SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 28, 1994
COLLINS & AIKMAN HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-10218 13-3489233
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
8320 University Executive Park, Suite 102
Charlotte, North Carolina 28262
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 548-2350
Item 2. Acquisition or Disposition of Assets
(a) On January 28, 1994, Collins & Aikman Group, Inc.
("Group") a wholly owned subsidiary of Collins & Aikman
Holdings Corporation ("Holdings"), sold all the
outstanding stock of its wholly owned subsidiary
Kayser-Roth Corporation ("Kayser-Roth") to Legwear
Acquisition Corporation ("Legwear"), a corporation
organized by Grupo Synkro, S.A. de C.V. of Mexico City,
Mexico. The purchase price was (i) approximately
$170,000,000 of which $100,000,000 was paid in cash and
the balance in the form of a $70,000,000 Senior Bridge
Note of Legwear (the "Senior Bridge Note") and (ii) the
Warrant described below. Approximately $66,000,000 of
the cash received in the sale was used to pay in full
the outstanding balance under a credit agreement of
Kayser-Roth.
The Senior Bridge Note bears interest at 7% per annum
and matures April 28, 1994. If not paid in full at
maturity, the Senior Bridge Note will be replaced by a
Senior Secured Note from Legwear (the "Senior Secured
Note") which matures April 28, 1997 and provides for
the payment of interest at an initial rate of 12% per
annum increasing by 1% per month to a maximum of 15%
per annum.
The Warrant issued to Group in consideration of the
sale (the "Warrant") entitles Group to purchase 1,000
shares of Class B Common Stock of Legwear (representing
10% of the equity of Legwear) for a total exercise
price of approximately $11,100,000, subject to
adjustment as provided in the Warrant Agreement, dated
as of January 28, 1994 by and between Group and
Legwear. The Warrant expires on January 28, 1997.
The consideration received for the sale of the
Kayser-Roth stock was determined through arms-length
negotiations after several potential purchasers had
previously submitted bids to acquire Kayser-Roth.
Kayser-Roth, based in Greensboro, North Carolina,
manufactures and markets brand name and private label
women's and men's legwear, including the "No Nonsense"
and "Burlington" brands.
(b) Not applicable.
Item 7. Financial Statements and Exhibits
(a) Not applicable.
(b) The pro forma financial information furnished herein
reflects the disposition of Kayser-Roth on Holdings'
consolidated financial statements.
Introduction . . . . . . . . . . . . . . . . . . . . . . F-2
Pro Forma Consolidated Balance Sheet at
October 30, 1993 . . . . . . . . . . . . . . . . . . . F-3
Pro Forma Consolidated Statement of Operations For the
Fiscal Year Ended January 30, 1993 . . . . . . . . . . F-4
Pro Forma Consolidated Statement of Operations For the
Thirty-Nine Weeks Ended October 30, 1993 . . . . . . . F-5
Notes to Pro Forma Consolidated Financial Statements . . F-6
(c) The exhibits furnished in connection with this report are as
follows:
Exhibit
Number Description
2.1 - Acquisition Agreement dated as of November 22, 1993 as
amended and restated as of January 28, 1994, among
Collins & Aikman Group, Inc., Kayser-Roth Corporation
and Legwear Acquisition Corporation.
99.1 - Press Release dated November 22, 1993.
99.2 - Press Release dated December 29, 1993.
99.3 - Press Release dated January 18, 1994.
99.4 - Press Release dated January 28, 1994.
The following schedules to the Acquisition Agreement filed as
Exhibit 2.1 hereto have been omitted. Registrant hereby
undertakes to furnish supplementally a copy of any such
omitted schedule to the Commission upon request.
<TABLE>
<CAPTION>
Schedule
Number Description
<C> <S>
2.1 (a) The Warrant
2.2 (a) (1) The Estimated Closing Date Balance Sheet
2.2 (a) (2) Certain Assets and Liabilities Not Reflected In
Closing Date Balance Sheet
2.3 Certain Assets and Rights
3.1.1 Certain Jurisdictions
3.1.2 The Shares
3.1.3 Officers and Directors
3.1.5 Certain Seller Restrictions
3.1.6 (a) Audited Financial Statements
3.1.6 (b)(i) Balance Sheet
3.1.6 (b)(ii) Certain Adjustments
3.1.6 (c) Interim Financial Statements
3.1.6 (d) Certain Accounting Policies
3.1.7 (a) Conduct of the Business
3.1.8 Certain Matters
3.1.9 Certain Liens
3.1.10 Real Property
3.1.11 Current Insurance Policies
3.1.12 Intellectual Property
2
Schedule
Number Description
3.1.13 Litigation
3.1.14 Contracts
3.1.15 Employee Matters
3.1.16 (b) Taxes
3.1.17 (a) Certain Remediation Matters
3.1.17 (b) Certain Environmental Matters
3.1.18 Certain Intercompany Matters
3.2.3 Certain Purchaser Restrictions
3.3 Certain Individuals
5.2.4 (a) Form of Opinion of Seller's General Counsel
5.2.4 (b) Form of Opinion of Jones, Day, Reavis &
Pogue
5.3.3 Form of Opinion of Dechert Price & Rhoads
5.6.1 Certain Loan Documents
6.1 Survival of Certain Representations and
Warranties
6.2 (f) Certain Facility Policies
7.2.4 (o) Form of Treasury Regulation Certificate
</TABLE>
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
COLLINS & AIKMAN HOLDINGS CORPORATION
(Registrant)
Date: February 10, 1994 By: /s/ DAVID J. McKITTRICK
David J. McKittrick
Vice Chairman
4
ITEM 7(b)
Pro Forma Financial Information
F-1
Pro Forma Consolidated Financial Statements of
Collins & Aikman Holdings Corporation
Adjusted for the Disposition of
Kayser-Roth Corporation
Introduction
The following pro forma consolidated balance sheet as of October
30, 1993 and the pro forma consolidated statements of operations for
the fiscal year ended January 30, 1993 and the thirty-nine weeks ended
October 30, 1993 give effect to the disposition of the Kayser-Roth
Corporation ("Kayser-Roth") subsidiary of Collins & Aikman Group, Inc.
("Group"), a wholly owned subsidiary of Collins & Aikman Holdings
Corporation ("Holdings"). Such statements include the adjustments
described in the accompanying notes to the pro forma consolidated
financial statements. Group sold Kayser-Roth to Legwear Acquisition
Corporation ("Legwear") on January 28, 1994 for total proceeds of
approximately $170 million (of which $100 million was paid in cash and
the balance in the form of a $70 million Senior Bridge Note of Legwear
(the "Senior Bridge Note")) and a warrant to purchase 10% of the
equity of Legwear.
The pro forma consolidated financial statements are not
necessarily indicative of the results which actually would have
occurred if the disposition had taken place on the dates indicated,
nor are they necessarily indicative of future results. The pro forma
consolidated financial statements should be read in conjunction with
the audited consolidated financial statements of Holdings filed with
the Securities and Exchange Commission in its Annual Report on Form
10-K for the fiscal year ended January 30, 1993.
F-2
Collins & Aikman Holdings Corporation
Pro Forma Consolidated Balance Sheet
October 30, 1993
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Collins & Collins &
Aikman Aikman
Holdings Pro Forma Adjustments Holdings
Corporation Corporation
Historical Debit Credit Pro Forma
Assets
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 122,992 $ 29,150 (a) $ - $ 152,142
Accounts and notes receivable, net 193,547 193,547
Inventories 170,321 170,321
Net assets of discontinued
operations 114,083 130,676 (a) (16,593)
Other current assets 19,022 19,022
Total current assets 619,965 29,150 130,676 518,439
Property, plant and equipment,
net 272,308 272,308
Other assets 59,621 70,000 (a) 129,621
$ 951,894 $ 99,150 $ 130,676 $ 920,368
Liabilities and Stockholder's
Equity
Current Liabilities:
Notes payable $ 731 $ - $ - $ 731
Current portion of long-term debt 94,355 70,500 (a) 23,855
Accounts payable 65,712 65,712
Accrued expenses 275,429 8,395 (a) 283,824
Total current liabilities 436,227 70,500 8,395 374,122
Long-term debt 925,428 925,428
Deferred income taxes 4,838 4,838
Other non-current liabilities 220,415 220,415
Redeemable preferred stock of
subsidiary 109 109
Preferred stock of subsidiary 181 181
Redeemable preferred stock 116,115 116,115
Common Stockholder's deficit (751,419) 30,579 (a) (720,840)
$ 951,894 $ 70,500 $ 38,974 $ 920,368
</TABLE>
F-3
Collins & Aikman Holdings Corporation
Pro Forma Consolidated Statement of Operations
For the Fiscal Year Ended January 30, 1993
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Collins & Collins &
Aikman Aikman
Holdings Pro Forma Adjustments Holdings
Corporation Corporation
Historical Debit Credit Pro Forma
<S> <C> <C> <C> <C>
Net sales $1,643,581 $ 395,328 (b) $ - $1,248,253
Cost of goods sold 1,180,412 221,782 (b) 958,630
Selling, general and
administrative expenses 374,505 155,705 (b) 218,800
Restructuring costs 10,000 10,000
1,564,917 - 377,487 1,187,430
Operating income 78,664 395,328 377,487 60,823
Interest expense, net (122,877) 21,562 (a) (101,315)
Dividends on preferred stock of
subsidiary 4,514 4,514
Loss from continuing
operations before income taxes (48,727) 395,328 399,049 (45,006)
Income taxes 1,043 4,199 (b) (3,156)
Loss from continuing operations (49,770) $ 395,328 $ 403,248 $ (41,850)
Discontinued operations:
Loss from discontinued
operations, net of income taxes (45,888)
Loss on disposals, net of income
taxes (168,000)
Net loss $ (263,658)
</TABLE>
F-4
Collins & Aikman Holdings Corporation
Pro Forma Consolidated Statement of Operations
For the Thirty-Nine Weeks Ended October 30, 1993
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Collins & Collins &
Aikman Aikman
Holdings Pro Forma Adjustments Holdings
Corporation Corporation
Historical Debit Credit Pro Forma
<S> <C> <C> <C> <C>
Net sales $ 963,366 $ - $ - $ 963,366
Cost of goods sold 738,743 738,743
Selling, general and
administrative expenses 154,386 154,386
Restructuring costs 24,000 24,000
Goodwill write-down 129,854 129,854
1,046,983 - - 1,046,983
Operating loss (83,617) - - (83,617)
Interest expense, net (83,267) 6,779 (a) (76,488)
Dividends on preferred stock of
subsidiary 3,386 3,386
Loss from continuing operations
before income taxes (170,270) - 6,779 (163,491)
Income taxes 9,652 9,652
Loss from continuing operations (179,922) $ - $ 6,779 $ (173,143)
Discontinued operations:
Loss from discontinued
operations, net of income taxes (4,775)
Loss on disposal (127,673)
Net loss $ (312,370)
</TABLE>
F-5
COLLINS & AIKMAN HOLDINGS CORPORATION
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following adjustments have been made to reflect the
disposition of Kayser-Roth as if such transaction had taken place on
October 30, 1993 for the purpose of presenting the pro forma
consolidated balance sheet, and January 26, 1992, for the purpose of
presenting the pro forma consolidated statements of operations.
Kayser-Roth was presented as a discontinued operation in the
historical balance sheet and statement of operations as of and for the
thirty-nine weeks ended October 30, 1993 and as a continuing operation
in the historical statement of operations for the fiscal year ended
January 30, 1993.
PRO FORMA CONSOLIDATED BALANCE SHEET - OCTOBER 30, 1993
(a) To eliminate historical assets and liabilities of Holdings
applicable to Kayser-Roth; and to reflect the net proceeds
from the sale of Kayser-Roth and the pay-off in full of the
outstanding balance under a credit agreement of Kayser-Roth.
Holdings expects to realize a gain of approximately $30.6
million on the sale of Kayser-Roth which will be reflected
in Holdings' consolidated financial statements for the
fiscal year ended January 29, 1994 as an offset to loss on
disposals of discontinued operations.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - FISCAL YEAR ENDED
JANUARY 30, 1993
(a) To reflect reduction in consolidated net interest expense
from the elimination of Kayser-Roth's interest expense and
from the assumed interest income earned on the cash proceeds
and the seller bridge financing. Assumed interest earned on
cash proceeds is 2% per annum and on bridge financing at
rates ranging from 7% on the Senior Bridge Note to 15% on
the Senior Secured Note of Legwear that may be issued to
Group on maturity of the Senior Bridge Note (the "Senior
Secured Note"). It is assumed that the Senior Bridge Note
will be replaced at maturity by the Senior Secured Note.
(b) To eliminate sales and expenses of Kayser-Roth.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - THIRTY-NINE
WEEKS ENDED OCTOBER 30, 1993
(a) To reflect reduction in consolidated interest expense from
the assumed interest income earned on the cash proceeds and
the seller bridge financing. Assumed interest earned on
excess expected proceeds is 2% per annum and on bridge
financing is at rates ranging from 7% on the Senior
Bridge Note to 15% on the Senior Secured Note. It is ssumed
that the Senior Bridge Note will be replaced at maturity by
the Senior Secured Note.
F-6
Exhibit 2.1
ACQUISITION AGREEMENT,
dated as of November 22, 1993
as amended and restated
as of January 28, 1994,
among
COLLINS & AIKMAN GROUP, INC.,
KAYSER-ROTH CORPORATION,
and
LEGWEAR ACQUISITION CORPORATION
TABLE OF CONTENTS
(Not a part of the Agreement.)
Page
I. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . 2
1.1. Purchase and Sale of Shares . . . . . . . . . . . 2
II. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . 2
2.1. Closing Payment; the Warrant . . . . . . . . . . . 2
2.2. Adjustment . . . . . . . . . . . . . . . . . . . . 2
2.3. Intercompany Obligations . . . . . . . . . . . . . 8
III. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 9
3.1. Representations and Warranties of Seller . . . 9
3.1.1. Corporate Matters . . . . . . . . . . . . . . 9
3.1.2. The Shares . . . . . . . . . . . . . . . . . . 10
3.1.3. Officers and Directors . . . . . . . . . . . . 11
3.1.4. Authorization and Effect of Agreement . . . . 11
3.1.5. No Restrictions . . . . . . . . . . . . . . . 12
3.1.6. Financial Statements . . . . . . . . . . . . . 13
3.1.7. Conduct of the Business Since the Balance
Sheet Date . . . . . . . . . . . . . . . . . . 15
3.1.8. Compliance With Laws . . . . . . . . . . . . . 17
3.1.9. Tangible Personal Property; Title to Assets . 17
3.1.10. Real Property . . . . . . . . . . . . . . . . 18
3.1.11. Insurance . . . . . . . . . . . . . . . . . . 19
3.1.12. Intellectual Property . . . . . . . . . . . . 20
3.1.13. Litigation; Decrees . . . . . . . . . . . . . 22
3.1.14. Contract Rights . . . . . . . . . . . . . . . 23
3.1.15. Employee Plans . . . . . . . . . . . . . . . 27
3.1.16. Taxes . . . . . . . . . . . . . . . . . . . . 32
3.1.17. Environmental Matters . . . . . . . . . . . . 34
3.1.18. Intercompany Matters . . . . . . . . . . . . 35
3.1.19. Brokerage . . . . . . . . . . . . . . . . . . 35
3.2. Representations and Warranties of
Purchaser . . . . . . . . . . . . . . . . . . 36
3.2.1. Corporate Organization . . . . . . . . . . . . 36
3.2.2. Authorization and Effect of Agreement . . . . 36
3.2.3. No Restrictions. . . . . . . . . . . . . . . . 36
3.2.4. Brokerage . . . . . . . . . . . . . . . . . . 37
3.3. Certain Limitations on Representations and
Warranties . . . . . . . . . . . . . . . . . . 37
IV. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 39
4.1. Investigation by Purchaser . . . . . . . . . . . . 39
4.2. Press Releases . . . . . . . . . . . . . . . . . . 41
4.3. Regulatory Filings . . . . . . . . . . . . . . . . 42
4.4. Injunctions . . . . . . . . . . . . . . . . . . . 42
4.5. Operation of the Business . . . . . . . . . . . . 43
(i)
TABLE OF CONTENTS (cont'd)
Page
4.6. Satisfaction of Conditions . . . . . . . . . . . . 47
4.7. Termination of Credit Agreement . . . . . . . . . 47
4.8. Litigation . . . . . . . . . . . . . . . . . . . . 48
4.9. Confidentiality Agreements . . . . . . . . . . . . 48
4.10. Resignations . . . . . . . . . . . . . . . . . . 48
4.11. Limitation on Competition . . . . . . . . . . . . 48
V. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . 49
5.1. Conditions Precedent to Obligations of
Purchaser and Seller . . . . . . . . . . . . . . . . . 49
5.2. Additional Conditions Precedent to
Obligations of Purchaser . . . . . . . . . . . 50
5.2.1. No Material Misrepresentation or Breach . . . 50
5.2.2. Transfer Documents; Seller Financing
Documents . . . . . . . . . . . . . . . . . . 51
5.2.3. Credit Agreement . . . . . . . . . . . . . . . 51
5.2.4. Opinions of Counsel . . . . . . . . . . . . . 51
5.2.5. Pending Litigation . . . . . . . . . . . . . . 52
5.3. Additional Conditions Precedent to
Obligations of Seller . . . . . . . . . . . . 52
5.3.1. No Material Misrepresentation or Breach . . . 52
5.3.2. Closing Payment . . . . . . . . . . . . . . . 53
5.3.3. Opinion of Counsel . . . . . . . . . . . . . . 53
5.4. The Closing . . . . . . . . . . . . . . . . . 53
5.5. Seller's Obligations . . . . . . . . . . . . . 53
5.5.1. Transfer Documents . . . . . . . . . . . . . . 53
5.5.2. Receipts . . . . . . . . . . . . . . . . . . . 53
5.5.3. Other Documents . . . . . . . . . . . . . . . 53
5.6. Purchaser's Obligations . . . . . . . . . . . 53
5.6.1. Closing Payment; Seller Financing Documents . 54
5.6.2. Other Documents . . . . . . . . . . . . . . . 54
5.7. Termination . . . . . . . . . . . . . . . . . 54
5.8. The Purchaser-Company Merger . . . . . . . . . 55
VI. SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . 55
6.1. Survival of Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . . . 55
6.2. Limitations on Liability . . . . . . . . . . . . . 56
6.3. Indemnification . . . . . . . . . . . . . . . . . 61
6.4. Defense of Claims . . . . . . . . . . . . . . . . 64
VII. OTHER POST-CLOSING COVENANTS . . . . . . . . . . . . . 69
7.1. Employees and Employee Benefit Plans . . . . . 69
7.1.1. Assumption of Obligations . . . . . . . . . . 69
7.1.2. Transfer from Wickes Master Trust . . . . . . 70
7.1.3. Plan Amendments or Terminations . . . . . . . 71
7.1.4. Determination Letter Application . . . . . . . 71
(ii)
TABLE OF CONTENTS (cont'd)
Page
7.1.5. Transitional Matters . . . . . . . . . . . . . 71
7.1.6. Continuing Benefit Plans . . . . . . . . . . . 72
7.2. General Post-Closing Matters . . . . . . . . . 72
7.2.1. Post-Closing Notifications . . . . . . . . . . 72
7.2.2. Names, Trademarks, Etc . . . . . . . . . . . . 73
7.2.3. Access . . . . . . . . . . . . . . . . . . . . 74
7.2.4. Certain Tax Matters . . . . . . . . . . . . . 80
7.2.5. Insurance . . . . . . . . . . . . . . . . . . 94
VIII. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . 96
8.1. Notices . . . . . . . . . . . . . . . . . . . . . 96
8.2. Expenses . . . . . . . . . . . . . . . . . . . . . 97
8.3. Successors and Assigns . . . . . . . . . . . . . . 98
8.4. Waiver . . . . . . . . . . . . . . . . . . . . . . 98
8.5. Entire Agreement . . . . . . . . . . . . . . . . . 99
8.6. Amendments, Supplements, Etc . . . . . . . . . . . 100
8.7. Rights of the Parties . . . . . . . . . . . . . . 100
8.8. Further Assurances . . . . . . . . . . . . . . . . 100
8.9. Applicable Law; Jurisdiction . . . . . . . . . . . 100
8.10. Titles and Headings . . . . . . . . . . . . . . . 101
8.11. Certain Interpretive Matters and Definitions . . 101
EXECUTION PAGE . . . . . . . . . . . . . . . . . . . . . . . 103
(iii)
TABLE OF SCHEDULES
(Not a part of the Agreement.)
No.
The Warrant. . . . . . . . . . . . . . . . . . . . 2.1(a)
The Estimated Closing Date
Balance Sheet . . . . . . . . . . . . . . . . . 2.2(a)(1)
Certain Assets and Liabilities not
reflected in Closing Date Balance Sheet . . . . 2.2(a)(2)
Certain Assets and Rights . . . . . . . . . . . . 2.3
Certain Jurisdictions . . . . . . . . . . . . . . 3.1.1
The Shares . . . . . . . . . . . . . . . . . . . 3.1.2
Officers and Directors . . . . . . . . . . . . . 3.1.3
Certain Seller Restrictions . . . . . . . . . . . 3.1.5
Audited Financial Statements . . . . . . . . . . 3.1.6(a)
Balance Sheet . . . . . . . . . . . . . . . . . . 3.1.6(b)(i)
Certain Adjustments . . . . . . . . . . . . . . . 3.1.6(b)(ii)
Interim Financial Statements . . . . . . . . . . 3.1.6(c)
Certain Accounting Policies . . . . . . . . . . . 3.1.6(d)
Conduct of the Business . . . . . . . . . . . . . 3.1.7(a)
Certain Matters . . . . . . . . . . . . . . . . . 3.1.8
Certain Liens . . . . . . . . . . . . . . . . . . 3.1.9
Real Property . . . . . . . . . . . . . . . . . . 3.1.10
Current Insurance Policies . . . . . . . . . . . 3.1.11
Intellectual Property . . . . . . . . . . . . . . 3.1.12
Litigation . . . . . . . . . . . . . . . . . . . 3.1.13
Contracts . . . . . . . . . . . . . . . . . . . . 3.1.14
Employee Matters . . . . . . . . . . . . . . . . 3.1.15
Taxes . . . . . . . . . . . . . . . . . . . . . . 3.1.16(b)
(iv)
TABLE OF SCHEDULES (cont'd)
No.
Certain Remediation Matters . . . . . . . . . . . 3.1.17(a)
Certain Environmental Matters . . . . . . . . . . 3.1.17(b)
Certain Intercompany Matters . . . . . . . . . . 3.1.18
Certain Purchaser Restrictions . . . . . . . . . 3.2.3
Certain Individuals . . . . . . . . . . . . . . . 3.3
Form of Opinion of Seller's General Counsel . . . 5.2.4(a)
Form of Opinion of Jones, Day, Reavis & Pogue . . 5.2.4(b)
Form of Opinion of Dechert Price & Rhoads . . . . 5.3.3
Certain Loan Documents . . . . . . . . . . . . . . 5.6.1
Survival of Certain Representations and
Warranties . . . . . . . . . . . . . . . . . . 6.1
Certain Facility Policies . . . . . . . . . . . . 6.2(f)
Form of Treasury Regulation Certificate . . . . . 7.2.4(o)
(v)
AMENDED AND RESTATED
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT (as amended and restated, this
"Agreement") is made and entered into as of the 22nd day of
November, 1993 (the "Initial Execution Date"), and amended and
restated as of January 28, 1994 (the "Closing Date"), among
Collins & Aikman Group, Inc., a Delaware corporation ("Seller"),
Kayser-Roth Corporation, a Delaware corporation (the "Company"),
and Legwear Acquisition Corporation, a Delaware corporation
("Purchaser").
RECITALS:
A. The Company, together with its subsidiaries
Century Mills, Inc., Her Majesty Realty Company, Inc., Interwoven
Sock Co., Inc., Kayser-Roth Direct, Inc., Kayser-Roth Hosiery de
Puerto Rico, Inc., Kayser-Roth Leasing Corporation ("K-R
Leasing"), Kayser-Roth Payroll Services (NC), Inc., KR Products,
Inc., KRP Services, Inc., Medusa Company, Inc. and No nonsense
Factory Outlet, Inc. (collectively, the "Subsidiaries"), is
presently engaged in the business (the "Business") of designing,
manufacturing and marketing branded and private label sheer
hosiery, socks and certain components used in the manufacture of
disposable surgical gowns as well as other surgical knit products
(collectively, "Products");
B. Seller is the record and beneficial owner of all
of the issued and outstanding shares of capital stock of the
Company (the "Shares") and the Company is the record and
beneficial owner of all of the issued and outstanding capital
stock of each of the Subsidiaries; and
C. Seller desires to sell, assign and deliver
("Transfer") to Purchaser, and Purchaser desires to purchase and
accept from Seller, the Shares on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF SHARES
1.1. Purchase and Sale of Shares. On the terms and subject
to the conditions hereof, at the Closing (as hereafter defined),
Seller will Transfer to Purchaser, and Purchaser will purchase
and accept from Seller, the Shares.
II. PURCHASE PRICE
2.1. Closing Payment; the Warrant. In payment of the
purchase price for the Shares (as such purchase price may be
adjusted pursuant to Section 2.2 and Section 6.4(f), the
"Purchase Price"), at the Closing, Purchaser will, except as
provided in Section 5.6.1, pay to Seller U.S. $170,000,000 (the
"Closing Payment") by bank wire transfer of immediately available
funds to an account heretofore designated by Seller, and issue to
Seller the Warrant in the form of Schedule 2.1(a) (the
"Warrant").
2.2. Adjustment. (a) Attached hereto as Schedule
2.2(a)(1) is a balance sheet (the "Estimated Closing Balance
Sheet") which shows an estimate of Parent Company Equity (as
2
hereafter defined) as of the Closing Date of $120,271,000. The
Purchase Price will be adjusted downward (but not upward) by the
amount, if any, by which the Actual Closing Date Stockholder's
Equity Amount (as hereafter defined) is less than $120,000,000.
For purposes of this Agreement, the "Actual Closing Date
Stockholder's Equity Amount" means the line item amount for
"Parent Company Equity" as it appears on a consolidated balance
sheet of the Company and its Subsidiaries prepared in accordance
with this Section 2.2 as of the close of business on the Closing
Date (the "Closing Date Balance Sheet") on a basis consistent
with, and using the same accounting principles, policies,
practices and procedures used in preparing the Balance Sheet (as
hereafter defined), except that there will be excluded from the
Closing Date Balance Sheet (i) any liability or accrual in
respect of any obligations retained or assumed by Seller or any
of its Affiliates other than the Company and the Subsidiaries
(collectively, "Post-Closing Affiliates") or for which (but only
to the extent for which) Seller has an obligation to indemnify
any Purchaser Company (as hereafter defined) under any provision
of this Agreement, including without limitation Sections 6.3 and
7.1, (ii) any indebtedness or other obligation or liability
incurred by the Company or any Subsidiary in connection with the
financing by Purchaser or the Company of the transactions
contemplated hereby or otherwise at the direction of Purchaser or
any Affiliate thereof (including without limitation as provided
under Section 5.6.1), and (iii) any assets or rights described on
Schedule 2.3. Schedule 2.2(a)(2) is a non-exclusive listing
3
(furnished solely to facilitate understanding) of certain assets
and liabilities which will not be reflected in the Closing Date
Balance Sheet.
(b) Within 90 calendar days after the Closing Date, the
Company will cause, and Purchaser and Seller will use their
respective reasonable efforts to cause, the management of the
Company to prepare and deliver to Purchaser and Seller the
Closing Date Balance Sheet setting forth the Actual Closing Date
Stockholder's Equity Amount. Purchaser, Seller and their
respective representatives will be entitled to review and observe
the process of the preparation of the Closing Date Balance Sheet.
Without limiting the generality or effect of any other provision
hereof, (i) the Company will provide Purchaser, Seller and their
respective representatives access, during normal business hours,
to the facilities, personnel and accounting and other records and
work papers of the Company and its Subsidiaries, to the extent
reasonably requested by Purchaser or Seller, as the case may be,
in connection with the preparation of the Closing Date Balance
Sheet and the audit thereof hereafter contemplated (which access
will include without limitation the right to observe the taking
of physical inventory counts and other auditing procedures and
access to all work papers of the Accountants (as hereafter
defined)); provided, however, that Purchaser and Seller will
conduct any such review in a manner that does not unreasonably
interfere with the conduct of the Business after the Closing, and
(ii) Purchaser and Seller will each take such actions as may be
reasonably requested by the Company to assist the Company in
4
closing, as of the Closing Date, the books and accounting records
of the Company and its Subsidiaries and otherwise reasonably to
cooperate with the Company and its management in the preparation
of the Closing Date Balance Sheet and such audit.
(c) The Closing Date Balance Sheet will be (i) prepared in
accordance with the standards set forth in the third sentence of
Section 2.2(a), (ii) audited by the auditing firm of Arthur
Andersen & Co. (through its New York City office) or another
internationally recognized accounting firm acceptable to Seller
and Purchaser (the "Accountants"), and (iii) accompanied by a
report thereon by the Accountants, which will state that such
balance sheet has been prepared in accordance with such
standards. The audited balance sheet, accompanied by such report
(collectively, the "Audited Closing Date Balance Sheet Report"),
will be furnished by the Company to Purchaser and Seller as
promptly as practicable after completion of such audit. The
costs and expenses incurred in obtaining the Audited Closing Date
Balance Sheet Report from the Accountants will be borne by the
Company.
(d) If, within 30 calendar days after the date of the
Company's delivery to Seller and Purchaser of the Audited Closing
Date Balance Sheet Report, Seller or Purchaser determines in good
faith that the Actual Closing Date Stockholder's Equity Amount
has not been determined in accordance with Sections 2.2(a) and
2.2(c), Seller or Purchaser will give notice to the other within
such 30 calendar day period (i) setting forth Seller's or
Purchaser's determination of the correct Actual Closing Date
5
Stockholder's Equity Amount and (ii) specifying in reasonable
detail Seller's or Purchaser's basis for its disagreement
therewith. The failure by either party so to express its
disagreement or provide such specification within such
30 calendar day period will constitute such party's acceptance of
the determination of the Actual Closing Date Stockholder's Equity
Amount contained in the Audited Closing Date Balance Sheet
Report. If Purchaser and Seller are unable to resolve any
disagreement with regard to such determination within ten
calendar days after the giving of notice of such disagreement,
the items in dispute will be referred for determination to the
Charlotte, North Carolina office of Price Waterhouse (the
"Resolution Accountants") as promptly as practicable. The
Resolution Accountants will make a determination as to each of
the items in dispute, which determination will be (A) in writing,
(B) furnished to each of the parties hereto as promptly as
practicable after the items in dispute have been referred to the
Resolution Accountants, (C) made in accordance with Section
2.2(a), and (D) conclusive and binding upon each of the parties
hereto. In connection with their determination of the disputed
items, the Resolution Accountants will be entitled to rely on the
work papers, trial balances and similar materials prepared by the
Accountants in connection with such firm's examination of the
Closing Date Balance Sheet and the fees and expenses of the
Resolution Accountants will be shared equally by Purchaser and
Seller, except in the circumstances hereafter specified.
Purchaser and Seller will use reasonable efforts to cause the
6
Resolution Accountants to render their decision as soon as
practicable, including without limitation by promptly complying
with all reasonable requests by the Resolution Accountants for
information, books, records and similar items. If the
determination of the Resolution Accountants represents an outcome
more favorable to one party than (1) the outcome which represents
such party's last written offer related to all matters in dispute
submitted to the other party prior to referral of the matter to
the Resolution Accountants, plus (in the case such party is
Purchaser) and less (in the case such party is Seller) (2) 25% of
the magnitude of difference between the outcomes of both parties'
last written offers related to all matters in dispute submitted
to the other party prior to referral of the matter to the
Resolution Accountants, then for purposes of this Agreement the
party obtaining such favorable result will be deemed the
"Prevailing Party" and the other party will be deemed the
"Non-Prevailing Party." For purposes of this Agreement, all of
the fees and expenses of the Resolution Accountants, and the
reasonable out-of-pocket expenses of the Prevailing Party, will
be borne by the Non-Prevailing Party. Neither party will
disclose to the Resolution Accountants, and the Resolution
Accountants will not consider for any purpose, any settlement
offer made by either party.
(e) To the extent that the Actual Closing Date
Stockholder's Equity Amount determined as provided in this
Section 2.2 is less than $120,000,000, Seller will, within ten
calendar days after the final determination of the Actual Closing
7
Date Stockholder's Equity Amount pursuant to Section 2.2(d), make
payment by wire transfer of immediately available funds of the
amount of such difference, together with interest thereon from
the Closing Date to the date of payment (at a rate equal to the
LIBO Rate (as hereafter defined), in effect from time to time
during such period, plus 3%, calculated on the basis of the
actual number of days elapsed over 365), to such account as has
been designated by Purchaser. There will be no adjustment to the
Purchase Price if the Actual Closing Date Stockholder's Equity
Amount exceeds $120,000,000. For purposes of this Agreement, the
"LIBO Rate" means a rate per annum equal to the one-month London
Interbank Offered Rate for U.S. dollar-denominated deposits as
published in The Wall Street Journal. Seller hereby waives and
agrees that it will not exercise any right it might have under
applicable law to set off and apply any amounts which it is
entitled to claim or receive from Purchaser or the Company under
the Seller Financing Documents (as hereafter defined) against any
amounts payable by it under this Agreement.
2.3. Intercompany Obligations. Effective immediately prior
to the Closing, all intercompany obligations owing from Seller or
any Post-Closing Affiliate to the Company (or any of its
Subsidiaries) or owing from the Company (or any of its
Subsidiaries) to Seller or any Post-Closing Affiliate will be
netted against each other and the resulting balance will be
discharged and deemed forgiven without further action or payment.
As a result, as of the Closing there will be no further liability
with respect to the obligations so discharged between Seller or
8
any Post-Closing Affiliate, on the one hand, and the Company (or
any of its Subsidiaries), on the other hand. Any holder of a
note or other evidence of indebtedness deemed settled pursuant to
this Section 2.3 will surrender such note or other evidence of
indebtedness to the obligor thereon. Notwithstanding any other
provision of this Agreement, (a) at or prior to the Closing the
Company and the Subsidiaries will Transfer to Seller the assets
and rights described in Schedule 2.3 without the payment of
additional consideration, and no such transaction will constitute
a breach of any representation, warranty or covenant in this
Agreement and (b) each of Seller and the Company will retain all
of its respective liabilities and obligations under the 1/30/93
Agreement (as hereafter defined) and hereunder.
III. REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Seller. Subject to
Section 3.3, Seller represents and warrants to Purchaser as of
the Initial Execution Date (except that Section 3.1.14 is
represented as of the dates specified therein), and as of the
Closing Date, as follows:
3.1.1. Corporate Matters. (a) Seller is a
corporation duly organized, validly existing and in good standing
under the Law (as hereafter defined) of the State of Delaware and
has the requisite corporate power to own and hold the Shares.
(b) The Company and each Subsidiary are corporations duly
organized, validly existing and in good standing under the Laws
of their respective jurisdiction of organization and each of them
9
has the requisite corporate power and authority to own, lease or
otherwise hold the assets owned, leased or otherwise held by it
and to carry on the Business. The Company and each Subsidiary is
duly qualified to conduct business as a foreign corporation in
every jurisdiction in which its ownership, leasing or holding of
property or the nature or conduct of a material portion of the
Business makes such qualification necessary. Schedule 3.1.1 sets
forth the jurisdiction of incorporation of the Company and each
Subsidiary and the jurisdictions in which each such corporation
is qualified to do business. Seller has previously provided
Purchaser with copies of the certificate or articles of
incorporation and bylaws (or other constituent documents) of the
Company and of each Subsidiary as presently in effect.
3.1.2. The Shares. (a) Except as set forth on
Schedule 3.1.5, Seller owns free and clear of any mortgages,
liens, security interests or other encumbrances (collectively,
"Liens") the number of Shares listed in Schedule 3.1.2, which
Shares represent all of the issued and outstanding shares of
capital stock of the Company.
(b) Except as set forth on Schedule 3.1.5, the Company owns
free and clear of any Liens all of the issued and outstanding
shares of capital stock of each Subsidiary (collectively, the
"Subsidiary Shares").
(c) The Shares and the Subsidiary Shares are duly
authorized, validly issued and outstanding, fully paid and
nonassessable. The Shares and the Subsidiary Shares have not
been issued in violation of, and are not subject to, any
10
preemptive rights or other Contract (as hereafter defined) except
for this Agreement and as set forth in Schedule 3.1.5, and there
are no outstanding convertible or exchangeable securities, calls
or options relating to the Shares or to the Subsidiary Shares or
that may require the Company or any Subsidiary to issue to any
person or entity other than the Company or another Subsidiary any
shares of any of their capital stock. Except as listed or
described on Schedule 3.1.5, there are no voting trust agreements
or other Contracts restricting the voting, dividend rights or
disposition of the Shares or of the Subsidiary Shares.
(d) At the Closing, Seller will own the Shares free and
clear of all Liens and will transfer its entire right, title and
interest in and to the Shares to Purchaser.
(e) Except for the Subsidiary Shares and as listed on
Schedule 3.1.2, neither the Company nor any Subsidiary, directly
or indirectly, owns (beneficially or of record) any stock or
other ownership interests in, or controls, any other entity.
3.1.3. Officers and Directors. Schedule 3.1.3 sets
forth a list of all officers and directors of the Company as of
immediately prior to the Closing Date.
3.1.4. Authorization and Effect of Agreement. Each of
Seller and the Company has the requisite corporate power to
execute and deliver this Agreement and to perform the
transactions contemplated hereby to be performed by it. All
necessary corporate action required to be taken under the
Delaware General Corporation Law for the due authorization of the
execution and delivery by each of Seller and the Company of this
11
Agreement and the performance by each of Seller and the Company
of the transactions contemplated hereby to be performed by each
of them has been duly taken by each of Seller and the Company.
This Agreement has been duly executed and delivered by each of
Seller and the Company and, assuming the due execution and
delivery of this Agreement by Purchaser, constitutes a valid and
binding obligation of each of Seller and the Company enforceable
against each of them in accordance with its terms, subject to
bankruptcy, insolvency and other Laws relating to the rights of
creditors generally and to general equitable principles.
3.1.5. No Restrictions. The execution and delivery of
this Agreement by each of Seller and the Company does not, and
(except as set forth in Schedule 3.1.5) the performance by each
of Seller and the Company of the transactions contemplated hereby
to be performed by each of them will not, in any material
respect, conflict with, or result in any material violation of,
or constitute a material default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a
material benefit under, any provision of the Certificate of
Incorporation or By-laws of Seller or the Company or any
Subsidiary, any Contract listed or described or required to be
listed or described on Schedule 3.1.14 or any other Schedule, any
domestic, foreign or other statute, law, ordinance, rule,
regulation, judgment order, injunction, decree or ruling or
common law obligation ("Law") of any domestic, foreign or other
court, government, governmental agency, authority, entity or
12
instrumentality ("Governmental Entity") or any permit or approval
issued by any Governmental Entity that is necessary for the
continued conduct of the Business after the Closing in all
material respects in the same manner as it is being conducted as
of the Initial Execution Date and the Closing Date (a "Material
Permit"). No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required to be obtained or made by or with respect to Seller,
the Company or any Subsidiary under any applicable Law in
connection with the execution and delivery of this Agreement by
Seller and the Company or the performance by Seller and the
Company of the transactions contemplated hereby to be performed
by each of them, except (i) for such of the foregoing as are
listed or described on Schedule 3.1.5 and (ii) for such consents,
approvals, orders, authorizations of, or registrations,
declarations or filings with, any Governmental Entity, which if
not obtained or made (A) will not impair the ability of the
Company or any Subsidiary to continue to operate its respective
businesses in all material respects as operated immediately prior
to the Closing and (B) will not subject the Company or any
Subsidiary to any criminal prosecution or penalty; provided,
however, that nothing herein will be deemed to constitute a
representation or warranty of Seller or the Company in respect of
the applicability or requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
3.1.6. Financial Statements. (a) Attached as
Schedule 3.1.6(a) are the audited consolidated balance sheets of
13
the Company and the Subsidiaries as of January 30, 1993 (the
"Audited Balance Sheet") and January 25, 1992 and the related
audited consolidated statements of operations, retained earnings
and cash flows for the years then ended (collectively with the
audited consolidated balance sheets and related notes, the
"Audited Financial Statements"). The Audited Financial
Statements have been derived from the books of account and
records of the Company and, except as set forth in the notes to
the Audited Financial Statements, present fairly, in all material
respects, the consolidated financial position of the Company and
the Subsidiaries as of their respective dates and results of
their operations and their cash flows for the years then ended in
conformity with United States generally accepted accounting
principles, consistently applied ("GAAP"). The Audited Financial
Statements have been audited by Arthur Andersen & Co., which
firm's report thereon is included in Schedule 3.1.6(a). For
purposes of this Agreement, the "Balance Sheet Date" means
January 30, 1993.
(b) Attached as Schedule 3.1.6(b)(i) are the unaudited
consolidated special purpose balance sheet of the Company and the
Subsidiaries as of January 30, 1993 (the "Balance Sheet") and the
related notes. Except as set forth in the notes to the Balance
Sheet, the Balance Sheet presents fairly, in all material
respects, the financial position of the Company and the
Subsidiaries as of the Balance Sheet Date in conformity with
GAAP. The Balance Sheet has been derived by taking the Audited
14
Balance Sheet and making the adjustments to the items and in the
amounts set forth on Schedule 3.1.6(b)(ii).
(c) Attached as Schedule 3.1.6(c) is the unaudited
consolidated balance sheet of the Company and the Subsidiaries as
of December 25, 1993 (the "Interim Balance Sheet Date") and the
related statement of operations for the eleven-month fiscal
period then ended (collectively with the unaudited consolidated
balance sheet, the "Interim Financial Statements"). The Interim
Financial Statements have been derived from the books of account
and records of the Company and, except as set forth in the notes
to the Interim Financial Statements, present fairly, in all
material respects, the Company's consolidated financial position
as of December 25, 1993 and results of operations as of and for
the eleven months ended December 25, 1993, subject to normal
year-end adjustments, in conformity with GAAP as applicable to
interim financial statements.
(d) Set forth in Schedule 3.1.6(d) is a description of the
Company's accounting policies, procedures and practices with
respect to reserves relating to inventory and receivables, which
policies, procedures and practices were used in the preparation
of the Audited Financial Statements, the Balance Sheet and the
Interim Financial Statements.
3.1.7. Conduct of the Business Since the Balance Sheet
Date. (a) Except as described on Schedule 3.1.7(a) or any other
Schedule, and except as a result of matters required by this
Agreement, since the Balance Sheet Date, there has not been any
material adverse change in the consolidated financial position,
15
results of operations, cash flows, Business or prospects of the
Company and the Subsidiaries, taken as a whole, other than
changes that are reflected in (i) the Interim Financial
Statements or (ii) the information attached to Schedule 3.1.7(a)
and incorporated therein by this reference, which information was
prepared by management of the Company and was not modified by
Seller nor was the $120,271,000 estimated net worth number as of
January 29, 1994 contained in such information suggested by
Seller to management of the Company prior to managements'
determination of such estimate.
(b) Since the Balance Sheet Date, (i) the Company and the
Subsidiaries have conducted their respective businesses in the
ordinary course, consistent in all material respects with past
practice and (ii) except as set forth on Schedules 3.1.12,
3.1.14, 3.1.15, 3.1.16(b), 3.1.17(a) or 3.1.17(b), neither the
Company nor any Subsidiary has taken any action which would have
constituted a violation of Section 4.5 (other than Sections
4.5(b)(xix), (xx) and (xxi)), if Section 4.5 had applied since
the Balance Sheet Date. Since the Balance Sheet Date, none of
the following has occurred: (i) any organized labor walkout,
work stoppage or slow down by the Company's or any of its
Subsidiaries' employees or, to the knowledge of Seller, any
threat thereof or any organized attempts to establish unions or
collectively bargain by or with respect to the employees of the
Company or any Subsidiary or (ii) any material adverse change in
the Company's or any Subsidiary's relations with suppliers,
16
customers or licensors of Intellectual Property (as hereafter
defined).
3.1.8. Compliance With Laws. Except as listed or
described on Schedule 3.1.8, and except with respect to the
environmental matters covered by Section 3.1.17, neither the
Company nor any Subsidiary is in violation of any applicable Law
in any material respect or has been in violation of any Law in
any material respect, except for such violations which will not
result in liability to the Company or any Subsidiary.
3.1.9. Tangible Personal Property; Title to Assets.
Except (a) with respect to the Owned Real Property and the Leased
Real Property (each as hereafter defined), which are the subject
of Section 3.1.10, (b) as listed or described on Schedules 2.3 or
3.1.9, and (c) for assets sold in the ordinary course of business
since the Interim Balance Sheet Date, the Company or a Subsidiary
owns its respective assets and properties, including those
reflected on the balance sheet included in the Interim Financial
Statements as owned by the Company or a Subsidiary or thereafter
purchased or acquired by the Company or a Subsidiary, free and
clear of all Liens except for (i) Liens that are listed or
described on Schedule 3.1.9, (ii) mechanics', carriers',
workers', repairmen's or other like statutory Liens arising or
incurred in the ordinary course of business of the Business for
which the underlying payments giving rise to such Liens are not
yet due and payable or which may thereafter be paid without
penalty or which are being contested in good faith and for which
adequate reserves have been provided in accordance with GAAP,
17
(iii) Liens for taxes, assessments and other similar governmental
charges which are not due and payable or which may thereafter be
paid without penalty or which are being contested in good faith
and for which adequate reserves have been provided in accordance
with GAAP, and (iv) Liens that arise under zoning, land use and
other similar Laws and other imperfections of title or
encumbrances, if any, which do not, individually or in the
aggregate, materially affect the marketability of the property
subject thereto and do not materially impair the use of the
property subject thereto in the Business as presently conducted.
(The items referred to in clauses (i) through (iv) of the
immediately preceding sentence are hereafter referred to as
"Permitted Liens".)
3.1.10. Real Property. Schedule 3.1.10 lists all real
property owned in fee simple by the Company or a Subsidiary (the
"Owned Real Property") or leased by the Company or any Subsidiary
(the "Leased Real Property"). The Company or a Subsidiary has
good and marketable title to the Owned Real Property and good and
valid title to the leasehold interests in the Leased Real
Property (subject to the terms of the applicable leases,
subleases and related instruments governing the Company's or any
Subsidiary's interests therein, as listed on Schedule 3.1.10),
free and clear of all Liens other than (a) Liens listed or
described on Schedule 3.1.10 and (b) Permitted Liens. The
Company and the Subsidiaries have quiet enjoyment of the Owned
Real Property and the Leased Real Property. The leases and
subleases related to the Leased Real Property are valid and
18
subsisting leases or subleases which are in full force and
effect. To the knowledge of Seller, although neither Seller nor
any Subsidiary has any legally binding right of renewal or
extension thereof, as of the business day immediately preceding
the Closing Date, the lessor of the facility leased by the
Company or a Subsidiary in Arecibo, Puerto Rico has not advised
the Company or any Subsidiary that it intends not to renew such
lease.
3.1.11. Insurance. Schedule 3.1.11 lists all policies
of insurance covering occurrences as of, or claims made on, the
Initial Execution Date and the Closing Date ("Current Insurance
Policies") in respect of which the Company or any Subsidiary is
the owner, insured or beneficiary, or covering any of their
property or assets or relating to the Business, and indicates for
each such policy a description of the risks insured, the carrier,
the dollar limits of coverage, the deductible and the policy
period. The written historical loss run and payroll information
provided to Purchaser's representative Alexander & Alexander was
derived from the records of Seller, the Company and the
Subsidiaries and was accurate in all material respects as of the
date of such information, and the reserve information included in
the loss run was prepared on a basis consistent with prior
practice. To the knowledge of Seller, with respect to any
insurable loss suffered by the Company or any Subsidiary, none of
Seller, any Post-Closing Affiliate, the Company or any Subsidiary
has failed to pay any premium or other amount due, or taken or
failed to take any action, under any of the Current Insurance
19
Policies which would permit the insurers thereunder to terminate
such insurance in a manner such that reasonably comparable
additional or substitute insurance would not be available at
substantially comparable rates. No notice of cancellation with
respect to any of the Current Insurance Policies has been
received prior to the business day immediately preceding the
Closing Date. The budgeted allocation of insurance costs from
Seller to the Company and the Subsidiaries is $1,362,000 for
fiscal 1993; provided that such budgeted allocation may vary from
the actual insurance costs incurred by the Company and the
Subsidiaries.
3.1.12. Intellectual Property. Schedule 3.1.12 lists
or describes all material patents, trademarks, trade names,
service marks, registered copyrights and registrations and
applications therefor used in or necessary for the conduct of the
Business as of the Closing Date and all licenses pertaining to
any of the foregoing (collectively, the "Scheduled IP", and,
together with all material trade dress, trade secrets and
unregistered copyrights used in or necessary for the conduct of
the Business as of the Closing Date, collectively, the
"Intellectual Property"). No Intellectual Property is used by
the Company or any Subsidiary pursuant to a license from a third
party or is licensed by the Company or any Subsidiary to a third
party except pursuant to a license listed on Schedule 3.1.12.
Except as set forth on Schedule 3.1.12, the Company or one of the
Subsidiaries (i) owns free and clear of all Liens all of the
Scheduled IP (other than the Scheduled IP that is used pursuant
20
to a license disclosed on Schedule 3.1.12), (ii) has the legal
right to use all of the Scheduled IP that is used pursuant to a
license, and (iii) owns, free and clear of all Liens or has the
legal right to use, all of the other Intellectual Property as it
is used as of the Initial Execution Date and the Closing Date.
Except as set forth on Schedules 3.1.12 or 3.1.13, neither
Seller, any Post-Closing Affiliate, the Company, nor any
Subsidiary has received any written notice (that has not been
subsequently satisfied or withdrawn), nor to the knowledge of
Seller, has there been any assertion against the Company or any
of the Subsidiaries of any infringement, dilution, unfair
competition or material conflict with the asserted rights of
others in connection with the use by the Company or any
Subsidiary of any of the Intellectual Property in the conduct of
the Business. To the knowledge of Seller, all of the material
patents, copyright registrations and trademark and service mark
registrations listed in Schedule 3.1.12 are valid and in full
force and effect, are held of record in the Company's name, free
and clear of any Liens, and, except as set forth in Schedule
3.1.12 and 3.1.13, are not subject to any pending cancellation or
reexamination proceeding or other proceeding or written claim
challenging their extent or validity. With respect to the
Scheduled IP, except as described on Schedule 3.1.12 or 3.1.13,
the Company is the applicant of record in all pending patent
applications and all applications for trademark, service mark or
copyright registration, and no action of opposition or
interference or final refusal has been received in connection
21
with any such application. Except as disclosed on Schedule
3.1.12 or 3.1.13, no Order (as hereafter defined) has been
rendered by any Governmental Authority in any Legal Proceeding in
which Seller, the Company, any Subsidiary or any Post-Closing
Affiliate was or is a party, and neither the Company nor any
Subsidiary is a party to or, to the knowledge of Seller, is bound
by any Contract, which limits the use by the Company or any
Subsidiary of any Intellectual Property. Without limiting the
foregoing, (a) the Company has made all filings, paid all fees
and taken all other action necessary to obtain Mexican trademark
registration of "No nonsense" for hosiery, (b) Seller does not
have knowledge of any basis upon which its application for such
registration might be rejected, and (c) the Company has received
no notice that any party intends to file a petition for
invalidity or otherwise challenge the Company's right to register
the trademark "No nonsense" in Mexico.
3.1.13. Litigation; Decrees. Except (a) as listed or
described on Schedules 3.1.8 or 3.1.13 and (b) for claims under
workers' compensation Laws, no lawsuits, claims, administrative
or other proceedings ("Legal Proceedings") are pending against
the Company or any of the Subsidiaries, and, to the knowledge of
Seller, no such Legal Proceedings are threatened, other than
threatened Legal Proceedings which, if determined adversely,
individually or in the aggregate would not have a material
adverse effect on the consolidated financial condition, results
of operation, Business or prospects of the Company and the
Subsidiaries, taken as a whole (a "Material Adverse Effect").
22
Neither the Company nor any Subsidiary is in default in any
material respect under, or has failed to comply in any material
respect with, the terms of any judgment, order or decree of any
Governmental Entity (collectively, "Orders"), or of any Contract
entered into with any Governmental Entity to settle any claim of
alleged compliance with applicable Law (collectively, "Consent
Decrees"), that is, in any such case, binding upon the Company or
any Subsidiary. Schedule 3.1.13 sets forth a list of all Orders
and Consent Decrees that are binding upon the Company or any
Subsidiary and that remain in effect as of the Closing Date.
3.1.14. Contract Rights. Except as listed or
described on Schedule 3.1.14 or one of the other Schedules, as of
the Initial Execution Date, neither the Company nor any
Subsidiary was a party to or bound by any lease, agreement or
other contract or legally binding contractual right or obligation
(collectively, "Contracts") that is of a type described below:
(a) Any employment, severance or consulting Contract
with an Employee or Former Employee (as hereafter defined)
that is not terminable at will by the Company or any
Subsidiary (other than any Contract for the employment of
any such Employee or Former Employee implied in Law) and
which will either require the payment of amounts by the
Company or any Subsidiary after the Initial Execution Date
in excess of $10,000 per annum under any such individual
Contract or $100,000 for all such Contracts;
(b) Any union or collective bargaining agreement with
any collective bargaining group or labor union;
23
(c) Any Contract or series of related Contracts for
capital expenditures or the acquisition or construction of
fixed assets which requires or require aggregate future
payments or expenditures in excess of $50,000;
(d) Any Contract requiring aggregate future payments
or expenditures in excess of $10,000 and relating to
cleanup, abatement or other actions in connection with
environmental liabilities;
(e) Any Contract granting to any person a
first-refusal, first-offer or other right to purchase or
acquire any of the Shares or any of the Subsidiary Shares or
any other capital stock or other securities of the Company
or any Subsidiary;
(f) Any license or royalty Contract, or other Contract
with respect to Intellectual Property, which pursuant to the
terms thereof requires future payments to or by the Company
or any Subsidiary;
(g) Any indenture, mortgage, loan or credit Contract
under which the Company or any Subsidiary has borrowed any
money or issued any note, bond, indenture or other evidence
of indebtedness for borrowed money, or guaranteed
indebtedness for money borrowed by others, other than such
of the foregoing under which neither the Company nor any
Subsidiary has any current or future obligation or
liability;
(h) Any Contract with any manufacturer's
representative or other sales agent or relating to
24
distribution or commission arrangements having a remaining
term in excess of one year and which is not terminable
without penalty on 90 calendar days' or less notice;
(i) Any Contract under which the Company or any
Subsidiary is (i) a lessee of real property, (ii) a lessee
of, or holds or uses, any machinery, equipment, vehicle or
other tangible personal property owned by a third person or
entity, (iii) a lessor of real property, or (iv) a lessor
of, or makes available for use by any third person or
entity, any tangible personal property owned by the Company
or any Subsidiary, in any such case which requires aggregate
annual payments in excess of $100,000;
(j) Any Contract under which any payment would be
classified as a "parachute payment" under Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code");
(k) Any Contract with respect to a joint venture or
partnership arrangement;
(l) Any Contract granting a power of attorney other
than such of the foregoing granted pursuant to customs forms
executed by the Company or any Subsidiary;
(m) Any Contract with respect to letters of credit,
surety or other bonds or pursuant to which any of the
Company's or the Subsidiaries' assets or properties are or
are to be subjected to a Lien other than a Permitted Lien;
(n) Any Contract limiting or restricting the ability
of the Company or any Subsidiary from entering into or
engaging in any market or line of business;
25
(o) Any guarantee, indemnity, retroactive or
retrospective premium adjustment or similar Contract
pursuant to which the Company or any Subsidiary could
(whether or not subject to contingencies) be required to
make payments with respect to or as a result of losses,
costs or expenses paid or incurred by another person or
entity providing insurance coverage;
(p) Any Contract to which (i) the Company or any
Subsidiary and (ii) Seller or any Post-Closing Affiliate are
parties;
(q) Any Contract regarding the filing of Tax Returns
(as hereafter defined) or relating in whole or in part to
the sharing of tax benefits or liabilities (including tax
indemnities); or
(r) Any Contract which (i) involves aggregate future
payments by or to the Company or any Subsidiary in excess of
$250,000 other than a purchase or sales order or other
Contract entered into in the ordinary course of the conduct
of the Business, (ii) is reasonably likely to result in a
Material Adverse Effect, or (iii) to the knowledge of
Seller, is otherwise material to the Company and the
Subsidiaries.
Except as set forth on Schedule 3.1.14, each Contract listed or
described on Schedule 3.1.14 or one of the other Schedules is a
valid and binding obligation of the Company and any Subsidiary
that is a party thereto and is in full force and effect. Except
as set forth on Schedule 3.1.14, the Company and any Subsidiary
26
that is a party thereto has performed in all material respects
the obligations required to be performed by it through the
Initial Execution Date under each of such Contracts and the
Company and the Subsidiaries are not (with or without the lapse
of time or the giving of notice, or both) in breach or default in
any material respect thereunder, and as of the Closing will have
performed in all material respects all obligations required to be
performed by it through the Closing Date under each of such
Contracts and not be in such breach or default. Except as
described on Schedule 3.1.14, to the knowledge of Seller, each
party to any such Contract, other than the Company or any
Subsidiary, is not (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material
respect under any such Contract.
3.1.15. Employee Plans. (a) For purposes of this
Agreement, the term "Employee Plan" means each employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and each other
material plan, program, agreement or arrangement, whether or not
subject to ERISA, that provides benefits or incentive or deferred
compensation for Employees or Former Employees and (i) that is
maintained by Seller, any Post-Closing Affiliate, the Company or
any of the Subsidiaries, or (ii) to which Seller, any Post-
Closing Affiliate, the Company or any of the Subsidiaries
contributes or is obligated to contribute, or (iii) under which
Seller, any Post-Closing Affiliate, the Company or any of the
Subsidiaries is liable. For purposes of this Agreement, the term
27
"Employee" means any person who is employed by the Company or any
Subsidiary on the Closing Date, including any person on short-
term disability or approved leave of absence who was so employed
immediately before such absence, and the term "Former Employee"
means any person formerly employed by the Company, any
Subsidiaries or any of their respective predecessors that were
engaged primarily in the conduct of the Business, whose
employment terminated before the Closing Date. The terms
"Employee" and "Former Employee" include, where an Employee Plan
provides benefits for beneficiaries or dependents, the
beneficiaries and dependents of an Employee or Former Employee.
Each Employee is employed primarily in the conduct of the
Business. Schedule 3.1.15 lists or describes all Employee Plans
other than Employee Plans listed or described on Schedule 3.1.14
or mandated by Law. None of the Employee Plans is a multi-
employer plan within the meaning of Section 3(37) of ERISA.
Seller, the Post-Closing Affiliates, the Company and the
Subsidiaries do not maintain any benefit plan or arrangement,
including any deferred compensation arrangement, solely for
directors, consultants or independent contractors of the Company
or any Subsidiary.
(b) With respect to each Employee Plan other than the C&A
Equity Share Plan and C&A Selling Bonus Plan listed on Schedule
3.1.15, Seller has delivered to Purchaser (or promptly will
deliver on request), to the extent applicable, (i) an accurate
copy of the plan document for each Employee Plan as currently in
effect (or a description of any Employee Plan for which there is
28
no plan document), including any agreements entered into in
connection with such Employee Plan, (ii) a copy of the three most
recent annual reports (Form 5500 Series) filed with the Internal
Revenue Service, (iii) a copy of the three most recent actuarial
reports, (iv) a copy of the most recent summary plan description,
together with each summary of material modifications, and (v) a
copy of the most recent determination letter. Each Employee Plan
which is intended to be qualified under Section 401(a) of the
Code (as designated on Schedule 3.1.15) is qualified, and the
trust forming a part thereof is tax exempt under Section 501(a)
of the Code, provided that the Company complies with the covenant
contained in Section 7.1.4. The form of the Personal Account
Retirement Plan and the Employee Savings Plan listed on Schedule
3.1.15 as a qualified plan is sufficient to enable the Company to
receive a favorable initial determination letter from the
appropriate Internal Revenue Service Key District Director with
respect to the period from each such plan's effective date
through the Closing Date without the requirement of any amendment
that would materially increase the cost of benefits under such
Employee Plan when compared to the cost of benefits immediately
prior to the Closing Date (based on such Employee Plan's actual
operation prior to the Closing Date).
(c) Seller, the Post-Closing Affiliates, the Company and
the Subsidiaries have not and, to the knowledge of Seller, no
other person or entity has, engaged in a transaction or taken or
failed to take any action with respect to any Employee Plan which
could subject the Company, any Subsidiary, any Employee Plan or
29
Purchaser to any liability for violation of ERISA or for any tax
under the Code (other than an income tax on unrelated business
income of an Employee Plan). Each of the Employee Plans has been
operated and administered in accordance with its terms and
applicable Laws, including without limitation ERISA. Seller, the
Post-Closing Affiliates, the Company and the Subsidiaries have
not incurred nor do they reasonably expect to incur any liability
under Title IV of ERISA that could result in liability to the
Company, any Subsidiary or Purchaser. Each Employee Plan that is
a group health plan within the meaning of Section 5000(b)(1) of
the Code ("Group Health Plan") is in compliance in all material
respects with the provisions of Section 4980B(f) of the Code.
Except as listed on Schedule 3.1.13, there is not any pending or,
to the knowledge of Seller, threatened claim by or on behalf of
any Employee Plan, by any Employee or Former Employee covered
under any Employee Plan or otherwise involving any Employee Plan
(other than routine non-contested claims for benefits). Neither
Seller nor any Post-Closing Affiliate is, in any material
respect, in violation of any applicable Law with respect to the
employment or termination of employment with the Company or a
Subsidiary of any Employee or Former Employee, or has been in
violation of any such Law in any material respect, except for
such violations as will not result in liability to the Company or
any Subsidiary.
(d) All contributions to, and payments from, any Employee
Plan which have been required in accordance with the terms of
such Employee Plan or by Law have been timely made. No Employee
30
Plan has incurred an "accumulated funding deficiency" within the
meaning of Section 302 of ERISA or Section 412 of the Code, nor
has any waiver of the minimum funding standards of ERISA and the
Code been requested with respect to any Employee Plan. There has
been no "reportable event" within the meaning of Section 4043 of
ERISA with respect to an Employee Plan that has not been fully
and accurately reported in a timely fashion or which, whether or
not reported, would authorize the Pension Benefit Guaranty
Corporation to institute termination proceedings with respect to
any Employee Plan. Any premium under any insurance policy
related to an Employee Plan and any premium imposed under Section
4007 of ERISA that is required to be paid with respect to any
Employee Plan for any period prior to the Closing Date will be
properly paid or accrued on or before the Closing Date. Neither
the Company nor any Subsidiary will be subject to a retroactive
rate adjustment or retroactive loss sharing arrangement under any
insurance policy issued in connection with an Employee Plan
arising wholly or partially out of events occurring on or before
the Closing Date. Except as set forth on Schedule 3.1.15, no
Employee Plan provides benefits beyond termination of employment
other than as required by Law. Seller has delivered to Purchaser
(i) a list of Employees or Former Employees receiving short-term
or long-term disability benefits under any Employee Plan as of
the business day immediately preceding the Closing Date, and
(ii) a list of the number of individuals receiving as of the
business day immediately preceding the Closing Date continuation
coverage within the meaning of Section 4980B(f)(2) of the Code,
31
the amount of premiums paid for such coverage and an estimate of
the annualized net cost to the Company and the Subsidiaries of
such continuation coverage based on claims experience for the
most recent month.
3.1.16. Taxes. (a) Either the Company or one of its
Affiliates has filed or caused to be filed with the appropriate
Governmental Entities or tax authorities or otherwise forwarded
(as appropriate), all material Tax Returns required to be filed
or forwarded by or on behalf of the Company and its Subsidiaries
on or prior to the Closing Date (taking into account all
extensions of due dates). All such Tax Returns have been
prepared in all material respects in accordance with all
applicable Laws and accurately reflect in all material respects
the amounts and other information required to be shown thereon.
All Income, franchise and Unemployment Taxes shown on such Tax
Returns to be due, and all other Taxes which are material shown
on such Tax Returns, have been paid. All Income, franchise and
Unemployment Taxes and, to the knowledge of Seller, except as set
forth in the Interim Financial Statements, or the notes thereto,
all other Taxes for which a notice of assessment or demand for
payment has been received have been paid. All material Taxes of
the Company or any Subsidiary not due by the Closing Date but
properly accruable on or before the Closing Date or allocable to
a period ending on or before the Closing Date or to a portion of
a period beginning before and ending after the Closing Date have
been adequately reserved for in the aggregate on the books of the
Company or a Subsidiary as appropriate.
32
(b) Except as set forth on Schedule 3.1.16(b), (i) no
Governmental Entity has proposed in writing, and to the knowledge
of Seller, no Governmental Entity has otherwise actually proposed
or indicated an intention to propose, any material adjustment to
any Tax Return of the Company or any Subsidiary which adjustment
has not been adequately provided for on the books of the Company
or satisfied, (ii) no waiver of any statute of limitation with
respect to, or any extension of the period for the assessment of,
any Tax has been granted by or on behalf of the Company or any
Subsidiary, (iii) no Tax ruling (other than for a determination
of the status of a qualified pension plan) has been requested by
or on behalf of the Company or a Subsidiary, and (iv) neither the
Company nor any Subsidiary has joined in filing or been required
to file any consolidated, combined or unitary state or local Tax
Return.
(c) Seller, the Company and each of the Subsidiaries
(except Kayser-Roth Hosiery de Puerto Rico, Inc.) are and will be
on the Closing Date members of one "selling consolidated group"
of corporations for purposes of Section 338(h)(10)(B) of the Code
and will properly join in the filing of a consolidated federal
Income Tax Return for the taxable year that includes the Closing
Date.
(d) The Company and each of the Subsidiaries are and will
be on the Closing Date "domestic corporations," within the
meaning of Section 7701 of the Code.
(e) Neither Kayser-Roth Direct, Inc. nor any of its
predecessors has had and Kayser-Roth Direct, Inc. does not have
33
any physical facilities, inventories, employees or property in
any jurisdiction within the United States other than in North
Carolina and Tennessee. No Affiliate of Kayser-Roth Direct, Inc.
has accepted or does accept orders or returns of merchandise for
Kayser-Roth Direct, Inc. Except for sales that would not in the
aggregate be material, neither the Company nor any of its
Subsidiaries (except Kayser-Roth Direct, Inc. and No nonsense
Factory Outlet, Inc.) engage or have engaged in retail sales of
merchandise.
3.1.17. Environmental Matters. (a) The Company has,
or has caused to be, remediated the matters listed in Schedule
3.1.17(a) in the manner and to the extent, as of the Closing
Date, described in Schedule 3.1.17(a), which matters were
identified in the Geraghty & Miller, Inc. Phase I Environmental
Site Assessment Report, dated April 30, 1993 (the "G&M Phase I
Report"), attached to Schedule 3.1.17(a). All matters listed in
Schedule 3.1.17(a) as having been remediated, in whole or in
part, have been so remediated in all material respects in
accordance with applicable Law. Seller's good faith estimate of
the aggregate cost of remediating the matters not identified in
Schedule 3.1.17(a) as completed (other than those identified as
an ongoing process with respect to stained soil) is approximately
$43,000.
(b) Except as disclosed in the G&M Phase I Report or in
Schedule 3.1.17(a) or (b), to the knowledge of Seller, neither
the Company nor any of the Subsidiaries has any obligation or
liability under any Law, as in effect on the Closing Date,
34
relating to the protection of the environment to remediate any
condition at any site presently or formerly owned, leased or
operated by the Company or any subsidiary of the Company or any
other site to which materials are or were transported by or on
behalf of the Company or any subsidiary of the Company for
storage, disposal or treatment, including without limitation in
respect of investigation or clean-up costs, remedial work, damage
to natural resources or for personal injury or property damage
claims, including without limitation under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
in effect on the Closing Date, or the Resource Conservation and
Recovery Act of 1976, in effect on the Closing Date.
3.1.18. Intercompany Matters. Schedule 3.1.18 sets
forth a list of the principal support services provided since
January 25, 1992 by Seller or any Post-Closing Affiliate to the
Company and the Subsidiaries and the obligations and liabilities
of the Company and the Subsidiaries paid for since January 25,
1992 by Seller or any Post-Closing Affiliate that are not charged
to the Company or a Subsidiary. Schedule 3.1.18 sets forth the
amount charged for each of the principal support services
provided by Seller for the year ended January 30, 1993, which
charges were expensed in the Audited Financial Statements.
3.1.19. Brokerage. Neither the Company, any
Subsidiary, Seller nor any Post-Closing Affiliate has made any
agreement or taken any other action which might cause Purchaser
or any of the Purchaser Companies to become obligated for any
35
broker's fee or commission as a result of the transactions
contemplated hereunder.
3.2. Representations and Warranties of Purchaser. Subject
to Section 3.3, Purchaser represents and warrants to Seller as of
the Initial Execution Date and as of the Closing Date as follows:
3.2.1. Corporate Organization. Purchaser is a
corporation duly organized, validly existing and in good standing
under the Law of the State of Delaware and has the requisite
corporate power to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted.
3.2.2. Authorization and Effect of Agreement.
Purchaser has the requisite corporate power to execute and
deliver this Agreement and to perform the transactions
contemplated hereby to be performed by it. All necessary
corporate action required to be taken under the Delaware General
Corporation Law for the due authorization of the execution and
delivery by Purchaser of this Agreement and the performance by
Purchaser of the transactions contemplated hereby to be performed
by Purchaser has been duly taken by Purchaser. This Agreement
has been duly executed and delivered by Purchaser and, assuming
the due execution and delivery of this Agreement by Seller and
the Company, constitutes a valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency and other laws relating to the
rights of creditors generally and general equitable principles.
3.2.3. No Restrictions. The execution and delivery of
this Agreement by Purchaser does not, and the performance by
36
Purchaser of the transactions contemplated hereby to be performed
by it will not, in any material respect, conflict with, or result
in any material violation of, or constitute a material default
(with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, any
provision of the charter or bylaws or comparable governing
documents of Purchaser, any Law of any Governmental Entity or any
contract or permit applicable to Purchaser, except as set forth
on Schedule 3.2.3. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by or with respect to
Purchaser under an applicable Law in connection with the
execution and delivery of this Agreement by Purchaser or the
performance by Purchaser of the transactions contemplated hereby
to be performed by Purchaser, except as listed or described on
Schedule 3.2.3. Purchaser is not aware of any indicia of foreign
ownership, control or influence of Purchaser that would support
the refusal to grant or the denial of the approvals identified by
an asterisk on Schedule 3.2.3.
3.2.4. Brokerage. Neither the Purchaser nor any of
the other Purchaser Companies has made any agreement or taken any
other action which might cause Seller or any of the Post-Closing
Affiliates to become obligated for any broker's fee or commission
as a result of the transactions contemplated hereunder.
3.3. Certain Limitations on Representations and Warranties.
(a) Each of the parties is a sophisticated legal entity that was
37
advised by experienced counsel and, to the extent it deemed
necessary, other advisors in connection with this Agreement.
Accordingly, each of the parties hereby acknowledges that (i) no
party has relied or will rely in respect of this Agreement or the
transactions contemplated hereby upon any document or written or
oral information previously furnished to or discovered by it or
its representatives, other than this Agreement (including the
Schedules hereto) or such of the foregoing as are delivered at
the Closing, (ii) there are no representations or warranties by
or on behalf of any party hereto or any of its respective
Affiliates or representatives other than those expressly set
forth in this Agreement, and (iii) the parties' respective rights
and obligations with respect to this Agreement and the events
giving rise thereto will be solely as set forth in this
Agreement.
(b) Any matter that is disclosed in a Schedule to this
Agreement in such a way as to make its relevance to the
information called for by another Schedule to this Agreement
readily apparent will be deemed to have been included in such
other Schedule. All references in this Agreement to the
"knowledge of Seller" will be deemed to be references solely to
the actual knowledge, after due inquiry, of the individuals
listed on Schedule 3.3, and then subject to the limitations
therein set forth.
38
IV. COVENANTS
4.1. Investigation by Purchaser. (a) Prior to the
Closing, upon reasonable notice from Purchaser to Seller given in
accordance with this Agreement, Seller will (i) afford to the
officers, attorneys, accountants or other authorized
representatives of Purchaser reasonable access during normal
business hours to the properties, facilities, books and records
of the Company and the Subsidiaries, to the individuals listed on
Schedule 3.3 and to the attorneys, accountants and other
authorized representatives of the Company and the Subsidiaries
("Company Representatives") and (ii) cause the Company
Representatives to cooperate, in each case so as to afford
Purchaser a reasonable opportunity to make, at its sole cost and
expense, such review, examination and investigation of the
Company and the Subsidiaries as Purchaser may reasonably desire
to make, including without limitation a so-called "Phase I"
(i.e., documentary review and walk-through site inspection)
preliminary environmental evaluation; provided, however, that no
borings or other so-called "Phase II" environmental examinations
will be performed without Seller's prior consent, which consent
may be given or withheld in Seller's sole discretion. Purchaser
will be permitted to make extracts from or to make copies of such
books and records as may be reasonably necessary. Purchaser will
not contact any employee of Seller, any Post-Closing Affiliate,
the Company or any Subsidiary without the prior oral or written
approval of an authorized representative of Seller or any
individual listed on Schedule 3.3. Prior to the Closing, Seller
39
will furnish to Purchaser, or cause to be furnished to Purchaser,
such financial and operating data and other information
pertaining to the Company and the Subsidiaries as Purchaser may
reasonably request; provided, however, that nothing in this
Section will obligate Seller to take actions that would
unreasonably disrupt the normal course of business of Seller, any
Post-Closing Affiliate, the Company or the Subsidiaries, or
violate the terms of any applicable Law or any Contract to which
the Company or any of the Subsidiaries is a party or to which the
Company or any of the other Subsidiaries or any of their assets
are subject.
(b) Subject to Section 4.2, whether or not the Closing
occurs, each of the parties will treat in confidence all
documents, materials and other information (including without
limitation information relating to supply and sales agreements
and relationships with third persons or entities) disclosed by
any other party that is not its Affiliate, whether during the
course of the negotiations leading to the execution of this
Agreement or thereafter, in its investigation of the other
parties and in the preparation of agreements, schedules and other
documents relating to the consummation of the transactions
contemplated hereby. Prior to the Closing, or in the event that
this Agreement is terminated, none of the parties will use any
such information furnished by any other party that is not its
Affiliate in its or any of its Affiliates' businesses, unless
such information is ascertainable from public or published
information or trade sources or already known or subsequently
40
developed or discovered by such party or its Affiliates,
independent of such information so furnished. If this Agreement
is terminated, each of the parties will use its reasonable
efforts to return to the other parties all originals and copies
of all non-public documents and materials of the type provided
for in this Section 4.1 which have been furnished to such party
in connection with this Agreement. Following the Closing, Seller
will, and will cause the Post-Closing Affiliates to, treat in
confidence all non-public information regarding the Company and
the Subsidiaries and their respective businesses, except as
otherwise expressly provided herein or as required by Law after
prior written notice to Purchaser.
4.2. Press Releases. Prior to the Closing, no party will
issue or cause the publication of any press release or other
public announcement with respect to this Agreement or the
transactions contemplated hereby without the prior consent of
Purchaser (in the case of Seller or the Company) or Seller (in
the case of Purchaser), which consent will not be unreasonably
withheld; provided, however, that nothing herein will prohibit
any party from issuing or causing publication of any such press
release or public announcement to the extent that such party
determines such action to be required by Law or the rules of any
stock exchange applicable to it or its Affiliates, in which event
the party making such determination will, if practicable in the
circumstances, use reasonable efforts to allow the other parties
reasonable time to comment on such release or announcement in
advance of its issuance.
41
4.3. Regulatory Filings. (a) To the extent required by
Law, Seller will make such filings and use reasonable efforts to
obtain the approvals referred to in Section 3.1.5, and Purchaser
will make such filings and use reasonable efforts to obtain the
approvals referred to in Section 3.2.3. All filings referred to
in this Section 4.3(a) will comply in all material respects with
the requirements of the respective Laws pursuant to which they
are made.
(b) Without limiting the generality or effect of Section
4.3(a), none of the parties will enter into any agreement with
any Governmental Entity not to consummate the transactions
contemplated by this Agreement, except with the prior consent of
each of the other parties hereto.
4.4. Injunctions. Without limiting the generality or
effect of any provision of Article V, if any United States, state
or foreign court having jurisdiction over any party issues or
otherwise promulgates any injunction, decree or similar order
prior to the Closing which prohibits the consummation of the
transactions contemplated hereby, the parties will use their
respective reasonable efforts to have such injunction dissolved
or otherwise eliminated as promptly as possible and, prior to or
after the Closing, to pursue the underlying litigation diligently
and in good faith; provided, however, that in no event will such
reasonable efforts require either party as a condition to or as a
result of dissolving or eliminating such injunction, decree or
order to pay damages, other than any incidental costs of such
litigation, or to accept any hold-separate order, agree to any
42
divestiture or any limitation on the conduct by Purchaser, the
Company, the Subsidiaries or any Affiliate of any of the
foregoing of their respective businesses or other action which
would have an adverse effect on the value to Purchaser of the
transactions contemplated hereby.
4.5. Operation of the Business. Except as expressly
provided herein or in any Schedule hereto or as otherwise
consented to by Purchaser in writing, until the Closing, Seller
will cause the Company and each Subsidiary to:
(a) Conduct its business in the ordinary course
consistent in all material respects with past practice,
including without limitation billing, shipping and
collection practices, marketing and sales practices
(including without limitation with respect to discounts,
coupons and co-op advertising payments), inventory
transactions and payment of accounts payable; use
reasonable, good faith efforts (i) to keep its business
intact, to preserve and maintain the goodwill of its
business and the Company's and the Subsidiaries'
relationships with their respective customers, suppliers,
distributors, licensors and others with whom the Company and
the Subsidiaries have material business relationships, and
(ii) to keep available to Purchaser the services of the
present employees of the Company and the Subsidiaries;
provided, however, that nothing in this Agreement or
otherwise will prohibit or restrict the Company or any
Subsidiary prior to the Closing from (A) paying or prepaying
43
in cash any indebtedness for borrowed money or any
intercompany obligation, (B) paying any dividend or other
distribution of cash or cash equivalent items, or
(C) repurchasing any capital stock for cash;
(b) Without limiting the generality of the foregoing,
not: (i) amend its charter document or by-laws;
(ii) declare, set aside or pay any dividend or make any
distribution on or with respect to shares of its capital
stock, except as expressly permitted by Section 4.5(a);
(iii) issue, grant, sell or pledge any shares of, or rights
of any kind to acquire any shares of, the capital stock of
any of the Company or the Subsidiaries, or purchase, redeem
or otherwise acquire any shares of such capital stock,
except as expressly permitted by Section 4.5(a); (iv) enter
into any merger, consolidation, recapitalization or other
business combination or reorganization; (v) create, incur or
assume any indebtedness for borrowed money unless repaid in
full prior to Closing; (vi) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations or
liabilities of any other person or entity, except for
endorsements of negotiable instruments or relocation or
other benefits provided to employees in the ordinary course
of business consistent with past practice; (vii) grant any
severance or termination pay or benefit, other than in
accordance with policies or agreements of the Company and
the Subsidiaries in effect on the Initial Execution Date;
44
(viii) sell, transfer, license, fail to keep in effect or
otherwise dispose of any material Intellectual Property;
(ix) waive, release, grant or transfer any rights of
material value or modify or change in any material respect
any existing Contract, other than in the ordinary course of
business consistent with past practice; (x) make commitments
for any single capital project which would exceed $50,000 in
capital expenditures unless included on the 1993 capital
expenditures forecast provided to Purchaser; (xi) make any
change in any method of accounting or accounting practice,
except as may be required by Law or by GAAP; (xii) increase
the compensation payable or to become payable by them to any
of its employees except for normal periodic increases in the
ordinary course of business that are made in accordance with
established compensation policies of the Company or as
required pursuant to any Contract; (xiii) make any payment
or provision with respect to any Employee Plan, except in
accordance with the terms thereof in effect on the Initial
Execution Date or otherwise in the ordinary course of the
administration of such plans consistent with the established
compensation policies of the Company; (xiv) enter into any
employment Contract with respect to the performance of
personal services which is not terminable at will without
obligation or liability by the Company or such Subsidiary;
(xv) change in any material respect the level of sales and
marketing promotional activities from historical norms, on a
seasonal basis, including without limitation with respect to
45
discounts, coupon usage and free or discounted advertising
to customers; (xvi) fail to continue its existing practices,
or to change such practices (except for the practices
relating to the roof on the facility referred to in Section
6.3(a)(iii)(F)) if required to comply with applicable Law,
relating to repair and maintenance of the assets owned,
leased or otherwise held by the Company or any Subsidiary;
(xvii) purchase, sell, lease or dispose of, or make any
Contract for the purchase, sale, lease or disposition of, or
subject to Lien, any assets owned, leased or otherwise held
by the Company or any Subsidiary other than in the ordinary
course of business of the Business consistent with past
practices; (xviii) adopt or enter into any new employee
benefit plan or make any amendment to any Employee Plan that
materially increases the current or future cost associated
with any such Employee Plan; (xix) make, change or revoke
any election with respect to Taxes except where the election
(A) does not affect the Company or any Subsidiary, or (B) is
consistent with prior practice and will not adversely
affect, before or after the Closing, Purchaser, the Company
or any Subsidiary; (xx) enter into any closing or other
agreement or settlement with respect to Taxes, except where
such closing or other agreement or settlement would not
affect the Company or a Subsidiary; (xxi) materially alter
their normal schedule for the preparation of Tax Returns
that Purchaser will prepare and file or cause to be prepared
and filed pursuant to Sections 7.2.4(d) and 7.2.4(e);
46
(xxii) make any loans, advances or capital contributions to
or investments in any person or entity, other than to or in
(A) the Company and any Subsidiary, (B) any employee in the
ordinary course of business, consistent with past practice,
and (C) any supplier or customer as an extension of credit
in the ordinary course of business, consistent with past
practice; or (xxiii) enter into any Contract with respect to
any of the foregoing.
4.6. Satisfaction of Conditions. Without limiting the
generality or effect of any provision of Article V, prior to the
Closing, each of the parties hereto will use reasonable efforts
with due diligence and in good faith to satisfy promptly all
conditions required hereby to be satisfied by such party in order
to expedite the consummation of the transactions contemplated
hereby.
4.7. Termination of Credit Agreement. Effective as of the
Closing, Seller will cause the Company and the Subsidiaries to be
released from all obligations and liabilities with respect to the
Credit Agreement and any agreements, instruments and documents
ancillary thereto (collectively, the "Credit Agreement"), dated
as of May 27, 1993, among the Company, Continental Bank, N.A. and
the other parties listed therein, as amended and/or modified, and
to cause all Liens or other encumbrances on any of the assets or
securities of the Company and the Subsidiaries (including without
limitation the Shares and Subsidiary Shares) arising from or
related to such Credit Agreement to be terminated and released.
47
4.8. Litigation. Seller will promptly notify Purchaser of
any Legal Proceeding which after the Initial Execution Date is
commenced against the Company or the Subsidiaries or against any
director, officer, employee, consultant, agent or shareholder
thereof with respect to the affairs of the Company or the
Subsidiaries.
4.9. Confidentiality Agreements. Seller has entered into
certain additional confidentiality agreements (similar to the
Confidentiality Agreement, dated May 12, 1993, between Grupo
Synkro, S.A. de C.V. and Seller (the "Confidentiality
Agreement")) with third parties regarding the possible sale of
the Company and the Subsidiaries, and, to the extent any such
confidentiality agreement is capable of being assigned, at the
Closing, Seller will assign all of its rights in such
confidentiality agreement to Purchaser.
4.10. Resignations. Effective as of the Closing, Seller
will cause to be removed or will deliver to Purchaser the written
resignations of such of the Company's and the Subsidiaries'
directors and officers and of the trustees, plan administrators
and fiduciaries of the Employee Plans, as Purchaser will request.
4.11. Limitation on Competition. For a period of three
years after the Closing, Seller will not, and will cause
Collins & Aikman Holdings Corporation ("C&A Holdings") and each
entity controlled by C&A Holdings not to, directly or indirectly,
(i) own, manage, operate, finance, join, control or participate
in the ownership management, operation, financing or control of,
or be associated as a director, partner or representative in
48
connection with, any profit or not-for-profit business or
enterprise that directly or indirectly competes with the Business
in the United States, Mexico or elsewhere. In the event that
this Section 4.11 is determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for
too long a period of time or over too large a geographical area
or by reason of its being too extensive in any other respect or
for any other reason, it will be interpreted to extend only over
the longest period of time for which it may be enforceable,
and/or over the largest geographical area as to which it may be
enforceable and/or to the maximum extent in all other aspects as
to which it may be enforceable, all as determined by such court
in such action. Seller acknowledges that a breach of this
Section 4.11 will cause irreparable damage to the Company and the
Subsidiaries, the exact amount of which will be difficult or
impossible to ascertain, and that the Company's remedies at Law
for any such breach will be inadequate. Accordingly, Seller
agrees that upon a breach of this Section 4.11, the Company will
be entitled to injunctive or other equitable relief.
V. THE CLOSING
5.1. Conditions Precedent to Obligations of Purchaser and
Seller. The obligations of each of Purchaser and Seller under
this Agreement to consummate the transactions contemplated hereby
are subject to the satisfaction, at or prior to the Closing, of
the conditions that, subject to the last sentence of this Section
5.1, (a) each of the governmental and other approvals, consents
49
or waivers identified with an asterisk on Schedule 3.1.5 or
Schedule 3.2.3 shall have been obtained and be in full force and
effect as of the Closing and (b) there shall not have been
entered a preliminary or permanent injunction, temporary
restraining order or other judicial or administrative order or
decree in any jurisdiction, the effect of which restrains or
prohibits the Closing. Either of the foregoing conditions may be
waived, (i) insofar as it is a condition to the obligations of
Purchaser, by Purchaser at its option and in its sole discretion
and (ii) insofar as it is a condition to the obligations of
Seller, by Seller at its option and in its sole discretion.
5.2. Additional Conditions Precedent to Obligations of
Purchaser. The obligations of Purchaser under this Agreement to
consummate the transactions contemplated hereby are subject to
the satisfaction, at or prior to the Closing, of all of the
following conditions, any one or more of which may be waived at
the option of Purchaser in its sole discretion:
5.2.1. No Material Misrepresentation or Breach.
(a) Seller shall have performed in all material respects the
covenants and agreements herein required to be performed by it in
whole or in part on or prior to the Closing, (b) the
representations and warranties of Seller contained in this
Agreement shall be true and correct in all material respects on
and as of the Initial Execution Date and on and as of the Closing
Date with the same force and effect as though made on and as of
the Closing Date, except for representations or warranties of
Seller in Section 3.1.14, which shall be true and correct in all
50
material respects as of the specified date, and (c) Seller shall
have delivered to Purchaser a certificate affirmatively
certifying to each of the matters set forth in clauses (a) and
(b) above, dated the Closing Date and signed by one of its
executive officers on its behalf, as well as certificates of each
of the President or a Vice President acceptable to Purchaser and
the Chief Financial Officer of the Company affirmatively
certifying to their knowledge as to the same matters, dated the
Closing Date, signed by such persons;
5.2.2. Transfer Documents; Seller Financing Documents.
There shall have been delivered to Purchaser by Seller
certificates representing the Shares, which certificates shall be
duly endorsed in blank for transfer or accompanied by duly
executed stock powers endorsed in blank, and, if required by
Section 5.6.1 the Seller Financing Documents (as hereafter
defined) to which Seller is to be a party;
5.2.3. Credit Agreement. Purchaser shall have
received evidence reasonably satisfactory to it that the Company
and the Subsidiaries have been released effective as of the
Closing from all obligations and liabilities with respect to the
Credit Agreement, as amended and/or modified, and that all Liens
or other encumbrances on any of the assets or securities of the
Company and the Subsidiaries (including without limitation the
Shares and Subsidiary Shares) arising from or related to such
Credit Agreement have been terminated and released;
5.2.4. Opinions of Counsel. Purchaser shall have
received the opinions of the General Counsel of Seller and of
51
Jones, Day, Reavis & Pogue addressed to Purchaser in the form of
Schedules 5.2.4(a) and (b) respectively; and
5.2.5. Pending Litigation. There shall not have been
entered a preliminary or permanent injunction, temporary
restraining order or other judicial or administrative order or
decree in any jurisdiction, the effect of which would be to
impair Purchaser's ownership and control of the Company and the
Subsidiaries.
5.3. Additional Conditions Precedent to Obligations of
Seller. The obligations of Seller under this Agreement to
consummate the transactions contemplated hereby are subject to
the satisfaction, at or prior to the Closing, of all the
following conditions, any one or more of which may be waived at
the option of Seller in its sole discretion:
5.3.1. No Material Misrepresentation or Breach.
(a) Purchaser shall have performed in all material respects the
covenants and agreements herein required to be performed by it in
whole or in part on or prior to the Closing, (b) the
representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects on
and as of the Initial Execution Date and on and as of the Closing
Date with the same force and effect as though made on and as of
the Closing Date, and (c) Purchaser shall have delivered to
Seller a certificate affirmatively certifying to each of the
matters set forth in clauses (a) and (b) above, dated the Closing
Date and signed by its chief executive officer on its behalf;
52
5.3.2. Closing Payment. Subject to Section 5.6.1,
Purchaser shall have delivered to Seller the cash and other
consideration specified in Section 2.1; and
5.3.3. Opinion of Counsel. Seller shall have received
the opinion of Dechert Price & Rhoads addressed to Seller in the
form of Schedule 5.3.3.
5.4. The Closing. Subject to the fulfillment or waiver of
the conditions precedent specified in Sections 5.1, 5.2 and 5.3,
the consummation of the purchase and sale of the Shares
contemplated hereby (the "Closing") will take place on
January 28, 1994 (herein the "Closing Date"). The Closing will
take place at 10:00 A.M., Eastern Time, at the offices of Jones,
Day, Reavis & Pogue at 599 Lexington Avenue, New York, New York
10022.
5.5. Seller's Obligations. At the Closing, Seller will
deliver to Purchaser the following, at the expense of Seller and
in proper form for recording when appropriate:
5.5.1. Transfer Documents. Appropriate transfer
documents executed and acknowledged in accordance with Section
5.2.2;
5.5.2. Receipts. Appropriate receipts; and
5.5.3. Other Documents. Such other documents as may
be contemplated by the provisions of this Agreement.
5.6. Purchaser's Obligations. At the Closing, Purchaser
will deliver to Seller the following, at the expense of Purchaser
and in proper form for recording when appropriate:
53
5.6.1. Closing Payment; Seller Financing Documents.
In the manner specified in Section 2.1, an amount equal to
$170,000,000, representing the Closing Payment, and the Warrant;
provided, however, that in the event that Purchaser has not
received by the Closing Date net proceeds of not less than
$70,000,000 of senior financing for the transactions contemplated
by this Agreement, then at the Closing, (a) Purchaser will
instead deliver to Seller $100,000,000, (b) Purchaser will
execute and deliver to Seller the Senior Bridge Note, the
Subordination Agreement, the Consent and Agreement of the Company
and Purchaser to the Subordination Agreement, and the Increasing
Rate Senior Secured Note, which Note is being delivered in
escrow, each as attached as a part of Schedule 5.6.1 (the "Seller
Financing Documents"), and (c) K-R Leasing Corporation, a wholly
owned subsidiary of the Company, will be merged into the Company;
and
5.6.2. Other Documents. Such other documents as may
be contemplated by the provisions of this Agreement.
5.7. Termination. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated
at any time prior to the Closing:
(a) By the mutual written consent of Purchaser and
Seller;
(b) By Purchaser or Seller if the Closing shall not
have occurred on or before January 28, 1994; and
(c) By either Purchaser or Seller if there shall have
been entered a final, nonappealable order or injunction of
54
any Governmental Entity restraining or prohibiting the
consummation of the transactions contemplated hereby or any
material part thereof.
In the event of the termination of this Agreement under this
Section 5.7, each party hereto will pay all of its own fees and
expenses. There will be no further liability hereunder on the
part of any party hereto if this Agreement is so terminated,
except (A) under Section 4.1(b), and (B) as may arise by reason
of a material breach prior to such termination of any
representation, warranty, covenant or agreement contained in this
Agreement, including without limitation Sections 4.3, 4.4 and
4.7.
5.8. The Purchaser-Company Merger. Immediately after the
Closing, Purchaser will be merged into the Company (the
"Merger"), whereupon, without further action, the Company, as the
surviving corporation in the Merger, will assume all of the
liabilities and obligations of Purchaser hereunder, under the
Warrant and under the Seller Financing Documents.
VI. SURVIVAL AND INDEMNIFICATION
6.1. Survival of Representations, Warranties and Covenants.
(a) Each of the representations and warranties contained in this
Agreement or in any certificate or other instrument delivered at
the Closing will survive the Closing and remain in full force and
effect for the periods specified in Schedule 6.1. Any claim for
indemnification with respect to any breach of a representation or
warranty which is not asserted pursuant to the giving of a Notice
55
of Claim for Indemnity (as hereafter defined) within such
specified periods of survival may not be pursued and is hereby
irrevocably waived. Any claim for indemnification asserted
within such specified periods of survival pursuant to the giving
of a Notice of Claim for Indemnity will be timely made for
purposes hereof.
(b) Unless a specified period is set forth in this
Agreement (in which event such specified period will control),
the covenants and agreements contained in this Agreement will
survive the Closing and remain in effect indefinitely.
6.2. Limitations on Liability. (a) For purposes of this
Agreement, (i) "Indemnity Payment" means any amount of
Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled
to indemnification under this Agreement, (iii) "Indemnifying
Party" means any person or entity required to provide
indemnification under this Agreement, (iv) "Indemnifiable Losses"
means any and all loss, liability, claim, demand, obligation,
damage, deficiency, cost or expense (including without limitation
reasonable attorneys' fees and expenses), including without
limitation any of the foregoing relating to, resulting from or
arising out of any action, suit, administrative proceeding,
investigation, audit or other proceeding brought by any person or
entity and any settlement or compromise thereof, reduced by the
amount of any Third-Party Recovery (as hereafter defined), but
only to the extent such Third-Party Recovery is not reasonably
likely to result in any significant additional insurance premium
56
or cost to the Indemnitee or its Affiliates, (v) "Indemnifiable
Law Losses" means any Indemnifiable Loss relating to, resulting
from or arising out of any breach by Seller of any of the
representations or warranties of Seller contained in Section
3.1.8, (vi) "Third Party Claim" means any threat, demand, action,
suit, administrative proceeding, investigation or audit or other
proceeding made or brought by any person or entity who or which
is not a party to this Agreement or an Affiliate of a party to
this Agreement, and (vii) "Notice of Claim for Indemnity" means a
written notice given in accordance with Section 8.1 which (A) if
based upon a Third Party Claim against any Indemnitee, must
include copies of all material notices and documents received by
the Indemnitee with respect to such Third Party Claim and will
indicate the estimated amount, if reasonably practicable, of the
Indemnifiable Loss that has been or may be sustained by the
Indemnitee, or (B) if based upon an alleged breach of a
representation, warranty, covenant or agreement contained in this
Agreement, which does not relate to, result from or arise out of
a Third Party Claim (a "Direct Claim"), and which relates to,
results from or arises out of an event or circumstance discovered
by the Indemnitee which the Indemnitee in good faith reasonably
believes is reasonably likely to lead to the incurrence of an
Indemnifiable Loss by reason of such alleged breach, whether or
not the Indemnifiable Loss is actually suffered or sustained
within the applicable period of survival specified in Schedule
6.1, must include in reasonable detail the basis for the
Indemnitee's good faith, reasonable belief and must indicate the
57
estimated amount, if reasonably practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee;
provided, however, that the Indemnifying Party will have no
liability with respect to any estimate referred to in this clause
(vii) and any such estimate will, itself, in no way limit or
enlarge the amount of Indemnifiable Loss recoverable by the
Indemnitee indicating such estimate.
(b) Notwithstanding any other provision hereof, other than
Section 6.2(g), or of any applicable Law:
(i) No Indemnitee will be entitled to recovery under
Sections 6.3(a)(i) or 6.3(b)(i) unless and until the
aggregate amount of Indemnifiable Losses incurred by the
Indemnitee in respect of any individual event or occurrence
or any series of related events or occurrences giving rise
to such Indemnifiable Losses exceeds $25,000, in which event
(subject to the following provisions of this Section 6.2),
such Indemnitee may assert its right to indemnification
hereunder to the full extent of its Indemnifiable Losses in
respect thereof;
(ii) No Indemnitee will be entitled to recovery under
Section 6.3(a)(i) for any Indemnifiable Loss, which
Indemnifiable Loss is not an Indemnifiable Law Loss, or for
any Indemnifiable Loss under Section 6.3(b)(i) unless and
until the aggregate amount of claims which may be asserted
for Indemnifiable Losses, including Indemnifiable Law Losses
under Section 6.3(a)(i) or 6.3(b)(i), as applicable, exceeds
$2,500,000, and then only to the extent of the excess; and
58
(iii) No Indemnitee will be entitled to recovery under
Section 6.3(a)(i) for any Indemnifiable Law Loss unless and
until (A) a claim for an Indemnifiable Loss under Section
6.3(a)(i) may be made against Seller pursuant to Section
6.2(b)(ii), and (B) the aggregate amount of claims for
Indemnifiable Law Losses exceeds $1,500,000, and then only
to the extent of the excess.
(c) Notwithstanding any other provision of this Agreement,
other than Section 6.2(g), the indemnification obligations of
Seller under Section 6.3(a)(i) and of Purchaser under Section
6.3(b)(i) will not exceed $75,000,000.
(d) As between Seller and any Post-Closing Affiliate, on
the one hand, and Purchaser or any Affiliate thereof, including
without limitation after the Closing, the Company and the
Subsidiaries (collectively, the "Purchaser Companies"), on the
other hand, the rights and obligations set forth in this
Agreement will be the exclusive rights and obligations with
respect to this Agreement, the events giving rise to this
Agreement and the transactions provided for herein or
contemplated hereby (other than, prior to the Closing, the
Confidentiality Agreement). Without limiting the generality or
effect of the foregoing, as a material inducement to the other
parties hereto entering into this Agreement, and in light of,
among other factors, the acknowledgements contained in Section
3.3, each of the parties to this Agreement hereby waives any
claim or cause of action which it otherwise might assert,
including without limitation under the common law or federal or
59
state securities, trade regulation, environmental or other Laws,
by reason of this Agreement, the events giving rise to this
Agreement and the transactions provided for herein or
contemplated hereby or thereby (other than in respect of the
Confidentiality Agreement), except for (i) claims or causes of
action brought under and subject to the terms and conditions of
this Agreement, or (ii) injunctive or other equitable relief
(other than for rescission or rescissory or similar damages).
(e) No Indemnifying Party may assert any offset or similar
right in respect of its obligations under Section 6.3 based upon
any actual or alleged breach of any representation, warranty or
covenant in this Agreement; provided, however, that the inability
to assert any such offset or similar right pursuant to this
sentence will not of itself result in a waiver of any such actual
or alleged breach, which may, subject to Sections 6.1 and 6.4 and
the other provisions of this Section 6.2, be asserted pursuant to
Section 6.3.
(f) No Indemnifying Party may assert any claim for
indemnification under Section 6.3(a)(iii)(F) unless the event
giving rise to Indemnifiable Losses covered thereby occurs prior
to the first anniversary of the Closing Date and then only to the
extent that, in connection with any Indemnifiable Losses so
suffered, the Company operated the facility referred to therein
in substantially the same manner as previously operated by the
Company, including without limitation compliance with the safety
and other rules summarized on Schedule 6.2(f).
60
(g) Notwithstanding any other provision hereof,
(i) Sections 6.2(b) and (c) will not apply to breaches of
Sections 3.1.2, 3.1.19, and 3.2.5, and (ii) Section 6.2(c) will
not apply in the case of actual fraud.
6.3. Indemnification. (a) Subject to Sections 6.1, 6.2
and 6.4, Seller will indemnify, defend and hold harmless
Purchaser and each other Purchaser Company and their respective
directors, officers, partners, employees, agents and
representatives from and against any and all Indemnifiable Losses
relating to, resulting from or arising out of:
(i) Any breach by Seller of any of the representations
or warranties of Seller contained in this Agreement;
(ii) Any material breach by Seller or any Post-Closing
Affiliate of any covenant of Seller or any Post-Closing
Affiliate contained in this Agreement; and
(iii) Any of the following: (A)(1) any business
formerly owned or operated by the Company or any Subsidiary
or any predecessor of any thereof but not presently so owned
or operated (collectively, "Previously Owned Businesses"),
including without limitation the following disposed of
businesses: 1979 sale of Bostonian Shoes; 1985 sale of
men's and women's clothing manufacturing company; 1987 sale
of Nazareth/Century (an infant wear manufacturing company);
1989 sale of Cole, Catalina and Colina (a bathing suits and
sportswear manufacturer); 1989 sale of Her Majesty Clothes
Company (girl's dresses); 1990 sale of European hosiery and
socks business; and 1992 sale of yarn covering operations,
61
and (2) any matter arising out of, or related to, any
indemnification or other provision under any contract or
other agreement pursuant to which any sale or disposition
was made of a Previously Owned Business; (B) the Stamina
Mills Superfund site in Rhode Island and the Beaunit
Superfund site in South Carolina and any Third Party Claims
in any way related to or in connection with those sites;
(C) Third Party Claims (including without limitation arising
out of any personal injury, property damage claims or clean-
up, remediation or investigation obligation) in connection
with or arising from any environmental condition related to
(1) any property previously owned, operated, leased, used,
occupied or controlled by any Previously Owned Business or
by the Company or any Subsidiary or any predecessor of any
thereof but not presently so owned, operated, leased, used,
occupied or controlled or (2) any other property on which
any materials that were used at, originated from or were
generated at or resulted from activities conducted at any
property identified in clause (1) above have come to be
located; (D) the Credit Agreement; (E) any liability of the
Company or any Subsidiary for indemnification of, or
advancement of expenses or payment of insurance proceeds to,
any present or former director or officer of (or other
person serving in a fiduciary capacity at the request of)
the Company or any Subsidiary based upon an actual or
alleged breach of fiduciary duty of such person prior to the
Closing; (F) any Third Party Claim relating to, resulting
62
from or arising out of the failure, if applicable, of the
roof on the Company's Goldston, North Carolina facilities to
comply with the local building code with respect to load
bearing capacity (nothing herein to be deemed to constitute
an admission that such roof is not in compliance with such
requirements); and (G) the premises leased by the Company at
640 Fifth Avenue, New York, New York or the lease, subleases
or licenses related thereto.
(b) Subject to Sections 6.1, 6.2 and 6.4, Purchaser will
indemnify, defend and hold harmless Seller and each Post-Closing
Affiliate and their respective directors, officers, partners,
employees, agents and representatives from and against any and
all Indemnifiable Losses relating to, resulting from or arising
out of:
(i) Any breach by Purchaser of any of the
representations or warranties of Purchaser contained in this
Agreement; and
(ii) Any material breach by Purchaser or any Purchaser
Company (other than the Company, which has separate
indemnification obligations under Section 6.2(c)) of any
covenant of Purchaser or any such Purchaser Company
contained in this Agreement.
(c) Subject to Sections 6.1, 6.2 and 6.4, the Company will
indemnify, defend and hold harmless Seller and each Post-Closing
Affiliate and their respective directors, officers, partners,
employees, agents and representatives from and against any and
63
all Indemnifiable Losses relating to, resulting from or arising
out of:
(i) Any material breach by the Company of any covenant
of the Company contained in this Agreement which covenant
requires performance by the Company after the Closing; and
(ii) Any Third Party Claim in respect of the conduct of
the Business or any part thereof, and any liability (whether
primary or secondary or absolute or contingent) or
obligation of, or in respect of, the Company, any Subsidiary
or any predecessor of any thereof arising at any time prior
to or after the Closing in respect of the conduct of the
Business or any part thereof, except in each case to the
extent Seller is obligated to indemnify any Purchaser
Company with respect thereto pursuant to the terms of this
Agreement.
(d) The rights of Purchaser under clauses (i) through (iii)
of Section 6.3(a) and of Seller under clauses (i) and (ii) of
Section 6.3(b) and under 6.3(c) are cumulative.
6.4. Defense of Claims. (a) Except as otherwise provided
in Section 7.2.4, if any Indemnitee receives notice of the
assertion or commencement of any Third Party Claim against such
Indemnitee with respect to which an Indemnifying Party is or may
be obligated to provide indemnification under this Agreement, the
Indemnitee will, as promptly as reasonably possible, give such
Indemnifying Party a Notice of Claim for Indemnity, which notice
will in any event be given not later than 30 calendar days after
receipt of such notice of such Third Party Claim. The
64
Indemnifying Party and the Indemnitee will cooperate in good
faith in evaluating and determining how the defense of such Third
Party Claim should be administered. It is the intent of the
parties that the party which is most likely to be liable for more
than 50% of the monetary relief relating to a Third Party Claim
should have the right to defend such Third Party Claim unless
such Third Party Claim also seeks relief other than monetary
damages, remediation or other monetary relief, in which case the
Indemnifying Party will have no right to assume the defense
thereof; provided, however, that (i) the right of the
Indemnifying Party to assume the defense of a Third Party Claim
will be subject to its prior undertaking in writing fully to
indemnify the Indemnitee with respect thereto, subject to any
applicable limitations under Section 6.2(b) and (ii) if the
Indemnifying Party undertakes fully to indemnify the Indemnitee
with respect thereto, after giving effect to the limitations set
forth in Section 6.2, the Indemnifying Party will in all events
have the right to assume the defense of any Third Party Claim
which seeks only monetary damages, remediation or other monetary
relief. Except as set forth in the immediately preceding
sentence, if within ten calendar days after receipt by the
Indemnifying Party of a Notice of Claim for Indemnity relating to
a Third Party Claim, the Indemnifying Party and the Indemnitee
have not agreed to the administration of the defense of such
Third Party Claim, both the Indemnifying Party and the Indemnitee
will jointly administer the defense of such Third Party Claim.
Except as provided in Section 7.2.4, the Indemnifying Party will
65
have the right to participate in the defense of any Third Party
Claim, in any case at such Indemnifying Party's own expense and
by such Indemnifying Party's own counsel (reasonably satisfactory
to the Indemnitee).
(b) If the Indemnifying Party has assumed the defense of a
Third Party Claim as provided in Section 6.4(a), the Indemnifying
Party will not be liable for any legal expenses subsequently
incurred by the Indemnitee in connection with the defense
thereof; provided, however, that if (i) the Third Party Claim
initially sought but ceases to seek, solely monetary damages,
monetary remediation or other monetary relief or (ii) the
Indemnifying Party fails to take reasonable steps necessary to
defend diligently such Third Party Claim within ten calendar days
(or such shorter period as may be required to defend diligently
such Third Party Claim) after receiving written notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party
has failed to take such steps, the Indemnitee may assume its own
defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection
therewith. Without the prior written consent of the Indemnitee,
the Indemnifying Party will not enter into any compromise or
settlement of any Third Party Claim which would lead to liability
or create any financial or other obligation on the part of the
Indemnitee for which the Indemnifying Party has not undertaken in
writing fully to indemnify the Indemnitee with respect thereto,
subject to any applicable limitations under Section 6.2(b), or
which commits the Indemnitee to take, or forbear to take, any
66
action (other than ministerial actions incident to settlement of
such Third Party Claim). If a firm written offer is made to
compromise or settle a Third Party Claim without (A) leading to
liability or the creation of a financial or other obligation on
the part of the Indemnitee for which the Indemnifying Party has
not undertaken in writing fully to indemnify the Indemnitee, and
(B) committing the Indemnitee to take or forbear to take, any
action (other than ministerial actions incident to settlement),
and the Indemnifying Party desires to accept and agree to such
offer, the Indemnifying Party will give written notice to the
Indemnitee to that effect. If the Indemnitee fails to consent to
such firm offer within ten calendar days after its receipt of
such notice, the Indemnitee may continue to contest or defend
such Third Party Claim and, in such event, the maximum liability
of the Indemnifying Party as to such Third Party Claim will not
exceed the amount of such settlement offer, plus costs and
expenses paid or incurred by the Indemnitee through the end of
such ten calendar day period.
(c) Any Direct Claim will be asserted by giving the
Indemnifying Party a Notice of Claim for Indemnity as promptly as
reasonably possible after discovery thereof.
(d) A failure to give timely notice (other than within the
time periods specified in Section 6.1(a)) or to include any
specified information in any notice as provided in this
Article VI will not affect the rights or obligations of any party
hereunder except and only to the extent that, as a result of such
failure, any party which was entitled to receive such notice was
67
deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise damaged as a result of such
failure.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an Indemnity Payment, is reduced by
recovery, settlement or otherwise under or pursuant to any
insurance coverage, or pursuant to any claim, recovery,
settlement against or with any person or entity which is not an
Affiliate of the Indemnitee (a "Third-Party Recovery"), the
amount of such reduction, in each case less any costs, expenses,
premiums or taxes incurred in connection therewith, together with
interest thereon from the date of payment thereof at the rate of
interest described in Section 2.2(e), will promptly be repaid by
the Indemnitee to the Indemnifying Party. Upon making any
Indemnity Payment the Indemnifying Party will, to the extent of
such Indemnity Payment, be subrogated to all rights of the
Indemnitee against any third person or entity that is not an
Affiliate of the Indemnitee in respect of the Indemnifiable Loss
to which the Indemnity Payment relates; provided, however, that
(A) the Indemnifying Party shall then be in compliance with its
obligations under this Agreement in respect of such Indemnifiable
Loss and (B) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party
against any such third person or entity on account of said
Indemnity Payment will be subrogated and subordinated in right of
payment to the Indemnitee's rights against such third person or
entity. Without limiting the generality or effect of any other
68
provision hereof, each such Indemnitee and Indemnifying Party
will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation
and subordination rights.
(f) Amounts payable in respect of Indemnifiable Losses
hereunder will be treated as adjustments to the Purchase Price.
VII. OTHER POST-CLOSING COVENANTS
7.1. Employees and Employee Benefit Plans.
7.1.1. Assumption of Obligations. (a) Effective as
of the Closing, the Company will assume and be solely responsible
for all obligations and liabilities of Seller or any Post-Closing
Affiliate arising at any time and relating to the employment or
termination of employment from the Company or any Subsidiary of
any Employee or Former Employee, including without limitation all
obligations and liabilities arising out of or under the severance
policies listed on Schedule 3.1.15 or under any other Employee
Plan listed on Schedule 3.1.15 other than the C&A Equity Share
Plan and the C&A Selling Bonus Plan, except to the extent such
obligations or liabilities are (i) expressly retained by Seller
or any Post-Closing Affiliate pursuant to this Section 7.1 or the
1/30/93 Agreement (as defined in Schedule 3.1.14) or (ii) arise
out of actions taken by Seller or any Post-Closing Affiliate
after the Closing. Neither Purchaser nor any Purchaser Company
will retain or assume any liability or responsibility with
respect to the C&A Equity Share Plan and the C&A Selling Bonus
69
Plan, and Seller will retain or assume all such liability and
responsibility.
(b) Effective as of the Closing, the Company will assume
and be solely responsible for all obligations and liabilities of
Seller or any Post-Closing Affiliate relating to workers'
compensation claims, damages and expenses which arise or are
incurred at any time with respect to the employment relationship
of any Employee or Former Employee with the Company or any
Subsidiary, including without limitation the responsibility for
administering all such claims, damages or expenses, and Seller
and each Post-Closing Affiliate will be relieved of all such
obligations and liabilities.
(c) Neither Purchaser nor any other Purchaser Company will
retain or assume any obligations or liabilities that were assumed
by Seller with respect to employee benefits under the 1/30/93
Agreement, and Seller will retain all such obligations or
liabilities. In addition, neither Purchaser nor any other
Purchaser Company will retain or assume any obligations or
liabilities with respect to employees or former employees of any
business other than the Business.
7.1.2. Transfer from Wickes Master Trust. As soon as
practicable after the Closing Date, but in no event later than 60
calendar days thereafter, Purchaser will, or will cause another
Purchaser Company to, establish a trust to hold the assets of the
Kayser-Roth Personal Account Retirement Plan (the "Retirement
Plan"), or will designate an existing trust for such purpose, and
Seller will transfer to such trust from the Wickes Master
70
Retirement Trust cash representing the proportionate interest of
the Retirement Plan in the Wickes Master Retirement Trust.
7.1.3. Plan Amendments or Terminations. No provision
of this Section 7.1 will limit any Purchaser Company's authority
to discontinue, suspend or modify any and all benefits provided
to Employees or Former Employees after the Closing Date. Neither
Seller nor any Post-Closing Affiliate will be liable for any
obligation or liability that may arise from the amendment or
termination by any Purchaser Company of any employee benefit plan
assumed or continued by any Purchaser Company under this Section
7.1.
7.1.4. Determination Letter Application. The Company
will submit the Personal Account Retirement Plan and the Employee
Savings Plan listed on Schedule 3.1.15 to the appropriate
Internal Revenue Service Key District Director for a
determination letter within the remedial amendment period
provided under Section 401(b) of the Code, and will make any
reasonable changes requested by such Key District Director as a
condition to qualification.
7.1.5. Transitional Matters. Seller and Purchaser
will use reasonable efforts to cooperate to (a) transfer to
Purchaser or any other Purchaser Company any insurance and
administrative services contracts that Purchaser wishes to
continue with respect to any Employee Plan that Purchaser or any
other Purchaser Company is assuming or continuing pursuant to
this Agreement and (b) cause any insurance carrier or third party
administrator administering workers' compensation or other
71
employee benefit obligations or liabilities assumed by Purchaser
or any other Purchaser Company to deal directly with Purchaser or
such other Purchaser Company.
7.1.6. Continuing Benefit Plans. Subject to Section
7.1.3, it is Purchaser's present intention that for a period of
at least six months after the Closing, the Company will continue
to make available to salaried and hourly Employees and Former
Employees benefit plans (including severance benefits) which will
provide such Employees and Former Employees with benefits that
are, in the aggregate, comparable to the benefits provided as of
the Initial Execution Date to such Employees and Former
Employees. Purchaser will, or will cause another Purchaser
Company to, take all actions required so that Employees receive
credit for their years of service with the Business or otherwise
with the Company, any Subsidiary or Seller or any Post-Closing
Affiliate prior to the Closing Date in determining eligibility
and vesting under any retirement plan qualified under Section
401(a) of the Code made available or established by the Company
or a Subsidiary after the Closing Date in which such Employees
are eligible to participate.
7.2. General Post-Closing Matters.
7.2.1. Post-Closing Notifications. Purchaser and
Seller will, and each will cause their respective Affiliates to,
comply with any post-Closing notification or other requirements,
to the extent then applicable to such party, of any antitrust,
trade competition, investment, control or other Law of any
Governmental Entity having jurisdiction over the Business.
72
7.2.2. Names, Trademarks, Etc. (a) Purchaser will
cause the Company to revise Product literature, change signage
and stationery, amend corporate constituent documents and
otherwise discontinue use of the names "Collins & Aikman,"
"Wickes" and all variations thereof (collectively, the "C&A Trade
Names") as promptly as practicable after the Closing; provided,
however, that for a period of six months from the Closing Date,
Purchaser, the Company and the Subsidiaries may consume
stationery and similar supplies on hand as of the Closing which
contain C&A Trade Names thereon. Without limiting the generality
or effect of the foregoing, Purchaser will, and will cause the
Company and the Subsidiaries to, discontinue (i) no later than
the close of business on the calendar date that is six months
after the Closing Date, affixing in any manner whatsoever any C&A
Trade Name to any Product and (ii) no later than the close of
business on the calendar day that is six months after the Closing
Date, selling, shipping and delivering any assembled Product
having any C&A Trade Name affixed thereto in any manner
whatsoever. Nothing in this Section 7.2.2 will affect the rights
and obligations of the parties under Section 6.3.
(b) After the Closing, Seller will not have the right to
use any of the Intellectual Property, but nothing herein will
restrict the rights of Seller or any Post-Closing Affiliate in
respect of publicly available technical knowledge or know-how, or
any technical knowledge or know-how acquired by Seller after the
Closing Date.
73
7.2.3. Access. (a) On the Closing Date, or as soon
thereafter as practicable, and in no event later than 90 calendar
days after the Closing Date, Seller will deliver or cause to be
delivered to Purchaser all original agreements, documents, books,
records and files relating to the Business, the Company or any of
the Subsidiaries (collectively, "Records") in the possession of
Seller or any other Post-Closing Affiliate to the extent not in
the possession of the Company, any of the Subsidiaries or
Purchaser, subject to the following exceptions:
(i) Purchaser recognizes that certain Records may
contain only incidental information relating to the Company
or any Subsidiary or may primarily relate to Seller or the
Post-Closing Affiliates, or the businesses of Seller or the
Post-Closing Affiliates other than the Business, and that
Seller and the Post-Closing Affiliates may retain such
Records and Seller will at Purchaser's request made at any
time (whether or not within the aforementioned 90-day
period) specifying the items needed deliver appropriately
excised copies of such Records; and
(ii) Seller and the Post-Closing Affiliates may retain
any Taxs Returns, but will promptly make available to
Purchaser or Purchaser's representatives information
appearing on such Tax Returns or in related documents which
relates to the Company, any of the Subsidiaries or the
Business or which Purchaser will reasonably request to
fulfill tax-related or financial obligations or obligations
under this Agreement.
74
After the Closing, Purchaser will, and will cause the other
Purchaser Companies to, and Seller will, and will cause the Post-
Closing Affiliates to, retain all Records required to be retained
pursuant to obligations imposed by any applicable Law; provided,
however, that Seller will not be required to retain those Records
specified in Section 7.2.3(a)(i). Except as provided in the
immediately preceding sentence, Purchaser will, and will cause
the other Purchaser Companies to, and Seller will, and will cause
the Post-Closing Affiliates to, use all reasonable efforts to
retain all Records for a period of seven years after the Closing
Date. After the end of such seven-year period, before disposing,
or permitting any Post-Closing Affiliate or Purchaser Company to
dispose, of any such Records, Seller or Purchaser, as the case
may be, will use its best efforts to give notice to such effect
to the other party and to give the other party, at such other
party's cost and expense, an opportunity to remove and retain all
or any part of such Records as such other party may elect.
(b) After the Closing, upon reasonable notice, each of
Purchaser and Seller will give, or cause to be given, to the
representatives, employees, counsel and accountants of the other
access, during normal business hours, to Records relating to
periods prior to or including the Closing and will permit such
persons to examine and copy such Records, to the extent
reasonably necessary to the other party in connection with Tax
and financial reporting matters (including without limitation any
Tax Return relating to state or local real property transfer or
gains Taxes), audits, legal proceedings, governmental
75
investigations and other business purposes; provided, however,
that nothing herein will obligate any party to take actions that
would unreasonably disrupt the normal course of its business,
violate the terms of any contract to which it is a party or to
which it or any of its assets is subject or grant access to any
of its proprietary, privileged or classified information. Seller
and Purchaser each will provide or will make available to such
party access to, and assistance from, employees of the other and
its Affiliates (including with respect to Purchaser, the Company
and the Subsidiaries) for the purposes of, and with the
limitations described in, the preceding sentence; provided,
however, that in connection with any Third Party Claim or Direct
Claim, Seller and Purchaser each will (i) provide or will make
available to the other reasonable access to all Records and
employees of it and its Affiliates (including, with respect to
Purchaser, the Company and the Subsidiaries) as the other party
may reasonably request in connection with the administration,
management and defense of such claim (including without
limitation access to employees for the purpose of reviewing and
responding to pleadings and documents filed or otherwise
delivered or relevant in any such claim, and testifying in any
deposition, investigation, trial or other proceeding) and
(ii) use reasonable efforts to maintain the attorney-client
privilege and the attorney work product doctrine, if any, with
respect to any Records. Seller and Purchaser will, and will
cause their respective Affiliates to, cooperate with each other
in the conduct of any Tax audit, claim for refund of Taxes, or
76
similar proceedings involving or otherwise relating to the
Company, any of the Subsidiaries or the Business (or the income
therefrom or assets thereof) with respect to any Tax and each
will execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this
Section 7.2.3(b) in light of the obligations and responsibilities
allocated by the provisions of Section 7.2.4. Purchaser will,
and will cause each other Purchaser Company to, cooperate with
Seller in Seller's filing and pursuing (at Seller's sole cost and
expense) any claim for refund or credit of Income Taxes or
Unemployment Taxes made in good faith relating to the Company,
any of the Subsidiaries or the Business attributable to any
taxable period that ends on or before the Closing Date ("Pre-
Closing Tax Period") or any Straddle Period subject to
Section 7.2.4(h) (including without limitation any claim for
refund or credit with respect to Tax Returns filed in connection
with the operation of the manufacturing facilities of the
Business located in Arecibo, Puerto Rico). Without limiting the
generality or effect of the foregoing, Purchaser will provide, or
cause to be provided, to Seller upon request, as promptly as
possible, for the year in which the Closing Date takes place,
copies of any Tax Return in which the Company or any Subsidiary
is included provided that Seller has indemnified Purchaser, in
whole or in part, for such Tax in such period pursuant to Section
7.2.4. Purchaser will use all reasonable efforts to ensure that
the information and Tax Returns described in this Section
77
7.2.3(b) can be provided to Seller in the event that Purchaser
disposes of the Shares or any portion of the Business.
(c) It is expressly understood and agreed that all
information obtained and exchanged pursuant to this Section 7.2.3
will be treated by the parties hereto as confidential and will be
used and disclosed to third parties only for the purposes
permitted or contemplated by this Agreement, including the
preparation and filing of Tax Returns and other Tax-related
documents.
(d) Without limiting the generality or effect of any other
provision hereof, in connection with the "Assumed Liabilities" as
defined in the 1/30/93 Agreement or the liabilities covered by
the indemnification referred to in Section 6.3(a)(iii)
(collectively, the "Retained Liabilities"), the Company (i) will,
at the request and expense of Seller, deliver to Seller copies of
any Records within its possession that relate to the Retained
Liabilities, (ii) will make available to Seller such personnel
and information as may be reasonably available to the Company and
as Seller may reasonably request in connection with the defense
or administration of the Retained Labilities and will promptly
forward to Seller copies of all written communications received
by the Company after the Closing relating to the Retained
Liabilities, (iii) hereby assigns to Seller its entire right,
title and interest in each and every Retained Liability and
agrees that, as to any such matter, Seller will have the sole
right to initiate, prosecute, defend or settle any such Retained
Liability in the name of the Company, using counsel of Seller's
78
choice, the Company hereby (A) waiving any right it might
otherwise have to designate counsel in such matter,
(B) acknowledging that Seller's right to appoint counsel and to
control such litigation is a right the quantification of the
value of which is difficult if not impossible to determine,
(C) agreeing to specific performance of the rights provided in
this Section, and (iv) Seller will cooperate fully in connection
with the pursuit of insurance coverage directly or indirectly
relating to any Retained Liability that could or might implicate
any common policies of insurance and provide such assistance and
execute such documentation or consents as might be necessary or
appropriate to effectuate the purposes of this Section 7.2.3(d);
provided, however, that nothing in this Section will be construed
to require the Company to take any action that would lead to
liability or create any financial or other obligation on the part
of the Company for which Seller has not undertaken in writing
fully to indemnify the Company or which commits the Company to
take, or forbear to take, any action in the conduct of the
Business.
(e) Notwithstanding any other provision hereof, the 1/30/93
Agreement will not be affected by the existence of this Agreement
or the consummation of the Closing, except that if the Closing
occurs (i) the last sentence of Section 2 of the 1/30/93
Agreement will be amended by deleting it in its entirety and
inserting in lieu thereof the following:
"K-R hereby agrees that nothing in this
Agreement will relieve K-R of its obligations
in respect of any of its liabilities other
than the Assumed Liabilities and that Group
79
shall have no obligation by reason of this
Agreement to pay, perform or discharge any of
K-R's liabilities other than the Assumed
Liabilities."
and (ii) the second sentence of Section 4 of the 1/30/93
Agreement will be amended by inserting the word "reasonably"
between the words "may" and "request" therein.
(f) Without limiting the generality or effect of any other
provision hereof, Seller will have the right and obligation to
defend and to control the defense, prosecution, investigation,
remediation or other action in respect of the matters described
in Section 6.3(a)(iii)(B) and (C) (the "Environmental Matters").
The Company will, and will cause any Subsidiary to, cooperate in
good faith with Seller in the defense, prosecution,
investigation, remediation or other action in respect of the
Environmental Matters, including without limitation providing
such certifications as may be required by any Governmental Entity
regarding the financial condition of the Company and the
Subsidiaries.
7.2.4. Certain Tax Matters. (a)(i) Except as provided in
Section 7.2.4(a)(iii), Purchaser and Seller will share equally
the transfer Taxes imposed by any taxing jurisdiction, domestic
or foreign, with respect to the Transfer of the Shares on account
of this Agreement.
(ii) Seller will pay any Taxes that are attributable to
the Transfer of the assets and rights described in Schedule 2.3.
(iii) Seller will be responsible for compliance with the
New York State stock transfer tax prior to the Closing, including
80
filing any required forms and paying any amount required to be
paid.
(b)(i) Seller hereby agrees to pay and to indemnify
Purchaser and its Affiliates (including without limitation the
Company and the Subsidiaries) and hold them harmless from and
against (A) all Income, Unemployment, Withholding and Foundation
Taxes (including without limitation all Taxes arising from or
attributable to the deemed sale of assets under the provisions of
Code section 338 or similar provisions of applicable Law) for
which the Company or any Subsidiary is liable for any Pre-Closing
Tax Period and for any Straddle Period (but with respect to a
Straddle Period, only to the extent of Seller's portion of such
Taxes based on an interim closing of the books as of the end of
the Closing Date), other than to the extent such Taxes are
reflected as a liability on the Closing Date Balance Sheet and
(B) all liability for costs and expenses (including reasonable
attorneys and accountants fees) attributable to any audit,
investigation, contest or dispute involving the foregoing.
Seller will promptly notify Purchaser of the amount and date on
which all such payments were made and the type of Tax in respect
of which such payments were made.
(ii) Purchaser hereby agrees to pay and to indemnify
Seller and its Affiliates (including without limitation the Post-
Closing Affiliates) and hold them harmless from and against
(A) all Taxes except those described in Sections 7.2.4(a)(ii),
7.2.4(a)(iii), 7.2.4(b)(i) and 7.2.4(i) and except those for
which Seller is indemnifying Purchaser under any other provision
81
of this Agreement, for which the Company or any Subsidiary is
liable and (B) all liability for costs and expenses (including
reasonable attorneys and accountants fees) attributable to any
contest or dispute involving the foregoing.
(c) Seller will prepare and file or cause to be prepared
and filed all Income Tax Returns for the Company and each of the
Subsidiaries required to be filed with the appropriate
Governmental Entities (other than Income Tax Returns to be filed
in Puerto Rico) (i) for any Pre-Closing Tax Period and (ii) for
any Straddle Period ending on or before January 29, 1994, if the
relevant taxing jurisdiction does not accept a Tax Return which
treats the Closing Date as the end of a taxable period within the
Straddle Period. Seller will prepare and, if required to do so
by applicable Law, deliver to Purchaser for signing and filing
(provided in such case that such Returns have been prepared in
good faith and to the knowledge of Seller, such Returns are
correct and complete in all material respects) any Tax Returns
described in the preceding sentence that have not been filed
prior to the Closing Date including without limitation any Income
Tax Returns reflecting a deemed sale of assets under the
provisions of Code section 338 or similar provisions of
applicable Law. Seller will make all payments shown thereon as
owing with respect to any such Tax Returns, provided that
Purchaser will pay to Seller its portion of total Taxes due for
any Income Tax Return with respect to a Straddle Period as
determined on the basis of an interim closing of the books as of
the end of the Closing Date, but in no event will Purchaser be
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required to pay any Tax attributable to a deemed sale of assets
under the provisions of Code section 338 or similar provisions of
applicable Law. Seller will in good faith compute the amounts so
due from Purchaser and will notify Purchaser of such amounts no
later than 10 calendar days before they are due to be paid.
Seller will provide Purchaser or its representatives with such
information as they shall reasonably request regarding the
derivation of any such amount, including access to books,
records, and appropriate personnel. If Purchaser disagrees with
the amount so determined by Seller, it will give notice to Seller
of its objections and the reasons therefor, and will pay to
Seller at such time the portion of such amount not in dispute.
Seller and Purchaser will then diligently endeavor to resolve
such differences. If agreement on these matters cannot be
reached within 20 calendar days after notice has been given by
Purchaser to Seller of Purchaser's objections, the Resolution
Accountants will determine the appropriate allocation on the
basis of an interim closing of the books and such determination
will be binding on the Seller and Purchaser. The fees and other
expenses of the Resolution Accountants' determination will be
borne equally by the Purchaser and Seller.
(d)(i) This Section 7.2.4(d) applies with respect to any
taxable period of the Company or a Subsidiary that includes but
does not end on the Closing Date (such period being referred to
herein as a "Straddle Period").
(ii) If the relevant taxing jurisdiction accepts a Tax
Return which treats the Closing Date as the end of a taxable
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period within the Straddle Period, Seller's and Purchaser's
obligations with respect to preparation and filing of the Tax
Return and making payments of Taxes and indemnifications with
respect to the portion of the Straddle Period ending on the
Closing Date will be determined under Sections 7.2.4(b), 7.2.4(c)
and 7.2.4(e) as if the portion of the Straddle Period ending on
the Closing Date were a Pre-Closing Tax Period.
(iii) If the relevant taxing jurisdiction does not
accept a Tax Return which treats the Closing Date as the end of a
taxable period within the Straddle Period, except as otherwise
provided in Section 7.2.4(c), Purchaser will prepare and file or
cause to be prepared and filed such Tax Return for the Straddle
Period and in that case, Purchaser will make all payments shown
as owing on such Tax Return; provided, however, that Seller will
remit to Purchaser Seller's portion of the total Taxes (to the
extent such Taxes are not reflected on the Closing Date Balance
Sheet) due for the Straddle Period determined on the basis of an
interim closing of the books as of the end of the Closing Date;
provided, further, that for purposes of determining Seller's
portion in the case of ad valorem Taxes, such Taxes will be
allocated on a per diem basis. Such payment will be made by
Seller to Purchaser not later than 15 calendar days after notice
thereof is given by Purchaser to Seller. If Purchaser is taxable
on such remittance, the amount due to Purchaser in this
connection will be increased by the amount of the Tax on the
remittance.
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(iv) Without limiting the generality of obligations to
cooperate and provide access to records under this Agreement,
Seller and Purchaser will cooperate with one another in the
preparation of Tax Returns subject to this Section 7.2.4(d),
including providing reasonable access to appropriate records.
(v) Notwithstanding the foregoing provisions of this
Section 7.2.4(d), Purchaser will prepare or cause to be prepared
any Puerto Rico Income Tax Returns for taxable periods that end
on or include the Closing Date. Such Puerto Rico Income Tax
Returns will be prepared on a basis consistent with prior year
Puerto Rico Income Tax Returns (unless Purchaser in good faith
concludes that such basis would be clearly impermissible or
clearly incorrect). Purchaser will provide or cause to be
provided such Puerto Rico Income Tax Returns to Seller for
Seller's review at least 30 calendar days prior to the due date
(including extensions) for the filing of such Returns. Purchaser
will be responsible for filing such Puerto Rico Income Tax
Returns and paying amounts shown thereon as due. Except to the
extent that amounts shown as due on such Puerto Rico Income Tax
Returns are reflected on the Closing Date Balance Sheet, Seller
will pay to Purchaser the amount of such Tax shown as due prior
to the date on which such Tax Return is due (without regard to
extensions) and, if Purchaser is taxable on such remittance, the
amount due to Purchaser in this connection will be increased by
the amount of the Tax on the remittance.
(e) Except as otherwise provided in Section 7.2.4(c) or
Section 7.2.4(d), Purchaser will prepare and file or cause to be
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prepared and filed all Tax Returns for the Company and each of
the Subsidiaries that are required to be filed with the
appropriate Governmental Entities for all periods as to which
such Tax Returns are due after the Closing Date (taking into
account all extensions of due dates). Except as otherwise
provided in the Agreement, Purchaser will pay or cause to be paid
all Taxes required to be paid with respect to such Tax Returns.
(f) In order to assist Seller in the preparation of all Tax
Returns that Seller is required to prepare pursuant to
Section 7.2.4(c) or 7.2.4(d), Purchaser will prepare (or cause
another Purchaser Company to prepare) and deliver within 60
calendar days of receipt of Seller's request therefor, Seller's
standard federal and state Tax Return data gathering packages
relating to the Company and the Subsidiaries. An extension of
such 60-day period may be requested, and Seller's consent to such
request will not be unreasonably withheld. Such packages will be
prepared on a basis consistent with the prior year's Tax Returns.
In addition to providing such packages to Seller, Purchaser will
promptly provide or cause to be provided to Seller such other
information as Seller may reasonably request in order for the
operations of the Company and the Subsidiaries to be properly
reported in such Tax Returns.
(g) Purchaser will pay or cause to be paid to Seller all
refunds or credits of Income, Unemployment, Withholding and
Foundation Taxes (including any interest thereon) actually
received by Purchaser or any other Purchaser Company after the
Closing Date (to the extent not reflected on the Closing Date
86
Balance Sheet) and attributable to Income, Unemployment,
Withholding or Foundation Taxes paid by Seller or any Affiliate
(or any predecessor of any thereof) with respect to any
Pre-Closing Tax Period. Such payment will be made to Seller
promptly, but in no event later than thirty calendar days, after
(i) actual receipt of any such refund from the relevant taxing
authority or (ii) any such credit has actually been applied by
Purchaser, the Company or a Subsidiary to reduce a payment
otherwise due, to the extent of such reduction. To the extent a
refund or credit (including interest thereon) subject to this
Section 7.2.4(g) is included in taxable income of the Company or
a Subsidiary, the payment to Seller otherwise required pursuant
to this Section 7.2.4(g) (without regard to this sentence) will
be reduced by thirty percent of such payment.
(h) (i) If a Tax Return with respect to an Income,
Unemployment, Withholding of Foundation Tax for a Pre-Closing Tax
Period for which Seller has indemnified Purchaser under Section
7.2.4(b)(i) is audited by a Governmental Entity or other tax
authority or if a change in such Tax due for that period is
proposed or assessed, Seller will be entitled to control the
dealings with the appropriate Governmental Entity or tax
authority and ensuing litigation, if any, with respect to the
amounts indemnified and will have the right to settle or
compromise such matters; provided, however, that Seller will
consult with Purchaser about such matters and will give due
regard to Purchaser's interests. Seller will have the right to
claim in good faith a refund of an Income, Unemployment,
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Withholding or Foundation Tax for a Pre-Closing Tax Period for
which Seller has indemnified Purchaser under Section 7.2.4(b)(i)
and to control the dealings with the appropriate Governmental
Entity or tax authority in connection with the claim; provided,
however, that Seller will consult with Purchaser about such
matters before and after a claim is made and will give due regard
to Purchaser's interests while pursuing such claim.
(ii) If a Tax Return is audited with respect to an
Income, Unemployment, Withholding or Foundation Tax for a
Straddle Period ending prior to January 29, 1994, for which
Seller has indemnified Purchaser under Section 7.2.4(b)(i) for
the Tax for the portion of the Straddle Period through the
Closing Date or if a change in such Tax due for that period is
proposed or assessed, Seller will be entitled to control the
dealings with the appropriate Governmental Entity or tax
authority and ensuing litigation, if any, and will have the right
to settle and compromise such matters; provided, however, that
Seller will consult with Purchaser about such matters, will give
due regard to Purchaser's interests, will diligently defend such
matter and will not settle or compromise such matter without the
written consent of the Purchaser, which consent will not be
unreasonably withheld. Seller will have the right to claim in
good faith a refund of an Income, Unemployment, Withholding or
Foundation Tax for a Straddle Period for which Seller has
indemnified Purchaser under Section 7.2.4(b)(i); provided,
however, that such claim will not be made without Purchaser's
written consent, which consent will not be unreasonably withheld.
88
If Seller makes such a claim, it will be entitled to control the
proceedings relating thereto but will consult with Purchaser and
will give due regard to Purchaser's interests while pursuing the
claim. If the claim for refund results in a refund or credit,
Seller will remit to Purchaser a portion of the recovered amount
(net of expenses incurred by Seller in connection with the refund
claim) reflecting the portion of the recovered Tax allocated
under Section 7.2.4(d) to Purchaser.
(iii) Except as otherwise provided in this Section
7.2.4(h), Purchaser will control all audits, refund claims and
other proceedings involving any Tax Return of the Company or any
Subsidiary.
(i) Seller will indemnify, defend, and hold harmless
Purchaser and each other Purchaser Company from and against any
and all liability for any taxable period resulting from the joint
and several liability (and any costs and expenses associated with
audits, disputes, and contests relating to such liability) of one
or more Purchaser Companies pursuant to Treasury Regulation
Section 1.1502-6 or 1.1502-78 (or any comparable provision or
provision of the same or similar effect of state, local, or other
Law) by reason of any of the Purchaser Companies having been a
member of any consolidated, combined or unitary group on or prior
to the Closing Date.
(j) Both Seller and Purchaser are eligible to and will join
in making timely elections under Section 338(h)(10) of the Code
("Section 338(h)(10) Elections") with respect to the purchase of
the Shares and with respect to each Subsidiary (except
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Kayser-Roth de Puerto Rico, Inc., as to which Purchaser will make
or cause to be made a timely election under Section 338(g) of the
Code ("Section 338(g) Election")). All such elections will be
made in accordance with applicable law. No later than 60
calendar days after the Closing, Seller and Purchaser will begin
consulting with one another in order to evaluate the desirability
of making (or refraining from making) Section 338(h)(10)
Elections and the Section 338(g) Election in light of Treasury
Regulations currently effective under Code Section 338 and giving
due regard to the special tax status of Kayser-Roth de Puerto
Rico, Inc. An appropriate amendment to this Agreement shall be
made in writing if and to the extent that the parties
subsequently agree that a Section 338(h)(10) Election or
Section 338(g) Election should not be made with respect to the
Company or one or more of its Subsidiaries.
(k) Except to the extent Purchaser and Seller agree
otherwise in writing, Purchaser and Seller will cooperate with
one another and their respective representatives with regard to
the timely preparing and filing of appropriate and effective
Section 338(g) Elections and Section 338(h)(10) Elections and
attachments thereto. Purchaser will deliver to Seller a duly
executed and completed Internal Revenue Service Form 8023 as well
as drafts of any required attachments (collectively, the "Section
338 Forms"), no later than 120 calendar days prior to the date
the Section 338 Forms are required to be filed. In the event of
any dispute with regard to the content of any Section 338 Form,
the parties will diligently attempt to resolve such dispute. If
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they have not done so by the seventy-fifth day prior to the date
the Section 338 Form in question is required to be filed, the
dispute will be resolved prior to the time such form is required
to be filed by the Resolution Accountants. Once finalized,
Seller will promptly cause the Section 338 Forms to be duly
executed by an authorized person for Seller, and return such
Section 338 Forms to Purchaser. Subject to the receipt by
Purchaser of the Section 338 Forms executed by Seller, Purchaser
will duly and timely file the Section 338 Forms in accordance
with applicable tax laws, and will provide written evidence to
Seller that it has done so. The obligations and procedures set
forth in Section 7.2.4(j) and this Section 7.2.4(k) will apply
for purposes of making elections for state and other non-federal
Tax purposes which are similar to elections under Code Section
338(g) or Code Section 338(h)(10), it being the intent of the
parties to this Agreement to effect such elections wherever
permissible.
(l) Within thirty calendar days after the Closing Date,
Purchaser and Seller (or their representatives) will begin
consulting with one another regarding (i) the allocation of
consideration paid to Seller with respect to the covenant set
forth in Section 4.11 and (ii) the fair market values of assets
of the Company and the Subsidiaries in connection with
allocations required under Code section 338 and comparable
provisions of other applicable Laws. Seller and Purchaser will
participate in such consultations in good faith and as reasonably
requested by the other party with a view to making required
91
determinations of values in connection with determinations of
Taxes. To the extent that Seller and Purchaser agree to values
pursuant to this procedure, they will both utilize such values in
determining the amount allocated to said covenant and the Tax
consequences of the purchase of the Shares and the deemed sale of
assets under Code section 338 and comparable provisions
applicable under other Law. Neither Purchaser nor Seller will,
and each will cause their Affiliates not to, take any action to
modify or revoke the elections contained in or the content of any
Section 338 Form (or comparable state or local form) without the
express written consent of the other party. Purchaser and Seller
agree that their Tax Returns and other appropriate documents will
be consistent with the elections made under Code Section 338
(and, where applicable, similar non-federal elections) and not to
take any position contrary thereto.
(m) Seller will cause any tax sharing agreement between the
Company or any Subsidiary and Seller or any Post-Closing
Affiliate and any other tax sharing agreement under which the
Company or any Subsidiary is bound, to be terminated effective as
of the Closing Date; provided that the parties to this Agreement
acknowledge that any such tax sharing agreement is intended and
will remain in effect as to the Seller and any Post-Closing
Affiliate. Upon such terminations, the Company and the
Subsidiaries will be released from any and all liabilities or
obligations under those agreements.
(n) For purposes of this Agreement, (i) "Tax" or "Taxes"
includes all federal, state, local, foreign, possessions
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(including Puerto Rico) and other taxes, assessments, or
governmental charges of any kind whatsoever including, without
limitation, income, franchise, capital stock, excise, property,
sales, use, gross receipts, transfer, payroll, withholding, and
employment and unemployment taxes, together with interest and
penalties thereon and estimated payments thereof, (ii) "Tax
Return" or "Tax Returns" includes all returns, reports,
information returns, forms, statements and other documents
(including any amendments thereto) in connection with Taxes that
are required to be filed with a Government Entity or other tax
authority, or sent or provided to another party under applicable
Law, (iii) "Income Tax" or "Income Taxes" means all Taxes imposed
on, measured by, or which require reference to, net or taxable
income (including any income, franchise, estimated, alternative,
minimum, add-on minimum or other tax imposed on, measured by, or
which require reference to, net or taxable income), together with
interest and penalties thereon and estimated payments thereof,
(iv) "Unemployment Tax" or "Unemployment Taxes" means the Taxes
or other charges imposed under the North Carolina employment
security law, together with interest and penalties thereon and
estimated payments or deposits thereof, (v) "Withholding Tax" or
"Withholding Taxes" means withholding taxes (including
obligations to withhold) on payments of gross or net income,
together with interest and penalties thereon and deposits
thereof, and (vi) "Foundation Tax" or "Foundation Taxes" means
any Tax imposed under Code section 4941, together with interest
and penalties thereon and estimated payments or deposits thereof.
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(o) On Closing Seller will provide Purchaser with a duly
executed certificate certifying that Seller is not a "foreign
person" within the meaning of Treasury Regulation Section
1.1445-2(b). The certificate will be substantially in the form
set forth on Schedule 7.2.4(o).
7.2.5. Insurance. (a) Except as referred to in the
1/30/93 Agreement, with respect to any loss, liability or damage
relating to, resulting from or arising out of the ownership or
conduct of the business on or prior to the Closing Date for which
Seller would be entitled to assert, or cause any other person or
entity to assert, a claim for recovery under any policy of
insurance maintained by or for the benefit of Seller in respect
of the Business or the Company or any Subsidiary ("Insurance"),
at the request of Purchaser, Seller will use its reasonable
efforts to assert, or to assist a Purchaser Company to assert,
one or more claims under such Insurance covering such loss,
liability or damage if a Purchaser Company is not itself entitled
to assert such claim but Seller is so entitled and Seller will
promptly pay to Purchaser any amounts recovered in respect of any
such claim, provided that all of Seller's and each Post-Closing
Affiliate's out-of-pocket costs and expenses incurred in
connection with the foregoing, including without limitation any
liability, obligation or expense referred to in the next sentence
of this Section 7.2.5, are, at the option of Seller, paid in
advance or are promptly reimbursed by Purchaser. Seller will be
deemed, solely for the purpose of asserting claims for insurance
pursuant to the immediately preceding sentence, to have retained
94
liability for such loss, liability or damage to the extent of the
policy limits of the applicable Insurance; provided, however,
that (i) Purchaser's obligations under Section 6.3(b) will not be
affected by the provisions of this Section 7.2.5, (ii) the
Company's obligations under Section 6.3(c) will not be affected
by the provision of this Section 7.2.5, and (iii) with respect to
any claim made by Seller under any Insurance pursuant to this
Section 7.2.5, each of Purchaser and each Purchaser Company will
jointly and severally indemnify, defend and hold harmless Seller
and each Post-Closing Affiliate and their respective directors,
officers, partners, employees, agents and representatives
harmless from and against any Indemnifiable Loss relating to,
resulting from or arising out of any deductible, policy limit,
reinsurance due to the liquidation or insolvency of the
reinsurer, self-insurance retention, retrospective premium
resulting from claims made under this Section 7.2.5 or other like
arrangement by which Seller or any Post-Closing Affiliate,
including without limitation any captive insurance company of
Seller or any Post-Closing Affiliate, retains any liability under
any such policy of Insurance or otherwise.
(b) Until the Closing Date, if any Current Insurance Policy
is cancelled or expires, Seller will use its reasonable efforts
to have such Current Insurance Policy renewed or extended or to
replace such policy with one or more policies providing
substantially the same type and amount of coverage prior to such
cancellation or expiration, provided that any such renewal,
extension or replacement is on reasonable terms. After the
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Closing Date, Seller will not terminate or otherwise discontinue
any Current Insurance Policy solely for the purpose of obtaining
a refund thereunder; provided, however, that nothing in this
Agreement will prevent or interfere with Seller's right to
terminate or otherwise discontinue any insurance policy,
including without limitation any Current Insurance Policy, for
any other reason, including without limitation in connection with
the settlement or discharge of any claim.
VIII. MISCELLANEOUS PROVISIONS
8.1. Notices. All notices and other communications
required or permitted hereunder will be in writing and, unless
otherwise provided in this Agreement, will be deemed to have been
duly given when delivered in person or when dispatched by
telegram or electronic facsimile transfer (confirmed in writing
by postage prepaid first class air mail simultaneously
dispatched) or three business days after having been dispatched
by an internationally recognized overnight courier service to the
appropriate party at the address specified below:
(a) If to Purchaser (or, after the Closing, to the
Company), to:
Legwear Acquisition Corporation
c/o Sander M. Bieber
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
Facsimile No.: (202) 626-3334
Attention: President
96
With a required copy to:
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
Facsimile No.: (202) 626-3334
Attention: Sander M. Bieber, Esq.
(b) If to Seller (or, prior to the Closing, to the
Company), to:
Collins & Aikman Group, Inc.
8320 University Executive Park
Suite 102
Charlotte, North Carolina 28262
Facsimile No.: (704) 548-8712
Attention: Corporate Counsel
with a required copy to each of:
Wasserstein Perella & Co., Inc.
31 West 52nd Street, Seventh Floor
New York, New York 10019
Facsimile No.: (212) 969-7879
Attention: Mr. W. Townsend Ziebold
The Blackstone Group L.P.
345 Park Avenue, 31st Floor
New York, New York 10154
Facsimile No.: (212) 754-8703
Attention: Mr. John P. McNicholas
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Facsimile No.: (212) 755-7306
Attention: Robert A. Profusek, Esq.
or to such other address or addresses as any such party may from
time to time designate as to itself by like notice.
8.2. Expenses. Except as otherwise expressly provided
herein, (a) Seller will pay any fees and expenses incurred by it
incident to this Agreement and in preparing to consummate and
consummating the transactions provided for herein and
(b) Purchaser will pay any fees and expenses incurred by it
97
incident to this Agreement and in preparing to consummate and
consummating the transactions provided for herein.
8.3. Successors and Assigns. This Agreement will be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but will not
be assignable or delegatable by any party without the prior
written consent of the other parties hereto; provided, however,
that nothing in this Agreement is intended to limit the parent
company of Purchaser from Transferring any of the Shares
following the Closing Date; provided further, that, any such sale
or Transfer will not result in a termination of any of
Purchaser's or the Company's covenants hereunder, including
without limitation under Articles VI and VII.
8.4. Waiver. Either Purchaser or Seller by written notice
to the other may (a) extend the time for performance of any of
the obligations or other actions of the other under this
Agreement, (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement, (c) waive
compliance with any of the conditions or covenants of the other
contained in this Agreement, or (d) waive or modify performance
of any of the obligations of the other under this Agreement;
provided, however, that neither Purchaser nor Seller may, without
the prior written consent of the other, make or grant such
extension of time, waiver of inaccuracies or compliance or waiver
or modification of performance with respect to its (or any of its
Affiliates') representations, warranties, conditions or covenants
hereunder. Except as provided in the immediately preceding
98
sentence, no action taken pursuant to this Agreement will be
deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this
Agreement and will not operate or be construed as a waiver of any
subsequent breach, whether of a similar or dissimilar nature.
8.5. Entire Agreement. Each of the representations,
warranties, covenants and agreements of any party hereto
contained in this Agreement or any Schedule hereto or any
certificate delivered by or on behalf of such party pursuant to
and which makes reference to this Agreement will be deemed
incorporated and contained in this Agreement and will constitute
representations and warranties of such party. This Agreement
(including the Schedules hereto) supersedes any other agreement,
whether written or oral, that may have been made or entered into
by any party or any of their respective Affiliates (or by any
director, officer or representative thereof) with respect to the
subject matter hereof, other than the Confidentiality Agreement,
which will without further action terminate and be of no further
force and effect as of the Closing. This Agreement (together
with the Schedules hereto) constitutes the entire agreement by
and among the parties hereto with respect to the subject matter
hereof and there are no agreements or commitments by or among
such parties or their Affiliates with respect to the subject
matter hereof except as expressly set forth herein or in any
written instrument signed by the parties and delivered at the
Closing that refers to this Section 8.5. No investigation or
receipt of information by or on behalf of Purchaser will diminish
99
or obviate any of the representations, warranties, covenants or
agreements of Seller under this Agreement or the conditions to
obligations of Purchaser under this Agreement. No investigation
or receipt of information by or on behalf of Seller will diminish
or obviate any of the representations, warranties, covenants or
agreements of Purchaser under this Agreement or the conditions to
obligations of Seller under this Agreement.
8.6. Amendments, Supplements, Etc. This Agreement may be
amended or supplemented at any time by additional written
agreements as may mutually be determined by Purchaser and Seller
to be necessary, desirable or expedient to further the purposes
of this Agreement, or to clarify the intention of the parties
hereto or for any other purpose.
8.7. Rights of the Parties. Nothing expressed or implied
in this Agreement is intended or will be construed to confer upon
or give any person or entity other than the parties hereto and
their respective Affiliates any rights or remedies under or by
reason of this Agreement or any transaction contemplated hereby.
8.8. Further Assurances. From time to time, as and when
requested by either Purchaser or Seller, the other will execute
and deliver, or cause to be executed and delivered, all such
documents and instruments as may be reasonably necessary to
consummate the transactions contemplated by this Agreement.
8.9. Applicable Law; Jurisdiction. (a) This Agreement and
the legal relations among the parties hereto will be governed by
and construed in accordance with the substantive Laws of the
100
State of New York, without giving effect to the principles of
conflicts of law thereof.
(b) Each party irrevocably submits to the exclusive
jurisdiction of any United States federal court sitting in the
Borough of Manhattan, City of New York (or absent lawful
jurisdiction of such court, the Supreme Court of the State of New
York, New York County), for purposes of any action, suit or other
proceeding arising out of this Agreement or any transaction
contemplated hereby. Purchaser hereby irrevocably designates,
appoints and empowers Robert A. Cohen and Dechert Price & Rhoads
and Seller hereby irrevocably designates, appoints and empowers
the officers thereof, located in its New York office, in each
case as its true and lawful agent and attorney-in-fact in its
name, place and stead to receive and accept on its behalf service
of process in any action, suit or proceeding in New York with
respect to any matters as to which it has submitted to
jurisdiction as set forth in the immediately preceding sentence.
8.10. Titles and Headings. Titles and headings to Sections
herein are inserted for convenience of reference only, and are
not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
8.11. Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections or Schedules are to Sections or Schedules of or to this
Agreement, (ii) each term defined in this Agreement has the
meaning assigned to it, (iii) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in
101
accordance with GAAP, (iv) "or" is disjunctive but not
necessarily exclusive, (v) words in the singular include the
plural and vice versa, (vi) the term "Affiliate" has the meaning
given to that term in Rule 12b-2 of Regulation 12B under the
Securities Exchange Act of 1934, as amended, and (vii) all
references to "business days" will be to any day other than a
weekend day or a day which is a holiday in either Mexico or the
United States. All references to "$" or dollar amounts will be
to lawful currency of the United States of America.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the
extent to which any such party or its counsel participated in the
drafting thereof or by reason of the extent to which any such
provision is inconsistent with any prior draft hereof or thereof.
(c) The inclusion of any matter on any Schedule will not be
deemed an admission that such listed matter is material or a
violation of any Law.
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on January 28, 1994.
COLLINS & AIKMAN GROUP, INC.
By:
Name:
Title:
LEGWEAR ACQUISITION CORPORATION
By:
Name:
Title:
KAYSER-ROTH CORPORATION
By:
Name:
Title:
103
Exhibit 99-1
NEWS RELEASE
Contact: Paul Meeks
Collins & Aikman Group, Inc.
(704) 548-2350
CHARLOTTE, North Carolina -- November 22, 1993 -- Collins &
Aikman Group, Inc. today announced that it has entered into a
definitive agreement for the sale of its Kayser-Roth Corporation
subsidiary to Legwear Acquisition Corporation, a corporation
organized by Grupo Synkro, S.A. de C.V. of Mexico City, Mexico and
members of the Ballesteros family, principal stockholders of the
Mexican company. The purchase price will be approximately $233
million.
The agreement is subject to financing and customary closing
conditions. The transaction is targeted to close by the end of
December.
Kayser-Roth Corporation, based in Greensboro, North Carolina,
manufactures and markets brand name and private label women's and
men's legwear, including the "No nonsense" and "Burlington" brands.
Collins & Aikman Group, Inc., a wholly-owned subsidiary of
Collins & Aikman Holdings Corporation, owns Collins & Aikman
Corporation, which manufactures and distributes automotive
textiles, decorative upholstery fabrics, commercial floorcoverings
and wallcoverings. Collins & Aikman Holdings Corporation is
jointly owned by Blackstone Capital Partners L.P. and Wasserstein
Perella Partners, L.P. and their respective affiliates.
###
Exhibit 99.2
News Release
Contact: Paul Meeks
(704) 548-2350
CHARLOTTE, NORTH CAROLINA -- December 29, 1993 -- Collins &
Aikman Group, Inc. announced today that the sale of its Kayser-Roth
Corporation subsidiary to Legwear Acquisition Corporation, which
was previously targeted to close by the end of December 1993, is
now targeted to close in the first quarter of 1994. The sale is
subject to financing and customary closing conditions.
###
Exhibit 99.3
NEWS RELEASE
CONTACT: Paul Meeks
(704) 548-2350
Charlotte, North Carolina -- January 18, 1994. Collins
& Aikman Group, Inc. announced that it has reached an agreement in
principle to modify the terms for its proposed sale of Kayser-Roth
Corporation in light of recent changes in Kayser-Roth's operating
performance. The modified terms provide for Collins & Aikman to
receive $170.0 million in the transaction, up to $70.0 million of
which could be in the form of seller bridge financing, and an
option to acquire 10% of the equity of the purchasing company
within three years of the closing. The acquisition is expected to
be completed on or before January 28, 1994. The agreement in
principle is subject to the negotiation and execution of definitive
documentation and other conditions.
###
Exhibit 99.4
NEWS RELEASE
Contact: Paul Meeks
Collins & Aikman Group, Inc.
(704)548-2350
CHARLOTTE, NORTH CAROLINA -- January 28, 1994 -- Collins & Aikman
Group, Inc. today announced that it has sold its Kayser-Roth
Corporation subsidiary to Legwear Acquisition Corporation for total
proceeds of approximately $170 million and a warrant to purchase
10% of the equity of Legwear within three years. The warrant can
be repurchased by Legwear for $10 million. The proceeds include a
$70 million Senior Bridge Note of Legwear, which matures April 28,
1994. If not paid in full at maturity, the Senior Bridge Note will
automatically be exchanged for a $70 million increasing rate Senior
Secured Note due April 28, 1997.
Approximately $66 million of the cash proceeds from the
transaction were used to repay outstanding bank debt of
Kayser-Roth. The remainder of the proceeds will be used for general
corporate purposes, including possibly the redemption of a portion
of Collins & Aikman Group's outstanding 15% Subordinated Notes Due
1995 or other debt.
Kayser-Roth Corporation, based in Greensboro, North Carolina,
manufactures and markets brand name and private label women's and
men's legwear, including the "No Nonsense" and "Burlington" brands.
Collins & Aikman Group, Inc., a wholly-owned subsidiary of
Collins & Aikman Holdings Corporation, owns Collins & Aikman
Corporation, which manufactures and distributes automotive
textiles, decorative upholstery fabrics, commercial floorcoverings
and wallcoverings. Collins & Aikman Holdings Corporation is
jointly owned by Blackstone Capital Partners L.P. and Wasserstein
Perella Partners, L.P. and their respective affiliates.
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