SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): March 24, 1998
ITHACA INDUSTRIES, INC.
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(Exact name of registrant as specified in charter)
Delaware 000-22385 56-1385842
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Highway 268 West, P.O. Box 620, Wilkesboro, North Carolina 28697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (336) 667-5231
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to an Asset Purchase Agreement (the "Agreement") between
Ithaca Industries, Inc., a Delaware corporation ("Ithaca" or the "Company"), and
Glendale Hosiery Company, a North Carolina corporation ("Glendale"), dated as of
March 13, 1998, Ithaca acquired substantially all of the assets of Glendale on
March 24, 1998 (the "Closing Date").
Glendale is in the business of manufacturing, marketing and
distributing women's hosiery. The purchased assets include substantially all the
assets of Glendale. In addition, Ithaca assumed substantially all of Glendale's
ordinary course liabilities. The Company currently intends to use the acquired
assets in the combined hosiery business.
The consideration paid by the Company was determined pursuant to arm's
length negotiations. The Agreement required Ithaca, on the Closing Date, to pay
Glendale 90% of Glendale's net worth (within 60 days of the Closing Date, the
Company will conduct an audit of Glendale's closing balance sheet in accordance
with GAAP, and the purchase price will be finalized based on this final audit),
plus $1.5 million in cash, plus $2 million in Ithaca common stock, calculated
according to a formula market price based on the average closing price of
Ithaca's common stock on the 20 trading days prior to the Closing Date. Under
the Agreement, Ithaca could not issue more than 400,000 shares of Ithaca common
stock and if the market price as determined under the formula was less than
$5.00 per share, then Ithaca was to deliver a 10% subordinated promissory note
in the principal amount equal to the amount by which $2 million exceeded the
market value of the common stock so delivered. In addition under the Agreement,
Ithaca is obliged to pay an additional $500,000 in cash in five quarterly
installments of $100,000 commencing on the last day of the first full fiscal
quarter following the Closing Date, and was required to refinance up to $9.0
million of Glendale's outstanding bank indebtedness.
The acquisition was financed by $110 million in senior credit
facilities ("Senior Credit Facilities"). The Senior Credit Facilities include a
five-year bank credit facility consisting of a $25 million term loan and up to
$70 million in revolving credit loans to be provided by a syndicate of banks led
by NationsBank, N.A. The Senior Credit Facilities also include an additional $15
million term loan provided by Foothill Capital Corporation and arranged by
NationsBanc Montgomery Securities LLC. The Senior Credit Facilities were also
used to refinance Ithaca's existing credit agreement with another bank syndicate
and will also be used for general corporate purposes.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The Company currently expects that it will file the required financial
statements when they are available, but no later than June 8, 1998.
(B) PRO FORMA FINANCIAL INFORMATION
The Company expects to file pro forma financial information with
respect to assets acquired by the Company referenced in Item 2 above when they
are available, but no later than June 8, 1998.
(C) EXHIBITS
Exhibit Number Description
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2 Asset Purchase Agreement between Ithaca
Industries, Inc. and Glendale Hosiery
Company dated March 13, 1998. The
schedules and exhibits to the foregoing
Asset Purchase Agreement have been
omitted pursuant to Item 601(b)(2) of
Regulation S-K. A copy of any omitted
schedule and exhibit will be furnished
supplementally to the Securities and
Exchange Commission upon request.
99.1 Press Release of Ithaca Industries, Inc. dated
March 16, 1998.
99.2 Press Release of Ithaca Industries, Inc. dated
March 25, 1998.
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SIGNATURE
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.
ITHACA INDUSTRIES, INC.
Date: April 3, 1998 By: /s/ Richard P. Thrush
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Richard P. Thrush
Senior Vice President - Finance
and Administration, Chief Accounting
and Principal Financial Officer
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Exhibit Number Description
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2 Asset Purchase Agreement between Ithaca
Industries, Inc. and Glendale Hosiery
Company dated March 13, 1998.
99.1 Press Release of Ithaca Industries, Inc. dated
March 16, 1998.
99.2 Press Release of Ithaca Industries, Inc. dated
March 25, 1998.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ITHACA INDUSTRIES, INC.
AND
GLENDALE HOSIERY COMPANY
DATED AS OF MARCH 13, 1998
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TABLE OF CONTENTS
Page
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1. Transfer of Assets and Liabilities........................................2
1.1 Assets to be Sold............................................2
1.2 Excluded Assets..............................................4
1.3 Liabilities to be Assumed....................................4
1.4 Liabilities Not Assumed......................................5
2. The Closing...............................................................7
2.1 Closing; Closing Date........................................7
3. Consideration and Payment.................................................7
3.1 Payment on the Closing Date..................................7
3.2 Closing Net Worth............................................9
3.3 Allocation..................................................11
4. Representations and Warranties of the Seller.............................12
4.1 Due Incorporation and Qualification.........................12
4.2 Subsidiaries and Investments................................13
4.3 Authority to Execute and Perform Agreements.................13
4.4 Non-contravention...........................................13
4.5 Articles of Incorporation and By-laws.......................14
4.6 Financial Statements........................................15
4.7 No Material Adverse Change or Undisclosed Liabilities.......16
4.8 Tax Matters.................................................16
4.9 Compliance with Laws........................................17
4.10 Litigation..................................................18
4.11 Employees and Employee Benefit Plans........................19
4.12 Agreements..................................................20
4.13 Real Estate.................................................22
4.14 Accounts Receivable.........................................30
4.15 Inventory...................................................30
4.16 Accounts Payable............................................31
4.17 Tangible Property...........................................31
4.18 Intangible Property.........................................32
4.19 Ownership and Adequacy of Assets............................35
4.20 Suppliers and Customers.....................................36
4.21 Employee Benefit Plans......................................36
4.22 Insurance...................................................39
4.23 Officers, Directors and Employees...........................40
4.24 Operation of the Business...................................41
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4.25 Full Disclosure.............................................44
4.26 No Broker...................................................45
4.27 Environmental Matters.......................................45
5. Representations and Warranties of the Buyer..............................48
5.1 Due Incorporation and Qualification.........................48
5.2 Authority to Execute and Perform Agreements.................49
5.3 Non-contravention...........................................49
5.4 No Broker...................................................50
5.5 Ithaca Common Stock.........................................50
5.6 Capitalization..............................................50
5.7 SEC Reports.................................................51
5.8 Absence of Material Adverse Change..........................51
6. Covenants and Agreements.................................................52
6.1 Conduct of Business.........................................52
6.2 Insurance...................................................52
6.3 Preservation of Business....................................52
6.4 Litigation..................................................52
6.5 Continued Effectiveness of Representations and Warranties
of the Seller...............................................53
6.6 Corporate Examinations and Investigations;
Confidentiality.............................................53
6.7 Other Transactions..........................................54
6.8 Premerger Notification......................................55
6.9 Third Party Consents........................................55
6.10 Environmental Transfer Laws.................................56
6.11 Title Report and Survey.....................................57
6.12 Change and Use of the Seller's Name.........................57
6.13 Employment Status...........................................57
6.14 Employment and Bonus Plan...................................58
7. Conditions Precedent to the Obligations of the Buyer.....................58
7.1 Representations and Covenants of the Seller.................59
7.2 Assumption by Shareholders..................................59
7.3 Hart-Scott-Rodino...........................................59
7.4 Governmental Permits and Approvals..........................60
7.5 Consents....................................................60
7.6 No Material Adverse Change..................................60
7.7 Litigation..................................................60
7.8 Opinion of Counsel to the Seller............................61
7.9 Additional Closing Documents of the Seller..................61
7.10 Title Insurance.............................................63
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7.11 Survey......................................................63
7.12 Estoppel Certificates.......................................64
7.13 Environmental Audit.........................................66
7.14 Employment Agreements.......................................66
7.15 Existing Liens..............................................66
7.16 Completion of Financing.....................................66
8. Conditions Precedent to the Obligation of the Seller.....................66
8.1 Representations and Covenants of the Buyer..................67
8.2 Hart-Scott-Rodino...........................................67
8.3 Governmental Permits and Approvals..........................67
8.4 Litigation..................................................67
8.5 Opinion of Counsel to the Buyer.............................67
8.6 Additional Closing Documents of the Buyer...................68
9. Post-Closing Covenants and Agreements....................................68
9.1 Audit of Seller.............................................68
9.2 Expenses of Sale............................................69
9.3 Indemnification of Brokerage................................69
9.4 Bulk Sales Laws.............................................69
9.5 Collection of Receivables...................................70
9.6 Mail........................................................70
9.7 Further Assurances..........................................70
9.8 Non-Competition Covenant of the Seller......................71
9.9 Corporate Records...........................................72
10.Survival of Representations and Warranties of the Seller.................72
11.Indemnification..........................................................74
11.1 Obligation of the Seller to Indemnify.......................74
11.2 Obligation of the Buyer to Indemnify........................75
11.3 Notice to Indemnifying Party................................76
11.4 Limitation on Indemnification...............................78
12.Indemnification by the Seller for Environmental Actions and
Environmental Compliance Costs...........................................79
12.1 Obligation of the Seller to Indemnify.......................79
12.2 Procedure for Indemnification for Environmental
Liabilities.................................................81
13.Termination of Agreement.................................................82
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14.Miscellaneous............................................................84
14.1 Certain Definitions.........................................84
14.2 Publicity...................................................88
14.3 Notices.....................................................89
14.4 Entire Agreement............................................90
14.5 Waivers and Amendments......................................90
14.6 Governing Law...............................................91
14.7 Binding Effect; No Assignment...............................91
14.8 Variations in Pronouns......................................91
14.9 Counterparts................................................92
14.10 Exhibits and Schedules......................................92
14.11 Headings....................................................92
14.12 No Third Party Rights.......................................92
14.13 Specific Performance........................................92
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EXHIBITS
A Form of Promissory Note
B-1 Form of Employment Agreement of Brian F. Slagle
B-2 Form of Employment Agreement of Glenn "Buzz" Floyd
B-3 Form of Employment Agreement of Wiley L. Brown
C Form of Hosiery Division Incentive Bonus Plan
D Form of Shareholder Assumption
E Form of Opinion of Counsel to the Seller
F Form of Bill of Sale and Assignment
G Form of Trademark Assignment
H Form of Patent Assignment
I Form of Real Property Lease Assignment and Assumption Agreement
J Form of Opinion of Counsel to the Buyer
K Form of Assumption of Liabilities
SCHEDULES
1.1(c) Assumed Contracts and Other Agreements
1.2 Excluded Assets
1.3(b) Assumed Liabilities
3.3 Allocation
4.1 Jurisdictions of Incorporation
4.2 Subsidiaries and Investments
4.4 Non-contravention
4.9 Compliance with Laws
4.10 Litigation
4.11 Employment Matters
4.12 Agreements
4.13.1(a) Owned Real Property
4.13.1(b) Interests Affecting Owned Real Property
4.13.2(a) Real Property Leases
4.13.2(b) Interests Affecting Leased Real Property
4.13.4 Space Leases
4.13.5 Options to Purchase Real Estate
4.13.7 Loan Documents
4.13.11 Real Property Taxes
4.18 Intangible Property
4.19 Permitted Liens
4.20 Suppliers and Customers
4.21.1 Benefit Plans
4.21.3 Administration of Benefit Plans
4.21.5 Welfare Plans
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4.22 Insurance
4.23 Officers, Directors and Employees
4.24 Operation of the Business
4.27 Environmental Matters
4.27(b) Environmental Permits
4.27(i) Hazardous Substance Locations
5.1 Jurisdictions of Incorporation
5.3 Non-contravention
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ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT, dated as of March 13, 1998 (this
"AGREEMENT"), by and among Ithaca Industries, Inc., a Delaware corporation (the
"BUYER"), and Glendale Hosiery Company, a North Carolina corporation (the
"SELLER").
W I T N E S S E T H :
WHEREAS, the Seller owns and engages in the business of
manufacturing, marketing and distributing women's hosiery (the "BUSINESS") and
owns or leases the assets and properties relating thereto;
WHEREAS, the Buyer wishes to purchase and acquire from the
Seller and the Seller wishes to sell, assign and transfer to the Buyer, all of
the Assets (as defined in Section 1.1) and the Business for the Purchase Price
(as defined in Section 3) and the assumption by the Buyer of the Assumed
Liabilities (as defined in Section 1.3) and upon the terms and subject to the
conditions hereinafter set forth;
WHEREAS, concurrently with the execution of this Agreement,
the Buyer and certain employees of the Seller are entering into the Employment
Agreements (as defined in Section 6.14) and a Bonus Plan (as defined in Section
6.14); and
WHEREAS, the Seller and all of its shareholders have approved
this Agreement and the Seller has determined that it is in the best interest of
the Seller and
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its shareholders that the Seller sell the Assets and the Business to the Buyer,
in consideration of the payment of the Purchase Price and the assumption of the
Assumed Liabilities, all upon the terms and conditions and subject to the
provisions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and other mutual benefits to be
derived hereby, the parties hereto agree as follows:
1. TRANSFER OF ASSETS AND LIABILITIES.
1.1 ASSETS TO BE SOLD. Subject to the terms and
conditions of this Agreement and in consideration of the payment of the Purchase
Price and assumption of the Assumed Liabilities, at the Closing (as defined in
Section 2.1), the Seller shall sell, assign, transfer and convey to the Buyer,
free and clear of all Liens (as defined in Section 14.1(k)) except Liens
securing Assumed Liabilities, all the assets, properties and rights of the
Seller of every type and description, whether currently idle or in use, real,
personal or mixed, tangible or intangible, choate or inchoate, known or unknown,
fixed or unfixed, accrued, absolute, contingent or otherwise, wherever located
and whether or not reflected on the books and records of the Seller or
specifically referred to in this Agreement, except Excluded Assets (as defined
in Section 1.2) (all of such assets, properties and rights, collectively, the
"ASSETS"), including, without limitation, all of the Seller's right, title and
interest in and to the following:
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(a) all assets of the Seller, including,
without limitation, all Owned Real Property (as defined in Section 4.13.1) and
Leased Real Property (as defined in Section 4.13.2) and all machinery, equipment
(excluding equipment on loan from vendors), fixtures, furniture and other
personalty located therein or thereon or attached thereto (the "OPERATING
ASSETS");
(b) all intangible assets, interests and
rights related to the Operating Assets or the Business, including, without
limitation, all names, trade names, trademarks, service marks, patents,
copyrights (including applications for, rights to acquire and other rights with
respect to any of the foregoing), Trade Secrets (as defined in Section 4.18.2)
and other intellectual property held or used by the Seller, including, without
limitation, the intellectual property set forth on Schedule 4.18, all
advertising, sales and promotional materials, catalogues, price lists, mailing
lists, lists of customers, lists of suppliers, distribution lists, production
data, licenses, technology, know-how, franchises, Permits (as defined in Section
4.9), authorizations, procedures and documentation;
(c) those contracts and agreements of the
Seller set forth on Schedule 1.1(c), all Real Property Leases (as defined in
Section 4.13.2) and all Space Leases (as defined in Section 4.13.4);
(d) all of the books, records and files of
the Seller or pertaining to the Business, including, without limitation, all
computerized records and other computerized storage media and all software and
user manuals and documentation relating thereto;
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(e) all accounts receivable, motor vehicles,
inventories of raw materials, work in process, finished products, irregular
goods, goods and parts, office and other supplies, rights under open orders for
the purchase or sale of assets, customer orders, prepayments of every kind,
security deposits and other deposits of every kind, in each case used in or
related to the Business, and all insurance proceeds relating to any of the
Assets;
(f) the goodwill of the Seller;
(g) all of the other assets, tangible and
intangible, of the Business listed or reflected on the Interim Balance Sheet (as
defined in Section 4.6.2) as it may be adjusted to reflect ordinary course of
business activities between the Interim Balance Sheet Date (as defined in
Section 4.6.2) and the Closing Date; and
(h) all assets used in or relating to the
Business.
1.2 EXCLUDED ASSETS. The Seller will retain and not
transfer, and the Buyer will not purchase or acquire, the assets listed on
Schedule 1.2 (collectively, the "EXCLUDED ASSETS").
1.3 LIABILITIES TO BE ASSUMED. Effective as of the
Closing, the Buyer shall, without any further responsibility or liability of or
recourse to the Seller or its shareholders, directors, officers, employees,
agents, consultants, representatives, successors, transferees or assignees,
absolutely and irrevocably assume and be solely liable and responsible for the
following liabilities and obligations
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of the Seller, but in all events excluding the Excluded Liabilities (as defined
in Section 1.4), to the extent existing on the Closing Date (the "ASSUMED
LIABILITIES"):
(a) all liabilities (including not more than
$9,000,000 of liabilities under the Bank Credit Agreement (as defined in Section
14.1(b))) of the Seller reflected on the Interim Balance Sheet, or incurred in
the ordinary course of business since the Interim Balance Sheet Date and through
and including the Closing Date, but in no event in excess of the amount accrued
on the balance sheet of the Seller as of the Closing Date as finally determined
under Section 3.2 (the "CLOSING BALANCE SHEET");
(b) all obligations and liabilities of the
Seller arising from and after the Closing Date under the contracts and
agreements of the Seller set forth on Schedule 1.1(c), all Real Property Leases
and Space Leases, all liabilities set forth on Schedule 1.3(b) and all
liabilities and unperformed and unfulfilled obligations relating to all purchase
orders and sale orders that are assigned to the Buyer pursuant to Section 1.1(e)
hereof.
1.4 LIABILITIES NOT ASSUMED. Anything in this
Agreement to the contrary notwithstanding, the Buyer shall not assume or in any
way be liable or responsible for, and the Seller shall be responsible for the
payment, performance and discharge of, any liabilities or obligations of the
Seller except as specifically provided in Section 1.3. Without limiting the
generality of the foregoing, and notwithstanding anything to the contrary in
Section 1.3, the Buyer shall not assume, the Assumed Liabilities shall not
include, and the Seller shall retain and indemnify the Buyer
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against, pursuant to Section 11.1, the following (collectively, the "EXCLUDED
LIABILITIES"):
(a) all liabilities, obligations and
expenses relating to the Excluded Assets;
(b) all liabilities, obligations and
expenses of any kind in excess of that amount properly accrued on the Closing
Balance Sheet;
(c) any Taxes payable in connection with the
transactions contemplated by this Agreement;
(d) defaults by the Seller under any
contracts or other agreements (including, without limitation, Real Property
Leases) (i) occurring on or before the Closing Date or (ii) caused by or arising
out of the execution or performance of this Agreement or the consummation of the
transactions contemplated hereby;
(e) all liabilities, obligations and
expenses of any kind or nature relating to Environmental Actions (as defined in
Section 14.1(f)) attributable to the ownership or operation of the Business or
the Assets by the Seller or its predecessors or affiliates on or prior to the
Closing Date or to events that have occurred, or conditions that existed, on or
prior to the Closing Date;
(f) all claims, liabilities and obligations,
known or unknown, whether absolute, contingent or otherwise, the existence of
which is a breach of any representation, warranty, covenant or agreement of the
Seller set forth in this Agreement; and
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(g) all other liabilities, obligations and
expenses of any nature whatsoever, known or unknown, whether absolute,
contingent or otherwise, not expressly assumed by the Buyer pursuant to Section
1.3.
2. THE CLOSING.
2.1 CLOSING; CLOSING DATE. The closing of the sale
and purchase of the Assets contemplated hereby (the "CLOSING") shall take place
at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York at 10:00 a.m. local time on the business day next
following the day upon which all of the conditions to the Closing set forth in
Sections 7 and 8 have been satisfied or waived by the party entitled to waive
the same, but in no event later than March 31, 1998 or at such other place or
such other time or date as the parties may mutually agree in writing. The time
and date upon which the Closing occurs is referred to herein as the "CLOSING
DATE."
3. CONSIDERATION AND PAYMENT.
Subject to the terms and conditions of this
Agreement, in reliance upon the representations, warranties and agreements of
the Seller contained herein, and in consideration of the sale, assignment,
transfer and delivery of the Assets referred to in Section 1, the Buyer agrees
to make the payments provided for in this Section 3.1 (the "PURCHASE PRICE"):
3.1 PAYMENT ON THE CLOSING DATE.
(a) Not later than five business days prior
to the Closing, the parties shall mutually agree on an estimate of the Net Worth
(as Net
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Worth is defined below, such estimate, "ESTIMATED NET WORTH") of the Seller on
the Closing Date on a basis consistent with the Audited Balance Sheet (as
defined in Section 4.6.1). "NET WORTH" shall mean total shareholders' equity as
computed in accordance with GAAP (as defined in Section 14.1(i)) but excluding
all Excluded Assets and Excluded Liabilities. The Buyer shall pay or cause to be
paid at the Closing in cash, by wire transfer of immediately available funds, to
the Seller the sum of (i) ninety percent of the Estimated Net Worth, subject to
the post-closing adjustment as set forth in Section 3.2(b) and (ii) $1,500,000;
(b) At the Closing, the Buyer shall deliver
a certificate representing a number of shares of its common stock, par value
$.01 per share ("ITHACA COMMON STOCK"), equal to the quotient obtained by
dividing $2,000,000 by the Market Price Per Share (as defined below), but in no
event shall Ithaca deliver more than 400,000 shares of Ithaca Common Stock.
"MARKET PRICE PER SHARE" shall mean the average of the "Closing Prices" per
share of Ithaca Common Stock for the 20 consecutive trading day period ending
the day before the Closing Date. "CLOSING PRICE" for any day shall be the last
reported sale price or, in the case no such sale takes place on such day, the
average of the last reported bid and ask quotations for Ithaca Common Stock on
the automated quotation system of the NASDAQ National Market or the OTC Bulletin
Board. If the Market Price Per Share is less than $5.00, then the Buyer shall
deliver its subordinated promissory note (the "PROMISSORY NOTE") in
substantially the form of Exhibit A, in the principal amount equal to the amount
by which (i) $2,000,000 exceeds (ii)(x) the number of
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shares issued pursuant to this Section 3.1(b) multiplied (y) by the Market Price
Per Share. The Promissory Note shall bear an interest rate of 10%.
(c) At the Closing, the Buyer shall deliver
evidence reasonably satisfactory to the Seller, that the Buyer has either
assumed or made a cash payment in satisfaction of the Company's indebtedness
under the Bank Credit Agreements; provided that the Buyer shall not be required
to assume or pay more than $9,000,000 of indebtedness under the Bank Credit
Agreements.
(d) The Buyer shall pay to the Seller a
total of $500,000, which shall be paid in five equal installments of $100,000
each on the last day of each fiscal quarter commencing with the last day of the
first full fiscal quarter after the Closing Date.
3.2 CLOSING NET WORTH.
(a) Within 60 days after the Closing, the
Buyer's independent auditors shall conduct a full audit of the Closing Balance
Sheet (the "FINAL AUDIT") in accordance with GAAP and shall determine the Net
Worth of the Seller as of the Closing Date but excluding all Excluded Assets and
Excluded Liabilities on a basis consistent with the Audited Balance Sheet (but
subject to GAAP) and in accordance with the procedures set forth in this Section
3.2 (the "CLOSING NET WORTH").
(b) Within 5 business days after the
preparation of the Final Audit, the Buyer shall cause a copy of the Final Audit
containing the statement of Closing Net Worth (the "STATEMENT") to be delivered
to the Seller. Following
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delivery of the Statement to the Seller, the Seller and its professional
advisors shall be permitted to review the Buyer's independent auditors' work
papers relating to the Statement, provided that the Seller executes a release
letter in standard form required by the Buyer's independent auditors. The
Statement shall become final and binding upon the parties on the thirtieth day
following delivery thereof to the Seller unless the Seller gives written notice
of its disagreement (a "NOTICE OF DISAGREEMENT") to the Buyer prior to such
date. Any Notice of Disagreement shall specify in reasonable detail the nature
and amount of any disagreement so asserted. If a timely Notice of Disagreement
is received by the Buyer, then the Statement (as revised in accordance with
clause (x) or (y) below) shall become final and binding upon the parties on the
earlier of (x) the date the parties hereto resolve in writing any differences
they have with respect to any matter specified in the Notice of Disagreement or
(y) the date any matters properly in dispute are finally resolved in writing by
the Accounting Firm (as defined below). During the 30 days immediately following
the delivery of a Notice of Disagreement, the Seller and the Buyer shall seek in
good faith to resolve in writing any difference which they may have with respect
to each matter specified in the Notice of Disagreement. During such period, the
Buyer shall have full access to the working papers of the Seller prepared in
connection with the Seller's preparation of the Notice of Disagreement. At the
end of such 30-day period, the Seller and the Buyer shall submit to a nationally
recognized accounting firm (the "ACCOUNTING FIRM") for review and resolution of
any and all matters which remain in dispute and which were properly included in
the Notice of Disagreement, and the Accounting
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Firm shall make a final determination of the Closing Net Worth, which
determination shall be final and binding on the parties (it being understood,
however, that the Accounting Firm shall act as an arbitrator to determine, based
solely on presentations by the Buyer and the Seller (and not by independent
review), only those matters which remain in dispute and which were properly
included in the Notice of Disagreement). The Accounting Firm shall be selected
by the Seller and the Buyer or, if the parties are unable to agree, by the
Seller's and the Buyer's independent accountants and, if they are unable to
agree, by the American Arbitration Association. The Statement shall become final
and binding on the Buyer and the Seller on the date the Accounting Firm delivers
its final resolution to the parties (which final resolution shall be delivered
as soon as practicable following the selection of the Accounting Firm). The fees
and expenses of the Accounting Firm pursuant to this Section shall be borne 50%
by the Buyer and 50% by the Seller.
(c) Within 5 business days following the
final determination of Closing Net Worth under Section 3.2(a) and 3.2(b) (the
"FINAL ADJUSTMENT DATE"), the Buyer shall pay to the Seller the amount by which
Closing Net Worth exceeds 90% of the Estimated Net Worth or the Seller shall pay
to the Buyer the amount by which the 90% of the Estimated Net Worth exceeds
Closing Net Worth, in each case, in cash, by wire transfer of immediately
available funds.
3.3 ALLOCATION. The Seller and the Buyer agree to
allocate $250,000 to the covenants set forth in Section 9.8. Within 60 days of
the Closing Date, the Buyer will deliver to the Seller Schedule 3.3 which will
set forth the
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12
allocation of the Purchase Price among the Assets. The allocation delivered by
the Buyer shall be based on the Buyer's reasonable, good faith determination of
the fair market value of the Assets and shall be subject to the Seller's
consent, which shall not be unreasonably withheld or delayed. The parties agree
to file all tax reports, returns and claims and other statements consistent with
such allocation set forth on Sched ule 3.3 (and in particular to report the
information required by section 1060(b) of the Code) in a manner consistent with
such allocation and shall not make any inconsistent written statement or take
any inconsistent position on any returns, in any refund claim, during the course
of any Internal Revenue Service or other tax audit, for any financial or
regulatory purpose, in any litigation or investigation or otherwise, so long as
there exists a reasonable basis in law to maintain such position. Each party
shall notify the other party if it receives notice that the Internal Revenue
Service proposes any allocation different from Schedule 3.3.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Buyer as follows:
4.1 DUE INCORPORATION AND QUALIFICATION. The Seller
is a corporation duly organized, validly existing and in good standing under the
laws of the State of North Carolina and has the corporate power and lawful
authority to own, lease and operate its assets, properties and business and to
carry on the Business as now conducted. The Seller is qualified to transact
business and is in good standing as a foreign corporation in each jurisdiction
set forth on Schedule 4.1, which are the only jurisdictions in which the Seller
is required to be so qualified, except for such
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13
jurisdictions in which the failure to be so qualified is not reasonably likely
to have, individually or in the aggregate, a material adverse effect on the
Business or the Assets.
4.2 SUBSIDIARIES AND INVESTMENTS. Schedule 4.2 sets
forth the name and jurisdiction of incorporation of each corporation or other
person (each, a "SUBSIDIARY") in which the Seller directly or indirectly owns or
has the power to vote shares of any capital stock or other ownership interest.
Except for the Subsidiaries, the Seller does not directly or indirectly own any
interest in any other person. Each of the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
4.3 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. The
Seller has the requisite corporate power and authority to enter into, execute
and deliver this Agreement and each and every agreement and instrument
contemplated hereby to which the Seller is or will be a party, and to perform
fully the Seller's obligations hereunder and thereunder, and this Agreement and
each such other agreement and instrument, upon execution and delivery by the
Seller, will be duly executed and delivered by the Seller and (assuming due
execution and delivery hereof and thereof by the other parties hereto and
thereto) will be valid and binding obligations of the Seller enforceable against
the Seller in accordance with their respective terms.
4.4 NON-CONTRAVENTION. Neither the execution and
delivery of this Agreement or any other agreement or instrument contemplated
hereby, the
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14
consummation of the transactions contemplated hereby or thereby nor the
performance of this Agreement or any other agreement or instrument contemplated
hereby in accordance with their respective terms and conditions by the Seller
(a) requires the approval or consent of any governmental body (other than
approvals required under the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended, and the rules and regulations promulgated thereunder (the "HSR
ACT")) or (except as otherwise specified on Schedule 4.4 hereto) of any other
person, (b) except as specified on Schedule 4.4, conflicts with or results in
any breach or violation of, results in a material modification of the effect of,
otherwise causes the termination of or gives any other contracting party the
right to terminate, or constitutes (or with notice or lapse of time or both
would constitute) a default under, any agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, license, franchise,
commitment or other binding arrangement, certificate of incorporation, by-law,
judgment, decree, order, statute, rule, Permit or governmental regulation
applicable to the Seller, the Business or any of the Assets or (c) results in
the creation of any Lien on any of the Assets.
4.5 ARTICLES OF INCORPORATION AND BY-LAWS. True,
correct and complete copies of articles of incorporation (certified by the
Secretary of State of the State of North Carolina) and by-laws (certified by the
Secretary or any other appropriate officer of the Seller) of the Seller, and all
amendments to each, have been delivered to the Buyer.
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15
4.6 FINANCIAL STATEMENTS.
4.6.1 The consolidated balance sheets of the
Seller as of December 26, 1992, December 25, 1993, December 31, 1994, December
30, 1995 and December 28, 1996 and the related statements of income and retained
earnings and cash flows for the years then ended, including the footnotes
thereto, which have been audited by Deloitte & Touche LLP and delivered to the
Buyer, fairly present the financial position, results of operations and cash
flows of the Seller at such dates and for the years then ended in accordance
with GAAP. The audited balance sheet included in the audited financial
statements as at December 28, 1996 and for the year ended is sometimes referred
to herein as the "AUDITED BALANCE SHEET."
4.6.2 The unaudited balance sheet of the
Seller as at January 31, 1998, and the related statements of income and retained
earnings and cash flows for the year then ended, including the footnotes
thereto, which have been delivered to the Buyer, fairly present the financial
position, results of operations and cash flows of the Seller at such date and
for the year then ended in accordance with GAAP except that: (a) such financial
statements do not reflect any Excluded Assets or Excluded Liabilities and (b)
such financial statements will reflect an accrual of 1/6 of the amount of
vacation pay in excess of two weeks due employees. The foregoing financial
statements of the Seller as at January 31, 1998 and for the year then ended, are
sometimes referred to herein as the "INTERIM FINANCIALS," the balance sheet
included in the Interim Financials is sometimes referred to herein as the
"INTERIM
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16
BALANCE SHEET" and January 31, 1998, is sometimes referred to herein as the
"INTERIM BALANCE SHEET DATE."
4.7 NO MATERIAL ADVERSE CHANGE OR UNDISCLOSED
LIABILITIES.
(a) Since December 28, 1996, there has been
no material adverse change in the assets, properties, business, prospects,
operations or condition (financial or otherwise) of the Business or any of the
Assets, and the Seller does not know of any such change that is threatened, nor
has there been any damage, destruction or loss materially adversely affecting
the Business or any of the Assets, whether or not covered by insurance.
(b) Neither the Seller nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether known,
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, except (i) as set forth in this Agreement, (ii) as and to the extent
disclosed or reserved against in the Seller's balance sheet dated December 28,
1996, or specifically disclosed in the notes thereto, or in the Interim Balance
Sheet, (iii) for liabilities and obligations that (x) are incurred after
December 28, 1996, in the ordinary course of business consistent with past
practice and (y) individually and in the aggregate, will not be material to the
Business or have or result in a material adverse effect or (iv) for Excluded
Liabilities.
4.8 TAX MATTERS. No state of facts exists or has
existed that would constitute grounds for the assessment against the Buyer,
whether by reason of transferee liability or otherwise, of any liability for any
federal, state, county, local,
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17
foreign or other tax (including, without limitation, income, profits, premium,
estimated, excise, sales, withholding, value-added, capital stock, transfer,
use, occupancy, gross receipts, franchise, employment, payroll related, property
or any other tax of any sort), whether or not measured in whole or in part by
net income, and including deficiencies, interest, penalties and additions to tax
thereon and obligations under any tax sharing, tax allocation or similar
agreement to which the Seller is a party and including expenses associated with
contesting any proposed adjustment related to any of the foregoing
(collectively, "TAXES") attributable to any period ending on or before the
Closing Date relating to the Seller's income, assets and operations, including
the Business and the Assets, or arising out of the transactions contemplated by
this Agreement. There is no pending or threatened Tax audit of any Tax return
filed by or on behalf of the Seller or with respect to any of the Seller's
income, assets and operations, including the Business and the Assets.
4.9 COMPLIANCE WITH LAWS. The Seller has complied in
all material respects with all federal, state, county, local and foreign laws,
ordinances, regulations, orders, judgments, injunctions, awards or decrees
applicable to the Business or any of the Assets. To the knowledge of the Seller,
the Seller would not be in violation of any law, ordinance, regulation or other
requirement applicable to the Business or any of the Assets that has been
enacted or adopted but is not yet effective, if such law, ordinance, regulation
or other requirement were effective at the date hereof. The Seller has not made
any illegal payment on behalf of the Business to officers or employees of any
governmental or regulatory body or to customers for the
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18
sharing of fees or to customers or suppliers for rebating of charges, engaged in
any other illegal reciprocal practices or illegally given any consideration to
purchasing agents or other representatives of customers in respect of sales made
or to be made by the Seller that relate to the Business. Except as set forth on
Schedule 4.9, no license, permit, certificate of occupancy, exemption, consent,
waiver, authorization, franchise, right, order or approval of any federal,
state, county, local or foreign governmental or regulatory body or any insurance
company or fire rating or similar board or organization (collectively,
"PERMITS") is material to or necessary for the conduct of the Business or the
ownership or use of the Assets. All Permits included on Sched ule 4.9 are in
full force and effect and no proceeding is pending or, to the knowledge of the
Seller, threatened, to revoke or limit any Permit. Except as set forth on
Schedule 4.9, no action by the Seller or the Buyer is required in order that all
Permits will remain in full force and effect following the consummation of the
transactions provided for herein.
4.10 LITIGATION. The Seller is not subject to any
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or arbitration tribunal against or involving the
Business or any of the Assets. Except as set forth on Schedule 4.10, the Seller
is not a party to or, to the knowledge of the Seller, threatened with, any
litigation or judicial, administrative or arbitration proceeding. Except as set
forth on Schedule 4.10, the Seller does not know of any dispute with any person
under contract with the Seller that materially adversely affects, or may
materially adversely affect, the assets, properties, business,
<PAGE>
19
prospects, operations or condition (financial or otherwise) of the Business or
any of the Assets. Except as set forth on Schedule 4.10, to the knowledge of the
Seller, there is no fact, event or circumstance that is reasonably likely to
give rise to any action, suit, claim or proceeding relating to the Business or
any of the Assets that would be required to be set forth on Schedule 4.10 if
currently pending or threatened.
4.11 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) The Seller has previously delivered to
the Buyer a true and complete list as set forth on Schedule 4.11 of (i) all
effective employment or consulting agreements including memoranda or letters of
understanding and accepted offers of employment with current or former
employees, including current or former directors and consultants, of the Seller,
if still in effect and (ii) all union or collective bargaining agreements
covering employees of the Seller. Schedule 4.11 contains a list of all current
employees of the Seller, together with the title or job classification of each
such employee, the employee's current annual rate of base salary or wage, and
the employee's title or job classification. Copies of each employment agreement
have been delivered to the Buyer.
(b) Except as set forth in Schedule 4.11,
(i) there is no unfair labor practice complaint against the Seller pending
before the National Labor Relations Board; (ii) there is no labor strike,
slowdown or stoppage actually pending or threatened against the Seller; (iii) no
representation petition respecting the employees of the Seller has been filed
with the National Labor Relations Board; (iv) the Seller has not experienced any
primary work stoppage or any attempt to
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20
unionize involving its employees; (v) no labor union represents or purports to
represent any employee of the Seller and there has not been any attempt by any
union to organize or represent the Seller's employees within the last five
years; (vi) there are no material controversies pending between the Seller and
any of its employees, nor to the Seller's knowledge are any such material
controversies threatened; (vii) the Seller is in compliance with all laws and
governmental rules and regulations relating to the employment of labor,
including any provisions thereof relating to wages, hours, collective bargaining
and the payment of social security, withholding and similar taxes; (viii) the
Seller has not received notice that any management employee intends to terminate
his or her employment; (ix) there are no complaints by or on behalf of any
current or former employee of the Seller pending or threatened to be brought
before any court, agency of the United States or any state or local government,
alleging discrimination or wrongful termination of employment on account of sex,
race, age, color, national origin, handicap, marital status, height, weight,
payment of wages and benefits (or the failure to pay same); and (x) all of the
Seller's employment, consulting or similar contracts or arrangements with its
employees may be terminated without notice and without cost or penalty.
4.12 AGREEMENTS. Schedule 4.12 sets forth all of the
material contracts and other agreements to which the Seller is a party, or by
which it is bound, or by or to which any portion of the Business or any of the
Assets are bound or subject, including (a) contracts and other agreements with
any affiliate of the Seller or any current or former officer, director,
employee, consultant, agent or stockholder of
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21
the Seller or any such affiliate, (b) contracts and other agreements with any
labor union or association representing any employees, (c) contracts and other
agreements not made in the ordinary course of business, (d) contracts for the
purchase of materials, supplies, goods, services, equipment or other assets
providing for annual payments by the Seller of, or pursuant to which in the last
year the Seller paid in the aggregate, $25,000 or more, (e) sales, distribution
or other similar agreements providing for the sale by the Seller of materials,
supplies, goods, services, equipment or other assets that provides for annual
payments to the Seller of, or pursuant to which in the last year the Seller was
paid in the aggregate, $25,000 or more, (f) distributorship, sales
representative, marketing, agency, dealer or other similar agreements, (g)
contracts and other agreements for the sale of any portion of the Business or
any of the Assets other than in the ordinary course of business or for the grant
to any person of any preferential rights to purchase any portion of the Business
or any of the Assets, (h) joint venture agreements, (i) financing agreements,
(j) con tracts and other agreements containing covenants of the Seller (or any
affiliate thereof relating to the Seller) not to compete in any line of business
or with any person in any geographical area or (k) any other material contract
or other agreement, whether or not made in the ordinary course of business. All
of the contracts and other agreements set forth on Schedule 1.1(c) or any other
Schedule hereto have been delivered or made available to the Buyer and are
valid, subsisting agreements, in full force and effect and binding upon the
parties thereto in accordance with their respective terms and the Seller is not
in default under any of them, and, to the
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22
Seller's knowledge, no other party to any such contract or other agreement is in
default thereunder. Except as separately identified on Schedule 4.12, the Seller
is not a party to or bound by or subject to any contract or other agreement that
either individually or in the aggregate materially and adversely affects, or,
without breach by one of the parties thereto, may materially and adversely
affect, the assets, properties, business, prospects, operations or condition
(financial or otherwise) of the Business or any of the Assets or that was
entered into other than in the ordinary course of its business. Except as
separately identified on Schedule 1.1(c), no approval or consent of any person
is needed in order that (i) the contracts and other agreements set forth on
Schedule 1.1(c), the Real Property Leases and the Space Leases continue in full
force and effect following the consummation of the transactions contemplated by
this Agreement and (ii) the contracts listed on Sched ule 1.1(c), the Real
Property Leases and the Space Leases can be assigned to and assumed by the Buyer
and remain in full force and effect after such assignment and assumption.
4.13 REAL ESTATE.
4.13.1 OWNERSHIP OF PREMISES. The Seller is
the owner of good, marketable and insurable fee title to the land described on
Schedule 4.13.1(a) and to all of the buildings, structures and other
improvements located thereon (collectively, the "OWNED REAL PROPERTY") free and
clear of all Title Defects (as defined in this Section) except as listed on
Schedule 4.13.1(b). The Owned Real Property constitutes all of the real property
owned by the Seller on the date hereof.
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23
For purposes of this Agreement, "TITLE DEFECTS" shall mean and include any
mortgage, deed of trust, Lien, pledge, security interest, claim, lease, charge,
option, right of first refusal, easement, restrictive covenant, encroachment or
other survey defect, encumbrance or other restriction or limitation whatsoever
(other than Liens securing indebtedness under the Bank Credit Agreements).
4.13.2 LEASED PROPERTIES. Schedule 4.13.2(a)
is a true, correct and complete schedule of all leases, subleases, licenses and
other agreements (collectively, the "REAL PROPERTY LEASES") under which the
Seller uses or occupies or has the right to use or occupy, now or in the future,
any real property (the land, buildings, structures and other improvements
covered by the Real Property Leases being referred to herein as the "LEASED REAL
PROPERTY"), which Schedule 4.13.2(a) sets forth the date of and parties to each
Real Property Lease, the date of and parties to each amendment, modification and
supplement thereto, the term and renewal terms (whether or not exercised)
thereof and a brief description of the Leased Real Property covered thereby. The
Seller has heretofore delivered to the Buyer true, correct and complete copies
of all Real Property Leases (including all modifications, amendments and
supplements). Each Real Property Lease is valid, binding and in full force and
effect, all rent and other sums and charges payable by the Seller as tenant
thereunder are current, no notice of default or termination under any Real
Property Lease is outstanding, no termination event or condition or uncured
default on the part of the Seller or, to the best of the Seller's knowledge, the
landlord, exists under any Real Property Lease, and no event has occurred and no
condition exists which, with the
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24
giving of notice or the lapse of time or both, would constitute such a default
or termination event or condition. To the Seller's knowledge there is no
underlying mortgage, deed of trust, lease grant of term or other estate in or
interest affecting the fee simple reversionary interest of the landlord under
the Real Property Leases in and to the Leased Real Property that is superior to
the interest of the Seller as tenant under the applicable Real Property Leases.
The Seller holds the leasehold estate under and interest in each Real Property
Lease free and clear of all Title Defects (exclusive of mortgages which will be
assumed by the Buyer or satisfied by the Seller at the Closing) except those
Title Defects listed on Schedule 4.13.2(b). None of the Seller, or any affiliate
or stockholder thereof has any ownership, financial or other interest in the
landlord under any Real Property Lease.
4.13.3 ENTIRE PREMISES. All of the land,
buildings, structures, plants, facilities and other improvements used by the
Seller in the conduct of the Business are included in the Owned Real Property
and the Leased Real Property. The Leased Real Property and the Owned Real
Property are collectively referred to herein as the "REAL PROPERTY."
4.13.4 SPACE LEASES. Schedule 4.13.4 is a
true, correct and complete schedule of all leases, subleases, licenses and other
agreements (collec tively, the "SPACE LEASES") granting to any person or entity
other than the Seller any right to the possession, use, occupancy or enjoyment
of the Real Property or any portion thereof, which schedule sets forth the date
of and parties to each Space Lease, the date of and parties to each amendment,
modification and supplement thereto, the
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25
term and renewal terms (whether or not exercised) thereof and a brief
description of the portion of the Real Property covered thereby. The Seller has
heretofore delivered to the Buyer true, correct and complete copies of all Space
Leases (including all modifications, amendments and supplements). Each Space
Lease is valid, binding and in full force and effect, all rent and other sums
and charges payable by the tenant or occupant thereunder (the "SPACE TENANT")
are current, no notice of default or termination under any Space Lease is
outstanding, no termination event or condition or uncured default on the part of
the Seller or, to the best of the Seller's knowledge, the Space Tenant, exists
under any Space Lease, and no event has occurred and no condition exists that,
with the giving of notice or the lapse of time or both, would constitute such a
default or termination event or condition. The Seller holds the landlord's
interest in each Space Lease free and clear of all Title Defects (exclusive of
mortgages which will be satisfied by the Seller at the Closing). None of the
Seller, or any affiliate thereof has any ownership, financial or other interest
in the Space Tenant under any Space Lease.
4.13.5 NO OPTIONS. Except as set forth on
Schedule 4.13.5, none of the Seller, or any affiliate thereof owns or holds, or
is obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose of the Real Property or
any portion thereof or interest therein.
4.13.6 CONDITION AND OPERATION OF
IMPROVEMENTS. All components of all buildings, structures and other improvements
included within
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26
the Real Property (the "IMPROVEMENTS"), including but not limited to the roofs
and structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water, storm water, paving and
parking equipment, systems and facilities included therein, are in good
operating condition and repair, subject to continued repair and replacement in
accordance with past practice. To the Seller's knowledge, all water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and systems and other similar systems serving each Real Property parcel
are installed and operating and are sufficient to enable each such parcel to
continue to be used and operated in the manner currently being used and
operated, and any so-called hookup fees or other associated charges have been
fully paid. To the Seller's knowledge, each such utility or other service is
provided by a public or private utility or service company and enters the
applicable Real Property parcel from an adjacent public street or valid private
easement owned by the supplier of such utility or other service. To the Seller's
knowledge, each Improvement has direct access to a public street adjoining the
Real Property on which such Improvement is situated over the driveways and
accessways currently being used in connection with the use and operation of such
Improvement, and no existing accessway, crosses or encroaches upon any property
or property interest not owned or leased by the Seller. To the Seller's
knowledge, no Improvement or portion thereof is dependent for its access,
operation or utility on any land, building or other improvement not included in
the Real Property.
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27
4.13.7 LOAN DOCUMENTS. Schedule 4.13.7
contains a true, correct and complete schedule of the Bank Credit Agreements and
all notes, bonds, mortgages, deeds of trust, collateral security documents,
guarantees and other related documents binding upon the Seller or the Seller and
one or more others, in connection with any and all secured financings
encumbering or otherwise affecting the Seller's interest in the Real Property,
including all amendments, modifications, extensions and supplements thereto
(collectively, the "LOAN DOCUMENTS"). The Seller covenants and agrees to cause
all of the Loan Documents to be satisfied, released and discharged of record at
or prior to the Closing and to deliver all such deeds, releases, satisfactions
and/or other documents that the Buyer or the Buyer's title insurance company
shall reasonably request to effect and evidence the full release, satisfaction
and discharge of record of all Loan Documents.
4.13.8 REAL PROPERTY LAWS. The Real Property
and its continued use, occupancy and operation as currently used, occupied and
operated does not constitute a material nonconforming use under any applicable
building, zoning, subdivision or other land use or similar law, ordinance,
regulation, order or decree (collectively, "REAL PROPERTY LAWS"). The continued
existence, use, occupancy and operation of each Improvement in the manner
presently used, occupied or operated is not dependent on the granting of any
special permit, exception, approval or variance. The Seller has no knowledge of
any pending or anticipated change in any Real Property Law that would have a
material adverse effect upon the ownership, use, occupancy or operation of the
Real Property or any portion thereof, or upon the
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28
making of reasonable additions or alterations to the Improvements thereat or
upon reconstruction of any Improvement in the event of a casualty. No dispute
currently exists between the Seller and any governmental authority having
jurisdiction over the Real Property with respect to any Real Property Law or the
application thereof to the Real Property.
4.13.9 CONDEMNATION. The Seller has not
received notice, and has no knowledge of, any pending, threatened or
contemplated condemnation proceeding affecting the Real Property or any part
thereof or of any sale or other disposition of the Real Property or any part
thereof in lieu of condemnation.
4.13.10 CASUALTY. No portion of the Real
Property has suffered any material damage by fire or other casualty that has not
heretofore been completely repaired and restored to its original condition. No
portion of the Real Property is located in a special flood hazard area as
designated by Federal governmental authorities.
4.13.11 REAL PROPERTY TAXES. Each of the
parcels included in the Real Property is assessed for real estate tax purposes
as a wholly independent tax lot, separate from any adjoining land or
improvements not constituting a part of such parcel. Schedule 4.13.11 sets forth
for each such parcel its assessed valuation for real property tax purposes and
the amount of all real property taxes (including all city, town, school, fire
district, garbage district and other special taxes and also including any
special assessments or conditional levies) levied for each
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29
of the current tax year and the preceding tax year, and sets forth with respect
to each such parcel in each such year whether certiorari proceedings were
instituted and, if so, whether the same are pending or have been adjudicated or
settled (and if adjudicated or settled, the terms of such judgment or
settlement). Except as otherwise set forth herein, the assessment for each
Improvement set forth on Schedule 4.13.11 reflects the current state of
completion and condition of such Improvement. The Seller has no knowledge of any
pending or contemplated reassessment of any parcel included in the Owned Real
Property, or of any pending or contemplated reassessment of any parcel included
in the Leased Real Property that would result in a change in the rent,
additional rent or other sums and charges payable by the Seller under the Real
Property Lease covering such Leased Real Property.
4.13.12 SURVEY. There are no encroachments
or other facts or conditions affecting any parcel of Real Property that would be
revealed by an accurate survey or careful physical inspection thereof that
would, individually or in the aggregate, (a) interfere in any material respect
with, or materially increase the cost of, the use, occupancy or operation
thereof as currently used, occupied and operated or as intended to be used,
occupied and operated or (b) materially reduce the fair market value thereof
below the fair market value such parcel would have had but for such encroachment
or other fact or condition. To the Seller's knowledge, no portion of any
Improvement encroaches upon any property not included within the Real Property
or upon the area of any easement affecting the Real Property.
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30
4.13.13 MECHANICS AND OTHER LIENS. The
Seller does not owe any money to any architect, contractor, subcontractor or
materialman for labor or materials performed, rendered or supplied to or in
connection with any Real Property within the past four months. There is no work
being done at or materials being supplied to any parcel of Real Property at the
date hereof other than routine maintenance projects having an aggregate cost
through completion of not more than $5,000.
4.14 ACCOUNTS RECEIVABLE. All accounts receivable
relating to the Business reflected on the Interim Balance Sheet, and all
accounts receivable relating to the Business arising subsequent to the Interim
Balance Sheet Date, (a) have arisen in the ordinary course of business of the
Seller and (b) subject only to a reserve for bad debts computed in accordance
with GAAP and reasonably estimated to reflect the probable results of
collection, have been fully collected or are fully collectible in the ordinary
course of business of the Seller in the aggregate recorded amounts thereof in
accordance with their terms. All items that are required by GAAP to be reflected
as accounts receivable on the Audited Balance Sheet and the Interim Balance
Sheet and on the books of the Seller are so reflected and any reserve accounts
relating thereto have been established in accordance with GAAP.
4.15 INVENTORY. The inventory of the Seller that
relates to the Business as set forth on the Interim Balance Sheet (other than
irregular merchandise) was, and the inventory of the Seller that relates to the
Business currently is, in good and merchantable condition, and is suitable,
usable and salable in the ordinary course
<PAGE>
31
of business for the purposes for which intended. The materials, supplies and
work-in-process, and additions thereto, included in such inventory (a) are
substantially equivalent in quality to the materials, supplies and
work-in-process, and additions thereto, generally included in such inventory in
the past, (b) are suitable for the manufacture and distribution of the Seller's
products in a manner substantially equivalent in quality to that achieved
generally by the Business in the past, (c) are not in excess of the normal
purchasing patterns of the Seller as they relate to the Business, and (d) are
valued consistent with GAAP at lower of cost or market on a first-in first-out
basis ("FIFO").
4.16 ACCOUNTS PAYABLE. The Seller has not delayed or
postponed the payment of accounts payable and other liabilities outside the
ordinary course of business. All accounts payable reflected on the Closing
Balance Sheet were incurred in the ordinary course of business, and were
recorded consistent with GAAP and past practice.
4.17 TANGIBLE PROPERTY. The facilities, machinery,
equipment, rental equipment, furniture, buildings and other improvements,
fixtures, vehicles, structures, software, any related capitalized items and
other tangible property included in any of the Assets (the "TANGIBLE PROPERTY")
are in good operating condition and repair, subject to continued repair and
replacement in accordance with past practice, and are suitable for their
intended use. During the past three years there has not been any significant
interruption of the operations of the Business due to inadequate maintenance of
any Tangible Property. All material
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32
leases, conditional sale contracts, franchises or licenses pursuant to which the
Seller may hold or use any interest owned or claimed by the Seller (including,
without limitation, options) in or to Tangible Property have been delivered or
made available to the Buyer and are valid, subsisting agreements, in full force
and effect and binding upon the parties thereto in accordance with their terms
and, with respect to performance by the Seller, there is no default or event of
default or event that with notice or lapse of time or both would constitute a
default.
4.18 INTANGIBLE PROPERTY.
4.18.1 Schedule 4.18 sets forth a complete
and accurate list of:
(a) all United States and foreign
trademarks, service marks, trade names, brand names, trade dress, designs and
logos, corporate names, product or service identifiers, whether registered or
not registered, and pending applications for registration therefor
("TRADEMARKS") of the Seller that are owned by it, filed by or on behalf of it
or used in the conduct of the Business and all registra tions;
(b) all United States and foreign patents
and all pending United States and foreign patent applications, including any
divisions, continuations, continuations-in-part substitutions or reissues
thereof, whether or not patents are issued on such applications and whether or
not such applications are modified, withdrawn or resubmitted, ("PATENTS") issued
to, used by or filed by or on behalf of the Seller;
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33
(c) all United States and foreign copyrights
including copyrights for printed matter, databases, software and source codes,
whether registered or not registered, and all United States and foreign
copyright registrations and pending applications for copyright registration
therefore ("COPYRIGHTS") issued to, used by, filed by or on behalf of the
Seller;
(d) all existing license agreements or
arrangements to which the Seller is party, whether as licensor or licensee or
otherwise, with respect to any Trademark, Patent or Copyright except for
software license agreements generally available to the public under which the
Seller is a licensee; and
4.18.2 Except as set forth on Schedule 4.18,
all designs, plans, trade secrets, inventions, know-how, processes, procedures,
formulas and similar rights used by the Seller, to the extent not in the public
domain (collectively, "TRADE SECRETS"), are owned by the Seller, free and clear
of any and all liabilities, obligations, licenses, Liens (other than Liens
securing indebtedness under the Bank Credit Agreements), assignments or claims,
whether written, oral or implied in fact or law.
4.18.3 Except as set forth on Schedule 4.18:
(a) no Trademarks or Trade Secrets are
necessary or contemplated in the conduct of the Business;
(b) no Patents, inventions, copyrights,
databases, software, source codes, Trade Secrets or other intangible property
rights, or licenses,
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34
franchises, drawings or other proprietary information relating to any of the
foregoing are necessary for the conduct of the Business;
(c) each of the items listed on Schedule
4.18 pursuant to clauses (a), (b) and (c) of Section 4.18.1 (i) is owned by the
Seller, free and clear of any and all liabilities, obligations, licenses, Liens
(other than Liens securing indebtedness under the Bank Credit Agreements),
assignments or claims, whether written, oral or implied in fact or law, (ii) are
transferable to the Buyer hereunder without the approval or consent of any
person and (iii) will continue to be valid and in full force and effect after
the Closing;
(d) none of the items listed on Schedule
4.18 and used in the Business is the subject of any claim or pending or
threatened claim made by or against the Seller for infringement of any Patent,
Trademark, Trade Secret, Copyright, industrial property right or other
proprietary right or to any claim of unfair competition and, to the knowledge of
the Seller, no basis for any such claim exists; and
(e) no person, other than employees of the
Seller, is permitted to possess any copies of or use any of the databases,
software or source codes listed on Schedule 4.18 that contain Trade Secrets of
the Seller.
4.18.4 The Seller is not, in the operation
or conduct of the Business, making use of any confidential information, Trade
Secret, Patent Trademark or Copyright of any person except with written
permission or as a result of the acquisition by the Seller of the business of
such person.
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35
4.18.5 Except as set forth on Schedule 4.18,
all licenses, agreements or arrangements listed on Schedule 4.18 (a) are in full
force and effect, (b) are transferable to the Buyer hereunder without the
approval or consent of any person and (c) will continue to be valid, binding and
in full force and effect after the Closing. Except as set forth on Schedule
4.18, neither the Seller nor, to the knowledge of the Seller, any other party to
any of such licenses, agreements or arrangements is in default or alleged
default thereunder, in any respect, nor is there any event which with notice or
lapse of time or both would constitute a default thereunder.
4.18.6 True and correct copies of all
letters Patent, Trademark and Copyright registrations or applications therefor,
and licenses, agreements and arrangements included in any of the Assets have
been delivered to the Buyer, and the originals of all such items will be
delivered to the Buyer on the Closing Date.
4.19 OWNERSHIP AND ADEQUACY OF ASSETS. The Seller
owns outright and has good title to all of the Assets being transferred to the
Buyer hereunder (other than the Leased Real Property and leased equipment), in
each case free and clear of any Liens (other than Liens securing indebtedness
under the Bank Credit Agreements and equipment Liens as described in Schedule
4.19). The Assets, together with the Excluded Assets, include all rights,
properties and other assets necessary to the conduct of the Business in the same
manner as it has been conducted prior to the date hereof.
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36
4.20 SUPPLIERS AND CUSTOMERS. Schedule 4.20 sets
forth by dollar volume for the two years ended December 28, 1996 and December
31, 1997, the ten largest suppliers and the ten largest customers of the Seller.
Except as specifically identified on Schedule 4.20, no single supplier or
customer is of material importance to the Business. To the knowledge of the
Seller, the relationships of the Seller with each of the suppliers and customers
of the Seller are good commercial working relationships and no supplier or
customer of the Seller has canceled or otherwise terminated, or threatened in
writing to cancel or otherwise terminate, its relationship with the Seller, or
has during the last 12 months decreased materially, or threatened to decrease or
limit materially, any such supplier's provision of services, supplies or
materials to the Seller or any such customer's usage or purchase of services or
products of the Seller. To the Seller's knowledge, the consummation of the
transactions contemplated hereby will not adversely affect the relationship of
the Seller with any such supplier or customer. True and correct copies of all
customer and supplier lists of the Seller have been delivered to the Buyer.
4.21 EMPLOYEE BENEFIT PLANS.
4.21.1 Except as set forth on Schedule
4.21.1, there are no employee benefit plans or arrangements of any type
(including, without limitation, plans described in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
thereunder ("ERISA")), under which the Seller has any direct or indirect, actual
or contingent liability with respect to any current or former employee of the
Seller or any entity (each a "COMMONLY CONTROLLED ENTITY")
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37
that would be treated as an employer along with the Seller under section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "CODE") (collectively, "BENEFIT PLANS").
4.21.2 With respect to each Benefit Plan
(where applicable), the Seller has delivered to the Buyer complete and accurate
copies of (a) all plan texts and agreements, (b) all plan summaries and employee
communications, (c) all funding vehicles, (d) the most recent annual report, (e)
the most recent annual and periodic accounting of plan assets, (f) the most
recent determination letter received from the Internal Revenue Service and (g)
the most recent actuarial valuation.
4.21.3 With respect to each Benefit Plan,
except as set forth on Schedule 4.21.3, (a) if intended to qualify under Code
section 401(a), such Benefit Plan so qualifies and its related trust is exempt
from taxation under Code section 501(a), (b) each such Benefit Plan has been
administered in accordance with its terms and applicable law, (c) the Seller has
no direct or indirect, actual or contingent liability with respect to any
Benefit Plan other than to make contributions to Benefit Plans covering current
and former employees of the Seller in accordance with the terms of such plans,
(d) there are no actions, suits or claims pending (other than routine claims for
benefits) or, to the knowledge of the Seller, threatened, with respect to any
Benefit Plan or against the assets of any Benefit Plan, (e) no non-exempt
"prohibited transaction" (as defined in ERISA section 406 or in Code section
4975) has occurred, (f) all contributions and premiums due to any Benefit Plan
have
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38
been made on a timely basis and (g) all contributions made or required to be
made under any Benefit Plan meet the requirements for deductibility under the
Code and all required contributions to any Benefit Plan that have not been made
have been properly recorded on the books of the Seller in accordance with GAAP.
4.21.4 No Benefit Plan is or has ever been
subject to Title IV of ERISA, Code section 412 or ERISA section 302.
4.21.5 With respect to each Benefit Plan
that is a "welfare plan" (as defined in ERISA section 3(1)), except as set forth
on Schedule 4.21.5, (a) no such plan provides medical or death benefits (whether
or not insured) with respect to current or former employees beyond their
termination of employment (other than coverage mandated by the Consolidated
Omnibus Budget Reconciliation Act of 1986, as amended, the cost of which is
fully paid by the employee or former employee), (b) there are no reserves,
assets, surplus or prepaid premiums under any such plan and (c) the Seller and
any Commonly Controlled Entity have complied with the requirements of Code
section 4980B.
4.21.6 The consummation of the transactions
contemplated by this Agreement will not (a) entitle any individual to severance
pay, unemployment compensation or similar pay, (b) accelerate the time of
payment or vesting or increase the amount of compensation due to any individual
(c) result in the payment of an amount that would not be deductible due to the
application of Code section 280G or (d) constitute or involve a non-exempt
prohibited transaction (within
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39
the meaning of Code section 4975 or ERISA section 406 or a breach of fiduciary
responsibility within the meaning of ERISA section 502(l)).
4.21.7 No Benefit Plan is a "multiemployer
plan" (as defined in ERISA section 3(37)), or a multiple employer plan within
the meaning of the Code or ERISA.
4.22 INSURANCE. Schedule 4.22 sets forth a list and
brief description of all policies or binders of fire, liability, product
liability, workers' compensation, vehicular or other insurance held by or on
behalf of the Seller, describing each pending claim thereunder of more than
$5,000 and setting forth the aggregate amounts paid out under each such policy
from December 31, 1993 through the date hereof and the aggregate limit, if any,
of the insurer's liability thereunder. Such policies and binders are valid and
enforceable in accordance with their terms, are in full force and effect and
insure against risks and liabilities to the extent and in the manner deemed
appropriate and sufficient by the Seller. The Seller is not in default with
respect to any provision contained in any such policy or binder nor has the
Seller failed to give any notice or present any claim under any such policy or
binder in due and timely fashion. Except for claims set forth on Schedule 4.22,
there are no outstanding unpaid claims under any such policy or binder. All
policies of liability and casualty insurance (collectively, "INSURANCE
POLICIES") heretofore contracted for by or behalf of the Seller with respect to
each parcel of Real Property, or customarily maintained with respect to similar
properties in the applicable region, or required in connection with the
ownership, leasing, use, occupancy or operation of
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40
each parcel of Real Property as currently used, occupied and operated, have been
issued to the Seller by reputable insurance companies and are currently in full
force and effect. The Seller has not received or been informed by a third party
of the receipt by it of any notice from any governmental authority having
jurisdiction over the Real Property or from any insurance carrier or
organization (a) threatening a suspension, revocation, modification or
cancellation of any Insurance Policy or a material increase in any premium in
connection therewith or (b) informing the Seller that any coverage listed on
Schedule 4.22 will or may not be available in the future on substantially the
same terms as now in effect, and, to the best of the Seller's knowledge, there
is no basis for the issuance of any such notice or the taking of any such
action. There is no material inaccuracy in any application for such policies or
binders, no failure to pay premiums when due and no similar state of facts that
might form the basis for termination of any such insurance.
4.23 OFFICERS, DIRECTORS AND EMPLOYEES. Schedule 4.23
sets forth (a) the name and total compensation of each officer and director of
the Seller employed in connection with the Business and of each employee,
consultant or agent of the Seller employed in connection with the Business whose
current annual rate of compensation (including bonuses and commissions) exceeds
$50,000 and (b) all wage or salary increases or bonuses received by such persons
since the Audited Balance Sheet Date and any accrual for or commitment or
agreement by the Seller to pay such increases or bonuses. None of such persons
has indicated in writing to the Seller or
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41
to any of the officers or directors of the Seller an intention to cancel or
otherwise terminate such person's relationship with the Seller.
4.24 OPERATION OF THE BUSINESS. Except as set forth
on Schedule 4.24, since December 28, 1996 the Seller has not:
(a) (i) amended, or agreed to amend, its
articles of incorporation or by-laws (or comparable instruments), (ii) merged
with or into or consolidated with, or agreed to merge with or into or
consolidate with, any other person or (iii) changed, or agreed to change, in any
manner the character of the Business;
(b) (i) hired, or agreed to hire, any
employee or consultant for annual compensation (including bonuses and
commissions) exceeding $50,000, (ii) entered into or amended, or agreed to enter
into or amend, any employment agreement with any employee, (iii) entered into,
or agreed to enter into, any agreement with any labor union or association
representing any employee, (iv) entered into or amended, or agreed to enter into
or amend, any Benefit Plan, (v) made any change in the actuarial methods or
assumptions used in funding any pension plan relating to the employees or (vi)
made any change in the assumptions or factors used in determining benefit
equivalencies thereunder;
(c) waived, or agreed to waive, any right of
material value to the Business or any of the Assets;
(d) (i) made, or agreed to make, any change
in its accounting methods or practices other than with the consent of the Buyer
or (ii) made,
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42
or agreed to make, any change in depreciation or amortization policies or rates
adopted by it;
(e) materially changed, or agreed to
materially change, any of its business policies or practices that relate to the
Business, including, without limitation, advertising, marketing, pricing,
purchasing, personnel, sales, returns or budget policies or practices;
(f) increased the wages, salary, bonus,
benefits provided under a Benefit Plan or other direct or indirect compensation,
for or to any employee, or made any commitment to increase the same;
(g) paid, or agreed to pay, any severance or
termination pay to any employee;
(h) except in the ordinary course of
business, (i) entered into, or agreed to enter into, any lease (as lessor or
lessee) on behalf of the Business or (ii) sold, abandoned or made, or agreed to
sell, abandon or make, any other disposition of any of the assets or properties
of the Business;
(i) granted or suffered, or agreed to grant
or suffer, any Lien (other than Liens securing indebtedness under the Bank
Credit Agreements) on any of the assets or properties of the Business;
(j) entered into or amended, or agreed to
enter into or amend, any contract or other agreement by or to which the Assets
or the Business are bound or subject, pursuant to which it agrees to indemnify
any party on behalf of
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43
the Business or pursuant to which it agrees to refrain from competing with any
party with respect to the Business;
(k) except in the ordinary course of
business,incurred or assumed, or agreed to incur or assume any liability
(whether or not currently due and payable);
(l) terminated, or agreed to terminate, or
failed to renew any contract or other agreement that is or was material to any
of the Assets or the assets, properties, business, prospects, operations or
condition (financial or otherwise) of the Business or received a written
indication (that was not subsequently withdrawn) that a party to such contract
or agreement intends to terminate or fail to renew such contract or agreement;
(m) except in the ordinary course of
business, entered into or amended, or agreed to enter into or amend, any
material contract or other agreement or other material transaction relating to
the Business or waived any material right under any material contract or other
agreement;
(n) paid or declared any dividend or other
distribution on its capital stock or made any direct or indirect redemption,
retirement, purchase or other acquisition of any shares of its capital stock or
other ownership interest, as applicable, other than distributions made to its
shareholders to fund shareholder income tax liabilities arising from the
allocation of the Seller's taxable income under the S corporation election;
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44
(o) except for short-term bank borrowings in
the ordinary course of business, incurred any indebtedness for borrowed money;
(p) made any loan or advance to any of its
shareholders, officers, directors, employees, consultants, agents, comparable
persons or other representatives, as applicable (other than travel advances made
in the ordinary course of business), or made any other loan or advance otherwise
than in the ordinary course of business;
(q) except for inventory or equipment in the
ordinary course of business, sold, abandoned or made any other disposition of
any of its properties or made any acquisition of all or any part of the
properties, capital stock or business of any other person;
(r) paid, directly or indirectly, any
material liability before the same became due in accordance with its terms or
otherwise than in the ordinary course of business; or
(s) undertaken a capital project or
authorized or committed to undertake a capital project involving the expenditure
of $25,000 or more.
4.25 FULL DISCLOSURE. All documents and other papers
delivered by or on behalf of the Seller to the Buyer in connection with this
Agreement and the transactions contemplated hereby are true, complete and
authentic. This Agreement, all documents and other papers delivered by or on
behalf of the Seller to the Buyer in connection with this Agreement and the
transactions contemplated hereby
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45
and the information furnished by or on behalf of the Seller to the Buyer in
connection with this Agreement and the transactions contemplated hereby do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements made not false or misleading. There is no
fact known to the Seller that materially adversely affects, or so far as the
Seller is aware, will materially adversely affect, the Business or any of the
Assets or the ability of the Seller to perform this Agreement or the agreements
referred to herein and the transactions contemplated hereby or thereby.
4.26 NO BROKER. No broker, finder, agent or similar
intermediary has acted for or on behalf of the Seller or any of their respective
affiliates, in connection with this Agreement or the transactions contemplated
hereby, and no broker, finder, agent or similar intermediary is entitled to any
broker's, finder's or similar fee or other commission in connection therewith
based on any agreement, arrangement or understanding with the Seller or any
affiliate thereof or any action taken by any of the Seller or any affiliate
thereof.
4.27 ENVIRONMENTAL MATTERS. Except as disclosed on
Schedule 4.27, to the knowledge of the Seller:
(a) Neither the Seller's conduct of the
Business nor its ownership or operation of the Assets is or has been in material
violation of any applicable Environmental Law.
(b) The Seller has all Permits required
pursuant to Environmental Laws in connection with the ownership or operation of
the Business or
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46
the Assets, all such Permits are in full force and effect, no action or
proceeding to revoke, limit or modify any such Permits is pending and the
ownership and operation of the Business and the Assets is in material compliance
in all respects with all terms and conditions thereof. All such Permits are
listed on Schedule 4.27(b).
(c) The Seller has not received, and will
not receive due to the consummation of this transaction, any Environmental
Action relating to its ownership or operation of the Business or the Assets.
(d) The Seller has filed all notices
required under Environmental Laws indicating the past or present Release (as
defined in Section 14.1(n)), generation, treatment, storage or disposal of
Hazardous Substances (as defined in Section 14.1(j)) in connection with its
ownership or operation of the Business or the Assets.
(e) The Seller has not entered into any
written agreement with any governmental authority or any other person by which
the Seller has assumed responsibility, either directly or as a guarantor or
surety for the remedia tion of any condition arising from or relating to a
Release or threatened Release of Hazardous Substances into the Environment (as
defined in Section 14.1(e)).
(f) To the knowledge of the Seller, there is
not now and has not been at any time in the past a Release or threatened Release
of Hazardous Substances into the Environment at, on, in or under any of the
Assets, or arising in any way out of its ownership or operation of the Business
or the Assets.
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(g) There is not now and has not been at any
time in the past at, on or in any of the Assets and, to the knowledge of the
Seller, was not at, on or in any real property previously owned, leased or
operated by the Seller or any predecessor or affiliate (i) any generation, use,
handling, Release, treatment, recycling, storage or disposal of any "hazardous
wastes" (as defined in the Resource Conservation and Recovery Act), (ii) any
underground storage tank, surface impoundment, lagoon or other containment
facility (past or present) for the temporary or permanent storage, treatment or
disposal of Hazardous Substances, (iii) any landfill or solid waste disposal
area, (iv) any asbestos-containing material, (v) any polychlorinated biphenyls
(PCBs) used in hydraulic oils, electrical transformers or other equipment, (vi)
any Release or threatened Release, or any visible signs of Releases or
threatened Releases, of a Hazardous Substance to the Environment in form or
quantity requiring Remedial Action (as defined in Section 14.1(o)) under
Environmental Laws or (vii) any Hazardous Substances present at such property,
excepting such quantities as are or were handled in accordance with all
applicable manufacturer's instructions and Environmental Laws and in proper
storage containers, and as are necessary for the operations of the Business and
the Assets.
(h) To the knowledge of the Seller, based on
reasonable investigation, there is no basis or reasonably anticipated basis for
any Environmental Action or Environmental Compliance Costs (as defined in
Section 14.1(g)).
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48
(i) The Seller has not transported, stored,
treated or disposed, nor has it allowed or arranged for any third persons to
transport, store, treat or dispose, any Hazardous Substance generated in
connection with its ownership or operation of the Business or the Assets to or
at (i) any location other than a site lawfully permitted to receive such
substances for such purposes or (ii) any location designated for Remedial Action
pursuant to Environmental Laws; nor has it performed, arranged for or allowed by
any method or procedure such transportation or disposal in contravention of any
Environmental Laws or in any other manner that may result in Environmental
Compliance Costs or in an Environmental Action. All locations at which any
Hazardous Substances generated in connection with the Seller's ownership or
operation of the Business or the Assets have been disposed of are listed on
Schedule 4.27(i).
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller as follows:
5.1 DUE INCORPORATION AND QUALIFICATION. The Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware and has the corporate power and lawful authority
to own, lease and operate its assets, properties and business and to carry on
its business as now conducted. The Buyer is qualified to transact business and
is in good standing as a foreign corporation in each jurisdiction set forth on
Schedule 5.1, which are the only jurisdictions in which the Buyer is required to
be so qualified, except for such
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49
jurisdictions in which the failure to be so qualified is not reasonably likely
to have, individually or in the aggregate, a material adverse effect on the
Buyer.
5.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. The
Buyer has the requisite corporate power and authority to enter into, execute and
deliver this Agreement and each and every other agreement and instrument
contemplated hereby to which the Buyer is or will be a party, and to perform
fully the Buyer's obligations hereunder and thereunder, and this Agreement and
each such other agreement and instrument, upon execution and delivery by the
Buyer, will be duly executed and delivered by the Buyer and (assuming due
execution and delivery hereof and thereof by the other parties hereto and
thereto) will be valid and binding obligations of the Buyer enforceable against
the Buyer in accordance with their respective terms.
5.3 NON-CONTRAVENTION. Except as set forth on
Schedule 5.3, neither the execution and delivery of this Agreement or any other
agreement or instrument contemplated hereby, the consummation of the
transactions contemplated hereby or thereby nor the performance of this
agreement or any other agreement or instrument contemplated hereby in accordance
with their respective terms and conditions by the Buyer (a) requires the
approval or consent of any governmental body (other than approvals required
under the HSR Act) or (b) conflicts with or results in any breach or violation
of, results in a material modification of the effect of, otherwise causes the
termination of, or constitutes (or with notice or lapse of time or both would
constitute) a default under, any certificate of incorporation,
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50
by-law, judgment, decree, order, statute, rule, Permit or governmental
regulation applicable to the Buyer.
5.4 NO BROKER. No broker, finder, agent or similar
intermediary has acted for or on behalf of the Buyer or any affiliate of the
Buyer in connection with this Agreement or the transactions contemplated hereby,
and no broker, finder, agent or similar intermediary is entitled to any
broker's, finder's or similar fee or other commission in connection therewith
based on any agreement, arrangement or understanding with the Buyer or any of
its affiliates; provided, however, that the Buyer has received financial advice
from Houlihan Lokey Howard & Zukin ("HLHZ") and that the Buyer will be solely
responsible for the fees and expenses of such firm.
5.5 ITHACA COMMON STOCK. The issuance of shares of
Ithaca Common Stock to be issued to the Seller pursuant to this Agreement has
been duly authorized by the Buyer and, when issued and delivered in accordance
with this Agreement, such shares will be validly issued, fully paid and
nonassessable. Upon the issuance and delivery of the Ithaca Common Stock, the
Seller will have good, marketable and valid title to the Ithaca Common Stock,
free and clear of all Liens, security interests, negative pledges, encumbrances,
or options, save as expressly set out in this Agreement.
5.6 CAPITALIZATION. On the Closing Date, immediately
prior to the closing of the transactions contemplated by this Agreement the
authorized capital stock of the Buyer shall consist of 10,000,000 issued and
outstanding shares of
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51
Ithaca Common Stock which consist of all of the outstanding Ithaca Common Stock,
other than 973,962 shares of Ithaca Common Stock reserved for issuance under the
Buyer's 1996 Long Term Incentive Plan and 1997 Stock Option Plan for Non-
Employee Directors.
5.7 SEC REPORTS. The Buyer has delivered, or is
herewith delivering, to the Seller its (a) Annual Report on Form 10-K for the
fiscal year ended February 2, 1997 as filed with the Securities and Exchange
Commission ("SEC"), (b) Quarterly Reports on Form 10-Q for the quarters ended
May 3, 1997, August 2, 1997, and November 1, 1997, as filed with the SEC, (c)
current reports on Form 8- K, as filed with the SEC on August 30, 1997, and (d)
all other reports or registration statements filed with the SEC since August 30,
1997. As of their respective dates, such reports and statements did not contain
any untrue statements of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
5.8 ABSENCE OF MATERIAL ADVERSE CHANGE. Since
February 2, 1997, except as set forth in the reports referred to in Section 5.7,
there has been no material adverse change, and there is no condition,
development or contingency of any kind existing which, individually or in the
aggregate, would result in a material adverse change, in the business or
financial condition of the Buyer.
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52
6. COVENANTS AND AGREEMENTS. The parties covenant and agree as
follows:
6.1 CONDUCT OF BUSINESS. From the date hereof through
the Closing Date, the Seller shall conduct the Business in the ordinary course
of business and, without the prior written consent of the Buyer, the Seller
shall not undertake any of the actions specified in Section 4.24.
6.2 INSURANCE. From the date hereof through the
Closing Date, the Seller shall maintain in force (including necessary renewals
thereof) the insurance policies relating to the Business or any of the Assets
listed on Sched ule 4.22, except to the extent that they may be replaced with
policies appropriate to insure the assets, properties and business of the
Business or any of the Assets to the same extent as currently insured.
6.3 PRESERVATION OF BUSINESS. From the date hereof
through the Closing Date, the Seller shall preserve the business organization of
the Business intact, use its best efforts to keep available the services of the
employees and the present consultants and agents of the Business, maintain the
present suppliers and customers of the Business and preserve the goodwill of the
Business.
6.4 LITIGATION. From the date hereof through the
Closing Date, the Seller shall promptly notify the Buyer of any investigations
of which the Seller has knowledge or any lawsuits, claims or proceeding that
after the date hereof are commenced or, to the knowledge of the Seller,
threatened against the Seller or against any officer, director, employee,
consultant, agent, stockholder or other
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representative of the Seller arising out of or relating to the affairs or
conduct of the Business or relating to any of the Assets.
6.5 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND
WARRANTIES OF THE SELLER. From the date hereof through the Closing Date, the
Seller shall not take any action that would result (or omit to take any action
if such omission would result) in nonsatisfaction of the condition set forth in
Section 7.1 that all representations and warranties contained in Section 4 shall
continue to be true on and as of the Closing Date as if made on and as of the
Closing Date and the Seller shall promptly give notice to the Buyer of any
event, condition or circumstance occurring from the date hereof through the
Closing Date that would cause such representations and warranties to become
untrue in any respect or that would constitute a violation or breach of this
Agreement.
6.6 CORPORATE EXAMINATIONS AND INVESTIGATIONS;
CONFIDENTIALITY. Prior to the Closing Date, the Buyer shall be entitled, through
its employees and representatives, including, without limitation, Paul, Weiss,
Rifkind, Wharton & Garrison, KPMG Peat Marwick LLP and HLHZ to make such
investigation of the assets, properties, business and operations of the Seller
and such examination of the books, records and financial conditions of the
Seller as the Buyer reasonably deems necessary. Any such investigation and
examination shall be conducted at reasonable times and under reasonable
circumstances and the Seller shall cooperate fully therein. No investigation by
the Buyer shall, however, diminish or obviate in any way any of the
representations, warranties, covenants or agreements of
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the Seller under this Agreement. In order that the Buyer may have full
opportunity to make such business, accounting, legal and environmental review,
examination or investigation as it deems necessary, the Seller shall furnish or
make available to the representatives of the Buyer during such period all such
information and copies of such documents concerning the affairs of the Seller as
such representatives may reasonably request, and the Seller shall cause its
officers, employees, consultants, agents, accountants and attorneys to cooperate
fully with such representatives in connection with such review and examination
and to make full disclosure to the Buyer of all material facts affecting the
financial condition and business operations of the Business. In addition, the
Seller shall make available to the Buyer and its representa tives full and
complete copies of all returns, reports and forms filed by the Seller relating
to Taxes for taxable periods for which the statute of limitations for the assess
ment of taxes has not expired. Until the Closing, the terms of the
Confidentiality Agreements, dated March 3, 1997 and March 4, 1997, respectively,
between the Buyer and the Seller (the "CONFIDENTIALITY AGREEMENTS") shall remain
in full force and effect. The Confidentiality Agreements shall terminate upon
the occurrence of the Closing as to the Assets and the Assumed Liabilities, but
shall survive the Closing with respect to the Excluded Assets and the Excluded
Liabilities.
6.7 OTHER TRANSACTIONS. Prior to the Closing Date,
neither the Seller nor any of its respective representatives shall, directly or
indirectly, (a) encourage, initiate or engage in any discussions or negotiations
with, or provide any information to, any corporation, partnership, person or
other entity or group,
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other than the Buyer, concerning or (b) consummate, any sale of all or any
material part of the Assets or the Business, any merger or consolidation of the
Seller with or into any other entity or any other transaction effecting a change
in control of the Seller or otherwise involving all or any material part of the
Business or any of the Assets, except for discussions and negotiations with
respect to consents necessary to the transactions contemplated hereby and except
for any sales of any of the Assets in the ordinary course of the Seller's
business. If any third party contacts the Seller or any of its affiliates with
any proposal or expression of interest concerning any such transaction, the
Seller promptly shall notify the Buyer of the identity of such third party and
the nature and terms, if any, of such proposal or expression of interest.
6.8 PREMERGER NOTIFICATION. Unless previously filed,
within 5 days after the execution and delivery of this Agreement, the Seller and
the Buyer shall file (or shall cause their respective "ultimate parent entities"
under the HSR Act to file) with the Federal Trade Commission and the Antitrust
Division of the Department of Justice notification and report forms with respect
to the transactions contemplated by this Agreement under the HSR Act and shall
take or cause to be taken all actions and shall do or cause to be done all
things necessary, proper or advisable to obtain prompt termination of the
waiting period under the HSR Act.
6.9 THIRD PARTY CONSENTS. Prior to the Closing Date,
the Seller, at its sole expense, shall obtain all consents, permits and
approvals from parties to any contracts or other agreements with the Seller that
relate to the Business or any of the Assets, and from governmental and
regulatory authorities, that may be
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required in connection with the performance by the Seller of its obligations
under this Agreement, the continuance of such contracts or other agreements
after the Closing, the assignment of such contracts or other agreements to the
Buyer and the continued validity and effectiveness of all Permits after the
Closing. All such consents shall be in writing and executed counterparts thereof
shall be delivered to the Buyer at or prior to the Closing. The Seller shall not
agree to any modification of any contract, agreement or Permit in the course of
obtaining any such consent.
In the event any such consent or approval is not
obtained and the Buyer chooses to waive, in part, this Section 6.9 on or prior
to the Closing Date, the Seller shall assist the Buyer in obtaining any such
approval or consent after the Closing Date until such time as such consent or
approval has been obtained, and the Seller will cooperate with the Buyer in any
lawful and economically feasible arrangement to provide that the Buyer shall
receive the interest of the Seller in the benefits under any such instrument,
contract, lease or permit or other agreement or arrangement, including
performance by the Seller as agent, if economically feasible, provided that the
Buyer shall undertake to pay or satisfy the corresponding liabilities for the
enjoyment of such benefit to the extent the Buyer would have been responsible
therefor hereunder if such consent or approval had been obtained.
6.10 ENVIRONMENTAL TRANSFER LAWS. The Seller
represents and warrants to the Buyer that no Environmental Laws require the
submission of notice to the Buyer to any government authority in connection with
the transfer of title to the Asset and to the Business, except for Environmental
Laws concerning the
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transfer or modification of permits, licenses or authorizations issued pursuant
to Environmental Laws.
6.11 TITLE REPORT AND SURVEY. Within ten (10) days
after the date hereof, the Seller shall deliver to the Buyer's counsel copies of
all existing title policies and surveys with respect to the Real Property.
6.12 CHANGE AND USE OF THE SELLER'S NAME. On or
before the Closing Date, the Seller shall take or cause to be taken such action
as may be required to change the corporate name of the Seller and each of its
Subsidiaries to a name that is not the same as, or confusingly similar to, the
Seller's or such Subsidiary's current corporate name or the other names or marks
of the Seller trans ferred to the Buyer hereunder, and promptly thereafter the
Seller shall deliver to the Buyer evidence that whatever filings are necessary
in those jurisdictions, if any, in which the Seller or any of its Subsidiaries
is licensed or qualified to do business to effect such name change have been
made.
6.13 EMPLOYMENT STATUS.
(a) At the Closing, the Buyer shall offer
employment to such of Sellers' employees as Buyer shall determine in its sole
discretion.
(b) As soon as practicable following the
Closing Date, the Seller shall cause the Glendale Hosiery Company Retirement
Savings Plan (the "401(k) Plan") to transfer to a plan sponsored or to be
established by the Buyer all assets under such plan and liabilities for benefit
payments with respect to any participant who, immediately after the Closing, is
employed by the Buyer. The Seller
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shall, prior to such transfer, contribute to the 401(k) Plan all amounts
required to be contributed to the 401(k) Plan on account of the period through
the Closing Date. The Buyer represents and covenants that the transferee plan
(i) is or will be a qualified plan and (ii) will preserve all accrued benefits
to the extent as required by section 411(d)(6) of the Code.
(c) The Buyer shall be solely responsible
for any severance or termination pay due on account of the termination of
employment of the Seller's employees on or after the Closing Date, either
because they are not offered employment by the Buyer or for any other reason
other than their refusal to accept employment on substantially the same terms
and conditions as in effect at the time of Closing. The Seller shall be solely
responsible for any severance or termination pay due on account of the
termination of employment of any of the Seller's employees prior to the Closing
Date.
6.14 EMPLOYMENT AND BONUS PLAN. The Buyer agrees to
enter into, simultaneously with the Closing, the Employment Agreements
substantially in the form of Exhibit B-1, B-2 and B-3 (collectively, the
"EMPLOYMENT AGREEMENTS") and the Bonus Plan substantially in the form Exhibit C
(the "BONUS PLAN").
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER. The
obligations of the Buyer to complete the Closing are subject to the fulfillment
on or prior to the Closing Date of the following conditions, any one or more of
which (other than Section 7.3) may be waived by it:
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7.1 REPRESENTATIONS AND COVENANTS OF THE SELLER. The
representations and warranties of the Seller contained in this Agreement shall
be true in all material respects, except where qualified by materiality, then
true according to their terms, on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date. The Seller and its
affiliates shall have performed and complied with all covenants or agreements
required by this Agreement to be performed or complied with by the Seller or its
affiliates on or prior to the Closing Date. The Seller shall have delivered to
the Buyer a certificate, dated the Closing Date and signed by a senior executive
officer of the Seller, to the foregoing effect and stating that all conditions
to the Buyer's obligations hereunder have been satisfied.
7.2 ASSUMPTION BY SHAREHOLDERS. Each of the
shareholders of the Seller who, as of the Closing Date, owns 10% or more of the
outstanding capital stock of the Seller have entered into a written agreement in
the form of Exhibit D with the Seller and the Buyer (the "ASSUMPTION AGREEMENT")
to assume the warranties and representations made by the Seller in this
Agreement and to assume the covenants of indemnification contained in Sections
9.3, 11 and 12 and competition contained in Section 9.8, made by the Seller to
the Buyer in this Agreement.
7.3 HART-SCOTT-RODINO. The waiting period specified
in the HSR Act, including any extensions thereof, shall have expired or been
terminated.
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7.4 GOVERNMENTAL PERMITS AND APPROVALS. All Permits
and approvals from any governmental or regulatory body required for the lawful
consummation of the Closing shall have been obtained.
7.5 CONSENTS. All consents, permits and approvals
from the Seller's board of directors, lenders, parties to any contracts, leases
or other agreements of the Seller, and from governmental and regulatory
authorities, that may be required in connection with (a) the performance by the
Seller of its obligations under this Agreement, (b) the assignment of each of
the contracts and agreements listed on Schedule 1.1(c), the Real Property Leases
and the Space Leases and (c) the continued validity and effectiveness of the
Permits after the Closing shall have been obtained and no modification to any
such contract, agreement or Permit shall have been made in connection with the
obtaining of such consents. All consents and approvals from the Buyer's board of
directors and lenders shall have been obtained.
7.6 NO MATERIAL ADVERSE CHANGE. Since the Audited
Balance Sheet Date, there shall have been no material adverse change in the
assets, properties, business, prospects, operations or condition (financial or
otherwise) of the Seller, the Business or any of the Assets, and the Seller
shall not know of any such change that is threatened, nor shall there have been
any damage, destruction or loss materially adversely affecting the Business or
any of the Assets, whether or not covered by insurance.
7.7 LITIGATION. No action, suit or proceeding shall
have been instituted or, to the knowledge of the Seller, threatened by any
governmental or
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regulatory body or any other person before any court or governmental or
regulatory body to restrain, modify or prevent the carrying out of the
transactions contemplated hereby or that has or may have a material adverse
effect on any of the assets, properties, business, prospects, operations or
condition (financial or otherwise) of the Business or any of the Assets.
7.8 OPINION OF COUNSEL TO THE SELLER. The Buyer shall
have received an opinion substantially in the form attached as Exhibit E of
Kennedy Covington Lobdell & Hickman, L.L.P., counsel to the Seller, dated the
Closing Date and addressed to the Buyer.
7.9 ADDITIONAL CLOSING DOCUMENTS OF THE SELLER. The
Seller shall have executed and delivered to the Buyer the following documents,
each dated the Closing Date:
(a) a bill of sale and assignment in the
form of Exhibit F (the "BILL OF SALE AND ASSIGNMENT");
(b) a trademark assignment in the form of
Exhibit G (the "TRADEMARK ASSIGNMENT");
(c) a patent assignment in the form of
Exhibit H (the "PATENT ASSIGNMENT");
(d) an assignment and assumption in the form
of Exhibit I (a "REAL PROPERTY LEASE ASSIGNMENT AND ASSUMPTION AGREEMENT") for
each Real Property Lease;
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(e) a special warranty deed (the "DEED") (or
its equivalent in each applicable state) in proper statutory form for recording
for each parcel of Owned Real Property;
(f) such further instruments of sale,
transfer, conveyance, assignment or delivery covering the Assets or any part
thereof as the Buyer may reasonably require to assure the full and effective
sale, transfer, conveyance, assignment or delivery to it of the Assets
(including the Permits);
(g) any and all real property transfer tax
returns and other similar filings required by law in connection with the
transactions contemplated hereby and relating to the Real Property and the Real
Property Leases, any part thereof or ownership interest therein, all duly and
properly executed and acknowledged by the Seller, together with such filings as
shall have been required by law or reasonably requested by the Buyer;
(h) an affidavit of an officer of the Seller
sworn to under penalty of perjury, setting forth the Seller's name, address and
Federal tax identification number and stating that the Seller is not a "foreign
person" within the meaning of section 1445 of the Code;
(i) a certificate, in form and substance
satisfactory to the Buyer in its reasonable judgment, signed by the secretary of
the Seller, certifying that full and complete copies of the following are
attached thereto: (i) minutes of the board of directors of the Seller
authorizing and approving this Agreement and the transactions contemplated
hereby, (ii) copies of the articles of incorporation and
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by-laws of the Seller as in effect on the date thereof and (iii) such other
documents or instruments as the Buyer may reasonably request to carry out the
intent and purpose of this Agreement; and
7.10 TITLE INSURANCE. The Buyer shall have received,
at its own cost and expense, an owner's extended coverage policy of title
insurance with respect to each parcel of Owned Real Property and a leasehold
extended coverage policy of title insurance with respect to each parcel of
Leased Real Property, in each case issued on the Closing Date. Each such title
insurance policy shall be in an amount designated by the Buyer and shall insure
the Buyer's ownership of fee title (with respect to the Owned Real Property) or
leasehold title (with respect to the Leased Real Property) without any of the
Schedule B standard preprinted exceptions (other than taxes not yet due and
payable) and free and clear of Title Defects and other exceptions to or
exclusions from coverage except those Title Defects listed on Schedules
4.13.1(b) and 4.13.2(b). Each such title insurance policy shall be in form
satisfactory to the Buyer.
7.11 SURVEY. The Buyer shall have received, at the
Buyer's expense, a current survey of each parcel of Owned Real Property and of
each parcel of Leased Real Property, in each case prepared in insurable form in
accordance with standards applicable to registered and licensed land surveyors
making surveys in the States in which such parcels are located. Each such survey
shall be certified to the Buyer and the Title Company and shall be in form
satisfactory to the Buyer.
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7.12 ESTOPPEL CERTIFICATES.
(a) The Buyer shall have received, without
expense to it, a current estoppel certificate from the landlord under each Real
Property Lease stating (i) that such Real Property Lease is in full force and
effect and has not been amended, modified or supplemented other than as set
forth on Schedule 4.13.2(a), (ii) that all rent and other sums and charges
payable under such Real Property Lease are current and setting forth the date
through which such payments have been made, (iii) setting forth the term of such
Real Property Lease, (iv) the amount of any tenant security or other similar
deposit held by or on behalf of such landlord under such Real Property Lease,
(v) that no notice of default on the part of the Seller or termination notice
has been served under such Real Property Lease that remains outstanding, (vi)
that to the best of such landlord's knowledge, no uncured default or termination
event or condition exists under such Real Property Lease and that no event has
occurred or condition exists that, with the giving of notice or the lapse of
time or both, would constitute such a default or termination event or condition
and (vii) that the consummation of the transactions provided for herein will not
constitute a default under such Real Property Lease or grounds for the
termination thereof or for the exercise of any other right or remedy adverse to
the interests of the tenant thereunder. Each such estoppel certificate shall
otherwise be in form satisfactory to the Buyer.
(b) The Buyer shall have received, without
expense to it, a current estoppel certificate from the Space Tenant under each
Space Lease stating
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(i) that such Space Lease is in full force and effect and has not been amended,
modified or supplemented other than as set forth on Schedule 4.13.4, (ii) that
all rent and other sums and charges payable under such Space Lease are current
and setting forth the date through which such payments have been made, (iii)
that no rent or other sum or charge has been paid more than one month in
advance, (iv) the amount of any tenant security or other similar deposit made
under such Space Lease, (v) that no notice of default or termination under such
Space Lease is outstanding, (vi) that to the best of such Space Tenant's
knowledge, the landlord under such Space Lease is not in default of any
obligations on its part to be performed under such Space Lease, (vii) that no
default, event or condition has occurred or exists under such Space Lease that
entitles such Space Tenant to terminate such Space Lease and that no event has
occurred or condition exists that, with the giving of notice or the lapse of
time or both, would entitle such Space Tenant to terminate such Space Lease,
(viii) that, as of the date of such certificate, such Space Tenant has no
charge, lien, claim, defense or offset of any kind against the rents or other
charges payable by such Space Tenant under such Space Lease or otherwise against
the Seller, (ix) that any and all construction and/or alteration work required
to be performed by the landlord under such Space Lease has been performed and
(x) that the consummation of the transactions provided for herein will not
constitute a default under such Space Lease or grounds for the termination
thereof or for the exercise of any other right or remedy adverse to the
interests of the Seller as landlord thereunder. Each such estoppel certificate
shall otherwise be in form satisfactory to the Buyer.
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7.13 ENVIRONMENTAL AUDIT. An environmental
consultant, selected by the Buyer shall have delivered to the Buyer final
written reports of the results of environmental assessments, including
evaluation of compliance with Environmental Laws, of the Business and the
Assets, which shall be satisfactory in scope and content to the Buyer. The
environmental consultant's assessments and reports shall be conducted and
prepared at the sole expense of the Buyer.
7.14 EMPLOYMENT AGREEMENTS. At Closing, the Buyer and
Brian Slagle, Glenn J. "Buzz" Floyd and Wiley L. Brown, respectively, shall
enter into employment agreements substantially in the forms of Exhibit B-1, B-2,
and B-3, respectively.
7.15 EXISTING LIENS. Prior to the Closing, the Buyer
shall have received copies of Requests for Information (Form UCC-11), or
equivalent reports, listing all effective financing statements that name the
Seller as debtor and that are filed in any county of North Carolina.
7.16 COMPLETION OF FINANCING. The Buyer shall have
completed the financings contemplated by the commitment letters, copies of which
have heretofore been delivered to the Seller.
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SELLER. The
obligations of the Seller to complete the Closing are subject to the fulfillment
on or prior to the Closing Date of the following conditions, any one or more of
which (other than Section 8.2) may be waived by the Seller.
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8.1 REPRESENTATIONS AND COVENANTS OF THE BUYER. The
representations and warranties of the Buyer contained in this Agreement shall be
true in all material respects on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date. The Buyer shall have
performed and complied with all covenants and agreements required by this
Agreement to be performed or complied with by the Buyer on or prior to the
Closing Date. The Buyer shall have delivered to the Seller a certificate, dated
the Closing Date and signed by a senior executive officer of the Buyer, to the
foregoing effect and stating that all conditions to the Seller's obligations
hereunder have been satisfied.
8.2 HART-SCOTT-RODINO. The waiting period specified
in the HSR Act, including any extensions thereof, shall have expired or been
terminated.
8.3 GOVERNMENTAL PERMITS AND APPROVALS. All Permits
and approvals from any governmental or regulatory body required for the lawful
consummation of the Closing shall have been obtained.
8.4 LITIGATION. There shall not be in effect any
preliminary or permanent injunction or other order issued by a court or other
governmental body or agency of competent jurisdiction directing that the
transactions contemplated hereby not be consummated.
8.5 OPINION OF COUNSEL TO THE BUYER. The Seller shall
have received an opinion substantially in the form attached hereto as Exhibit J
of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Buyer, dated the
Closing Date and addressed to the Seller.
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8.6 ADDITIONAL CLOSING DOCUMENTS OF THE BUYER.
(a) The Buyer shall have executed and
delivered to the Seller the following documents, each dated the Closing Date:
(i) an assumption of liabilities in
the form of Exhibit K (the "ASSUMPTION OF LIABILITIES");
(ii) a Real Property Lease Assignment
and Assumption Agreement for each Real Property Lease;
(iii) a certificate, in form and
substance reasonably satisfactory to the Seller, signed by the secretary of the
Buyer, certifying that full and complete copies of the following are attached
thereto: (A) resolutions of the board of directors of the Buyer authorizing and
approving this Agreement and the transactions contemplated hereby and (B) copies
of the certificate of incorporation and by-laws of the Buyer as in effect on the
date thereof.
(b) The Buyer shall have executed and
delivered to each of Brian Slagle, Glenn J. "Buzz" Floyd and Wiley L. Brown (1)
an executed copy of an employment agreement, substantially in the form of
Exhibits B-1, B-2, and B-3, respectively; and (2) a copy of the resolution,
certified by the Secretary of the Buyer, authorizing and approving the Bonus
Plan.
9. POST-CLOSING COVENANTS AND AGREEMENTS.
9.1 AUDIT OF SELLER. The Buyer shall at its expense
conduct a Final Audit in accordance with the terms and conditions of Section
3.2(a).
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9.2 EXPENSES OF SALE. Except to the extent otherwise
expressly provided in this Agreement, the parties to this Agreement shall bear
their respective direct and indirect expenses incurred in connection with the
negotiation, preparation, execution and performance of this Agreement and the
transactions contemplated hereby, whether or not the transactions contemplated
hereby are consummated, including, without limitation, all fees, charges,
disbursements and expenses of agents, representatives, counsel and accountants.
All transfer, documentary, gross receipt, sales and use taxes and similar
liabilities, if any, resulting from the sale, assignment, transfer and delivery
hereunder of any of the Assets or the Business shall be paid by the Seller.
9.3 INDEMNIFICATION OF BROKERAGE. The Buyer, on the
one hand, and the Seller, on the other hand, each agrees to indemnify and save
the other harmless from any claim or demand for commission or other compensation
by any broker, finder, agent or similar intermediary claiming to have been
employed by or on behalf of the Buyer or any of its affiliates (other than HLHZ,
for whom the Buyer shall be solely responsible), on the one hand, or by the
Seller or any of its affiliates, on the other hand, and to bear the cost of
legal expenses incurred in defending against any such claim.
9.4 BULK SALES LAWS. The Buyer and Seller acknowledge
that this transaction involves a transfer in bulk, and not in the ordinary
course of the Seller's business, a major part of the materials, supplies,
merchandise or other inventory of the Seller's business and acknowledge that the
North Carolina bulk
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transfer laws are applicable to the transactions contemplated by this Agreement.
The Seller agrees promptly and diligently to pay and discharge when due or to
contest or litigate all claims of creditors that are asserted against the Buyer
by reason of any non-compliance with such laws, except to the extent such claims
are Assumed Liabilities.
9.5 COLLECTION OF RECEIVABLES. The Seller agrees that
the Buyer shall have the right and authority to collect for its own account or
the account of its affiliates all receivables of the Seller that are transferred
and assigned to the Buyer as provided herein and the Buyer and its affiliates
have the right to endorse with the name of the Seller any checks received on
account of any such receivable. The Seller agrees that it will promptly transfer
and deliver to the Buyer any cash or other property that the Seller may receive
in respect of such receivables.
9.6 MAIL. The Seller agrees that at any time and from
time to time after the Closing, the Buyer and the Buyer's affiliates shall have
the right and authority to open all mail received by the Business, even if
addressed to the Seller, for processing or forwarding to the Seller, as
appropriate.
9.7 FURTHER ASSURANCES. At any time and from time to
time after the Closing, at the Buyer's request and without further
consideration, the Seller shall execute and deliver such further documents, and
perform such further acts, as may be necessary in order to effectively transfer
and convey the Assets to the Buyer, or to enable the Buyer to properly assume
the Assumed Liabilities on the terms herein
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contained, and to otherwise comply with the terms of this Agreement and
consummate the transactions herein provided.
9.8 NON-COMPETITION COVENANT OF THE SELLER
(a) Non-Compete. For a period of five years
following the Closing Date, the Seller shall not, directly or indirectly,
through any subsidiary or otherwise, in the United States or in any foreign
country, in any form or manner, (i) engage in the hosiery business, whether for
its own account or for the account of any other person; or (ii) become
interested in any such person as a partner, stockholder, officer, director,
principal, agent, employee, trustee, consultant or in any other relationship or
capacity; provided, however, Seller may own, directly or indirectly, solely as a
passive investment, securities of any person which are traded on any national
securities exchange if (x) the Seller or any of its affiliates (1) is not a
controlling person of, or a member of a group which controls, such person and
(2) does not, directly or indirectly, own 1% or more of any class of securities
of such person and (y) such person does not, directly or indirectly, derive 20%
or more of its total revenues from activities described in clause (i) above.
(b) Specific Performance. The right and
remedy to have this Section 9.8 specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Buyer and that money
damages will not provide adequate remedy to the Buyer.
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(c) Blue-Pencilling. If any court determines
that this Section 9.8, or any part thereof, is unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such provision and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
9.9 CORPORATE RECORDS. After the Closing Date, the Seller
shall not destroy any book, record, report, file, contract or any other document
pertaining to the Seller's business during the next six years beginning on the
Closing Date, without first giving 30 days prior written notice of the documents
intended to be destroyed to the Buyer, and allowing the Buyer to copy, at the
Buyer's expense, or to remove and take possession, at the Buyer's expense, of
any book, record, report, file, contract or any other document intended to be
destroyed. After the Closing Date, the Buyer shall be entitled, through its
officers, directors, employees, auditors and other representatives, to full and
free access to the books, records, reports, files, contracts and other documents
of the Seller, and the Buyer shall also be entitled to make copies, at the
Buyer's expense, of any such documents.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE SELLER.
Notwithstanding any right of the Buyer fully to investigate the affairs of the
Seller and the Business and the Assets and notwithstanding any knowledge of
facts determined or determinable by the Buyer pursuant to such investigation or
right of investigation, the Buyer shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the Seller contained in
this Agreement. All such representations,
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warranties, covenants and agreements shall survive the execution and delivery
hereof and the Closing hereunder, except that:
(a) any theretofore unasserted General Claim
(as defined in this Section 10) shall expire on the close of business on the day
that is the second anniversary of the Closing Date;
(b) any theretofore unasserted Tax/Benefits
Claim (as defined in this Section 10) shall expire when the applicable period
under the statute of limitations therefor has expired; and
(c) any theretofore unasserted Covenant
Claim (as defined in this Section 10) and Environmental Claim (as defined in
this Section 10) shall expire on the close of business on the day that is the
sixth anniversary of the Closing Date.
As used in this Agreement, the following terms have the
following meanings:
(i) "GENERAL CLAIM" means any claim
arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation or warranty of the Seller contained in this Agreement or any
certificates or schedules delivered by the Seller pursuant hereto; provided that
the term General Claim shall not mean or include any Environmental Claim or Tax/
Benefits Claim;
(ii) "ENVIRONMENTAL CLAIM" means any
claim made pursuant to Section 12;
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74
(iii) "TAX/BENEFITS CLAIM" means any
claim arising out of or otherwise in respect of any inaccuracy in or any breach
of any representation or warranty of the Seller contained in this Agreement
related to Taxes or any Benefit Plan; and
(iv) "COVENANT CLAIM" means any claim
arising out of or otherwise in respect of any breach of any covenant or
agreement of the Seller or the Buyer, as the case may be, contained in this
Agreement or any agreement contemplated hereby; provided that the term "Covenant
Claim" shall not mean or include any Environmental Claim.
11. INDEMNIFICATION.
11.1 OBLIGATION OF THE SELLER TO INDEMNIFY. Subject
to the limitations contained in Section 11.4, the Seller shall indemnify, defend
and hold harmless the Buyer, its directors, officers, employees, affiliates and
assigns (collectively, the "BUYER INDEMNIFIED PARTIES") and the Business from
and against any losses, liabilities, damages, deficiencies, costs or expenses
(including interest, penalties, amounts paid in settlement and reasonable
attorneys' fees and disbursements) (collectively, "LOSSES") based upon, arising
out of or otherwise in respect of:
(a) any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of the Seller contained in this
Agreement or any certificates or schedules delivered by the Seller pursuant
hereto or any facts or circumstances constituting such an inaccuracy or breach;
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75
(b) any liability or obligation of, or claim
against, the Seller or any affiliate thereof (excluding the Assumed Liabilities)
whether or not such liability or obligation was known at the Closing;
(c) any liability or obligation of, or claim
against, the Seller, any of its Affiliates or all or any portion of the Business
or any of the Assets (other than the Assumed Liabilities) (i) relating to any
period on or prior to the Closing Date or (ii) arising out of any facts or
circumstances existing at or prior to the Closing Date whether or not such
liability or obligation was known at the time of Closing;
(d) any failure to comply with any "bulk
sales" laws applicable to the transactions contemplated hereby except to the
extent that claims relate to Assumed Liability;
(e) any Excluded Liability;
(f) enforcing Buyer's rights under this
Agreement (including this Article 11 thereof).
11.2 OBLIGATION OF THE BUYER TO INDEMNIFY.
(a) The Seller shall be entitled to rely
fully upon the representations, warranties, covenants and agreements of the
Buyer contained in this Agreement. All such representations, warranties,
covenants and agreements shall survive the execution and delivery of this
Agreement and the Closing hereunder.
(b) The Buyer shall indemnify, defend and
hold harmless the Seller, its shareholders, directors and officers, from and
against any
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76
Losses based upon, arising out of or otherwise in respect of (i) any inaccuracy
in or any breach of any representation, warranty, covenant or agreement of the
Buyer contained in this Agreement or any certificate delivered by the Buyer
pursuant hereto or any facts or circumstances constituting such an inaccuracy or
breach or (ii) any Assumed Liability or (iii) enforcing Seller's rights under
this Agreement.
11.3 NOTICE TO INDEMNIFYING PARTY. If either the
Buyer, on the one hand, or the Seller, on the other, as the case may be (the
"INDEMNITEE"), has a claim or potential claim or receives notice of any claim or
potential claim or the commencement of any action or proceeding that could give
rise to an obligation on the part of the Seller, on the one hand, or the Buyer,
on the other, as the case may be, to provide indemnification (the "INDEMNIFYING
PARTY") pursuant to Section 11.1 or 11.2, the Indemnitee shall give the
Indemnifying Party reasonable notice thereof. The omission by any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its indemnification obligation under this Agreement except to the extent that
the Indemnifying Party is actually prejudiced thereby. The Indemnifying Party
may elect to compromise or defend, at such Indemnifying Party's own expense and
by such Indemnifying Party's own counsel, any such matter involving the asserted
liability of the Indemnitee. If the Indemnifying Party elects to compromise or
defend such asserted liability, it shall within 30 days (or sooner, if the
nature of the asserted liability so requires) notify the Indemnitee of its
intent to do so and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, any such asserted
liability. If the Indemnifying
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Party elects not to compromise or defend such asserted liability, or fails to
notify the Indemnitee of its election as herein provided, the Indemnitee may, at
the Indemnifying Party's expense, pay, compromise or defend such asserted
liability. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnitee may settle or compromise any claim over the objection of the other;
provided, however, that if the settlement or compromise does not result in any
liability to the Indemnified Party or otherwise adversely affect the Indemnified
Party, consent to such settlement or com promise shall not be unreasonably
withheld. In any event, the Indemnitee and the Indemnifying Party may each
participate, at its own expense, in the defense of such asserted liability. If
the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are necessary or appropriate for such defense. Not withstanding
the foregoing, the Indemnitee shall have the right to employ separate counsel at
the Indemnifying Party's expense and to control its own defense of such asserted
liability if (a) there are or may be legal defenses available to such Indemnitee
or to other Indemnitees that are different from or additional to those available
to the Indemnifying Party or (b) in the reasonable opinion of counsel to such
Indemnitee, a conflict or potential conflict exists between the Indemnifying
Party and such Indemnitee that would make such separate representation
advisable.
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11.4 LIMITATION ON INDEMNIFICATION. The
indemnification provided for in Section 11.1 shall be subject to the following
limitations:
(a) The Seller shall not be obligated to
make any payment for indemnification pursuant to Section 11.1 in respect of any
General Claim (except those based upon, arising out of or otherwise in respect
of Sections 4.1, 4.2, 4.3, 4.5, 4.13.1, and 4.21 (the "BASKET EXCLUSIONS"))
until the aggregate amount of such payments, exclusive of those in respect of
the Basket Exclusions, exceeds $200,000 (the "BASKET AMOUNT"), whereupon the
Seller shall be obligated to pay all such amounts for indemnification in excess
of the Basket Amount; provided, however, that solely for determining whether the
amount of the Seller's indemnification obligations exceed $200,000 in the
aggregate, a breach of the Seller's representations or warranties shall be
determined without regard to any limitation or qualification as to materiality
set forth in such representation or warranty.
(b) The Buyer shall be entitled to receive
any indemnification payments in respect of the Basket Exclusions without regard
to the individual or aggregate amounts thereof and without regard to whether the
aggregate of all other indemnification payments shall have exceeded, in the
aggregate, the Basket Amount.
(c) Other than with respect to Tax/Benefit
Claims, the Seller's maximum liability for indemnification payments under this
Article 11 shall be Five Million Dollars ($5,000,000). The first Three Million
Dollars ($3,000,000) of indemnification payment shall be made in cash and the
Second Two
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Million Dollars ($2,000,000) may at Seller's election be made in Ithaca Common
Stock valued at the Market Price Per Share (as defined in Section 3.1(b))
computed as of the date the respective claim for indemnification is made.
(d) In the event that the Indemnifying Party
is obligated to indemnify the Indemnified Party pursuant to this Article 11 or
Article 12 below, the Loss shall be reduced by the amount actually received by
the Indemnified Party from its insurance carriers.
(e) From and after the Closing Date, the
remedies provided in Section 9.8, Section 14.13 and Articles 11 and 12 of this
Agreement shall be exclusive and neither party shall be entitled to any other
remedy at law or in equity.
12. INDEMNIFICATION BY THE SELLER FOR ENVIRONMENTAL ACTIONS
AND ENVIRONMENTAL COMPLIANCE COSTS.
12.1 OBLIGATION OF THE SELLER TO INDEMNIFY.
(a) The Seller shall indemnify, defend and
hold harmless the Buyer Indemnified Parties and the Business from and against
(i) any and all Environmental Actions based upon, arising out of or otherwise in
respect of (A) any Release of Hazardous Substances on or prior to the Closing
Date or the ownership or operation of the Business or of the Assets on or prior
to the Closing Date, (B) any inaccuracy in or breach of any representation,
warranty, covenant or agreement of the Seller contained in this Agreement or in
any certificate, schedule, instrument or other document prepared by or on behalf
of the Seller and delivered
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pursuant hereto relating to Environmental Laws or (C) any and all obligations,
debts or liabilities of the Seller (other than Assumed Liabilities) relating to
Environmental Laws and (ii) any and all Losses based upon, arising out of or
otherwise in respect of any such Environmental Action (not including diminution
in value of any real property).
(b) The Seller shall indemnify, defend and
hold harmless the Buyer Indemnified Parties and the Business from and against
any and all Environmental Compliance Costs based upon, arising out of or
otherwise in respect of (i) the condition of the Environment on or prior to the
Closing Date on, at or under any real property owned, leased, operated or used
by the Seller in connection with the Business, (ii) the Seller's ownership or
operation of the Business or the Assets on or prior to the Closing Date, (iii)
the condition of the Assets on or prior to the Closing Date, (iv) any inaccuracy
in or breach of any representation, warranty, covenant or agreement of the
Seller contained in this Agreement or in any certificate, schedule, instrument
or other document prepared by or on behalf of the Seller and delivered pursuant
hereto relating to Environmental Laws and (v) any and all obligations, debts or
liabilities of the Seller (other than Assumed Liabilities) relating to
Environmental Laws.
(c) This Section 12 shall be the Buyer
Indemnified Parties' and the Business's sole source of indemnification or other
remedy pursuant to this Agreement with respect to Losses arising pursuant to
Environmental Laws or principles of common law relating to pollution, protection
of the Environment or
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health and safety (with respect to health and safety, to the extent relating to
the presence of Hazardous Substances or the exposure of the individuals to
Hazardous Substances).
12.2 PROCEDURE FOR INDEMNIFICATION FOR ENVIRONMENTAL
LIABILITIES. Claims for indemnification pursuant to this Section 12 shall be
subject to the procedural provisions of Section 11.3; provided, however, that
the Indemnitee shall have the exclusive right to manage and control all actions
resulting in Environmental Compliance Costs with respect to which the Indemnitee
has made a claim for indemnification pursuant to Section 12.1(b). The Indemnitee
shall keep the Indemnifying Party fully informed of the progress of such
actions. The Indemnifying Party shall be obligated to indemnify the Indemnitee
for all Environmental Compliance Costs resulting from such actions but only to
the extent that such Environmental Compliance Costs are incurred or undertaken
in the manner in which a reasonable and prudent person to whom no indemnity was
available would incur or undertake such Environmental Compliance Costs, avoiding
any material disruption of the Business, taking into account the nature of the
Business and the condition of and the operations of the Assets, as well as
methods commonly used to minimize environmental liabilities, which include but
are not limited to passive remediation to resolve certain releases of Hazardous
Substances, regulatory variances, so-called "brownfields" legislation, policies
or programs (such as North Carolina's Brownfield Property Reuse Act, 1997 N.C.
Sess. Laws 97-0357), and available defenses to regulatory enforcement, provided,
however, that it is acknowledged and agreed that
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82
such a reasonable and prudent person would in any event comply with at least the
minimum requirements of Environmental Laws, and provided, further, that such a
reasonable and prudent person shall be assumed to have considered in its
evaluation of the appropriate action the possible future costs of leaving
Hazardous Substances in the environment, including possible future remedial
obligations, diminished property values, limits on the expansion of operations,
and personal injury and property damage claims by third parties arising out of
the presence of the Hazardous Substances.
13. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated prior to the
Closing as follows:
(i) at the election of the Seller, if
any one or more of the conditions set forth in Section 8 has not been fulfilled
as of March 31, 1998;
(ii) at the election of the Buyer, if
any one or more of the conditions set forth in Section 7 has not been fulfilled
as of March 31, 1998;
(iii) at the election of the Seller or
the Buyer, if the Closing does not occur on or before March 31, 1998;
(iv) at any time on or prior to the
Closing Date, by mutual written consent of the Seller and the Buyer;
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(v) at the election of the Seller, if
there has been a material breach of any representation, warranty, covenant or
agreement on the part of the Buyer contained in this Agreement, which breach has
not been cured within fifteen (15) Business Days of notice to Buyer of such
breach; or
(vi) at the election of the Buyer, if
there has been a material breach of any representation, warranty, covenant or
agreement on the part of the Seller contained in this Agreement, which breach
has not been cured within fifteen (15) Business Days notice to the Seller of
such breach.
(b) If this Agreement so terminates, it
shall become null and void and have no further force or effect, except that any
such termination shall be without prejudice to the rights of any party on
account of the nonsatisfaction of the conditions set forth in Sections 7 and 8
resulting from the intentional or willful breach or violation of the
representations, warranties, covenants or agreements of another party under this
Agreement. Notwithstanding anything in this Agreement to the contrary, Sections
9.2, 9.3, 13(c) and 14.2 shall survive any termination of this Agreement.
(c) If this Agreement is terminated the
Buyer and Seller agree that for a period of one year following such termination
each will not, directly or indirectly, offer employment to any officer or
employee of the other unless such officer or employee has, without any
solicitation or encouragement by the other, already terminated his or her
employment.
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14. MISCELLANEOUS.
14.1 CERTAIN DEFINITIONS. As used in this Agreement,
the following terms have the following meanings unless the context otherwise
requires:
(a) "AFFILIATE," with respect to any person,
means and includes any other person controlling, controlled by or under common
control with such person.
(b) "BANK CREDIT AGREEMENT" shall mean the
Amended and Restated Loan Agreement dated April 13, 1993 between the Seller and
First Union National Bank (f/k/a/ First Union Bank of North Carolina), as
amended by the first amendment thereto dated June 28, 1994, the second amendment
thereto dated March 1, 1995, and the third amendment thereto dated July 1, 1995.
(c) "CONTRACTS AND OTHER AGREEMENTS" means
and includes all contracts, agreements, understandings, indentures, notes,
bonds, loans, instruments, leases, mortgages, franchises, licenses, commitments
or binding arrange ments, express or implied.
(d) "DOCUMENT OR OTHER PAPER" means and
includes any document, agreement, instrument, certificate, notice, consent,
affidavit, letter, telegram, telex, statement, computer disk, microfiche or
other document in electronic format, schedule (including any Schedule to this
Agreement), exhibit (including any Exhibit to this Agreement) or any other paper
whatsoever.
(e) "ENVIRONMENT" means navigable waters,
waters of the contiguous zone, ocean waters, natural resources, surface waters,
ground
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85
water, drinking water supply, land surface, subsurface strata, ambient air, both
inside and outside of buildings and structures, man-made buildings and
structures, and plant and animal life on earth.
(f) "ENVIRONMENTAL ACTION" means any
notification, whether direct or indirect, formal or informal, written or oral,
pursuant to Environmental Laws or principles of common law relating to
pollution, protection of the Environment or health and safety (with respect to
health and safety, to the extent relating to the presence of Hazardous
Substances or the exposure of individuals to Hazardous Substances), that the
ownership or operation of the Business or any of the Assets, or any by-product
thereof, or any of the current or past operations of the Seller, or any
by-product thereof, or any of the property currently or formerly owned, leased
or operated by the Seller, during such ownership, lease, or operation, or the
operations or property of any predecessor of the Seller, during such ownership,
lease or operation is, or may be implicated in, or subject to any proceeding,
action, investigation, claim, lawsuit, order, agreement or evaluation by any
governmental authority or any other person.
(g) "ENVIRONMENTAL COMPLIANCE COSTS" means
any expenditures, costs, assessments or expenses (including, without limitation,
any expenditures, costs, assessments or expenses in connection with the conduct
of any Remedial Action, as well as reasonable fees, charges, disbursements and
expenses of attorneys, experts, personnel and consultants), whether direct or
indirect, necessary to cause the Business or any of the Assets to be in
compliance with any and all
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86
requirements, as in effect at the Closing Date and with respect to which the
Buyer reasonably believes the Business or any of the Assets are obligated to
comply, of Environmental Laws, principles of common law concerning pollution,
protection of the Environment or health and safety (with respect to health and
safety, to the extent relating to the presence of Hazardous Substances or the
exposure of individuals to Hazardous Substances), or Permits issued pursuant to
Environmental Laws; provided, however, that Environmental Compliance Costs do
not include expenditures, costs, assessments or expenses necessary in connection
with normal maintenance of the Business or any of the Assets or the replacement
of equipment in the normal course of events due to ordinary wear and tear.
(h) "ENVIRONMENTAL LAWS" means all laws,
ordinances, regulations, codes, orders, judgments, injunctions, awards or
decrees relating to pollution, protection of the Environment, public or worker
health and safety (with respect to health and safety to the extent relating to
the presence of Hazardous Substances or the exposure of individuals to Hazardous
Substances), or the emission, discharge, release or threatened release of
Hazardous Substances into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901
et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the
Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq., the Clean
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87
Air Act, 42 U.S.C. ss. 7401 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. ss. 136 et seq., the Occupational Safety and Health
Act, 29 U.S.C. ss. 651 et seq., the Asbestos Hazard Emergency Response Act, 15
U.S.C. ss.2601 et seq., the Safe Drinking Water Act, 42 U.S.C. ss. 300f et seq.,
the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., and analogous state
acts.
(i) "GAAP" means generally accepted
accounting principles then in effect, consistently applied.
(j) "HAZARDOUS SUBSTANCE" means any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous
waste, special waste, industrial substance or waste, petroleum or
petroleum-derived substance or waste, radioactive substance or waste, or any
constituent of any such substance or waste, or any other substance regulated
under or defined by any Environmental Law.
(k) "LIEN" means any lien, pledge, mortgage,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or similar
agreement, or any other encumbrance, restriction or limitation whatsoever.
(l) "PERSON" means any individual,
corporation, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental or regulatory body or other
entity.
(m) "PROPERTY" means real, personal or mixed
property, tangible or intangible.
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(n) "RELEASE" means any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into or through the indoor or outdoor Environment or into,
through or out of any property, including the movement of Hazardous Substances
through or in the air, soil, surface water, ground water or property.
(o) "REMEDIAL ACTION" means all actions,
whether voluntary or involuntary, reasonably necessary to comply with
Environmental Laws to (i) clean up, remove, treat, cover or in any other way
adjust Hazardous Substances in the indoor or outdoor Environment, (ii) prevent
or control the Release of Hazardous Substances so that they do not migrate or
endanger or threaten to endanger public health or welfare or the Environment or
(iii) perform such remedial studies, investigations, restoration and
post-remedial studies, investigations and monitoring as may be required by
applicable Environmental Laws.
(p) "SELLER'S KNOWLEDGE" means the personal
knowledge of either of Brian Slagle, Wiley L. Brown or Glenn J. "Buzz" Floyd
after due inquiry. "DUE INQUIRY" means conducting an appropriate review with
suitable employees, consultants and advisors who are reasonably likely to have
knowledge of the subject matter.
14.2 PUBLICITY. No publicity release or announcement
concerning this Agreement or the transactions contemplated hereby shall be
issued without advance approval of the form and substance thereof by the Seller
and the Buyer; provided, however, that the parties hereto may, on a confidential
basis, advise
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their respective affiliates, employees, customers, suppliers, agents,
accountants, attorneys and prospective financing sources with respect to the
contents of this Agreement and the transactions contemplated hereby.
14.3 NOTICES. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or overnight
courier, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed, sent by facsimile or telexed with confirmed answerback
or on the next business day when given by overnight courier, as follows:
(a) if to the Buyer, to it at:
Ithaca Industries, Inc.
Highway 268 W.
P.O. Box 620
Wilkesboro, NC 28697
Attention: Jim D. Waller
Facsimile: (910) 667-2407
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner, Esq.
Facsimile: (212) 373-2085
(b) if to the Seller, to it at:
Glendale Hosiery Co.
1200 East 3rd Street
Siler City, NC 27344
Attention: Brian F. Slagle
Facsimile: (919) 663-2649
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90
with a copy to:
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
Attention: Clarence W. Walker, Esq.
Facsimile: (919) 331-7598
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
14.4 ENTIRE AGREEMENT. This Agreement (including the
Exhibits and Schedules hereto) and the collateral agreements executed in
connection with the consummation of the transactions contemplated hereby contain
the entire agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements, written or oral, with
respect thereto.
14.5 WAIVERS AND AMENDMENTS. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
Seller and the Buyer or, in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder, nor any single
or partial exercise of any right, power or privilege hereunder, preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder. The rights and remedies of any party based upon, arising
out of or otherwise in respect of any inaccuracy in or
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91
breach of any representation, warranty, covenant or agreement contained in this
Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach.
14.6 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of North Carolina
applicable to agreements made and to be performed entirely within such State,
without regard to the choice of law principles thereof.
14.7 BINDING EFFECT; NO ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and legal representatives. This Agreement is not
assignable except by operation of law and except that the Buyer may assign any
or all of its rights to any subsidiary, to any successor to all or substantially
all of its business or assets or to any bank or other person that may provide
financing for the transactions contemplated by this Agreement.
14.8 VARIATIONS IN PRONOUNS. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or persons may require.
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14.9 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
14.10 EXHIBITS AND SCHEDULES. The Exhibits and
Schedules to this Agreement (but not documents incorporated by reference to such
Exhibits and Schedules that are not separately attached hereto as Exhibits or
Schedules) are a part of this Agreement as if set forth in full herein. All
references herein to Sections, Exhibits and Schedules shall be deemed references
to such parts of this Agreement, unless the context shall otherwise require.
14.11 HEADINGS. The headings in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
14.12 NO THIRD PARTY RIGHTS. Except as otherwise
specifically provided in Sections 11 and 12, nothing in this Agreement,
expressed or implied, is intended to confer on any person not a party hereto any
rights or remedies by reason of this Agreement.
14.13 SPECIFIC PERFORMANCE. The Seller and the Buyer
each acknowledge that the Buyer would not have an adequate remedy at law for
money damages in the event that this Agreement were not performed in accordance
with its terms and therefore agree that the Buyer shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled at law or in equity.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ITHACA INDUSTRIES, INC.
By: /s/ Richard P. Thrush
-------------------------
Name: Richard P. Thrush
Title: Senior Vice President and Chief
Financial Officer
GLENDALE HOSIERY CO.
By: /s/ Brian Slagle
--------------------
Name: Brian Slagle
Title: President
ITHACA INDUSTRIES TO ACQUIRE GLENDALE HOSIERY
$110 MILLION IN CREDIT FACILITIES ARRANGED
WILKESBORO, N.C., MARCH 16, 1998 - ITHACA INDUSTRIES, INC., one of the nation's
largest manufacturers of private-label men's and women's underwear and women's
hosiery products, today announced that it has executed an agreement to acquire
Glendale Hosiery Company of Siler City, N.C. Glendale is a quality manufacturer
of women's sheer hosiery. Other terms of the transaction were not disclosed.
Ithaca also announced that it has received commitments for $110 million in
senior credit facilities. Proceeds from the financing will be used to refinance
the company's existing credit agreement and provide funds for acquisitions and
general corporate purposes. The financing will include a five-year bank credit
facility consisting of a $25 million term loan and up to $70 million in
revolving credit loans to be provided by a syndicate of banks led by
NationsBank, N.A. The financing also will include an additional $15 million term
loan to be provided by Foothill Capital Corporation's investment partnerships
and placed through NationsBanc Montgomery Securities LLC, as placement agent.
Completion of the financing is subject to a number of conditions, including,
without limitation, completion of definitive documents and completion of the
Glendale acquisition. Completion of the acquisition of Glendale is also subject
to a number of conditions, including completion of the financings.
Jim Waller, Ithaca's Chairman, president and chief executive officer said, "We
are very pleased to have arranged these financings because they give us
additional funding at a lower cost than our previous facility. We believe this
is reflective of the substantial actions we took throughout the year to
establish a firm foundation for 1998 and the future. The private-label apparel
industry remains highly fragmented, featuring many small, private companies. We
are seeing a lot of consolidation, and this financing will position us to pursue
targeted acquisitions."
Waller also noted that the private placement marks Ithaca's return to the
non-bank credit market.
"We are also extremely pleased to announce that we have signed a purchase
agreement to acquire Glendale. This acquisition is expected to allow us to
achieve substantial cost savings in the hosiery division and better serve our
customers. Glendale's management will continue with our hosiery division and we
are excited about welcoming them to the Ithaca team."
Ithaca Industries, Inc. is one of the largest manufacturers of private-label
men's and women's underwear and women's hosiery in the United States. Products
are sold through a wide range of retail distribution channels and are offered to
the public through more than 10,000 customer outlets, including discount stores,
department stores, specialty stores, drug stores and supermarkets. Ithaca stock
is currently traded via the Nasdaq bulletin board.
THIS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS WHICH ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES, INCLUDING COMPLETION OF THE FINANCINGS AND THE
ACQUISITIONS REFERRED TO ABOVE, AS
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WELL AS A NUMBER OF OTHER FACTORS LISTED IN ITHACA'S FORM 10-K FOR ITS FISCAL
YEAR ENDED JANUARY 31, 1997 AND ITS OTHER FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION.
FOR ADDITIONAL INFORMATION REGARDING ITHACA INDUSTRIES FREE OF CHARGE VIA FAX,
DIAL 1-800-PRO-INFO AND ENTER "ITHA9."
ITHACA INDUSTRIES ACQUIRES GLENDALE HOSIERY
WILKESBORO, N.C., MARCH 25, 1998--ITHACA INDUSTRIES, INC., one of the nation's
largest manufacturers of private-brand men's and women's underwear and women's
hosiery products, today announced it has completed the acquisition of privately
held Glendale Hosiery Company of Siler City, N.C., a quality manufacturer of
women's sheer hosiery. Ithaca expects the transaction to be accretive to net
income and earnings per share during its 1990 fiscal year that commenced
February 1, 1998.
Ithaca also announced the closing of $110 million in senior credit facilities.
In announcing the acquisition, Jim D. Waller, Ithaca's chairman, president and
chief executive officer said, "The private-brand apparel market is highly
fragmented, featuring many small, private companies. Ithaca management
anticipates realizing substantial annual savings through production
efficiencies, streamlining of operations and economies of scale. We're excited
this acquisition of a quality hosiery company will expand our business with
existing customers and give us entry into others."
Glendale, the former hosiery division of Kellwood, was the subject of a
management buyout in 1986. It has been operating as a profitable private company
since then, and posted 1997 revenues of $45 million. Glendale is a principal
supplier of women's hosiery to Sears, Roebuck & Co., J.C. Penny and other major
national retailers.
Senior management of Glendale will remain with the company after the
acquisition. Brian F. Slagle, Glendale's president and chief executive officer,
said, "We're pleased and excited about joining the Ithaca team. Our
complementary strengths and the efficiencies of this combination will serve our
customers well." Slagle will become executive vice president, heading Ithaca's
combined hosiery division.
Ithaca Industries, Inc. is one of the largest manufacturers of private-brand
men's and women's underwear and women's hosiery products in the United States.
Products are sold through a wide range of retail distribution channels and are
offered to the public through more than 10,000 customer outlets, including
discount stores, department stores, specialty stores, drug stores and
supermarkets. Ithaca stock is currently traded via the Nasdaq bulletin board.
THIS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM FUTURE RESULTS IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THESE
RISKS INCLUDE BUSINESS RISKS SUCH AS CHANGES IN THE PRICE OF RAW MATERIALS,
CONCENTRATION OF ITHACA'S PRINCIPAL CUSTOMERS, AVAILABILITY OF LABOR
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AND COMPETITIVE FACTORS; INDUSTRY RISKS SUCH AS CHANGES IN THE RETAILING
INDUSTRY AND SHIFTS IN CONSUMER PREFERENCES; FINANCIAL RISKS SUCH AS LIQUIDITY
AND ACCESS TO CAPITAL; CONSUMMATION OF THE GLENDALE HOSIERY COMPANY ACQUISITION
AND SUBSEQUENT INTEGRATION; AND OTHER RISKS AS SET FORTH FROM TIME TO TIME IN
THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
FOR ADDITIONAL INFORMATION REGARDING ITHACA INDUSTRIES FREE OF CHARGE VIA FAX,
DIAL 1-800-PRO-INFO AND ENTER "ITHA9."
