess of $35,000
and of more than one year in duration;
(f) any contract or agreement for the purchase of equipment or
any construction or other contract or agreement, not otherwise covered by this
Section 2.1.13, involving annual payments in excess of $35,000 or of more than
one year in duration;
(g) any contract or agreement for the sale of its products
exceeding $35,000 on an annual basis and of more than one year in duration;
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(h) any contract or agreement with an agent, sales
representative, dealer or other distributor of products of the Company;
(i) any contract or agreement, not otherwise covered by this
Section 2.1.13, containing covenants limiting the freedom of the Company to
compete in any line of business or with any person or in any geographic area;
(j) any license or franchise agreement in which the Company is
the licensor or franchisor;
(k) any license or franchise agreement in which the Company is
the licensee or franchisee;
(l) any contract or agreement, not of the type covered by any
of the other items of this Section 2.1.13, which, with respect to the Company,
involves the payment or receipt by LADD of $35,000 or more in any one year or
which by its terms is either (i) not to be fully performed by LADD prior to one
year from the date hereof, or (ii) does not terminate, or is not terminable, by
and without penalty to LADD prior to one year from the date hereof.
All contracts, franchises, agreements, plans, leases and
licenses described in Schedule 2.1.13 (the "Material Agreements") are valid and
in full force and effect and LADD (or, to the knowledge of LADD, any other party
to such Material Agreements) has not breached any material provision of, and is
not in default in any material respect under the terms of, any such Material
Agreement. Schedule 2.1.13 correctly identifies and specially designates thereon
each Material Agreement which is or might be terminable by any other party upon
the change of control of the Company.
2.1.14 Intellectual Property. Schedule 2.1.14 contains a list
of all trademarks, service marks, patents and patent applications, trade names
and copyrights, whether registered or not, owned by LADD or in which it has an
interest by license, agreement, shop right,
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common law, or otherwise and which are used by the Company or material to the
conduct of the Business, and LADD owns and will convey all such rights as are
necessary for the conduct of the Business as it is now being conducted. There
are no claims or proceedings pending or, to the knowledge of LADD, threatened
against LADD or the Company asserting that LADD or the Company has or is
infringing any patent, trademark, service mark, copyright or trade name of any
third party. Nor, to the knowledge of LADD is there any basis for any such
claim to be asserted.
2.1.15 Labor Matters. Except as set forth on Schedule 2.1.15,
there has been no work stoppage or slowdown or other labor difficulties relating
to the Company that has had or could reasonably be expected to have a Material
Adverse Effect on the Business. Except as set forth on Schedule 2.1.15, LADD is
not a party to any collective bargaining agreement with any labor union or
similar organization with respect to the Business, nor does LADD know of any
such organization which represents or claims to represent any of the Company's
employees or is currently seeking to represent or organize any employees of the
Company. Schedule 2.1.15 contains a complete and accurate list of all employees
of the Business and their rates of compensation as of the date of this
Agreement.
2.1.16 No Judgments or Orders. With respect to the Business,
LADD is not a party to or subject to any judgment, order or decree entered in
any action or proceeding brought by any governmental agency or any other party
enjoining it in respect of any business practice or the conduct of business in
any area or the acquisition of any property.
2.1.17 Affiliate Transactions. Except as reflected in the
Annual Financials, the Interim Financials or otherwise set forth in Schedule
2.1.17, there are no transactions involving LADD arising out of any transaction
with the Company (other than for services as employees, officers and directors),
including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from LADD
or any affiliate of LADD.
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2.1.18 Environmental. Except as set forth on Schedule 2.1.18,
with respect to the Business:
(i) (A) LADD is not in violation in any material respect of
any Environmental Laws; (B) no lien has been attached to any real or personal
property of the Company pursuant to any Environmental Laws; (C) there has been
no treatment, storage, disposal or release of any Hazardous Materials by LADD on
any property currently owned, operated, or leased by LADD that could reasonably
be expected to lead to a material liability; (D) there are no sites, locations
or operations at which LADD is currently undertaking, or has completed, or has
been advised to undertake, any remedial or response action relating to any such
disposal or release, as required by Environmental Laws; (E) LADD has obtained,
and is in compliance with, all permits, licenses, authorizations, registrations
and other governmental consents required by applicable Environmental Laws
("Environmental Permits"), and all such Environmental Permits are transferable
under the circumstances presented by the current transaction; (F) LADD has not
received notice of any civil, criminal or administrative claims, actions, suits,
hearings, investigations, or proceedings pending or threatened that are based on
or related to any Environmental Laws; (G) all underground storage tanks and
solid waste disposal facilities owned or operated by the Company are used and
operated in compliance in all material respects with Environmental Laws; (H)
there are no polychlorinated biphenyls ("PCBs") in any equipment on, about,
under or within any of such properties; and (I) there is no friable asbestos or,
to LADD's knowledge, other Hazardous Materials at, on, about, under or within
any of such properties other than those Hazardous Materials utilized in the
ordinary course of the Business in compliance with Environmental Laws.
(ii) Schedule 2.1.18 sets forth every site that is listed on
either the Comprehensive Environmental Response, Compensation and Liability Act
Information System ("CERCLIS") data base or a similar state, provincial,
regional, territorial, municipal, local or foreign law list with respect to
which LADD has received notice from the United States Environmental Protection
Agency or a state, provincial, regional, territorial, municipal, local or
foreign agency that it is or may be considered to be a potentially responsible
party under any
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Environmental Law. LADD has not received any notice from any governmental agency
of any violation of Environmental Laws or any condition on any property where
the Company has caused Hazardous Materials to be disposed of which would require
any remedial action or removal action, as such terms are defined in applicable
Environmental Laws.
(iii) For purposes of this Section 2.1.18, the term
"Environmental Laws" shall mean any federal, state, provincial, regional,
territorial, municipal, local or foreign statute, code, ordinance, rule,
regulation, policy, guideline, permit, consent, approval, license, judgment,
order, writ, decree, injunction or other authorization, including the
requirement to register underground storage tanks, relating to: (A) emissions,
discharges, releases or threatened releases at any time of Hazardous Materials
into the natural environment, including, without limitation, into ambient air,
soil, sediments, land surface or subsurface, buildings or facilities, surface
water, groundwater, publicly-owned treatment works, septic systems or land; (B)
the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Materials; or (C) otherwise relating to
pollution or the protection of health or safety or the environment, solid waste
handling, treatment or disposal or operation or reclamation of mines.
(iv) For purposes of this Section 2.1.18, the term "Hazardous
Materials" shall mean: (1) hazardous materials, contaminants, constituents,
hazardous wastes and hazardous substances as those terms are defined in any of
the following statutes and their implementing regulations: the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1801 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. ss. 9601 et seq., the
Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Toxic Substance Control Act, 15
U.S.C. ss. 2601 et seq., (2) petroleum, including crude oil and any fractions
thereof, (3) natural gas, synthetic gas and any mixtures thereof, (4) asbestos
and/or asbestos-containing materials, (5) PCBs, or PCB-containing materials or
fluids, (6) any other substances with respect to which any federal, state or
local agency or other governmental authority may require either an environmental
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investigation or environmental remediation, and (7) any other hazardous or
noxious substance, materials, pollutant or solid or liquid waste that is
regulated by any Environmental Laws.
2.1.19 Suppliers and Customers. Each customer accounting for
more than five (5) percent of the sales of the Business in any of the last two
years, and each material supplier of the Business is listed on Schedule 2.1.19.
LADD has not been notified that any such customer or supplier has indicated that
it intends to materially reduce the amount of business it will do with LADD or
with the Purchaser as the successor owner of the Business.
2.1.20 Disclosure. To LADD's knowledge, this Agreement, the
Schedules hereto and the certificates and other documents furnished by LADD to
the Purchaser pursuant hereto, taken as a whole, do not as of their respective
dates contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein and therein not
misleading. No officer, director or employee of LADD or any other person except
those named in Schedule 7.8 has been authorized to give any information or to
make any representation in connection with the transactions contemplated hereby
other than those contained herein and in any certificates or documents furnished
pursuant hereto and, if given or made, such information or representation may
not be relied upon as having been authorized by LADD.
2.2 Representations and Warranties of Purchaser. The Purchaser
represents and warrants to LADD as of the date hereof as follows:
2.2.1 Purchaser's Status. The Purchaser is a limited liability
company duly formed and validly existing under the laws of the State of
Delaware.
2.2.2 Authorization, etc. The Purchaser has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of the Purchaser. This Agreement has been duly executed and
delivered by
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the Purchaser and constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms.
2.2.3 Conflicts, Consents. (a) Conflicts. The execution and
delivery of this Agreement by the Purchaser, and the consummation by the
Purchaser of the transactions contemplated hereby in the manner contemplated
hereby, do not and will not conflict with or result in any violation of, or
default under (or any event that, with notice or lapse of time or both, would
constitute a default under), any provision of (i) the Certificate of Formation
or Operating Agreement of the Purchaser, (ii) any material mortgage, indenture,
loan agreement, note, bond, deed of trust, other agreement, commitment or
obligation for the borrowing of money or the obtaining of credit, material lease
or other material agreement, contract, license, franchise, permit or instrument
to which the Purchaser is a party or by which it may be bound, or (iii) any
judgment, order, decree, law, statute, rule or regulation applicable to the
Purchaser.
(b) Consents. No consent, approval, authorization, permit,
order, filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by the Purchaser in
connection with the execution and delivery by the Purchaser of this Agreement or
the consummation by the Purchaser of the transactions contemplated hereby in the
manner contemplated hereby.
2.2.4 Brokers, Finders. The Purchaser has not retained any
broker or finder in connection with the transactions contemplated hereby so as
to give rise to any valid claim against LADD or the Company for any brokerage or
finder's commission, fee or similar compensation.
ARTICLE 3
CERTAIN COVENANTS PENDING AND FOLLOWING THE CLOSING
3.1 Access and Information; Confidentiality. Prior to the
Closing, LADD will, with respect to the Business, (a) give to the Purchaser and
its representatives full and free access to its properties, books, records,
contracts and commitments upon reasonable notice during
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normal business hours, (b) furnish all such information and documents relating
to the Properties and Business as the Purchaser may reasonably request, and (c)
allow the Purchaser to discuss matters relating to the Company with the outside
auditors, attorneys and such other representatives of LADD as are reasonably
requested by the Purchaser. Unless and until the transactions contemplated
hereby are consummated, the Purchaser shall use its best efforts to cause all
information obtained by it or its representatives pursuant to this Agreement or
in connection with the negotiation hereof to be treated as confidential, and
except for such disclosure as is reasonably necessary to be made in connection
with Purchaser's financing activities, Purchaser shall not use or disclose, or
knowingly permit others to use or disclose, any such information in a manner
detrimental to the Business. In the event of the termination of this Agreement,
the Purchaser will use its best efforts cause to be kept confidential all
information obtained from the Company.
3.2 Conduct of Business of the Company. Except as set forth in
Schedule 3.2, or as is otherwise specifically permitted or required by this
Agreement, from the date hereof to the Closing, LADD will, with respect to the
Business, (a) conduct its business only in the ordinary course in substantially
the same manner as heretofore, (b) maintain and keep its properties and
equipment in such repair, working order and condition as is sufficient for the
operation of the Business in the ordinary course, (c) keep in full force and
effect insurance comparable in amount and scope of coverage to that now
maintained by it (to the extent available on commercially reasonable terms in
the case of any renewal or replacement policies), (d) perform in all material
respects all of its obligations under all contracts and commitments applicable
to the Business or Properties, (e) use its best efforts to maintain and preserve
the Company's business organization intact, and maintain satisfactory
relationships with employees, suppliers, distributors and customers so that they
will be preserved after the Closing, (f) maintain its books of account and
records in the usual and regular manner, (g) comply in all material respects
with all laws and regulations applicable to it and to the conduct of the
Business, (h) not make any material commitments or expenditures other than those
previously disclosed to and approved by Purchaser, (i) promptly advise the
Purchaser in writing of any emergency or other change in the normal course of
business or in the operations of the Business and of any governmental or any
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other third party complaints, investigations or hearings (or communications
indicating that the same may be contemplated), (j) promptly advise the Purchaser
of any material adverse change in the business, operations or financial
condition of the Business, (k) use its best efforts to insure that the
representations and warranties contained in Section 2 hereof shall be true and
correct as of the Closing Date and (l) not take any action described in Section
2.1.12 hereof.
3.3 Efforts to Consummate Transaction. Subject to the terms
and conditions herein provided, each of the parties agrees to perform each of
its express covenants in this Agreement and to use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations and
otherwise to consummate and make effective the transactions contemplated hereby
in accordance with the terms of this Agreement.
3.4 Employee Matters. LADD shall make no announcement or
general communication to its employees regarding this transaction except that
the parties shall make a joint announcement in a manner agreed upon by them at
an appropriate time prior to the Closing. Purchaser shall offer "at-will"
employment to each of the present employees of the Business, but with no express
or implied promise of continued employment. Purchaser shall afford or cause to
be afforded health, life, disability and severance pay benefits and
participation in bonus, savings, incentive and retirement plans of Purchaser to
such employees which, in the aggregate, are no less favorable to such employees
than the benefits applicable to Purchaser's similarly situated employees of
Springfield Forest Product and Fitzgerald Forest Products, taking into account
geographic and other similar relevant factors. Purchaser shall grant employees
credit for all service with LADD and the affiliates hereof through the Closing
Date for purposes of vacation and all other existing benefit plans as described
above, to the extent permitted by the terms of such plans; provided, however,
that LADD shall pay, and Purchaser shall have no liability for, all accrued and
untaken or unpaid vacation, sick leave, personal leave and similar accrued
entitlements of all its employees, including, without limitation,
post-retirement medical, health care, pension and other employee retirement
benefits. No employee is intended to be a
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third party beneficiary of, and no employee may enforce, directly or indirectly,
the covenants of this Section 3.4 or any other provision of this Agreement.
3.5 Consents and Approvals; Releases. LADD shall use its best
efforts (without the obligation to make any extraordinary payment or
extraordinary concession to any third party) promptly to obtain all consents
from parties to the Material Agreements, which are required by the terms
thereof, this Agreement or otherwise for the due and punctual consummation of
the transactions contemplated by this Agreement. Purchaser will cooperate with
LADD in obtaining such consents and Agreements. LADD shall also cooperate with
and assist Purchaser and its authorized representatives in order to provide an
efficient transfer of the control and management of the Business and to avoid
any undue interruption in the activities and operations of the Business
following the Closing Date.
3.6 Collection of Receivables. Purchaser is not acquiring any
of LADD's accounts receivable, but the parties wish to agree on a convenient and
fair method of collecting their respective accounts. Shortly before the Closing,
the parties shall agree upon and send to each customer of the Business a
notification of the impending sale and advising them where to direct their
payments and requesting them to designate on their payments the specific
invoices being paid. The parties shall apply payments in accordance with such
designation and shall hold in trust and pay over to each other amounts
erroneously directed. The parties may establish such other procedures as they
may desire with regard to the collection of receivables.
3.7 Non-Competition. (a) For a period of two years following
the Closing (the "Non-Competition Period"), LADD will not in the continental
United States engage or participate in competition, directly or indirectly
(whether as a holder of an equity or debt investment, lender or in any other
manner or capacity) in any business which is in competition with the Business as
the same is conducted as of Closing.
(b) Notwithstanding the foregoing, the following shall not be
deemed a breach by LADD of the prohibitions set forth in Section 3.7(a) above:
(i) ownership by LADD for
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investment of less than five percent (5%) of the outstanding shares of capital
stock of any corporation with one or more classes of its capital stock listed on
a national securities exchange or actively traded in the over-the-counter market
nor (ii) the manufacture, marketing and sale amongst LADD and its affiliates of
lines of products currently manufactured, marketed and sold by LADD or any of
its affiliates or lines of products reasonably similar to such current lines of
products, whether or not such lines of products compete directly or indirectly
with the Business. Further, LADD shall not be prohibited from acquiring and
operating any business which is competitive with the Business provided that (x)
such acquired competitive business constitutes less than twenty-five percent
(25%) of the annual net sales of any entity acquired, (y) to the extent such
acquired business does not at the time of such acquisition serve or sell
products to those customers of the Business listed on Schedule 3.7(b) (the
"Customers"), such acquired entity will not deal in a competitive manner with
any of the Customers during the Non-Competition Period, and (z) to the extent
that such acquired business does at the time of such acquisition serve or sell
products to any Customers, LADD will not increase such service or sales except
to the extent required by oral or written supply agreements or contracts in
existence prior to the date of acquisition.
(c) LADD acknowledges that the covenants contained in this
Section 3.7 are reasonable and necessary to protect the legitimate interests of
Purchaser and that any breach or threatened breach of such covenants will result
in irreparable injury to Purchaser and that the remedy at law for such breach or
threatened breach would be inadequate. Accordingly, LADD agrees that Purchaser
shall, in addition to any other rights or remedies which it may have, be
entitled to seek such equitable and injunctive relief as may be available from
any court of competent jurisdiction to restrain LADD from any breach or
threatened breach of this Section 3.7. The arbitration provisions of Section
7.11 of this Agreement do not apply to contests or proceedings arising under
this Section 3.7. The prevailing party in any contest or proceeding under this
Section 3.7 shall be entitled to reasonable attorneys' fees from the
non-prevailing party in any such action or proceeding.
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ARTICLE 4
CONDITIONS PRECEDENT
4.1 Conditions to Obligations of Purchaser. The obligations of
the Purchaser under this Agreement are subject to the fulfillment, at or prior
to the Closing, of the following conditions, any one or more of which may be
waived by the Purchaser at its sole discretion:
4.1.1 Representations, Performance, etc. The representations
and warranties of the LADD contained in Section 2.1 that are not conditioned as
to materiality shall be true and correct in all material respects at and as of
the Closing Date with the same effect as though made at and as of the Closing
Date, except as modified by transactions permitted by this Agreement, and all
representations and warranties of LADD that are so qualified as to materiality
shall be true and correct at and as of the Closing Date with the same effect as
though made at and as of the Closing Date. LADD shall have duly performed and
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date. LADD shall have delivered to the Purchaser a certificate of LADD signed by
an officer of LADD familiar with the transactions contemplated by this
Agreement.
4.1.2 Opinion of Counsel. The Purchaser shall have received a
favorable opinion in form and substance reasonably acceptable to counsel to
Purchaser, addressed to the Purchaser and dated the Closing Date, of Petree
Stockton, L.L.P., counsel to LADD.
4.1.3 Certain Approvals, etc. All consents and approvals from
governmental authorities and third parties required to be obtained by LADD or by
Purchaser to consummate the transactions contemplated hereby shall have been
obtained, other than any consents and approvals of third parties in respect of
any contract or agreement of the Company (not involving the borrowing of money)
in respect of which the failure to obtain such consent or approval, either in
any case or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Business.
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4.1.4 No Injunction; Other Litigation. No injunction or other
order issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated by this Agreement shall be in
effect, and there shall be no other litigation, including any condemnation
action or eminent domain proceeding, filed or threatened with respect to this
transaction or any of the Property, which, if decided adversely, could
reasonably be expected to have a Material Adverse Effect on the Business or on
Purchaser.
4.1.5 No Material Adverse Changes. From the date hereof to the
Closing Date, there has been no material adverse change in the business, assets,
operations, prospects or financial condition of the Business, whether or not
insured.
4.1.6 Title Insurance; Survey. Purchaser shall have obtained,
at its expense, an ALTA Owners Form title insurance policy, or an irrevocable
commitment therefor, insuring good and marketable title in fee simple to the
Owned Real Property, free and clear of all liens, claims and encumbrances,
except only for Permitted Liens, utility easements and other encumbrances of
record that do not materially adversely affect title to the Owned Real Property
and which would be acceptable to a reasonable buyer. Correct surveys shall have
been prepared, at Purchaser's expense, and certified to Purchaser, showing the
boundaries of and the location of the Owned Real Property and the locations and
all improvements, which surveys shall be reasonably acceptable to Purchaser.
4.1.7 Environmental Remediation. LADD shall use its best
efforts to complete remediation of Underground Storage Tank sites for petroleum
compounds and asbestos removal on the old boiler and the Coe veneer dryer, as
more particularly described in the ERM-Southeast Report, and such remediation
shall have been completed at LADD's sole cost prior to the Closing, and if
completion prior to the Closing is not feasible, LADD shall have established a
program for such completion satisfactory to Purchaser, including such assurances
as Purchaser may reasonably require of LADD's financial capacity to complete
such program. The provisions of this Section 4.1.9 shall supplement and not
reduce LADD's obligations under Section 6.1.
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4.2 Conditions to Obligations of LADD. The obligations of LADD
under this Agreement are subject to the fulfillment, at or prior to the Closing,
of the following conditions, any one or more of which may be waived by LADD in
its sole discretion:
4.2.1 Representations, Performance, etc. The representations
and warranties of the Purchaser contained in Section 2.2 that are not
conditioned as to materiality shall be true and correct in all material respects
at and as of the Closing Date with the same effect as though made at and as of
the Closing Date, except as modified by transactions permitted by this
Agreement, and all representations and warranties of the Purchaser that are so
qualified as to materiality shall be true and correct at and as of the Closing
Date with the same effect as though made at and as of the Closing Date. The
Purchaser shall have duly performed and complied with all agreements, covenants
and conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date. The Purchaser shall have delivered to LADD a
certificate of the Purchaser signed by an officer of the Purchaser familiar with
the transactions contemplated by this Agreement, dated the Closing Date, to the
effect set forth above in this Section 4.2.1.
4.2.2 Opinion of Counsel. LADD shall have received a favorable
opinion, addressed to it and dated the Closing Date, of Crosby, Heafey, Roach &
May Professional Corporation, counsel for the Purchaser, in substantially the
form attached hereto as Exhibit 4.2.2.
4.2.3 Certain Approvals, etc. All consents and approvals from
governmental authorities and third parties required to be obtained by the
Purchaser or by LADD, including, without limitation, those referred to in
Section 6.1(b)(vi), to consummate the transactions contemplated hereby shall
have been obtained, other than any consents and approvals of third parties in
respect of any contract or agreement of the Purchaser (not involving the
borrowing of money) in respect of which the failure to obtain such consent or
approval, either in any case or in the aggregate, could not reasonably be
expected to have a material adverse effect on the transactions contemplated
hereby.
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4.2.4 No Injunction. No injunction or other order issued by a
court of competent jurisdiction restraining or prohibiting the consummation of
the transactions contemplated by this Agreement shall be in effect.
4.2.5 Purchase Price. LADD shall have received from Purchaser
the Purchase Price.
ARTICLE 5
TERMINATION
5.1 Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing Date in the circumstances set forth in this
Section 5.1 by delivering written notice of such termination.
5.1.1 Termination by LADD. This Agreement may be terminated by
LADD upon the happening of an occurrence or circumstance which will result in a
failure to satisfy any of the conditions set forth in Section 4.2 and the
Purchaser shall have failed to satisfy such a condition within 20 days after
notice by LADD.
5.1.2 Termination by Purchaser. This Agreement may be
terminated by the Purchaser upon the happening of an occurrence or circumstance
which will result in the failure to satisfy any of the conditions set forth in
Section 4.1 and LADD shall have failed to satisfy such a condition within 20
days after notice by the Purchaser.
5.1.3 Termination by Either Party. This Agreement may be
terminated by either the Purchaser or LADD if (i) the representations and
warranties of the other party shall prove not to have been true in all material
respects as of the date when made, (ii) events shall have occurred subsequent to
the date hereof as a result of which the representations and warranties of the
other party could not be true in all material respects as of the Closing Date,
unless the occurrence of such events shall be due to the failure of the party
seeking to terminate this
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Agreement to perform or comply with any of the covenants, agreements or
conditions hereof to be performed or complied with by such party prior to the
Closing, or (iii) the Closing shall not have occurred prior to December 28, 1995
(or such other date as may be mutually agreed to by the parties) through no
fault of the terminating party.
5.2 Effect of Termination. If this Agreement is terminated as
permitted under Section 5.1 by a party without any breach of this Agreement by
the other, such termination shall be without liability of or to any party to
this Agreement or any shareholder, partner, director, officer, employee or agent
of such party. The provisions of Sections 3.1 and 5.2 shall survive any such
termination. If this Agreement is terminated a party as a result of a breach by
the other, the terminating party shall have all rights and remedies therefor
under this Agreement, at law or in equity. If, having a right to do so by reason
of the breach of the other, a party does not terminate this Agreement, but
nevertheless proceeds with the Closing, that party shall retain all its rights
and remedies against the breaching party.
ARTICLE 6
INDEMNIFICATION
6.1 Indemnification by LADD. (a) LADD agrees to indemnify and
hold harmless Purchaser and its affiliates, successors and assigns from and
against any and all (a) liabilities, losses, costs or damages ("Loss") and (b)
reasonable attorneys' and accountants' fees and expenses, court costs and all
other reasonable out-of-pocket expenses ("Expense") incurred by Purchaser, its
affiliates, successors and assigns in connection with or arising from:
(i) any breach by LADD of any warranty or the
inaccuracy of any representation of LADD contained in this
Agreement;
(ii) any breach by LADD of any of its covenants in
this Agreement or in any agreement or instrument contemplated
hereby; and
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(iii) any condition of any of the Properties
involving any Hazardous Materials or Environmental Law which
existed at the time of the Closing, whether or not such
condition is disclosed in any Schedule to this Agreement or
was otherwise known to Purchaser and particularly including
those conditions disclosed in Section 10 of ERM-Southeast,
Inc.'s report dated October 11, 1995 (the "ERM- Southeast
Report"), and items (1), (2)(a) and (2)(d) listed on Schedule
2.1.18.
provided, however, that LADD shall be required to indemnify and hold harmless
under clauses (i) and (ii) of this Section 6.1 with respect to such Loss and
Expense incurred by Purchaser or its affiliates, successors and assigns only to
the extent that the aggregate amount of such Loss and Expense exceeds $50,000,
at which time claims hereunder may be asserted for all such claims in excess of
the initial $50,000. The indemnification with respect to clause (iii) of this
Section 6.1 shall not be so limited with respect to those items requiring
remediation pursuant to the ERM-Southeast Report, and, without limiting its
obligations hereunder, LADD shall at its sole cost take all the actions
recommended in the ERM-Southeast Report, for which Purchaser shall provide all
necessary access to the Property. The indemnification provided for in this
Section 6.1 shall terminate eighteen (18) months after Closing Date (and no
claims shall be made by any party indemnified under this Section 6.2
thereafter), except that the indemnification shall continue as to any Loss or
Expense of which Purchaser or its affiliates, successors or assigns has notified
LADD in accordance with the requirements of Section 6.3 on or prior to the date
such indemnification would otherwise terminate in accordance with this Section
6.1, as to which the obligation of LADD shall continue until the liability of
LADD shall have been determined pursuant to this Article 6, and LADD shall have
reimbursed Purchaser, its affiliates, successors or assigns for the full amount
of such Loss and Expense in accordance with this Article 6.
(b) In the event of any claim for indemnification under
Section 6.1 with respect an Environmental Claim:
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(i) Purchaser shall provide reasonable access to the
premises of such of the Company's properties as may be
necessary or appropriate to enable LADD and its employees,
agents, attorneys, consultants and contractors to evaluate the
claim and take remedial or other appropriate action;
(ii) Purchaser shall make available to LADD or its
representatives all information, records and other materials
in the possession or control of Purchaser which are reasonably
required by LADD for its use in connection with any claim,
investigation or remedial action (it being understood that any
such materials that constitute Confidential Information will
be subject to the provisions of Section 7.16) and shall
otherwise cooperate and assist LADD in connection with such
claim, investigation or remedial action (including, where
appropriate, providing testimony in connection with any
litigation; provided, that in the event of such provision,
LADD shall reimburse Purchaser for any Expense incurred in
connection therewith);
(iii) LADD shall have the right and responsibility of
defending, remedying, compromising and settling any
Environmental Claim and shall have the right to employ and
control its own counsel, consultants and contractors in
connection therewith. LADD shall have full control over any
actions (including, without limitation, any remedial action,
negotiation or litigation) in connection with any such
Environmental Claim; provided, that (i) if a remedial or other
action proposed to be taken by LADD in settlement of the
Environmental Claim would materially and adversely affect the
Purchaser's operations at a facility, such action shall not be
taken without the prior written consent of Purchaser (which
consent shall not unreasonably be withheld); (ii) LADD shall
not compromise or settle any Environmental Claim without the
consent of Purchaser (which consent shall not unreasonably be
withheld); and (iii) in the event Purchaser shall unreasonably
refuse to consent to the taking of any remedial or other
action approved by applicable regulatory agencies in respect
of, or the compromise or
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settlement of, any Environmental Claim, LADD may
elect to take over the defense of such Environmental Claim,
and in any case, the liability of LADD shall not exceed the
amount for which the Environmental Claim could have been
settled plus the amount of Expense incurred by Purchaser prior
to the time of the proposed settlement to which it is entitled
to indemnification;
(iv) The obligations of LADD in respect of an
Environmental Claim (other than with respect to a claim for
damage to or loss by a third party) shall be limited to the
taking of such remedial actions as are necessary under the
circumstances giving rise to such Environmental Claim, and
reimbursement of any resulting Loss to Purchaser, and LADD
shall not be liable for any effect upon the business
operations of any of the facilities included in the properties
(including without limitation, business interruption or loss
of profits) caused by or resulting from remedial or other
action taken by LADD in furtherance of its obligations
hereunder, unless resulting from LADD's willful misconduct or
gross negligence and LADD shall not be liable for any Loss or
Expense resulting from actions taken or omitted by Purchaser
on or after the Closing Date. Any Loss and Expense in respect
of a violation of Environmental Law occurring both before and
after the Closing Date shall be allocated between LADD and
Purchaser on the basis of their relative participation in the
release or discharge, with all materials contained in or on
the Property sold hereunder at the time of the Closing to be
the sole responsibility of LADD;
(v) Effective upon being indemnified as provided in
Section 6.1, Purchaser hereunder (A) transfers and assigns to
LADD all rights and claims Purchaser has or may have against
third parties for reimbursement or contribution; (B) agrees to
execute such instruments and take such other actions as may be
necessary or appropriate to transfer and assign the foregoing
rights or claims to the latter; and (C) agrees to take such
reasonable actions when and as
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necessary or appropriate to assist the latter to
obtain reimbursement or contribution from third parties, but
at the expense of LADD;
(vi) The parties to this Agreement shall use
reasonable efforts and shall cooperate with each other to
obtain any necessary consent, transfer or reissuance of any
governmentally issued environmental permits, licenses and
registrations necessary to operate the Business as it was
operated as of the Closing Date. LADD makes no representations
or warranties with respect to whether or when such consent,
transfer or reissuance will occur or whether such consent,
transfer or reissuance will be conditioned upon new or
additional requirements. LADD shall not be required to incur
any liability or make any payment or concession to any third
party in order to obtain such consent, transfer or reissuance;
and
(vii) LADD and Purchaser agree that their respective
rights and obligations in respect of liabilities in respect of
Environmental Laws as provided in this Agreement shall
supersede any such rights and obligations either may have
under any existing or future law.
6.2 Indemnification by Purchaser. Purchaser agrees to
indemnify and hold harmless LADD and its respective affiliates, successors and
assigns from and against any and all Loss and Expense incurred by them in
connection with or arising from:
(i) any breach by Purchaser of any warranty or the
inaccuracy of any representation of Purchaser contained in
this Agreement or in any agreement or instrument contemplated
hereby;
(ii) any breach by Purchaser of any of its covenants
or agreements in this Agreement or any agreement or instrument
contemplated hereby; and
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(iii) any liability, Loss or Expense associated with
the business and operations of the Company by Purchaser
occurring or arising after Closing.
The foregoing indemnification shall terminate eighteen (18) months after the
Closing Date (and no claims shall be made by any party indemnified under this
Section 6.2 thereafter) except that (y) the foregoing indemnification contained
in Section 6.2(iii) shall survive without termination, and (z) except that the
indemnification by Purchaser shall continue as to any Loss or Expense of which a
party indemnified pursuant to this Section 6.2 has notified Purchaser in
accordance with the requirements of Section 6.3 on or prior to the date such
indemnification would otherwise terminate in accordance with this Section 6.2,
as to which the obligation of Purchaser shall continue until the liability of
Purchaser shall have been determined pursuant to this Article 6, and Purchaser
shall have reimbursed such party for the full amount of such Loss and Expense in
accordance with this Article 6.
6.3 Notice of Claims. (a) If Purchaser or LADD believes that
any of the persons indemnified under this Article 6 has suffered or incurred any
Loss or incurred any Expense, Purchaser or LADD shall so notify the other
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement or other agreement, instrument or certificate delivered pursuant
hereto in respect of which such Loss or Expense shall have occurred. If any
action at law or suit in equity is instituted by or against a third party with
respect to which any of the indemnified persons intends to claim any liability
or expense as Loss or Expense under this Article 6, any such indemnified person
shall promptly notify the indemnifying party of such action or suit. The failure
to give such prompt notice, however, shall not bar a claim of indemnification
except to the extent the indemnitor was actually prejudiced by such delay.
(b) In calculating any Loss or Expense there shall be deducted
(i) any insurance recovery in respect thereof (and no right of subrogation shall
accrue hereunder to any insurer) and (ii) the amount of any actual net tax
benefit to the indemnified person with respect
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to such Loss or Expense (after giving effect to the tax effect of receipt of the
indemnification payments). The amount of such tax benefit to the indemnified
person shall be conclusively evidenced by a certificate of the chief financial
officer of the indemnified person, absent manifest error.
(c) The amount to which an indemnified person shall be
entitled under this Article 6 shall be determined by the written agreement
between the indemnified person and the indemnifying party. If the parties are
unable to agree upon such amount, the indemnifying party shall pay that amount
agreed upon between the parties and the remainder shall be determined by a final
judgment or decree of any court of competent jurisdiction upon an award of an
arbitrator or arbitrators as provided in Section 7.11 or by any other means to
which the indemnified person and the indemnifying party shall agree. The
judgment or decree of a court shall be deemed final when the time for appeal, if
any, shall have expired and no appeal shall have been taken or when all appeal
taken have been finally determined.
6.4 Third Party Claims. (a) Subject to Section 6.1(b)(iii) and
6.4(b), the persons indemnified under Sections 6.1 and 6.2 shall have the right
to conduct and control, through counsel of their choosing, any third party
claim, action or suit, and the persons indemnified may compromise or settle the
same, provided that any of the indemnified persons shall give the indemnifying
party advance notice of any proposed compromise or settlement. The indemnified
persons shall permit the indemnifying party to participate in the defense of any
such action or suit through counsel chosen by it, provided that the fees and
expenses of such counsel shall be borne by the indemnifying party. Subject to
Section 6.1(b)(iii) and 6.4(b), any compromise or settlement with respect to a
claim for money damages effected after the indemnifying party, by notice to the
indemnified party, shall have disapproved such compromise or settlement and
shall have unconditionally admitted its indemnification obligation and
demonstrated its financial capacity to perform the same, shall discharge the
indemnifying party from liability with respect to the subject matter thereof,
and no amount in respect thereof shall be claimed as Loss or Expense under this
Article 6.
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(b) If the remedy sought in any action or suit referred to in
Section 6.4(a) is solely money damages and will have no continuing effect on the
business of any indemnified person, the indemnifying party shall have 30
business days after receipt of the notice referred to in the first sentence of
Section 6.4(a) to notify the indemnified persons that it admits unconditionally
its indemnification obligation and that it elects to conduct and control such
action or suit. If the indemnifying party does not give the foregoing notice,
the indemnified persons shall have the right to defend, contest, settle or
compromise such action or suit in the exercise of their exclusive discretion,
and the indemnifying party shall, upon request from any of the indemnified
persons, promptly pay to such indemnified persons in accordance with the other
terms of this Article 6 the amount of any Loss resulting from its liability to
the third party claimant and all related Expense. If the indemnifying party
gives the foregoing notice, the indemnifying party shall have the right to
undertake, conduct and control, through counsel of its own choosing and
reasonably acceptable to the indemnified party and at the sole expense of the
indemnifying party, the conduct and settlement of such action or suit, and the
indemnified persons shall cooperate with the indemnifying party in connection
therewith; provided that (w) the indemnifying party shall not settle or
compromise any such action or suit without the indemnified party's prior written
consent, unless the terms of such settlement or compromise release the
indemnified party from any and all liability with respect to such action or
suit, (x) the indemnifying party shall not thereby permit to exist any lien,
encumbrance or other adverse charge upon any asset of any indemnified person;
(y) the indemnifying party shall permit the indemnified persons to participate
in such conduct or settlement through counsel chosen by the indemnified persons,
but the fees and expenses of such counsel shall be borne by the indemnified
persons except as provided in clause (z) below; and (z) the indemnifying party
shall agree promptly to reimburse to the extent required under this Article 6
the indemnified persons for the full amount of any Loss resulting from such
action or suit and all related Expense incurred by the indemnified persons,
except fees and expenses of counsel for the indemnified persons incurred after
the assumption of the conduct and control of such action or suit by the
indemnifying party. So long as the indemnifying party is contesting any such
action or suit in good faith, the indemnified persons shall not pay or settle
any such action or suit. Notwithstanding the foregoing, the indemnified persons
shall have the right to pay or settle any
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such action or suit, provided that in such event the indemnified persons shall
waive the right to indemnity therefor by the indemnifying party, and no amount
in respect thereof shall be claimed as Loss or Expense under this Article 6
unless the indemnified party in good faith believed that the indemnifying party
might not be financially capable of performing in full its indemnification
obligation.
ARTICLE 7
MISCELLANEOUS
7.1 Survival. Only those agreements and covenants of Purchaser
and LADD which by their express terms apply in whole or in part after the
Closing, including but not limited to the rights of indemnification contained in
Article 6, shall survive the Closing. Notwithstanding any otherwise applicable
statute of limitations, all other agreements, covenants, representations and
warranties of Purchaser and LADD in this Agreement shall be conditions to the
Closing only and shall not survive the Closing.
7.2 Expenses. Each of LADD and the Purchaser shall assume and
bear their own expenses, costs and fees incurred in the preparation and
execution of this Agreement and compliance herewith, including attorneys' and
accountants' fees, whether or not the purchase and sale provided for herein
shall be consummated. LADD shall pay the fees and expenses of Stump Financial
Corporation and Stump & Company.
7.3 Assignment; Successors; Parties in Interest. This
Agreement shall not be assignable by any party hereto without the prior written
consent of all of the other parties and any attempt to assign this Agreement
without such consent shall be void and of no effect, except that Purchaser may
assign its rights hereunder to an affiliated entity which assumes in writing all
Purchaser's obligations, provided that no such assignment shall relieve
Purchaser of any of its obligations hereunder to LADD. This Agreement shall
inure to the benefit of, and be binding on and enforceable against, each party
hereto and such permitted successors and assigns of the respective parties
hereto, and nothing in this Agreement, express or implied, is intended to
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confer upon any employee or affiliate of either party or any other person any
rights or remedies of any nature whatsoever under this Agreement.
7.4 Amendment, Waiver and Modification. Neither this Agreement
nor any term hereof may be changed, waived, discharged or terminated orally, but
only with the written consent signed by the party against which such change,
waiver, discharge or termination is sought to be enforced.
7.5 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal processes
in regard hereto shall be validly given, made or served, if in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by commercial courier or by telecopy (promptly confirmed in writing) to the
following addresses (or at such other addresses for such party as shall be
specified by like notice):
To LADD:
LADD Furniture, Inc.
One Plaza Center, Box HP-3
High Point, NC 27261-1500
Attention: Richard R. Allen
Chairman and Chief Executive Officer
Telecopy: 910/888-6344
With a copy to:
(which copy shall not constitute notice)
Petree Stockton, L.L.P.
1001 West Fourth Street
Winston-Salem, North Carolina 27101
Telecopy: 910/607-7505
Attention: Robert E. Esleeck, Esq.
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To the Purchaser:
Lea Lumber & Plywood, LLC
c/o The Springfield Group
72B Centennial Loop, Suite 1
Eugene, OR 97401
Attention: James B. Ehren
Vice President/CFO
Telecopy: 503/683-8758
With a copy to:
(which copy shall not constitute notice)
Crosby, Heafey, Roach & May
Professional Corporation
1999 Harrison Street
Oakland, CA 94612
Telecopy: 510/763-8898
Attention: Sean M. Rhatigan, Esq.
7.6 Access After Closing. Each party shall retain for a period
of six years following Closing all books and records within its possession or
control which relate to the operation and conduct of the Business prior to
Closing. Each party will provide the other party, at the requesting party's
expense, with copies of documents reasonably needed by the requesting party,
including employee immigration forms, related to the operation of the Business,
subject to the proprietary rights of third parties and requirements of
confidentiality. Each party shall provide to the other party and its
representatives reasonable access during normal business hours to copies of all
such books and records upon request by the other party hereto. LADD will
cooperate with Purchaser with respect to the continuation or transfer of the
following services upon mutually agreeable terms at market rates for a period
not to exceed one year unless mutually agreeable to the parties: payroll/human
resources, general ledger, accounts payable,
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accounts receivable, fixed asset, medical claims processing, order processing,
cost accounting and applicable telephone linkages.
7.7 Best Efforts. Each party agrees to perform each of its
covenants and obligations under this Agreement and otherwise to use its best
efforts to satisfy the conditions to the Closing set forth in this Agreement and
otherwise to consummate the transactions contemplated by this Agreement.
7.8 Knowledge. For the purposes of the representations and
warranties of LADD contained in this Agreement, the knowledge of LADD, shall be
deemed to consist solely of the actual knowledge of those individuals listed on
Schedule 7.8 after conducting such inquiry as is reasonable in the
circumstances.
7.9 Sales and Transfer Taxes. Any sales tax payable by reason
of the transfer and conveyance of the Properties hereunder and any documentary
stamps or transfer taxes payable by reason of the real estate or interests
therein included in the Properties shall be paid by LADD.
7.10 Severability. If any term or provision of this Agreement
is held by a court or other authority of competent jurisdiction to be invalid,
void or unenforceable, the remaining terms and provisions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
7.11 Arbitration. The parties hereto agree to submit to
arbitration any and all matters in dispute or in controversy among them
concerning the terms and provisions of this Agreement. All such disputes and
controversies shall be determined and adjudged by the arbitrators, pursuant to
the Federal Arbitration Act and the hearing shall be held in Greensboro, North
Carolina. The selection of arbitrators and the procedure shall be in accordance
with the Commercial Arbitration Rules of the American Arbitration Association.
The parties shall be entitled to reasonable discovery as determined by the
arbitrators. Any award rendered shall be
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final and conclusive upon the parties and a judgment thereon may be entered in
the highest court of the forum, state or federal, having jurisdiction. The
expenses of the arbitration shall be borne equally by the parties to the
arbitration, provided that each party shall pay for and bear the costs of their
own experts, evidence and counsel's fees, except that in the discretion of the
arbitrator, any award may include the costs of a party's counsel if the
arbitrator expressly determines that the party against whom such award is
entered has caused the dispute, controversy or claim to be submitted to
arbitration as a dilatory tactic.
7.12 Schedules and Exhibits. The Schedules and Exhibits are a
part of this Agreement as if fully set forth herein. All references to Sections,
subsections, Schedules and Exhibits shall be deemed references to such parts of
this Agreement, unless the context shall otherwise require. Disclosure of any
factor items in any Schedule hereto referenced by a particular section in this
Agreement shall, should the existence of the fact or item or its contents be
relevant to any other section, be deemed to be disclosed with respect to that
other section whether or not an explicit cross-reference appears.
7.13 Bulk Sales Law. Purchaser hereby waives compliance by
LADD with any applicable bulk sales law, and LADD agrees to indemnify and hold
Purchaser harmless from and against any liability thereunder or from failure to
comply therewith; provided, however, that (i) this indemnity shall not affect
the obligation of Purchaser to pay and discharge the Assumed Liabilities and
(ii) no indemnity is made under this Section 7.13 with respect to the Assumed
Liabilities.
7.14 Allocation of Purchase Price. The parties shall negotiate
in good faith and agree to an allocation of the Purchase Price prior to Closing.
Each party will report this transaction under Section 1060 of the Code (on IRS
Form 8594) in accordance with this allocation of the Purchase Price.
7.15 Definitions. As used in this Agreement, the following
terms have the meaning specified or referred to in this Section 7.15:
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(a) "Agreement" shall have the meaning set forth on Page 1 of
this Agreement.
(b) "Annual Financials" shall have the meaning set forth in
Section 2.1.3(a).
(c) "Assumed Liabilities" shall have the meaning set forth in
Section 1.4(a).
(d) "Business" shall have the meaning set forth in the
recitals to this Agreement.
(e) "CERCLIS" shall have the meaning set forth in Section
2.1.18(ii).
(f) "Closing" shall have the meaning set forth in Section 1.2.
(g) "Closing Date" shall have the meaning set forth in Section
1.2.
(h) "Company" shall have the meaning set forth on Page 1 of
this Agreement.
(i) "Customers" shall have the meaning set forth in Section
3.7(b) of this Agreement.
(j) "Environmental Claim" shall mean any claim with respect to
indemnification relating to any environmental matters.
(k) "Environmental Laws" shall have the meaning set forth in
Section 2.1.18(iii).
(l) "Environmental Permits" shall have the meaning set forth
in Section 2.1.18(i).
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(m) "ERM-Southeast Report" shall have the meaning set forth in
Section 6.1(a)(iii).
(n) "Escrow Agent" means the escrow agent identified in
Section 1.5.
(o) "Excluded Liabilities" shall have the meaning set forth in
Section 1.4(b).
(p) "GAAP" shall have the meaning set forth in Section
2.1.3(a).
(q) "Hazardous Materials" shall have the meaning set forth in
Section 2.1.18(iv).
(r) "Interim Financials" shall have the meaning set forth in
Section 2.1.3(a).
(s) "LADD" shall have the meaning set forth on Page 1 of this
Agreement.
(t) "Liens" means, with respect to any assets or properties
(whether real, personal or mixed or tangible or intangible), any mortgage,
pledge, option, escrow, hypothecation, lien, security interest, financing
statement, lease, charge, encumbrances, easement, conditional sale or other
title retention or security agreement or any other similar restriction, claim or
right of others, on, in, or with respect to such assets or properties, whether
arising by contract, operation of law or otherwise.
(u) "Loss and Expenses" shall have the meaning set forth in
Section 6.1.
(v) "Material Adverse Effect" shall mean a material adverse
effect on the business, properties, assets (tangible and intangible) or
financial condition or results of operations of the Business; provided that an
event, change or effect that arises from general economic conditions or that
otherwise affects the furniture industry generally shall not be considered
material or to have a material adverse effect on the Business.
41
<PAGE>
(w) "Material Agreements" shall have the meaning set forth in
Section 2.1.13.
(x) "Non-Competition Period" shall have the meaning set forth
in Section 3.7(a).
(y) "Owned Real Property" shall have the meaning set forth in
Section 2.1.6.
(z) "PCBs" shall have the meaning set forth in Section
2.1.18(i).
(aa) "Permitted Liens" means (i) Liens for taxes not yet due
or which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto have been deposited with Purchaser; (ii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of the Business which are not overdue for a
period of more than 30 days or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto have been
deposited with Purchaser; (iii) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security legislation; (iv)
deposits to secure the performance of any or all of the following: bids, trade
contracts (other than for borrowed money), leases (other than financing leases),
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of the Business;
(v) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of the Business which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct of
the Business; (vi) such imperfections or irregularities of title and
encumbrances, if any, as are not substantial in character, amount or extent so
as to materially detract from the value or interfere with the present use of the
properties affected thereby or otherwise materially impair present business
operations; and (vii) those liens or encumbrances described on Schedule 7.15
attached hereto.
(bb) "Properties" or "Property "shall have the meaning set
forth in Section 1.1.
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(cc) "Purchase Price" shall have the meaning set forth in
Section 1.3.
(dd) "Purchaser" shall have the meaning set forth on Page 1 of
this Agreement.
(ee) "Taxes" shall have the meaning set forth in Section
2.1.10.
7.16 Confidential Nature of Information. Subject only to
necessary disclosure in connection with Purchaser's financing, each party agrees
that it will treat in confidence all documents, materials and other information
which it shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
(whether obtained before or after the date of this Agreement), the investigation
provided for herein and the preparation of this Agreement and other related
documents, and, in the event the transactions contemplated hereby shall not be
consummated, each party will return to the other party all copies of nonpublic
documents and materials which have been furnished in connection therewith. The
obligation of each party to treat such documents, materials and other
information in confidence shall not apply to any information which (i) such
party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (ii) is known to the public and did not
become so known through any violation of a legal obligation, (iii) became known
to the public through no fault of such party or (iv) is later lawfully acquired
by such party from other sources, and following the Closing, Purchaser shall
have no obligation to treat documents, materials and other information
concerning the Company in confidence.
7.17 Public Announcement. Neither LADD nor Purchaser will
make, directly or indirectly, any public announcement with respect to this
transaction without the prior written approval of the other party, except as
required by law.
7.18 Captions. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE>
7.19 Entire Agreement. This Agreement (including the Schedules
and Exhibits) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
7.20 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute one and the same instrument.
7.21 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of North Carolina, without giving effect to the conflict of laws rules
thereof. Each party hereto consents to the personal jurisdiction of such State
and voluntarily submits to the jurisdiction of the courts of such State in any
action or proceeding with respect to this Agreement, including the federal
courts located in such State without waiving its right to remove any matter to a
federal court sitting in North Carolina based on diversity or other grounds for
federal jurisdiction.
44
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
LADD:
LADD FURNITURE, INC.
By: (Signature of Richard R. Allen)
Chairman and Chief Executive
Officer
PURCHASER:
LEA LUMBER & PLYWOOD, LLC
By: (Signature of Richard T. Baldwin)
Title: Manager
President & CEO
The undersigned hereby absolutely and unconditionally (with
the exception of the conditions precedent to Purchaser's obligations to close
under the terms of the Asset Purchase Agreement described below) guarantees, as
primary obligor and not merely as a surety, the faithful and full payment and
performance of all obligations and liabilities of Lea Lumber & Plywood, LLC
("Purchaser") under the terms of the Asset Purchase Agreement dated as of
November 6, 1995, between Purchaser and LADD Furniture, Inc. ("LADD") (the
"Agreement"). The undersigned agrees that in the event Purchaser fails to
perform its obligations under such Agreement, LADD will be entitled to pursue
its remedies against the undersigned regardless of whether LADD has exhausted
any or all of its remedies against Purchaser. This guarantee shall terminate 60
days following the Closing Date of the sale of the Properties to Purchaser by
LADD as contemplated in the Agreement.
FOREST PRODUCTS HOLDINGS LIMITED
PARTNERSHIP
By: SPRINGFIELD FOREST PRODUCTS, INC.
Its: General Partner
By: Richard T. Baldwin
Title: President & CEO
Dated: Nov. 6, 1995
45
<PAGE>
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT, dated as of
December 29, 1995 (the "Amendment") by and between LADD FURNITURE, INC., a North
Carolina corporation ("LADD"), and LEA LUMBER & PLYWOOD, LLC, a Delaware limited
liability company (the "Purchaser").
W I T N E S S E T H:
WHEREAS, LADD and Purchaser entered into an Asset Purchase
Agreement dated as of November 6, 1995 (the "Agreement"), pursuant to which LADD
agreed to sell and Purchaser agreed to acquire from LADD, on a going concern
basis, substantially all of the assets, properties and business of LADD's Lea
Lumber & Plywood Division; and
WHEREAS, the Agreement provided for a purchase price of
$4,200,000, plus an amount equal to the inventory of the Company on hand as of
the Closing Date, payable in cash at Closing; and
WHEREAS, the parties desire to amend the Agreement to provide
that $1,000,000 of the Purchase Price will be payable pursuant to a Term Note to
be delivered at Closing.
NOW, THEREFORE, in consideration of the mutual promises made
herein and of the mutual benefits to be derived herefrom, the parties hereto do
hereby agree as follows:
1. Amendment to Section 1.5 of the Agreement. Section 1.5 of
the Agreement is hereby amended and restated as follows:
1.5 Closing Date Deliveries. (a) On the Closing Date,
LADD shall deliver to Purchaser (i) a bill of sale, assignment
and assumption agreement, in the form of Exhibit A,
collectively covering all of the non real estate Properties,
(ii) deeds conveying to Purchaser the parcels of real estate
identified in Schedule 2.1.6 in form reasonably satisfactory
to Purchaser, and (iii) all of the documents, instruments and
opinions required to be delivered by LADD pursuant to Article
4.
(b) On the Closing Date, Purchaser shall deliver to
LADD (i) by bank wire transfer of immediately available funds
to LADD's account, account number 101-074-664 at NationsBank,
N.A. (Carolinas), High Point, North Carolina, an amount equal
to the Purchase Price, less One Million and No/100 Dollars
($1,000,000), (ii) a Term Note in the amount of One Million
and No/100 Dollars ($1,000,000), as more particularly
described in Section 1.5(c) below, and (iii) all of the
documents, instruments
<PAGE>
and opinions required to be delivered by Purchaser pursuant to
Section 1.3 and Article 4.
(c) One Million and No/100 Dollars ($1,000,000) of
the Purchase Price will be payable pursuant to a Term Note of
the Purchaser to be delivered at Closing. The Term Note will
bear interest at the rate of twelve percent (12%) per annum.
Interest only will be payable quarterly, in arrears, with all
principal being due and payable on a date two years after the
Closing Date. The Term Note will be subordinated in right of
payment to up to $6,500,000 of Purchaser's principal bank
financing with The First National Bank of Maryland, a national
banking association. All principal and interest on the Term
Note will be due and payable upon any refinancing of such
indebtedness to The First National Bank of Maryland prior to
the expiration of the two-year term of the Term Note.
(d) All ad valorem taxes and utilities related to the
Properties will be prorated as of Closing.
2. Purchaser acknowledges that LADD has disclosed to Purchaser
those conditions described on Schedule I attached hereto. Purchaser agrees to
close the transaction described in the Agreement notwithstanding such conditions
and waives any rights or claims for indemnification or breach of the Agreement
caused by such conditions to the extent such disclosure is true and correct.
3. LADD agrees to cooperate with Purchaser in seeking
recordable documentation of the timber rights described on Schedule 2.1.6 of the
Agreement.
4. Attached hereto as Schedule II is a preliminary allocation
of Purchase Price. The parties agree to negotiate in good faith to finalize such
allocation prior to January 29, 1996.
5. All other terms and conditions of the Agreement remain in
full force and effect. Any conflict between the terms of this Amendment and the
Agreement will be resolved in favor of this Amendment. All capitalized terms
used in this Amendment, unless otherwise defined herein, shall have the meanings
set forth in the Agreement.
6. This Amendment shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of North Carolina,
without giving effect to the conflict of laws rules thereof.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the date first above written.
LADD:
LADD FURNITURE, INC.
By: (Signature of Richard R. Allen)
Chairman and Chief Executive
Officer
PURCHASER:
LEA LUMBER & PLYWOOD, LLC
By: (Signature of James B. Edren)
Title: Manager
The undersigned hereby consents and agrees to the terms and conditions
of this Amendment and reaffirms its guarantee of Purchaser's obligations under
the Agreement, as amended, all as more particularly set forth in the Agreement
and this Amendment.
FOREST PRODUCTS HOLDINGS LIMITED
PARTNERSHIP
By: Springfield Forest Products, Inc.,
Its General Partner
By: (Signature of James B. Edren)
Title: Vice President
Dated: December 29, 1995
<PAGE>
Schedule I
to
First Amendment to Asset Purchase Agreement
(Bullet) As indicated on the attached survey, certain railroad rights of way
crossing the real property listed or described in Schedule 2.1.6 may be
owned by third parties and limit access to certain portions of such
real property.
(Bullet) As of November 22, 1995, the Company's "backlog" figures were $748,153.
<PAGE>
SCHEDULE II
Lea Lumber & Plywood, LLC
Preliminary Allocation of Purchase Price
Inventories $826,782
Timber Cutting Rights 94,747
Fixed Assets 4,082,973
$5,004,502
