<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Date of Report (Date of Earliest Event Reported) September 2, 1994
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-20416
EAGLE INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3384361
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Offices)
(312) 906-8700
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 2, 1994, an indirect wholly-owned subsidiary of Eagle Industries,
Inc. (the "Company") sold certain assets of Caron International, Inc. ("Caron")
to a subsidiary of National Spinning Co., pursuant to a purchase agreement (the
"Agreement") dated September 2, 1994.
Under the terms of the Agreement, total consideration received amounted to $3.0
million in cash and a $4.0 million note. The cash proceeds received at closing
were primarily utilized by a subsidiary of the Company to reduce outstanding
debt.
Caron is a manufacturer and distributor of acrylic hand knitting and craft
yarns and a producer of craft kits.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
A. Financial Statements
Not applicable
B. Pro Forma Financial Statements
The required financial information was included in the Company's quarterly
report on Form 10-Q dated June 30, 1994.
C. Exhibits
2.1 Purchase Agreement among Caron International, Inc., Eagle Industrial
Products Corporation and Eagle Industries, Inc. and NSC Buyer, Inc. and
National Spinning Co., Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EAGLE INDUSTRIES, INC.
Dated: September 15, 1994 By: /s/ Sam A. Cottone
------------------
Sam A. Cottone
Senior Vice President and
Chief Financial Officer
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of September 2, 1994,
among Caron International, Inc., a Delaware corporation
("Seller"), Eagle Industrial Products Corporation, a Delaware
corporation and the parent company of Seller ("Eagle"), Eagle
Industries, Inc., a Delaware corporation and the parent company
of Eagle ("Parent"), NSC Buyer, Inc., a Delaware corporation
("Buyer"), and National Spinning Co., Inc., a New York
corporation and the parent company of Buyer ("NSC").
Parent, Eagle and Seller desire that Seller sell, and
NSC and Buyer desire that Buyer purchase, subject to the terms
and conditions hereof, certain assets of Seller relating to the
Business. Certain terms defined for purposes of this Agreement
are listed on Exhibit A to this Agreement.
Accordingly, the parties agree as follows:
1. PURCHASE AND SALE.
Subject to the terms and conditions hereof, at the
Closing, Seller shall sell, transfer and assign to Buyer, and
Buyer shall purchase and acquire from Seller, all right, title
and interest of Seller in and to the Acquired Assets.
1.1 Acquired Assets. As used herein, "Acquired
Assets" shall mean all properties, assets, privileges, rights,
interests, and claims, tangible and intangible, wherever
located (except for Excluded Assets), that are both (i) used or
held for use in, or attributable to, the Business and (ii) of
the following categories:
(a) All accounts receivable and notes receivable
("Receivables"). Buyer acknowledges that title to
certain Business-Related Receivables that are part of
the Acquired Assets are held by Continental Bank,
National Association, as Trustee under the Eagle Trade
Receivables Master Trust (the "Receivables Trustee")
and that the Seller shall sell such Receivables as
herein provided by causing the Receivables Trustee to
transfer the Receivables to Buyer at Closing pursuant
to a Receivables Sales Agreement (herein so called) in
substantially the same form as attached hereto as
Schedule 1.1(a).
(b) All inventories, including raw materials
(including but not limited to craft kit materials,
packaging materials, fiber, dyes and chemicals),
work-in-process and finished goods ("Inventory").
(c) All prepaid expenses and deferred expenses
of the types listed on Schedule 1.1(c) hereto, to the
extent such items will benefit Buyer after the Closing
Date assuming Buyer conducts the Business in a manner
consistent with the conduct of the Business prior to
the Closing Date (collectively, the "Other Current
Assets").
(d) All patents, patent rights, trademarks,
trade names (including, without limitation, the names
"Caron" and "Caron International" and the other names
under which Seller operates and the logos associated
therewith) other than those used exclusively in the
Excluded Business, service marks, service names,
copyrights, applications for the foregoing, licenses
with respect to the foregoing and other such property
("Intellectual Property").
(e) All trade secrets, proprietary information,
inventions, know how, formulae, processes, procedures,
research records, records of inventions, test
information, customer lists, market surveys, marketing
know-how and other intangible assets ("Technology").
(f) Seller's right, title and interest in, to
and under each of the Assumed Contracts.
(g) All permits, licenses, franchises,
registrations, approvals and authorizations by
governmental or regulatory authorities or bodies
("Permits").
(h) All spare, replacement or repair parts, all
"big pack" containers, all point of sale materials and
all supplies (collectively, "Supplies").
(i) All claims and rights against other persons
attributable or related to any Acquired Asset,
including, without limitation, unliquidated rights
under manufacturers' and vendors' warranties, rights
of recovery, set-offs and credits.
(j) All books and records in existence relating
to the Acquired Assets and Assumed Liabilities
including, without limitation, copies of lists of
customers and suppliers (past, present and potential);
records with respect to Receivables and Inventory;
business development plans; advertising matter,
catalogues, correspondence, mailing lists,
photographs, sales materials and records; purchasing
materials and records; sales order files; personnel
records of employees; accounting, tax and litigation
files; and other records pertaining to the Acquired
Assets and Assumed Liabilities. Seller, however,
shall be entitled to retain copies of any such
documents or records which are necessary for its tax,
accounting or legal purposes.
1.2 Excluded Assets. The following assets ("Excluded
Assets") are not included in the Acquired Assets, and Seller
shall not sell to Buyer and Buyer shall not purchase from
Seller any of them pursuant to Article 1:
(a) Any rights or benefits to and under a
Contract not an Assumed Contract.
(b) The corporate seals, certificates of
incorporation, minute books, stock books, tax returns,
or other records having to do solely with the
corporate organization of Seller.
(c) The rights to any of Seller's claims for any
Federal, state, local, or foreign tax refunds.
(d) All cash and cash equivalents, checks and
drafts in the possession of Seller and the
consideration paid by Buyer to Seller hereunder.
(e) All assets used or held for use exclusively
in the Excluded Business.
(f) Any Receivable attributable to any sales to
the Excluded Business and any other amount payable to
Seller by any Affiliate of Seller.
(g) Claims under Seller's insurance policies.
(h) All Machinery and Equipment of Seller and
Seller's right, title and interest in and to any Real
Property.
1.3 Assurances. After the Closing, for no further
consideration, Seller shall perform all such other action and
shall execute, acknowledge and deliver all such assignments,
transfers, consents and other documents as Buyer or its counsel
may reasonably request to vest in Buyer and protect Buyer's
right, title and interest in the Acquired Assets.
2. ASSUMPTION OF OBLIGATIONS AND LIABILITIES.
2.1 Assumed Contracts. From and after the Closing,
Buyer shall assume and perform Seller's obligations to be
performed after the Closing Date under the following
Contracts: (i) all Contracts for the purchase or sale of
Inventory or services attributable solely to, and incurred in
the ordinary course of, the Business, no one of which will
involve the expenditure by any party thereto of an amount in
excess of $10,000 after the Closing Date or will have a
duration of more than three months after the Closing Date
("Routine Contracts"), but only if and to the extent such
Contracts shall be consistent with the representations and
warranties of Seller and the other provisions of this Agreement
and (ii) those of the Contracts listed on Schedule 4.5 hereto
that Buyer (by so indicating on such Schedule) has agreed to
assume; provided, however, that (a) in no event shall Buyer
assume any liability or obligation under any Contract
(i) required by the terms thereof to be discharged on or prior
to the Closing Date, (ii) the existence of which constitutes a
breach of any representation or warranty of Seller, Eagle or
Parent contained in or made pursuant to this Agreement,
(iii) incurred by Seller in violation of the provisions of this
Agreement, (iv) arising out of a breach or default by Seller on
or prior to the Closing Date (including any event that with the
passage of time or the giving of notice, or both, would become
a breach or default) under any Contract, or (v) existing as of
the Closing Date that, under GAAP, should have been accrued or
reserved for on a balance sheet or in the notes thereto as a
liability or obligation if and to the extent not accrued or
reserved for on the Closing Net Asset Value Statement, and
(b) Buyer shall have the right not to assume any Contract if
either Seller or another party thereto is in breach thereof or
default thereunder (including any event that with the passage
of time or the giving of notice, or both, would become a breach
or default) as of the Closing or to the assumption of which any
necessary consent is not received prior to the Closing.
Contracts to be assumed by Buyer hereunder (and, as of any time
prior to the Closing, without giving effect to clause (b) of
the preceding sentence) are referred to as "Assumed
Contracts." If any Assumed Contract for which assignment to
Buyer is provided herein is not assignable without the consent
of another party, then such Assumed Contract shall not be
assigned to and assumed by Buyer at the Closing. Seller and
Buyer agree to use reasonable efforts (without any requirement
on the part of Buyer or Seller to pay any money or agree to any
change in the terms of any such Assumed Contract) to obtain the
consent of such other party to the assignment of any such
Assumed Contract to Buyer in all cases in which such consent is
or may be required for such assignment. If any such consent
shall not be obtained, Seller and Buyer shall cooperate in any
reasonable arrangement designed to provide for Buyer the
benefits intended to be assigned to Buyer under the relevant
Assumed Contract, including enforcement of any and all rights
of Seller against the other party thereto arising out of the
breach or cancellation thereof by such other party or otherwise.
2.2 Other Liabilities Assumed. Buyer shall assume as
of the Closing and pay thereafter the liabilities that are not
discharged on or prior to the Closing Date for Trade Payables
and Other Accrued Expenses, to the extent accrued or reserved
for on the Closing Net Asset Value Statement, as finally
determined (the "Assumed Liabilities"). To the extent a
liability is an Assumed Liability pursuant to this Section 2.2,
Buyer shall be deemed to have assumed it notwithstanding the
provisions of Section 2.1.
2.3 Non-Assumption of Liabilities. Buyer shall not
assume or be bound by any duties, responsibilities, obligations
or liabilities of Seller of any kind or nature, known, unknown,
contingent or otherwise, other than those obligations and
liabilities expressly assumed by it pursuant to Sections 2.1
and 2.2. Without limiting the generality of the foregoing, in
no event shall Buyer assume or incur any liability or
obligation under this Agreement or otherwise in respect of any
of the following:
(a) Any product liability or similar claim for
injury to person or property, regardless of when made
or asserted, which arises out of or is based upon any
express or implied representation, warranty, agreement
or guarantee made by Seller, or alleged to have been
made by Seller, or which is imposed or asserted to be
imposed by operation of law, in connection with any
service performed or product sold or leased by or on
behalf of Seller on or prior to the Closing Date,
including without limitation any claim relating to any
product delivered in connection with the performance
of such service and any claim seeking recovery for
consequential damage, lost revenue or income ("Product
Liability Claims").
(b) Any liability or obligation for any Tax
imposed on Seller or assessed or incurred in
connection with the operation of the Business on or
prior to the Closing Date or arising under or in
connection with the Excluded Assets or the Excluded
Business.
(c) Any liability or obligation arising prior to
or as a result of the Closing to any employees, agents
or independent contractors of Seller, whether or not
employed by Buyer after the Closing, or under any
benefit arrangement with respect thereto, except as
expressly set forth in Section 10.2.
(d) Any liability or obligation with respect to
an Environmental Condition as to which Eagle is
obligated to indemnify Buyer pursuant to Section
11.1(a), including without limitation any indemnified
matter arising under CERCLA.
3. PURCHASE PRICE.
The purchase price for the Acquired Assets (the
"Purchase Price") shall be calculated and paid in accordance
with this Article 3.
3.1 Calculation of Closing Consideration.
(a) On the fourth Business Day prior to the
Closing Date, Seller shall deliver to Buyer a projected Closing
Net Asset Value Statement (the "Estimated Closing Statement"),
prepared in accordance with GAAP, which Estimated Closing
Statement Seller agrees shall reflect Seller's best good faith
estimates made on a reasonable basis in accordance with
information then available to Seller, together with Seller's
estimates of Closing Gross Asset Value and of Closing Net Asset
Value, each determined in accordance with the Estimated Closing
Statement ("Seller's Estimates"). Seller shall promptly
furnish to Buyer all information relevant to the preparation of
the Estimated Closing Statement and Seller's Estimates,
including Seller's workpapers utilized in such preparation. On
the second Business Day prior to the Closing Date, Buyer shall
give Seller notice either that it does not dispute Seller's
Estimates, in which case Seller's Estimates shall be the
Estimated Closing Gross Asset Value and Estimated Closing Net
Asset Value, as the case may be, or proposing alternate
estimates of Closing Gross Asset Value and of Closing Net Asset
Value ("Buyer's Estimates"), which Buyer agrees shall reflect
Buyer's best good faith estimates thereof made on a reasonable
basis in accordance with information then available to Buyer.
If Buyer gives notice of Buyer's Estimates, the parties shall
negotiate in good faith to reach agreement on the Estimated
Closing Gross Asset Value and Estimated Closing Net Asset Value
(which Agreement shall be in writing signed by Seller and
Buyer) and, if they cannot agree on or before the Business Day
preceding the Closing Date, the Estimated Closing Gross Asset
Value and Estimated Closing Net Asset Value shall be the
average of the respective amounts thereof included in Seller's
Estimates and Buyer's Estimates. If either party shall fail to
give notice as required above by this Section 3.1(a), the other
party's estimates of Closing Gross Asset Value and Closing Net
Asset Value shall be the Estimated Closing Gross Asset Value
and the Estimated Closing Net Asset Value. If the Estimated
Closing Net Asset Value exceeds $20,000,000, at or prior to the
Closing Buyer shall give Seller notice of Buyer's election
(i) to terminate this Agreement pursuant to Section 12.5(v), or
(ii) to increase the principal amount of the Purchase Price
Note by an amount equal to the Excess Value, if any, pursuant
to Section 3.3(a).
(b) Subject to the terms and conditions of this
Agreement, at the Closing Buyer shall deliver to Seller
(i) cash in an amount equal to (x) the lesser of (A) the
Estimated Closing Net Asset Value multiplied by 90%, minus
$4,000,000, and (B) $14,000,000, plus (y) $900,000 (such sum,
the "Closing Cash Payment") and (ii) a promissory note of NSC,
dated the Closing Date and substantially in the form of
Exhibit B hereto, in the original principal amount of
$4,000,000 (the "Purchase Price Note"). Buyer shall pay to the
Receivables Trustee a portion of the Closing Cash Payment, as
provided in the Receivables Sales Agreement.
3.2 Calculation of Closing Net Asset Value.
(a) Seller shall cause a physical examination
and count of the Inventory included in the Acquired Assets as
of the close of business on the Closing Date to be conducted
under the supervision of Arthur Andersen & Co., which Buyer and
its representatives shall be entitled to observe, provided that
those categories of Inventory listed in Part A of Schedule
3.2(a) located at the Rochelle Facility may be included
pursuant to Seller's perpetual inventory system to the extent
retested as of the Closing Date and the Inventory located at
the places or with the Persons listed in Part B of Schedule
3.2(a) may be verified through other means, in each case to the
extent acceptable to Arthur Andersen & Co. As promptly as
practicable after the Closing Date, and in any event not later
than 75 days after the Closing Date, Seller shall deliver to
Buyer (i) a statement of Closing Net Asset Value as of the end
of the Closing Date (the "Closing Net Asset Value Statement"),
presented in the form of Exhibit H hereto, prepared by Seller
in accordance with GAAP but without giving effect to any
changes attributable to the purchase of the Acquired Assets or
assumption of the Assumed Liabilities by Buyer, and (ii) the
unqualified opinion without explanatory language of Arthur
Andersen & Co. with respect to the Closing Net Asset Value
Statement substantially in the form of Exhibit I hereto. Buyer
shall give Seller full access to the personnel, books and
records relating to the Acquired Assets or the Assumed
Liabilities during normal business hours upon reasonable
request of Seller and shall provide to Seller information
reasonably requested by Seller, all to enable Seller and its
representatives to prepare the Closing Net Asset Value
Statement. Seller shall make available to Buyer its
accountants' work papers (excluding papers containing
Accountants Proprietary Information of such accountants) and
such other information relating to the preparation of the
Closing Net Asset Value Statement and the calculation of the
Closing Net Asset Value as Buyer shall reasonably request.
(b) In the event that Buyer disputes Seller's
calculation of the Closing Net Asset Value or any component
thereof, Buyer shall give written notice thereof to Seller on
or before the 30th day after delivery to Buyer of the items
referred to in clauses (i) and (ii) of Section 3.2(a), which
notice shall set forth the basis for such disputes in
reasonable detail. The parties shall use all reasonable
efforts to resolve any such disputes, but if any such dispute
cannot be resolved by the parties within 30 days after the date
the dispute notice is given, Buyer and Seller shall within five
days after the end of such 30 day period select an Arbitrating
Firm and all such unresolved disputes shall be referred to the
Arbitrating Firm for resolution. The parties shall seek to
cause the Arbitrating Firm to make its determination within 30
days after referral of a dispute to it. The determination of
the Arbitrating Firm shall be conclusive and binding on each
party. The fees of the Arbitrating Firm shall be allocated and
paid by Seller or Buyer, or divided between them, on a basis
determined by the Arbitrating Firm to be fair taking into
account the correctness of the positions asserted by each of
them with respect to the disputed matters resolved by the
Arbitrating Firm.
(c) The Closing Net Asset Value and the Assumed
Liabilities shall be deemed to be finally determined in the
amounts set forth in the Closing Net Asset Value Statement on
the 30th day after delivery to Buyer of the items referred to
in clauses (i) and (ii) of Section 3.2(a) unless a dispute
notice is given in accordance with Section 3.2(b) with respect
to the calculation thereof. If such a dispute notice is given,
the Closing Net Asset Value and the Assumed Liabilities shall
be deemed finally determined on the date that the Arbitrating
Firm gives written notice to Buyer and Seller of its
determination with respect to all disputes regarding the
calculation thereof, or, if earlier, the date on which Seller
and Buyer agree in writing on the amount thereof, in which case
the Closing Net Asset Value and the Assumed Liabilities shall
be calculated in accordance with such determination or
agreement, as the case may be.
(d) If the Closing Net Asset Value, as finally
determined, exceeds the sum of the Closing Cash Payment plus
$3,165,312 (such sum, the "Closing Consideration"), Buyer shall
(i) pay to Seller an amount in cash equal to the lesser of
(x) such excess and (y) the excess, if any, of $20,000,000 over
the Closing Consideration and (ii) at or before the time of
such payment give Seller notice of Buyer's election either (x)
to increase the principal amount of the Purchase Price Note by
an amount equal to the Excess Value pursuant to Section 3.3(a)
or (y) to convey to Seller beneficial ownership of Closing
Inventory with a book value equal to the Excess Value pursuant
to Section 3.3(b). If the Closing Net Asset Value, as finally
determined, is less than the Closing Consideration, Seller
shall pay to Buyer an amount in cash equal to such deficiency.
Payments of cash required pursuant to this Section, if any,
shall be made on the fifth Business Day after the Closing Net
Asset Value is finally determined (the "Adjustment Payment
Date").
3.3 Excess Closing Net Asset Value.
(a) If after the final determination of Closing
Net Asset Value, there is Excess Value and Buyer has given
Seller notice of Buyer's election to increase the principal
amount of the Purchase Price Note by the amount of the Excess
Value pursuant to Section 3.1(a) or Section 3.2(d)(ii)(x), then
effective as of the Adjustment Payment Date, the principal
amount of the Purchase Price Note shall be deemed increased by
the amount of the Excess Value.
(b) If after the final determination of Closing
Net Asset Value, there is Excess Value and Buyer has given
Seller notice of Buyer's election to convey to Seller
beneficial ownership of Closing Inventory pursuant to Section
3.2(d)(ii)(y), then on the Adjustment Payment Date, Buyer shall
deliver to Seller notice describing the Closing Inventory that
Buyer shall sell on behalf of Seller (the "Excess Value
Inventory"), which notice shall set forth the items of Excess
Value Inventory (identified by part or lot number) and the
volume (in pounds or other applicable units) of each item,
provided, that if, within 10 days after the Adjustment Date,
Seller gives Buyer notice requesting the Excess Value
Inventory, Buyer shall not be obligated to sell Excess Value
Inventory and instead shall convey it to Seller on the same
terms as the conveyance contemplated by Section 3.5(a). The
Excess Value Inventory shall have a book value (based on the
amount thereof utilized in calculating the Closing Net Asset
Value, as finally determined) not less than the Excess Value.
If Seller does not give notice requesting the Excess Value
Inventory as provided above, Buyer shall endeavor to sell the
Excess Value Inventory on behalf of Seller in the ordinary
course of Buyer's business on terms similar to those applicable
to the remaining Closing Inventory. Buyer shall be entitled to
favor the sale of its own Inventory over the sale of Excess
Value Inventory. Neither Seller, Eagle nor Parent shall
challenge in any respect Buyer's efforts to sell the Excess
Value Inventory, except for Buyer's failure to make any effort
to sell the Excess Value Inventory. Promptly after receipt by
Buyer of any proceeds from the sale of Excess Value Inventory,
Buyer shall pay to Seller such proceeds, net of an amount equal
to 17% of such proceeds.
3.4 Adjustment for Receivables.
(a) On or before the fifth Business Day after
the Closing Date, Seller shall deliver to Buyer a list of all
Receivables included in the Acquired Assets as of the Closing
(the "Closing Receivables") showing, in each case, the name of
the customer owing such Receivable, the date and number of each
outstanding invoice and the amount owed by such customer on
each such invoice. The total of all such Receivables, less the
amount of the Receivables Reserves, shall equal the amount
included for Receivables in Seller's calculation of Closing Net
Asset Value set forth in the Closing Net Asset Value
Statement. Buyer shall provide Seller with access to the books
and records of Buyer to the extent necessary to prepare such
list. Seller shall write-off any Business-Related Receivables
as of the Closing that are known to be uncollectable and shall
not pursue further attempts to collect such Receivables, and
none of the Receivables referred to in this sentence shall be
included as Closing Receivables.
(b) After the Closing, Buyer shall have full
right and authority to collect for its own account all Closing
Receivables. Seller shall immediately pay to Buyer any amount
received by Seller after the Closing attributable to payment of
any Closing Receivables, except with respect to Assigned
Receivables after assignment thereof to Seller as provided
below. Within 30 days after the Cut-Off Date, Buyer shall give
Seller notice (the "Receivables Notice") specifying the
aggregate amount of Closing Receivables collected by Buyer
during the period from the Closing Date through the Cut-Off
Date (the "Collected Amount") and, if the (i) Receivables
Reserve exceeds (ii) the face amount of the Closing Receivables
minus the Collected Amount (the "Uncollected Amount"), then
simultaneous with giving the Receivables Notice Buyer shall pay
to Seller cash in an amount equal to such excess plus interest
accrued on the amount of such excess from and including the
Closing Date to but excluding the date of payment at a rate per
annum equal to the Note Rate. If the Uncollected Amount
exceeds the Receivables Reserve (the "Receivables Deficiency"),
then within five Business Days after the date that the
Receivables Notice is given, Seller shall pay to Buyer cash in
an amount equal to the Receivables Deficiency, plus interest
accrued on the amount thereof from and including the Closing
Date to but excluding the date of payment at a rate per annum
equal to the Note Rate. On the date that the Receivables
Notice is given or, if there is a Receivables Deficiency, on
such date that Seller shall pay Buyer an amount equal to the
Receivables Deficiency plus interest as aforesaid, Buyer shall
select and assign to Seller any of the Closing Receivables
(including the unpaid portion of any Closing Receivables) that
were not collected during the period from the Closing Date
through the Cut-Off Date and as to which Buyer has not
compromised or settled the customer's obligation in an
aggregate face amount (the "Assigned Receivables") equal to the
lesser of (i) the Uncollected Amount minus 50% of the
Receivables Reserve and (ii) 35% of the Uncollected Amount,
provided that Buyer shall not be obligated to assign any
Receivables to Seller if the amount referred to in clause
(i) is zero or a negative number. If on the Cut-Off Date the
Closing Net Asset Value shall not have been finally determined,
Buyer shall have given a dispute notice pursuant to
Section 3.2(b) including a dispute with respect to the
Receivables Reserves and Buyer shall not have elected to extend
the Cut-Off Date, then the Receivables Reserves shall be deemed
to have been finally determined for purposes of determining the
Closing Net Asset Value and the Receivables Reserve as the
amount thereof used in determining Closing Net Asset Value, as
set forth in the Closing Net Asset Value Statement delivered by
Seller. Upon an assignment to Seller of Assigned Receivables
pursuant to this Section, Buyer shall have no further
responsibility with respect to any such Assigned Receivables
and shall not be entitled to receive any portion of any amounts
collected by Seller with respect thereto, and Seller shall be
entitled to undertake any and all collection efforts with
respect to any such Assigned Receivables as it may elect.
After the effectiveness of any such assignment of Assigned
Receivables, Buyer shall immediately pay to Seller any amount
received by Buyer after the Cut-Off Date within 90 days after
the Cut-Off Date attributable to payment of any Closing
Receivables. For purposes of this Section 3.4, all amounts
collected on account of Receivables shall be applied as
indicated by the customer or, if no indication is made, to the
oldest outstanding Receivable, except to the extent that the
customer has asserted to Buyer a colorable defense against a
Receivable as to which payment would otherwise be applied
hereunder.
3.5 Adjustment for Inventory.
(a) After the Closing, Buyer shall attempt to
sell the Inventory included in the Acquired Assets as of the
Closing (the "Closing Inventory") in the ordinary course of its
business at a profit in a manner consistent with Seller's past
practices. If any Closing Inventory (excluding Excess Value
Inventory) remains unsold at April 30, 1995, Buyer shall have
the right (but not the obligation) to give to Seller notice by
May 20, 1995, identifying some or all of such items of unsold
Inventory (the "Remaining Inventory") and the volume (in pounds
or other applicable units) of each item. Within five Business
Days after such notice is given, Seller may make an offer in
writing to Buyer to purchase all or any portion of such
Remaining Inventory for an amount in cash specified in such
offer. If within five Business Days after Seller gives Buyer
notice of such offer Buyer gives to Seller notice of acceptance
of such offer, on the fifth Business Day after such notice of
acceptance is given Buyer shall sell such Remaining Inventory
to Seller, f.o.b. its location at the time on an "as is" basis
without any representation or warranty, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED and
Seller shall pay to Buyer cash in the amount specified in
Seller's offer within 30 days after such fifth Business Day.
If Seller does not so make such an offer to purchase or, if so
made, Buyer does not so accept such offer, then Buyer shall
attempt to sell such Remaining Inventory as first-quality
goods, if possible, or as close-outs. Buyer shall be entitled
to favor the sale of its own Inventory over the sale of the
Remaining Inventory. Neither Seller, Eagle nor Parent shall
challenge in any respect Buyer's efforts to sell the Remaining
Inventory, except for Buyer's failure to make any effort to
sell the Remaining Inventory.
(b) If Buyer is obligated to attempt to sell
Remaining Inventory pursuant to the third to last sentence of
Section 3.5(a), on or before July 31, 1995, Buyer shall give
Seller notice (the "Inventory Adjustment Notice") of the total
amount of cash received by Buyer with respect to sales of
Remaining Inventory by it through June 30, 1995, net of Buyer's
direct out-of-pocket costs incurred in attempting to sell the
Remaining Inventory (the "Remaining Inventory Revenues"). If
(i) the book value of the Remaining Inventory, less the
Inventory Reserves, less the book value of any Remaining
Inventory that is unsold as a direct result of Buyer
voluntarily ceasing to market after the Closing the product
line that includes such Inventory (the "Discontinued Book
Value"), plus, if there is any Discontinued Book Value, an
amount equal to the Inventory Reserves multiplied by a
fraction, the numerator of which is the Discontinued Book Value
and the denominator of which is the book value of the Closing
Inventory (such book values referred to in this clause (i) to
be based on the amounts thereof utilized in calculating Closing
Net Asset Value, as finally determined) exceeds (ii) the
Remaining Inventory Revenues (such excess, the "Inventory
Deficiency"), then, effective on the date that the Inventory
Adjustment Notice is given to Seller, the outstanding principal
amount of the Purchase Price Note shall be reduced by the
lesser of (i) the Inventory Deficiency and (ii) $500,000 (such
lesser amount, the "Inventory Adjustment Amount"). If any
Inventory Adjustment Amount remains after such principal amount
shall have been reduced to zero, Seller shall pay to Buyer the
balance of the Inventory Adjustment Amount in four equal annual
installments commencing on the fifth Business Day after the
date such Inventory Adjustment Notice is given and on the next
three succeeding anniversaries of such date, plus interest
accrued on the balance of the Inventory Adjustment Amount at
the Note Rate from the Closing Date to the date of each such
payment. In addition, if there is an Inventory Deficiency and
if any Remaining Inventory remains unsold, then effective on
the date that the Inventory Adjustment Notice is given Buyer
shall convey to Seller, on the same terms as the conveyance
contemplated by Section 3.5(a), Remaining Inventory with a book
value (based on the amount thereof utilized in calculating
Closing Net Asset Value, as finally determined) equal to the
Inventory Adjustment Amount or, if there is not sufficient
Remaining Inventory to do so, then all of the Remaining
Inventory.
3.6 (Intentionally omitted).
3.7 Royalty Payments. Buyer shall pay to Seller
royalties with respect to certain future sales of Buyer in
accordance with the provisions of Exhibit C hereto.
3.8 Payments. All payments of cash required to be
made pursuant to this Article 3 shall be made by wire transfer
of immediately available funds to such account in the United
States as shall be designated by the party entitled to receive
the payment in a notice to the party required to make the
payment given at least two Business Days prior to the date such
payment is due. Any payments pursuant to Article 3 (excluding
pursuant to Section 3.1 or 3.7) shall be deemed to be an
adjustment to the Purchase Price.
3.9 Allocation of Purchase Price. The parties hereto
agree that the consideration for the Acquired Assets shall be
allocated as follows:
(a) an amount equal to the book value of the Closing
Receivables, net of the Receivables Reserves, shall be
allocated to the Receivables;
(b) an amount equal to the book value of the Closing
Inventory, net of the Inventory Reserves, shall be allocated to
the Inventory;
(c) an amount equal to the book value, as of the
Closing Date, of the Other Current Assets shall be allocated to
the Other Current Assets; and
(d) $900,000 shall be allocated to the Supplies.
The parties hereto agree to file all tax returns in a
manner that reflects the allocation set forth above.
4. REPRESENTATIONS AND WARRANTIES OF SELLER, EAGLE
AND PARENT.
Seller, Eagle and Parent hereby jointly and severally
represent and warrant to Buyer and NSC that:
4.1 Organization. Each of Seller, Eagle, Parent and
GAMI is a corporation duly organized and validly existing in
good standing under the laws of Delaware. Seller has the
corporate power to own its assets and carry on the Business as
it is now conducted. Seller is duly qualified to do business
and is in good standing in the states and other jurisdictions
listed in Schedule 4.1 hereto, which includes all states and
jurisdictions where qualification is required in connection
with the conduct of the Business, except where the failure to
so qualify would not have a Material Adverse Effect. Seller
has delivered to Buyer prior to the date of this Agreement
complete and correct copies of the Certificate of Incorporation
and By-Laws of Seller, as currently in effect. Eagle is the
sole record and beneficial owner of all of the outstanding
capital stock of Seller. Seller does not own any shares of
capital stock of any other corporation or any equity interest
in any partnership, joint venture or other entity.
4.2 Authority; Binding Effect. Each of Seller, Eagle
and Parent has full power and authority to execute and deliver
this Agreement and the other instruments and documents required
or contemplated by this Agreement to be executed and delivered
by it, to perform its obligations hereunder and thereunder and
to consummate the transactions provided for herein and therein,
and GAMI has full power and authority to execute and deliver
the GAMI Guarantee and to perform its obligations thereunder.
Such execution, delivery, performance and consummation do not
and will not (i) contravene any provision of the certificate of
incorporation or by-laws or similar governing instrument of
Seller, Eagle, Parent or GAMI, (ii) except to the extent
expressly indicated on Schedule 4.5, contravene or conflict
with, result in a breach of, entitle any party not to perform
under, require any consent, approval or waiver of any party
(other than Seller) to, or entitle any party (with notice or
the passage of time or both) to terminate, accelerate any
obligation under, materially alter the terms of or call a
default with respect to, any Seller Contract (any of the
foregoing referred to in this clause (ii), including those
referred to on Schedule 4.5, being defined as a "Contract
Default"), (iii) result in the creation of a Lien upon any of
the Transferred Assets, (iv) result in any violation by Seller,
Eagle, Parent or GAMI of any law, rule or regulation applicable
to it, (v) violate or require any consent or approval under any
judgment, injunction or decree of any court or governmental
authority applicable to Seller, Eagle, Parent or GAMI, or (vi)
except for filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(including a notification and report form and related exhibits,
which Seller duly filed under the HSR Act on August 1, 1994),
require any consent or approval of, notice to or filing,
registration or qualification with, any court or governmental
authority. This Agreement has been duly authorized by all
necessary corporate action of each of Seller, Eagle and Parent,
has been duly executed and delivered by each of Seller, Eagle
or Parent and constitutes, and the other instruments and
documents required or contemplated by this Agreement to be
executed by Seller, Eagle or Parent will be duly executed by it
as so required or contemplated and when so executed will
constitute, its valid and binding obligation, enforceable
against it in accordance with the terms thereof (except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by the principles
governing the availability of equitable remedies). The GAMI
Guarantee has been duly authorized by all necessary corporate
action of GAMI, has been duly executed and delivered by GAMI
and constitutes its valid and binding obligation, enforceable
against it in accordance with the terms thereof (except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by the principles
governing the availability of equitable remedies).
4.3 Financial and Other Information; Absence of
Adverse Changes.
(a) Attached as Schedule 4.3(a) hereto are
unaudited (i) balance sheets of the Business as of July 1,
1994, December 31, 1993 and December 31, 1992 and (ii) the
related statements of operating income of the Business for each
of the one year periods (or, in the case of such July 1, 1994,
statements, six months) then ended. (The foregoing financial
statements, in each case including the notes thereto, are
referred to collectively as the "Financial Statements"; and the
foregoing July 1, 1994, balance sheet, the "Pre-Closing Balance
Sheet.")
(b) Schedule 4.3(b) hereto correctly sets forth
the total net sales (determined in accordance with Unmodified
GAAP) by the Business of Hand Knit Yarn, Jobber/Industrial
Yarn, latch-hook Craft Kits and non-latch-hook Craft Kits and,
in the case of yarn, total volume sold in pounds, for Seller's
1993 and 1992 fiscal years and for six months ended July 1,
1994. The Net Asset Value was within $300,000 of $21.5 million
as of December 31, 1993, and was within $200,000 of $17.6
million as of July 1, 1994. The total net sales by the
Business to the Excluded Business was $1,083,000 in 1992,
$933,000 in 1993 and $292,000 in the first six months of 1994.
(c) The detailed product sales information set
forth on Schedule 4.3(c) is true and correct in all material
respects.
(d) The statements of operating income included
in the Financial Statements do not contain any material items
of special or nonrecurring income, and the balance sheets
included in the Financial Statements do not reflect any
write-up or revaluation increasing the book value of any assets
since December 31, 1989; nor have there been any transactions
since December 31, 1993, giving rise to material special or
nonrecurring income or any such write-up or revaluation.
Inventories have been valued throughout the periods after
December 31, 1991 on a consistent basis. The books and
accounts of Seller relating to the periods after December 31,
1991 are complete and correct and fairly reflect all of the
transactions of Seller relating to the Business. The Financial
Statements are in accordance with the books and records of
Seller, were prepared in conformity with Unmodified GAAP
applied on a consistent basis and present fairly the financial
position and results of operations of the Business as of the
dates and for the periods indicated, except as otherwise stated
in the notes to the Financial Statements and except that the
Financial Statements do not have footnotes required by
Unmodified GAAP and the statements of operating income only
reflect the operating income of the Business.
(e) Except as set forth in Schedule 4.3(e),
since December 31, 1993: (i) there has been no general wage
increase for hourly Business Employees; (ii) no capital
expenditures have been authorized or made by Seller with
respect to the Business other than those in the ordinary course
of business and that in the aggregate do not involve
expenditures by Seller of more than $1,000,000; (iii) there
have been no sales or other dispositions or acquisitions
(including by purchase, lease as lessee or otherwise) of
Business-Related properties or assets by Seller other than
those in the ordinary course of business and that in the
aggregate (excluding sales and acquisitions of Inventory in the
ordinary course of business) do not involve expenditures by
Seller of more than $10,000; (iv) there have been no damages or
destructions, whether or not fully covered by insurance, of or
to any Business-Related properties or assets with a book value
in excess of $25,000; (v) neither Seller, Eagle nor Parent has
received written notice that any party to any Seller Contract
intends to cancel or terminate any of such agreements or to
exercise or not exercise any options thereunder; (vi) the
operations and business of Seller relating to the Business have
been conducted in all respects only in the ordinary course
consistent with past practice (except for the execution of this
Agreement) and, in particular, Seller has not increased its
production of Inventory, accelerated the collection of
Receivables or deferred the payment of Trade Payables or Other
Accrued Expenses as compared to Seller's past practices; and
(vii) there has been no Material Adverse Effect.
4.4 Transferred Assets.
(a) Title. Seller has as of the date of this
Agreement, and on the Closing Date will have and convey to
Buyer, transferable title to all the Acquired Assets (except
the Receivables owned by the Receivables Trustee, as to which
the Receivables Trustee will transfer transferable title to
Buyer on the Closing Date), subject to no Lien, other than
those set forth in Schedule 4.4(a) hereto, which (individually
or in the aggregate) do not materially adversely affect any
Acquired Asset or interfere with the conduct of the Business as
now conducted. No other person has any right to the use or
possession of any of the Acquired Assets. Except with respect
to Liens listed in Schedule 4.4(a), no financing statement
under the Uniform Commercial Code with respect to any of the
Acquired Assets has been filed in any jurisdiction and Seller
has not signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any
such financing statement. The Transferred Assets are
sufficient for Buyer to conduct and operate the Business as now
being conducted by Seller.
(b) Real Property. Schedule 4.4(b) hereto sets
forth a complete and accurate list of all Real Property,
wherever located, owned, used or occupied by Seller in the
conduct of the Business (the "Property"), including, with
respect to each parcel of Property, its street address.
Schedule 4.5 includes a true and correct list of all Contracts
("Real Property Leases") for the use or occupancy by Seller in
connection with the Business of Real Property, including
fixtures, buildings, improvements, appurtenances, easements and
rights of way. The monthly rent payable by Seller under the
Quest Lease is $1,300. Except as disclosed on Schedule 4.4(b)
hereto, all Property conforms in all material respects with all
applicable building, zoning, environmental, land use and other
laws, ordinances, codes, orders and regulations and the current
use of such Property conforms in all material respects with
such laws, ordinances, codes, orders and regulations. All
necessary occupancy and other certificates and Permits for the
lawful use and occupancy of the Property and the Machinery and
Equipment thereon have been issued. All notes or notices of
violations of law, ordinances, codes, orders or regulations
noted in or issued by any state, county, municipal or local
department having jurisdiction against or affecting any of such
Property have been complied with. All Property has access over
currently utilized facilities and land (independent of any
facilities or other property not included in the Property) to
all public roads necessary to the conduct of the Business
carried out on Property by Seller. No condemnation or eminent
domain proceeding against or affecting all or any portion of
any Property is pending or, to the best knowledge of Seller,
Eagle and Parent, threatened. No person is in possession of
(or has any right, absolute or contingent, to possess superior
to Seller's right to possess) all or any portion of the
Property, except for lessor's right under any Real Property
Lease to retake upon termination of such Real Property Lease
the Property leased to Seller thereunder and except as
expressly provided in the Shared Services Agreement. There are
no disputes with, or notices from, the lessor under any Real
Property Lease that have not been fully resolved and satisfied.
(c) Machinery and Equipment. Schedule 4.4(c)
hereto sets forth a complete and accurate list as of July 31,
1994, of (i) each item of Business-Related Machinery and
Equipment with a book value or, in the case of leased items,
fair market value in excess of $10,000 (the "Principal
Machinery and Equipment") specifying the facility at which it
was then located and, in the case of owned equipment, its date
of purchase, method of depreciation, book value as of July 31,
1994, and monthly amount of depreciation and (ii) the
categories of other Business-Related Machinery and Equipment,
specifying the total book value of all such Machinery and
Equipment included in each such category. None of the
Business-Related Machinery and Equipment has been moved to a
different facility since July 31, 1994. The Machinery and
Equipment listed or included in the categories listed on
Schedule 4.4(c) (i) comprises sufficient Machinery and
Equipment for Buyer to conduct and operate the Business as now
being conducted by Seller, (ii) is in working order, is free
from any material defects and has been maintained, all in a
manner sufficient for Buyer to conduct and operate the Business
as now being conducted by Seller, and (iii) will be included in
the Leased Assets. No other person has any right to use or
possession of any of the Machinery and Equipment included in
the Leased Assets, except for lessors to Seller upon default
under the applicable lease of any such Machinery and Equipment
and except as expressly provided in the Shared Services
Agreement.
(d) Insurance. Set forth in Schedule 4.4(d) is
a list of all policies of fire, liability, product liability,
workers compensation and other forms of insurance presently in
effect with respect to the Business and the Transferred
Assets. All such policies are in full force and effect and
Seller has not received any notice of cancellation with respect
thereto. During the past three years, no application by Seller
for insurance with respect to the Transferred Assets has been
denied for any reason.
(e) Inventory. Schedule 4.4(e) hereto sets
forth a complete and accurate list of the locations of Seller's
Inventory. The values of all Business-Related Inventory of
Seller as shown by the books of Seller do not exceed the
aggregate of cost (determined on a FIFO basis) or market
thereof (whichever is lower) in accordance with Unmodified GAAP
applied consistently with the Financial Statements. There have
been no material acquisitions or dispositions by Seller of
Business-Related Inventory since December 31, 1993, except in
the ordinary course of business.
(f) Receivables. Schedule 4.4(f) hereto
contains a summary statement as of August 5, 1994, indicating
the aging of all outstanding Business-Related Receivables,
which is correct in all material respects.
(g) Permits. Schedule 4.4(g) hereto sets forth
a list of all Permits (including, without limitation,
Environmental Permits) used or held for use in connection with
the conduct of the Business as presently conducted. Such
Permits include all Permits the use and exercise of which are
necessary for the conduct of the Business as now conducted or
the ownership, use or possession of the Acquired Assets or the
use or possession of the Leased Assets, and, except as set
forth in Schedule 4.4(g), all such Permits will be assigned to
Buyer as of the Closing and Buyer will be entitled to all
authorizations and benefits provided thereunder. Seller
(except as set forth in Schedule 4.4(g)) is in compliance in
all material respects with all Permits.
(h) Intellectual Property; Software;
Technology. The Intellectual Property, Technology and Software
owned by or licensed to Seller and related to, used in, or held
for use in, the Business (the "Business Intellectual Property")
is sufficient for Buyer to conduct and operate the Business as
now being conducted by Seller. Schedule 4.4(h) hereto sets
forth a list of all Intellectual Property and Software included
in the Business Intellectual Property and any licenses or other
agreements relating thereto, and contains an indication of any
governmental registrations made by Seller of Business
Intellectual Property. Except as indicated on such Schedule,
all Intellectual Property included on such Schedule and shown
as registered has been duly registered and filed. Except as
set forth on Schedule 4.4(h), Seller is the sole and exclusive
owner of, and has the sole and exclusive right to use, the
Business Intellectual Property, in each case free and clear of
any Lien, free from any requirement of any past, present or
future royalty payments, license fees, charges or other
payments and subject to no interference or other contest
proceeding. Seller has, and at the Closing will assign to
Buyer, valid, binding and enforceable rights to use all
Business Intellectual Property not owned by Seller. Except as
set forth in Schedule 4.4(h), Seller has not granted any
outstanding licenses or other rights, and has no obligations to
grant licenses or other rights with respect to, any of the
Business Intellectual Property. No claims have been made by
Seller of any violation or infringement by others of the rights
of Seller with respect to any Business Intellectual Property,
and Seller does not know of any basis for the making of any
such claim. To the best knowledge of Seller, Eagle and Parent,
the Business has not violated or infringed any Intellectual
Property or Technology rights of others. Seller has not
received any written notice from any other person pertaining to
or challenging the right of Seller to use any Business
Intellectual Property.
(i) Other Current Assets. Schedule 4.4(i)
hereto sets forth a list of the Other Current Assets included
in the Pre-Closing Balance Sheet and their respective book
values.
4.5 Contracts. Schedule 4.5 hereto sets forth a list
of all Business-Related Contracts (excluding Routine Contracts)
of categories (a) through (p) of Schedule 4.5 (collectively,
and together with Routine Contracts, "Seller Contracts"),
separately indicating each amendment or modification under each
such Contract. Seller has at or prior to the date of this
Agreement furnished to Buyer true and complete copies of all
Contracts and amendments and modifications thereto listed on
Schedule 4.5. Except as expressly indicated on Schedule 4.5,
neither Seller nor, to Seller's, Eagle's or Parent's knowledge,
any other party to any Seller Contract is in default or is
claimed to be in default in complying with any material
provision of any Seller Contract or has committed or permitted
any event which, with notice or the passage of time or both,
would constitute such a default; and each Seller Contract is in
full force and valid and binding upon the Seller, and (to its
knowledge) upon any other parties thereto. The Routine
Contracts not listed on Schedule 4.5 will not require the
expenditure by Buyer after the Closing of more than $100,000 in
the aggregate.
4.6 Litigation; Compliance with Law. Except as
disclosed on Schedule 4.6 hereto, there is no action, suit or
proceeding pending or, to the best of Seller's, Eagle's and
Parent's knowledge, threatened against or affecting Seller, the
Business or Transferred Assets. No investigation or review by
any governmental entity with respect to Seller or the
Transferred Assets is pending or, to the best of Seller's,
Eagle's and Parent's knowledge, threatened. The Business is
being conducted in compliance in all material respects with all
laws, ordinances, codes, rules, standards, regulations,
requirements, decrees or orders of any judicial or governmental
entity (collectively, "Legal Requirements") applicable to
Seller, the Business or any of the Transferred Assets. No
event has occurred and is continuing that permits, or after
notice or lapse of time or both would permit, any modification
or termination of any Permit. Seller has not received any
written notice from any governmental authority asserting any
noncompliance with any Legal Requirement or Permit.
4.7 Taxes. Seller, and any consolidated, combined or
unitary group of which Seller is or was a member, have timely
filed all federal income tax returns and all other federal,
state, municipal, local, foreign and other returns, estimates
and reports of Taxes ("Tax Returns") which are required to be
filed, and all Taxes shown to be due on such Tax Returns have
been timely paid.
4.8 Employee Benefits.
(a) Set forth in Schedule 4.8(a) hereto is a
complete and correct list of:
(i) each "employee benefit plan" within
the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and
(ii) any other employee benefit plan,
arrangement or policy, including, without limitation,
any stock option, stock purchase, sick leave, vacation
pay, holiday pay, employee loan, educational
assistance, incentive or bonus plan, policy or
arrangement or any employment, indemnification,
consulting or severance plan, policy or agreement,
covering current or former employees of Seller employed in the
Business ("Business Employees"), whether written or oral
("Benefit Plans"). Seller has delivered to Buyer prior to the
date of this Agreement complete and correct copies of each
Benefit Plan or written summaries of any unwritten Benefit Plan.
(b) Within the last seven years, Seller has not
contributed to or had an obligation to contribute to any
"defined benefit plan" within the meaning of Section 3(35) of
ERISA.
(c) Seller has never contributed to or had an
obligation to contribute to a "multiemployer plan" within the
meaning of Section 3(37) of ERISA or a "multiple employer plan"
within the meaning of Section 4063 or 4064 of ERISA.
(d) No event has occurred nor does any condition
exist with respect to any employee benefit plan or arrangement
maintained, sponsored or contributed to by Seller or any entity
which is treated as a single employer with Seller under Section
414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") which
could subject NSC or Buyer, directly or indirectly (through an
indemnification agreement or otherwise), to liability,
including, without limitation, liability under Section 412,
4971, 4975 or 4980B of the Code or Section 406 or Title IV of
ERISA. Neither the execution of this Agreement nor the Closing
will be a "reportable event" under Section 4043 of ERISA (for
which the 30-day notice requirement has not been waived by the
Pension Benefit Guaranty Corporation (the "PBGC") with respect
to any defined benefit plan maintained, sponsored or
contributed to by an ERISA Affiliate.
(e) Schedule 4.8(e) sets forth: (i) the amount
of premiums paid by Seller or an ERISA Affiliate of Seller with
respect to current and former employees of the Business under
any insured group health plan for each of the last three years;
and (ii) the amount of claims paid by Seller with respect to
current and former employees of the Business under any
self-insured group health plan for each of the last three
years. Except as set forth on Schedule 4.8(e), no Benefit Plan
provides life, health or other welfare benefits to retirees or
other terminated employees, other than continuation coverage
mandated by Section 4980B of the Code or any state law
requiring similar continuation coverage.
(f) Except with respect to payments of amounts
due under the Severance Pay Policy, the execution and
performance of this Agreement will not trigger or accelerate
the payment or vesting, or increase the amount of compensation
or remuneration (whether of severance pay or otherwise) due any
employee, former employee, or director of Seller.
(g) Schedule 4.8(g) hereto sets forth a complete
and correct list, with respect to each Business Employee, of
his or her name, date of birth, date of hire, job title, job
classification, location of employment, current annual salary
or hourly wage rate, salary rate as of December 31, 1993 (as to
each salaried and clerical employee only) and total
compensation during 1993.
(h) Schedule 4.8(h) hereto sets forth a complete
and correct copy of Seller's severance pay policy (the
"Severance Pay Policy"). Schedule 4.8(h) also sets forth a
complete and correct list showing the amount of severance pay
due to each Business Employee in accordance with the Severance
Pay Policy, assuming that he or she were terminated by Seller
as of the Closing and not offered employment by Buyer.
4.9 Labor Relations.
(a) Seller is not a party to or bound by any
collective bargaining agreements, and there are no labor unions
or other organizations representing, purporting to represent or
attempting to represent any Business Employees. Since
December 31, 1992, there has not occurred or, to the best
knowledge of Seller, Eagle and Parent, been threatened any
strike, slowdown, picketing, work stoppage, concerted refusal
to work overtime or other similar labor activity with respect
to any Business Employees. There are no labor disputes
currently subject to any grievance procedure, arbitration or
litigation and there is no representation petition pending or,
to the best knowledge of Seller, Eagle and Parent, threatened
with respect to any Business Employee. Seller has paid or made
provision for payment of all salaries and accrued wages and has
complied in all respects with all applicable laws, rules and
regulations relating to the employment of labor, including
those relating to wages, hours, collective bargaining, labor
relations, equal employment opportunity, fair employment
practices, entitlements, and the payment and withholding of
Taxes, and has withheld and paid to the appropriate government
authority, or is holding for payment not yet due to such
authority, all amounts required by law or agreement to be
withheld from the wages or salaries of its employees. Seller
has on file a properly completed Immigration and Naturalization
Service Form I-9 for each Business Employee to the extent
required by law, and Seller has duly examined all appropriate
documentation in connection therewith.
(b) During the preceding 90 days, there has been
no "employment loss" (as defined in the WARN Act) with respect
to any Business Employee.
4.10 Environmental Matters.
(a) Seller has obtained all permits, licenses
and other authorizations that are required with respect to the
ownership or occupancy of any Transferred Asset or the
operation of the Business as currently conducted under any
Environmental Laws (as hereinafter defined) (such permits,
licenses and authorizations being hereinafter referred to as
"Environmental Permits"), including all federal, state and
local laws relating to pollution or protection of the
environment such as laws relating to emissions, discharges,
releases or threatened releases of hazardous, toxic or other
pollutants, contaminants, chemicals, petroleum substances,
petroleum substance derivatives or industrial materials,
substances or wastes into the environment, including but not
limited to ambient air, surface water, ground water, land
surface or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of hazardous, toxic or other
pollutants, contaminants, chemicals, petroleum substances,
petroleum substance derivatives or industrial materials,
substances or wastes (which laws, together with all
regulations, rules, codes, plans, decrees, judgments,
injunctions, notices and demand letters issued, entered,
promulgated or approved thereunder being herein referred to as
"Environmental Laws"). Except as expressly set forth on
Schedule 4.10, Seller is in compliance in all material respects
with all terms and conditions of all Environmental Permits
required under the Environmental Laws, and is also in
compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained
in the Environmental Laws. Seller has not received any notice
within the five years preceding the date of this Agreement
alleging noncompliance with any Environmental Law, and neither
Seller, Eagle nor Parent knows of any fact or circumstance that
could reasonably give rise to or with the passage of time could
reasonably be likely to give rise to such notice.
(b) There is no civil, criminal or
administrative action, demand, claim, investigation, order,
notice, or proceeding pending or threatened against Seller,
under or relating to the Environmental Laws or the
Environmental Permits.
(c) Except as disclosed on Schedule 4.10, there
are no past or present events, conditions, circumstances or
plans that may interfere with or prevent compliance or
continued compliance with respect to the Business or the
Transferred Assets with the Environmental Laws or Environmental
Permits, or that may give rise to any common law or other legal
liability or obligation with respect to the Business or the
Transferred Assets, including, but not limited to, liability or
obligation under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), based on or related
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling or the emission,
discharge, release or threatened release into the environment,
of any pollutant, contaminant, chemical, petroleum substance,
petroleum substance derivative, industrial toxic or hazardous
material, substance or waste. Without in any way limiting the
foregoing, except as disclosed on Schedule 4.10, no release,
emission or discharge into the environment of any hazardous
substance (as that term is currently defined under CERCLA or
any applicable similar state law) has occurred or is currently
occurring in connection with the conduct of the Seller's
business and there is no spill, deposit or discharge of any
hazardous substance (as that term is currently defined under
CERCLA or any applicable similar state law) at, on, into, under
or having originated from any facility of Seller, including
without limitation, at any off-site location whatsoever.
Except as disclosed on Schedule 4.10, the Transferred Assets do
not include any equipment, machinery, device, or other
apparatus that contains polychlorinated biphenyls that is not
now or ever has been leaking; any asbestos that is or
reasonably may be anticipated to become in friable condition
within the next five years; or any underground tank that
contains or in the past has contained petroleum products or any
toxic or hazardous material, substance or waste, as those terms
are defined in the Environmental Laws, which tank has not been
determined by Petro Tite test or equivalent method to be free
of leaks within the last twelve months. All underground tanks
previously used in connection with the Transferred Assets were
free of leaks.
4.11 Customers and Suppliers. Schedule 4.11 contains
a true and complete list of (i) the names of, and the dollar
volume of products or services purchased from, each of Seller's
25 largest suppliers of products and services to the Business
during the year 1993 and first six months of 1994 and (ii) the
dollar volume of sales to each of Seller's 25 largest customers
(in terms of sales and gross profits) of products and services
of the Business during such periods. Neither Eagle, Parent nor
Seller has received notice from any such customer or supplier
that it does not intend to continue, or currently is
contemplating ceasing or materially changing the nature of,
business dealings with the Business.
4.12 Transactions with Related Person. Schedule 4.12
contains a true and complete description of all transactions
between Seller, on the one hand, and Eagle, Parent or any of
their or Seller's respective Related Person, on the other hand,
that have occurred since December 31, 1992, or that have not
been fully performed and discharged as of the date of this
Agreement (whether under any of the Contracts listed on
Schedule 4.5 or otherwise). For purposes of this Agreement, a
"Related Person" of a specified person is (i) an Affiliate of
the person specified, (ii) a director or officer of any of the
foregoing, (iii) a spouse, parent, sibling, child, mother-or
father-in-law, son-or daughter-in-law, or brother-or sister-in-
law of any of the foregoing, and (iv) any trust or other estate
in which any of the foregoing has a substantial beneficial
interest or as to which any of the foregoing serves as trustee
or in a similar fiduciary capacity.
4.13 Investment. Seller will be acquiring the
Purchase Price Note for investment for its own account and not
with a view to public distribution thereof.
4.14 Disclosure of All Material Facts. The
information provided to Buyer or NSC by Seller, Eagle or
Parent, taken as a whole, does not contain any misstatement
relating to this Agreement, Seller, the Business or the
Transferred Assets, or omit to state any fact relating to this
Agreement, Seller, the Business or the Transferred Assets that,
in either case, may reasonably be expected to have a Material
Adverse Effect.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND NSC.
Buyer and NSC hereby jointly and severally represent
and warrant to Seller, Eagle and Parent that:
5.1 Organization. Buyer is a corporation duly
organized and validly existing in good standing under the laws
of Delaware. NSC is a corporation duly organized and validly
existing in good standing under the laws of New York.
5.2 Authority; Binding Effect. Each of Buyer and NSC
has the corporate power and authority to execute and deliver
this Agreement and the other instruments and documents required
or contemplated by this Agreement to be executed and delivered
by it, to perform its obligations hereunder and thereunder and
to consummate the transactions provided for herein and
therein. Such execution, delivery, performance and
consummation do not and will not (i) contravene any provision
of the certificate of incorporation or by-laws of Buyer or NSC,
(ii) result in any violation by Buyer or NSC of any law, rule
or regulation applicable to it, (iii) violate or require any
consent or approval under any judgment, injunction or decree of
any court or governmental authority applicable to Buyer or NSC
or (iv) except for the applicable filing requirements of the
HSR Act (including a notification and report form and related
exhibits, which NSC duly filed under the HSR Act on August 1,
1994), require any consent or approval of or notice to or
filing, registration or qualification with, any court or
governmental authority. This Agreement has been duly
authorized by all necessary corporate action of each of Buyer
and NSC, has been duly executed and delivered by Buyer and NSC
and constitutes, and such other instruments and documents
required or contemplated by this Agreement to be executed and
delivered by Buyer will be duly executed by it as so required
or contemplated and when so executed will constitute, its valid
and binding obligation enforceable against it in accordance
with the terms thereof (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally or by the principles governing the availability of
equitable remedies).
5.3 NSC's Net Sales. NSC's Net Sales for its
13 fiscal periods ended June 18, 1994 were not less than
$19,375,000 (it being understood that if such Net Sales were
actually less than $19,375,000, then the reference to
$18,400,000 in Section (a) of Exhibit C shall be decreased by
an amount equal to the difference between $19,375,000 and such
actual amount).
6. COVENANTS.
The parties covenant and agree as follows:
6.1 Access. Between the date hereof and the Closing,
Seller shall: (i) afford the officers, employees, auditors,
attorneys and other authorized representatives of Buyer access
during normal business hours to any and all premises,
properties, personnel, files, books, records, documents and
other information of Seller which Buyer may reasonably request;
(ii) make available for inspection and copying by Buyer or any
such representatives of Buyer true and complete copies of any
documents relating to the foregoing; and (iii) on as frequent
and timely a basis as is practicable, furnish interim financial
statements and summaries and other business and financial
information that may be reasonably requested by Buyer.
6.2 Public Announcements. Prior to the Closing,
neither Seller, Eagle nor Parent, without the consent of Buyer,
nor Buyer, without the consent of Seller, shall issue any press
release or otherwise make any public statement with respect to
the transactions contemplated by this Agreement, except as and
to the extent that such party shall be so obligated by law, in
which case such party shall give advance notice to the other
parties. Promptly following the execution and delivery of this
Agreement, and promptly following the Closing, Seller and Buyer
will cooperate in issuing joint statements to suppliers,
customers and employees of the Business.
6.3 Conduct of Business of Seller Prior to the
Closing. Seller, Eagle and Parent agree that, during the
period from the date hereof to the Closing, except as
specifically consented to or approved by Buyer in writing, the
business and operations of Seller shall be conducted only in
the ordinary course and in a manner consistent with past
practice.
(a) Without limiting the generality of the
foregoing, (i) Seller, Eagle and Parent shall not take any
action that would be inconsistent with the representations and
warranties contained in clauses (i) through (vii) of
Section 4.3(e) being true and correct as of the Closing, (ii)
Seller will not take any action or fail to take any action that
is reasonably likely to have a material effect on the business,
results of operations, financial condition or prospects of the
Business, and (iii) in general, Seller, Eagle and Parent shall
not take any action that would result in a failure to meet the
condition contained in Section 7.1.
(b) Seller shall duly perform and comply with
its obligations under the Seller Contracts required to be
performed and complied with on or prior to the Closing Date.
(c) From the date hereof to the Closing, Seller
shall use its best efforts to preserve the business
organization of the Business intact, to keep available to
Seller the current services of its employees engaged in the
Business and to preserve for Seller the goodwill of the
Business's suppliers, customers and others with whom a business
relationship exists; provided, however, that nothing shall
permit Seller to dispose of any assets, make or agree to make
any increase in compensation, or take any other action with
respect to employees, suppliers or customers that is
inconsistent with current policies and practices of Seller or
with any other provisions of this Agreement.
6.4 Consents. Seller will use its reasonable efforts
to obtain the consents of other parties required for the
consummation of the transactions contemplated hereunder or
which if not obtained could constitute a breach or default
under any Seller Contract.
6.5 Confidential Information.
(a) Prior to the Closing and after the
termination of the Agreement if there is no Closing, NSC shall,
and shall cause Buyer, NSC's Affiliates and their respective
directors, officers, employees, auditors, attorneys and other
authorized representatives ("Representatives") to, hold in
confidence (unless and to the extent compelled to disclose by
judicial or administrative process or, in the opinion of its
counsel, by other requirements of law) all Seller Confidential
Information (as defined below), not disclose the same to any
third party except as may reasonably be necessary to carry out
this Agreement and the transactions contemplated hereby,
including any due diligence review and, if the Agreement is
terminated without the Closing having occurred, not use the
Seller Confidential Information for any other purpose. As used
in this Section 6.5(a), "Seller Confidential Information" shall
mean all information concerning Seller obtained by NSC or Buyer
from Seller, Eagle or Parent or any of their Representatives in
connection with the transactions contemplated by this Agreement
except information (i) ascertainable or obtained from public
information, (ii) received from a third party not employed by
or otherwise affiliated with Seller, Eagle or Parent,
(iii) which is or becomes known to the public, other than
through a breach of this Agreement, or (iv) independently
acquired or developed by Buyer or NSC without violating any of
its obligations under this Section 6.5(a).
(b) Parent shall, and shall cause Eagle, Seller,
Parent's Affiliates, and their respective Representatives to,
hold in confidence (unless and to the extent compelled to
disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law) all
Confidential Information (as defined below) and shall not
disclose the same to any third party except as may reasonably
be necessary to carry out this Agreement and the transactions
contemplated hereby. As used in this Section 6.5(b),
"Confidential Information" shall mean all information
concerning the Business or NSC except information
(i) ascertainable or obtained from public information,
(ii) received from a third party not employed by or otherwise
affiliated with Buyer, NSC, Seller, Eagle or Parent, or
(iii) which is or becomes known to the public, other than
through a breach of this Agreement.
6.6 Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees
to use its reasonable efforts at its own expense and in
compliance with applicable law to take, or cause to be taken,
all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement. In case at
any time after the Closing any further action is necessary to
carry out the purposes of this Agreement, the proper officers
of Seller and Buyer, as appropriate, shall take all such
action. After the Closing, Buyer shall have the right and
authority to endorse without recourse the name of Seller on any
check or any other evidences of indebtedness received by Buyer
on account of the Business or the Acquired Assets. In
addition, after the Closing Seller shall take all necessary and
appropriate action reasonably requested by Buyer to cause the
Buyer Receivable Assets (as defined in the Receivables Sales
Agreement) to be conveyed to Buyer.
6.7 HSR Act. Seller and Buyer each shall respond
promptly to inquiries, if any, from the Federal Trade
Commission or the Department of Justice in connection with the
filings required for the transactions contemplated hereunder by
the HSR Act. Seller shall pay the fees in connection with the
filings required by the HSR Act.
6.8 Notification of Certain Matters. Between the
date hereof and the Closing, Seller, Eagle and Parent shall
give prompt notice in writing to Buyer of: (i) any information
that indicates that any representation or warranty of Seller,
Eagle and Parent contained in this Agreement was not true and
correct as of the date of this Agreement or will not be true
and correct as of the Closing, (ii) any notice or other
communication from any other person alleging that the consent
of such other person is or may be required in connection with
the transactions contemplated by this Agreement (other than
those consents indicated as required on Schedule 4.5 hereto),
and (iii) any notice of, or other communication relating to,
any default or event which, with notice or lapse of time or
both, would become a default under any Seller Contract.
6.9 Expenses; Transfer Taxes. Each party shall pay
its own fees and expenses (including the fees of any attorneys,
accountants, investment bankers or others engaged by such
party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions
contemplated hereby are consummated. Notwithstanding the
foregoing, Eagle shall pay, and shall indemnify and hold
harmless Buyer from and against, all sales, use, transfer, real
property gains or similar taxes imposed as a result of the
transfer or lease of the Transferred Assets to Buyer pursuant
to this Agreement. Buyer shall take such reasonable action as
Seller shall request to minimize such taxes, provided that
Buyer shall not be obligated to violate any Legal Requirement.
6.10 Non-Solicitation of Transactions. From and
after the date of this Agreement, Seller, Eagle and Parent
shall not, and shall cause their respective Affiliates
(including their respective directors, officers, employees and
advisors) not to, solicit, encourage or initiate any offer or
proposal from, or engage in any discussions or negotiations
with, or provide any information to, any person or group, other
than NSC, Buyer, and NSC's Affiliates (including their
respective Representatives), concerning a merger, consolidation
or similar transaction involving, or any purchase of all or any
significant portion of the assets of, or any equity interest
in, the Business (any such transactions being referred to
herein as an "Acquisition Transaction"), and Seller, Eagle and
Parent shall not, and shall cause their respective Affiliates
(including their respective Representatives) not to, accept any
proposal with respect to any Acquisition Transaction. If
Seller, Eagle, Parent or any of their respective Affiliates
(including their respective Representatives) shall receive any
proposal with respect to any Acquisition Transaction, Seller,
Eagle or Parent shall immediately communicate to Buyer the
terms of such proposal.
6.11 Non-Competition. Each of Parent, Eagle and
Seller agrees that it shall not, and shall cause the GAMI
Affiliates not to, prior to the tenth anniversary of the
Closing Date (the "Non-Compete Period"), directly or
indirectly, individually or for, with or through any other
person (which shall be deemed to include any equity
participation in any other person), compete with Buyer or any
subsidiary or other Affiliate of Buyer or any of its or their
successors or assigns of the Acquired Assets (collectively,
"Non-Compete Parties"), with respect to the Business in the
United States, Mexico or Canada; provided, however, that
nothing herein shall be construed to prevent Parent, Eagle,
Seller or any of their Affiliates from (i) selling any Excess
Value Inventory or Remaining Inventory acquired by Seller
pursuant to Section 3.3(b) or Section 3.5, respectively, (ii)
engaging in the Excluded Business or (iii) owning in the
aggregate for all such entities, as an investment, up to 5% of
a class of equity securities issued by any competitor of any
Non-Compete Party that is publicly traded and registered under
Section 12 of the Securities Exchange Act of 1934. The parties
intend that the covenant contained in the preceding sentence
shall be construed as a series of separate covenants, one for
each county and city (or other similar subdivision) included
within each state or other jurisdiction and, except for
geographic coverage, each such separate covenant shall be
deemed identical. The parties agree that the covenants deemed
included in this Section are, taken as a whole, reasonable in
their geographic scope and their duration and no party shall
raise any issue of the reasonableness of the scope or duration
of the covenants in any proceeding to enforce any such
covenants. If, in any judicial proceeding, a court shall
refuse to enforce any separate covenant, then the unenforceable
covenant shall be modified in order to make it acceptable to
the court and enforced accordingly, or, if necessary, deemed
eliminated to the extent necessary to permit the remaining
separate covenants to be enforced.
6.12 Non-Solicitation of Employees. Except with the
consent of Buyer, which shall not be unreasonably withheld,
Seller, Eagle and Parent agree that neither Seller, Eagle,
Parent nor any of their respective Affiliates will, directly or
indirectly, (i) prior to the fifth anniversary of the Closing
Date, influence or attempt to influence any person employed by
Seller not to accept employment with Buyer or, if employed by
Buyer, to leave Buyer's employ, or (ii) prior to the second
anniversary of the Closing Date, employ any Business Employee
to whom Buyer has offered employment on terms comparable to
such Business Employee's terms with Seller prior to the Closing.
6.13 Machinery and Equipment.
(a) On or before the first anniversary of the
Closing Date, Buyer shall give Seller notice designating the
items of Machinery and Equipment included in the Leased Assets
that Buyer shall purchase or assume lease obligations for on
January 5, 1996, which Machinery and Equipment shall have a
value of not less than $2,300,000 (valued at net book value in
the case of Machinery and Equipment owned by Seller and at the
present value of future lease obligations (discounted at a rate
equal to the Note Rate as then in effect) in the case of
Machinery and Equipment leased by Seller, in each case valued
as of the first anniversary of the Closing Date). In addition,
Buyer may elect to purchase or assume lease obligations with
respect to any other Machinery and Equipment included in the
Leased Assets by giving Seller notice of such election prior to
the expiration of the applicable lease, valued as provided in
the preceding sentence, but as of the expiration of such lease
rather than as of such first anniversary, provided that if such
lease expires before January 5, 1996, such purchase or lease
assumption will not occur until such date. Buyer will promptly
remove from any Property at the end of the term of Buyer's
lease thereof any Machinery and Equipment that Buyer has
elected to purchase pursuant to this Section. The Machinery
and Equipment other than Principal Machinery and Equipment is
included in Schedule 4.4(c) and the Schedule to the Lease
Agreements for informational purposes only and shall not affect
Buyer's rights or obligations under the Agreement or under the
Lease Agreements (notwithstanding any contrary provisions
thereof).
(b) On the date of any purchase of Machinery and
Equipment and/or assumption of lease obligations with respect
thereto pursuant to Section 6.13(a), Buyer shall pay cash to
Seller for the Machinery and Equipment designated to be
purchased in an amount equal to the value thereof determined
pursuant to Section 6.13(a) and Seller shall execute and
deliver to Buyer, without any further warranty of any kind or
nature, including without limitation warranty of
merchantability or fitness for a particular purpose, bills of
sale, instruments of transfer assignment and conveyances and
other instruments in form and substance satisfactory to Buyer
and sufficient to convey, transfer and assign to Buyer all
right, title and interest in and to the purchased equipment,
free and clear of all Liens, and to assign to Buyer all of
Seller's right, title and interest in and to any such assigned
lease. Buyer shall not be obligated to assume any such lease
if the assignment thereof to Buyer itself would result in a
Contract Default unless and to the extent Seller and Eagle
agree to indemnify Buyer from any Losses arising from such
Contract Default.
6.14 Authorization of Use of Name. Promptly after
the Closing, Seller will change its corporate name to one that
does not include "Caron" or any similar word and will take
appropriate action to make the name "Caron International, Inc."
available to Buyer as Buyer's corporate name and for purposes
of qualifying to do business in those states in which the
Business is conducted.
6.15 Sales of Yarn to Seller. Buyer shall sell to
Seller for resale through the retail outlets of the Excluded
Business the Hand Knit Yarn referred to on Schedule 6.15 at the
respective prices referred to on such Schedule (f.o.b. shipping
point, no matter what Schedule 6.15 provides), to the extent
available in Buyer's finished goods inventory, as specified on
purchase orders received by Buyer prior to May 31, 1995 and,
thereafter, for purchase orders received by Buyer prior to May
31, 1998, Buyer shall sell to Seller for resale through retail
stores of the Excluded Business owned by Seller any of such
Hand Knit Yarn at a price equal to the lowest price received by
Buyer for substantially the same quantity and lot size of such
Hand Knit Yarn as Seller's order thereof sold by Buyer within
the 60 days preceding Seller's order. Seller shall pay the
purchase price for all such purchases of Hand Knit Yarn within
30 days after shipment by Buyer. The quantities of Hand Knit
Yarn purchased by Seller under this Section during any calendar
year shall not exceed purchases thereof by the Excluded
Business during 1993 plus 10% thereof (except, in the case of
the balance of 1994, one third of the foregoing limitation).
6.16 Shared Services Agreement. The following
provisions shall constitute the "Shared Services Agreement":
(a) Seller shall be entitled to utilize the
areas so designated on Schedule 6.16 hereto for its ordinary
business operations during the term of the Rochelle Lease
Agreement. Alec Kaplanes shall relocate his office to space
within the foregoing area within 90 days after the Closing Date.
(b) All expenses directly related to Seller's
operations shall be Seller's responsibility and Seller shall
reimburse Buyer for any such expenses paid by Buyer within 15
days after request by Buyer accompanied by reasonable
documentation evidencing such payment by Buyer. These expenses
shall include telephone, postage and payroll taxes.
(c) Seller shall be entitled to reasonable use
of the following during the term of the Rochelle Lease
Agreement, to the extent available and so long as such use does
not materially interfere with Buyer's operations: (i) the
following accounting systems: general ledger, accounts payable
and payroll; (ii) personnel to support accounting systems,
benefit administration and computer systems (excluding system
development, modification and maintenance); (iii) mainframe
computer to support the foregoing accounting systems; and (iv)
the services of Pat Gosse, Richard Snyder, Sandra Estrem and
Andrea Fletcher, so long as such individuals are employed by
Buyer and otherwise satisfactorily performing services for
Buyer.
(d) Seller shall provide separation and baling
of waste for Buyer during the term of the Rochelle Lease
Agreement at no charge and pay Buyer any proceeds realized on
the sale of such waste.
(e) Seller shall permit Buyer to use the
facilities leased to Seller under the Quest Lease during the
term of the Rochelle Lease Agreement in a manner materially
consistent with Seller's use thereof prior to the Closing at no
further charge.
(f) Seller shall pay to Buyer on the last
Business Day of each month commencing September 1994 through
August 1995 $10,700.
6.17 Disposal of Certain Assets. After the Closing,
upon request of Buyer, Seller shall remove from any Facility
and dispose of in accordance with applicable Legal Requirements
and Permits any Hazardous Substance, Hazardous Waste, or
Petroleum Substance (as such terms are defined in the
definition of Environmental Condition) or any dyes or chemicals
that are located at any Facility on the Closing Date. To the
extent Seller has removed any such material, the determination
of the Closing Net Asset Value shall not be reduced by the cost
of disposal of such material or, if such Closing Net Asset
Value has been finally determined at the time of such removal,
then Buyer shall pay to Seller the amount attributable to the
cost of such disposal that was reflected in the calculation of
Closing Net Asset Value, as finally determined. In addition,
at the end of the term of Buyer's lease of any of the
Facilities, Buyer may leave at the Facility any Supplies
included in the Acquired Assets.
7. CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer required to be performed by
it at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each
of which may be waived by Buyer by consummating the Closing
except as otherwise required by applicable law:
7.1 Representations and Warranties; Covenants. Each
of the representations and warranties of Seller, Eagle and
Parent contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and
(having been deemed to have been made again at and as of the
Closing in the same language) shall be true and correct in all
material respects as of the Closing. Each of the obligations
of Seller, Eagle or Parent required by this Agreement to be
performed by them at or prior to the Closing shall have been
duly performed and complied with as of the Closing. At the
Closing, Buyer shall have received certificates, dated the
Closing Date and duly executed on behalf of Seller, Eagle and
Parent, to the effect that the conditions set forth in the
preceding sentences have been satisfied.
7.2 Absence of Litigation, Damages, Changes. No
order, stay, injunction or decree of any court of competent
jurisdiction shall be in effect (i) that prevents or delays the
consummation of any of the transactions contemplated hereby to
occur at the Closing or (ii) that would impose any material
limitation on the ability of Buyer effectively to exercise full
rights of ownership of the Acquired Assets. No action, suit or
proceeding before any court or any governmental entity shall be
pending or threatened, and no investigation by any governmental
entity shall have been commenced (and be pending), (i) seeking
to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated
by this Agreement or seeking damages in connection therewith
that Buyer, in good faith, believes makes it undesirable to
proceed with the consummation of the transactions contemplated
hereby or (ii) that might result in a Material Adverse Effect.
7.3 HSR Act. All filings required to be made under
the HSR Act in connection with the transactions contemplated
hereby shall have been made and all applicable waiting periods
with respect to each such filing, including any extensions
thereof, shall have expired or been terminated.
7.4 Consents Obtained.
(a) NSC shall have obtained the consents,
amendments and waivers required under the Note Agreements and
the NSC Credit Agreement to consummate the transactions
contemplated hereby.
(b) NSC shall have received satisfactory
evidence that the waste water discharge permit from the City of
Rochelle with respect to the Rochelle Facility will be assigned
to Buyer.
7.5 Dalton Lease. Seller and the owner of the Dalton
Facility shall have executed and delivered an extension of the
Dalton Lease Agreement for a period expiring 89 days after the
Closing Date.
7.6 Estimates Within Ranges. The Estimated Closing
Gross Asset Value shall not be more than $25,000,000 nor less
than $19,000,000 and the Estimated Closing Net Asset Value
shall not be more than $20,000,000 nor less than $15,000,000.
7.7 Employment Agreements. Buyer shall have entered
into employment agreements in form and substance satisfactory
to Buyer with each of the individuals listed on Schedule 7.7
hereto.
7.8 Opinion of Counsel. Buyer shall have been
furnished with the opinion of Rosenberg & Liebentritt, P.C.,
counsel to Seller, Eagle and Parent, addressed to Buyer and
dated the Closing Date, to the effect set forth in Schedule 7.8
hereto.
8. CONDITIONS TO OBLIGATIONS OF SELLER.
The obligations of Seller required to be performed by
it at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each
of which may be waived by it by consummating the Closing,
except as otherwise provided by applicable law:
8.1 Representations and Warranties; Covenants. Each
of the representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (having been
deemed to have been made again at and as of the Closing in the
same language) shall be true and correct in all material
respects as of the Closing. Each of the obligations of Buyer
required by this Agreement to be performed by them at or prior
to the Closing shall have been duly performed and complied with
as of the Closing. At the Closing, Seller shall have received
a certificate, dated the Closing Date and duly executed on
behalf of Buyer, to the effect that the conditions set forth in
the preceding sentences have been satisfied.
8.2 Absence of Litigation. No order, stay,
injunction or decree of any court of competent jurisdiction
shall be in effect that prevents or delays the consummation of
any of the transactions contemplated hereby to occur at the
Closing.
8.3 HSR Act. All filings required to be made under
the HSR Act in connection with the transactions contemplated
hereby shall have been made and all applicable waiting periods
with respect to each such filing, including any extensions
thereof, shall have expired or been terminated.
8.4 Consents Obtained. Eagle shall have obtained the
consent, amendment and waiver required under the Eagle Credit
Agreement to consummate the transactions contemplated hereby.
8.5 Opinion of Counsel to Buyer. Buyer shall have
delivered to Seller an opinion of Hughes Hubbard & Reed,
counsel to Buyer, addressed to Seller, Eagle and Parent and
dated the Closing Date, to the effect set forth in Schedule 8.5
hereto.
9. CLOSING.
The transfers and deliveries to be made pursuant to
this Agreement (the "Closing") shall take place at the offices
of Hughes Hubbard & Reed, One Battery Park Plaza, New York,
New York at 10:00 a.m. on September 2, 1994, or, if the
conditions set forth in Sections 7.2, 7.3, 7.4, 7.5, 7.7, 8.2,
8.3 and 8.4 shall not have been satisfied or waived on such
date, then on the fifth Business Day after the date on which
all such conditions shall have been satisfied or waived, or at
such other place, time or date as the parties shall agree upon
in writing. The date on which the Closing is to occur is
herein referred to as the "Closing Date". At the Closing,
subject to the satisfaction or waiver of the conditions to its
obligations set forth in this Agreement, Seller and Buyer shall
make the following deliveries or such deliveries in
substitution therefor as are satisfactory to the indicated
recipient:
9.1 Deliveries by Seller. Seller shall deliver to
Buyer:
(a) The Lafayette Lease Agreement, the Rochelle
Lease Agreement and the Dalton Sublease, each duly executed by
Seller.
(b) Bills of sale, instruments of transfer,
assignment and conveyance, and other instruments in form and
substance satisfactory to Buyer and Seller and sufficient to
convey, transfer, and assign to Buyer and effectively vest in
Buyer all right, title and interest in and to the Acquired
Assets free of all Liens, subject only to exceptions referred
to in Part B of Schedule 4.4(a) hereto.
(c) Evidence satisfactory to Buyer of the
discharge and termination of the Liens listed in Part A of
Schedule 4.4(a).
(d) A certificate of an officer of each of
Seller, Eagle and Parent certifying (i) that attached to such
certificate are true and correct copies of the Certificate of
Incorporation, By-Laws or similar governing instruments of such
company as in effect as of the Closing, (ii) that attached to
such certificate are true and correct copies of resolutions
adopted by the Board of Directors of such company (and, in the
case of Seller, of its sole stockholder) authorizing the
execution, delivery and performance of this Agreement by such
company (and, in the case of Seller, the Lafayette Lease
Agreement, the Rochelle Lease Agreement and the Dalton
Sublease) and that such resolutions are in full force and
effect as of the Closing and (iii) the incumbency and
signatures of the officers of such company who have executed
this Agreement and the other instruments and documents
delivered at the Closing on behalf of such company.
(e) Certificates from the Secretary of State of
Delaware as to the good standing of each of Seller, Eagle and
Parent and listing all charter documents on file.
(f) Possession of the tangible Acquired Assets.
(g) The Receivables Sales Agreement, duly
executed and delivered by the Receivables Trustee.
(h) Such other instruments and documents as may
be reasonably requested by, and in form and substance
reasonably satisfactory to, Buyer in order to effect the
transactions contemplated by this Agreement to occur at the
Closing.
9.2 Deliveries by Buyer. Buyer shall deliver to
Seller:
(a) Cash by wire transfer of immediately
available funds to an account of Seller in the United States
designated to Buyer at least two Business Days in advance of
the Closing in an amount equal to the Closing Cash Payment.
(b) The Purchase Price Note.
(c) The Lafayette Lease Agreement, the Rochelle
Lease Agreement and the Dalton Sublease, each duly executed by
Buyer.
(d) A certificate of an officer of each of Buyer
and of NSC certifying (i) that attached to such certificate are
true and correct copies of the Certificate of Incorporation and
By-Laws of such company as in effect as of the Closing, (ii)
that attached to such certificate are true and correct copies
of resolutions adopted by the Board of Directors of such
company authorizing the execution, delivery and performance of
this Agreement by such company (and, in the case of Buyer, the
Lafayette Lease Agreement, the Rochelle Lease Agreement and the
Dalton Sublease) and that such resolutions are in full force
and effect as of the Closing and (iii) the incumbency and
signatures of the officers of such company who have executed
this Agreement and the other instruments and documents
delivered at the Closing on behalf of such company.
(e) Certificates from the Secretary of State of
New York with respect to NSC and from the Secretary of State of
Delaware with respect to Buyer as to the good standing of such
company and listing all of its charter documents on file.
(f) The Receivables Sales Agreement for delivery
to the Receivables Trustee.
(g) Such other instruments and documents as may
be reasonably requested by, and in form and substance
reasonably satisfactory to, Seller in order to effect the
transactions contemplated by this Agreement to occur at the
Closing.
10. EMPLOYEE BENEFIT MATTERS.
10.1 Offers of Employment. Seller will terminate
employment of all Business Employees, effective as of the
Closing. Buyer shall offer employment to a sufficient number
of Business Employees so that there is not an "employment loss"
(as defined in the WARN Act) that would require a 60 day notice
under 29 U.S.C. 2102(a) (assuming no such "employment loss"
occurred prior to the Closing that would be aggregated with the
"employment loss" attributable to Buyer not offering employment
to any Business Employees). Seller will use reasonable efforts
to assist Buyer in hiring Business Employees that Buyer wishes
to hire. Except as expressly provided in Section 10.6, the
terms of employment of any Business Employee hired by Buyer (a
"Transferred Employee") shall be determined in Buyer's sole
discretion. Except as expressly provided in Section 10.2,
Buyer shall not assume any obligation or liability relating to
or arising from any Benefit Plan, commitment, undertaking, act
or omission of Seller, any Affiliate of Seller or any of their
respective Representatives with respect to the Business
Employees or any occupational injury or disease of any Business
Employee occurring or existing on or prior to the Closing Date
(collectively, "Employee Claims"). Seller shall pay directly
to each Business Employee that portion of all benefits that has
been accrued on behalf of that employee as of the Closing Date,
including obligations with respect to accrued bonuses,
incentive pay, and travel and entertainment expense
reimbursement, but excluding amounts properly included as Other
Accrued Expenses as of the Closing Date.
10.2 Severance Benefits.
(a) If any Business Employee is terminated by
Seller as of the Closing and is not offered employment by
Buyer, Buyer shall be responsible for any severance pay and
other benefits, including COBRA premiums (collectively,
"Severance Payments") due to or paid for the benefit of such
Business Employee under the Severance Pay Policy up to an
aggregate amount of $500,000 for all such Business Employees.
Buyer shall satisfy its responsibilities under this Section
10.2(a) by reimbursing Seller within ten (10) Business Days
after receiving reasonable documentation from Seller
substantiating that Seller has made Severance Payments under
the Severance Pay Policy.
(b) In addition to its obligations under Section
10.2(a), Buyer agrees to pay to or for the benefit of any
Transferred Employee whose employment is terminated by Buyer
within thirteen (13) months after the Closing Date, any
Severance Payments which the Transferred Employee would have
been entitled to under the Severance Pay Policy had Seller so
terminated such Transferred Employee's employment. In the
event that the Severance Payments required to be paid to
Transferred Employees under this Section 10.2(b), together with
the Severance Payments required to be paid under Section
10.2(a), exceed $500,000, Seller agrees to be responsible for
all such excess payments. Payments of Severance Payments with
respect to those Business Employees identified on Schedule 10.2
shall not be taken into account in determining whether the
$500,000 amount has been exceeded under this Section 10.2. In
the event that Buyer makes Severance Payments in an amount in
excess of that which the Transferred Employee would have been
eligible to have paid under the Severance Pay Policy, Seller
shall have no responsibilities with respect to such excess
amounts. Seller shall satisfy its responsibilities under this
Section 10.2(b) by reimbursing Buyer within ten (10) Business
Days after receiving reasonable documentation from Buyer
substantiating that Buyer's payments under subsections (a) and
(b) of this Section 10.2 are in excess of $500,000. Buyer
shall repay to Seller any reimbursement of Severance Payments
made by Seller to Buyer pursuant to the preceding sentence with
respect to any Transferred Employee that is rehired by Buyer
within six months after the termination by Buyer that required
such Severance Payment.
10.3 Employment Taxes.
(a) Seller and Buyer will treat the Buyer as a
"successor employer" and Seller as "predecessor," within the
meaning of sections 3121(a)(1) and 3306(b)(1) of the Code, with
respect to Transferred Employees for purposes of Taxes imposed
under the United States Federal Unemployment Tax Act ("FUTA")
or the United States Federal Insurance Contributions Act
("FICA").
(b) At the request of the Buyer with respect to
any particular applicable Tax law relating to employment,
unemployment insurance, social security, disability, workers'
compensation, payroll, health care or other similar Tax other
than Taxes imposed under FICA and FUTA, Seller and Buyer will
(i) treat the Buyer as a successor employer and Seller as a
predecessor employer, within the meaning of the relevant
provisions of such Tax law, with respect to Transferred
Employees and (ii) cooperate with each other to avoid to the
extent possible, the filing of more than one individual
information reporting form pursuant to each such Tax law with
respect to each such Transferred Employee for the calendar year
within which the Closing Date occurs.
10.4 WARN Act. Buyer shall be responsible for
compliance with the WARN Act with respect to the transactions
contemplated by this Article 10 to occur as of the Closing and
for actions taken by Buyer subsequent to the Closing, provided
that if the representation and warranty set forth in Section
4.9(b) is not correct and there is a failure to comply with the
WARN Act attributable in part thereto, then Seller shall be
responsible for any consequences of any failure to comply with
the WARN Act by Buyer.
10.5 No Other Beneficiaries. Notwithstanding any
possible inference to the contrary, none of the parties to this
Agreement intends for this Article 10 to create any right or
obligation except as between the parties to this Agreement, and
no past, present or future employees of Seller or Buyer shall
be treated as third-party beneficiaries of this Article 10.
10.6 Health Insurance Coverage. Buyer shall offer to
Transferred Employees health care coverage under an employee
welfare benefit plan (as defined in Section 3(l) of ERISA)
maintained by Buyer which (i) waives any preexisting condition
exclusion, and (ii) waives any waiting period condition,
provided that Buyer shall not be obligated to waive any of the
foregoing to the extent that any such condition was applicable
to a Transferred Employee under Seller's health care coverage
so long as it does not extend the aggregate time periods for
any such conditions. Notwithstanding the preceding sentence,
Buyer shall have the right to amend or terminate such health
care coverage in its discretion.
11. INDEMNIFICATION.
11.1 Indemnification Obligations.
(a) Eagle shall indemnify and hold harmless
Buyer, NSC and their respective directors, officers, employees
and Affiliates against and in respect of any and all losses,
damages, liabilities, claims, fines, penalties, costs and
expenses (including, without limitation, Legal Expenses and
costs of experts) (collectively, "Losses") arising out of,
based upon or resulting from
(i) the breach of any representation or
warranty of Seller, Eagle or Parent contained in this
Agreement or in any statement or certification of
Seller, Eagle or Parent furnished pursuant hereto,
(ii) the breach by Seller, Eagle or
Parent of or failure of any of them to observe any of
their respective covenants or agreements contained in
this Agreement,
(iii) any liability or obligation of or
attributable to Seller, Eagle or Parent or any
Affiliate of Seller, Eagle or Parent not expressly
assumed by Buyer pursuant to Section 2.1 or 2.2
(including, without limitation, any liability or
obligation arising under or in connection with an
employee benefit plan, policy or arrangement
maintained or contributed to by Seller or any entity
treated as a single employer with Seller under
Section 414(b), (c), (m) or (o) of the Code),
(iv) any Product Liability Claim,
(v) any Employee Claim,
(vi) any Contract Default,
(vii) any Environmental Condition, subject
to the provisions of Section 11.3 below,
(viii) the Liens held by IDBI Managers,
Inc. referred to on Schedule 4.4(a), and
(ix) Rochelle Permit Matters,
(regardless of whether, in the case of Third Party Actions,
Seller, Eagle or Parent may have a meritorious defense).
Notwithstanding the foregoing, Seller, Eagle and Parent shall
not be obligated to provide such indemnification with respect
to matters referred to in Section 11.1(a)(i) unless and until
the cumulative aggregate amount of all Losses paid or suffered
by Buyer and such other persons described above as to which
Buyer and such other persons would otherwise be indemnified
hereunder exceeds $100,000, in which case Eagle shall then be
held liable hereunder for all such Losses in excess of the
initial $100,000; provided that Eagle shall provide such
indemnification on a dollar-for-dollar basis for any breach of
any representation or warranty set forth in the last sentence
of Section 4.5.
(b) Buyer shall indemnify and hold harmless
Seller, Eagle and Parent, and their respective directors,
officers, employees and Affiliates against and in respect of
any and all Losses arising out of, based upon or resulting from
(i) the breach of any representation or warranty of Buyer or
NSC contained in this Agreement or in any statement or
certification of Buyer or NSC furnished pursuant hereto,
(ii) the breach by Buyer or NSC of or failure of either of them
to observe any of their respective covenants or agreements
contained in this Agreement (including without limitation the
provisions of Section 2.2) or in any Lease Agreement, (iii)
Buyer Environmental Matters and (iv) Buyer Property Matters
(regardless of whether, in the case of Third Party Actions,
Buyer may have a meritorious defense). Notwithstanding the
foregoing, Buyer shall not be obligated to provide such
indemnification with respect to matters referred to in
clause (i) of the preceding sentence unless and until the
cumulative amount of all Losses paid or suffered by Seller and
such other persons described above as to which Seller and such
other persons would otherwise be indemnified hereunder exceeds
$100,000, in which case Buyer shall then be held liable
hereunder for all such Losses in excess of the initial $100,000.
(c) For purposes of this Section 11.1, a party
shall not be deemed to have made a representation or warranty
as of the Closing to the extent that such party expressly
disclaims such representation or warranty in the certificate
delivered by such party to the other parties pursuant to the
last sentence of Section 7.1 or Section 8.1.
(d) The right to indemnification pursuant to
this Section 11.1 shall constitute the sole and exclusive
remedy of each of the parties to this Agreement for a breach of
any representation or warranty contained in this Agreement or
in any statement or certification delivered by a party pursuant
to this Agreement.
11.2 Indemnification Procedures.
(a) Promptly after receipt by any person
entitled to indemnification under Section 11.1 (an "indemnified
party") of notice of the commencement of any action, suit or
proceeding by a person not a party to this Agreement in respect
of which the indemnified party will seek indemnification
hereunder (a "Third Party Action"), the indemnified party shall
notify the person that is obligated to provide such
indemnification (an "indemnifying party") thereof in writing,
but any failure to so notify the indemnifying party shall not
relieve it from any liability that it may have to the
indemnified party under Section 11.1, except to the extent that
the indemnifying party is materially prejudiced by the failure
to give such notice. The indemnifying party shall be entitled
to participate in the defense of such Third Party Action and to
assume control of such defense with counsel reasonably
satisfactory to such indemnified party; provided, however, that:
(i) the indemnified party shall be
entitled to participate in the defense of such Third
Party Action and to employ counsel at its own expense
to assist in the handling of such Third Party Action;
(ii) the indemnifying party shall obtain
the prior written approval of the indemnified party
before entering into any settlement of such Third
Party Action or ceasing to defend against such Third
Party Action, if pursuant to or as a result of such
settlement or cessation, injunctive or other equitable
relief would be imposed against the indemnified party
or the indemnified party would be materially and
adversely affected thereby;
(iii) no indemnifying party shall consent
to the entry of any judgment or enter into any
settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff
to each indemnified party of a release from all
liability in respect of such Third Party Action; and
(iv) the indemnifying party shall not be
entitled to control the defense of any Third Party
Action unless within 15 days after receipt of such
written notice from the indemnified party the
indemnifying party confirms in writing its
responsibility to indemnify the indemnified party with
respect to such Third Party Action and reasonably
demonstrates that it will be able to pay the full
amount of the reasonably expected Losses in connection
with any such Third Party Action.
After written notice by the indemnifying party to the
indemnified party of its election to assume control of the
defense of any such Third Party Action in accordance with the
foregoing and compliance by the indemnifying party with Section
11.2(a)(iv), (i) the indemnifying party shall not be liable to
such indemnified party hereunder for any Legal Expenses
subsequently incurred by such indemnified party attributable to
defending against such Third Party Action, and (ii) as long as
the indemnifying party is reasonably contesting such Third
Party Action in good faith, the indemnified party shall not
admit any liability with respect to, or settle, compromise or
discharge the claim underlying, such Third Party Action without
the indemnifying party's prior written consent. If the
indemnifying party does not assume control of the defense of
such Third Party Action in accordance with this Section 11.2,
(i) the indemnifying party shall be entitled to participate in
the defense of such Third Party Action and to employ counsel at
its own expense to assist in the handling of such Third Party
Action and (ii) the indemnified party shall have the right to
defend and/or settle such Third Party Action in such manner as
it may deem appropriate at the cost and expense of the
indemnifying party, and the indemnifying party will promptly
reimburse the indemnified party therefor in accordance with
this Article 11, but only to the extent that such costs and
expenses are covered by the terms of Section 11.1. The
reimbursement of fees, costs and expenses required by this
Article 11 shall be made by periodic payments during the course
of the investigation or defense, as and when bills are received
or expenses incurred. The procedures in this Section 11.2(a)
shall not be applicable to any right to indemnification that
does not involve a Third Party Action.
(b) If the indemnifying party shall be obligated
to indemnify the indemnified party pursuant to this Article 11,
the indemnifying party shall, upon payment of such indemnity in
full, be subrogated to all rights of the indemnified party with
respect to the claims to which such indemnification relates.
(c) If an indemnified party becomes entitled to
any indemnification from an indemnifying party, such
indemnification shall be made in cash upon demand. If Eagle
shall fail to make any payment when due pursuant to this
Article 11, Buyer may elect, at its option, to reduce the
amount payable by Buyer pursuant to any Purchase Price Note or
for any Royalty Payment by the amount so due and not paid by
Eagle.
(d) Any payment made by an indemnifying party to
an indemnified party pursuant to this Article 11 shall be
deemed an adjustment to the Purchase Price.
11.3 Environmental Indemnity. Eagle and Buyer
acknowledge that there may be certain Environmental Conditions
associated with certain of the Transferred Assets, including
the Property. Eagle acknowledges that Buyer's activities after
the Closing may cause, contribute to, or exacerbate such
Environmental Conditions or may cause new Environmental
Conditions, and these circumstances shall not alter, affect or
reduce Eagle's obligations under Section 11.1(a) to indemnify
and hold harmless Buyer, NSC and the other indemnified parties
referred to therein, provided, however, Eagle's obligation to
indemnify and hold harmless Buyer, NSC and the other
indemnified parties shall not include Buyer Environmental
Matters. Eagle shall have the responsibility and burden of
establishing that any Environmental Condition is a Buyer
Environmental Matter.
11.4 Agreement Not to Seek Indemnity. Schedule 11.4
contains a list of actions that Buyer expects to take after the
Closing, although Buyer has no obligation to take any such
action. Buyer shall not seek indemnification pursuant to
Section 11.1 from Eagle for any expenses incurred by Buyer in
taking any such actions.
12. MISCELLANEOUS.
12.1 Brokerage. In the event any person shall assert
a claim to a fee, commission or other compensation on account
of alleged employment as a broker or finder, or performance of
services as a broker or finder, in connection with the
transactions contemplated by this Agreement, the party (or
parties) alleged to have been responsible for such employment
or performance of services shall hold harmless the other party
(or parties) as well as the other party's (or parties')
directors, officers and employees, from and against such claim
and at the indemnifying party's (or parties') sole expense
defend any and all actions, suits or proceedings involving such
claim that may at any time be brought against those so
indemnified and satisfy promptly any settlement or judgment
arising therefrom. If, however, it is ultimately determined in
any such action, suit or proceeding in which the indemnified
party (or parties) were afforded the opportunity to have their
counsel participate in the defense, that the employment was by
or services were performed for the indemnified party (or
parties), then the latter shall be responsible under this
Section and shall reimburse any amounts theretofore paid by the
indemnifying party (or parties) by reason hereof.
12.2 Survival. All covenants and agreements
contained in this Agreement and the right to indemnification
with respect to all representations and warranties contained in
this Agreement or in any certificate, document or statement
delivered pursuant hereto, shall survive (and not be affected
in any respect by) the Closing, any investigation conducted by
any party hereto and any information which any party may
receive. Notwithstanding the foregoing, the right to
indemnification with respect to each representation and
warranty contained in this Agreement or made pursuant to any
certificate, document or statement delivered pursuant hereto
shall terminate on the last day of the eighteenth month
following the month in which the Closing occurs (the "End
Date"); provided, however, that (i) the right to
indemnification with respect to the representations and
warranties set forth in Sections 4.7 and 4.8 shall survive
until 30 days after the expiration of the applicable statute of
limitations relating to the matters set forth in such sections,
and the first sentence of Section 4.4(a) shall survive without
limitation, (ii) the right to indemnification with respect to
such representations and warranties, and the liability of any
party with respect thereto, shall not terminate with respect to
any claim, whether or not fixed as to liability or liquidated
as to amount, with respect to which such party has been given
written notice prior to the End Date or such 30th day after the
expiration of the applicable statute of limitations, whichever
shall be applicable thereto in accordance with this Section and
(iii) the sole remedy for a breach of Section 5.3 shall be the
change in Exhibit C referred to therein and a payment of
additional Royalty Payments giving effect to such change, and
the right to seek such remedy shall terminate unless notice of
a claimed breach is given to Buyer prior to the first
anniversary of the Closing Date.
12.3 Notices. Any notice, request or other
communication under or with respect to this Agreement shall be
in writing and shall be sent by certified mail, return receipt
requested, postage prepaid, by nationally recognized air
courier service such as Federal Express or by personal delivery
against receipt to the party to whom it is to be given at its
address set forth below:
If to Buyer or NSC:
National Spinning Co., Inc.
183 Madison Avenue
New York, New York 10016
Attention: Chief Financial Officer
If to Seller, Eagle or Parent:
Eagle Industries, Inc.
2 North Riverside Plaza, Suite 1100
Chicago, Illinois 60606
Attention: Gus J. Athas, Esq.
and to
Aunt Mary's
150 Avenue E
Rochelle, Illinois 61068
Attention: Alec Kaplanes
Any such communication shall be deemed to have been given as of
the date so personally delivered, on the next Business Day when
sent by overnight delivery service or on the fifth Business Day
after the date so mailed. Any party may change its address set
forth above by written notice in accordance herewith given to
the other parties.
12.4 Bulk Sales Laws. The parties hereto waive
compliance by Seller with the provisions of any applicable bulk
sales, fraudulent conveyance or other law for the protection of
creditors, including any bulk sales and similar laws relating
to Taxes. Seller, Eagle and Parent, jointly and severally,
shall indemnify and hold Buyer harmless from, and reimburse
Buyer for, any loss, cost, expense, liability or damage which
Buyer may suffer or incur by virtue of the noncompliance by the
parties with such applicable laws.
12.5 Termination. This Agreement and the
transactions contemplated hereby may be terminated and
abandoned at any time prior to the Closing (i) by mutual
written agreement of the parties hereto, (ii) by NSC or Eagle
upon written notice to the other if the Closing shall not have
taken place by October 31, 1994, other than by reason of a
matter within the control of the party asserting such
termination or any of such party's Affiliates, (iii) by NSC, if
there has been any violation or breach by Seller, Eagle or
Parent of any representation, warranty, covenant or obligation
contained in this Agreement that has rendered the satisfaction
of any condition to the obligations of Buyer set forth in
Article 7 hereof impossible and such violation or breach has
not been waived by Buyer or if any other event shall occur that
shall render the satisfaction of any such condition to the
obligations of Buyer impossible and such condition has not been
waived by Buyer; (iv) by Eagle, if there has been a violation
or breach by Buyer or NSC of any representation, warranty,
covenant or obligation contained in this Agreement that has
rendered the satisfaction of any condition to the obligations
of Seller set forth in Article 8 hereof impossible and such
violation or breach has not been waived by Seller, Eagle or
Parent or if any other event shall occur that shall render the
satisfaction of any such condition to the obligations of Seller
impossible and such condition has not been waived by Seller,
Eagle or Parent; or (v) by Buyer to the extent authorized under
Section 3.1(a). Except for any breach of this Agreement
occurring at or prior to termination and for the obligations
contained in Sections 6.5, 6.9 and 12.1, upon the termination
of this Agreement pursuant to this Section, this Agreement
shall forthwith become null and void and none of the parties
hereto or any of their respective officers, directors,
employees, agents, consultants, stockholders or principals
shall have any liability or obligation hereunder or with
respect hereto.
12.6 Consent to Jurisdiction. Each party hereto,
hereby consents to, and confers nonexclusive jurisdiction upon,
the courts of the States of New York and Illinois and the
Federal courts of the United States of America located in the
City of New York, Borough of Manhattan, or in the City of
Chicago, County of Cook, and appropriate appellate courts
therefrom, over any action, suit or proceeding arising out of
or relating to this Agreement. Each party hereto hereby
waives, and agrees not to assert, as a defense in any such
action, suit or proceeding that it is not subject to such
jurisdiction or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that this
Agreement may not be enforced in or by said courts or that its
property is exempt or immune from execution, that the suit,
action or proceeding is brought in an inconvenient forum, or
that the venue of the suit, action or proceeding is improper.
Service of process in any such action, suit or proceeding may
be served on any party anywhere in the world, whether within or
without the State of New York or Illinois, provided that notice
thereof is provided pursuant to provisions for notice under
this Agreement.
12.7 Binding Effect; Assignment; No Third Party
Beneficiaries. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and permitted assigns and the provisions of
Article 11 shall inure to the benefit of the indemnified
parties referred to therein; provided, however, that prior to
the Closing neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any of
the parties hereto without the prior written consent of the
other parties and any such purported assignment shall be void.
Neither Parent, Eagle nor NSC may consolidate or merge with any
other person or transfer all or substantially all of its
assets to any other person, unless the person formed by such
consolidation or with which the applicable party is merged or
to which the assets of the applicable party are transferred
shall be a corporation organized and existing under the laws of
the United States or any state thereof or the District of
Columbia and shall expressly assume, by written agreement,
executed and delivered to the other parties hereto, all the
obligations of the applicable party under this Agreement. This
Agreement is not intended to confer upon any other person any
rights or remedies hereunder.
12.8 Specific Performance. The parties to this
Agreement recognize that any breach of the terms of this
Agreement by Seller, Eagle or Parent may give rise to
irreparable harm for which money damages would not be an
adequate remedy, and accordingly agree that, in addition to
other remedies, Buyer and NSC shall be entitled to enforce the
terms of this Agreement by a decree of specific performance
without the necessity of proving the inadequacy as a remedy of
money damages.
12.9 Entire Agreement; Modifications; Headings;
Counterparts. This Agreement and the Exhibits and Schedules
attached hereto, and the other writings specifically identified
herein or contemplated hereby, contain the entire agreement
among the parties hereto with respect to the transactions
contemplated herein and supersede all previous written or oral
negotiations, commitments and writings (including without
limitation, the agreement in principle dated July 26, 1994).
This Agreement may be modified only by a written instrument
duly executed by or on behalf of each party. No breach of any
covenant, agreement, warranty or representation shall be deemed
waived unless expressly waived in writing by and on behalf of
the party who might assert such breach. The Article and
Section headings of this Agreement are for convenience of
reference only and do not form a part hereof and do not in any
way modify, interpret or construe the intentions of the
parties. This Agreement may be executed in two or more
counterparts, and all such counterparts shall constitute one
and the same instrument.
12.10 Affiliate's Obligations. Each obligation of
Seller hereunder shall be deemed to include an obligation of
Eagle to cause Seller to perform such obligation or to perform
such obligation itself. Each obligation of Eagle hereunder
(including under the preceding sentence) shall be deemed to
include an obligation of Parent to cause Eagle to perform such
obligation or to perform such obligation itself. Each
obligation of Buyer hereunder shall be deemed to include an
obligation of NSC to cause Buyer to perform such obligation or
to perform such obligation itself.
12.11 Definitions. The provisions of Exhibit A shall
be deemed part of this Agreement.
12.12 Applicable Law. This Agreement and the GAMI
Guarantee shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to
contracts executed and to be performed in such State.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the day and
year first above written.
NSC BUYER, INC. CARON INTERNATIONAL, INC.
By: /s/ Jeffrey B. Koch By: /s/ Gus J. Athas
------------------- ----------------
Jeffrey B. Koch Gus J. Athas
Executive Vice-President Vice-President
NATIONAL SPINNING CO., INC. EAGLE INDUSTRIAL PRODUCTS
CORPORATION
By: /s/ Jeffrey B. Koch By: /s/ Gus J. Athas
------------------- ----------------
Jeffrey B. Koch Gus J. Athas
Executive Vice-President Senior Vice-President
EAGLE INDUSTRIES, INC.
By: /s/ Gus J. Athas
----------------
Gus J. Athas
Senior Vice-President
The undersigned, Great American Management and
Investment, Inc., a Delaware corporation, hereby absolutely and
unconditionally guarantees Eagle's payment obligations under
Section 11.1(a) with respect to any Environmental Condition,
subject to the provisions of Section 11.3, and agrees that it
may be pursued for the payment of such obligations without
first pursuing Eagle for payment of such obligations.
GREAT AMERICAN MANAGEMENT AND
INVESTMENT, INC.
By: /s/ Arthur A. Greenberg
-----------------------
Arthur A. Greenberg
Executive V.P.
<PAGE>
List of Exhibits
Exhibit A Definitions
Exhibit C Royalty Payments
EXHIBIT A
DEFINITIONS
1.1 Defined Terms. The following terms shall have
the respective meanings indicated below for purposes of the
Agreement:
"Accountants Proprietary Information" shall mean
planning documentation, inherent and control risk assessments,
listing of matters for the attention of the partner and
detailed audit programs or records of tests, provided that any
information relating to the company that is the subject of such
work papers contained in any of the foregoing shall not be
deemed Accountants Proprietary Information, and such
information shall be provided to a party when such party is
entitled to accountants' work papers pursuant to this Agreement.
"Affiliate" of a specified person shall mean a person
directly or indirectly controlling, controlled by, or under
common control with, such other Person. For the purposes of
this definition, "control" when used with respect to any Person
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" shall mean the Purchase Agreement to which
this Exhibit is attached, including all of the Exhibits and
Schedules thereto.
"Arbitrating Firm" shall mean one of the "big six"
independent public accounting firms (other than any such firm
that audited the 1991, 1992 or 1993 financial statements of
NSC, Buyer, Seller, Eagle, Parent, or any of their respective
Affiliates or that has been engaged to audit the 1994 financial
statements of any of them) selected by agreement of Buyer and
Seller or, if they cannot agree, chosen by lot from among the
aforesaid firms.
"Best efforts" shall mean, whenever used with
reference to a party's obligation, an obligation of such party
to use every reasonable commercial effort, but shall not be
interpreted to require such party to take any action or refrain
from taking any action that would be materially burdensome to
such party or to amend this Agreement or any agreement
contemplated hereby or to forego or waive any of its rights
hereunder or thereunder.
"Business" shall mean the business of Seller of
manufacturing, marketing and selling yarn and craft kits to
retail resellers, wholesalers or manufacturers and specifically
excluding the Excluded Business.
"Business Day" shall mean any day other than a
Saturday, Sunday or other day on which banks in New York City,
New York, are required to or may be closed.
"Business-Related" shall mean, when used in reference
to a specified asset or obligation, only those of such assets
or obligations that are used or held for use in, or related or
attributable to, the Business.
"Buyer Environmental Matter" shall mean an
Environmental Condition with respect to any Facility that
arises, originates or first occurs after the Closing Date and
during the period that such Facility is leased to Buyer, except
for such an Environmental Condition that (i) arises from an
underground storage tank, underground vault or other reasonably
inaccessible container, storage facility or process or waste
disposal equipment where a release therefrom is not readily
ascertainable and (ii) is not the result of the negligent acts
or omissions of Buyer, its employees, agents or contractors.
"Buyer Property Matter" shall mean a Third Party
Action arising out of, based upon or resulting from any actions
of Buyer with respect to the operation of a Leased Facility in
a manner that is materially inconsistent with the manner in
which such Leased Facility was operated prior to the Closing,
unless Buyer, NSC or any other indemnified party would be
entitled to indemnification from Eagle pursuant to Section 11.1
with respect to such Third Party Action, and excluding any
Third Party Action relating to an Environmental Condition.
"Cash," "dollars" or "$" shall mean United States
dollars.
"Closing Gross Asset Value" shall mean the sum of the
Closing Receivables, net of the Receivables Reserves, plus the
Closing Inventory, net of the Inventory Reserves.
"Closing Net Asset Value" shall mean the Net Asset
Value as of the Closing Date, determined in accordance with the
Closing Net Asset Value Statement.
"Contracts" shall mean all leases, instruments,
contracts, commitments, arrangements and agreements of every
type and description to which Seller is a party or by which it
or any of the Acquired Assets are bound.
"CPI" shall mean the consumer price index for all
urban consumers all items as compiled and most recently
published as of the date of calculation by the United States
Department of Labor, Bureau of Labor Statistics, but if CPI
shall not for any reason be published, the term "CPI" shall
mean any similar index containing information prepared by the
United States Government or an agency thereof on substantially
a comparable basis, which the parties agree shall be the CPI.
In the event the parties cannot agree within thirty days of the
end of publication of the CPI, the parties shall appoint an
Arbitrating Firm who shall determine what index shall become
the CPI. Buyer and Seller shall each bear one half of the
expenses of any such Arbitrating Firm under this provision.
"Craft Kits" shall mean Latch Hook Kits, Easy Weave
Kits, Silk Screened Stamped Goods, Magic Weave Kits, Homestead
Dolls, Yarn Needles and Crochet Hooks, Plastic Canvas Kits,
Creative Expression Branded Kits and Seasonal Craft Kits
utilizing Hand Knit Yarn.
"Cut-Off Date" shall mean the 180th day after the
Closing Date or, if (i) the Closing Net Asset Value shall not
have been finally determined by such day, (ii) Buyer shall have
given a dispute notice pursuant to Section 3.2(b) including a
dispute with respect to the Receivables Reserves and (iii) Buyer
shall have given notice to Seller by such 180th day of its
election to extend the Cut-Off Date, then the date on which the
Closing Net Asset Value shall have been finally determined.
"Dalton Facility" shall mean Seller's facility located
at 2926 N. Dug Gap Road, Dalton, Georgia.
"Dalton Lease Agreement" shall mean the lease
agreement between James Lamar Hennon and Seller with respect to
the Dalton Facility.
"Dalton Sublease" shall mean the sublease and
equipment lease agreement between Seller and Buyer in the form
of Exhibit G hereto.
"Eagle Credit Agreement" shall mean the Credit
Agreement, dated as of January 31, 1994, among Eagle, the
lenders named therein, Chemical Bank, as administrative agent,
and Citicorp North America, Inc., as collateral agent, as
amended.
"Environmental Condition" shall mean (w) any
generation, use, handling, storage, transportation, treatment,
release, discharge, emission, spillage or disposal of any
Hazardous Substance, Hazardous Waste, waste containing a
Hazardous Substance or Petroleum Substance which occurred at,
prior to or after the Closing in connection with any site or
Facility owned, leased, used, operated or managed at any time
at, prior to or after the Closing, by Seller or any of its
Affiliates, (x) any contamination of air, soil, groundwater or
surface water above, at, on, under, or adjacent to any such
site or Facility at, prior to or after the Closing, (y) any
generation, use, handling, storage, transportation, treatment,
release, discharge, emission, spillage or disposal at any
location whatsoever at, prior to or after the Closing, by
Seller or any of its Affiliates, or any person with whom any of
them have had a contractual or other relationship, of any
Hazardous Substance, Hazardous Waste, Petroleum Substance or
waste containing a Hazardous Substance or (z) any condition
adversely affecting public health or welfare or the environment
in existence at, prior to or after the Closing of or affecting
real property owned, leased, used or held for use by Seller or
any of its Affiliates at, prior to or after the Closing. For
purposes of this definition, the terms "Hazardous Waste,"
"Hazardous Substance," "Release" and "Facility" have the
meanings set forth in the Resource Conservation and Recovery
Act and the Comprehensive Environmental Response Compensation
and Liability Act, as such statutes are amended from time to
time, and any federal or state law, rule or regulation adopted
pursuant thereto or otherwise relating to liability for
environmental contamination, and "Petroleum Substance" means
petroleum, petroleum products, crude oil or any fraction thereof
and waste oil.
"Estimated Closing Gross Asset Value" shall mean the
estimate of the Closing Gross Asset Value, determined pursuant
to Section 3.1(a).
"Estimated Closing Net Asset Value" shall mean the
estimate of the Closing Net Asset Value, determined pursuant to
Section 3.1(a).
"Excess Value" shall mean the excess, if any, of the
Closing Net Asset Value, as finally determined pursuant to
Section 3.2, over $20,000,000.
"Excluded Business" shall mean the business of Seller
of reselling Hand Knit Yarn and Craft Kits to consumers through
Seller's retail stores, which stores operate under the trade
name "Aunt Mary's".
"Facilities" shall mean, collectively, the Dalton
Facility, the Lafayette Facility and the Rochelle Facility.
"FIFO" shall mean the first-in, first-out method of
accounting for inventory under Unmodified GAAP.
"GAAP" shall mean the accounting principles set forth
on Exhibit D to the Agreement and, to the extent not specified
in Exhibit D, other generally accepted accounting principles in
the United States of America in effect from time to time.
"GAMI" shall mean Great American Management and
Investment, Inc., a Delaware corporation.
"GAMI Affiliate" shall mean an Affiliate of GAMI that
is controlled (as defined in the definition of Affiliate) by
GAMI.
"GAMI Guarantee" shall mean the guarantee of GAMI set
forth on the signature page of this Agreement.
"Hand Knit Yarn" shall mean yarn of any fiber or count
intended for sale or resale to retailers or through consumer
catalogues ultimately intended for home use by consumers or for
use in manufacturing Craft Kits.
"Income Taxes" shall mean Taxes in the nature of
income or franchise taxes.
"Inventory Reserves" shall mean the reserves
applicable to the Closing Inventory, determined in accordance
with GAAP, to the extent included in calculating Closing Net
Asset Value, as finally determined.
"Jobber" shall mean a Person who resells Hand Knit
Yarn to retailers or uses Hand Knit Yarn in the production of
Craft Kits.
"Jobber/Industrial Yarn" shall mean yarn sold to
Jobbers or to manufacturers.
"Lafayette Facility" shall mean Seller's facility
located at No. 1 Grant Street, Lafayette, Georgia.
"Lafayette Lease Agreement" shall mean the lease
agreement between Seller and Buyer in the form of Exhibit E
hereto.
"Lease Agreements" shall mean, collectively, the
Lafayette Lease Agreement, the Rochelle Lease Agreement and the
Dalton Sublease.
"Leased Assets" shall mean the Business-Related
Machinery and Equipment in existence as of the Closing, the
Dalton Facility and the Leased Facilities.
"Leased Facilities" shall mean, collectively, the
Premises and Buildings (as such terms are defined in the Lease
Agreements) located in Rochelle, Illinois, and Lafayette,
Georgia, and to be leased to Buyer pursuant to the Lease
Agreements.
"Legal Expenses" shall mean the reasonable fees, costs
and expenses of any kind incurred by any person entitled to
indemnification pursuant to Article 11 in investigating,
preparing for, defending against or providing evidence,
producing documents or taking other action with respect to any
claim as to which such person is entitled to indemnification
under Article 11.
"Lien" shall mean any lien, mortgage, pledge,
hypothecation, right of others, claim, security interest,
encumbrance, attachment, lease, sublease, license, occupancy
agreement, adverse claim or interest, easement, covenant,
encroachment, burden, title defect, title retention agreement,
voting trust agreement, interest of others, option, right of
first refusal, charge or other restrictions or limitations of
any nature whatsoever, including but not limited to such as may
arise under any Seller Contracts.
"Machinery and Equipment" shall mean all machinery,
equipment, changeover parts, computer hardware, Software,
fixtures, tools, furniture, vehicles, and other fixed assets,
wherever located, but excluding the Supplies.
"Material Adverse Effect" shall mean any event,
occurrence, fact, condition, effect or change that is
materially adverse to the business, operations, assets,
condition, financial position, financial results, obligations,
liabilities or prospects of the Business as a whole.
"Net Asset Value" shall mean, as of any date, the book
value as of such date of the Business-Related Receivables,
Business-Related Inventory and Business-Related Other Current
Assets (in each case net of applicable reserves but without
deducting any Restructuring Reserves) of Seller, less the
amount of the Trade Payables and Other Accrued Expenses as of
such date, all as determined in accordance with GAAP.
"Net Sales" shall mean Buyer's and its Affiliates'
gross sales from sales of Hand Knit Yarn and of Craft Kits to
retailers, less all returns of products of Buyer and its
Affiliates, credits to correct pricing and delivery errors and
write-offs for bad debt, net of bad debt recoveries.
"Note Agreements" shall mean the Note Agreement, dated
as of February 25, 1993, among NSC, the Prudential Insurance
Company of America ("Prudential") and the other note purchasers
named therein, the Note Agreement, dated as of January 16,
1992, between NSC and Prudential and the Note Agreement, dated
as of June 19, 1987, between NSC and Prudential, each as
amended.
"Note Rate" shall mean the rate per annum at which
interest is payable on the Purchase Price Note, as in effect
from time to time.
"NSC Credit Agreement" shall mean the Revolving Credit
and Reimbursement Agreement, dated as of February 25, 1993,
among NSC, NationsBank of North Carolina, N.A., as lender and
as agent, and the other others lenders named therein, as
amended.
"Other Accrued Expenses" shall mean other accrued
expenses of Seller determined in accordance with GAAP relating
solely to the Business incurred in the ordinary course of the
Business, excluding liabilities to any Affiliate of Seller,
liabilities for Taxes, Trade Payables, liabilities relating to
the Excluded Business, liabilities for audit fees, legal fees,
interest expense or insurance, liabilities relating to Benefit
Plans, severance pay and workers compensation (provided that
accrued salaries, wages, bonus or incentive pay, sick pay,
holiday pay and vacation pay for Transferred Employees shall be
included as Other Accrued Expenses) and expenses relating to
the transactions contemplated by this Agreement. Other Accrued
Expenses shall include amounts due after the Closing to
complete installation of the K-Mart distribution
scanning/labeling system.
"Person" shall mean and include an individual,
corporation, company, partnership, joint venture, association,
trust, and other unincorporated organization or entity and a
governmental entity or any department or agency thereto.
"Quest Lease" shall mean the Industrial Building
Lease, as extended October 3, 1991, between Gladys Quest,
landlord, and Seller, tenant.
"Real Property" shall mean all real property,
fixtures, buildings and improvements thereon, all appurtenances
and all easements and rights of way which benefit the real
property and all construction-in-progress relating thereto.
"Receivables Reserves" shall mean the reserves
applicable to the Closing Receivables determined in accordance
with GAAP, to the extent included in calculating the Closing
Net Asset Value, as finally determined, or, if at the relevant
time Closing Net Asset Value shall not have then been finally
determined, then the amount of such reserves reflected in
Seller's calculation of Closing Net Asset Value, as set forth
in the Closing Net Asset Value Statement.
"Restructuring Reserves" shall mean accrued expenses
related to the closing or restructuring of Seller's operations
prior to Closing.
"Rochelle Facility" shall mean Seller's facility
located at 150 Avenue E, Rochelle, Illinois, and the facility
leased under the Quest Lease.
"Rochelle Lease Agreement" shall mean the lease
agreement between Seller and Buyer in the form of Exhibit F
hereto.
"Rochelle Permit Matters" shall mean actions required
to comply with the waste water Discharge Permit 001 issued to
the Rochelle Facility that are different in any material
respect from the manner in which the Rochelle Facility was
operated prior to the Closing including, but not limited to,
any equipment or process changes and any enforcement actions or
penalties arising from the nonconformity of the Rochelle
Facility with Discharge Permit 001.
"Shared Services Agreement" shall mean the agreement
between Seller and Buyer in the form of Exhibit J hereto.
"Software" shall mean all computer software, including
documentation and object and source codes.
"Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll,
employment, excise, estimated, severance, stamp, occupation,
property, import, export or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional
amounts, imposed by any governmental authority (domestic or
foreign).
"Trade Payables" shall mean the current liabilities of
Seller for accounts payable attributable to the acquisition on
or prior to the Closing Date of goods and services solely
related to the Business incurred in the ordinary course of the
Business, excluding any liability to any Affiliate of Seller or
attributable to the Excluded Business.
"Transferred Assets" shall mean the Acquired Assets
and the Leased Assets.
"Unmodified GAAP" shall mean generally accepted
accounting principles in the United States of America in effect
from time to time.
"WARN Act" shall mean the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. 2101 et seq.
1.2 Terms Defined Elsewhere. The following terms are
defined in the text of the Agreement as indicated below:
Term Location in Agreement
"Acquired Assets" Section 1.1.
"Acquisition Transaction" Section 6.10.
"Adjustment Payment Date" Section 3.2(d).
"Assigned Receivables" Section 3.4(b).
"Assumed Contracts" Section 2.1.
"Assumed Liabilities" Section 2.2.
"Benefit Plans" Section 4.8(a).
"Business Employee" Section 4.8(e).
"Buyer" Preamble to the
Agreement.
"Buyer's Estimates" Section 3.1(a).
"CERCLA" Section 4.10(c).
"Closing" Article 9.
"Closing Cash Payment" Section 3.1(b).
"Closing Consideration" Section 3.2(d).
"Closing Date" Article 9.
"Closing Inventory" Section 3.5(a).
"Closing Net Asset Value
Statement" Section 3.2(a).
"Closing Receivables" Section 3.4(a).
"Code" Section 4.7(a).
"Collected Amount" Section 2.4(b).
"Confidential Information" Section 6.5(b).
"Contract Default" Section 4.2.
"Discontinued Book Value" Section 3.5(b).
"Eagle" Preamble to the
Agreement.
"Employee Claims" Section 10.1.
"End Date" Section 12.2.
"Environmental Laws" Section 4.10(a).
"Environmental Permits" Section 4.10(a).
"ERISA" Section 4.8(a)(i).
"ERISA Affiliate" Section 4.8(g).
"Estimated Closing
Statement" Section 3.1.
Term Location in Agreement
"Excess Value Inventory" Section 3.3(b).
"Excluded Assets" Section 1.2.
"FICA" Section 10.3(a).
"Financial Statements" Section 4.3.
"FUTA" Section 10.3(a).
"HSR Act" Section 4.2.
"Indemnified party" Section 11.2(a).
"Indemnifying party" Section 11.2(a).
"Intellectual Property" Section 1.1(d).
"Inventory" Section 1.1(b).
"Inventory Adjustment Amount" Section 3.5(b).
"Inventory Adjustment Notice" Section 3.5(b).
"Inventory Deficiency" Section 3.5(b).
"Legal Requirements" Section 4.6.
"Losses" Section 11.1.
"Multiemployer Plan" Section 4.8(e).
"Non-Compete Parties" Section 6.11.
"Non-Compete Period" Section 6.11.
"NSC" Preamble to the
Agreement.
"Other Current Assets" Section 1.1(c).
"Parent" Preamble to the
Agreement.
"PBGC" Section 4.8(g).
"Permits" Section 1.1(g).
"Pre-Closing Net Asset
Value Statement" Section 4.2(a).
"Principal Machinery and Section 4.4(c).
Equipment"
"Process Change" Section 11.3
"Product Liability Claims" Section 2.3(a).
"Property" Section 4.4(b).
"Purchase Price" Article 3
"Purchase Price Note" Section 3.1(b).
"Real Property Leases" Section 4.4(b)
"Receivables" Section 1.1(a).
"Receivables Notice" Section 3.4(b).
"Receivables Sale Agreement" Section 1.1(a).
"Receivables Trustee" Section 1.1(a).
"Related Person" Section 4.12.
"Remaining Inventory" Section 3.5(a).
"Remaining Inventory Revenues" Section 3.5(b).
"Reportable Event" Section 4.8(g).
"Representatives" Section 6.5(a).
"Routine Contracts" Section 2.1.
"Royalty Payment" Exhibit C.
"Seller" Preamble to the
Agreement.
Term Location in Agreement
"Seller Confidential Information" Section 6.5(a).
"Seller Contracts" Section 4.5.
"Seller's Affiliated Group" Section 4.7(a).
"Seller's Estimates" Section 3.1(a).
"Severance Payments" Section 10.2(a).
"Severance Pay Policy" Section 4.8(h).
"Shared Services Agreement" Section 6.16.
"Supplies" Section 1.1(h).
"Tax Returns" Section 4.7.
"Taxes" Section 4.7.
"Technology" Section 1.1(e).
"Third Party Action" Section 11.2(a).
"Transferred Employee" Section 10.1.
"Uncollected Amount" Section 3.4(b).
1.3 Construction. Unless herein otherwise provided,
or unless the context shall otherwise require, words importing
the singular number shall include the plural number, and vice
versa; the terms "herein", "hereof" and "hereunder", or other
similar terms, refer to this Agreement as a whole and not only
the particular sentence, paragraph, Section or Article in which
any such terms may be employed; a reference to any person shall
include such person's predecessors and successors; and all
accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP or, to the extent
applicable to periods ended prior to the Closing Date,
Unmodified GAAP.
Exhibit C
Royalty Payments
Pursuant to Section 3.7 of the Agreement, Buyer shall
pay to Seller royalties with respect to certain future sales of
Buyer in accordance with the following:
(a) With respect to each of the seven one-year
periods commencing with the day following the Closing Date
(each, a "Contract Year"), Buyer shall pay to Seller a
percentage of Caron Net Sales during such Contract Year
determined pursuant to the following schedule (the "Royalty
Payment"), subject to a maximum Royalty Payment with respect to
any Contract Year of $1,900,000:
1% of Caron Net Sales over $18,400,000 up to $40.8 million
2% of Caron Net Sales over $40.8 million up to $50.8 million
3% of Caron Net Sales over $50.8 million up to $60.8 million
5% of Caron Net Sales over $60.8 million
(b) Within 20 days after the end of each fiscal
quarter of Buyer, commencing with the first such quarter ending
at least 60 days after the Closing Date, Buyer shall pay to
Seller the amount of the Royalty Payment accrued during such
fiscal quarter (or, in the case of the first Royalty Payment,
accrued since the Closing Date through the end of such fiscal
quarter). Buyer may set off against any payment required to be
made by it pursuant to this Exhibit C any amount required to be
paid by Seller, Eagle or Parent pursuant to the Agreement and
not paid when due.
(c) Effective as of the commencement of the fourth
Contract Year, each dollar amount set forth in the schedule in
Section (a) above and the maximum payment of $1,900,000 set
forth in such Section (each such amount, the "Subject Amount")
shall be increased or decreased by the product of such Subject
Amount multiplied by the percentage increase or decrease, as
the case may be, in the CPI between August 1994 and August
1998. If the CPI for such period has increased, such product
shall be added to the Subject Amount, and if the CPI for such
period has decreased, such product shall be subtracted from the
Subject Amount. Buyer shall include in the first report
required to be delivered pursuant to Section (d) below after
the commencement of the fourth Contract Year its calculation of
each Subject Amount, as adjusted.
(d) Within twenty (20) days after the end of each
fiscal quarter of Buyer, commencing with the first such quarter
ending at least sixty (60) days after the Closing Date, Buyer
shall submit to Seller a report of Caron Net Sales during such
quarter, certified by an officer of Buyer to be true and
correct. Seller shall have the right to audit the reports with
respect to any Contract Year by written notice to Buyer given
within 180 days after the end of such Contract Year, and Buyer
will make available personnel, books, records and any other
information reasonably requested by Seller in completing such
audit. The Caron Net Sales for a Contract Year will become
final on the 365th day after the end of such Contract Year,
unless Seller has given Buyer notice of a dispute with respect
to such Caron Net Sales prior to such day. Seller will be
responsible for the costs of such audit unless, as a result of
such audit it is demonstrated that actual Caron Net Sales for
the audited Contract Year were at least 10% greater than the
Caron Net Sales reported by Buyer, in which case the cost of
the audit shall be paid by Buyer.
(e) For purposes of this Exhibit C, "Caron Net Sales"
for a Contract Year shall mean the Net Sales for such Contract
Year; provided, however, that if after the Closing a Person not
an Affiliate of Buyer as of the Closing becomes an Affiliate of
Buyer or Buyer or any of its Affiliates acquires assets of
another Person (collectively, an "Acquisition") and such Person
(in the former case) or such assets (in the latter case) are
engaged in the sale of Hand Knit Yarn and/or Craft Kits (the
"Acquired Business"), then Caron Net Sales for any Contract
Year or portion thereof being determined (the "Applicable
Period") from and after any such Acquisition shall mean Net
Sales for such period multiplied by a fraction, the numerator
of which shall be the Caron Net Sales for the Contract Year
preceding the Contract Year in which the Acquisition occurs and
the denominator of which shall be the amount of such numerator,
plus the Net Sales (assuming for this purpose that the
reference to "Buyer and its Affiliates" in the definition of
Net Sales referred to the Acquired Business) attributable to
the Acquired Business for such preceding Contract Year, plus
the amount of Net Sales of Buyer excluded from Caron Net Sales
by virtue of this Section (e) for such preceding Contract
Year. Such fraction shall be recalculated as of each
Acquisition.
