UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 31, 1996
-----------------
SHELTER COMPONENTS CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
Indiana 1-9844 22-2825183
- ------- ------ ----------
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
2831 Dexter Drive, P.O. Box 4026, Elkhart, Indiana 46514
- -------------------------------------------------- ------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (219) 262-1514
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Not Applicable
--------------
(Former Name or Former Address, if changed since Last Report.)
Page 1 of 54 Pages
Index Exhibit Appears on Page 12
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the terms of an Asset Purchase Agreement (the "Purchase
Agreement") dated as of December 31, 1996 by and among Shelter
Components Corporation ("Registrant"), Danube Carpet Mills, Inc.
("Danube"), Dixie Yarns, Inc. ("Dixie") and Carriage Industries,
Inc. ("Carriage"), a wholly-owned subsidiary of Dixie, the
Registrant sold the operations and certain assets and transferred
certain liabilities of Danube, its wholly owned carpet
manufacturing subsidiary, to Carriage effective December 31, 1996.
The selling price, subject to certain adjustments, was
approximately $25 million, consisting of $18.2 million in cash,
$4.4 million in accounts receivable retained by the Registrant, and
$2.4 million deferred for certain real estate not yet conveyed to
Carriage.
The Registrant had not yet reached a decision on the reinvestment
of the net proceeds from the sale as of the date of this filing.
In addition, the Registrant agreed not to compete with Carriage for
a period of five (5) years in the carpet and yarn business and for
a period of two (2) years in the vinyl flooring business.
The foregoing description of the Purchase Agreement is qualified in
its entirety by reference to such agreement, which has been filed
as Exhibit 2.1 to this Form 8-K.
On January 2, 1997, the Registrant issued a Press Release relating
to the foregoing, a copy of which is attached hereto as Exhibit
99.1 and incorporated herein by reference.
PAGE 2
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ITEM 5. OTHER EVENTS.
On January 9, 1997, the Registrant announced that G. Ray Stults has
been named President of the Registrant, in addition to his duties
as Chief Operating Officer. Larry D. Renbarger, the former
President will retain the title and responsibilities of Chief
Executive Officer of the Registrant. The Registrant issued a Press
Release relating to the foregoing, a copy of which is attached
hereto as Exhibit 99.2 and incorporated herein by reference.
PAGE 3
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma adjustments made in the preparation of the Pro Forma
Consolidated Balance Sheet assume that the sale of the operations
and certain assets and transfer of certain liabilities of Danube
occurred on September 30, 1996. The pro forma adjustments made in
the preparation of the Pro Forma Consolidated Statements of Income
give effect to the transaction as though it occurred on January 1,
1995 for the year ended December 31, 1995 and on January 1, 1996
for the nine months ended September 30, 1996.
The Registrant retained trade receivables of $5.1 million that are
expected to be fully collectible and liabilities of $.9 million
which will be paid by the Registrant. In addition, the Registrant
retained certain real estate, with a net book value of $1.6
million, which is expected to be purchased by Carriage for $2.4
million during 1997. The real estate sale is expected to result in
a pre-tax gain to the Registrant of $.8 million ($.5 million after-
tax).
As of the date of this filing, management had not reached a
decision on the reinvestment of the net proceeds of the sale. The
proceeds are reflected in cash and cash equivalents. No income
associated with the use of the proceeds has been reflected in the
pro forma statements.
The pro forma financial statements are required by the rules of the
Securities and Exchange Commission and are provided for comparative
purposes only. The pro forma adjustments are based upon
allocations, assumptions and approximations and, therefore, do not
necessarily reflect in precise numerical terms the impact of the
transaction on the historical financial statements. In addition,
such pro forma statements should not be used as a basis for
forecasting the future operations of the Registrant.
PAGE 4
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands) -----------As of September 30,1996----------
(a)
As Sale of Other
Reported Danube Adjustments Proforma
--------- -------- ---------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 25 $18,154 $ --- $ 18,179
Trade receivables-net 36,701 --- --- 36,701
Due from Carriage --- --- 1,362(b) 1,362
Inventories 53,446 (14,042) --- 39,404
Deferred income taxes 1,412 --- (126)(f) 1,286
Prepaid expenses and other 1,070 --- (13)(c) 1,057
Real estate held for sale --- --- 1,643 (d) 1,643
-------- ------- ------ --------
Total current assets 92,654 4,112 2,866 99,632
PROPERTY, PLANT AND EQUIPMENT, 21,942 (1,614) (1,643)(d) 18,685
NET COST IN EXCESS OF NET ASSETS
ACQUIRED,
net of accumulated amortization 11,132 --- (800)(c) 10,332
OTHER ASSETS 593 --- (29)(c) 564
-------- ------- ------ --------
Total assets $126,321 $ 2,498 $ 394 $129,213
======== ======= ====== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Short-term borrowings $ --- $ --- $ --- $ ---
Current maturities of
long-term debt 1,957 --- --- 1,957
Accounts payable trade 36,663 (6,080) --- 30,583
Accrued expenses and income
taxes payable 8,413 --- 2,700(e) 14,072
2,959(f)
-------- ------- ------ --------
Total current liabilities 47,033 (6,080) 5,659 46,612
-------- ------- ------ --------
LONG-TERM DEBT 18,694 --- --- 18,694
DEFERRED INCOME TAXES 888 --- (205)(f) 683
OTHER DEFERRED LIABILITIES 108 --- --- 108
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value --- --- --- ---
Common stock, $.01 par value 77 --- --- 77
Additional paid-in capital 11,806 --- --- 11,806
Retained earnings 47,752 8,578 1,362 (b) 51,270
(842)(c)
(2,700)(e)
(2,880)(f)
-------- ------- ------- --------
59,635 8,578 (5,060) 63,153
Less, Treasury stock 37 --- --- 37
-------- ------- ------- --------
Total stockholders' equity 59,598 8,578 (5,060) 63,116
Total liabilities and -------- ------- ------- --------
stockholders' equity $126,321 $ 2,498 $ 394 $129,213
======== ======= ======= ========
See accompanying notes to Pro forma Consolidated Balance Sheet.
PAGE 5
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NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
For purposes of this pro forma consolidated balance sheet, it is
assumed that the sale of Danube to Carriage occurred on September
30, 1996.
The following is a brief description of the pro forma adjustments:
(a) To record cash received, assets sold and liabilities
transferred in the sale of Danube.
(b) To record additional sales proceeds due from Carriage based on
actual inventory and accounts payable levels.
(c) To write-off goodwill and other intangible assets related to
Danube.
(d) To reclassify certain real estate held for sale to Carriage.
(e) To record adjustments and accruals for costs associated with
the sale of certain assets and closure of the Danube
operations.
(f) To record $2.9 million income taxes due and payable associated
with the $6.4 million pre-tax gain on the sale of Danube.
PAGE 6
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME
The following unaudited pro forma consolidated statement of income
for the nine months ended September 30, 1996 has been prepared to
reflect the sale of Danube as if the transaction was completed on
January 1, 1996. The Danube results have been adjusted to
eliminate all intercompany transactions with the Registrant. These
pro forma adjustments are based on assumptions and estimates made
for the purpose of preparing this pro forma consolidated statement
of income. In the opinion of the Registrant's management, the
assumptions and estimates used in the preparation of this pro forma
consolidated statement of income are reasonable.
As of the date of this filing, management had not reached a
decision on the reinvestment of the net proceeds of the sale. The
proceeds are reflected in cash and cash equivalents. No income
associated with the use of the proceeds has been reflected in the
pro forma statements.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
For The Nine Months Ended September 30, 1996
--------------------------------------------
(a)
As Sale of
Reported Danube Proforma
-------- -------- --------
Net sales $397,065 $(58,015) $339,050
Cost of sales 339,549 (47,381) 292,168
-------- -------- --------
Gross profit 57,516 (10,634) 46,882
Other income-commissions 1,827 --- 1,827
-------- -------- --------
59,343 (10,634) 48,709
Selling, general and administrative
expenses 44,291 (7,232) 37,059
-------- -------- --------
Operating income 15,052 (3,402) 11,650
Interest income 102 --- 102
Interest expense (1,398) --- (1,398)
-------- -------- --------
Income before income taxes 13,756 (3,402) 10,354
Income taxes 5,365 (1,326) 4,039
-------- -------- --------
Net income $ 8,391 $ (2,076) $ 6,315
======== ======== ========
Weighted average common and
common equivalent shares
outstanding 7,749 7,749
======== ========
Earnings per common and common
equivalent share $ 1.08 $ .81
======== ========
See accompanying notes to Pro forma Consolidated Statements ofIncome
PAGE 7
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME
The following unaudited pro forma consolidated statement of income
for the year ended December 31, 1995 has been prepared to reflect
the sale of Danube as if the transaction was completed on January
1, 1995. The Danube results have been adjusted to eliminate all
intercompany transactions with the Registrant. These pro forma
adjustments are based on the assumptions and estimates made for the
purpose of preparing this pro forma consolidated statement of
income. In the opinion of the Registrant's management, the
assumptions and estimates used in the preparation of this pro forma
consolidated statement of income are reasonable.
As of the date of this filing, management had not reached a
decision on the reinvestment of the net proceeds of the sale. The
proceeds are reflected in cash and cash equivalents. No income
associated with the use of the proceeds has been reflected in the
pro forma statements.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
(in thousands, except per share data)
For The Year Ended December 31, 1995
------------------------------------
(a)
As Sale
Reported of Danube Proforma
-------- --------- --------
Net sales $462,323 $(68,210) $394,113
Cost of sales 393,775 (55,385) 338,390
-------- -------- --------
Gross profit 68,548 (12,825) 55,723
Other income-commissions 3,005 --- 3,005
-------- -------- --------
71,553 (12,825) 58,728
Selling, general and administrative
expenses 52,709 (8,709) 44,000
-------- -------- --------
Operating income 18,844 (4,116) 14,728
Interest income 142 --- 142
Interest expense (2,472) 3 (2,469)
-------- -------- --------
Income before income taxes 16,514 (4,113) 12,401
Income taxes 6,476 (1,604) 4,872
------- -------- --------
Net income $10,038 $ (2,509) 7,529
======= ======== ========
Weighted average common and
common equivalent shares
outstanding (b) 7,680 7,680
======= =========
Earnings per common and common
equivalent share (b) $ 1.31 $ .98
======= =========
See accompanying notes to Pro forma Consolidated Statements ofIncome
PAGE 8
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NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For purposes of these pro forma consolidated statements of income,
it is assumed that the sale of Danube occurred on January 1 of the
respective periods.
The following is a brief description of the pro forma adjustments:
(a) To eliminate the results of Danube operations and all
intercompany transactions.
(b) The 1995 figures have been adjusted to reflect a 1996 5-for-4
stock split affected in July 1996.
PAGE 9
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
2.1 Asset Purchase Agreement dated December 31, 1996 by
and among Shelter Components Corporation,
Danube Carpet Mills, Inc., Carriage Industries,
Inc., and Dixie Yarns, Inc.*
99.1 Press Release issued by Shelter Components
Corporation dated January 2, 1997.
99.2 Press Release issued by Shelter Components
Corporation dated January 9, 1997.
_______________________________________________________________________
* Pursuant to Item 2 of Rule 601 under Regulation S-K, certain
exhibits and schedules have been omitted from this Agreement. The
Registrant hereby agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the Commission upon request.
PAGE 10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Shelter Components Corporation
(Registrant)
Date: January 15, 1997 s/ Mark C. Neilson
---------------- --------------------------
Mark C. Neilson
Secretary-Treasurer,
Principal Financial & Accounting
Officer, and Director
PAGE 11
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EXHIBIT INDEX
Exhibit No. Description Page
- ---------- ----------- -----
2.1 Asset Purchase Agreement dated 13-52
December 31, 1996 by and among Shelter
Components Corporation, Danube
Carpet Mills, Inc., Carriage Industries,
Inc., and Dixie Yarns, Inc.*
99.1 Press Release issued by Shelter 53
Components Corporation dated
January 2, 1997.
99.2 Press Release issued by Shelter Components 54
Corporation dated January 9, 1997.
________________________________________________________________________
* Pursuant to Item 2 of Rule 601 under Regulation S-K, certain
exhibits and schedules have been omitted from this Agreement. The
Registrant hereby agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the Commission upon request.
PAGE 12
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of
December 31, 1996 is made by and among SHELTER COMPONENTS
CORPORATION, an Indiana corporation ("Shelter"), DANUBE CARPET
MILLS, INC., a Tennessee corporation and wholly owned subsidiary of
Shelter ("Danube") (Shelter and Danube are sometimes collectively
referred to herein as "Sellers"), CARRIAGE INDUSTRIES, INC., a
Georgia corporation, ("Buyer") and DIXIE YARNS, INC., a Tennessee
corporation ("Dixie").
W I T N E S S E T H:
WHEREAS, Danube is principally engaged in the business of
manufacturing, distributing and selling carpet for the manufactured
housing, modular housing, recreational vehicle and van conversion
industries, twisting and heat setting of yarn for the carpet
industry and for use by textile mills for the manufacture of
related products and the retail distribution of carpet (the
"Business"); and
WHEREAS, Shelter is joining in the execution of this Agreement
as a result of its ownership of certain assets used in the Business
and as guarantor of Danube's obligations hereunder, and Dixie is
joining in the execution of this Agreement as guarantor of Buyer's
obligations; and
WHEREAS, Sellers desire to sell, assign, transfer, convey and
deliver to Buyer and Buyer desires to purchase all of Sellers'
right, title and interest in and to certain assets related to the
Business to the extent and pursuant to the terms and conditions of
this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
promises and conditions contained herein, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following capitalized terms used herein and in
the agreements and other documents collateral hereto which
incorporate the terms set forth below by reference shall have the
meanings set forth opposite such term
below:
"Accounts Payable" shall mean Danube's accounts payable to non-
related third parties.
"Adjacent Property" shall mean the approximately 12.29 acres
of unimproved real property adjacent to the Yarntex Facility as
more particularly shown in the Owners Boundary Survey made by
Hopkins Surveying Group, Inc., revised December 16, 1996 and
described in Exhibit A hereto.
"Adjusted Working Capital" shall mean Inventory minus Accounts
Payable as deemed final pursuant to Article IV hereof.
"Adjustment Calculation" shall have the meaning set forth in
Section 4.3.
PAGE 13
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"Assets" shall have the meaning set forth in Section 2.1.
"Assignment and Assumption Agreement" shall have the meaning
set forth in Section 2.1(l).
"Assumed Liabilities" shall have the meaning set forth in
Section 6.1(a) hereof.
"Astro" shall mean Astro Yarn Mills, Inc., a Georgia
corporation.
"Audit Notice" shall have the meaning set forth in Section
4.5.
"Benefit Plans" shall mean any employee benefit plans within
the meaning of Section 3(3) of ERISA or any other employee
arrangements and benefits of any type maintained, established or
contributed to by Sellers for the benefit of Danube employees.
"Business" shall have the meaning set forth in the prefatory
language hereinabove.
"Business Day" shall mean any day other than (1) a Saturday
or Sunday or (2) a day on which the Federal Reserve Bank of Atlanta
is not open.
"Buyer's Third Party Claims" shall have the meaning set forth
in Section 13.7.
"Closing" shall mean the delivery of the Purchase Price
pursuant to Section 3.2 hereof, the sale, transfer, assignment and
delivery of the Purchased Assets pursuant to Section 2.1 hereof and
the delivery of the other instruments, certificates and legal
opinions required hereunder.
"Closing Date" shall mean 9:00 a.m. Eastern Time on December
31, 1996 or on such other date as the parties hereto shall agree in
writing.
"Confidential Information" shall have the meaning set forth in
Section 14.8.
"Contracts" shall have the meaning set forth in Section
2.1(l).
"Controlled Group" shall have the meaning set forth in
Section8.21(a).
"Customers" shall have the meaning set forth in Section
2.1(h).
"Danube Financial Statements" shall mean (i) the financial
information of Danube (including projections) included in the
Information Package and (ii) the monthly unaudited interim
financial packages for the months ended August 31, 1996, September
30, 1996, October 31, 1996 and November 30, 1996, attached hereto
as Exhibit B.
"Distribution Facility" shall mean the facility located the
finished goods warehouse located at 3114 Freeman Avenue,
Chattanooga, TN as more particularly shown in the Owners Boundary
Survey made by Hopkins Surveying Group, Inc., revised December 16,
1996.
"E'Con" shall mean E'Con Mills, Inc., a Tennessee corporation.
PAGE 14
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"Employee Benefit Plans" shall have the meaning set forth in
Section 8.21(d).
"Employees" shall have the meaning set forth in Section 14.1.
"Environmental Audits" shall have the meaning set forth in
Section 10.6.
"Environmental Laws" means and includes all applicable
federal, state and local statutes, regulations, ordinances, rules,
and orders which pertain to (i) the protection of the environment;
(ii) the release, threatened release, spill, leak, discharge or
emission of any Hazardous Material to the air, surface water,
groundwater or soil; (iii) the storage, treatment, disposal or
handling of any Hazardous Materials or (iv) the construction,
operation, maintenance, repair or closing of aboveground or
underground storage tanks or impoundments containing or which
previously contained Hazardous Materials.
"Environmental List" shall mean a list of all Environmental
Matters, a copy of which is attached as Exhibit C, disclosed by the
Environmental Audits which will be remediated pursuant to the Plan
of Remediation.
"Environmental Matters" shall mean the agreed upon matters set
forth in the Environmental List.
"Excluded Assets" shall have the meaning set forth in Section
2.2.
"Facilities" shall mean the Ft. Oglethorpe Facility, the
Finishing Facility, the Distribution Facility and the Yarntex
Facility, collectively.
"Finishing Facility" shall mean the finishing facility located
at 3115 Freeman Avenue, Chattanooga. TN as more particularly shown
in the Owners Boundary Survey made by Hopkins Surveying Group,
Inc., revised December 16, 1996.
"Fixed Assets" shall have the meaning set forth in Section
2.1(g).
"Ft. Oglethorpe Facility" shall mean the tufting and corporate
office facility located at 212-215 First Street (a.k.a. Third
Street), Fort Oglethorpe, GA as more particularly shown in the
Owners Boundary Survey made by Hopkins Surveying Group, Inc.,
revised December 16, 1996.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Hazardous Materials" means and includes any hazardous or
toxic substance or waste or any contaminant or pollutant identified
by any Environmental Laws, including, but not limited to,
"hazardous substances" as defined by the Comprehensive
Environmental Response Compensation and Liability Act, as amended
("CERCLA"), a "hazardous waste" as defined by the Resource
Conservation and Recovery Act ("RCRA"), as amended, PCBs, petroleum
products, solvents, waste oil, grease, lead based paint, asbestos
or any other material which is known to cause injury to the health
of humans.
"Health and Safety Laws" means and includes all applicable
federal, state and local statutes, regulations, ordinances, rules
and orders which pertain to the protection of human health or
safety, including but not limited to, the Occupational Health and
Safety Act, as amended ("OSHA"), its implementing regulations, and
any similar state laws and regulations.
"Improvements" shall have the meaning set forth in Section
2.1(a).
PAGE 15
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"Information Package" shall mean that certain package of
information provided by Seller to Buyer and attached hereto as
Exhibit D.
"Initial Title Search" shall have the meaning set forth in
Section 10.2.
"Inventory" shall mean product inventory of Danube, wherever
located, comprised of (a) all first quality raw materials, in
process and finished inventories ("First Inventory") and (b) off
quality raw materials, in process and finished inventories
categorized and valued as set forth in Schedule 1.1 ("Other
Inventory") wherever located. First Inventory excludes creel lots
of yarn which cannot be beamed, yarn lots for cut pile products of
less than 1000 lbs., yarn intended for "cut and loop" products in
less than 3,000lb lots, yarn which cannot be manufactured into
first quality carpet and other yarn which is intended as sales yarn
but which cannot be sold at a regular mark-up.
"Land" shall have the meaning set forth in Section 2.1(a).
"Leased Property" shall mean the parcels of land and all
improvements, fixtures and attachments thereon under tenancy as set
forth in the Leases.
"Leases" shall have the meaning set forth in Section 2.1(b).
"Losses" shall have the meaning set forth in Section 13.2.
"Material Adverse Change" shall mean a material adverse change
to Danube's financial condition, results of operations or Business
taken as a whole.
"Material Adverse Effect" shall have the meaning set forth in
Section 8.15.
"Motor Vehicles" shall have the meaning set forth in Section
2.1(f).
"Other Materials" means asbestos-containing materials and lead-
based paint or any other material which is known to cause injury to
the health of humans.
"Permits" shall mean permits, licenses, certificates and
approvals required by the Environmental laws and Health and Safety
Laws for the operation of the Business.
"Permitted Exceptions" shall have the meaning set forth in
Section 10.2.
"Permitted Liens" shall have the meaning set forth in Section
2.4.
"Plan of Remediation" shall mean the measures necessary to
remediate the Environmental Matters to the extent necessary to
bring the affected Real Property or Adjacent Property, as
applicable, into minimum compliance with Environmental Laws, as
mutually agreed upon by the parties.
"Purchase Price" shall have the meaning set forth in Section
3.1.
"Purchased Assets" shall have the meaning set forth in Section
2.1.
"Real Estate Instruments" shall have the meaning set forth in
Section 10.3.
"Real Property" shall have the meaning set forth in Section
2.1(a).
"Recommended Action" shall have the meaning set forth in
Section 10.6.
"Related Documents" shall have the meaning set forth in
Section 8.1.
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"Retained Employee" shall have the meaning set forth in
Section 14.2
"Reviewing Firm" shall have the meaning set forth in Section
4.5.
"Sales Analyses" shall have the meaning set forth in Section
8.7.
"Sellers' Third Party Claims" shall have the meaning set forth
in Section 13.8.
"Shelter Assets" shall have the meaning set forth in Section
2.1(q).
"Short Form Option" shall have the meaning set forth in
Section 2.1(r).
"Tax" or "Taxes" shall mean all income, gross receipt, gains,
sales, use, payroll, employment, franchise, license, school,
profits, property, ad valorem, excise or other taxes, estimated
taxes, import duties, fees, stamp, taxes and assessments or charges
of any kind whatsoever (whether payable directly or by
withholding), together with any additional charges, interest and
any penalties, additions to tax or additional amounts imposed by
any taxing authority with respect thereto, or any charges, interest
or penalties imposed by any taxing authority as the result of the
failure to file any return.
"Tax Reserves" shall have the meaning set forth in Section
2.1(m).
"Working Capital Adjustment" shall mean the working capital
adjustment to the Purchase Price described in Section 4.1 as deemed
final pursuant to Section 4.5.
"Yarntex Facility" shall mean the yarn processing facility
including all Land and Improvements (but not the Fixed Assets)
located at Shattuck Industrial Blvd., Lafayette, GA, excluding the
Adjacent Property all as more particularly shown in the Owners
Boundary Survey made by Hopkins Surveying Group, Inc., revised
December 16, 1996.
1.2 Plurals, Etc. As used herein or in any document which
incorporates the terms hereof:
(a)the plural form of the noun shall include the singular
and the singular shall include the plural, unless the context
requires otherwise;
(b)each of the masculine, neuter and feminine forms of
any pronoun shall include all forms unless the context
otherwise requires; and
(c)words of inclusion shall not be construed as terms of
limitation, so that references to included matters shall be
regarded as non-exclusive, non-characterizing illustrations.
1.3 Headings.The table of contents and article and section
headings contained herein and in any document which incorporates
the terms hereof are for convenience only and shall not control or
affect the meaning or construction of any provisions of this
Agreement or such document.
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ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase of Assets. At the Closing and upon the terms and
conditions contained herein, Sellers shall bargain, sell, assign,
convey and transfer to Buyer, and Buyer shall purchase and acquire
from Sellers, all of Sellers' right, title and interest in and to
all of the assets of Sellers on the Closing Date that are located
at the Facilities or used in the Business, whether tangible, intan
gible, real, personal, mixed, booked or unbooked, other than the
Excluded Assets (hereinafter collectively referred to as the
"Purchased Assets"). Buyer shall lease the Yarntex Facility the Ft.
Oglethorpe Facility and the Finishing Facility unless purchased by
Buyer as described hereinafter in Section 2.3 (the Purchased
Assets, and the Yarntex Facility, the Ft. Oglethorpe Facility and
the Finishing Facility are sometimes herein collectively referred
to as the "Assets") . The Assets include, without limitation, all
of Sellers' right, title and interest in the following property
used in the Business:
(a) all of Sellers' right, title and interest in the
parcels of land described in Schedule 2.1(a) (including land
lying in the bed or right of way of any street, road, avenue
or railroad right of way opened, closed or proposed, public or
private, in front of or adjoining the land; any strips or
gores in front of or adjacent to the land; any waterways,
courses, streams or ditches in front of or adjoining the land;
and any reversionary rights which Sellers may have in any
easement or license granted with respect to the foregoing)
(the "Land"), together with all of Sellers' right, title and
interest in (i) improvements, fixtures, equipment (including
without limitation all plumbing, electrical, heating and air
conditioning systems) and each and every type of other
physical improvement located at, on, under or affixed to the
Land to the full extent such items constitute, or are or may
be construed as, realty or fixtures under the laws of the
jurisdiction in which the land is located (the
"Improvements"); (ii) all oil, gas, water, and mineral rights;
(iii) all easements, rights of way and any and all other
rights appurtenant thereto; (iv) all transferable licenses,
permits, appurtenances, drawings, plans, specifications,
development rights, certificates of occupancy, records and all
other items used in the ownership and/or operation of the Real
Property (as hereinafter defined). The Land and Improvements,
and such other rights, easements, rights of way and other
items as described above are hereinafter collectively referred
to as the "Real Property";
(b)all of Sellers' rights, title and interest in and to
the real property leases which Buyer has agreed to accept,
which leases are set forth in Schedule 2.1(b) (the "Leases");
(c)all prepaid expenses and miscellaneous investments
(including capital stock of others);
(d)Inventory;
(e) all supplies, repair parts and miscellaneous items
used or usable in connection with the Facilities, including
but not limited to all repair, instruction, safety and
maintenance manuals which are necessary or convenient to the
operation and utilization of the Purchased Assets;
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(f) all of Sellers' owned motor vehicles and trailers
listed on Schedule 2.1(f) attached hereto (the "Motor
Vehicles");
(g) all of (i) Shelter's tangible assets located on the
Real Property or the Leased Property and (ii) all of Danube's
other tangible assets (excluding as to both clause (i) and
clause (ii) tangible assets that are Excluded Assets),
including but not limited to all assets located on the Real
Property or the Leased Property including all machinery and
equipment, furniture and furnishings and other assets set
forth in the list attached hereto as Schedule 2.1(g) (all such
assets are hereinafter collectively referred to as the "Fixed
Assets");
(h) all of Danube's customer lists, as set forth on the
reports listed on Schedule 2.1(h) (the "Customers") attached
hereto (which reports contain aggregate sales, pricing and
rebate information with respect to each Customer for the
periods indicated), and all records relating
thereto (including, without limitation, credit files);
(i) all of Danube's owned or licensed intangible assets,
including but not limited to (i) the rights under computer
software license agreements permitted to be assigned (with or
without consent) under the terms of such agreements, (ii) all
agreements not to compete with Danube which are transferable
(with or without consent) by the terms thereof, (iii) all
nondisclosure agreements with Danube which are transferable
(with or without consent) by the terms thereof, (iv) to the
extent transferable (with or without consent), all product
warranties that relate to the Purchased Assets and (v) any and
all claims or causes of action Danube has or may have relating
to the Purchased Assets against any party including, but not
limited to, claims or causes of action arising out of or
resulting from the release, threatened release, discharge,
disposal, spill, leak or emission of any Hazardous Materials
or Other Materials; excluding, however, any and all of
Danube's employment agreements and agreements pertaining to
Sellers' employee welfare benefit plans, stock option plans or
bonus plans or any other similar employee benefit, bonus or
compensation plans or similar items;
(j) whether or not reflected on Danube's books and records
(i) all of Danube's rights in the name Danube Carpet Mills,
Inc. and all variations thereof which Danube will cease using
as of the Closing; all of Danube's rights in the name Yarntex;
and all of Danube's rights in any corporate names, trademarks,
tradenames, copyrights, or service marks currently or
historically used in connection with the Business, of which
the current items are listed on Schedule 2.1(j)(i) attached
hereto, and the goodwill of the Business in connection
therewith, (ii) the going concern value of the Business and
(iii) all of the Danube's rights in the patents, patent
registrations and applications, inventions, trade secrets,
secret processes, formulae, know-how and other proprietary
data and information, intellectual property and licenses
thereof relating solely to the Business, of which the material
items are listed on Schedule 2.1(j)(iii) attached hereto;
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(k) all of Danube's financial, business and other records
relating solely to the Business or the Purchased Assets that
Buyer considers useful (or copies of those portions of other
records containing useful information), including, but not
limited to, all customer records, personnel files and records
with respect to the Employees (as hereinafter defined)
employed by Buyer, supplier lists and files, sales listings,
advertising and promotional materials, files and records,
inventory records and reports to any governmental or
regulatory agency; provided, however, that Danube may retain a
copy (or, if required by law, may retain the original and
provide a copy to Buyer) of such documents as needed for legal
or business purposes;
(l) all of Danube's rights under all material contracts,
personal property leases, licenses and other agreements (as
listed on Schedule 2.1(l)) pertaining to the Business (each of
which is to be assumed by Buyer pursuant to Section 6.1 hereof
unless excluded pursuant to Section 2.2 hereof), which are set
forth in and expressly assumed pursuant to the terms of that
certain Assignment and Assumption Agreement, which agreement
shall be in substantially the form attached hereto as Exhibit
E (the "Assignment and Assumption Agreement") (the
"Contracts"), to the extent such Contracts are assignable by
the terms thereof or consent to assignment is obtained prior
to the Closing;
(m) all of Danube's unemployment tax reserves held by any
applicable state and ratings relating to the Business to the
extent assignment thereof to Buyer is permitted by applicable
law and Buyer requests that they be assigned (the "Tax
Reserves");
(n) all of Danube's federal, state and local licenses
required for the conduct of the Business (including, but not
limited to, environmental discharge permits) to the extent
assignment thereof to Buyer is permitted by applicable law;
(o) all of the Danube's rights to all of Yarntex Facility
telephone numbers and facsimile numbers, and to the post
office boxes set forth on Schedule 2.1(o) attached hereto;
(p) all other assets of Danube other than the Excluded
Assets, used or useful in the Business and whether or not
reflected on Sellers' books and records;
(q) all other assets of Shelter used primarily in
connection with the Business, (collectively, the "Shelter
Assets"); and
(r) the Short Form Option dated January 1, 1993 between Astro
and Yarntex relating to the Adjacent Property (the "Short Form
Option").
2.2 Excluded Assets. Notwithstanding anything contained
herein to the contrary, the parties acknowledge and agree that the
Purchased Assets expressly exclude the following collectively (the
"Excluded Assets"):
(a)cash and cash equivalents;
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(b)accounts receivable;
(c)finished goods held in Eight (8) trailers to fill open
orders representing approximately 80,000 sq. yds. and sales
revenues not exceeding $350,000 to be delivered to Customers
on or prior to January 3, 1997;
(d)Fee title to Yarntex Facility;
(e)Fee title to Finishing Facility;
(f)Fee title to the Ft. Oglethorpe Facility;
(g)Employee Benefit Plans, including any accounts, trusts
or other assets held in connection therewith by Sellers; and
(h)those certain assets listed on Schedule 2.2 hereto.
All Excluded Assets (other than the Yarntex Facility, the Ft.
Oglethorpe Facility and Finishing Facility) shall be removed from
the Real Property as soon as practicable following the Closing
Date.
2.3 Lease/Purchase of the Yarntex, Ft. Oglethorpe and Finishing
Facilities.Buyer shall lease the Yarntex Facility, the Ft.
Oglethorpe Facility and the Finishing Facility from Shelter and/or
Danube pursuant to the terms of lease agreements in the forms
attached hereto as Exhibit F (the "Yarntex Lease"), Exhibit G (the
"Ft. Oglethorpe Lease") and Exhibit H (the "Finishing Lease"),
respectively, in each instance from the Closing Date until (i) all
Environmental Matters in respect of such Facility (and, in the case
of the Yarntex Facility, the Adjacent Property), if any, have been
fully remediated pursuant to the Plan of Remediation, (ii) a
warranty deed has been delivered to Buyer which conveys to Buyer
such Facility free and clear of all liens, encumbrances, security
interests, charges and liabilities except those listed in Section
2.4 hereof and any created by Buyer and (iii) with respect to
the Yarntex Facility, Danube has assigned to Buyer and Astro has
consented to such assignment of an option to purchase the Adjacent
Property pursuant to the Assignment of Option attached hereto as
Exhibit I (the "Assignment of Option"), by which Buyer will assume
Danube's rights and obligations under the Short Form Option. With
respect to the Adjacent Property, Buyer shall be entitled, pursuant
to the terms of the Assignment of Option, to Danube's rights and
obligations under that certain Third Addendum to Asset Purchase
Agreement dated as of January 1, 1993 by and among E'Con, Astro,
Danube and Yarntex, in which the Adjacent Property is referred to
as the "Remediation Property" and the Yarntex Facility is referred
to as the "Mill Property". Upon the completion of all of items (i)
through (iii) in respect of the Yarntex Facility, Buyer shall
purchase the Yarntex Facility and Buyer will pay to Danube the sum
of $1,200,000, in immediately available funds pursuant to the wire
transfer instructions then given from Danube to Buyer. Upon the
completion of all of items (i) and (ii) in respect of the Finishing
Facility, Buyer shall purchase the Finishing Facility and Buyer
will pay to Danube the sum of $600,000, in immediately available
funds pursuant to the wire transfer instructions then given from
Danube to Buyer. Upon the completion of all of item (ii) in respect
of the Ft. Oglethorpe Facility, Buyer shall purchase the Ft.
Oglethorpe Facility and Buyer will pay to Sellers the sum of
$625,000, in immediately available funds pursuant to the wire
transfer instructions then given from Danube to Buyer.
Notwithstanding anything contained herein to the contrary, in the
event that such events have not occurred by the second anniversary
of the Closing Date
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with respect to any such Facility, then the lease applicable
thereto shall terminate and Buyer shall remove itself and its
assets from, and have no further obligation to purchase, such
Facility.
2.4 Absence of Liens; Instruments of Conveyance and Transfer.
All of the Purchased Assets will be conveyed to Buyer free and
clear of all liens, encumbrances, security interests, charges and
liabilities except (i) for liens of taxes and assessments not yet
due and payable or for taxes that the taxpayer is contesting in
good faith through appropriate proceedings; (ii) for unfiled
materialmen's, mechanics and similar liens incurred in connection
with the ordinary course of operating, repairing and maintaining
the Purchased Assets, which do not exceed $5,000 with respect to
the Real Property or the Fixed Assets and the Vehicles; (iii) for
such state of facts that are shown by the current surveys of the
Real Property; (iv) for other defects and encumbrances, which do
not materially affect the fair market value of the Real Property
including those listed as exceptions in the title insurance policy
obtained by Buyer with respect to the Real Property and which are
in all respects reasonably acceptable to Buyer ("Permitted Liens");
(v) Permitted Exceptions (defined hereinafter) and (vi) Assumed
Liabilities (defined hereinafter). On the Closing Date, Sellers
shall deliver to Buyer such certificates, bills of sale, documents
of title and other instruments of conveyance and transfer, in a
form reasonably satisfactory to Buyer, as shall be reasonably
necessary and effective to vest in Buyer good and marketable title
in and to any property sold, transferred, conveyed or delivered
under this Agreement subject to the foregoing exceptions.
ARTICLE III
PURCHASE PRICE OF ASSETS
3.1 Purchase Price.The purchase price for the Assets, shall
be Twenty Million Eight Hundred Thousand Dollars ($20,800,000) as
adjusted in accordance with Article IV hereinafter (the "Purchase
Price") and shall be payable in the manner set forth in Schedule
3.1.
3.2 Allocation of Purchase Price. An allocation of the
Purchase Price shall be proposed by Buyer and shall be delivered to
Shelter within six months following the Closing Date. Sellers and
Buyer agree that the Purchase Price shall be allocated among the
Assets as agreed upon between Shelter and Buyer within 30 days
following delivery by Buyer. Sellers and Buyer agree to use such
allocation for all federal income tax purposes, including without
limitation on Internal Revenue Service Form 8954 (Asset Acquisition
Statement under Internal Revenue Code Section 1060) which form each
of Shelter and Buyer is required to file in connection with the
transactions contemplated hereby and which form each of Sellers and
Buyer hereby covenant and agree to timely and properly file with
its federal income tax return.
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ARTICLE IV
PURCHASE PRICE ADJUSTMENTS
4.1 Working Capital Adjustment. If the Adjusted Working
Capital is less than Six Million Six Hundred Thousand Dollars
($6,600,000), then the Purchase Price shall be reduced by such
deficiency. Similarly, if the Adjusted Working Capital is greater
than Six Million Six Hundred Thousand Dollars ($6,600,000), then
the Purchase Price shall be increased by such excess.
For purposes of this Agreement, Inventory shall be valued in
accordance with the pricing schedule set forth on Schedule 1.1 or
as otherwise provided in Section 4.3. The determination as to
whether products subject to orders taken prior to Closing and
delivered subsequent to Closing (other than products described in
Section 2.2(c) hereof) shall be classified as either Inventory or
sold goods in accordance with GAAP.
4.2 Payment of Working Capital Adjustment. If, upon
determination of the Adjusted Working Capital, the Working Capital
Adjustment requires a reduction in the Purchase Price, then Sellers
shall pay any such amount owing by wire transfer of immediately
available funds (pursuant to wire transfer instructions to be
provided by Buyer) no later than five (5) Business Days following
final determination thereof pursuant to Section 4.5. In the event
that the Working Capital Adjustment requires an increase in the
Purchase Price, then Buyer shall pay Danube any such amount owing
by wire transfer of immediately available funds (pursuant to wire
transfer instructions to be provided by Danube) no later than five
(5) Business Days following such determination.
4.3 Adjustment Calculation. As promptly as practicable after
the Closing Date, Shelter shall, as of the close of business on the
Closing Date, determine the Accounts Payable and Inventory and
prepare its calculation of the Working Capital Adjustment
("Adjustment Calculation"). First Inventory will be valued using
the cost (first in-first out) method (with "cost" for in process
being determined on the basis set forth in Schedule 4.3) on an item
by item basis, consistent with the standard costing method used in
the preparation of the August 31, 1996 balance sheet information
set forth in the Projected Balance Sheet Model included in the
Information Package. Other Inventory shall be valued in accordance
with Schedule 1.1. A joint physical inventory of the Inventories
shall be conducted by the parties as soon as practicable after
Closing at times to be agreed to by the parties. The actual joint
physical inventory, including any adjustments for changes in on
hand items, quantities, roll length and width, shall be used to
determine the amount of inventory on hand. Items found during the
inventory but not listed on computer records shall be subject to
the review noted in Schedule 1.1.
4.4 Review by Buyer. During the preparation of the Adjustment
Calculation, Buyer shall be permitted to review the details of the
Accounts Payable and Inventory determination and the Adjustment
Calculation. Pursuant to such review, Buyer shall be entitled from
time to time to examine the working papers of Shelter prepared in
connection therewith and the books and records of Danube, and
discuss with Shelter the Adjustment Calculation. Such discussions
shall be held by telephone or at places mutually agreeable to
Shelter and Buyer.
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4.5 Final Determination. After receipt of the Adjustment
Calculation, Buyer shall have a reasonable period not to exceed
fifteen (15) Business Days in which to review the basis of and
working papers relating to the Adjustment Calculation. The
determination of the Adjusted Working Capital as set forth in the
Adjustment Calculation shall be deemed final and be binding on
Buyer and Sellers, and the Purchase Price shall be adjusted in
accordance therewith unless Buyer delivers written notice of
objection to Shelter, in whole or in part, to the Adjustment
Calculation ("Audit Notice") within fifteen (15) Business Days
following receipt of the Adjustment Calculation. The Audit Notice
shall set forth in detail the items and calculations objected to
and the factual and technical bases for each such objection, and
Buyer and Shelter will seek in good faith, for a period of ten (10)
Business Days following receipt of the Audit Notice to resolve the
matters set forth therein. In the event such differences are not
resolved during such ten-day period, Buyer and Shelter shall
promptly deliver the matters in dispute concerning the Adjustment
Calculation to a nationally recognized independent accounting firm
mutually selected by Buyer and Shelter (the "Reviewing Firm") which
firm shall be engaged for the purposes of conducting a review of
the matter or matters in dispute regarding the Adjustment
Calculation and then only in regard to the application of the
appropriate accounting methods and practices necessary to resolve
those matters in dispute (the fees and expenses of the Reviewing
Firm to be shared equally between Buyer and Sellers). The
Reviewing Firm shall issue a report as promptly as possible,
setting forth in reasonable detail its determination regarding the
disputed items. The determination of the Reviewing Firm as to the
disputed matters concerning the Adjustment Calculation and the
Adjusted Working Capital shall be deemed final and binding on the
parties on the date said written report is delivered to Buyer and
Shelter.
ARTICLE V
CLOSING
The Closing shall take place at the offices of Witt, Gaither &
Whitaker, P.C., 1100 SunTrust Bank Building, Chattanooga, Tennessee
at 9:00 A.M. Eastern Time on December 31, 1996 or on such other
date or at such other time or place as the parties hereto shall
agree in writing (the date and time of the Closing being referred
to herein as the "Closing Date"). At the Closing, (a) Sellers
shall convey the Purchased Assets to Buyer by delivery of warranty
deeds, bills of sale and instruments of transfer and assignment
reasonably satisfactory to Buyer and its counsel, and shall deliver
all certificates, opinions of counsel and other instruments and
documents contemplated hereby all in form and substance reasonably
satisfactory to Buyer's counsel, and (b) Buyer shall deliver to
Danube the Purchase Price, the instruments of assumption pertaining
to Danube liabilities and obligations to be assumed hereunder and
all certificates, opinions of counsel and other instruments and
documents contemplated hereby, all in form and substance reasonably
satisfactory to Danube and Danube's counsel.
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ARTICLE VI
LIABILITIES NOT ASSUMED
6.1 Liabilities Not Assumed.
(a)Buyer expressly assumes no liabilities or obligations
of Sellers whatsoever, whether known or unknown, contingent or
otherwise except for:
(i) Accounts Payable accounted for in the Working
Capital Adjustment and all obligations of Danube under
those certain vehicle leases, equipment leases, and
Contracts as set forth on Schedule 6.1(a) attached
hereto;
(ii) as otherwise provided in this Agreement or the
Assignment and Assumption Agreement; and
(iii) third party open sales and supply orders of
Danube set forth on Schedule 6.1(a) ((i) (ii) and (iii)
are herein collectively referred to as the "Assumed
Liabilities").
Without limiting the foregoing, and except as otherwise
provided in Article XIII, Buyer specifically does not assume
any liability of Sellers (except for the Assumed Liabilities)
with respect to (i) obligations for any Taxes (ii) obligations
for pension, profit-sharing or other employee benefit programs
or termination or unemployment benefits, whether funded or
unfunded, (iii) liability relating to any Environmental
Matters or arising under or pursuant to any Environmental Laws
or Health and Safety Laws, or (iv) other liability which may
hereinafter be asserted as the result of acts or omissions on
the part of Sellers (or either of them) prior to the Closing
Date, including but not limited to any liability arising from
(but only to the extent caused by Danube in respect of) any
products manufactured, finished, processed or sold by Danube
prior to the Closing Date.
(b) Sellers shall indemnify and hold Buyer harmless with
respect to any liabilities not assumed by Buyer hereunder
subject to the provisions of Article XIII hereof. Buyer and
Dixie shall defend indemnify and hold Sellers harmless with
respect to, and Buyer and Dixie agree that they will fully
pay, perform, observe the terms, satisfy, and/or discharge,
each, every, and all Assumed Liabilities.
(c)Danube and Buyer will pay their own expenses,
including legal and accounting expenses in connection
herewith; provided however that the fees and expenses of the
Collier, Shannon, Rill & Scott law firm related to regulatory
filings and approvals required in connection with the
transaction contemplated herein and the filing fees associated
therewith shall be shared equally by Buyer and Sellers.
(d)With respect to goods shipped by Danube prior to the
Closing Date, Buyer shall not assume liability for any rebates
or other such discounts or incentives earned by Customers on
such goods shipped prior to the Closing Date.
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6.2 Waiver of Bulk Sales Compliance. In consideration of the
indemnification provided in Article XIII, Buyer waives compliance
with the Bulk Sales Act of the States of Georgia and Tennessee and
any other state, if and to the extent such acts are applicable.
Nothing contained in this Section, however, shall be construed to
be a determination by any of the parties hereto that any of such
acts are applicable to the transactions contemplated by this
Agreement.
ARTICLE VII
SALES AND TRANSFER TAXES, PROPERTY TAXES,
RECORDING FEES, AND PROFESSIONAL FEES
7.1 Sales and Transfer Taxes.Danube shall be responsible for
payment to the appropriate state or local governmental authorities
of all transfer taxes, whether for personal property or real
property, with respect to the sale contemplated herein. Buyer
shall be responsible for all sales taxes with respect to the sale
contemplated herein.
7.2 Recording or Filing Fees.The party receiving a conveyance
by deed, lease, assignment or otherwise shall pay any applicable
recording or filing fees thereon.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF SELLERS
As a material inducement to Buyer entering into this Agreement and
consummating the transactions contemplated hereby, Sellers hereby
make the following representations and warranties to Buyer, each of
which shall be continuing, shall be true at the date of execution
hereof and on the Closing Date, and shall survive the Closing and
the sale of the Purchased Assets and other transactions
contemplated hereby:
8.1 Corporate Existence and Authority. Each of Shelter and Danube
is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction in which it is
incorporated, and is in good standing as a foreign corporation in
each jurisdiction in which such qualification or authorization is
necessary for the conduct of the business in which each such Seller
is now engaged and in which the failure to qualify would have a
material adverse effect on the operations and financial condition
of such Seller. Danube has full power and authority to own its
properties and conduct the Business as now being conducted. Danube
and Shelter each has full corporate power and authority to execute
this Agreement and consummate the transactions contemplated hereby,
and Shelter's and Danube's Boards of Directors have properly
approved the transactions contemplated by this Agreement. True and
correct copies of the resolutions by the Directors of Shelter and
Danube and by Shelter as sole shareholder of Danube authorizing
Shelter and Danube, as applicable, to enter into this transaction,
properly certified by the President or Vice President and Secretary
or Assistant Secretary of each of Shelter and Danube, are attached
hereto as Exhibit J. Upon execution and delivery, this Agreement,
and the Assignment and Assumption Agreement, the Real Property
Instruments (as
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hereinafter defined), the Noncompetition Agreement (as hereinafter
defined) and all other instruments or documents delivered in
connection herewith or therewith (collectively, the "Related
Documents") shall be valid and legally binding documents,
enforceable in accordance with their terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditor's rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion
of the court before which any proceedings therefor may be brought
forth.
8.2 Capitalization. All issued and outstanding shares of the
authorized capital stock of Danube are owned by Shelter. There
are no other classes of Danube stock or rights convertible into
equity. There are no outstanding subscriptions, options, rights,
warrants, or other agreements or commitments obligating Danube to
issue or to transfer from treasury any additional shares of its
capital stock.
8.3 Financial Statements. Prior to the date hereof, Danube
has delivered to Buyer the Danube Financial Statements, all of
which (except for projections included therein) have been prepared
in accordance with GAAP consistently applied in each of the periods
indicated and, to Sellers' best knowledge, respectively present
fairly the financial position of Danube as of the respective dates
and the results of operations for the respective periods of the
statements.
8.4 Liens and Good Title. Danube or Shelter owns, of record,
all legal title and beneficial and equitable interest in and to all
of the Assets. Sellers have, and on the Closing Date will have,
good and marketable title to all of the Assets, free and clear of
any and all mortgages, deeds of trust, liens, security interests,
pledges, encumbrances, easements, leases, agreements, covenants,
charges, restrictions, options, joint ownership or adverse claims
or rights whatsoever except for Permitted Liens and Exceptions.
8.5 Authority. Except as otherwise set forth in Schedule
8.5, neither the execution and delivery of this Agreement and the
Related Documents, nor the consummation by Sellers of the
transactions contemplated hereby and thereby and the fulfillment
and compliance with the terms and provisions hereof and thereof by
Sellers, will violate, conflict with or constitute a breach of or
default under any of the terms, conditions or provisions of or
require any consent pursuant to any law or regulation (other than
the expiration of the waiting period under the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended) presently
applicable to Sellers, their respective articles of incorporation
or bylaws, or any order of any court, regulatory body or tribunal
or any loan, note, bond, mortgage, lease, indenture, license,
agreement, or other instrument or obligation to which either Seller
is a party or by which any of Sellers' respective properties or
assets are bound.
8.6 Inventory.The finished First Inventory is in good and
merchantable condition, currently salable to Danube's manufactured
housing and recreational vehicle customers or to former customers
of Danube currently being serviced by Buyer, and in a condition
such that it could be sold in the ordinary course of business under
current customer programs at a regular markup for the purposes for
which such Inventory is intended and is at customary and reasonable
levels.
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The in process First Inventory has been properly processed in the
ordinary course of Business. All raw material, in process and
greige inventory identified as First Inventory, either purchased as
a part of this Agreement or consigned to Buyer or its affiliate
prior to Closing, is free from defects and in a condition that it
can be processed in the ordinary course of business into finished
First Inventory at a normal cost and sold at a regular mark-up
under current customer programs. The Other Inventory will be
properly classified within the categories set forth in Schedule
1.1. There is no pending governmental investigation affecting the
Inventory. Schedule 8.6 contains a list of all consigned stock
locations at which consigned inventory of Sellers is located as of
the Closing Date.
8.7 Sales Analyses. Included in Schedule 8.7 are copies of
sales analyses for the periods indicated therein prepared in the
ordinary and usual course of business (the "Sales Analyses"). The
Sales Analyses fairly reflect the sales of the Business for the
periods then ended and contain the approximate total sales volume
of each product sold to each Customer by Sellers during such
period.
8.8 Compliance with Laws. Except as otherwise provided in
Sections 8.12, 8.17 and 8.26, neither Sellers nor the Business is
in violation of any applicable federal, state or local law,
statute, ordinance, order, rule or regulation which would have a
Material Adverse Effect on the ownership of the Assets or the
operation or conduct of the Business.
8.9 No Consents. All consents necessary to consummate the
transactions contemplated herein shall be obtained prior to or at
the Closing and, except as set forth on Schedule 8.9, no consent or
approval of, or declaration, filing or registration with, any non-
governmental third party or any governmental authority is required
to be obtained by Sellers (i) in connection with the execution of
this Agreement, (ii) for the consummation of the transactions
contemplated hereby or (iii) for the operation of the Business.
8.10 Condition and Use of the Assets. All of the tangible
Purchased Assets are generally in good repair (subject to normal
wear and tear) and have been maintained in accordance with normal
industry practice. The use of the Purchased Assets conforms in all
material respects to all applicable building, zoning, platting,
subdivision, land use and fire and other laws, ordinances, rules or
regulations, and no notice of any violation with respect thereto
has been received by Sellers. Along with certain of the Excluded
Assets, leased tractors and trailers whose leases are not being
assumed by Buyer and the Adjacent Property, the Purchased Assets
are all of the assets reasonably necessary to operate the Business
as it has been conducted by Danube prior to the Closing Date.
8.11 Absence of Change. Except as otherwise set forth on
Schedule 8.11, from September 1, 1996 and through the Closing Date
and except as otherwise requested by Buyer or Dixie:
(a) Danube has operated the Business diligently and only
in the usual, ordinary and customary manner as a going
business consistent with past practices.
(b) The Inventory of the Business shall have been main
tained at ordinary, normal and customary levels, and no extra
ordinary purchases or sales shall have occurred.
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(c) There shall have been no Material Adverse Change in
the Business or the Assets or the intended use thereof. For
purposes of this Agreement, a "Material Adverse Change" shall
mean a material adverse change (other than one resulting from
seasonal fluctuations) to Danube's financial condition,
results of operations or Business, taken as a whole.
(d) Sellers shall not have sold, contracted to sell, con
veyed, transferred, assigned, distributed or otherwise
disposed of any of the Assets, or any rights thereto, except
in the ordinary course of business.
(e) Sellers shall not have mortgaged, pledged, or
granted any security interests in, and has not encumbered or
otherwise caused a lien to be placed against any of the
Assets.
(f) Neither Danube nor the Business shall have incurred
any loss, damage, liability or destruction of property which
would or might have a Material Adverse Effect on Buyer's
intended use of the Assets or operation of the Business.
(g)Danube shall not have granted a general wage increase
or, except in accordance with its normal historical practice,
an increase in any salary, bonus, fringe benefits, incentive
or other compensation payable, or to become payable, to any
employee or agent of the Business, nor made any commitment to
adopt any bonus incentive compensation, deferred compensation,
profit sharing, pension, or other employee benefit plan.
(h)Danube shall not have made any material changes in its
general pricing, credit or rebate policies.
8.12 Licenses and Permits. To Sellers' knowledge, Danube and
the Business possess all approvals, authorizations, consents,
licenses, orders, franchises, rights, registrations and permits
from all governmental and non-governmental agencies and authorities
which are required to permit and material to the operation of the
Business as presently conducted.
8.13 Suppliers and Customers. Schedule 8.13 sets forth a list
of each supplier of goods to Danube to whom Danube paid in the
aggregate $10,000 or more during the most recent completed fiscal
year, together with the amount paid during such period and a list
of each customer of Danube to whom Danube sold more than $10,000 of
products during the most recent completed fiscal year together with
the amount of product sold during such period. Danube is not in
default of the terms of any contract for the delivery of any
merchandise. A summary of Danube's compilation of customer claims,
allowances and returns listed according to type of claim made by
Customers since January 1, 1995 is set forth on Schedule 8.13. Set
forth on Schedule 8.13 is a complete list of all blanket and future
purchase orders from Customers effective as of December 31, 1996.
Except as set forth on Schedule 8.13, Danube has no contract with
any customer or supplier (except for purchase orders received or
issued in the ordinary course of business) and is not subject to
any license or franchise agreement with any customer or supplier
which, in either case, is not terminable without penalty on thirty
(30) days' prior written notice to the other party or which exceeds
$25,000. Except as set forth on Schedule 8.13 hereto, Danube has no
volume incentive programs, rebate programs or consignment or
special return arrangements with any Customer.
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Except as set forth on Schedule 8.13, no Danube executive officer
was informed during the time period between October 2, 1996 and
October 25, 1996 that any customer intended to significantly reduce
its purchases from Danube for 1997 and/or any ensuing years. Danube
has been informed by Cavco and Clayton that each intended to
increase its orders in 1997 with Danube in an aggregate amount that
will fully offset the aggregate reduction in purchases (and margins
incidental to such purchases) described on Schedule 8.13.
8.14 Contracts and Commitments. Schedule 8.14 contains a
complete and accurate list of all contracts, agreements,
commitments or understandings, whether oral or written, to which
the Business or the Assets are subject and which are not terminable
without penalty on thirty (30) days' prior written notice to the
other party or which exceeds $25,000, including but not limited to
any:
(a)agreement guaranteeing, indemnifying, or otherwise
causing the Assets to be subject to or liable for the
obligations or liabilities of another;
(b)partnership or joint venture agreement;
(c)license or royalty agreement;
(d)indenture, mortgage, note or credit agreement or other
contract or obligation pertaining to the borrowing of money by
Danube which relates to the Business;
(e)leases of property, personal or real, whether as
Lessor or Lessee; and
(f)agreement to purchase goods or services from any
supplier in any quantity or through any specified period of
time which could impose a liability on Buyer.
Each of the Contracts is valid, in full force and effect, and
enforceable in accordance with its terms, except to the extent that
the same may be limited by laws concerning insolvency, bankruptcy,
or similar laws or equitable principles affecting the enforcement
of creditors' rights generally. Danube is not in default nor has
Danube received any notice of default under any of the Contracts.
Except as noted on Schedule 8.14 , all Contracts which are to be
assumed by Buyer are assignable to Buyer without the consent of the
third party.
8.15 Change in Business. For purposes of this Agreement, a
"Material Adverse Effect" shall mean a material adverse effect on
Danube's financial condition, results of operations or Business
taken as a whole. Except as otherwise set forth on Schedule 8.15
and as otherwise requested by Buyer or Dixie, Danube is aware of no
significant changes in the Business since October 25, 1996,
including but not limited to, changes with respect to its products,
Customers, employees, equipment needs or suppliers, to which either
Danube or the Business are subject, which would or might have a
Material Adverse Effect upon Danube, the Business or the Assets.
8.16 Business Records. All of the Danube's business records
have been maintained in accordance with good and sound accounting
and business practices in the ordinary and normal course of
business.
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8.17 Real Property.
(a) General. Except for the Real Property, the Adjacent
Property and the warehouses of Shelter, there is no real
property owned or continuously occupied by Sellers and used in
or connected with the Business.
(b) Codes, Ordinances, Use and Notice of Condemnation.
There are no existing, pending, or proposed material
violations of any fire or health codes, building ordinances,
zoning ordinances or rules of the Board of Fire Underwriters
(or organization exercising functions similar thereto), with
respect to the Real Property, nor, except for the
Environmental Matters, is there any defect in the Real
Property or Adjacent Property which would render all or any
part thereof unsuitable for the purposes for which it is
presently used, and no material alteration, repair,
improvement or other work has been performed in respect of the
Improvements within the last 120 days other than work on the
Yarntex Facility roof. Sellers have received no notice of any
condemnation proceeding in process or proposed that would
affect the Real Property. Danube shall advise Buyer forthwith
of any notice concerning violations, condemnation proceeding,
and tax or utility rate increases that may affect the Real
Property.
(c) Licenses and Permits. Danube holds all material
licenses, certificates, permits, franchises and rights from
all appropriate federal, state, local and other public
authorities necessary for the conduct of its current
operations at the Yarntex Facility, which licenses,
certificates, permits, franchises and rights are specified on
Schedule 8.17 (c).
(d) No Notice of Violations. Danube's Business is in
compliance with all applicable material laws, rules and
regulations. Except as otherwise set forth in Schedule
8.17(d), since 1985, Danube has not received any notice of
violations of any federal, state or local laws, ordinances,
rules, regulations or orders relating to the Business or the
Purchased Assets.
(e) Utility Connections. All public utility connections
located on the Real Property have been completed, installed,
activated, paid for and are in operational condition and, to
Danube's knowledge, are in compliance with all appropriate
codes, rules and regulations except for the wiring of the
coater at the Finishing Facility. Danube or Shelter, as
applicable, has available to it on the Real Property
sufficient power, fuel oil, natural gas, and water supplies
and adequate sewage and waste disposal systems for the
operation of the Business as presently conducted and to
Sellers' knowledge all such supplies and systems will be
available to Buyer after Closing.
(f) Taxes and Utilities. Sellers are not aware of, nor
has Danube or Shelter received, any notice or information of
any condition which would result in an increase in the
assessments covering the Real Property or utility rates
affecting the Real Property or the Business.
(g) Access. As shown on the survey and to the best
knowledge of Sellers, Danube or Shelter, as applicable,
presently has the unencumbered right to use (and, to Sellers'
knowledge, to transfer to Buyer) all accesses from the Real
Property to and from public thoroughfares, as such accesses
are presently configured and utilized.
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8.18 Litigation. Except as set forth on Schedule 8.18, there
is no governmental or private litigation, investigation,
proceeding, claim, suit or audit of any kind whatsoever pending or,
to the knowledge of Danube, threatened against Danube, the
Business, or any of the Assets. Except as set forth on Schedule
8.18, to Danube's knowledge, there is no private person or govern
mental agency who has any basis for any cause of action which would
cause the Business or Buyer, as a transferee, to suffer any loss or
liability not disclosed herein.
8.19 Labor Relations. With respect to the Yarntex Facility,
neither Danube nor the Business is, or has been since January 1,
1991, involved in any labor discussion with any unit or group
seeking to become the bargaining unit for any of its employees, nor
does Danube have any notice or knowledge that any such unit or
group has announced an intention to commence any organizational
activities among the employees of the Business. Since January 1,
1991, Danube has, to Sellers' knowledge, not been accused, notified
or made aware of any unfair labor or employment practice,
discriminatory acts or omissions relating to a group of employees,
nor is there any pending or threatened strike, work stoppage, or
other labor dispute affecting Danube or the Business.
8.20 Employee Contracts, Union Agreements and Benefit Plans.
Schedule 8.20 sets forth a complete and accurate list and descrip
tion of all current employment, consulting or collective bargaining
Contracts, deferred compensation, profit-sharing, bonus, option,
share purchase or other benefit or compensation commitments,
Benefit Plans, arrangements or plans, including all welfare plans
of or pertaining to the present employees of Danube. Except as set
forth on Schedule 8.20, Danube has complied with all of its
obligations, including the payment of all contributions, the filing
of all reports, and the payment or accrual of all expenses for the
period between the end of the previous plan year and the Closing
Date, with respect to such Contracts, commitments, arrangements and
plans. The plans have been maintained in compliance with all
applicable laws and regulations. The levels of insurance reserves
and accrued liabilities with regard to all such plans are
reasonable and are sufficient to provide for all incurred but
unreported claims and any retroactive premium adjustments.
8.21 Employee Benefit Plans.
(a) The only employee pension benefit plans as defined
in Section 3(2) of the Employee Retirement Income Security Act
of 1974 ("ERISA") and including all trusts executed in
connection therewith, adopted or sponsored or maintained or
contributed to by Danube with respect to which or as the
result of which Danube has or may have had or may have any
liability are the E'Con Mills, Inc. Employee Stock Ownership
Plan (the "ESOP") and the Shelter Components Savings
Incentive Plan (the "401(k) Plan"). The ESOP and the 401(k)
Plan are collectively referred to as the "Retirement Plan."
The term "Danube" specifically includes for the purposes of
this Section 8.21(a) any member of a controlled group with
Danube under Section 414(b),(c),(m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (the "Code") or any organization to
which Danube is a successor or parent corporation within the
meaning of Section 4069(b) of ERISA (all of the foregoing
collectively referred to as the "Controlled Group"). The
Retirement Plan has never been a Multiemployer Plan. as
defined in Sections 3(37) or 4001(a)(3) of ERISA and has never
been subject to Title IV of ERISA. All participant
contributions have been transferred to the Retirement Plan on
or before the earliest date described in Department of Labor
Regulations Section 2510.3-102(a).
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(b) The 401(k) Plan is a qualified plan under Section
401(a) of the Code, the trust with respect to such plan is
exempt from taxation under Section 501(a) of the Code and, in
either case, is subject to a favorable determination letter
which will be in effect at the Closing Date; and, other than
the amendment described in Section 14.2 , all amendments made
to the 401(k) Plan prior to the Closing Date have been
considered in the determination letter. No action has been
taken (or failure to take action has occurred) which would
cause such determination letter to be revoked. The
determination letter is effective for those provisions
required by Tax Reform Act of 1986 at the time such letter was
requested. The 401(k) Plan has been administered and operated
in accordance with its terms and in a manner so as to preserve
such qualification, including those provisions required by
all subsequent laws (including the Uniformed Services
Employment and Re-employment Rights Act of 1994) whose
effective date is prior to the Closing Date.
(c) Schedule 8.21(c) lists any employee welfare benefit
plan within the meaning of Section 3(1) of ERISA maintained
or contributed to by Danube during the last five (5) years.
With respect to any group health plan subject to COBRA,
Danube includes any member of the Controlled Group. "COBRA"
means the provisions for the continuation of health care
enacted by the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended as set forth in Section 4080B of the Code
(and any amendments or predecessor or successor provisions)
and Sections 601 through 608 of ERISA (and any amendments or
predecessor or successor provisions), including any
regulations promulgated under the applicable provisions of the
Code and ERISA. As of the Closing Date, each of the employee
benefit plans set forth in Schedule 8.21(c) and the 401(k)
Plan (collectively, the "Employee Benefit Plans") are in
material compliance with, and have been administered in
material compliance with, the provisions of ERISA and the
Code.
(d) In connection with each Employee Benefit Plan:
(i) Sellers have provided to Buyer true, complete
and correct copies of (A) each Employee Benefit Plan (or,
in the case of any unwritten Employee Benefit Plan, a
description thereof), (B) each trust agreement, group
annuity contract, and any other contract relating to any
Employee Benefit Plan, (C) the three (3) most recent
Annual Reports (Form 5500) filed for each Employee
Benefit Plan for which such a filing is required; and
there has been no material change or amendment to any of
such documents or filings relating to the Employee
Benefit Plans as of the Closing Date other than the
amendment described in Section 14.2; (D) the most recent
Summary Plan Descriptions and all Summary of Material
Modifications prepared subsequent to such Summary Plan
Descriptions, and (E) the three (3) most recent Summary
Annual Reports prepared and distributed for each Employee
Benefit Plan for which such document is required.
(ii) Neither Danube nor any member of the Controlled
Group nor any fiduciary as defined in Section 3(21) of
ERISA has taken any action or failed to take any action
which would result in any liability to Buyer after the
Closing Date with respect to any Employee Benefit Plan;
and Buyer is specifically free from any obligation to
continue any Employee Benefit Plan after the Closing
Date.
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(iii) There is no any contract, plan or commitment,
that would require Buyer to create any additional
employee benefit plan to provide or designed to provide
benefits for any employees of Danube or their dependents
or beneficiaries.
(iv) To the knowledge of Danube, there is no
action, suit, grievance, arbitration or other manner of
litigation, or claim with respect to the assets of any
Employee Benefit Plan (other than routine claims for
benefits made in the ordinary course of Employee Benefit
Plan administration of which Employee Benefit Plan
administrative review procedures have not been exhausted)
pending, and to the knowledge of the Danube, threatened
or imminent against or with respect to the Employee
Benefit Plan, Danube or any other fiduciary (as defined
in Section 3(21) of ERISA) of the Employee Benefit Plan
(including any action, suit, grievance, arbitration or
other manner of litigation, or claim regarding conduct
which allegedly interferes with the attainment of rights
under the Employee Benefit Plan); and
(v) Neither Seller nor any other fiduciary (as
defined in Section 3(21) of ERISA) has any knowledge of
any facts which would give rise to or could give rise to
any action, suit, grievance, arbitration or other manner
of litigation, or claim with respect to the Employee
Benefit Plans.
8.22 [intentionally omitted]
8.23 Insurance. Attached hereto as Schedule 8.23 is a summary
of Sellers' insurance policies insuring the Assets. All policies
are occurrence policies. Sellers maintain general commercial,
general liability and product liability coverage for the Business.
8.24 No Broker or Finder. Sellers have not had discussions
with, negotiated with, been represented by, employed any broker or
finder or incurred any liability for any brokerage fees,
commissions or finder's fees to any individual or entity in
connection with this Agreement or any of the transactions
contemplated hereby.
8.25 No Material Omission. To the best knowledge of Sellers
after due inquiry, no representation or warranty contained in this
Agreement, and no Exhibit, certificate, Schedule, list or other
information furnished by or on behalf of Sellers to Buyer in
connection herewith, contains any untrue statement of a material
fact or omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances under
which they were made, not misleading.
8.26 Environmental and Health and Safety Status. Except for
the Environmental Matters or as otherwise set forth in Schedule
8.26, to the knowledge of Sellers:
(a)There has been no release, threatened release,
application, spill, leak, discharge or emission of any
Hazardous Material or Other Material (as such terms are
hereinafter defined) to the air, surface water, groundwater or
soil of the Real Property or Adjacent Property requiring
corrective action and which is a violation of, any of the
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Environmental Laws or Health and Safety Laws (as such terms
are hereinafter defined).
(b)Danube, Shelter and the owners of the Adjacent
Property have duly complied in all respects with, and the Real
Property and Adjacent Property are in compliance with, the
Environmental Laws and Health and Safety Laws.
(c)Neither Sellers nor the owners of the Adjacent
Property have any documents or information relating to or
disclosing any release, threatened release, application,
spill, leak, discharge or emission of any Hazardous Material
or Other Material to the air, surface water, groundwater or
soil of the Real Property requiring corrective action and
which is a violation of any Environmental Law or any Health
and Safety Law at the Real Property or the Adjacent Property.
(d)Danube has provided Buyer with true and accurate
information pertaining to the environmental history of the
Real Property and the Adjacent Property, for the time period
Danube has owned the Real Property and, to Sellers' knowledge,
for the time period prior to Danube's or Shelter's ownership.
(e)Sellers and the owners of the Adjacent Property have
been issued or have applied for all Permits, a complete list
of which is set forth on Schedule 8.26. To the extent
permissible, Sellers shall maintain such Permits for the Real
Property, even after the Closing, until Buyer can secure
similar Permits in its name, provided that Buyer acts with
diligence to secure such Permits promptly.
(f)There are no facts which, as of the Closing, would
constitute a violation of the Environmental Laws or any
violation of Health and Safety Laws with respect to the Real
Property or the Adjacent Property.
(g)Sellers have received no complaint, order, directive,
claim, citation, notice, information request or investigation
by any governmental authority or any other person or entity
with respect to any release, threatened release, application,
spill, leak, discharge or emission of any Hazardous Material
or Other Material to the air, surface water, groundwater or
soil of the Real Property requiring corrective action and
which is a violation or alleged violation of any Environmental
Laws or Health and Safety Laws at the Real Property.
(h)Non-hazardous solid waste materials have not been
disposed of or buried at the Real Property.
(i)Sellers has previously delivered to Buyer all reports,
filings and other correspondence made or filed by Sellers
pursuant to all applicable occupational safety and health
legislation, regulations and orders since January 1, 1992.
ARTICLE IX
BUYER'S AND DIXIE'S REPRESENTATIONS AND WARRANTIES
Buyer and Dixie hereby make the following representations and
warranties to Danube, each of which shall be continuing, shall be
true at the date of execution
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hereof and on the Closing Date, and shall survive the Closing and
the sale of Purchased Assets and other transactions contemplated
hereby.
9.1 Incorporation, Good Standing and Power. Each of Buyer and
Dixie is a corporation duly organized, validly existing, and in
good standing under the laws of the respective jurisdictions in
which they are incorporated, with full power and authority to
execute this Agreement and consummate the transactions contemplated
hereby. Buyer's and Dixie's Boards of Directors (or authorized
Executive Committees thereof ) have properly approved the execution
of this Agreement and the consummation of the transactions
contemplated hereby and a true and correct copy of the resolutions
of Buyer's and Dixie's Directors of Dixie and Buyer authorizing
Dixie and Buyer, as applicable, to execute this Agreement and
consummate the transactions contemplated hereby, properly certified
by the Treasurer and Vice President thereof, respectively, is
attached hereto as Exhibit J . Upon execution, this Agreement
and all other instruments and documents delivered by Buyer and
Dixie shall be valid, legal and binding, enforceable in accordance
with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditor's rights, and
(ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceedings
therefor may be brought forth.
9.2 No Consents. All consents necessary to consummate the
transactions contemplated herein shall be obtained prior to or at
the Closing and, except as set forth on Schedule 9.2, no consent or
approval of, or declaration, filing or registration with, any non-
governmental third party or any governmental authority is required
to be obtained by Buyer or Dixie (i) in connection with the
execution of this Agreement or (ii) for the consummation of the
transactions contemplated hereby.
9.3 Authority. Neither the execution and delivery of this
Agreement and the Related Documents, nor the consummation by Buyer
and Dixie of the transactions contemplated hereby and thereby and
the fulfillment and compliance with the terms and provisions hereof
and thereof by Buyer or Dixie, will violate, conflict with or
constitute a breach of or default under any of the terms,
conditions or provisions of or require any consent pursuant to any
law or regulation presently applicable to Buyer or Dixie, their
respective articles of incorporation or bylaws, any order of any
court, regulatory body or tribunal or any loan, note, bond,
mortgage, lease, indenture, license, agreement, or other instrument
or obligation to which either Buyer or Dixie is a party or by which
any of Buyer's or Dixie's respective properties or assets are
bound.
9.4 No Broker or Finder. Neither Dixie nor Buyer has had
discussions with, negotiated with, been represented by, employed
any broker or finder or incurred any liability for any brokerage
fees, commissions or finder's fees to any individual or entity in
connection with this Agreement or any of the transactions
contemplated hereby.
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9.5 No Material Omission. To the best knowledge of Dixie and
Buyer after due inquiry, no representation or warranty contained in
this Agreement, and no Exhibit, certificate, Schedule, list or
other information furnished by or on behalf of Dixie or Buyer to
Sellers in connection herewith, contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE X
REAL PROPERTY
10.1 Delivery of Preliminary Information. Sellers have
delivered to Buyer copies of the items described in clause (a), (b)
and (c) directly relating to the Real Property that are in Sellers'
possession or control:
(a)Surveys. To the extent the same is presently in
Sellers' possession, the most recently dated surveys for each
parcel of the Real Property;
(b)Title Policies. The most recently issued title
insurance policies presently in Sellers' possession with
respect to the title for each parcel of the Real Property as
set forth in Schedule 2.1(a); and
(c)Environmental Reports. All environmental studies,
environmental reports, reports of remediation work or repairs
relating to the handling and disposal of Hazard Waste or any
other records, reports or memoranda relating to environmental
issues with regard to the Real Property, and a list of all
contractors and agents used by Danube with regard to the same.
10.2 Title Search; Survey. Buyer shall (i) conduct a title
search of the Real Property (the "Initial Title Search") and obtain
a commitment or binder for issuance of a title insurance policy
issued by the title insurance insurer for each parcel of the Real
Property; (ii) cause a local licensed surveyor to prepare an
accurate and adequate survey of each parcel of the Real Property;
and (iii) provide to Danube within five (5) days thereafter a copy
of the survey and title commitment or binder and a letter setting
forth all of Buyer's objections to Danube's or Shelter's title to
each parcel of the Real Property other than general utility
easements, rights of way abutting each parcel of the Real Property,
unviolated restrictive covenants that do not affect the value of
any parcel of the real property; and applicable zoning and building
laws or ordinances provided they do not prohibit the use of each
parcel of the Real Property and Improvements thereon for Buyer's
intended use and so long as each parcel of the Real Property is in
compliance with the same.
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After the receipt of such letter, title exceptions not specifically
objected to by Buyer and all exceptions as set forth above shall be
deemed and referred to as "Permitted Exceptions"; provided,
however, Buyer may object to such exceptions to title, other than
the Permitted Exceptions, as are discovered after the Initial Title
Search as they relate to the Yarntex or Finishing Facility but
prior to purchase thereof by Buyer, and Sellers shall have until
the closing of such purchase to correct or make arrangements as are
reasonably satisfactory to Buyer to correct such defects in title
objected to by Buyer. If Sellers are unwilling or unable to
correct or make arrangements for such defects on or before the
Closing Date, Buyer will have the option to waive such defects or
terminate this Agreement without further liability of Sellers to
Buyer or Buyer to Sellers.
10.3 Real Estate Instruments. At the Closing, Sellers shall
deliver or cause to be delivered to Buyer the following items (all
documents will be duly executed and acknowledged as required)
(collectively, "Real Estate Instruments"):
(a) Warranty Deed. A general warranty deed for each
parcel of the Real Property executed by Danube or Shelter, as
applicable, conveying to Buyer good and marketable fee simple
title to each parcel of the Real Property, free and clear of
all liens, restrictions and encumbrances except and subject
only to the Permitted Exceptions.
(b) Owner's Affidavit. An affidavit in the form
acceptable to the title insurer certifying that each parcel of
the Real Property is free from claims for mechanics',
materialmen's and laborers' liens.
(c) Non-Foreign Affidavit. An affidavit, in the form and
substance satisfactory to Buyer, stating Sellers' U.S.
Taxpayer's Identification Number, that the Seller and all
persons holding beneficial interest in the Real Property are
"United States Persons" as defined by Section 1445(f)(3) and
Section 7701(g) of the Internal Revenue Code of 1986, as
amended.
(d) Closing Affidavit. An affidavit, in form acceptable
to Buyer, stating that there are no other parties entitled to
possession of any parcel of the Real Property other than Buyer
as of the Closing Date.
(e) Other Documents. Any and all documents and papers
solely in conformity with the terms of this Agreement which
may be reasonably necessary or requested by Buyer in
connection with the consummation of the transactions
contemplated by this Agreement, including evidence of
authority to execute each deed.
10.4 Closing Costs For Real Property. Danube shall pay for
all state, county, city or other transfer taxes and for the cost of
preparation of each deed for each parcel of the Real Property.
Buyer shall pay the premiums for the issuance of the owner's title
insurance policies, the cost of recording each deed for each parcel
of the Real Property and any other instruments under the terms of
this Agreement with respect to the Real Property and all costs to
obtain the surveys of each parcel of the Real Property.
10.5 Adjustments and Prorations. General real estate and
personal property taxes for the calendar year 1996 and all utility
charges and operating expenses of the Real Property incurred
through the Closing Date shall be the obligation of Sellers.
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10.6 Environmental Remediation.
(a) The parties agree that prior to the Closing Date,
Buyer, at Sellers' cost and expense, has caused a Phase I
environmental audit of the Real Property and the Adjacent
Property and a limited Phase II environmental site assessment,
copies of which are attached hereto as Exhibit K (the
"Environmental Audits"). The parties have agreed on a list of
items which will be remediated subsequent to the Closing (the
"Environmental List"). Each item on the Environmental List
shall be referred to hereafter as an "Environmental Matter".
After the Closing Date, Sellers shall, or shall cause E'Con
and/or Astro to, commence or continue the remediation of all
Environmental Matters on the Environmental List which have not
been remediated prior to Closing in accordance with the Plan
of Remediation.
(b) If after the parties have agreed upon the Plan of
Remediation, Buyer has been informed by an authorized
governmental entity that additional or alternative measures
are necessary to effect remediation of the Environmental
Matters to thereby render the Real Property or Adjacent
Property in minimum compliance with Environmental Laws, then
Buyer shall notify Sellers in writing of such fact and propose
its recommended course of action ("Recommended Action").
Sellers shall notify Buyer in writing within thirty (30) days
of receipt of Buyer's written notice of any disagreement with
the Recommended Action, and if the parties are unable to agree
upon a mutually satisfactory course of action, then any such
disputed matter shall be referred to an environmental lawyer
mutually acceptable to the parties. The decision of such
environmental lawyer regarding the disputed matters shall be
binding upon the parties hereto. The fees and expenses of
such environmental lawyer shall be paid by the party against
whom the dispute shall have been decided, or, if the dispute
is not decided completely in favor of either party, such fees
and expenses shall be paid by each party in such proportion as
the environmental lawyer shall determine to be fair and
equitable. Should Sellers fail to notify Buyer of any
disagreement within said thirty (30) day period, then the
Recommended Action shall be deemed accepted by Sellers.
ARTICLE XI
COVENANTS OF SELLERS
Sellers covenant and agree with Buyer as follows:
11.1 Bulk Sales. Sellers acknowledge noncompliance with any
applicable bulk sales or transfer act and agrees to pay all of its
creditors as Danube's liabilities thereto accrue and become due and
payable to the extent that such liabilities are not expressly
assumed by Buyer as provided herein.
11.2 Termination of Employees. On or prior to the Closing
Date, Danube shall terminate the employment of all employees of the
Business, except as otherwise provided in Schedule 11.2, so as to
make the services of such persons as Buyer elects to employ
available to Buyer. Subject to the provisions of Article XIII,
Danube shall indemnify and hold Buyer harmless from any and all
liabilities costs or expenses (including court costs and reasonable
attorneys fees) relating to the termination of Danube's employees
except as provided in Section 14.1.
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11.3 Name Change of Danube. Within ten (10) Business Days
following the Closing Date, Danube shall file with the Tennessee
Secretary of State an amendment to its Certificate of Incorporation
and with the Georgia Secretary of State an amendment to its
Certificate of Authority changing its name to one dissimilar to any
of the names constituting part of the Purchased Assets under
Section 2.1(j).
11.4 Handling of Other Inventory. Sellers' will provide, at
Sellers' expense, such employees at Shelter warehouses as are
reasonably necessary for a period of six (6) months following the
Closing Date to perform loading, handling and administrative
services and shall provide shipping, at its expense, for full
truckloads as reasonably requested by Buyer in connection with the
disposal of Other Inventory
ARTICLE XII
COVENANTS OF BUYER
Buyer hereby covenants and agrees as follows:
12.1 Nondisclosure of Proprietary Information. Other than in
connection with the transactions contemplated by this Agreement,
Buyer and its agents shall not reproduce, use, or disclose to
others any proprietary information of Danube or the Business
without the prior written consent of Danube. Nevertheless, Buyer
may make such proprietary information available to its Board of
Directors, officers, counsel, accountants and other advisors who
may use such information as necessary in the performance of their
functions in this transaction.
ARTICLE XIII
INDEMNIFICATION
13.1 Bulk Transfer Indemnity. Buyer has waived Sellers'
compliance with the bulk transfer statutes in force in the
jurisdictions in which the Assets are located. As a result,
Sellers, jointly and severally, hereby agree to indemnify and hold
harmless Buyer against any and all claims, loss, costs or expenses,
including reasonable attorneys' fees, which Buyer may sustain as a
result of any payment which may be required to be made or any
liability of any kind which may be imposed upon Buyer as a result
of any claim, loss, cost or expense or reasonable attorneys' fees
which may be required of or incurred by Buyer whatsoever arising
out of noncompliance with any bulk transfer laws.
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13.2 Mutual Indemnification Obligation. Sellers, jointly and
severally, hereby agree to indemnify and hold harmless Buyer and
Dixie, and Buyer and Dixie, jointly and severally, hereby agree to
indemnify and hold harmless Sellers, against any and all liability,
claims, damages, losses, costs or expenses, including reasonable
attorneys' fees ("Losses"), relating to (i) any claims by any
person for any commissions, broker's or finder's fee relating to
this Agreement or the purchase and sale of Assets contemplated
herein; and (ii) any breach of, noncompliance with or
misrepresentation contained in any representation, warranty or
covenant contained herein or in the Related Documents.
13.3 Sellers' Indemnification Obligations. Sellers hereby
agree to defend, indemnify and hold harmless Buyer from and against
any and all Losses, which Buyer may sustain as a result of any
claims, actions or damages of any nature whatsoever relating to (i)
except as otherwise expressly provided in this Agreement, Sellers'
operation of the Business or use of the Assets prior to the Closing
Date which would impose successor liability upon Buyer as a matter
of law (including, but not limited to, product liability claims and
contested taxes as referenced in Section2.4, where such contest is
resolved against Sellers), (ii) the existence of any lien,
encumbrance or security interest at the Closing Date in the Assets,
(iii) the remediation of Environmental Matters pursuant to the Plan
of Remediation (iv) any Accounts Payable not accounted for in the
Working Capital Adjustment and (v) the termination of any employees
by Danube.
13.4 Buyer's and Dixie's Indemnification Obligations. Buyer
and Dixie jointly and severally hereby agree to defend, indemnify,
and hold Sellers harmless from and against any and all Losses which
Sellers may sustain as a result of any claims, actions or damages
of any nature whatsoever relating to (i) Buyer's or its affiliate's
operation of the Business or use of the Assets on and after the
Closing Date including, but not limited to, any Losses relating to
products manufactured, sold, or distributed by Buyer or an
affiliate thereof subsequent to the Closing Date (except for and
only to the extent of any violation of Section 8.6 by Danube) and
all general liability claims arising out of or relating to
occurrences of any nature relating to Buyer's or an affiliate's
business subsequent to the Closing Date; and (ii) the failure of
Buyer or any affiliate to pay, perform, and discharge when due and
owing any of the Assumed Liabilities and (iii) Buyer's or an
affiliate's contribution to or exacerbation of any Environmental
Matter.
13.5 Inventory and Product Warranty Indemnity.
(a)Sellers hereby agree to defend, indemnify and hold
harmless Buyer from and against any and all Losses (including,
but not limited to out-of-pocket shipping costs, handling and
labor costs incurred in the removal and replacement or
reinstallation of products subject to product warranty claims
excluding Buyer or Dixie employee inspection costs and any
other costs for Dixie/Buyer personnel), which Buyer may
sustain as a result of any claims, actions or damages of any
nature whatsoever relating to (i) product warranty claims in
respect of goods manufactured and sold by Danube, (ii) product
warranty claims in respect of goods sold by Buyer which are
made up of Inventory which has been classified as of Closing
as First Inventory to the extent such claim results from a
defect in the First Inventory or because such items should
have been classified as Other
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Inventory and (iii) any misclassification of Inventory whether
discovered prior to or subsequent to shipping; provided that
Buyer exercises reasonable care in inspecting prior to
shipment, but in no event will Buyer be required to unroll
carpet in exercising such care. Sellers may request that
independent consultants, at Sellers' expense, assist Buyer in
resolving product warranty claims, and Buyer shall in good
faith consider the advice of such consultants in resolving
such claims.
(b) Buyer shall provide Shelter with bi-weekly reports
which shall outline with reasonable particularity the nature
and amount of (i) all product warranty claims involving
products comprised of First Inventory which Buyer has decided
to honor in accordance with the standard procedures used by
Buyer in regard to product warranty claims against Buyer and
(ii) all claims Buyer has as a result of a misclassification
of Inventory. Sellers shall have thirty (30) days from receipt
of the such report to notify Buyer of Sellers' objection to
the nature or amount of any particular item in such report,
specifying the grounds for such objection; provided, however,
that if (i) aggregate claims since the delivery of the latest
report exceed $30,000 or (ii) a group of claims having a
common or related basis exceed $5000 in the aggregate, then in
either event, Buyer shall provide Shelter with daily
information with respect to claims until the ensuing report
date. If no such notice of objection is given by the Seller
within thirty (30) days as set forth above, Buyer shall be
entitled to immediate indemnification hereunder. If objection
is given within thirty (30) days as set forth above, any
claims included in such report which are not disputed shall,
subject to the provisions of Section 13.6 hereof be paid over
within five (5) Business Days. With respect to disputed items,
the parties shall negotiate in good faith to resolve, such
items and in the event such items are not resolved within
thirty (30) days following delivery to Buyer of Sellers'
notice of objection as provided above, then the dispute may be
resolved by arbitration in accordance with Section 15.4. The
parties to any such arbitration shall be entitled to
indemnification for its reasonable attorneys' fees and filing
fees to the extent such indemnification is awarded by the
arbitrator or arbitrators. Notwithstanding anything contained
herein to the contrary, Sellers shall not be required to
indemnify buyer for any product warranty claims unless such
claims have been made by customers prior to June 1, 1998 and
Buyer has made a claim against Sellers for indemnification
prior to August 1, 1998.
13.6 Limitation .Notwithstanding anything contained herein to
the contrary, Sellers shall not be required to indemnify Buyer
pursuant to this Section 13 for any breach of or noncompliance
with any representation, warranty or covenant made herein or for
any goods sold by Sellers prior to Closing until the aggregate
amount of all Losses exceeds Seventy-Five Thousand Dollars
($75,000) in which event the entire aggregate amount and all
amounts thereafter shall be paid by Sellers; provided, however,
that such limitation shall not apply to Losses resulting from
mistakes in categorizing Inventory, the termination of any
employees by Danube, the remediation of Environmental Matters,
product liability tort actions or any Loss resulting from a breach
of Section 8.26.
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13.7 Buyer's Third Party Claims; Notice of Claims.
(a)Immediately upon receipt by Buyer of any claim against
it (other than by Sellers) as described in Sections 13.1,
13.2, 13.3 or 13.5 above (the "Buyer's Third Party Claims"),
it shall advise Sellers in writing of such claim and provide a
copy of the complaint or other document or documents asserting
the claim, and within thirty (30) days of receipt of such
notice, Sellers shall (i) pay the same or (ii) notify Buyer in
a writing executed by Sellers that it disputes such claim and
intends to defend against it, and thereafter so defend and
pay, any adverse final judgment or award of settlement amount
in regard thereto. During such thirty (30) day period, Buyer,
after consultation with Sellers, may take any reasonable
action with respect to said claim which is necessary to
protect against further damage or default. The cost of such
defense shall be borne by Sellers. If Sellers fail to take
action within thirty (30) days as set forth above, then Buyer
shall have the right to pay, compromise or defend any such
Buyer's Third Party Claims; provided that Buyer has delivered
a notice to Sellers of its intention to take such action at
least five (5) days prior to taking such action, in which
event Sellers shall promptly pay or reimburse Buyer in respect
of any amount of payment plus costs of defense incurred by
Buyer hereunder. Buyer and Sellers shall cooperate with each
other in the defense of any Buyer's Third Party Claims brought
hereunder.
(b)With respect to any matter under Sections 13.1, 13.2,
13.3 or 13.5 above other than Buyer's Third Party Claims,
Buyer shall give written notice to Sellers outlining with
reasonable particularity the nature and amount of such claim.
Sellers shall have thirty (30) days from receipt of Buyer's
notice of such claim to notify Buyer of Sellers' objection to
the nature or amount of the proposed claim for
indemnification, specifying the grounds for such objection.
If no such notice of objection is given by the Seller within
thirty (30) days as set forth above, Buyer shall be entitled
to immediate indemnification hereunder. If objection is given
within thirty (30) days as set forth above, the dispute may be
resolved by arbitration in accordance with Section or by
agreement between the parties. The parties to any such
arbitration shall be entitled to indemnification for its
reasonable attorneys' fees and filing fees to the extent such
indemnification is awarded by the arbitrator or arbitrators.
13.8 Sellers' Third Party Claims; Notice of Claims.
(a)Immediately upon receipt by any of Sellers of any
claim against it (other than by Buyer) as described in
Sections 13.2 and 13.4 above (the "Sellers' Third Party
Claims"), Sellers shall advise Buyer in writing of such claim,
and provide a copy of the complaint or other document or
documents asserting the claim and within thirty (30) days of
receipt of such notice Buyer shall (i) pay the same or
(ii) notify such Sellers in a writing executed by Buyer that
it disputes such claim and intends to defend against it, and
thereafter so defend and pay, any adverse final judgment or
award of settlement amount in regard thereto. During such
thirty (30) day period, the affected Seller, after
consultation with Buyer, may take any action with respect to
said claim which is necessary to protect against further
damage or default. The cost of such defense
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shall be borne by Buyer. If Buyer fails to take action within
thirty (30) days as set forth above, then the Seller shall
have the right to pay, compromise or defend any such Sellers'
Third Party Claims; provided that the affected Seller has
delivered a notice to Buyer of its intention to take such
action at least five (5) days prior to taking such action.
Buyer shall promptly pay or reimburse the affected Seller in
respect of any amount of payment plus costs of defense
incurred by the Seller hereunder. Buyer and the affected
Seller shall cooperate with each other in the defense of any
Sellers' Third Party Claims brought hereunder.
(b)With respect to any matter under Sections 13.2 and
13.4 above other than Sellers' Third Party Claims, the
affected Seller shall give written notice to Buyer outlining
with reasonable particularity the nature and amount of such
claim. Buyer shall have thirty (30) days from receipt of
Sellers' notice of such claim to notify the Seller of Buyer's
objection to the nature or amount of the proposed claim for
indemnification, specifying the ground for such objection. If
no such notice of objection is given by Buyer within thirty
(30) days as set forth above, the Seller shall be entitled to
immediate indemnification hereunder. If objection is given
within thirty (30) days as set forth above, the dispute may be
resolved by arbitration or by agreement between the parties.
The parties to any such arbitration shall be entitled to
indemnification for its reasonable attorneys' fees and filing
fees to the extent such indemnification is awarded by the
arbitrator or arbitrators.
ARTICLE XIV
OTHER POST-CLOSING COVENANTS
14.1 Danube's Employees.
(a)After the Closing, with respect to the employment by
Buyer of any employees no longer on Danube's payroll and
selected Shelter employees primarily performing services for
Danube in connection with the operation of the Business (the
"Employees"). Buyer will make such employment decisions in its
sole discretion on an individual basis. Any Employees hired by
Buyer will receive employee welfare and retirement benefits
similar to those currently provided to similarly situated
employees of Buyer.
(b)Subject to the provisions of Article XIII, Sellers
shall be responsible for and shall hold Buyer harmless with
respect to all claims (including the costs of defense thereof)
asserted against Buyer pursuant to the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. 2101-09 or similar
state, local or foreign country laws or regulations
(collectively, "WARN Laws") by Employees of Danube who Buyer
does not hire and place on its payroll immediately following
the Closing; provided, however, that Buyer and Dixie shall
indemnify Sellers for any Loss it may incur under WARN Laws
solely as a result of action or inaction by Sellers in
reliance on information regarding Buyer's post closing
intentions as provided to Danube by Buyer or Dixie.
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(c)In addition to any liability which Danube may have
under WARN Laws, Sellers shall be responsible for all other
obligations and severance costs, if any, required or committed
by Danube to be paid to Employees arising out of their
employment by Sellers or the termination thereof. Buyer shall
be responsible for all obligations and costs, if any, required
to be paid to Employees arising out of their employment by
Buyer or an affiliate of Buyer or the termination thereof or
the hiring practices of Buyer or any affiliate thereof.
14.2 Employee Benefit Plans. The Sellers and the Buyer agree
that Buyer is not acquiring or succeeding to any obligations with
respect to the Employee Benefit Plans and that the Buyer is not
intended to be and is not a successor employer to Sellers for any
purposes, including with respect to COBRA, and that no benefit plan
sponsored or maintained by the Buyer is intended to be and no such
benefit plan shall be a successor plan to any of Sellers' Employee
Benefit Plans. Sellers agree that they will comply with COBRA
after the Closing with respect to all qualified beneficiaries who
had a qualifying event as of or prior to the Closing. Buyer
agrees to waive for any Retained Employee (as defined in Section
14.2) to the extent such employee's medical coverage is provided by
an HMO any condition which would have been considered a pre-
existing condition and thereby otherwise excluded from coverage by
Buyer's medical plan. Sellers will provide the certification
described in Sections 9801 et seq of the Code to the extent
required by law for all employees of the Seller on the Closing
Date. Sellers agree to indemnify and hold harmless the Buyer
against and in respect of all claims, losses, costs or expenses
including reasonable attorneys' fees, which the Buyer may sustain
as a result of any claims, actions or damages of any nature
whatsoever relating to a breach of, noncompliance with or
misrepresentation contained in any representation and warranty
contained in Section 8.21 or covenant of the Sellers contained in
this Section 14.2.
401(k) Plan. At the Closing Date, the Buyer shall furnish the
Sellers with a list of those employees whom the Buyer will employ
after the Closing Date (the "Retained Employees"). The Sellers
will amend the 401(k) Plan before the Closing Date to provide that
the sale of the assets of contemplated in this Agreement and the
transfer of Retained Employees to the Buyer does not constitute a
termination of employment permitting a distribution or requiring a
repayment of a loan with respect to a Retained Employee. Sellers
agree that no distribution will be made to any Retained Employee
from the 401(k) Plan unless such distribution is permitted by the
Plan and by the Code either for hardship or after the Retained
Employee reaches age 59 1/2 or unless as to such Retained Employee,
the Buyer has informed the Sellers in writing that such Retained
Employee is no longer employed by the Buyer or by any member of a
controlled group with the Buyer under Section 414(b),(c),(m) or (o)
of the Code or any organization to which Buyer is a successor or
parent corporation within the meaning of Section 4069(b) of ERISA,
which written notice shall be given within five (5) days after such
Retained Employee is no longer so employed. In the event that the
401(k) Plan is terminated, Sellers will, upon the written request
of the Buyer, and, regardless of whether the 401(k) Plan is
terminated after thirty (3) days' written notice (which notice may
be given prior to December 31, 1997) at any time on or after
December 31, 1997, Seller may transfer all accounts of the Retained
Employees who are still employed at the time of such transfer by
Buyer to any plan of Buyer's specified by Buyer in a trustee-to-
trustee transfer and Buyer will cause such plan to accept such
transfer.
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Notwithstanding the preceding sentence, Buyer shall not be required
to accept any trustee-to -trustee transfer from the 401(k) Plan
unless all rollovers or other transfers from the ESOP to the 401(k)
Plan were made at a time when the ESOP was s a qualified plan
under Section 401(a) of the Code, the trust with respect to ESOP
was exempt from taxation under Section 501(a) of the Code and, in
either case, was subject to a favorable determination letter; and
there were no benefits, rights or features that were required to be
protected Section 411(d)(6) of the Code that would have modified
any provision of the 401(k) Plan. No further transfers will be
permitted from ESOP to the 401(k) Plan without the written approval
of the Buyer.
14.3 Delivery of Mail, Etc. Sellers will deliver promptly to
Buyer any mail, documents or instruments received by a Seller after
the Closing Date pertaining to the post-Closing Date operations of
Buyer and Buyer will promptly deliver to Sellers any mail,
documents or instruments received by it after the Closing Date
pertaining to the pre-Closing Date operations of Sellers.
14.4 Certain Assets of Sellers. Sellers agree that if,
following the Closing, the parties identify any assets of Shelter
used primarily in connection with the Business which are not listed
on Schedule 2.2(g) hereto (are then the Excluded Assets) which
exceed $50,000 in value in the aggregate, Sellers will take such
action as is necessary to transfer title to such assets to Buyer
without adjustment to the Purchase Price.
14.5 Access to Records. The parties agree to maintain all
records relating to the Business in accordance with their existing
records retention policies and procedures (including, in the case
of Sellers, retention of such records as if the Business were an on-
going operation of Sellers) and to make such records available for
inspection or copying by the other parties hereto (or their
attorneys, accountants, consultants or agents) on reasonable notice
and during normal business hours. In any event, Buyer shall
maintain personnel records for at least three (3) years following
the Closing Date.
14.6 Certain Employee Matters. Sellers and Buyer shall
cooperate with one another following the Closing in order to
achieve a smooth transition with respect to employment and payroll
matters.
14.7 Motor Vehicles. Sellers agree to cause the Motor
Vehicles designated by Buyers to be delivered to Buyers immediately
following the Closing.
14.8 Confidentiality. Sellers agree that the obligations
imposed upon them pursuant to the letter agreement dated October
28, 1996 between them and Buyer shall survive the Closing and
remain in full force and effect thereafter. In addition, Sellers
agree that all nonpublic or proprietary information, and all
information that constitutes trade secrets pertaining to the
Business, the Assets and the terms and conditions of this Agreement
unless the information sought to be disclosed or used (i) is
publicly known as of the date hereof or becomes publicly known
through no fault of the Seller or its or Danube's employees or
former employees or (ii) is lawfully received by any party from a
third party not bound in a confidential relationship to any party
whose confidential information is to be protected hereunder (the
"Confidential Information") shall be deemed confidential and shall
be kept by them in strict confidence. Sellers will not, without
the prior written consent of Buyer, except as required by law,
release or disclose any Confidential Information. In
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the event that any of Sellers receives a request to disclose all or
part of the Confidential Information (by oral questions,
interrogatories, requests for information or documents, subpoena,
civil investigative demand, any information or formal investigation
by any government or governmental agency or authority or otherwise)
such Seller will (a) immediately notify Buyer of the existence,
terms and circumstances surrounding such request, (b) consult with
Buyer on the advisability of taking legally available steps to
resist or narrow such request and (c) if disclosure of such
information is required, furnish only that portion of the
Confidential Information which, in the written opinion of such
Sellers' counsel, such Seller is legally compelled to disclose, and
to cooperate with any action by Buyer to obtain an appropriate
protective order or other reliable assurance that confidential
treatment will be accorded to such portion of the disclosed
Confidential Information which Buyer so designates. The foregoing
notwithstanding, Sellers may disclose the existence of this
Agreement, the Purchase Price for the Assets and the terms and
conditions of this Agreement to its attorneys, advisors and
consultants or as required to be disclosed pursuant to applicable
federal and state securities and tax laws.
14.9 Audited Financial Statements. Sellers shall provide to
Buyer within sixty (60) days following the Closing Date, such
audited financial statements as are required by the Securities and
Exchange Commission to be included in any Form 8-K Current Report
filed in respect of the consummation of the transactions
contemplated hereby.
14.10 Access to Danube Corporate Office.Buyer hereby grants to
Sellers the right to obtain access to the Facility comprising
Danube's pre-Closing corporate offices during the sixty (60) day
period beginning on the Closing Date and (subject to the sale of
such Facility), if necessary, for an additional thirty (30) day
period thereafter, for the purpose of winding up its Business and
performing other administrative activities. Sellers shall be
responsible for the payment of utilities used by Sellers. Sellers
shall not alter or damage such office space and shall indemnify and
hold Buyer harmless from all damages, costs and claims resulting
from Sellers' use of that office space.
14.11 Rebates and Discounts on Open Orders.Sellers shall be
responsible for, and indemnify Buyer in respect of, any Shelter
(and not Danube) rebates, discounts or other price adjustments
applicable to any open orders assumed and filled by Buyer pursuant
to Section 6.1 (a)(iii).
ARTICLE XV
MISCELLANEOUS
15.1 Risk Of Loss. The risk of loss or damage to the Pur
chased Assets from fire, storm, act of God or other casualty shall
be borne by Sellers through the Closing Date.
15.2 Simultaneous Closing. All transactions at Closing including
execution of Related Documents shall be deemed to take place
simultaneously and none shall be deemed to take place until all
shall have taken place.
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15.3 Survival of Representations and Warranties. The
representations and warranties in this Agreement, in any Related
Document or in any exhibit, list, instrument or document delivered
in connection herewith or therewith shall survive the Closing for a
period of eighteen (18) months thereafter; provided, however, that
(a) representations, warranties and covenants with respect to tort
product liability matters shall survive the Closing for the
applicable statutory period of limitations and (b) representations
and warranties with respect to title to the Assets and with respect
to Environmental Matters shall survive the Closing for five (5)
years. Notwithstanding anything contained herein to the contrary,
any covenant, agreement, representation or warranty in respect of
which indemnity may be sought pursuant to this Agreement, shall
survive the time at which it would otherwise terminate pursuant to
the preceding sentence, if, prior to such time, written notice of a
good faith claim, breach or inaccuracy thereof giving rise to such
indemnity shall have been given to the other party specifying in
reasonable detail the factual basis thereof and referencing the
provision of this Agreement pursuant to which the claim is being
asserted.
15.4 Arbitration. Except as otherwise provided herein, any
controversy, dispute or question arising out of, or in connection
with, or in relation to this Agreement or its interpretation,
performance or non-performance or any breach thereof shall be
determined by arbitration conducted in Chattanooga, Tennessee in
accordance with the then existing rules of The American Arbitration
Association and any decision rendered by The American Arbitration
Association shall be binding upon the parties hereto. Any judgment
upon any award, which may include an award of damages, may be
entered in the highest State or Federal court having jurisdiction
thereof. The expense of arbitration shall be borne equally by the
parties involved.
15.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original,
and all of which together shall constitute one and the same
instrument.
15.6 Notices. Any and all notices, certificates, demands or
other communications permitted or required to be made under this
Agreement shall be in writing signed by the party giving such
notice or demand, and delivered personally, or sent by
(i) facsimile transmission, (ii) recognized overnight delivery
service or (iii) registered or certified mail to the other party at
the address set forth below, or at such other address as may be
supplied in writing pursuant to the terms of this section. The
recipient of such notice shall be deemed to have received the
notice (i) on the date of delivery or the date of transmission if
the notice was personally delivered or sent by facsimile
transmission on a Business Day (or if not a Business Day then the
next Business Day), (ii) on the Business Day after dispatch if the
notice was sent by recognized overnight delivery service or
(iii) five (5) days after dispatch if sent by registered or
certified mail. The rejection or inability to deliver because of a
change of address of which no notice has been given shall not
effect the validity of any notice or demand sent in accordance with
the provisions hereof. For purposes of this Agreement, notices
shall be addressed as follows:
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If to Buyer at:
Carriage Industries, Inc.
c/o Dixie Yarns, Inc.
1100 South Watkins Street
Chattanooga, Tennessee 37404
Attention: William N. Fry
Facsimile No.: (423) 493-7442
with a required copy to:
Witt, Gaither & Whitaker, P.C.
1100 SunTrust Bank Bldg.
Chattanooga, Tennessee 37402
Attention: Ralph M. Killebrew, Jr., Esq.
Facsimile No: (423) 266-4138
If to Sellers at:
Shelter Components Corporation
2831 Dexter Drive
Elkhart, IN 46514
Attention: Mark Neilson
Facsimile No: (219) 262-2213
with a required copy to:
Shelter Components Corporation
2831 Dexter Drive
Elkhart, IN 46514
Attention: General Counsel
Facsimile No: (219) 262-1973
15.7 Entire Agreement, Modification. This instrument
contains the entire agreement of the parties with respect to the
subject matter hereof; all previous agreements and discussions
relating to the same or similar subject matter being merged herein.
The parties acknowledge and agree that neither of them has made any
representation with respect to the subject matter of this Agreement
or any representations inducing the execution and delivery hereof
except as specifically set forth herein. Each of the parties
hereto acknowledges that it has relied on its own judgment in
entering into this Agreement. This Agreement may not be changed,
amended, or modified including specifically the provisions of this
paragraph, except by a writing signed by both parties hereto. The
provisions of this paragraph may not be changed, amended, modified,
terminated, or waived as a result of any failure to enforce any
provision or the waiver of any specific breach or breaches thereof
or any course of conduct of the parties.
15.8 Assignment. This Agreement and the rights, obligations
and duties of the parties hereto shall not be assignable or
otherwise transferable to any party other than to a related party
of Buyer.
15.9 Binding Effect and Benefit. This Agreement shall inure
to the benefit of, and shall be binding upon, the parties, their
heirs, executors and administrators, successors and permitted
assigns.
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15.10 Further Assurances. Danube shall on the Closing Date,
and from time to time thereafter promptly at Buyer's request and
without further consideration, execute and deliver to Buyer such
instruments of transfer, conveyance and assignment as Buyer shall
reasonably request to transfer, convey and assign more effectively
the Purchased Assets to Buyer.
15.11 Partial Invalidation. If any portion of this Agreement
is held invalid, illegal or unenforceable, such determination shall
not impair the enforceability of the remaining terms and provisions
contained herein. In such event, this Agreement shall be construed
and interpreted as if such invalid, illegal or unenforceable terms
were limited to the minimum extent whereby such terms would be
valid, legal and enforceable. If such limitation is not possible,
this Agreement shall be construed and interpreted as if such
invalid, illegal or unenforceable terms were severed and not
included herein.
15.12 Waiver. No waiver of a breach or violation of any
provision of this Agreement shall operate or be construed as a
waiver of any subsequent breach.
15.13 Exhibits and Schedules. All Exhibits, Schedules and
documents referred to in this Agreement shall be deemed to be
incorporated herein by any reference thereto as if fully set out,
yet no matter disclosed in one Schedule or Exhibit shall be deemed
disclosed in another Schedule or Exhibit in the absence of an
express cross-reference.
15.14 No Third Party Beneficiaries. This Agreement shall not
create any rights for the benefit of any third party.
15.15 Governing Law. This Agreement shall be interpreted
and construed in accordance with the laws of the State of Georgia.
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IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year aforesaid.
SELLERS:
DANUBE CARPET MILLS, INC.
By:___________________________
SHELTER COMPONENTS CORPORATION
By:___________________________
BUYER:
CARRIAGE INDUSTRIES, INC.
By:____________________________
DIXIE:
DIXIE YARNS, INC.
By:______________________________
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ASSET PURCHASE AGREEMENT
BY AND AMONG
DANUBE CARPET MILLS, INC. ("DANUBE")
SHELTER COMPONENTS CORPORATION ("SHELTER")
CARRIAGE INDUSTRIES, INC. ("CARRIAGE")
AND DIXIE YARNS, INC. ("DIXIE")
Schedule 1.1 Other Inventory
Schedule 2.1(a) Parcels of Land
Schedule 2.1(b) Leases (real property)
Schedule 2.1(f) Motor Vehicles
Schedule 2.1(g) Fixed Assets
Schedule 2.1(h) Customers
Schedule 2.1(j)(i) Tradenames and Trademarks
Schedule 2.1(j)(iii) Rights
Schedule 2.1(l) Contracts
Schedule 2.1(o) Telephone Numbers, Etc.
Schedule 2.1(q) Shelter Assets
Schedule 2.2 Other Excluded Assets
Schedule 3.1 Payment of Purchase Price
Schedule 4.3 Inventory Cost Method
Schedule 6.1(a) Assumed Liabilities
Schedule 8.5 Authority
Schedule 8.6 Consigned Stock Locations
Schedule 8.7 Sales Analysis
Schedule 8.9 Consents
Schedule 8.11 Absence of Change
Schedule 8.13 Suppliers and Customers
Schedule 8.14 Contracts
Schedule 8.15 Change in Business
Schedule 8.17(c) Yarntex Permits
Schedule 8.17(d) Notice of Violations
Schedule 8.18 Litigation
Schedule 8.20 Employee Contracts, etc.
Schedule 8.21(c) Welfare Plans
Schedule 8.23 Insurance
Schedule 8.26 Environmental, Health and Safety
Schedule 9.2 Consents
Schedule 11.2 Termination of Employees
Exhibit A Adjacent Property
Exhibit B Danube Financial Statements
Exhibit C Environmental List
Exhibit D Information Package
Exhibit E Assignment and Assumption Agreement
Exhibit F Yarntex Lease
Exhibit G Ft. Oglethorpe Lease
Exhibit H Finishing Lease
Exhibit I Assignment of Option
Exhibit J Corporate Resolutions
Exhibit K Environmental Audits
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Exhibit 99.1
CONTACT:
Mark C. Neilson, CFO
Phone: 800-571-6929
Fax: 219-262-2213
Internet:
http://iw.zacks.com/firm/SST_cvr.htm
NEWS
RELEASE
SHELTER COMPONENTS CORPORATION
January 2, 1997
SHELTER COMPONENTS CORPORATION
COMPLETES THE SALE OF ITS CARPET OPERATIONS
Elkhart, IN, January 2, 1997,--Shelter Components Corporation
(SST-AMEX) announced today that it completed the sale of the net
assets and operations of its carpet manufacturing subsidiary,
Danube Carpet Mills, Inc. of Fort Oglethorpe, GA to Dixie Yarns,
Inc. (NASDAQ:DXYN) of Chattanooga, Tennessee effective December 31,
1996. Danube's 1996 revenues represent approximately $75 million
(15%) of Shelter's consolidated net sales, which are anticipated to
surpass $500 million in calendar year 1996.
The selling price, (subject to certain adjustments) was
approximately $25 million, consisting of $18.2 million in cash,
$4.4 million in accounts receivable retained by Shelter and $2.4
million deferred for certain real estate not yet conveyed to Dixie.
The Company indicated that it had not yet reached a decision on the
re-investment of the net proceeds from the sale. The Company
anticipates reporting a gain on the sale of the carpet operations
in its fourth quarter results which are schedfuled to be realeased
in late January.
Proforma results of the Company, excluding Danube Carpet Mills,
Inc., will be available when the Company files its Form 8-K with
the SEC in January.
Shelter Components Corporation, operating through its various
subsidiaries, is a nationwide distributor of hardware, fasteners,
building products, vinyl windows, floor coverings, plumbing,
electrical products, and decorative wallboard used principally in
the production of manufactured housing, modular housing, and
recreational vehicles. The Company also thermoforms plastic bath
products in Michigan and Texas, and laminates decorative wallboard
in Indiana, Georgia, Tennessee and Texas.
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Exhibit 99.2
CONTACT:
Mark C. Neilson, CFO
Phone: 800-571-6929
Fax: 219-262-2213
Internet:
http://iw.zacks.com/firm/SST_cvr.htm
NEWS
RELEASE
SHELTER COMPONENTS CORPORATION
January 9, 1997
SHELTER COMPONENTS CORPORATION
APPOINTS RAY STULTS PRESIDENT
Elkhart, Indiana, January 9, 1997 - G. Ray Stults has been named
President of Shelter Components Corporation effective immediately,
according to Larry D. Renbarger, Chief Executive Officer. As
President of Shelter Components Corporation, Mr. Stults will assume
full responsibility for all the day-to-day operations of the
Company. All operating divisions and all resource operations will
report to Mr. Stults, who will also continue to be the Chief
Operating Officer.
Mr. Renbarger, the former President of Shelter will retain the
title and responsibilities of Chief Executive Officer.
Shelter Components Corporation through its operating companies,
manufactures and distributes a broad array of products primarily to
the manufactured housing, modular housing and recreational vehicle
industries nationally.
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