<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January , 1998
PLUMA, INC.
(Exact name of Registrant as specified in Charter)
North Carolina 333-18755 56-1541893
(State of (Commission File (IRS Employer
incorporation) Number) Identification No.)
801 Fieldcrest Road
Eden, North Carolina 27289-0487
(Address of principal executive offices) (Zip Code)
(910) 635-4000
(Registrant's telephone number, including area code)
1
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On December 30, 1997, Pluma, Inc. (the "Company") acquired for cash
from Frank L. Robinson Company, a California general partnership having its
corporate headquarters in Los Angeles, California (the "Seller"), substantially
all the assets and properties of the Seller, real and personal, tangible and
intangible, of every kind and description, wherever located, used by the Seller
in connection with the operation of its national wholesale distributorship for
apparel products (the "Business").
The assets acquired by the Company from the Seller (the "FLR Assets")
included certain tangible personal property (machinery, equipment, tools,
furniture, office equipment, supplies, materials and other items of tangible
personal property of every kind owned by the Seller and used in connection
with the Business, wherever located and whether or not carried on the Seller's
financial books); inventories; (exclusive of certain obsolete inventory); other
tangible assets; certain contract rights; accounts receivable and trade
accounts due the Seller; all the intellectual property used by the Seller in
connection with the Business; all authorizations, certificates, approvals and
licenses relating to the operation of the Business; all records, technical data,
asset ledgers, books of accounts, inventory records, budgets, customer and
supplier lists, payroll and personnel records, computer programs, correspondence
and other files; all the Seller's rights to any choses in action, claims, causes
or rights of action; certain expenses prepaid by the Seller; and any and all of
the Seller's goodwill in and going concern value of the Business. The FLR Assets
were acquired by the Company free and clear of all liabilities, obligations,
liens, security interests and encumbrances except for a purchase money lien on
two fork lifts.
Excluded from the FLR Assets acquired by the Company were the Seller's
cash and securities; certain prepaid items; certain personal property and
insurance policies relating to the Business; all pension, profit sharing or
savings plans; certain contracts; and certain other identified assets.
The Company paid the Seller for the FLR Assets a total of $17,250,000.00 in
cash less accrued employee vacation and perfect attendance liabilities of Seller
as of the closing date in the approximate amount of $16,000. In addition to the
payment of the purchase price referenced above, the Company assumed Seller's
obligations under certain contracts and agreed to pay specific trade payables of
Seller incurred in the ordinary course of business as of December 30, 1997 (in
the approximate amount of $10,530,550, less $7,811,194 of such payables owed
to the Company), which amount will be finally determined during a post-closing
adjustment period. The Company also agreed to assume Seller's obligation for
certain accrued employee vacation and perfect attendance liabilities referenced
above.
2
<PAGE>
The purchase price paid to Seller is subject to adjustment as follows:
(i) if Seller's trade payables owed to the Company as of the
closing date ($7,811,194) exceeds the value of that portion of Seller's
inventories (as of the closing date) manufactured by the Company, the
purchase price will be reduced one dollar for each dollar of such
excess;
(ii) if Seller's trade payables owed to the Company as of the
closing date are less than the value of that portion of Seller's
inventories (as of the closing date) manufactured by the Company, the
purchase price will be increased one dollar for each dollar of such
shortfall;
(iii) if Seller's "adjusted working capital" as of the closing
date is less than Nine Million, Eight Hundred Sixteen Thousand and
no/100 Dollars ($9,816,000), the purchase price shall be reduced one
dollar for each one dollar of such shortfall. For purposes of this
transaction, "adjusted working capital" means Seller's trade accounts
receivable (as adjusted to reflect a reserve for uncollectible
accounts) plus Seller's inventories valued the lower of invoice cost
or market value (exclusive of that portion of the Seller's inventories
manufactured by the Company) plus other current assets purchased by the
Company, less Seller's trade accounts payable (exclusive of accounts
due the Company) less other current liabilities assumed by the Company
at closing; and
(iv) if the purchase price (as adjusted in (i) or (ii) above)
exceeds the "Net Asset Value" of the FLR Assets by more than Seven
Million, Four Hundred Thirty-Four Thousand and no/100 Dollars
($7,434,000), the purchase price shall be reduced one dollar for each
one dollar of such excess. "Net Asset Value" means the value of the
tangible FLR Assets (as reflected on Seller's books as of the closing
date) minus the amount of all Seller's liabilities assumed by the
Company at the closing of this transaction.
Any adjustment to be made to the purchase price in the manner set forth
above shall be determined during a post-closing adjustment period and settled
from an escow account into which a portion of the purchase price was deposited.
The FLR Assets were used by the Seller in its operation of the
Business. The Company is one of several manufacturers supplying apparel
products, namely fleece goods (i.e., sweatshirts, sweatpants), and tee shirts,
to the Seller. The Company will continue to use the FLR Assets in connection
with the national wholesale distribution of apparel products from the Seller's
current business location in Los Angeles.
The purchase price paid for the FLR Assets was established by
applying a multiple to the anticipated earnings attributable to the purchased
assets after integration into the Company's existing operations.
As consideration for the Company's purchase of the FLR Assets, the
Seller and its partners (Harold Robinson, Carole Robinson, Jeffrey N. Robinson
and James H. Robinson) agreed that for a period of five (5) years (or, in the
case of any partner who is employed by the Company, for a period of one (1) year
after the termination of such employment if such period is longer than five (5)
years from the Closing Date) they will not engage in the business of a wholesale
distributorship of apparel products within the entire United States except as an
employee of the Company. Additionally, Jeffrey N. Robinson, the chief operating
officer of the Seller, executed a three (3) year employment contract with the
Company.
The source of funds paid by the Company to the Seller was a new
short-term credit facility consisting of a Revolving Line of Credit in an amount
not to exceed $100,000,000.00 to be repaid in full on April 30, 1998 (the
"Loan"). The Loan was obtained from NationsBank, N.A., for the purposes of
funding the acquisition of the FLR Assets and certain assets of another
unrelated seller recently acquired by the Company; refinancing existing debt;
and providing general working capital. The Company intends to replace the Loan
with a permanent syndicated credit facility.
There is no material relationship between the Seller or any of its
partners and the Company or any of the Company's affiliates, directors, or
officers or any affiliates of the Company's directors and officers.
3
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of the business acquired.
Pursuant to Accounting Rule (section mark) 210.3-05(b)(2)(i)
of Regulation S-X (17 C.F.R. (section mark) 210.3-05(b)(2)(i)),
financial statements are not required to be filed with this Report.
(b) ProForma financial information.
Pursuant to Accounting Rule (section mark) 210.11-01(c) of
Regulation S-X (17 C.F.R. (section mark) 210.11-01(c)), the proforma
effects of a business combination will not be presented with this
Report since financial statements of the acquired business are not
required to be filed with this Report.
(c) Exhibits.
(1) Asset Purchase Agreement among Pluma, Inc., Frank
L. Robinson Company, Harold Robinson, Carole
Robinson, Jeffrey H. Robinson and James H. Robinson
dated as of December 30, 1997.
4
<PAGE>
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.
PLUMA, INC.
/s/ Forrest H. Truitt, II
By: _____________________________________
Forrest H. Truitt, II
Executive Vice President, Treasurer
and Chief Financial Officer
Dated: January , 1998
5
ASSET PURCHASE AGREEMENT
AMONG
PLUMA, INC.,
FRANK L. ROBINSON COMPANY
AND
THE PARTNERS OF FRANK L. ROBINSON COMPANY
DATED AS OF
December 30, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C> <C>
ARTICLE I.........................................................................................................1
SALE AND PURCHASE OF ASSETS..............................................................................1
1.1 Transfer of Assets.....................................................................1
------------------
1.2 Purchased Assets.......................................................................1
----------------
(a) Tangible Personal Property....................................................1
--------------------------
(b) Inventories...................................................................2
-----------
(c) Other Tangible Assets.........................................................2
---------------------
(d) Assumed Contracts.............................................................2
-----------------
(e) Accounts Receivable...........................................................2
-------------------
(f) Intellectual Property.........................................................2
---------------------
(g) Permits.......................................................................2
-------
(h) Records.......................................................................2
-------
(i) Claims........................................................................2
------
(j) Prepaid Items.................................................................2
-------------
(k) Yates Lease...................................................................3
-----------
(l) Goodwill......................................................................3
--------
1.3 Excluded Assets........................................................................3
---------------
(a) Cash; Securities..............................................................3
----------------
(b) Prepaid Items.................................................................3
-------------
(c) Personal Property Disposed Of.................................................3
-----------------------------
(d) Insurance.....................................................................3
---------
(e) Assets of Benefit Plans.......................................................3
-----------------------
(f) Certain Records...............................................................3
---------------
(g) Certain Contracts.............................................................3
-----------------
(h) Real Property.................................................................3
-------------
(i) Other Assets..................................................................3
------------
1.4 Liabilities............................................................................3
-----------
ARTICLE II........................................................................................................4
CONSIDERATION............................................................................................4
2.1 Purchase Price.........................................................................4
--------------
(a) General.......................................................................4
-------
(b) Closing Balance Sheet.........................................................5
---------------------
(c) Purchase Price Adjustments....................................................6
--------------------------
(i) Pluma Inventory and Payables..........................................6
(ii) Adjusted Working Capital..............................................6
(iii) Net Asset Value.......................................................6
(d) Dispute Resolution............................................................6
(e) Instructions to Escrow Agent; Other Payments..................................7
2.2 Allocation.............................................................................7
----------
2.3 Proration of Certain Items.............................................................7
--------------------------
(a) Operating Expenses............................................................7
(b) Taxes.........................................................................8
(c) Utilities; Rental Payments....................................................8
(d) Prepaid Items.................................................................8
i
<PAGE>
2.4 Noncompetition.........................................................................8
--------------
ARTICLE III.......................................................................................................9
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARTNERS....................................................9
3.1 Organization and Good Standing; Governing Documents....................................9
---------------------------------------------------
3.2 Authority..............................................................................9
---------
3.3 No Conflict or Breach.................................................................10
---------------------
3.4 Consents and Approvals................................................................10
----------------------
3.5 Financial Statements..................................................................10
--------------------
3.6 Books and Records.....................................................................11
-----------------
3.7 Title to and Sufficiency of Assets....................................................11
----------------------------------
3.8 Real Property.........................................................................11
-------------
(a) Owned........................................................................11
(b) Leased.......................................................................12
(c) Improvements; Zoning.........................................................12
3.9 Tangible Personal Property............................................................12
--------------------------
3.10 Inventories...........................................................................12
-----------
3.11 Contracts.............................................................................12
---------
3.12 Receivables...........................................................................13
-----------
3.13 Intellectual Property.................................................................13
---------------------
3.14 Major Suppliers and Customers.........................................................14
-----------------------------
3.15 Litigation............................................................................14
----------
3.16 Compliance with Decrees and Laws......................................................14
--------------------------------
3.17 Permits...............................................................................14
-------
3.18 Taxes.................................................................................15
-----
3.19 Environmental Matters.................................................................15
---------------------
3.20 Insurance.............................................................................17
---------
3.21 Labor and Employment Matters..........................................................17
----------------------------
3.22 Employees; Compensation; Benefit Plans................................................17
--------------------------------------
(a) Employees; Compensation......................................................17
(b) Employee Benefit Plans.......................................................18
3.23 Absence of Certain Changes............................................................20
--------------------------
3.24 Warranties............................................................................20
----------
3.25 Related Party Transactions............................................................21
--------------------------
3.26 Brokers...............................................................................21
-------
3.27 Names.................................................................................21
-----
3.28 Disclosure............................................................................21
----------
ARTICLE IV.......................................................................................................21
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................21
4.1 Organization and Good Standing........................................................21
------------------------------
4.2 Authority.............................................................................21
---------
4.3 No Conflict or Breach.................................................................22
---------------------
4.4 Governmental Approvals................................................................22
----------------------
4.5 Brokers...............................................................................22
-------
ARTICLE V........................................................................................................22
MUTUAL COVENANTS........................................................................................22
ii
<PAGE>
5.1 Best Efforts..........................................................................22
------------
5.2 Confidentiality.......................................................................23
---------------
5.3 August 31 Audit.......................................................................23
---------------
5.4 Employee Benefit Matters; Employees...................................................23
-----------------------------------
5.5 Collection of Receivables.............................................................25
-------------------------
ARTICLE VI.......................................................................................................26
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.............................................................26
6.1 Representations and Warranties........................................................26
------------------------------
6.2 Compliance with Covenants.............................................................26
-------------------------
6.3 Absence of Litigation.................................................................26
---------------------
6.4 Absence of Change.....................................................................26
-----------------
6.5 Consents and Approvals................................................................26
----------------------
6.6 Environmental Audit...................................................................26
-------------------
6.7 Removal of Liens......................................................................27
----------------
6.8 Legal Opinion.........................................................................27
-------------
6.9 Key Employee..........................................................................27
------------
6.10 August 31 Balance Sheet...............................................................27
-----------------------
6.11 Yates Premises........................................................................27
--------------
6.12 Dismissal of Lawsuit..................................................................27
--------------------
ARTICLE VII......................................................................................................27
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS............................................................27
7.1 Representations and Warranties........................................................27
------------------------------
7.2 Compliance with Covenants.............................................................27
-------------------------
7.3 Absence of Litigation.................................................................28
---------------------
7.4 Consents and Approvals................................................................28
----------------------
7.5 HSR Termination.......................................................................28
---------------
7.6 Legal Opinion.........................................................................28
-------------
ARTICLE VIII.....................................................................................................28
CLOSING ...............................................................................................28
8.1 Closing...............................................................................28
-------
8.2 Deliveries by Seller..................................................................28
--------------------
8.3 Deliveries by Buyer...................................................................29
-------------------
8.4 Mutual Deliveries.....................................................................29
-----------------
8.5 Further Assurances....................................................................30
------------------
ARTICLE IX.......................................................................................................30
INDEMNIFICATION.........................................................................................30
9.1 Indemnification by Seller.............................................................30
-------------------------
9.2 Indemnification by Buyer..............................................................31
------------------------
9.3 Notice of Claim.......................................................................31
---------------
9.4 Defense...............................................................................31
-------
9.5 Time for Claims.......................................................................32
---------------
9.6 Escrow................................................................................32
------
9.7 Sole Remedy...........................................................................32
-----------
iii
<PAGE>
9.8 Disclaimer Regarding Projections......................................................32
--------------------------------
9.9 Threshold.............................................................................32
---------
9.10 Ceiling...............................................................................33
-------
ARTICLE X........................................................................................................33
TERMINATION.............................................................................................33
10.1 Termination...........................................................................33
-----------
10.2 Effect on Obligations.................................................................34
---------------------
ARTICLE XI.......................................................................................................34
MISCELLANEOUS...........................................................................................34
11.1 Survival of Representations...........................................................34
---------------------------
11.2 Bulk Sales............................................................................34
----------
11.3 Risk of Loss..........................................................................34
------------
11.4 Expenses; Taxes.......................................................................35
---------------
11.5 Seller Employees......................................................................35
----------------
11.6 Publicity.............................................................................35
---------
11.7 Best Efforts..........................................................................35
------------
11.8 Notices...............................................................................35
-------
11.9 Governing Law.........................................................................37
-------------
11.10 Mediation/Arbitration.................................................................37
---------------------
11.11 Counterparts..........................................................................38
------------
11.12 Assignment............................................................................38
----------
11.13 Third Party Beneficiaries.............................................................38
-------------------------
11.14 Headings..............................................................................38
--------
11.15 Knowledge.............................................................................38
---------
11.16 Amendments............................................................................38
----------
11.17 Specific Performance..................................................................38
--------------------
11.18 Severability..........................................................................39
------------
11.19 Construction..........................................................................39
------------
11.20 Entire Agreement......................................................................39
----------------
</TABLE>
iv
<PAGE>
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Audit Procedures
Exhibit C Bill of Sale and Assignment
Exhibit D Instrument of Assumption
SCHEDULES
Schedule 1.2(a) Tangible Personal Property
Schedule 1.2(d) Assumed Contracts
Schedule 1.2(f) Intellectual Property
Schedule 1.2(g) Transferred Permits
Schedule 1.3(i) Other Excluded Assets
Schedule 1.4(b) Certain Accrued Expenses
Schedule 2.3(d) Certain Prepaid Items
Schedule 3.1 Foreign Qualifications
Schedule 3.4 Required Consents
Schedule 3.5 Financial Statement Matters
Schedule 3.7(b) Contested Tax Liens
Schedule 3.7(c) Other Liens
Schedule 3.8 Leased Real Property
Schedule 3.11 Material Contracts
Schedule 3.12 Receivables Set-Offs
Schedule 3.14 Major Suppliers and Customers
Schedule 3.15 Litigation
Schedule 3.17 Permits
Schedule 3.19 Environmental Matters
Schedule 3.20 Insurance Policies
Schedule 3.21 Employee Matters
Schedule 3.22 Employees; Employee Benefit Plans
Schedule 3.23 Absence of Changes
v
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (together with all Schedules and
Exhibits hereto, this "Agreement"), dated as of December 30, 1997, is entered
into by and among PLUMA, INC., a North Carolina corporation ("Buyer"), FRANK L.
ROBINSON COMPANY, a California general partnership ("Seller") and HAROLD
ROBINSON, CAROLE ROBINSON, JEFFREY N. ROBINSON and JAMES H. ROBINSON, who
constitute all of the partners of Seller (collectively, the "Partners").
R E C I T A L S :
1. Seller is headquartered in City of Commerce, California,
and is the owner and operator of a national wholesale distributorship for
apparel products (the "Business").
2. Seller desires to sell, and Buyer desires to buy,
substantially all of the assets of Seller used in or relating to the operation
of the Business, on the terms and conditions set forth in this Agreement.
THEREFORE, Seller and Buyer agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Transfer of Assets. Seller agrees to sell, assign,
transfer and deliver to Buyer, and Buyer agrees to purchase and accept from
Seller, at the Closing (as defined below) substantially all of the assets and
properties of Seller, real and personal, tangible and intangible, of every kind
and description, wherever located, used by Seller in connection with the
operations of the Business, but excluding certain assets described in Section
1.3. The assets being sold hereunder are collectively referred to as the
"Purchased Assets", and the assets described in Section 1.3 are collectively
referred to as the "Excluded Assets".
1.2 Purchased Assets. The Purchased Assets specifically
include, but are not limited to, the following:
(a) Tangible Personal Property. All machinery,
equipment, tools, furniture, office equipment, supplies, materials,
vehicles and other items of tangible personal property of every kind
owned by Seller and used in connection with the Business (wherever
located and whether or not carried on the Seller's books), including
without limitation those listed on Schedule 1.2(a) (the "Tangible
Personal Property"), and any additions, improvements, replacements and
alterations thereto made between the date of this Agreement and the
Closing Date, together with any express or implied warranty by the
manufacturers or sellers of any item or component part thereof, and all
maintenance records and other documents relating thereto.
<PAGE>
(b) Inventories. All inventories of the Business as
of the Effective Time (as defined below) (the "Inventory"); provided
that the Inventory shall not include certain obsolete items which are
listed on Schedule 1.3(i).
(c) Other Tangible Assets. All other tangible assets
of Seller of every kind and description, real, personal or mixed,
wherever located, which are carried on the books of the Business or
which are owned by Seller and used in connection with the Business.
(d) Assumed Contracts. All of Seller's interest in
those certain Contracts (as defined in Section 3.11 below) that are
described on Schedule 1.2(d) (the "Assumed Contracts").
(e) Accounts Receivable. All accounts receivable and
trade accounts carried on the books of Seller as of the Effective Time,
except for those listed on Schedule 1.3(i), due to Seller in connection
with the Business (the "Receivables"), and the full benefit of any
security therefor.
(f) Intellectual Property. All of the intellectual
property rights that are owned or used by Seller in connection with the
Business, including without limitation the following: (A) all
trademarks, service marks, trade names, logos and other designations,
including without limitation the name "Frank L. Robinson Company" and
any variations thereof (the "Marks") and all registrations relating
thereto, (B) all copyrighted works (the "Copyrights") and registrations
therefor, (C) all inventions that are the subject of letters patent or
applications therefor (the "Patents") and (D) all confidential or
proprietary processes, formulas, technical data and other similar
information that is of commercial value to the Business (the "Trade
Secrets") (the Marks and registrations therefor, Copyrights and
registrations therefor, Patents and Trade Secrets being referred to
collectively herein as the "Intellectual Property"), together with the
goodwill related thereto, and any royalty income from the Intellectual
Property accruing after the Effective Time. All items of Intellectual
Property are described on Schedule 1.2(f).
(g) Permits. All permits, authorizations,
certificates, approvals and licenses relating to the operation of the
Business that are legally transferable, including without limitation
those listed on Schedule 1.2(g) (the "Permits").
(h) Records. All records, technical data, asset
ledgers, inventory records, budgets, customer and supplier lists,
payroll and personnel records, computer programs, correspondence and
other files of Seller created or maintained in connection with the
Business.
(i) Claims. All of Seller's rights to any choses in
action, claims, causes or rights of action arising in connection with
the Business.
(j) Prepaid Items. Those prepaid expenses which will
benefit Buyer in its normal operation of the Business after the Closing
in an amount equivalent to such items' book value as reflected on the
Closing Balance Sheet.
(k) Yates Lease. All of Seller's right, title and
interest in and under the Yates Lease (as defined in Section 3.8).
(l) Goodwill. Any and all of Seller's goodwill in and
going concern value of
<PAGE>
the Business.
1.3 Excluded Assets. The following assets shall be excluded
from the Purchased Assets and shall be retained by Seller:
(a) Cash; Securities. All cash on hand and on deposit
in banks, cash equivalents, marketable securities and investments.
(b) Prepaid Items. All prepaid expenses which will
not benefit Buyer in its normal operation of the Business after the
Closing in an amount equivalent to such items' book value as reflected
on the Closing Balance Sheet.
(c) Personal Property Disposed Of. All tangible
personal property disposed of or consumed in the ordinary course of
business of the Business or with the written consent of Buyer between
the date hereof and the Closing Date.
(d) Insurance. All insurance policies relating to the
Business, including policies relating to property, liability, business
interruption, health and workers' compensation and lives of officers of
Seller, except for those identified as "Assumed Contracts" on Schedule
1.2(d).
(e) Assets of Benefit Plans. Pension, profit sharing
or savings plans and trusts and the assets thereof.
(f) Certain Records. Minute books of Seller.
(g) Certain Contracts. Any Contracts entered into by
Seller or by which Seller or any of the Purchased Assets is bound,
other than the Assumed Contracts.
(h) Real Property. Any of Seller's interests in owned
or leased real property, except for the Yates Lease.
(i) Other Assets. The assets listed on Schedule
1.3(i).
1.4 Liabilities.
(a) The Purchased Assets shall be sold and conveyed
to Buyer free and clear of all liabilities, obligations, liens,
security interests and encumbrances whatsoever. Buyer shall in no event
assume or be liable for any liability or obligation not specifically
assumed pursuant to this Section 1.4, and Seller shall retain
responsibility for all liabilities accrued as of the Effective Time (as
defined below in Section 8.1) and all liabilities arising from Seller's
operations prior to the Effective Time, whether or not accrued and
whether or not disclosed. Such liabilities of Seller, excluding the
"Assumed Liabilities" (as that term is defined below) are collectively
referred to herein as the "Excluded Liabilities". Specifically, but
without limiting the generality of the first sentence in this Section
1.4(a), Buyer shall not assume any liability or obligation of Seller
with respect to employees or former employees of Seller (including any
liability for accrued salaries, wages, payroll taxes, severance pay
entitlements, health, medical, retirement, vacation or deferred
compensation benefits); any tort or contractual claims; any taxes due
or claimed to be due in respect of the Purchased Assets or the
operation of the Business prior to the Effective Time; or any liability
in
<PAGE>
respect of the use, storage, transportation, discharge, handling or
disposal of any Hazardous Material (as defined in Section 3.19) prior
to the Effective Time, all of which constitute Excluded Liabilities.
(b) As the only exceptions to the provisions of
paragraph (a) above, Buyer will assume at Closing the following
obligations of Seller (collectively, "Assumed Liabilities"): (i)
obligations of Seller under the Yates Lease and the Assumed Contracts,
to the extent that such obligations are not by their terms required to
be performed prior to the Closing Date (provided that Buyer shall not
assume any obligations for any breach of Seller's obligations under the
Yates Lease or the Assumed Contracts attributable to acts or omissions
of Seller prior to the Effective Time); and (ii) obligations of Seller
for accounts payable and such other accrued expenses agreed by the
parties that are incurred in the ordinary course of operations of the
Business and reflected on the Closing Balance Sheet and, with respect
to accrued expenses, are of the nature described on Schedule 1.4(b)
(collectively, "Assumed Liabilities").
ARTICLE II
CONSIDERATION
2.1 Purchase Price.
(a) General. The aggregate purchase price (the
"Purchase Price") for the Purchased Assets shall be $17,250,000,
subject to adjustment as provided in Section 2.1(c) below. Because the
Purchase Price is subject to adjustment following the Closing Date, the
amount paid on the Closing Date is sometimes referred to in this
Agreement as the "Initial Purchase Price." The Initial Purchase Price
shall be payable on the Closing Date by delivery of the following:
(i) a wire transfer of immediately available
funds in the amount of $4,500,000 to First Union National Bank
(the "Escrow Agent"), which shall hold $3,500,000 (the "Price
Adjustment Holdback Amount") in escrow pending final
determination of the Closing Balance Sheet and the Adjustments
Statement (each as defined below) and shall hold the remaining
$1,000,000 (the "Indemnity Holdback Amount") in escrow until
the 18 month anniversary of the Closing Date, all in
accordance with the escrow agreement attached to this
Agreement as Exhibit A (the "Escrow Agreement"), which will be
executed and delivered at the Closing;
(ii) a wire transfer of immediately
available funds in the amount of $12,750,000 to a single
account designated by Seller, representing the remainder of
the Initial Purchase Price;
(iii) in addition to payment of the Purchase
Price, Buyer shall deliver to Seller the Instrument of
Assumption attached as Exhibit D; and
(iv) in addition to payment of the Purchase
Price, a wire transfer of immediately available funds in the
amount of $83,700 representing the aggregate amount of the
Seller's security deposit and prepaid rent with respect to the
Yates Lease.
(b) Closing Balance Sheet. Incident to the Closing,
Buyer and its independent
<PAGE>
auditors shall conduct a physical count and inspection of the Purchased
Assets, including without limitation the Inventory, as of the Effective
Time, for use in preparation of the Closing Balance Sheet described in
this paragraph. The physical inventory of the Purchased Assets shall be
conducted no later than five days following the Closing Date in
accordance with the policies and procedures described on Exhibit B
attached hereto. As soon as practicable following the Closing Date,
Buyer shall cause to be prepared a statement of Purchased Assets and
Assumed Liabilities as of the Effective Time (the "Closing Balance
Sheet"), and shall have the Closing Balance Sheet audited by Deloitte &
Touche. Seller and its independent auditors shall be permitted to
observe the physical inventory and to review the preparation of the
Closing Balance Sheet and all work papers, books and records associated
with such preparation. Buyer and Seller shall cooperate with each other
and their respective auditors to the extent reasonable and practical in
the course of preparing the Closing Balance Sheet. Buyer shall use its
commercially reasonable best efforts to cause the Closing Balance
Sheet, together with the auditor's report thereon, to be delivered to
Seller within 60 days following the Closing Date, and agrees that it
shall be delivered to Seller in any event no later than the 90th day
following the Closing Date. The Closing Balance Sheet shall be prepared
in accordance with generally accepted accounting principles applied on
a basis consistent with those applied in preparation of the "August 31
Balance Sheet" of Seller (as defined in Section 3.5 below), which
principles are described on Exhibit B attached hereto. The Closing
Balance Sheet shall reflect, among other things, the following items:
(i) all accounts payable of Seller due to Buyer as of the Effective
Time, valued at face value (the "Pluma Payables"); (ii) all Inventory
that consists of goods manufactured by Buyer, valued at the lower of
Buyer's invoice price or market under Accounting Research Bulletin
Number 43 (the "Pluma Inventories"); (iii) an amount to be known as
"Adjusted Working Capital", which shall consist of trade accounts
receivable as adjusted to reflect a reserve for uncollectible accounts,
plus Inventories valued at the lower of invoice cost or market under
Accounting Research Bulletin Number 43 (excluding the Pluma
Inventories), plus other current assets purchased by Buyer, less trade
accounts payable (excluding the Pluma Payables), less other current
liabilities assumed by Buyer, if any. The Closing Balance Sheet shall
form the basis for certain adjustments to the Purchase Price, as
described in Section 2.1(c) below. Buyer shall deliver to Seller at the
same time as the Closing Balance Sheet a statement (the "Adjustments
Statement") showing any Purchase Price adjustment required as a result
of the amounts reflected on Closing Balance Sheet, and specifying the
final Purchase Price, as adjusted (the "Final Purchase Price").
(c) Purchase Price Adjustments.
(i) Pluma Inventory and Payables. If the
Pluma Payables reflected on the Closing Balance Sheet exceed
the Pluma Inventories reflected on the Closing Balance Sheet,
the Purchase Price shall be reduced one dollar for each dollar
of such excess. If the Pluma Payables reflected on the Closing
Balance Sheet are less than the Pluma Inventories reflected on
the Closing Balance Sheet, the Purchase Price shall be
increased one dollar for each dollar of such excess.
(ii) Adjusted Working Capital. If Adjusted
Working Capital reflected on the Closing Balance Sheet is less
than $9,816,000, the Purchase Price shall be reduced one
dollar for each dollar of such shortfall.
(iii) Net Asset Value. If the Initial
Purchase Price, as adjusted pursuant to clauses (i) and (ii)
above, exceeds the "Net Asset Value" (as defined below) by
more than
<PAGE>
$7,434,000, the Purchase Price shall be reduced one dollar for
each dollar of such excess. For purposes of this Section, the
term "Net Asset Value" shall mean the value of all Accounts
Receivable (less reserves), Inventory (less reserves),
property, plant and equipment and other current assets
purchased by Buyer hereunder minus the amount of all
liabilities assumed by Buyer hereunder, all as shown on the
Closing Balance Sheet.
(d) Dispute Resolution. If Seller does not deliver to
Buyer, within 15 business days following its receipt of the Closing
Balance Sheet and the Adjustments Statement, any objection thereto,
then Seller shall be deemed to agree with the Closing Balance Sheet and
the Adjustments Statement, and such documents shall be final and
binding between the parties. If Seller does deliver a notice of
objection within the 15 business day period described above, the
parties agree to negotiate in good faith to resolve their differences
as to any disputed amounts. If they are unable to resolve their
differences within 15 business days after Seller's notice of objection,
then such differences shall be submitted to a mutually agreed upon
office of Ernst & Young or such other nationally recognized independent
certified public accounting firm as may be jointly selected by Buyer
and Seller, who shall act as an arbitrator. The arbitrator shall be
instructed to use its commercially reasonable efforts to perform such
services within 30 days of the submission to it of the Closing Balance
Sheet and Adjustments Statement and the related dispute, and, in any
case, as soon as practicable after such submission. Each of the parties
shall bear all costs and expenses incurred by it (including legal and
accounting fees) in connection with such arbitration; provided,
however, that the fees and expenses of the arbitrator shall be shared
equally by Buyer and Seller. This provision for arbitration shall be
specifically enforceable by the parties and the decision of the
arbitrator shall be final and binding and there shall be no right of
appeal therefrom.
(e) Instructions to Escrow Agent; Other Payments. As
soon as the Closing Balance Sheet and Adjustments Statement have become
final, whether by mutual agreement of the parties or by a decision of
the arbitrator, Buyer and Seller agree to execute joint instructions to
the Escrow Agent and to take other actions, as described below. If
either Buyer or Seller fails to execute such instructions to the Escrow
Agent within three business days following the final decision of the
arbitrator, then the arbitrator is authorized to execute such
instructions and deliver them to the Escrow Agent.
(i) If the Final Purchase Price equals the
Initial Purchase Price, the Escrow Agent shall be instructed
to distribute the entire Price Adjustment Holdback Amount
(with accrued interest) to Seller.
(ii) If the Final Purchase Price is greater
than the Initial Purchase Price, the Escrow Agent shall be
instructed to distribute the entire Price Adjustment Holdback
Amount (with accrued interest) to Seller, and Buyer shall pay
immediately by wire transfer to Seller the excess of the Final
Purchase Price over the Initial Purchase Price.
(iii) If the Final Purchase Price is less
than the Initial Purchase Price, the Escrow Agent shall be
instructed to distribute to Buyer so much of the Price
Adjustment Holdback Amount as shall be equal to such shortfall
(with accrued interest on such amount), and to distribute to
Seller the remainder of the Price Adjustment Holdback Amount,
if any (with accrued interest on such amount). If the Price
Adjustment Holdback Amount is less than the amount of the
shortfall between the Final Purchase Price and the Initial
Purchase Price, then Seller and the Partners jointly and
severally agree to pay
<PAGE>
immediately by wire transfer to Buyer any additional amounts
due to cover such shortfall.
2.2 Allocation. Following completion of the Closing Balance
Sheet and all adjustments to the Initial Purchase Price, the parties agree to
complete the Form 8594 in the form promulgated by the Internal Revenue Service
to show the parties' agreement as to the allocation of the Final Purchase Price
among the assets purchased by Buyer from Seller. The Form 8594 shall reflect the
allocation of $250,000 to the covenants not to compete set forth in Section 2.4
below. Each of Buyer and Seller agrees to file such Form 8594 with its
respective federal income tax return for the tax year in which the Closing
occurs. Each party agrees to deliver to the other a copy of the Form 8594 as
filed with its return within 30 days of filing such return.
2.3 Proration of Certain Items. With respect to certain
expenses incurred in the operation of the Business, the following prorations
shall be made:
7
<PAGE>
(a) Operating Expenses. Subject to the specific
provisions of this Section, Seller shall continue to be responsible for
all costs and expenses attributable to ownership of the Purchased
Assets up to the Effective Time, and Buyer shall become responsible for
all costs and expenses attributable to ownership of the Purchased
Assets from and after the Effective Time.
(b) Taxes. Real and personal ad valorem property
taxes shall be apportioned at the Closing as of the Effective Time,
based on current tax bills if available; and if not available, based on
the most recent tax bills available with appropriate subsequent
adjustment when bills for the current year are received.
(c) Utilities; Rental Payments. Utilities, water,
sewer charges and similar utility charges, as well as rental charges
for leased premises or leased personal property, shall be apportioned
based on the number of operating days occurring before and after the
Effective Time during the billing period or rental period, as the case
may be, for each such charge.
(d) Prepaid Items. Those prepaid expenses and
deferred items and similar other assets which will benefit Buyer in its
normal operation of the Business after the Closing and which are listed
on Schedule 2.3(d) shall be apportioned at the Closing as of the
Effective Time.
Appropriate cash payments by Seller or Buyer, as the case may require, shall be
made from time to time, as soon as practicable after the facts giving rise to
the obligation for such payments are known, to give effect to the prorations
provided in this Section, but in any event no later than the resolution of the
Closing Balance Sheet (except for any adjustments pursuant to the last clause of
Section 2.3(b), which shall be made after tax bills for the current year are
received).
2.4 Noncompetition. As a condition to Buyer's obligation to
purchase the Purchased Assets and in order to ensure to Buyer the full benefits
of the Purchased Assets and the Business, each of Seller and the Partners hereby
covenants and agrees that, during the "Restricted Period" (defined below), he or
it will not in any manner, directly or indirectly, whether as an owner, manager,
lender, consultant, partner, agent, employee, officer or director, engage in the
business of a wholesale distributorship of apparel products within any state in
the United States. In addition, each of Seller and the Partners hereby covenants
and agrees that, during the "Restricted Period" (defined below), he or it will
not directly or indirectly, on behalf of itself or himself or on behalf of any
other person, firm, partnership, corporation, association or other entity, (a)
call upon any of the customers or clients of Seller or Buyer for the purpose of
soliciting or providing any product or service similar to that provided by
Seller or Buyer, or (b) solicit, divert or take away any of the customers,
clients, business or patrons of Seller or Buyer. The term "Restricted Period"
shall mean five years following the Closing Date; provided, however, that in the
case of any Partner who becomes employed by Buyer, the "Restricted Period" shall
mean five years following the Closing Date or one year following termination of
such Partner's employment with Buyer, whichever occurs later. Notwithstanding
the foregoing, the parties agree that (a) Seller and the Partners shall be
permitted, for a period of six months following the Closing Date, to dispose of
those certain items of obsolete inventory which are listed in Schedule 1.3(i),
and that their actions in connection with
8
<PAGE>
such disposition shall not constitute a breach of the covenants of this Section,
and (b) Jeffrey Robinson's performance of his duties under the Employment
Agreement with Pluma described in Section 6.9 shall not constitute a breach of
the covenants in this Section. Seller and Partners acknowledge that any breach
of the covenants of this Section will result in irreparable damage and
continuing injury to Buyer. Therefore, in the event of any breach or threatened
breach of the covenants in this Section, Seller and Partners acknowledge that
Buyer shall be entitled, without limiting any other remedies, to an injunction
restraining Seller or any Partner, as the case may be, from committing any such
violation. Seller and the Partners acknowledge and agree that (a) Seller
presently sells to customers in each state in the United States, (b) the
covenants of this Section are reasonably necessary for the protection of Buyer
and its business, (c) such covenants are reasonably limited with respect to the
activities prohibited, the duration thereof, the geographical area thereof, the
scope thereof and the effect thereof on Seller, the Partners and the public, (d)
the purpose and effect of such covenants is solely to protect Buyer for a
limited period of time from unfair competition by Seller and the Partners and
(e) the purchase of the Purchased Assets is expressly conditioned upon Seller
and the Partners entering into all of the covenants and provisions of this
Section. In the event that any provision of this Section shall be determined by
any court to be unenforceable, this Section shall be interpreted to extend over
the maximum time periods for which it may be enforceable, and to the maximum
extent in any and all other respects as to which it may be enforceable, all as
shall be determined by such court.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARTNERS
Seller and the Partners, jointly and severally, represent and
warrant to Buyer as follows:
3.1 Organization and Good Standing; Governing Documents.
Seller is a general partnership duly organized and validly existing under the
laws of the State of California, and there has not occurred any dissolution of
Seller or any event which, with notice of the passage of time or either, could
cause dissolution of Seller, either pursuant to the terms of its Partnership
Agreement, by operation of law or otherwise. Seller has all requisite power and
authority to own, operate and lease the Purchased Assets and to conduct the
operations of the Business as presently conducted. Seller is duly qualified to
do business and is in good standing in all other jurisdictions in which the
character of the property owned, leased or operated by it or the nature of the
business conducted by it is such that the failure to so qualify would materially
and adversely affect the Business or the value of the Purchased Assets, and such
jurisdictions are listed on Schedule 3.1. Seller has previously delivered to
Buyer true and complete copies of its Partnership Agreement, including all
amendments thereto. The partners of Seller are Harold Robinson, Carole Robinson,
Jeffrey N. Robinson and James H. Robinson, and there are no other persons or
entities having any partnership interest or other ownership interest in Seller.
3.2 Authority. Seller has all requisite partnership power and
authority to execute and deliver this Agreement and the Escrow Agreement and to
perform the transactions contemplated hereby and thereby. Each Partner has full
legal capacity to execute and deliver this Agreement and to perform the
transactions contemplated hereby. The execution, delivery and performance of
this
9
<PAGE>
Agreement have been duly and validly authorized by all necessary action on the
part of Seller. This Agreement has been duly executed and delivered by Seller
and the Partners and constitutes a valid and binding obligation of Seller and
the Partners, enforceable against each of them in accordance with its terms,
except that enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by principles of equity regarding the availability of remedies. The Escrow
Agreement will be duly executed and delivered by Seller at the Closing, and will
constitute at Closing a valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except that enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by principles of equity regarding the
availability of remedies.
3.3 No Conflict or Breach. The execution, delivery and
performance of this Agreement and the Escrow Agreement by Seller and the
Partners do not and will not:
(a) conflict with or constitute a violation of the
Partnership Agreement of Seller;
(b) assuming compliance with the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations thereunder (the "HSR Act"), conflict with or
constitute a violation of any law, statute, judgment, order, decree or
regulation of any legislative body, court, administrative agency,
governmental authority or arbitrator applicable to or relating to
Seller, the Partners or the Purchased Assets;
(c) conflict with, constitute a default under, result
in a breach or acceleration of or, except as set forth on Schedule 3.4,
require notice to or the consent of any third party under any contract,
agreement, lease, commitment, mortgage, note, license or other
instrument or obligation to which Seller or any Partner is party or by
which any of them are bound or by which the Purchased Assets are
affected; or
(d) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever on any of the Purchased
Assets or on any of the funds to be held under the Escrow Agreement.
3.4 Consents and Approvals. Schedule 3.4 describes each of the
following which is required in connection with the valid execution and delivery
by Seller and the Partners of this Agreement, in connection with the valid
execution and delivery by Seller of the Escrow Agreement or in connection with
the consummation by Seller and the Partners of the transactions contemplated
herein and therein (including without limitation the assignment of the Assumed
Contracts to Buyer): (a) each consent, approval, authorization, registration or
filing with any federal, state or local judicial or governmental authority or
administrative agency other than as required under the HSR Act, and (b) each
consent, approval, authorization of or notice to any other third party. The
items described in clauses (a) and (b) are referred to collectively as the
"Required Consents".
3.5 Financial Statements. Seller has previously delivered to
Buyer true and complete copies of the compiled balance sheets of Seller as of
December 31, 1994, 1995 and 1996
10
<PAGE>
and the related statements of operations, partners' equity and cash flows for
the calendar years then ended, including the footnotes and schedules of
operating expenses supplied therewith. In addition, at Buyer's request, Seller
has prepared a balance sheet of Seller as of August 31, 1997 (which balance
sheet will be audited by Deloitte & Touche, as described in Section 5.3 below)
(such balance sheet, including the footnotes thereto and the opinion prepared in
connection therewith by the independent certified public accountants reviewing
the same, are referred to herein as the "August 31 Balance Sheet"). The August
31 Balance Sheet and the documents described in the first sentence of this
Section 3.5 are collectively referred to as the "Financial Statements." Except
as described on Schedule 3.5, each of the Financial Statements:
(a) is in accordance with the books and records of
the Seller;
(b) presents fairly the assets, liabilities and
financial condition of Seller as of the respective dates thereof, and
the results of operations for the periods then ending; and
(c) has been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved.
Seller has no liability or obligation, whether accrued, absolute, or contingent
that is not reflected or reserved against in the August 31 Balance Sheet, except
for those that are not required by generally accepted accounting principles to
be included therein, and except for (i) liabilities identified as such on
Schedule 3.5, (ii) accounts payable, accrued salaries and other employee
benefits that have been incurred in the ordinary course of business since August
31, 1997 and (iii) Seller's obligations under the Assumed Contracts.
3.6 Books and Records. The books and records of Seller
relating to the Business and the Purchased Assets are true, accurate and
complete.
3.7 Title to and Sufficiency of Assets. Seller has good and
marketable title to all of the Purchased Assets, free and clear of any liens,
encumbrances, claims, security interests, mortgages or pledges of any nature
(collectively, "Liens"), other than:
(a) Liens for taxes not yet due and payable;
(b) Liens for taxes being contested in good faith by
appropriate proceedings, all of which are described on Schedule 3.7
(b);
(c) Other Liens described on Schedule 3.7(c); and
(d) With respect to assets that are leased by Seller,
the conditions of the leases therefor.
All Liens described on Schedule 3.7(c) will be removed at or prior to Closing.
The Purchased Assets together with the Excluded Assets constitute all of the
assets, tangible and intangible, of any nature
11
<PAGE>
whatsoever, required to operate the Business in the City of Commerce, California
in the manner presently operated by Seller.
3.8 Real Property.
(a) Owned. Seller owns no real property.
(b) Leased. Schedule 3.8 contains a true and correct
description of all real property leased by Seller and used in
connection with the Business. A true and correct copy of the lease
(including all amendments thereto) for the Yates premises described on
Schedule 3.8 (the "Yates Premises") has previously been delivered to
Buyer (the "Yates Lease"). The Yates Lease is valid, binding and
enforceable by Seller in accordance with its terms and is in full force
and effect; and, to the best knowledge of Seller and the Partners,
there are no offsets or defenses by either landlord or tenant
thereunder. There are no existing defaults, and no events or
circumstances have occurred which, with or without notice or lapse of
time or both, would constitute defaults, under the Yates Lease.
(c) Improvements; Zoning. To the best knowledge of
Seller and the Partners, the Yates Premises are zoned for the various
purposes for which the improvements thereon are presently being used,
and all such improvements are in material compliance with all
applicable zoning and land use laws, ordinances and regulations. All
improvements at the Yates Premises used by Seller are in good repair
and in good operating condition, ordinary wear and tear excepted, and
are free from patent defects and, to the best knowledge of Seller and
the Partners, latent defects. To the best knowledge of Seller, no part
of any such improvement encroaches on any real property not included in
the Yates Premises.
3.9 Tangible Personal Property. Each item of tangible personal
property owned by Seller and used in connection with the Business and valued at
over $2,500 is listed on Schedule 1.2(a), and all tangible personal property
leased by Seller and used in connection with the Business (but excluding those
items described in Schedule 1.3(i), which are Excluded Assets) is described on
Schedule 1.2(d) (which lists Assumed Contracts). Each item of Tangible Personal
Property, and each item of tangible personal property leased under the Assumed
Contracts, is in good operating order, condition and repair, ordinary wear and
tear excepted, is suitable for immediate use in the ordinary course of business
of the Business, is free from known defects, and is of a quality and quantity
presently usable in the ordinary course of business of the Business. No item of
Tangible Personal Property is in need of repair or replacement other than as
part of routine maintenance in the ordinary course of business.
3.10 Inventories. All items included in the Inventory (net of
reserves to be reflected on the Closing Balance Sheet or notes thereto) (i) are
in good condition, not obsolete or defective; (ii) are and will be useable or
saleable within one year from the Closing Date at a price not less than 50% of
their cost; (iii) are located at either the Yates Premises or DDC warehouse
located at 2555 Olympic Boulevard, Los Angeles, California; and (iv) have been
acquired by Seller only in bona fide transactions entered into in the ordinary
course of business. No representation is made as to whether or not items
included in the Inventory may become obsolete from and after the Effective Time.
12
<PAGE>
3.11 Contracts. Schedule 3.11 lists all contracts,
commitments, agreements (including agreements for the borrowing of money or the
extension of credit), leases (except for leases of real property, which are
listed on Schedule 3.8), licenses, understandings and obligations, whether
written or oral, to which Seller is party or by which Seller or the Purchased
Assets are bound or affected which (i) are not terminable by Seller on 30 days'
notice without penalty or (ii) involve the expenditure by Seller of more than
$10,000 or the provision of goods or services by Seller having a value over
$10,000 (collectively, the "Contracts"). Certain of the Contracts will be
assigned to Buyer at the Closing, and are defined herein as "Assumed Contracts"
and are listed on Schedule 1.2(d). Seller has delivered to Buyer true and
complete copies of all written Contracts and true and complete memoranda of all
oral Contracts, including any and all amendments and other modifications
thereto. Each of the Assumed Contracts is valid, binding and enforceable against
Seller and, to the best knowledge of Seller and the Partners, against the other
parties thereto, in accordance with its terms and is in full force and effect.
There are no existing defaults by Seller or, to the best knowledge of Seller and
the Partners, by the other parties thereto; and, to the best knowledge of Seller
and the Partners, no events or circumstances have occurred which, with or
without notice or lapse of time or both, would constitute defaults, under any of
the Assumed Contracts. The assignment of the Assumed Contracts by Seller to
Buyer will not, with respect to any Assumed Contract, (i) constitute a default
thereunder, (ii) require the consent of any person or party, except for the
Required Consents, or (iii) adversely affect the validity thereof.
3.12 Receivables. All Receivables reflected on the August 31
Balance Sheet, and all Receivables to be reflected on the Closing Balance Sheet,
in each case net of the reserves established on such financial statements, are
or at the Closing Date will be, legal, valid and binding obligations, and will
be collected in full at face value (net of the reserves described above) within
180 days after the Closing Date. All such Receivables were created in the
ordinary course of business of the Business. Except as set forth in Schedule
3.12, there are no set-offs, counterclaims or disputes asserted with respect to
any Receivable, nor, to the best knowledge of Seller or any Partner, are any
such set-offs, counterclaims or disputes threatened, except as to which reserves
have been established. No discount or allowance from any Receivable has been
made or agreed to, except discounts reflected in documents evidencing such
account and described on Schedule 3.12.
3.13 Intellectual Property. Schedule 1.2(f) sets forth a list
of all Marks owned or used by Seller in connection with the Business (including
without limitation the name "Frank L. Robinson Company" and any variations
thereof), a list of the goods or services with which each Mark is used, the
dates of first use of each Mark and all United States, foreign and state
registrations relating to any of the Marks (the "Trademark Registrations"). Each
of the Marks has been in continuous use since the date of first use recited in
Schedule 1.2(f), and each of the Marks is now in use in interstate or intrastate
commerce, in each case as specified in Schedule 1.2(f), on or in connection with
all of the goods or services set forth on such Schedule. Schedule 1.2(f) also
sets forth (a) a list of all Copyrights and all registrations issued by the
United States Copyright Office or the office of any foreign jurisdiction for any
of the Copyrights (the "Copyright Registrations"), (b) a list of all inventions
owned or used by Seller in connection with the Business which are the subject of
United States or foreign letters patent or applications therefor, together with
the applicable patent number, application number, application date and issue
date, and (c) a brief description of all of the Trade Secrets. Seller has not
intentionally disclosed, and, to the best knowledge of Seller and the Partners,
no Partner, employee or agent of Seller has disclosed any of the Trade Secrets
to any
13
<PAGE>
third party, except in each case to attorneys, accountants or consultants of
Seller and to other parties who have executed a confidentiality agreement in
favor of Seller or are otherwise subject to an obligation of confidentiality.
Seller owns all right, title and interest in and to each item included in the
Intellectual Property, free and clear of any Liens or licenses. Seller is the
record owner of each of the Trademark Registrations, the Copyright Registrations
and the Patents, each of which is in full force and effect, and all required
maintenance filings, tax payments, annuities and maintenance fee payments have
been timely completed with respect to each. Seller has not licensed any of the
Intellectual Property to any third party, and no third party has any right to
use any of the Intellectual Property. The Intellectual Property consists of all
of the intellectual property rights necessary to conduct the Business. There are
no claims or suits pending against Seller challenging Seller's ownership of or
right to use any of the Intellectual Property, nor to the best knowledge of
Seller and the Partners does there exist any basis therefor. There are no claims
or suits pending against Seller alleging that any of the Intellectual Property
infringes any rights of any third parties, nor to the best knowledge of Seller
and the Partners does there exist any basis therefor.
3.14 Major Suppliers and Customers. Schedule 3.14 contains a
list of the top ten suppliers of Seller and the top 25 customers of Seller, as
measured by the amounts (net of returns and allowances) purchased by Seller from
such suppliers, or sold by Seller to such customers, during the 12 months ended
on August 31, 1997. Schedule 3.14 reflects in each case the amounts (net of
returns and allowances) so purchased or sold by Seller during such 12 month
period. Except as set forth in Schedule 3.14, Seller is not engaged in any
dispute with any of such top suppliers or customers. Except as set forth on
Schedule 3.14, neither Seller nor any Partner has reason to believe that the
sale of the Purchased Assets hereunder will have any adverse effect on the
business relationship of any such top suppliers or customers with the Business.
3.15 Litigation. Except as described on Schedule 3.15, there
are no claims, actions, suits, arbitration proceedings, inquiries, hearings,
injunctions or investigations ("Claims") pending, or to the best knowledge of
Seller or any Partner, threatened, against Seller, its operations or the
Business. Except as described on Schedule 3.15, no Claims have been brought
within the last two years against Seller or the Business, or affecting the
Purchased Assets, or relating to Seller's ownership, use or operation of the
Purchased Assets. Neither Seller nor any Partner knows of any facts or
circumstances which could reasonably serve as the basis for any Claim against
Seller involving the Business or the Purchased Assets, or, by virtue of the
execution, delivery and performance of this Agreement, against Buyer.
3.16 Compliance with Decrees and Laws. There is not
outstanding or, to the best knowledge of Seller or any Partner, threatened, any
order, writ, injunction or decree of any court, governmental agency or
arbitration tribunal against or involving Seller, the Business or the Purchased
Assets. Seller is currently, and has been at all times since January 1, 1995, in
compliance in all material respects with all laws, statutes, rules, regulations,
orders and licensing requirements ("Rules") of federal, state, local and foreign
agencies and authorities applicable to the business, properties and operations
of the Business (including, without limitation, those relating to antitrust and
trade regulation, civil rights, labor and discrimination, safety and health). To
the best knowledge of Seller and the Partners, there has been no allegation of
any violation of any such Rules, and no investigation or review by any federal,
state or local body or agency is pending or, to the best
14
<PAGE>
knowledge of Seller, threatened or planned with respect to Seller, the Business
or the Purchased Assets.
3.17 Permits. Seller has obtained all permits, authorizations,
certificates, approvals, licenses, exemptions and classifications required for
the conduct of the Business and the ownership and operation of the Purchased
Assets, all of which are described on Schedule 3.17. Seller is not in violation
of any of the Permits, and no proceedings are pending or, to the best knowledge
of Seller or the Partners, threatened, to revoke or limit any Permit. All of the
Permits that are legally transferable will be effectively assigned and
transferred to Buyer at the Closing.
3.18 Taxes. The Partners and Seller have properly completed,
and timely filed in correct form with the appropriate United States, state and
local governmental agencies and with the appropriate foreign countries and
political subdivisions thereof, all tax returns of any nature, all reports and
all declarations of estimated tax (collectively, the "Tax Returns") required to
be filed before the Effective Time. All of Tax Returns of Seller and each of the
Partners are accurate and complete as filed, and Seller and each of the Partners
have paid in full or, in the case of Seller, have paid in full or made adequate
provision in its financial statements for all amounts shown to be due thereon.
All United States, state and local income, profits, franchise, sales, use,
occupancy, property, severance, excise, value added, withholding and other
taxes, and all taxes owing to any foreign countries and political subdivisions
thereof (including interest, penalties and any additions to tax) (the "Taxes")
due to or claimed to be due to each taxing authority in respect of each Partner,
the Seller, the Business or the Purchased Assets, for all periods through the
date of this Agreement, have been, and for all periods through the Effective
Time will be, fully paid or, in the case of Seller, fully paid or adequately
provided for in the financial statements of Seller. The Seller has timely made
and will timely make all withholdings of tax required to be made under all
applicable United States, state and local tax regulations, and such withholdings
have either been paid or will be paid to the respective governmental agencies or
set aside in accounts for such purpose or accrued, reserved against and entered
upon the books of Seller. All deficiencies asserted as a result of any
examinations of the Tax Returns have been paid. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any Tax Return of Seller or any of the Partners, or the period for assessment or
collection of any Taxes of Seller or any of the Partners. Neither the Partners
nor Seller is a party to any pending action or proceeding, nor to the best
knowledge of the Partners or Seller, is there threatened any action or
proceeding, by any governmental authority for assessment or collection of taxes,
and neither the Partners nor Seller has been notified by any governmental
authority that an audit or review of any tax matter is contemplated. There are
no tax liens (other than liens for taxes for current and subsequent years which
are not yet due and payable) upon any of the Purchased Assets. Neither the
Partners nor Seller are a "foreign person" within the meaning of Section 1445 of
the Internal Revenue Code of 1986, as amended (the "Code") and Buyer has no
obligation to withhold taxes from the Purchase Price due to the Partners or
Seller.
3.19 Environmental Matters. The existing and prior uses of the
Purchased Assets and the Yates Premises by Seller comply with, and at all times
have complied with, and Seller is not in violation of, and has not violated, in
connection with the ownership, use, maintenance or operation of the Purchased
Assets or the Yates Premises, any applicable federal, state, county or local
statutes, laws, regulations, rules, ordinances, codes, licenses or permits of
any governmental authorities
15
<PAGE>
relating to environmental matters, including by way of illustration and not by
way of limitation the Comprehensive Environmental Response, Compensation and
Liability Act as amended, the Resource Conservation Recovery Act as amended, the
Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act, the
Toxic Substances Control Act, any "Superfund" or "Superlien" law, the California
Underground Storage of Hazardous Substances Account Act, the California
Hazardous Waste Control Act, the California Safe Drinking Water and Toxic
Enforcement Act, the Porter- Cologne Water Quality Act, or any other federal,
state or local statute, law, ordinance, code, rule, regulation, order, decree or
guideline (whether published or unpublished) regulating, relating to or imposing
liability or standards of conduct concerning any petroleum, petroleum by-product
(including but not limited to crude oil, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil mixed with other waste, oil sludge, and all
other liquid hydrocarbons, regardless of specific gravity), natural or synthetic
gas, hazardous substance or materials, toxic or dangerous waste, substance or
material, pollutant or contaminant (collectively "Environmental Laws").
Specifically, but not in limitation of the foregoing:
(a) Seller has obtained and is in compliance in all
material respects with the terms and provisions of all licenses and
permits necessary for compliance with the Environmental Laws with
respect to the Business, all of which licenses and permits issued to
Seller are listed on Schedule 3.17.
(b) Except as set forth on Schedule 3.19, to the best
knowledge of Seller and the Partners, the Purchased Assets and the
Yates Premises are free of asbestos containing materials ("ACM's") and
polychlorinated biphenyls ("PCB's").
(c) Seller and, to the best knowledge, without
inquiry, of Seller and the Partners, its predecessors in interest, have
operated the Purchased Assets and the Yates Premises, and have at all
times received, handled, used, stored, treated and disposed of all
Hazardous Materials, in compliance in all material respects with all
Environmental Laws. As used in this Agreement, "Hazardous Material"
means and includes asbestos, ACM's, PCB's, lead-based paints, any
petroleum product, petroleum by-products (including but not limited to
crude oil or any fraction of it, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil mixed with other wastes, oil sludge
and all other liquid hydrocarbons, regardless of specific gravity),
natural or synthetic gas products and/or hazardous substance or
materials, waste, pollutant or contaminant, defined as such in (or for
the purposes of) the Environmental Laws. Seller has not transported or
arranged for the transport of any Hazardous Materials.
(d) Except as set forth on Schedule 3.19, no
Hazardous Material has been released, deposited, discharged, placed,
disposed of or originated by Seller on or under the Purchased Assets or
the Yates Premises.
(e) Except as set forth on Schedule 3.19, to the best
knowledge of Seller and the Partners, there are no underground or
aboveground tanks situated on the Yates Premises.
16
<PAGE>
(f) No Environmental Law, and to the best knowledge
of Seller and the Partners, no proposed Environmental Law, imposes
standards or requirements, or will impose standards or requirements,
which will require the owner or operator of the Business to engage in
any work, repairs, construction or capital expenditures at the Yates
Premises in order to comply with such Environmental Law or such
proposed Environmental Law.
(g) Except as set forth on Schedule 3.19, no notices
of any violation, inquiries or requests for information relating to any
of the matters referred to in Subsections (a) through (f) above
relating to the Purchased Assets or the Yates Premises or their use
have been received by Seller.
3.20 Insurance. Schedule 3.20 describes all insurance policies
maintained by Seller with respect to the Business and the Purchased Assets. All
premiums due on such policies have been paid and will be paid through the
Effective Time, and neither Seller nor any Partner has received notice of
cancellation or of any dispute as to validity of coverage under any such
policies. Seller has not been refused any insurance by any insurance carrier
during the past two years.
3.21 Labor and Employment Matters. Except as set forth in
Schedule 3.21, with respect to employment matters:
(a) No employees of Seller who work in the Business
are or have been represented by a union or other labor organization or
covered by any collective bargaining agreement, and to the best
knowledge of Seller and the Partners, no union is attempting to
organize any such employees.
(b) There is no labor strike, dispute, slowdown,
stoppage or similar labor difficulty pending or, to the best knowledge
of Seller or the Partners, threatened against or affecting Seller or
the Business, nor have there been any such events pending or threatened
during the past 24 months.
(c) Seller is in compliance in all material respects
with all federal, state and local laws and regulations respecting
employment and employment practices, terms and conditions of employment
and wages and hours, and there is no unfair labor practice complaint
against Seller pending or, to the best knowledge of Seller or the
Partners, threatened.
(d) No representations have been made by Seller or
its Partners, employees or agents to employees of Seller with respect
to Buyer's intentions to employ, or not to employ, Seller's employees
or with respect to the conditions of any such employment.
3.22 Employees; Compensation; Benefit Plans.
(a) Employees; Compensation. Schedule 3.22 sets forth
a complete and correct list of the name, position, rate of compensation
and any incentive compensation arrangements, bonuses or commissions or
fringe or other benefits, whether payable in cash or in kind, of each
current employee, director, independent contractor, consultant and
agent
17
<PAGE>
of Seller who is associated with the Business and each other person to
whom Seller pays or provides, or has an obligation, agreement (written
or unwritten), policy or practice of paying or providing, retirement,
health, welfare or other benefits of any kind or description
whatsoever.
(b) Employee Benefit Plans.
(i) Schedule 3.22 contains an accurate and
complete list of all Plans, as defined below, contributed to,
maintained or sponsored by Seller, to which Seller is
obligated to contribute or with respect to which Seller has
any liability or potential liability, whether direct or
indirect, including all Plans contributed to, maintained or
sponsored by each member of the controlled group of companies,
within the meaning of Sections 414(b), 414(c), and 414(m) of
the Code, of which Seller is a member to the extent Seller has
any potential liability with respect to such Plans. For
purposes of this Agreement, the term "Plans" shall mean: (A)
employee benefit plans as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not funded and whether or not
terminated, (B) employment agreements, and (C) personnel
policies or fringe benefit plans, policies, programs and
arrangements, whether or not subject to ERISA, whether or not
funded, and whether or not terminated, including without
limitation, stock bonus, deferred compensation, pension,
severance, bonus, vacation, travel, incentive, and health,
disability and welfare plans.
(ii) Except as disclosed in Schedule 3.22,
Seller does not contribute to, has no obligation to contribute
to or otherwise has no liability or potential liability with
respect to (A) any Multiemployer Plan (as such term is defined
in Section 3(37) of ERISA), (B) any Pension Plan as such term
is defined in Section 3(2) of ERISA, or (C) any plan which
provides health, life insurance, accident or other
"welfare-type" benefits to current or future retirees or
current former employees, their spouses or dependents, other
than in accordance with Section 4980B of the Code or
applicable state continuation coverage law.
(iii) Except as disclosed in Schedule 3.22,
none of the Plans obligates Seller to pay separation,
severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement or
solely as a result of a "change in control," as such term is
used in Section 280G of the Code (and regulations promulgated
thereunder).
(iv) Each Plan and all related trusts,
insurance contracts, and funds have been maintained, funded
and administered in material compliance in all respects with
all applicable laws and regulations, including but not limited
to ERISA and the Code. None of Seller, any trustee or
administrator of any Plan, or any other person has engaged in
any transaction with respect to any Plan which could subject
Seller, or any trustee or administrator of any Plan, or any
party dealing with any Plan, or Buyer to any tax or penalty
imposed by ERISA or the Code. No actions, suits, claims,
complaints, charges, proceedings, hearings, investigations, or
demands with
18
<PAGE>
respect to the Plans (other than routine claims for benefits)
are pending or threatened, and Seller has no knowledge of any
facts which could give rise to or be expected to give rise to
any actions, suits, claims, complaints, charges, proceedings,
hearings, investigations, or demands. No Plan that is subject
to the funding requirements of Section 412 of the Code or
Section 302 of ERISA has incurred any "accumulated funding
deficiency" as such term is defined in such Sections of ERISA
and the Code, whether or not waived. No liability to the
Pension Benefit Guaranty Corporation ("PBGC") (except for
routine payment of premiums) has been or is expected to be
incurred with respect to any Plan that is subject to Title IV
of ERISA, no reportable event (as such term is defined in
Section 4043 of ERISA) has occurred with respect to any such
Plan, and the PBGC has not commenced or threatened the
termination of any Plan. None of the Purchased Assets is the
subject of any lien arising under Section 302(f) or ERISA or
Section 412(n) of the Code, Seller has not been required to
post any security pursuant to Section 307 of ERISA or Section
401(a)(29) of the Code, and neither Seller nor any officer or
director of Seller has knowledge of any facts which could be
expected to give rise to such lien or such posting of
security.
(v) Each Plan that is intended to be
qualified under Section 401(a) of the Code, and each trust (if
any) forming a part thereof, has received a favorable
determination letter from the Internal Revenue Service as to
the qualification under the Code of such Plan and the tax
exempt status of such related trust, and nothing has occurred
since the date of such determination letter that could
adversely affect the qualification of such Plan or the tax
exempt status of such related trust.
(vi) No underfunded "defined benefit plan"
(as such term is defined in Section 3(35) of ERISA) has been,
during the five years preceding the Closing Date, transferred
out of the controlled group of companies (within the meaning
of Sections 414(b), (c) and (m) of the Code) of which Seller
is a member or was a member during such five-year period.
(vii) As of the Closing Date, the fair
market value of the assets of each Plan that is a defined
benefit pension plan equals or exceeds the present value of
all vested and non-vested liabilities thereunder determined in
accordance with applicable PBGC methods, factors and
assumptions applicable to a defined benefit pension plan
terminating on such date. With respect to each Plan that is
subject to the funding requirements of Section 412 of the Code
and Section 302 of ERISA, all required or recommended
contributions for all periods ending prior to or as of the
Closing Date (including periods from the first day of the
then-current plan year to the Closing Date and including all
quarterly contributions required in accordance with Section
412(m) of the Code) shall have been made. With respect to each
other Plan, all required or recommended payments, premiums,
contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been
made. No Plan has any material unfunded liabilities.
(viii) With respect to each Plan, Seller has
provided Buyer with true, complete and correct copies, to the
extent applicable, of (A) all documents pursuant
19
<PAGE>
to which the Plans are maintained, funded and administered,
(B) the two most recent annual reports (Form 5500 series)
filed with the Internal Revenue Service (with attachments),
(C) the two most recent actuarial reports, (D) the two most
recent financial statements, (E) all governmental rulings,
determinations, and opinions (and pending requests for
governmental rulings, determinations, and opinions), and (F)
the most recent valuation (but in any case at least one that
has been completed within the last calendar year) of the
present and future obligations under each Plan that provides
post-retirement or post-employment health, life insurance,
accident or other "welfare- type" benefits.
3.23 Absence of Certain Changes. Except as described in
Schedule 3.23, since August 31, 1997, Seller has conducted the operations and
business of the Business only in the ordinary course, and has not:
(a) Suffered any damage, destruction or loss to any
asset of the Business, whether or not covered by insurance;
(b) Sold, transferred, distributed or otherwise
disposed of any assets used in the operation of the Business, except
for inventory sold or disposed of in the ordinary course of business
and except for assets consumed or disposed of in the ordinary course of
business having an aggregate value not in excess of $5,000;
(c) Made or entered into any general wage or salary
increase for its employees as a group;
(d) Amended or terminated any contract, lease,
license or commitment relating to the conduct of the Business or the
Purchased Assets;
(e) Incurred any obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become
due) except normal trade or business obligations incurred in the
ordinary course of business;
(f) Introduced any new method of management,
operations or accounting;
(g) Suffered any adverse change in the condition
(financial or otherwise), results of operations or business of the
Business or the Purchased Assets, or any other event or condition of
any character that might reasonably be expected to have a material
adverse effect on the Business or the Purchased Assets; or
(h) Agreed, whether in writing or otherwise, to take
any action described in this Section.
3.24 Warranties. There are no continuing or outstanding
warranties of Seller applicable to goods sold by Seller, other than express
warranties created by any description of goods in fliers, catalogs or invoices
of Seller, or by any sample thereof made available by Seller, and warranties
implied by law in connection with the sale of goods.
20
<PAGE>
3.25 Related Party Transactions. Except as described on
Schedule 3.25, the Assumed Contracts do not include any agreement with, or any
other commitment to (a) any officer or partner of Seller; (b) any person related
by blood or marriage to any such officer or partner; or (c) any corporation,
partnership, trust or other entity in which Seller or any such officer, partner
or related person has an equity or participating interest.
3.26 Brokers. Except for Inc. Business Resources, no finder,
broker, agent or other intermediary has acted for or on behalf of Seller in
connection with the negotiation or consummation of this Agreement or the sale of
the Business, and no party has made any claims for any brokerage commission,
finder's fee or similar payment due from Seller except for those of Inc.
Business Resources, for which Seller shall be solely responsible.
3.27 Names. During the term of its existence, Seller has not
been known by or conducted business under any name other than Frank L. Robinson
Company and FL Robinson Co. All Purchased Assets are held by, and all
agreements, obligations, expenses and transactions relating to the Business have
been entered into, incurred and conducted by Seller under that name.
3.28 Disclosure. No representation, warranty or statement made
by Seller or any Partner in this Agreement, or any document furnished or to be
furnished to Buyer in connection with the sale and purchase of the Purchased
Assets, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact known to Seller or any Partner
which is necessary to make the statements contained herein or therein not
misleading (except that no representation is made as to the omission of any fact
or circumstance which affects the industry in general or the economy of the
State of California in general and which is not peculiar to Seller). The fact
that Seller has delivered copies of certain documents to Buyer shall not alone
constitute disclosure of facts required to be disclosed on any Schedule to this
Agreement, unless such document is expressly referenced in such Schedule;
provided, however, that if an item is disclosed on any Schedule to which it is
relevant it shall be deemed to be cross-referenced on all other Schedules to
which it is relevant.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and the Partners as
follows:
4.1 Organization and Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of North Carolina.
4.2 Authority. Buyer has all requisite corporate power and
authority to execute, deliver and perform this Agreement and the Escrow
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Escrow
Agreement, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary corporate and
shareholder action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer, and the Escrow Agreement will be duly executed and
delivered by Buyer at the Closing, and constitutes or will
21
<PAGE>
constitute at Closing a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
4.3 No Conflict or Breach. The execution, delivery and
performance of this Agreement and the Escrow Agreement by Buyer do not and will
not:
(a) conflict with or constitute a violation of the
Articles of Incorporation or Bylaws of Buyer;
(b) assuming compliance with the HSR Act, conflict
with or constitute a violation of any law, statute, judgment, order,
decree or regulation of any legislative body, court, administrative
agency, governmental authority or arbitrator applicable to or relating
to Buyer;
(c) conflict with, constitute a default under, result
in a breach or acceleration of or require notice to or the consent of
any third party under any contract, agreement, lease, commitment,
mortgage, note, license or other instrument or obligation to which
Buyer is party or is bound or by which the Holdback Amounts are
affected or that would prohibit Buyer from performing its obligations
under this Agreement or the Escrow Agreement; or
(d) result in the creation or imposition of any lien,
charge or encumbrance on any of the funds to be held under the Escrow
Agreement.
4.4 Governmental Approvals. Except as required by the HSR Act,
no consent, approval, authorization, registration or filing with any federal,
state or local judicial or governmental authority or administrative agency is
required in connection with the valid execution and delivery by Buyer of this
Agreement or the consummation by Buyer of the transactions contemplated herein.
4.5 Brokers. Except for Philpott, Ball & Company, which is
acting as financial advisor to Buyer and for whose fees Buyer shall be solely
responsible, Buyer has retained no finder, broker, agent or other intermediary
to act for or on behalf of Buyer in connection with the negotiation or
consummation of this Agreement, and no party has made any claims for any
brokerage commission, finder's fee or similar payment due from Buyer.
ARTICLE V
MUTUAL COVENANTS
Each of Buyer and Seller covenants and agrees with the other
as follows:
5.1 Best Efforts. Each of Buyer and Seller shall use its best
efforts (without obligation to expend funds) to make or obtain all consents,
approvals, authorizations, registrations and filings with all federal, state or
local judicial or governmental authorities or administrative agencies as are
required in connection with the consummation of the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, Buyer and
Seller shall, as promptly
22
<PAGE>
as practicable following the execution of this Agreement, in cooperation with
each other, complete and file with the appropriate authorities the premerger
notification forms and any other documents required under the HSR Act. In
addition, Seller shall use its best efforts (without obligation to expend funds)
to obtain as promptly as possible all other Required Consents.
5.2 Confidentiality. In recognition of the confidential nature
of certain of the information which will be provided to each party by the other,
each of Buyer and Seller agrees to retain in confidence, and to require its
directors, officers, employees, consultants, professional representatives and
agents (collectively, its "Representatives") to retain in confidence all
information transmitted or disclosed to it by the other, and further agrees that
it will not use for its own benefit and will not use or disclose to any third
party, or permit the use or disclosure to any third party of, any information
obtained from or revealed by the other, except that each of Buyer and Seller may
disclose the information to those of its Representatives who need the
information for the proper performance of their assigned duties with respect to
the consummation of the transactions contemplated hereby. In making such
information available to its Representatives, each of Buyer and Seller shall
take any and all precautions necessary to ensure that its Representatives use
the information only as permitted hereby. Notwithstanding anything to the
contrary in the foregoing provisions, such information may be disclosed (a)
where it is necessary to any regulatory authorities or governmental agencies,
(b) if it is required by court order or decree or applicable law, (c) if it is
ascertainable or obtained from public or published information, (d) if it is
received from a third party not known to the recipient to be under an obligation
to keep such information confidential, or (e) if the recipient can demonstrate
by written instrument that such information was in its possession prior to
disclosure thereof in connection with this Agreement. If either party shall be
required to make disclosure of any such information by operation of law, such
disclosing party shall give the other party prior notice of the making of such
disclosure and shall use all reasonable efforts to afford such other party an
opportunity to contest the making of such disclosure. In the event that the
Closing shall not occur, each of Buyer and Seller shall immediately deliver, or
cause to be delivered, to the other (without retaining any copies thereof) any
and all documents, statements or other written information obtained from the
other that contain confidential information, including, without limitation, all
copies held by such party's Representatives.
5.3 August 31 Audit. The August 31 balance sheet of Seller,
including the footnotes thereto and the report prepared in connection therewith
by Deloitte & Touche, have previously been defined herein as the "August 31
Balance Sheet". Seller has delivered the draft of the face of the balance sheet
of Seller as of August 31, 1997 to Buyer and Deloitte & Touche, and has
cooperated fully with Buyer and Deloitte & Touche in connection with the audit.
Deloitte & Touche has agreed to deliver to Seller and Buyer a copy of the final
draft of the August 31 Balance Sheet.
5.4 Employee Benefit Matters; Employees.
(a) Subject to the provisions of this Section 5.4,
Buyer agrees to offer, contingent upon the Closing, employment to
substantially all full-time employees of the Seller, except for those
employees who are absent from employment on the Closing Date on account
of short or long term disability, on substantially the same terms as
the terms of employment (including compensation levels) enjoyed by such
employees at the date of this
23
<PAGE>
Agreement. Seller shall encourage the full-time employees of the Seller
to accept employment with Buyer. All employees who accept offers of
employment shall hereinafter be referred to in this Section 5.4 as the
"Continued Employees." Seller shall assist Buyer in effecting the
change of employment of the Continued Employees as of the Closing Date
in an orderly fashion.
(b) (i) Effective as of the Closing Date, Buyer shall
take all action necessary and appropriate to establish and
maintain for the Continued Employees medical benefit plans, as
well as other employee welfare and fringe benefit plans and
programs, as Buyer shall deem appropriate, and, except as
otherwise provided in subparagraphs (ii) and (iii) below,
Seller shall thereafter have no responsibility for the
provision of such benefits for the Continued Employees.
(ii) Except as otherwise provided in this
subparagraph (ii) and subparagraph (iii) below, Seller and its
insurers shall retain all liabilities, if any, for
disabilities, illnesses, injuries, expenses and losses
incurred prior to the Closing Date by any covered employee or
dependent under any employee welfare benefit plan of Seller,
regardless of whether claims for such liabilities shall be
made prior to or after the Closing Date. A claim will be
deemed to have been incurred upon the occurrence of any injury
or the diagnosis of any illness and the claim will include
expenses for any related claim or series of related claims.
Seller and its insurers shall have no responsibilities for any
liabilities for disabilities, illnesses, injuries, expenses
and losses incurred on or after the Closing Date for any
Continued Employee or the dependent of any Continued Employee.
(iii) As required by Section 6.4(b)(i),
effective as of the Closing Date, Buyer shall establish and
maintain medical plans for the benefit of the Continued
Employees and their dependents. The medical plans established
and maintained by Buyer shall not contain a pre-existing
condition limitation and shall provide coverage for the
Continued Employees and their dependents effective as of the
Closing Date, except that any Continued Employee or dependent
of any such employee who is hospitalized on the Closing Date
shall remain covered by the Seller's medical plan until
released from the hospital. Seller and its insurers shall
retain liabilities, if any, for any continuation of coverage,
if applicable, required under Sections 601 - 609 of ERISA and
Section 4980B of the Code with respect to any person other
than a Continued Employee, the obligation for which commenced
on or prior to the Closing Date. Buyer and its insurers shall
be responsible for any expenses and losses actually incurred
following the Closing Date for disabilities, injuries and
illnesses incurred by any Continued Employee or dependent
under Buyer's medical plans on or after the Closing Date.
Buyer shall be solely responsible for providing any notices
required under Section 606 of ERISA or Section 4980B of the
Code to qualified beneficiaries entitled to health care
continuation coverage in connection with qualifying events
occurring on or after the Closing Date with respect to
Continued Employees and their dependents. Nothing in this
subparagraph (iii) shall be construed to confer additional
benefits upon any employee, dependent or COBRA beneficiary
under any employee welfare benefit plan maintained by Seller
24
<PAGE>
or to limit the right of Seller to amend or terminate any
welfare benefit of Seller as of or after the Closing Date.
(iv) Nothing in this Section 5.4(b) is
intended or shall be deemed to expand or extend Seller's
liability beyond that which would have existed but for the
Closing of this transaction.
(c) As of the Closing Date, Buyer shall take all
action necessary and appropriate to enable the Continued Employees who
are not represented under the Collective Bargaining Agreement referred
to in paragraph (e) below ("Non-Union Employees") to receive credit for
their prior service with Seller for purposes of participation and
vesting under the 401(k) retirement plan maintained by Buyer for its
eligible employees (the "Buyer's 401(k) Plan"). Each such Continued
Employee who as of the Closing Date has attained age twenty-one (21)
and completed one or more years of service with Seller shall become a
participant in Buyer's 401(k) Plan on the Closing Date and shall be
fully vested under the Buyer's 401(k) Plan on and after the Closing
Date.
(d) With respect to employees of Seller, Seller shall
retain and shall assume, bear and discharge any and all liabilities for
workers' compensation benefits arising from acts or occurrences prior
to the Effective Time, and Buyer shall assume, bear and discharge all
liabilities for workers' compensation benefits for Continued Employees
and for any new employees of Buyer arising from acts or occurrences
that occur on or after the Effective Time.
(e) Seller and Buyer acknowledge the existence of a
Collective Bargaining Agreement between the Seller and Miscellaneous
Warehousemen Drivers and Helpers Teamsters Local Union No. 986 with an
effective date of September 18, 1995, and a termination date of
September 18, 1998. The Buyer agrees to adopt said contract and deal
with Miscellaneous Warehousemen Drivers and Helpers Teamsters Local
Union No. 986 as the sole and exclusive representative of the employees
covered by the aforementioned Collective Bargaining Agreement.
5.5 Collection of Receivables. Buyer shall, on and after the
Closing Date, take all actions in the ordinary course of business consistent
with Buyer's customary practices to collect the Receivables. Buyer agrees that
if it should discount or take any other action inconsistent with the collection
of any of the Receivables for the purpose of maintaining customer relations or
for any other reason, and, if such discount or other action is taken without the
prior written consent of Seller, then the uncollectibility of any such
Receivable shall not be taken into account in determining whether there has been
a breach of Seller's representations and warranties in Section 3.12. Buyer and
Seller agree that for purposes of crediting amounts collected by Buyer following
the Closing Date with respect to Receivables, each payment by an account debtor
shall be applied to the invoice for which it is expressly designated by the
debtor. If no such designation is made, the payment shall be applied to the
oldest outstanding invoice of such debtor; provided, however, that any payment
which is in the precise amount of an outstanding invoice or combination of
invoices shall be credited against such invoice or invoices. In the event that
Buyer collects indemnification from Seller, any Partner or the Escrow Agent for
any Loss arising out of the uncollectibility of any of the
25
<PAGE>
Receivables, Buyer agrees to assign all of its rights in such uncollected
Receivables (without regard to any reserve therefor, but not to exceed the
amount of the Loss with respect to which indemnification was collected) to
Seller, so that Seller may pursue collection thereof from the debtor.
ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions on or before the Closing Date, unless specifically waived in writing
by Buyer prior to the Closing Date:
6.1 Representations and Warranties. The representations and
warranties of Seller and the Partners contained in this Agreement shall have
been true and correct on the date of this Agreement and shall be true and
correct in all material respects on the Closing Date as though made on and as of
the Closing Date.
6.2 Compliance with Covenants. Seller and the Partners shall
have duly performed and complied with all covenants, agreements and obligations
required by this Agreement to be performed or complied with by them on or prior
to the Closing.
6.3 Absence of Litigation. No action or proceeding shall be
pending or, in the reasonable opinion of Buyer, threatened, by or before any
court or other governmental body or agency seeking to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which would
materially adversely affect the right of Buyer to own, operate or control the
Purchased Assets or the Business after the Closing Date.
6.4 Absence of Change. No material adverse change shall have
occurred in the operations or financial or other condition of the Business or
the Purchased Assets, nor shall there have occurred any material casualty loss
or destruction of, or damage to, any of the Purchased Assets.
6.5 Consents and Approvals. All (a) Required Consents, (b) all
other orders or notifications of, or registrations, declarations or filings
with, or expiration of waiting periods imposed by, any applicable governmental
or judicial authority and (c) consents, approvals, authorizations or
notifications of any other third parties in form reasonably satisfactory to
Buyer, all as reasonably required in connection with consummation of the
transactions contemplated by this Agreement by Buyer, including the operation of
the Business by Buyer, shall have been made or obtained or shall have occurred.
6.6 Environmental Audit. Buyer shall have caused an
independent environmental consultant, chosen by Buyer at its sole discretion, to
inspect, audit, and test the Purchased Assets and the Yates Premises for the
existence of any and all environmental conditions and any and all violations of
Environmental Laws, and to deliver a report describing the findings and
conclusions of the inspection (hereafter referred to as the "Environmental
Assessment"). The scope, sequence,
26
<PAGE>
and timing of the Environmental Assessment shall be at the sole discretion and
expense of the Buyer. The results of the Environmental Assessment shall be
satisfactory in all respects to Buyer.
6.7 Removal of Liens. All Liens indicated to exist by record
searches made by Buyer prior to the Closing Date (specifically including but not
limited to those Liens described on Schedule 3.7(c)), except for the Liens of
Caterpillar, shall have been removed, and Seller shall have provided evidence
satisfactory to Buyer of such removal.
6.8 Legal Opinion. Buyer shall have received from Rutter,
Hobbs & Davidoff Incorporated, counsel to Seller, an opinion, dated the Closing
Date, in form satisfactory to Buyer.
6.9 Key Employee. Buyer shall have entered into an employment
agreement (the "Employment Agreement") with Jeffrey N. Robinson.
6.10 August 31 Balance Sheet. The August 31 Balance Sheet
shall have been completed, and the audit of the August 31 balance sheet shall
have been completed.
6.11 Yates Premises. Either (i) Buyer and the owner of the
Yates Premises shall have entered into a new lease for the Yates Premises having
a term no greater than one year following the Closing Date, or (ii) the Yates
Lease shall have been assigned by Seller to Buyer, with the written consent of
the landlord, it being understood that either event shall satisfy such
condition.
6.12 Dismissal of Lawsuit. Plaintiff in the lawsuit styled
"Reservoir Capital Corp. vs. Frank L. Robinson Co., a partnership, et al.", No.
BC171631 pending in the Superior Court of California, County of Los Angeles,
shall have filed a dismissal of the suit, with prejudice, and Seller shall have
provided Buyer with evidence of the filing of such dismissal.
ARTICLE VII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transaction
contemplated by this Agreement are subject to the satisfaction of each of the
following conditions on or before the Closing Date, unless specifically waived
in writing by Seller prior to the Closing:
7.1 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall have been true and correct
on the date of this Agreement, and shall be true and correct in all material
respects on the Closing Date as though made on and as of the Closing Date.
7.2 Compliance with Covenants. Buyer shall have duly performed
and complied with all covenants, agreements and obligations required by this
Agreement to be performed or complied with by it on or before the Closing Date.
27
<PAGE>
7.3 Absence of Litigation. No action or proceeding shall be
pending by or before any court or other governmental body or agency seeking to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement.
7.4 Consents and Approvals. All Required Consents shall have
been obtained prior to or at the Closing.
7.5 HSR Termination. The waiting period under the HSR Act
shall have expired or been terminated.
7.6 Legal Opinion. Seller shall have received from Womble
Carlyle Sandridge & Rice, PLLC, and/or Allman Spry Leggett & Crumpler, counsel
to Buyer, an opinion, dated the Closing Date, in form satisfactory to Seller,
which, as to matters of California law, shall be given in reliance on an opinion
of Davis Wright Tremaine LLP.
ARTICLE VIII
CLOSING
8.1 Closing. The closing of the sale of the Purchased Assets
(the "Closing") shall take place at the offices of Rutter Hobbs & Davidoff, in
Los Angeles, California, at 10:00 a.m., local time, on December 30, 1997, or
such other date as may be mutually agreed upon by the parties hereto; provided,
however, as follows: (a) if one or more conditions to this Agreement is not
satisfied by such date, the party whose obligation is conditioned upon
satisfaction of such condition may elect, in its sole discretion, one or more
postponements of the Closing for the purpose of enabling such condition to be
satisfied; and (b) notwithstanding the provisions of the preceding clause (a),
in no event may the Closing be postponed beyond December 31, 1997. The date of
the Closing is referred to as the "Closing Date". For the purposes of passage of
title and risk of loss, allocation of expenses, adjustments and other economic
or financial effects of the transactions contemplated hereby, the Closing when
completed shall be deemed to have occurred at 12:01 a.m., local time, on the
Closing Date (the "Effective Time").
8.2 Deliveries by Seller. At the Closing, Seller shall deliver
or cause to be delivered to Buyer the following:
(a) A certificate of Harold Robinson and Jeffrey N.
Robinson confirming the satisfaction of the conditions set forth in
Sections 6.1 and 6.2 hereof as to representations, warranties and
covenants of Seller, and Section 6.4 hereof as to absence of changes.
(b) A copy of all partnership resolutions authorizing
the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated herein, accompanied by
the certification of Harold Robinson and Jeffrey N. Robinson to the
effect that such resolutions are in full force and effect and have not
been amended, modified or rescinded.
28
<PAGE>
(c) Evidence of the removal of Liens, as described in
Section 6.7.
(d) The legal opinion referred to in Section 6.8.
(e) Evidence of that all Required Consents have been
obtained or satisfied.
(f) Assignments of Leases transferring Seller's
leasehold interests in the Real Property Leases to Buyer, and an
estoppel certificate of the landlord under the Real Property Lease.
(g) Certificates of title, duly endorsed for transfer
and including odometer readings, with respect to all motor vehicles
included in the Purchased Assets.
(h) A Bill of Sale and Assignment in the form
attached hereto as Exhibit C and such other instruments of transfer as
Buyer may reasonably request to convey and vest in Buyer all of
Seller's right, title and interest in and to all of the remaining
Purchased Assets, free and clear of all Liens.
8.3 Deliveries by Buyer. At the Closing, Buyer shall deliver
or cause to be delivered to Seller the following:
(a) A certificate of the President of Buyer
confirming the satisfaction of the conditions set forth in Sections 7.1
and 7.2 as to representations, warranties and covenants of Buyer.
(b) A copy of all corporate resolutions authorizing
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, accompanied by
the certification of the Secretary of Buyer to the effect that such
resolutions are in full force and effect and have not been amended,
modified or rescinded.
(c) The legal opinion referred to in Section 7.6.
(d) An Instrument of Assumption of the Assumed
Liabilities by Buyer pursuant to Section 1.4(b), in the form attached
hereto as Exhibit D.
(e) The Initial Purchase Price, evidenced by a wire
transfer of immediately available funds.
8.4 Mutual Deliveries. At the Closing, each of Seller and
Buyer shall execute and deliver, or cause to be executed and delivered, to the
other the following:
(a) The Escrow Agreement.
(b) The Employment Agreement.
29
<PAGE>
8.5 Further Assurances. Seller and the Partners shall, at any
time on or after the Closing Date, take any and all steps requested by Buyer to
place Buyer in possession and operating control of the Purchased Assets and the
Business, and will do, execute, acknowledge and deliver all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney and assurances as
may be required for the more effective transfer to and reduction to possession
of Buyer, or its successors or assigns, of any of the Purchased Assets.
Specifically, but without limiting the generality of the foregoing, Seller and
the Partners agree to cooperate with Buyer to facilitate the transfer of
Seller's California unemployment compensation account balance and experience
rating to Buyer.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Seller. Seller and the Partners,
jointly and severally, shall indemnify, defend and hold harmless Buyer and its
officers, directors and affiliates (the "Buyer Indemnitees") from, against, and
with respect to any action or cause of action, loss, damage, claim, obligation,
liability, penalty, fine, cost and expense (including without limitation
reasonable attorneys' and consultants' fees and costs and expenses incurred in
investigating, preparing, defending against or prosecuting any litigation,
claim, proceeding, demand or request for action by any governmental or
administrative entity), of any kind or character (a "Loss") arising out of or in
connection with any of the following:
(a) any breach of any of the representations or
warranties of Seller or the Partners contained in this Agreement or any
other document referred to herein;
(b) any failure by Seller or the Partners to perform
or observe, or to have performed or observed, in full, any covenant,
agreement or condition (unless waived in writing by Buyer) to be
performed or observed by it pursuant to this Agreement;
(c) any and all liabilities and obligations of
Seller, of any kind or nature whatsoever, whether accrued, absolute,
contingent or otherwise, known or unknown, except for the Assumed
Liabilities;
(d) Seller's ownership and operation of the Business
and the Purchased Assets prior to the Effective Time, including any and
all liabilities under the Assumed Contracts which relate to events
occurring prior to the Effective Time;
(e) any use, release, emission, generation, storage,
transportation, disposal, or arrangement for the disposal of Hazardous
Materials by Seller, including, without limitation, the cost of any
environmental response action or liability under the Comprehensive
Environmental Response, Compensation and Liability Act whether such
Loss accrues, is required or is necessary prior to the Effective Time,
to the full extent that such Loss is attributable, in whole or in part,
directly or indirectly, to the presence, use, emission, generation,
storage, transportation, release, disposal, or arrangements for
disposal of Hazardous Materials by Seller on the property included in
the Purchased Assets or on any
30
<PAGE>
other properties to which Seller, its subsidiaries or affiliates has
sent or arranged for the disposal of Hazardous Materials prior to the
Effective Time. All terms used in this paragraph shall be given the
meanings provided under the Environmental Laws;
(f) any failure by Seller or a Partner to file any
Tax Return required to be filed after the date hereof for any period
prior to and including the Effective Time in an accurate, correct and
timely manner and to pay the amounts shown to be due thereon;
(g) any liability of Seller or a Partner, either in
their own right or as a transferee, for Taxes in excess of the amount
paid or reserved for any period prior to the Closing; or
(h) any obligations under the Yates Lease that were
required to have been performed prior to the Effective Time, or any
obligations or liabilities under the Yates Lease for the Seller's
breach or nonperformance of the terms thereof prior to the Effective
Time.
9.2 Indemnification by Buyer. Buyer shall indemnify, defend
and hold harmless Seller and the Partners from, against and with respect to any
Loss arising out of or in connection with any of the following:
(a) any breach of any of the representations or
warranties of Buyer contained in this Agreement or any other document
referred to herein;
(b) any failure by Buyer to perform or observe, or to
have performed or observed, in full, any covenant, agreement or
condition (unless waived in writing by Seller) to be performed or
observed by it pursuant to this Agreement;
(c) any Assumed Liabilities; or
(d) Buyer's ownership and operation of the Business
and the Purchased Assets on and after the Effective Time.
9.3 Notice of Claim. Any party seeking to be indemnified
hereunder (the "Indemnified Party") shall, within 15 days following discovery of
the matters giving rise to a Loss, notify the party from whom indemnity is
sought (the "Indemnity Obligor") in writing of any claim for recovery,
specifying in reasonable detail the nature of the Loss and the amount of the
liability estimated to arise therefrom. The Indemnified Party shall provide to
the Indemnity Obligor as promptly as practicable thereafter all information and
documentation reasonably requested by the Indemnity Obligor to verify the claim
asserted.
9.4 Defense. If the facts pertaining to a Loss arise out of
the claim of any third party, or if there is any claim against a third party
available by virtue of the circumstances of the Loss, the Indemnity Obligor may,
by giving written notice to the Indemnified Party within 15 days following its
receipt of the notice of such claim, elect to assume the defense or the
prosecution thereof, including the employment of counsel or accountants at its
cost and expense; provided,
31
<PAGE>
however, that during the interim the Indemnified Party shall use its best
efforts to take all action (not including settlement) reasonably necessary to
protect against further damage or loss with respect to the Loss. The Indemnified
Party shall have the right to employ counsel separate from counsel employed by
the Indemnity Obligor in any such action and to participate therein, but the
fees and expenses of such counsel shall be at the Indemnified Party's own
expense. Whether or not the Indemnity Obligor chooses so to defend or prosecute
such claim, all the parties hereto shall cooperate in the defense or prosecution
thereof and shall furnish such records, information and testimony and shall
attend such conferences, discovery proceedings and trials as may be reasonably
requested in connection therewith. The Indemnity Obligor shall not be liable for
any settlement of any such claim effected without its prior written consent,
which shall not be unreasonably withheld.
9.5 Time for Claims. Any claim asserted with respect to the
items enumerated in Section 9.1 or 9.2 of this Agreement must be submitted to
the Indemnity Obligor prior to the second anniversary of the Closing Date or be
forever barred, except for the following, each of which may be asserted at any
time following the Closing Date within the applicable statutes of limitations:
claims for breach of the representations in Section 3.7 with regard to title to
assets and absence of Liens; claims for breach of the representations in Section
3.18 with regard to Taxes and Tax Returns; claims for breach of the
representations in Section 3.19 with regard to environmental matters; claims
under Section 9.1(e) with respect to environmental matters; or claims under
Section 9.1(f) or (g) with respect to Taxes and Tax Returns.
9.6 Escrow. Any claim by a Buyer Indemnitee for a Loss under
this Article IX may be submitted to the Escrow Agent for payment, in accordance
with the terms of the Escrow Agreement. The parties acknowledge that the funds
held by the Escrow Agent are not intended to be the sole source of recovery for
any such Loss, and agree that the existence of the Escrow Agreement does not
foreclose Buyer from making claims directly against Seller or any Partner.
9.7 Sole Remedy. The remedies set forth in this Article IX are
the exclusive remedies for breaches of the representations and warranties and
covenants in this Agreement and shall be in lieu of all other remedies;
provided, however, that the foregoing clause of this sentence shall not be
deemed a waiver by any party to this Agreement of any rights or remedies arising
solely by reason of any claim of fraud.
9.8 Disclaimer Regarding Projections. In connection with
Buyer's investigation of the Seller, certain projections and certain business
plan information for succeeding fiscal years have been made available to Buyer.
Buyer acknowledges that there are uncertainties inherent in attempting to make
such projections and other forecasts and plans, that Buyer is familiar with such
uncertainties, that it is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all projections and other forecasts
and plans furnished to it, and that Buyer shall not have any claim against
Seller, the Partners, or any of its officers or employees with respect thereof.
Buyer acknowledges that actual results may differ from the projections.
Accordingly, no representations or warranties are made with respect to such
projections, forecasts or plan, and any implied representations and warranties
are specifically disclaimed.
9.9 Threshold. No Indemnity Obligor shall be required to make
any indemnification payment pursuant to this Article IX until the earlier of (i)
the date that the total
32
<PAGE>
amount of all Losses that have been directly or indirectly suffered or incurred
by any one or more of the Indemnified Parties, or to which any one or more of
the Indemnified Parties has or have otherwise become subject, exceeds $75,000 in
the aggregate, or (ii) the twenty third month anniversary of Closing Date. At
such time, the Indemnity Obligor shall be required to provide indemnification
for all Losses to the extent that they exceed $25,000 (but not for the first
$25,000 of Losses). The limitation on the indemnification obligations of Seller
and the Partners that are set forth in this Section 9.9 shall not apply to any
Losses arising directly or indirectly from any Excluded Liabilities or to any
Losses described under Section 9.1(h). The limitations on the indemnification
obligations of Buyer that are set forth in this Section 9.9 shall not apply to
any Losses arising directly or indirectly from any Assumed Contracts or Assumed
Liabilities.
9.10 Ceiling. The maximum aggregate liability of any Indemnity
Obligor under this Article IX shall be equal to $7,000,000. The limitations on
the indemnification obligations of Seller and the Partners that are set forth in
this Section 9.10 shall not apply to (i) any Losses arising directly or
indirectly from any fraud by Seller or any of the Partners in connection with
this Agreement; (ii) any Excluded Liability; (iii) claims for breach of the
representations in Section 3.19 with regard to environmental matters; or (iv)
claims under Section 9.1(e) with respect to environmental matters. The
limitations on the indemnification obligations of Buyer that are set forth in
this Section 9.10 shall not apply to (i) any Losses arising directly or
indirectly from any fraud by Buyer; (ii) any Losses arising directly or
indirectly from any Assumed Contract or any Assumed Liability; or (iii) any
Losses arising under Section 9.2(d).
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) By the mutual written consent of Seller and
Buyer;
(b) By Seller (if neither Seller nor any Partner is
then in material breach of any term of this Agreement), if Buyer shall
(i) fail to perform in any material respect its agreements contained
herein required to be performed on or prior to the Closing Date, or
(ii) materially breach any of its representations or warranties
contained herein, which failure or breach is not cured within five days
after Seller has notified Buyer of its intent to terminate this
Agreement pursuant to this subparagraph;
(c) By Buyer (if Buyer is not then in material breach
of any term of this Agreement), if Seller or any Partner shall (i) fail
to perform in any material respect its or his agreements contained
herein required to be performed on or prior to the Closing Date, or
(ii) materially breach any of its representations or warranties
contained herein, which failure of breach is not cured within five
business days after Seller has notified Buyer of its intent to
terminate this Agreement pursuant to this subparagraph.
33
<PAGE>
(d) By either Seller or Buyer, if there shall be any
order, writ, injunction or decree of any court or governmental or
regulatory agency binding on Seller or Buyer which prohibits or
restrains Seller or Buyer from consummating the transactions
contemplated hereby, which failure of breach is not cured within five
business days after Seller has notified Buyer of its intent to
terminate this Agreement pursuant to this subparagraph;
(e) By either Seller or Buyer, if a condition to its
obligation to consummate the transactions contemplated hereby has not
been satisfied by December 31, 1997, or if such a condition has become
impossible of fulfillment at any time subsequent to the date hereof; or
(f) By either Seller or Buyer, if the Closing has not
occurred by December 31, 1997, for any reason other than delay or
nonperformance of the party seeking such termination.
10.2 Effect on Obligations. Termination of this Agreement
pursuant to this Article shall terminate all obligation of the parties
hereunder, except for the obligations under Sections 11.4 (with respect to
expenses), 11.6 (with respect to publicity) and 6.2 (with respect to
confidentiality); provided, however, that termination pursuant to subparagraphs
(b) or (c) of Section 10.1 shall not relieve the defaulting or breaching party
from any liability to the other party hereto. In the event of termination under
subsection (c), Buyer shall have the rights and remedies with respect to
specific performance as set forth in Section 11.15 hereof, in addition to any
other remedies that may be available at law or in equity.
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations. All representations and
warranties of the parties hereto contained in this Agreement or otherwise made
in writing in connection with the transactions contemplated hereby shall survive
the execution and delivery of this Agreement and the Closing hereunder for two
years; provided, however, that each of the following categories of
representations and warranties of Seller and the Partners shall survive the
Closing for the entire period of the statute of limitations for claims of that
nature: the representations in Section 3.7 with regard to title to assets and
absence of Liens; the representations in Section 3.18 with regard to Taxes and
Tax Returns; and the representations in Section 3.19 with regard to
environmental matters.
11.2 Bulk Sales. The parties agree the sale of the Purchased
Assets pursuant to this Agreement does not constitute a "bulk sale" within the
meaning of applicable law.
11.3 Risk of Loss. The risk of loss, damage or condemnation of
any of the Purchased Assets from any cause whatsoever shall be borne by Seller
at all times prior to the completion of the Closing. In the event of any
material loss, damage or condemnation of any of the Purchased Assets prior to
completion of the Closing, Buyer shall have the option, in its sole discretion,
to:
34
<PAGE>
(a) terminate this Agreement by written notice to
Seller;
(b) postpone the Closing for a period of up to sixty
days to permit Seller to repair, replace or restore such Purchased
Assets to their prior condition; or
(c) proceed to close this Agreement and complete the
restoration and replacement of such damaged Purchased Assets after the
Closing Date, in which event Seller shall assign to Buyer the right to
receive all insurance proceeds payable in connection with such damage,
and Seller will pay to Buyer all deductible amounts required to be paid
in connection with such loss.
11.4 Expenses; Taxes. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense, whether or not the sale of the
Purchased Assets is consummated; provided, however, (a) that if Buyer terminates
this Agreement other than as permitted under Section 10.1 hereof, then Buyer
shall reimburse Seller for all expenses reasonably incurred by Seller in
connection with this transaction up to the date of such termination, up to but
not to exceed $100,000.00; (b) that Buyer shall pay the fees required in
connection with the premerger notification filings under the HSR Act; and (c)
that Buyer shall pay all fees of Deloitte & Touche. Buyer shall pay all
California sales taxes imposed by Parts 1 (Sales and Use Tax Law) and 1.5
(Bradley-Burns Uniform Local Sales and Use Tax Law) of the California Revenue
and Taxation Code, and Seller shall pay any and all other sales or transfer
taxes arising from the sale and transfer of the Purchased Assets.
11.5 Seller Employees. If Buyer terminates this Agreement
other than as permitted under Section 10.1 hereof, then Buyer agrees that it
will not, at any time prior to October 22, 1998, employ any person who is on the
date of this Agreement an employee of Seller, unless such person initiates the
contact with Buyer at a time when he or she has ceased to be employed by Seller.
11.6 Publicity. Each of Seller and Buyer agrees it will not
make any press releases or other announcements prior to the Closing with respect
to the transactions contemplated hereby, except as required by applicable law,
without the prior approval of the other party.
11.7 Best Efforts. Each party hereto agrees to use its
commercially reasonable best efforts (not to include the expenditure of money)
to satisfy the conditions to the Closing set forth in this Agreement and
otherwise to consummate the transactions contemplated by this Agreement.
11.8 Notices. All notices, demands and other communications
made hereunder shall be in writing and shall be given either by personal
delivery, by nationally recognized overnight courier (with charges prepaid) or
by facsimile (with telephone confirmation), and shall be deemed to have been
given or made when personally delivered, the day following the date deposited
with such overnight courier service or when transmitted to facsimile machine and
confirmed by telephone, addressed to the respective parties at the following
addresses (or such other address for a party as shall be specified by like
notice):
35
<PAGE>
If to Seller:
Frank L. Robinson Company
2640 Yates Avenue
Los Angeles, California 90040
Attention: Jeffrey Robinson
Telephone: (213) 725-3239
Facsimile: (213) 725-3281
With a copy (which shall not constitute notice) to:
Rutter, Hobbs & Davidoff Incorporated
1900 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attention: Joel Weinstein
Telephone: (310) 286-1700
Facsimile: (310) 286-1728
If to any one or more of the Partners, to the address
shown below his or her name on the signature page
hereof.
With a copy (which shall not constitute notice) to:
Rutter, Hobbs & Davidoff Incorporated
1900 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attention: Joel Weinstein
Telephone: (310) 286-1700
Facsimile: (310) 286-1728
If to Buyer:
Pluma, Inc.
801 Fieldcrest Road
P. O. Drawer 487
Eden, North Carolina 27289-0487
Attention: Forrest H. Truitt
Telephone: (910) 635-4000
Facsimile: (910) 635-1814
36
<PAGE>
With a copy (which shall not constitute notice) to:
Womble Carlyle Sandridge & Rice, PLLC
3300 One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6025
Attention: Lesley G. Powell
Telephone: (704) 331-4978
Facsimile: (704) 338-7857
11.9 Governing Law. This agreement shall be governed by the
laws of the State of California applicable to agreements made and to be
performed entirely within such state.
11.10 Mediation/Arbitration.
(a) If a dispute arises out of or relates to this
Agreement, or the breach thereof, and if the dispute cannot be settled
through negotiation, the parties agree first to try in good faith to
settle the dispute by mediation administered by the American
Arbitration Association ("Association") under its Commercial Mediation
Rules before resorting to arbitration or litigation pursuant to Section
11.10(b). The mediation shall take place in Los Angeles, California, at
a place to be designated by the mediator. The fees, expenses and
mediator compensation for such mediation shall be borne equally by the
parties. The mediation shall be treated as confidential settlement
discussions in accordance with applicable statutes and rules of
evidence. The parties will consult with each other in good faith to
select a qualified mediator within 15 days after either party notifies
the other that a mediation under this provision is requested. If no
mediator shall be mutually approved within such 15 day period, then the
Association shall appoint promptly a qualified mediator with at least
five years experience in comparable commercial transaction matters. The
Association and the parties shall use their best efforts so that the
mediation shall take place within 30 days after the Association
receives a request for mediation. The mediation shall last for at least
four hours, unless the mediator declares an impasse and adjourns the
mediation sooner or all disputes are sooner resolved. The mediation may
last longer or include mediation sessions if all parties and the
mediator consent.
(b) Subject to Section 11.10(a), any controversy or
claim arising out of or relating to this Agreement or the breach
thereof, other than (i) a claim seeking injunctive relief or (ii) a
controversy or claim with respect to the amounts held under the Escrow
Agreement which shall be governed by the Escrow Agreement, shall be
settled by final and binding arbitration administered by the
Association under its Commercial Arbitration Rules, and judgment on the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Any such controversy or claim shall be heard and
determined by a panel of three (3) arbitrators, one of whom shall be
selected by Seller, one by Buyer and the third by the first two. The
arbitration shall take place in Los Angeles, California, or in such
other location as the parties shall agree in writing. Each of the
parties to this Agreement waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives any
bond, surety or other security that may be required of any party with
respect
37
<PAGE>
thereto. If any party fails to select its arbitrator within 30 days of
receipt of a written request from either to do so, the arbitrator
selected by the other parties shall arbitrate the dispute. The
arbitrators' fees shall be shared equally by the parties. All costs and
expenses of the arbitration, including, without limitation, reasonable
attorneys' fees, shall be allocated among the parties according to the
arbitrators' discretion. The arbitrators shall make their determination
by majority vote and in accordance with the rules then in effect of the
Association. In no event shall legal counsel be prohibited from
representing either Buyer or Seller merely because such counsel (or a
member of such law firm) has served as an arbitrator or on a panel of
arbitrators on other actions or for the Association. The award shall be
made promptly by the arbitrators and, unless agreed by the parties, no
later than 14 days from the date of the closing of the hearing.
11.11 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.12 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interest or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of all other parties hereto, and any purported assignment
without such consent shall be void; provided, however, that Buyer may assign its
rights, interest and obligations hereunder to any subsidiary that is wholly
owned by Buyer.
11.13 Third Party Beneficiaries. None of the provisions of
this Agreement or any document contemplated hereby is intended to grant any
right or benefit to any person or entity which is not a party to this Agreement.
11.14 Headings. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of this
Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.
11.15 Knowledge. For purposes of this Agreement, in all places
except Section 3.19(c), the term "to the best knowledge of Seller" or "known to
Seller" or any similar phrase shall mean as to a particular fact or other
matter, only if Harold Robinson, Carole Robinson, Jeffrey Robinson or James
Robinson has actual knowledge, after due inquiry, of such fact or other matter.
11.16 Amendments. Any waiver, amendment, modification or
supplement of or to any term or condition of this Agreement shall be effective
only if in writing and signed by all parties hereto, and the parties hereto
waive the right to amend the provisions of this Section orally.
11.17 Specific Performance. Seller acknowledges that the Purchased
Assets are unique and that if Seller fails to consummate the transactions
contemplated by this Agreement such failure will cause irreparable harm to Buyer
for which there will be no adequate remedy at law. Buyer shall be entitled, in
addition to its other remedies at law or at equity, to specific performance of
this
38
<PAGE>
Agreement if Seller shall refuse to consummate the transactions contemplated by
this Agreement, except as permitted under Section 10.1.
11.18 Severability. In the event that any provision in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect, the remaining provisions of this Agreement shall not be in any way
impaired, and the illegal, invalid or unenforceable provision shall be fully
severed from this Agreement and there shall be automatically added in lieu
thereof a provision as similar in terms and intent to such severed provision as
may be legal, valid and enforceable.
11.19 Construction. Each party to this Agreement and its
counsel have reviewed and revised this Agreement. The normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
of any amendments, schedules or exhibits to this Agreement.
11.20 Entire Agreement. This Agreement and the Schedules and
Exhibits hereto constitute the entire contract between the parties hereto
pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings between the parties with respect
to such subject matter, including without limitation the letter of intent dated
August 18, 1997, and any Confidentiality Agreement previously signed by the
parties, all of which are hereby terminated.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement or caused this Agreement to be executed by its duly authorized
officer as of the date first above written.
SELLER:
FRANK L. ROBINSON COMPANY
By:
Harold Robinson, General Partner
By:
Carole Robinson, General Partner
By:
Jeffrey N. Robinson, General Partner
By:
James H. Robinson, General Partner
39
<PAGE>
PARTNERS:
HAROLD ROBINSON
Address: 550 Vick Place
Beverly Hills, CA 90210
CAROLE ROBINSON
Address: 550 Vick Place
Beverly Hills, CA 90210
JEFFREY N. ROBINSON
Address: 224 South Camden Drive
Beverly Hills, CA 90212
JAMES H. ROBINSON
Address: 13045 Ripple Creek Lane
Camarille, CA 93012
BUYER:
PLUMA, INC.
By:
R. Duke Ferrell, Jr.
President and Chief Executive Officer
40
