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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) June 30, 1999
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NATIONS FLOORING, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
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(State of Incorporation or Organization)
33-299942-NY 11-2925673
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(Commission File No.) (I.R.S. Employer Identification No.)
100 Maiden Lane, New York, New York 10038
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(Address of Principal Executive Offices) (Zip Code)
(212) 898-8888
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 30, 1999, Carpet Barn, Inc., a Delaware corporation
("Carpet Barn"), a wholly-owned subsidiary of Nations Flooring, Inc. (the
"Company"), entered into an Asset Purchase Agreement, effective as of June 30,
1999, with DuPont Flooring Systems, Inc., a California corporation ("DuPont"),
pursuant to which Carpet Barn purchased certain assets of DuPont (the "Assets").
The Assets were purchased for a cash price of $1,800,000. The source of such
funds was the working capital of Carpet Barn, including funds borrowed pursuant
to Carpet Barn's senior credit facility with Fleet Capital Corporation.
The Assets purchased by Carpet Barn under the Agreement
consist of all of the properties and assets previously used by DuPont in the
business of retailing, distributing and installation of residential floor
covering products and flooring systems under the "Kemper" name in the greater
Washington D.C. area.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of business acquired:
To the extent required by this Item, financial statements of
the business acquired will be filed by an amendment to this Current Report on
Form 8-K within 60 days after the date on which this initial report on Form 8-K
must be filed.
(b) Pro Forma Financial Information:
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To the extent required by this Item, pro forma financial
information relative to the business acquired will be filed by an amendment to
this Current Report on Form 8-K within 60 days after the date on which this
initial report on Form 8-K must be filed.
(c) Exhibits:
1. Asset Purchase Agreement effective as of June 30,
1999 by and among Carpet Barn and DuPont.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NATIONS FLOORING, INC.
Date: July 15, 1999 By: /s/ Philip A. Herman
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Philip A. Herman
Chairman of the Board
and President
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EXHIBIT INDEX
No. Description Page
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1. Asset Purchase Agreement effective as of June 30,
1999 by and among Carpet Barn and DuPont.
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ASSET PURCHASE AGREEMENT,
Effective as of June 30, 1999
by and among
CARPET BARN, INC.,
and
DUPONT FLOORING SYSTEMS, INC.
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, effective as of June 30, 1999 (the
"Agreement"), by and among Carpet Barn, Inc., a Delaware corporation (the
"Buyer"), and DuPont Flooring Systems Inc., a California corporation (the
"Seller").
W I T N E S S E T H:
WHEREAS, the Seller owns and operates a business involved in
the retailing, distribution and installation of residential floor coverings
products and flooring systems in the Washington, D.C. area, whose principal
place of business is located at 113 Executive Drive, Suite 125-129, Sterling,
Virginia 20166 (the "Business"); and
WHEREAS, the Buyer desires to acquire from the Seller, and the
Seller desires to sell to the Buyer, all of the Seller's assets and properties
associated with its operation of the Business, on the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1.0 Definitions. As used throughout this Agreement, the
following terms have the following meanings:
"Agreement" shall mean this Asset Purchase Agreement.
"Annual Financial Statements" shall have the meaning set forth
in Section 4.15.
"Assets" shall mean all of the Seller's properties and assets
used by the Seller in the operation of the Business and located at the addresses
set forth under the definition of "Business," which shall be listed on Schedule
1.1, all of Seller's right, title and interest in and to the Assumed Contracts,
all of Seller's Intangible Property listed on Schedule 4.7, Seller's right,
title and interest in and to the name "Kemper," Seller's leasehold interests in
the Leased Property and the Customer Deposit Account.
"Assumed Contracts" shall mean all Contracts which are listed
on Schedule 2.2(a) and all leases which are listed on Schedule 4.6(b), unless
the Buyer shall notify the Seller in writing prior to Closing of its intention
not to assume such contracts and/or leases, and all works in progress set forth
on Schedule 1.1(a).
"Assumed Liabilities" shall mean the liabilities, duties and
obligations of the Seller relating to the Assumed Contracts and assumed by the
Buyer pursuant to Section 2.2(a).
"Balance Sheet" shall mean a balance sheet of the Business
prepared in
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accordance with GAAP as at December 31, 1998.
"Balance Sheet Date" shall mean December 31, 1998.
"Bid Package" shall mean that certain letter from the Seller
dated January 8, 1999 and the accompanying information (financial and otherwise)
regarding the Business.
"Business"(or the "Kemper Residential Business") shall mean
the business of retailing, distribution and installation of residential floor
covering products and flooring systems from the following locations:
Rockville, MD 12145 Rockville Pike
Rockville, MD 20852
Fairfax, VA 3895 Pickett Road
Fairfax, VA 22031
Tyson's Corner, VA 7501 Leesburg Parkway
Falls Church, VA 22043
Sterling, VA 113 Executive Drive
Suite 125-129
Sterling, VA 20166
The Business is a part of the business of DuPont Flooring Systems, Inc., which
operates 56 owned operations and has franchise agreements with approximately 30
franchisees throughout the United States. This agreement specifically covers
only assets of the "Kemper" locations described above and specifically excludes
any other assets, liabilities, corporate or proprietary information of DuPont
Flooring Systems, Inc., its parent, its franchisees, or its affiliates, or any
other business, assets and properties of such companies. Further, any
information, disclosures, or schedules required herein shall pertain solely to
the locations described above and the business generated by these locations.
"Buyer" shall mean Carpet Barn, Inc., a Delaware corporation.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Closing" shall have the meaning set forth in Article 3.
"Closing Date" shall have the meaning set forth in Article 3.
"Confidential Information" shall have the meaning set forth in
Article 12.
"Contracts" shall mean all contracts, agreements, indentures,
notes, bonds, loans, guarantees, instruments, leases, sub-leases, deeds of
trust, conditional sales contracts, mortgages,
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franchises, licenses, commitments or other binding arrangements, express or
implied, written or oral, currently in effect to which the Seller is a party and
which relate to the Business or to which any of the assets or properties used by
the Seller in its operation of the Business are bound or subject.
"Customer Deposit Account" shall mean that certain segregated
account which shall be transferred by Seller to Buyer on the Closing Date,
representing customer deposits for works in progress on such date and which
shall be adjusted after the Closing in accordance with Section 6.11.
"Environmental Laws" shall mean the following: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C.A. Sec. 9061 et seq.); the Resource Conservation and Recovery Act (42
U.S.C.A. Sec. 6901 et seq.); the Clean Water Act (33 U.S.C.A. Sec. 1251 et
seq.); the Clean Air Act (42 U.S.C.A. Sec. 7401 et seq.); the Toxic Substance
Control Act (15 U.S.C.A. Sec. 2601 et seq.); the Occupational Safety and Health
Act (29 U.S.C.A. 651 et seq.); and all other federal, state and local statutes,
ordinances, codes, rules, standards, regulations and orders pertaining to the
protection of the environment, health or safety, and all amendments made to, and
regulations promulgated under, the foregoing laws effective at the time the
representations and warranties contained herein are made.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Excluded Assets" shall mean the assets and properties of the
Seller listed on Schedule 2.1.
"GAAP" shall mean generally accepted accounting principles in
the United States, consistently applied.
"Governmental Agency" shall mean any federal, state, local,
regional, municipal, regulatory or foreign department, commission, agency,
board, instrumentality, body or authority having jurisdiction over the Seller or
the Business or assets or properties of the Business.
"Hazardous Material" shall mean the following: (a) all
"hazardous substances," as such term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.A. Sec.
9601(14); (b) all "hazardous wastes, " as such term is defined in the Resource
Conservation and Recovery Act, 42 U.S.C.A. Sec. 6903(5); (c) all materials that
are classified as hazardous or toxic under any Environmental Laws; (d) all
petroleum products, including gasoline, diesel fuel, fuel oil, crude oil and
motor oil, and the constituents of those products; and (e) all medical wastes.
"Indemnitees" shall have the meaning set forth in Section 10.2
and 10.3.
"Intangible Property" shall have the meaning set forth in
Section 4.9.
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"Inventory" shall mean all products (finished or in the
process of manufacture) and whether or not located on the premises of the
Seller, on consignment to a third party, or in transit or storage, packaging
materials, supplies, ingredients, and any warehouse receipts and any other
similar documents relating thereto, held by the Seller for sale in the Business.
"Judgment" shall mean any judgment, writ, order or decree of
or by any court, judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Agency.
"Key Employees" shall mean those of Seller's employees listed
in Schedule 6.1.
"Laws" shall mean all federal, state, local, regional,
municipal or foreign laws, statutes, regulations, ordinances, codes, decrees,
judgments, orders or other legal requirements.
"Leased Property" shall mean all real property leased by the
Seller for use in the Business.
"Permits" shall mean all consents, franchises, licenses,
permits, certificates, authorizations, rights, qualifications, registrations,
orders and other approvals of Governmental Agencies necessary to conduct the
Business as currently conducted and as proposed to be conducted.
"Permitted Liens" shall mean liens for ad valorem real or
personal property taxes or assessments accrued since the Balance Sheet Date but
not due and liens in respect of pledges or deposits under workers' compensation
laws or similar legislation, carriers', warehousemen's, mechanics', laborers'
and materialmen's and similar liens accrued since the Balance Sheet Date if the
obligations secured by such liens are not delinquent and arose in the ordinary
course of business and consistent with past practices, together with liens that
are specifically identified and quantified on the Balance Sheet or in the notes
thereto.
"Persons" shall mean any corporation, partnership, firm, joint
venture, individual, association, trust, unincorporated organization or other
entity.
"Plans" shall have the meaning set forth in Section 4.13.
"Purchase Price" shall have the meaning set forth in Section
2.1.
"Returns" shall mean all federal, state, local and foreign
income, franchise, sales, use, excise, real and personal property, employment
(including FICA and other payroll) and other tax returns, reports, statements
and declarations of every kind and nature.
"Short Period" shall mean, with respect to any Taxable Year of
the Seller which begins before the Closing Date and ends thereafter, the portion
thereof beginning with the first day of such year and ending on the Closing
Date.
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"Surviving Lien" shall mean any Lien affecting the Assets
which the Buyer, prior to the Closing, expressly agrees in writing or by a
notation on a Schedule shall survive the Closing.
"Tax" (including, with correlative meaning, the terms "Taxes"
and "Taxable") shall mean any federal, state, county, local, foreign or other
tax or governmental charge, fee, levy or other assessment of any nature
whatsoever and however denominated, including, without limitation, any income
tax, excise tax, sales tax, use tax, gross receipts tax, franchise tax,
employment and payroll tax, withholding tax, property tax and import duties,
together with any interest and any penalty, addition to Tax or additional amount
imposed by any Taxing Authority due from, or allocable under any applicable law
or agreement to the Business or any assets or properties of the Business.
"Taxable Year" shall mean, with respect to any Tax of the
Seller, the calendar or fiscal year, or shorter period, for which the Tax is
computed and the Return for such Tax is made.
"Taxing Authority" shall mean any Governmental Agency
responsible for the imposition of any Tax.
"Unassumed Liabilities" shall mean all liabilities, duties and
obligations of or related to, and claims not against or not relating to, the
operation of the Business by the Seller or the ownership, possession or use of
any of the Assets prior to the Closing, whether accrued, unaccrued, absolute,
contingent, known or unknown, asserted or unasserted and whether now existing or
arising at any time prior to, at, or after the Closing (including, without
limitation, all liabilities of the Seller, or to any employee, consultant,
officer or director of the Seller, or to their respective spouses and/or
children and/or affiliates, in any amount whatsoever other than for current
wages and compensation for services rendered after the Closing) and any Lien
upon any of the Assets, except only the Assumed Liabilities and Surviving Liens.
"Withdrawal Liability" shall have the meaning set forth in
Section 4.13.
2.0 Sale and Payment.
2.1 Sale and Purchase of the Assets. Upon the terms and
subject to the conditions of this Agreement, and on the basis of this Agreement,
the Seller agrees that on the Closing Date, it will sell, assign, convey,
transfer and deliver to the Buyer, and the Buyer agrees to acquire, accept and
receive from the Seller, for the Purchase Price and in the manner herein below
provided, all of the Seller's rights, title and interests in and to the Assets
except for the Excluded Assets set forth on Schedule 2.1.
In consideration of the sale, assignment, conveyance, transfer
and delivery of the Assets, the Buyer shall pay at the Closing as the purchase
price therefor $1,800,000 (the "Purchase Price"), by bank or certified check or
by wire transfer of immediately available funds to the account of Seller.
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2.2 Assumption of Liabilities.
(a) Subject to the terms and conditions of this Agreement, the
Buyer shall assume as of the Closing all of the Seller's obligations to be
performed after the Closing Date pursuant to the express terms of the Assumed
Contracts; provided, however, that (i) in no event shall the Buyer assume or
otherwise be bound by, or responsible or liable for any liability, duty or
obligation incurred by the Seller in violation of the provisions of this
Agreement or which is substantially in excess of or substantially more
burdensome than disclosed in writing to the Buyer prior to the Closing Date or
any liability, duty or obligation arising out of a breach, violation or default
by the Seller of or under any Assumed Contract or other Assumed Liability, any
Law or Judgment (including any event occurring or fact or circumstance existing
as of or prior to the Closing Date that, with the passage of time or the giving
of notice or both and, without the fault of Buyer, may become such a breach,
violation or default); (ii) the Buyer may elect not to assume any liability,
duty or obligation pursuant to any Assumed Contract with respect to any leased
personal property of the Seller that is not in reasonably satisfactory operating
condition; and (iii) the Buyer may elect not to assume any Assumed Contract if
the Seller or any other party thereto is in material breach or violation thereof
or material default thereunder as of the Closing Date or if any event shall have
occurred as of or prior to the Closing Date or any fact or circumstance shall
exist as of the Closing Date which, with the passage of time or the giving of
notice or both, and without fault of Buyer, would become such a breach,
violation or default. Any election of the Buyer not to assume any Contract,
liability or obligation of the Seller pursuant to clauses (ii) or (iii) of this
Section 2.2(a) shall be made by written notice to the Seller within forty-five
(45) days after the Closing Date.
(b) The Buyer shall not assume or otherwise be bound by, or
responsible or liable for any Unassumed Liabilities.
2.3 Allocation of Consideration. The Buyer and the Seller
hereby agree that the Purchase Price shall be allocated by the Buyer and the
Seller among the Assets as set forth on Schedule 2.3. Such agreed allocation is
intended to comply with Section 1060 of the Code, and the Buyer and the Seller
hereby agree to report the transactions contemplated by this Agreement for
Federal income tax purposes in accordance with such allocation.
3.0 The Closing. Upon the terms and subject to the conditions
of this Agreement, the consummation of the sale and purchase of the Assets
contemplated hereby (the "Closing") shall take place at 10:00 a.m. (New York
City time) on Wednesday, June 30, 1999, at the offices of Herzfeld & Rubin,
P.C., 40 Wall Street, New York, New York 10005, or at such other place or such
other time or date as the parties may mutually agree in writing. The time and
date upon which the Closing occurs is hereinafter referred to as the "Closing
Date." Notwithstanding the actual Closing Date, the Closing shall be effective
as of June 30, 1999, and all results of the operations of the Business on or
after June 30, 1999 shall be for the account of Buyer.
4.0 Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Buyer as follows:
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4.1 Organization, Qualification, Good Standing and
Subsidiaries. The Seller is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, has the
requisite corporate power and authority to carry on its business as presently
conducted and as proposed to be conducted and to own, lease and operate all of
the assets and properties used, or proposed to be used, in connection therewith.
4.2 Bulk Sales and Transfer Taxes. Neither the sale and
transfer of the Assets pursuant to this Agreement, nor the Buyer's ownership,
possession or use thereof from and after the Closing as a result of such sale
and transfer, will result in or be subject to: (a) any Law pertaining to bulk
sales or transfers or fraudulent conveyances which might make such sale or
transfer or any part thereof ineffective as to creditors of or claimants against
the Seller; (b) any State or local sales, use, transfer, excise or license tax,
fee, or charge applicable to any of the Assets; or (c) the imposition of any
liability upon the Buyer for appraisal rights or any other liability of any
nature whatsoever owing to any stockholder of the Seller or any other Person
which has not been expressly assumed by the Buyer in this Agreement.
4.3 Authorization, Validity of Agreement. The Seller has the
full legal right and power (whether corporate or otherwise) and all approvals
and authority to enter into, execute and deliver this Agreement (and each other
agreement delivered or to be delivered in connection herewith) and to fully
carry out its obligations hereunder and thereunder. This Agreement (and each
other agreement delivered or to be delivered in connection herewith), when duly
executed and delivered, will constitute the legal, valid and binding obligation
of the Seller, enforceable against the Seller in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally from time to time in effect, and subject to rules of
law governing specific performance, injunctive relief and other equitable
remedies.
4.4 Compliance with Laws. The operations of the Business have
been, and are being, conducted in compliance with all Laws. No investigations by
any Governmental Agency asserting or alleging any violation of, or noncompliance
with, any such Laws, with respect to the Business are pending or, to the
knowledge of Seller, threatened. Except as set forth on Schedule 4.4, the Seller
possesses, and is operating the Business in compliance with, all Permits. All
Permits in Seller's name shall remain the sole property of Seller and no permits
or licenses shall be transferred to Buyer under this Agreement. All Permits held
by Seller in connection with its operation of the Business are set forth on
Schedule 4.4.
4.5 No Violation. Except as set forth on Schedule 4.5, none of
(a) the execution of this Agreement (and each other agreement delivered or to be
delivered in connection herewith), (b) the performance by the Seller of any of
its obligations hereunder and thereunder or (c) the compliance by the Seller
with any of the provisions hereof and thereof:
(i) violate, or conflict with, or result in a breach of
any provisions of, or constitute a default (or any event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in the
creation of any Lien upon any of the properties or assets of the Seller or any
of the
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terms, conditions or provisions of: (A) the Articles of Incorporation or By-Laws
of the Seller or (B) any note, bond, indenture, mortgage or deed of trust,
license, lease, agreement or other instrument or obligation to which the Seller
is a party or by which the Seller may be bound or by which the business, assets
or properties of the Seller may be affected or secured; or
(ii) violate: (A) any order, writ, injunction, award or
decree of any court, arbitrator or Governmental Agency against or binding upon
the Seller, or upon the securities, properties or business of the Seller, (B)
any statute, law, rule or regulation of any jurisdiction to which the Seller is
subject or (C) any Permit.
4.6 Title to Property; Encumbrances.
(a) The Seller has, and at the Closing will have, good and
marketable title to the Assets free and clear of all Liens except (i) as set
forth on Schedule 4.6(a) and (ii) Permitted Liens.
(b) All leases pursuant to which the Seller leases from any
party personal property in connection with its operation of the Business are
valid, subsisting and effective in accordance with their respective terms, and
there is not, under any personal property lease, any existing default or event
of default (or event that, with notice or passage of time, or both, would
constitute a default, or would constitute a basis of force majeure or other
claim of excusable delay or nonperformance). To the knowledge of the Seller,
there is no fact, event or circumstance which may give rise to an event of
default on the part of the Seller or any other party under any such personal
property lease. Except as set forth on Schedule 4.6(b), no approval or consent
of any Person is needed in order that such personal property leases continue in
full force and effect after the Closing in accordance with their respective
terms. Schedule 4.6(b) contains a list of all personal property leases related
to the Business, together with the location and nature of each of the leased
personal properties, the termination date of each such lease, the name of the
lessor and all rental and other payments made or required to be made during the
twelve-month period ending December 31, 1999. True and complete copies of all
personal property leases listed on Schedule 4.6(b) have been delivered to the
Buyer heretofore. Schedule 4.6(b) describes all Leased Property. Except as set
forth on Schedule 4.6(b), the Seller has a good and marketable lessee's interest
under a Lease with respect to the Leased Property, free and clear of all Liens,
other than Liens listed on Schedule 4.6(b) and Permitted Liens. Except as
described on Schedule 4.6(b), to the best of Seller's knowledge, all buildings
and other structures, and all mechanical systems (including, but not limited to,
electrical, plumbing and heating), roof and structural systems and fixtures
located thereon or therein or otherwise used by the Seller in the conduct of its
businesses as presently conducted are in good operating condition and repair,
reasonable wear and tear excepted.
(c) All personal property owned by the Seller and all personal
property held by the Seller pursuant to personal property leases, in each case,
in connection with its operation of the Business, are in good operating
condition and repair, subject only to ordinary wear and tear, have been
operated, serviced and maintained diligently and properly within the
recommendations and requirements of the manufacturers thereof, are not in need
of maintenance
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or repairs which are material in nature or cost and are suitable and appropriate
for the use thereof made and proposed to be made by the Seller in the operations
of the Business.
4.7 Intangible Property.
(a) Schedule 4.7 sets forth a true, correct and complete list
of all patents, patent applications, trade names, trademarks, service marks,
trademark and service mark registrations and applications, copyrights, copyright
registrations and applications, common law trademarks, service marks, copyrights
and trade names, slogans and all inventions, formulae, processes, computer
programs (and all versions thereof), compilations and data bases, Permits,
grants, franchises and licenses or other rights relating to any of the foregoing
that are attributable to the conduct of, used in, or related to, the Business
which shall be transferred to Buyer, (collectively, the "Intangible Property"),
copies of any documentation in respect of which have been delivered to the
Buyer. Except as specifically listed on Schedule 4.7, no intangible property of
DuPont Flooring Systems, Inc., or its parent or affiliates will be purchased by
or transferred to Buyer.
(b) Except as set forth on Schedule 4.7, all rights to the
Intangible Property which shall be transferred to Buyer are valid, uncontested
and in good standing and the Seller has good and marketable title with respect
to the Intangible Property and there is no conflict with, or infringement of,
the rights of others resulting directly or indirectly from the use of the
Intangible Property or the operation of the Seller's businesses, and the Seller
does not know of any basis for any such conflict or infringement. The Seller has
taken all necessary action to maintain the continued validity of the described
Intangible Property. The Seller possess all rights, licenses or other authority
necessary to have and enjoy the full, free and unencumbered use of all of its
rights in the described Intangible Property without conflict or infringement of
the rights of others relating directly or indirectly to the Intangible Property
and without payment of any royalties or other consideration to any party to this
Agreement or to any other Person. Except as set forth on Schedule 4.7, the
Seller has not granted any outstanding license in any of the Intangible Property
nor is the Seller under any obligation to grant the same. Except as set forth on
Schedule 4.7, the Seller is not using or in any way making use of any trade
secret or confidential information or proprietary property of any Person as to
which the permission or authorization of such other Person is required. Except
as described on Schedule 4.7, the Seller owns and has the unrestricted right to
use every trade secret, know-how, process, formula, discovery, development,
design, technique, customer and supplier list, blueprint, specification,
promotional idea, marketing and purchasing strategy, invention, process,
computer software, computer program, data base, confidential data and
information required for, or incidental to, the design, development,
manufacture, operation, sale and use of all products and services sold or
rendered by or proposed to be sold or rendered by the Seller, free and clear of
all Liens. The Seller has taken reasonable security measures to protect the
secrecy, confidentiality and value of its trade secrets and other technical
information. No employee or consultant of the Seller has any rights to
processes, systems and techniques used by the Seller that are transferred to
Buyer under this agreement. To the knowledge of Seller, no third party has
interfered with, or infringed upon, any Intangible Property transferred
hereunder.
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(c) To the knowledge of the Seller, the Business has all
systems and software necessary or appropriate to address and accommodate "Year
2000" computer systems issues.
4.8 Principal Customers and Suppliers.
(a) Schedule 4.8(a) contains a true and complete list of the
names and addresses of the five (5) largest customers of the Business in terms
of sales during the fiscal year ended December 31, 1998 and shows the
approximate total sales to each such customer during such period. Except for the
customers listed on Schedule 4.8(a), no customer of the Business accounted for
more than 5% of its sales during the fiscal year ended December 31, 1998. Except
as set forth on Schedule 4.8(a), since the Balance Sheet Date to the best of
Seller's knowledge, no customer listed on Schedule 4.8(a) has terminated its
relationship with, or adversely curtailed its purchases from the Seller. The
Seller has not received any notice, nor does Seller have any reason to believe,
that after the Closing the Seller's current customers in the Business will not
enter into a business relationship with the Buyer substantially on the same
terms as such customer had with the Seller prior to the Closing.
(b) Schedule 4.8(b) contains a true and complete list of the
names and addresses of the ten (10) largest suppliers of the Business in terms
of purchases during the fiscal year ended December 31, 1998 and shows the
approximate total purchases by such company from each such supplier during such
period. Except for the suppliers listed on Schedule 4.8(b), there are no
suppliers from whom the Business purchased more than 5% of the goods and
services it purchased during the fiscal year ended December 31, 1998. Except as
set forth on Schedule 4.8(b), at all times since December 31, 1998 the Seller
has had available to it adequate sources of supply consistent with the past,
present and planned requirements of the Business, and, since the Balance Sheet
Date, to the best of Seller's knowledge, there has not been any adverse change
in the business relationship of the Seller with any of the suppliers listed on
Schedule 4.8(b). The Seller has not received any notice, nor does Seller have
any reason to believe, that after the Closing any of its current suppliers of
the Business will not enter into a business relationship with the Buyer
substantially on the same terms as such supplier had with the Seller prior to
the Closing. The Seller has no knowledge of any threat to, or disruption of, the
Seller's regular sources of supply for the Business.
4.9 Agreements. Attached hereto as Schedule 4.9 is a true and
complete list of all Contracts. All of such Contracts are valid, subsisting, in
full force and effect and binding and enforceable upon the parties thereto in
accordance with their terms, except as enforcement may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally from time to time in
effect, and subject to rules of law governing specific performance, injunctive
relief and other equitable remedies. To the best of Seller's knowledge, the
Seller and each other party to the Contracts have satisfied in full or provided
for all of their respective liabilities and obligations thereunder requiring
performance prior to the date hereof, are not in default under any of such
Contracts, nor to Seller's knowledge does any condition exist that with notice
or lapse of time or both would constitute a default thereunder or would
constitute a basis of force majeure or other claim of excusable delay or
nonperformance by any party thereto. To the knowledge of the Seller, there is
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no fact, event or circumstance which may give rise to any event of default on
the part of the Seller or any other party under any Contract. Except as set
forth on Schedule 4.9, to the best of Seller's knowledge, no party to any such
Contract has given notice of its intention to cancel, terminate, modify or fail
to renew any such Contract. Except as set forth on Schedule 4.9, no approval or
consent of any Person is needed in order that the Contracts set forth on
Schedule 4.9 continue in full force and effect after the Closing, and after the
Closing each of such Contracts, if assumed by Buyer hereunder, will be
enforceable by the Buyer in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, reorganization, insolvency, moratorium and
other similar laws affecting the enforcement of creditors' rights generally from
time to time in effect, and subject to rules of law governing specific
performance, injunctive relief and other equitable remedies. All approvals and
consents set forth on Schedule 4.9 will be obtained by the Seller prior to the
Closing, when possible. No payment, other than payments contemplated by this
Agreement, is required to be made to any employee, officer, director or
consultant of the Seller or to any other Person as a result of the consummation
of the transactions contemplated hereby except for sales commissions due in the
regular course of business. The Seller has delivered to the Buyer true and
correct copies when available of all the Contracts listed on Schedule 4.9 and
any other Schedule hereto. The Seller has no reason to believe that any of the
Contracts that are renewable will not be renewed on reasonable terms.
4.10 No Finder's Fee. Neither the Seller nor any of its
officers, directors or employees has retained any finder, broker, agent or other
party, or incurred any liability or is otherwise obligated for any brokerage
fees, commissions, finder's fees or investment banking fees in connection with
this Agreement or the transactions contemplated hereby.
4.11 Employee Benefit Plans.
(a) Every pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus or other incentive plan, any other written or unwritten employee program,
arrangement, agreement or understanding, (whether arrived at through collective
bargaining or otherwise), any medical, vision, dental or other health plan, any
life insurance plan or any other employee benefit plan or fringe benefit plan,
including, without limitation, any "employee benefit plan" as that term is
defined in Section 3(3) of ERISA, currently in effect for the Business
(collectively, the "Plans"), have been made available to Buyer for its review.
No plan is a "multiemployer plan" within the meaning of Title IV of ERISA.
(b) All Plans, all Plan documents and all documents or
instruments establishing or constituting any related trust, annuity contract or
other funding instrument, and any amendments thereto, comply in all material
respects with the provisions of ERISA and the Code and applicable laws, rules
and regulations.
(c) Except as set forth on Schedule 4.11, the administration
of all Plans has been consistent with, and in material compliance with,
applicable requirements of the Code, ERISA and any applicable collective
bargaining arrangements, including, without limitation, compliance on a timely
basis with all requirements for reporting, disclosure and for the
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continuation of group health insurance. Neither the Seller nor any Plan
fiduciary (as defined in Section 3(21) of ERISA), with respect to any Plan, has
engaged in any transaction or acted or failed to act in any manner that violates
Section 404 or 406 of ERISA or engaged in any prohibited transaction (as defined
in Section 4975(c)(1) of the Code) for which there exists neither a statutory
nor regulatory exemption or for which an exemption has not been obtained. All
obligations required to be performed by the Seller under each Plan have been
performed, and the Seller is not in violation of the terms of any Plan, nor does
the Seller have any knowledge of any existing violation by any other party of
any term or requirement of, or applicable to, any Plan. All determination
letters received from the IRS with respect to the Plans are in full force and
effect. All contributions required by law or the terms of each Plan to have been
made under such Plan, or to any trusts or funds established thereunder or in
connection therewith, have been made by the due dates thereof (including any
valid extensions).
(d) No claims, suits or other proceedings are pending or
threatened, and no facts or circumstances exist that could provide a basis for
any such claim, suit or other proceeding, by the Seller's current or former
employees, with respect to any Plan.
(e) The Seller does not maintain any Plan that is subject to
the requirements of Section 412 of the Code.
(f) The Seller will provide notifications to all employees of
the Business of their rights under Section 4980B of the Code within the time
required for the giving of such notification under such section, and Seller has
complied with all of the other provisions of such Section 4980B in connection
with the sale of the Business pursuant to this Agreement.
4.12 Employees and Employee Relations. (a) Schedule 4.12
contains a complete list as of December 31, 1998 and as of the day prior to the
date hereof (and, with respect to compensation matters, for the twelve months
ended as of such date and the period subsequent to December 31, 1998,
respectively), of all employees and consultants of the Seller employed by the
Seller in the operation of the Business, including their names, birthdates, job
titles, base salaries, bonus compensation paid or payable and dates of hire. The
Seller, in the operation of the Business, is in compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours. Except as set forth in Schedule 4.12, the Seller
is not a party to or in the process of negotiating (and there does not otherwise
exist with respect to the Seller) any union, collective bargaining, labor or
similar agreement. Except as set forth on Schedule 4.12, the Business has not
had any strike, picket, work stoppage, work slowdown, or other labor trouble
against it. Except as set forth on Schedule 4.12, in connection with its
operation of the Business, there is no (a) strike, picket, work stoppage, work
slowdown, or other labor trouble pending or, to the knowledge of the Seller,
threatened against the Business; (b) to the knowledge of the Seller, union
organizing activities or union representation question threatened or existing
with respect to the employees of the Seller; (c) unfair labor practice charge or
complaint against the Seller pending or, to the knowledge of the Seller,
threatened before the National Labor Relations Board or any other tribunal; (d)
workman compensation claim pending against the Seller that is not adequately
provided for by insurance; or (e) charge, complaint or suit pending or, to the
knowledge of the Seller,
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threatened against the Seller respecting employment, hiring for employment,
terminating from employment, employment practices, employment discrimination,
terms and conditions of employment, safety, wrongful termination or wages and
hours. To the knowledge of the Seller, it has satisfactory employer-employee
relationships with its employees.
(b) The Seller is not, and the Buyer will not be, pursuant to
any Contract, arrangement or understanding, any applicable Law or Judgment or
otherwise, obligated to pay or liable for the payment of any severance pay or
other benefit by reason of the voluntary or involuntary termination of the
employment of any present or former employee, consultant, agent or manager of
Seller's Business prior to, on or after the Closing Date (other than as a result
of unlawful or tortious conduct of Buyer after the Closing Date or pursuant to
any contract, arrangement or understanding entered into by Buyer after the
Closing Date).
4.13 Litigation. There are currently no outstanding, nor
during the preceding twelve months have there been, any orders, judgments,
injunctions, awards or decrees of any court, governmental or regulatory body or
arbitration tribunal by or to which the Business or Assets is bound or subject
(each an "Order"). Except as set forth on Schedule 4.13, to the best of Seller's
knowledge, there are no claims, suits, actions or administrative, arbitration or
other proceedings, or governmental investigations or inquiries, whether formal
or informal, public or private, involving the Business its operations or the
Assets, which could result in the entry of such an Order.
4.14 Environmental, Health and Safety Matters. Except as
described on Schedule 4.14, the Seller, in the operation of the Business, is in
compliance in all material respects with all federal, state and local laws,
ordinances, codes, rules, standards, regulations, orders and common law
applicable to worker health and safety, air emissions, water discharges, solid
wastes, Hazardous Materials, drinking water, toxic substances, waste storage,
treatment, transportation and disposal, and groundwater and soil monitoring, or
otherwise relating to workers and/or the environment applicable to its business
as presently conducted. Except as so described, there are no violations,
citations or claims pending or threatened with respect to any such matters, and
the Seller has no liability under any such laws; and, except as so described,
the Seller has not entered into or been subject to any judgment, consent decree,
compliance order or administrative order with respect to any such matters or
received any request for information, notice, demand letter, administrative
inquiry or formal or informal complaint or claim with respect to any such
matters or the enforcement of any applicable law, regulation or order related
thereto nor has the Seller ever had a lien imposed on any property, facility,
machinery or equipment owned, leased, operated or used by the Seller in
connection with the presence of Hazardous Materials and there is no reason to
believe that any of such items will be forthcoming. Except as so described, no
Hazardous Materials have been disposed of, discharged, buried or deposited in,
on or under the ground by or on behalf of the Seller within the boundaries of a
location presently or formerly owned, leased, occupied, operated or used by the
Seller or elsewhere in connection with the Business, in violation of, or has not
been reported to a Governmental Agency as required by, any applicable law,
regulation or order (now in effect or in effect at the time of the relevant
act); except as so described, no spills, discharges, leaks, dumping, emissions
or other releases of Hazardous Materials have occurred within the
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boundaries of any such location during or prior to the ownership, lease,
occupancy, operation or use thereof by the Seller in violation of, or has not
been reported to a Governmental Agency as required by, any applicable law,
regulation or order (now in effect or in effect at the time of the relevant
act); except as so described, there are no materials containing urea
formaldehyde, asbestos or polychlorinated biphenyls or any other Hazardous
Materials, in or about any location presently utilized by the Seller in
connection with the Business in violation of any applicable law, regulation or
order.
4.15 Financial Statements. Schedule 4.15 contains true and
complete copies of the consolidated financial statements of the Business as at
and for the fiscal year ended December 31, 1998, including the related
consolidated balance sheets, statements of income, and statements of cash flows
(the "Annual Financial Statements"), and the unaudited consolidated financial
statements of the Business as at and for the three months ended May 31, 1999,
including the related consolidated balance sheets, statements of income and
statements of cash flows (the "Interim Financial Statements"). The Annual
Financial Statements and the Interim Financial Statements and all the historical
financial information contained in the Bid Package fairly present the financial
position of the Seller as at the respective dates thereof and the results of its
operations for the periods then ended. The Annual Financial Statements and the
Interim Financial Statements and all the historical financial information
contained in the Bid Package fairly are in accordance with the books and records
of the Seller and, except as set forth on Schedule 4.15, are in accordance with
GAAP. All of the financial books and records of the Seller relating to the
Business have been made available to the Buyer and such books and records
completely and fairly record in all respects the Seller's financial affairs
which should normally be recorded in financial books and records.
4.16 No Undisclosed Liabilities. Except as set forth on the
Interim Financial Statements or on Schedule 4.16, the Seller, does not have (a)
any liabilities that are material to the Business, the Assets, or the
operations, properties, prospects or condition of the Business (financial or
otherwise) other than as disclosed in this Agreement or specifically identified
as such on the Schedules hereto, or (b) any liabilities or other obligations of
any nature, either accrued or unaccrued, absolute or contingent, direct or
indirect, or otherwise, whether as principal, agent, partner, co-venturer, plan
fiduciary, guarantor or in any other capacity whatsoever, which are not properly
reflected or reserved against in the Balance Sheet (except for liabilities or
obligations which have been incurred in the ordinary course of business since
the Balance Sheet Date in a manner consistent with past practices, which
individually or in the aggregate do not exceed $10,000) and the reserves
reflected in the Balance Sheet are adequate, appropriate and reasonable.
4.17 Absence of Certain Changes or Events. Except as set forth
on Schedule 4.17, since the Balance Sheet Date: (a) the Seller has not suffered
any change which has or could have a Material Adverse Effect, (b) the Seller has
conducted the Business only in the ordinary course of business and consistent
with past practices and (c) the Seller, has not, in connection with the
Business:
(i) suffered any damage, destruction, loss or other
casualty, whether or not
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covered by insurance, adversely affecting the business, assets,
operations, prospects, properties or condition (financial or otherwise)
of the Seller;
(ii) incurred any liabilities or obligations (absolute,
accrued, contingent or otherwise) other than such liabilities or
obligations which (A) individually are less than $10,000 and (B) are
non-material items incurred in the ordinary course of business and
consistent with past practices;
(iii) paid, discharged or satisfied any debts, claims,
liabilities or obligations (absolute, accrued, contingent or otherwise)
other than such debts, claims, liabilities or obligations which (A)
individually are less than $10,000 and (B) were paid, discharged or
satisfied in the ordinary course of business and consistent with past
practices;
(iv) permitted or allowed any of its properties or assets
(real, personal or mixed, tangible or intangible) to be subjected to
any Lien, except for Permitted Liens;
(v) entered into, or agreed to enter into, any material
transaction other than in the ordinary course of business and
consistent with past practice;
(vi) changed its accounting methods or practices or made any
change in depreciation or amortization policies or rates adopted by it;
(vii) taken any action or omitted to take any action which
resulted in a breach of any provisions of, or constituted a default (or
with notice or lapse of time or both, would constitute a default)
under, or resulted in the termination of, or accelerated the
performance required by, or resulted in the creation of any Lien upon
any of the Assets under any of the terms, conditions or provisions of,
any Contract;
(viii) entered into, or agreed to enter into, any contract,
agreement or understanding with respect to any of the foregoing.
4.18 Consents and Approvals. Except as set forth on Schedule
4.18, no approval, consent, license, or authorization of, or declaration or
exemption from, or filing or registration with, any court or other Governmental
Agency or Person is required in connection with the execution and delivery by
the Seller of this Agreement (and each other agreement delivered or to be
delivered in connection herewith) or the consummation and performance by the
Seller of the transactions contemplated hereby and thereby.
4.19 Inventory. (a) All Inventory of the Seller reflected on
the Balance Sheet or acquired after the date thereof is of a quality and
quantity usable and salable in the ordinary and usual course of business, was
acquired in the ordinary course of business, in customary quantities and at
prevailing prices; (b) all Inventory not written off as of the Balance Sheet
Date has been and is valued at the lower of average cost or market (using the
first-in, first-out method); (c) the quantities of each type of Inventory
(whether raw materials, work in process, or finished goods) are not excessive
but are reasonable and warranted in the present circumstances of the business
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of the Seller and (d) all work in process and finished goods inventory are free
of any defect or other deficiency, to the best of Seller's knowledge.
4.20 Accounts Receivable. Each of the accounts receivable of
the Seller reflected on the Balance Sheet or created after the date thereof in
the operation of the Business (a) arose from bona fide sales in the ordinary
course of business; (b) was entered into under circumstances and by methods
usual and customary in the Seller's businesses in the applicable state and the
collection practices used with respect thereto have been and are in all respects
legal and proper; (c) was entered into, and credit was granted pursuant thereto,
consistent with the Seller's historical credit policies and practices; and (d)
are good and fully collectable. The books of the Seller relating to the Business
correctly record the principal balance of all accounts receivable.
4.21 Orders, Commitments and Returns. As of the date of this
Agreement, the aggregate of all accepted and unfulfilled orders for the sale of
merchandise or the provision of services entered into by the Seller in the
operation of the Business is approximately $896, 000.00, and the aggregate of
all contracts or commitments for the purchase of supplies by the Seller in the
operation of the Business is approximately $79,000.00, all of which orders,
contracts and commitments were made in the ordinary course of business and
consistent with past practice. As of the date of this Agreement, in connection
with its operation of the Business, there are no claims against the Seller to
return in excess of an aggregate of approximately $50,000.00 of merchandise by
reason of alleged overshipments, defective merchandise or otherwise, and there
is no merchandise in the hands of customers under an understanding that such
merchandise would be returnable.
4.22 Certain Business Practices. In connection with its
operation of the Business, no officer, director or stockholder of the Seller,
or, to the knowledge of the Seller, no employee, consultant, agent or other
representative of the Seller or any other person acting on behalf of the Seller
has, directly or indirectly, ever given or agreed to give any illegal, unethical
or improper gift or similar benefit to any customer, supplier, governmental
employee or other Person who is or may be in a position to help or hinder the
Seller or assist the Seller in connection with any actual or proposed
transaction.
4.23 Related Party Transactions. Except as set forth on
Schedule 4.23, no officer, director or stockholder of the Seller, and no
Subsidiary of such stockholder owns, directly or indirectly, any interest in
(excepting not more than five (5%) percent stockholdings for investment purposes
in securities of publicly held and traded companies), or is an officer, partner,
director, employee or consultant of or otherwise receives remuneration from, any
Person which is, or is engaged in business as, a lessor, lessee, customer or
supplier of the Business (other than E.I. DuPont de Nemours and its direct and
indirect subsidiaries).
4.24 Other Material Adverse Information. Except as set forth
in this Agreement or in the Interim Financial Statements certificates, exhibits
or schedules delivered pursuant hereto, the Seller has no knowledge of any
information of a materially adverse nature with respect to (a) the working
capital, results of operation, business, assets, liabilities (absolute,
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accrued, contingent or otherwise), reserves, operations, prospects, properties
or condition (financial or otherwise) of the Business; (b) the ability of the
Seller to consummate the transactions contemplated by this Agreement; or (c) the
ability of the Buyer to conduct its business after the consummation of the
transactions contemplated by this Agreement in the manner proposed to be
conducted.
4.25 Schedules. Any matters disclosed on one Schedule shall be
disclosed for purposes of that Schedule only except for specific cross
references from one Schedule to another Schedule. Inclusion in any Schedule of
any disclosure shall not be construed as relevant to any determination of
materiality.
4.26 Assets.
(a) There are no properties or assets used, held for use or
usable by the Seller in the Business which are not set forth on the Schedules
hereto and, except for contemplated additions or deletions in the ordinary
course of business that are not material in the aggregate, the Assets include
all properties and assets the ownership, holding or use of which is necessary
for the performance by the Buyer of any Assumed Liability and the lawful conduct
of the Business.
(b) The Seller has good and marketable title to all of the
Assets, free and clear of any Lien except (i) the lien of property taxes not
delinquent and (ii) the Liens listed on the Schedules hereto. Except as
disclosed on such Schedules, the Seller is the sole and exclusive owner of all
of the Assets, does not use any of the Assets by the consent of any other Person
and is not required to make any payments to others with respect thereto. Upon
the Closing, the Buyer will indefeasibly own and hold good and marketable title
to the Assets, free and clear of all Liens (except for any Surviving Liens) of
any nature whatsoever, whether such Liens are now existing or perfected or at
any time hereafter arise or become perfected pursuant to any Law, Contract or
otherwise.
(c) All leases, subleases, and other Contracts which are being
transferred to the Buyer at the Closing will be, upon the consummation of the
transactions contemplated by this Agreement, in good standing, valid and
effective and grant the leasehold estates or rights of occupancy or use they
purport to grant.
4.27 Tax Matters. Except as set forth on Schedule 4.27, (i)
all Returns required to be filed with any Taxing Authority on or before the
Closing Date by or on behalf of or with respect to the Seller have been or will
be timely filed in accordance with all applicable laws, (ii) as of the time of
filing, the Returns were prepared, or will have been prepared, in accordance
with the appropriate books of account and correctly reflect, or will correctly
reflect, the facts regarding the income, business, assets, operations,
activities and status of the subject parties and any other information required
to be shown therein, (iii) all Taxes that have been shown as due and payable on
the Returns that have been filed have been paid in a timely manner, (iv) the
charges, accruals and reserves for taxes reflected on the books of the Seller
and its financial statements are adequate to cover the Tax liabilities accruing
or payable in respect of Taxable Years ending on or before the Closing Date and
any Short Period, (v) all Returns with
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respect to federal income taxes filed with respect to Taxable Years of the
Seller through the Taxable Year ended 1997 have been examined and closed or are
Returns with respect to which the period during which any Tax due may be
properly assessed under applicable law has expired without extension or waiver,
(vi) the Seller is not delinquent in the payment of any Tax nor has the Seller
requested any extension of time within which to file any Return, which Return
has not since been timely filed, (vii) no deficiency for any Tax or claim for
additional Taxes by any Taxing Authority has been proposed, asserted or assessed
against the Seller, (viii) the Seller has not been granted any extension or
waiver of the statute of limitation period applicable to any Returns, which
extension or waiver is currently in effect, (ix) there is no audit, action,
suit, claim, proceeding or, to the knowledge of the Seller, any investigation or
inquiry, whether formal or informal, public or private, now pending or
threatened against or with respect to the Seller in respect of any Tax, (x) none
of the property owned or used by the Seller is subject to a tax benefit transfer
lease executed in accordance with Section 168(f)(8) of the Internal Revenue Code
of 1954 and (xi) there are no liens for Taxes upon the assets of the Seller
except liens for current Taxes not yet due.
5.0 Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:
5.1 Organization and Qualification. The Buyer is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
5.2 Authorization; Validity of Agreement. The Buyer has the
full legal right and power (whether corporate or otherwise) and all approvals
and authority to enter into, execute and deliver this Agreement (and each other
agreement delivered or to be delivered in connection herewith) and to fully
carry out the Buyer's obligations hereunder and thereunder. The execution and
delivery of this Agreement (and each other agreement delivered or to be
delivered in connection herewith) and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Buyer, and no other proceedings on the part of the Buyer is necessary to
authorize the execution and delivery of this Agreement (and each other agreement
delivered or to be delivered in connection herewith) and the consummation of the
transactions contemplated hereby and thereby. This Agreement (and each other
agreement delivered or to be delivered in connection herewith), when duly
executed and delivered, will constitute the legal, valid and binding obligation
of the Buyer enforceable against the Buyer in accordance with its terms, except
as enforcement may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally from time to time in effect, and subject to rules of
law governing specific performance, injunctive relief and other equitable
remedies.
5.3 No Finder's Fees. Neither the Buyer nor any officer,
director or employee of the Buyer has retained any finder, broker, agent or
other party or incurred any liability or is otherwise obligated for any
brokerage fees, commissions or finder's fees in connection with this Agreement
or the transactions contemplated hereby.
5.4 No Other Representations or Warranties. The Buyer makes no
other
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representations or warranties to the other parties hereto.
6.0 Covenants of the Buyer and the Seller.
6.1 Conduct of Business of the Seller Until the Closing Date.
(a) Except as permitted or required hereby or as the Buyer may
otherwise consent to in writing, between the date hereof and the Closing Date,
the Seller shall:
(i) Operate the Business of the Seller only in the usual,
regular and ordinary manner as conducted by the Seller prior to the date hereof,
and use its best efforts to (A) preserve the present business operations intact,
(B) preserve in full force and effect the Contracts, (C) keep available the
services of the present employees and (D) preserve the present goodwill and
business relationships with customers, suppliers and others having business
dealings with it;
(ii) Maintain the books, records and accounts which relate
to the Business of the Seller in the usual, regular and ordinary manner on a
basis consistent with prior periods;
(iii) In connection with its operation of the Business,
neither: (A) sell, lease or otherwise convey any material asset or group of
assets of the Seller, (B) change the character of the business of the Seller,
(C) assume or incur any indebtedness other than such indebtedness which (x)
individually is less than $10,000 is less than $100,000 in the aggregate and (y)
is assumed or incurred in the ordinary course of business and consistent with
past practices, (D) subject any Assets to any Lien, (E) accelerate the
collection of any accounts receivable of the Seller, (F) effect any
non-scheduled reduction in debt of the Seller, (G) discharge, other than for
cause, any employee or hire any new employee of the Seller, (H) pay, loan or
advance any amount to, transfer or lease any properties or assets (real,
personal or mixed, tangible or intangible) to or from, or enter into any
agreement or arrangement of any kind with, any of its employees, officers,
directors, consultants, stockholders or any affiliate or associate of any of the
foregoing, (I) effect a merger or consolidation involving the Business described
herein, (J) make any capital expenditures in an amount individually in excess of
$5,000 or in excess of $15,000 in the aggregate, (K) void or permit to be
voided, or exercise any option to renew, or extend, any material agreement or
renew any material agreement for any period of time, (L) increase the
compensation (by way of salary, bonus or otherwise) of any officer, director,
employee or consultant of the Seller or (M) enter into any agreement, commitment
or understanding with respect to any of the foregoing;
(iv) Maintain in full force and effect insurance coverage
of the type and in the amount as is maintained as of the date of this Agreement;
(v) Maintain the properties of the Seller used by it in
the Business in customary repair, order and condition; and
(vi) Use its best efforts to give the Buyer prompt written
notice of any
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material change in the working capital, results of operation, business, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves, operations,
prospects, properties or condition (financial or otherwise) affecting the
Business; provided, however, that no such notice shall be deemed to cure any
breach of any representation or warranty made in this Agreement unless the Buyer
specifically agrees thereto in writing.
(b) The Seller shall use its best efforts to prevent the
Seller's officers, directors, employees or consultants from seeking to induce or
otherwise cause any customer, licensee or any other Person with whom the Seller
has a business relationship in the operation of the Business, whether by
Contract or otherwise, to discontinue or alter, in manner adverse to the
business of the Seller or the Buyer or to the Assets, such business
relationship.
(c) From the date hereof through the Closing Date, the Seller
shall not take any affirmative action to terminate without cause the services
of, and shall use its best efforts to retain, the employees set forth on
Schedule 4.12 (the "Key Employees"), whom the Buyer wishes to employ after the
Closing Date.
6.2 Access. From and after the date hereof to and including
the Closing Date, the Buyer and its authorized employees, agents, officers and
financial, legal and other representatives shall be granted full and
unrestricted access, during normal business hours, to the offices, plants,
properties, books, documents and records of the Seller relating to the Business,
including Returns, to conduct such examinations and investigations thereof as
they may desire. The Seller shall also cause its officers, employees and
financial, legal and other representatives to be available for consultation and
discussion with the Buyer and its authorized employees, agents, officers and
financial, legal and other representatives, during normal business hours, and to
furnish such persons with any information as they may, from time to time,
request, and the Seller shall otherwise cooperate fully in permitting the Buyer
to investigate the Business, its properties and its financial condition.
6.3 No Third-Party Transaction. From the date of this
Agreement until the Closing Date, the Seller agrees that it will not, and will
use its best efforts to ensure that no officer, director, employee, consultant
or other agents of the Seller will directly or indirectly (a) contact, initiate
discussions with, or cooperate or negotiate with, or furnish or cause to be
furnished any information to, any Person in connection with any offer or
proposal from, any Person or group to acquire any of the securities of the
Seller, to merge or consolidate with the Business; or (b) enter into any
agreement or understanding with any Person with respect to the foregoing.
6.4 Approvals and Consents. The Seller shall use its best
efforts, to obtain as promptly as possible all waivers, approvals and consents
which are required to be obtained by such party in order to consummate the
transactions contemplated hereby, and shall obtain the approvals and consents
referred to in Sections 4.6(b), and Buyer shall cooperate with Seller in
obtaining such consents and approvals.
6.5 Satisfaction of Conditions. The Seller shall use its best
efforts to comply
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with and satisfy, or cause to be complied with and satisfied, each of the
covenants set forth in this Article 6 and each of the conditions set forth in
Article 7.
6.6 Public Announcements. Each of the parties hereto agrees
not to issue any press release or make any other public announcement with
respect to this Agreement or the transactions contemplated hereby without
obtaining the prior approval of the Buyer, in the case of the Seller, or of the
Seller, in the case of the Buyer (which approval in each case will not be
unreasonably withheld or delayed), except as otherwise required by law.
6.7 Reasonable Efforts; Further Assurances. Each of the
parties hereto will use its best efforts to take or cause to be taken all
actions and to do or cause to be done all things necessary, proper or advisable
under applicable Laws to consummate and make effective the transactions
contemplated by this Agreement (and each other agreement delivered or to be
delivered in connection herewith) and the Seller will use its best efforts to
assure that the Buyer has the benefits of all of the covenants and agreements
contained in this Agreement (and each other agreement delivered or to be
delivered in connection herewith). From and after the date hereof, Seller shall,
at the request of the Buyer, execute and deliver to the Buyer, without further
consideration, all such further assignments, endorsements, instruments of
conveyance and transfer, and other documents as the Buyer may reasonably request
in order to fully effectuate the transactions contemplated by this Agreement
(and each other agreement delivered or to be delivered in connection herewith).
6.8 Employees. Each of the parties hereto agrees that the
Buyer shall have the right, but not the obligation, to discuss, negotiate and
extend offers of employment with and to the Key Employees and any other
employees or consultants of the Seller.
6.9 Collections. On and after the Closing Date, the Buyer
shall have the sole right and authority to collect, for its own account and sole
benefit, all monies payable in respect of the Assets, no matter how or when
earned. If the Seller shall receive any such monies, it shall hold all such
monies in trust for the sole benefit of the Buyer. Within five (5) business days
after receipt thereof, the Seller shall cause the transfer and delivery to the
Buyer of any monies or other property which it may receive after the Closing
Date in respect of the Assets. The Seller authorizes the Buyer to endorse in the
Seller's names all notes, checks, drafts, money orders or other instruments of
payment in respect of the foregoing which may come into the possession of the
Buyer, and the Seller hereby ratifies all that the Buyer shall lawfully do or
cause to be done by virtue hereof. This right shall become irrevocable upon
Closing.
6.10 Notice to Third Parties. On the Closing Date, the Seller
shall execute and deliver to the Buyer for use by the Buyer with respect to
Persons, such as licensors, licensees, sub-licensees and any other third party
that currently has any rights whatsoever in or to the Assets, anywhere
throughout the world, letters prepared jointly by, and mutually acceptable to,
the Buyer and the Seller advising that (i) effective as at the Closing Date, the
Buyer owns the Seller's interests in and to the Assets; (ii) the Buyer is
entitled to receive all monies, payments, receipts, revenues or income derived
therefrom in accordance with this Agreement and (iii) the Buyer has not
purchased any Excluded Asset or assumed any Unassumed Liabilities; and
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requesting that thereafter they render all required statements and activity
reports and make payments of one hundred (100%) percent of all sums thereafter
otherwise due in respect of any period, whether before or after Closing, to the
Buyer in accordance with this Agreement, and provide copies of all notices,
claims or other correspondence directly to the Buyer.
6.11 Post-Closing Adjustment to Customer Deposit Account. As
soon as practicable after the Closing Date, but in no event more than 30 days
thereafter, the Buyer and Seller shall determine the actual amount of customer
deposits held by the Business on June 30, 1999 for work in progress. If such
amount determined by the parties pursuant to the preceding sentence exceeds the
balance of the Customer Deposit Account transferred to the Buyer on the Closing
Date, Seller shall remit to Buyer the amount of such excess; conversely, if such
amount is less than the balance of the Customer Deposit Account transferred to
the Buyer on the Closing Date, Buyer shall remit the amount of such shortfall to
Seller.
7.0 Conditions Precedent to the Obligations of the Buyer. The
obligations of the Buyer to effect the Closing under this Agreement are subject
to the satisfaction, prior to or at the Closing, of each of the following
conditions, any of which may be waived by the Buyer:
7.1 Performance. The Seller shall have performed and complied
in all material respects with all covenants, obligations and agreements required
by this Agreement to be performed or complied with by them prior to or at the
Closing.
7.2 Accuracy of Representations and Warranties. Each of the
representations and warranties of the Seller contained in this Agreement and in
any certificate delivered to the Buyer pursuant hereto shall be true and correct
in all material respects on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date (or on the date to which it
relates, in the case of any representation or warranty which specifically
relates to an earlier date).
7.3 Governmental Approvals; Consents. All consents, permits,
approvals, licenses or orders from any Governmental Agency or other third party
required to be obtained for the lawful consummation of the transactions
contemplated by this Agreement (and each other agreement delivered or to be
delivered in connection herewith) shall have been obtained (including, without
limitation, those set forth on Schedules 4.6(b)).
7.4 Material Adverse Change. From the Balance Sheet Date to
the Closing Date, the Seller shall not have suffered any change which has or
could have a Material Adverse Effect.
7.5 No Actions or Proceedings. There shall not have been any
action taken, or any statute, rule, regulation, decree, judgment, order or
injunction proposed, promulgated, enacted, issued or entered by any Governmental
Agency or judicial authority, and there shall be no action, suit or proceeding
pending or threatened which, in the Buyer's reasonable judgment, makes, or may
make, this Agreement (and each other agreement delivered or to be delivered in
connection herewith) or any of the transactions contemplated hereby or thereby
illegal or
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imposes, or may impose, material damages or penalties in connection therewith,
imposes, or may result in the imposition of, material limitations on the ability
of the Buyer effectively to exercise full rights of ownership of the Assets or
makes the holding by the Buyer of any Assets illegal or subject to any
materially burdensome requirement or condition, requires, or may require, the
Buyer or any of its affiliates or the Seller to cease or refrain from engaging
in any material business or otherwise prohibits, restricts or delays the
consummation of the transactions contemplated by this Agreement (and each other
agreement delivered or to be delivered in connection herewith); increases, or
may increase, in any material respect the liabilities or obligations of the
Buyer arising out of this Agreement (and each other agreement delivered or to be
delivered in connection herewith) or any of the other transactions contemplated
hereby and thereby; or impairs, or may impair, the contemplated benefits to the
Buyer of any of the transactions contemplated by this Agreement (and each other
agreement delivered or to be delivered in connection herewith).
7.6 Bring-Down Certificate. The Buyer shall have received a
certificate from Seller, executed by an executive officer of the Seller and
dated the Closing Date, satisfactory in form and substance to the Buyer and its
counsel, certifying as to the satisfaction by such parties of the conditions set
forth in Sections 7.1 and 7.2 hereof.
7.7 Due Diligence. All due diligence (financial, legal or
otherwise) reviews of the Seller shall have been completed and satisfactory to
the Buyer and its counsel.
7.8 Leases. The Real Property leases of the Seller to be
assumed by the Buyer set forth on Schedule 7.12 (the "Leases") shall be in form
and substance satisfactory to the Buyer and its counsel and shall be in full
force and effect and shall continue in full force and effect after the Closing.
7.9 Corporate Action. All corporate or other actions necessary
to authorize (a) the execution, delivery and performance by the Seller of this
Agreement (and each other agreement delivered or to be delivered in connection
herewith) and (b) the consummation of the transactions contemplated hereby and
thereby, shall have been duly and validly taken by the Seller and shall be in
full force and effect.
7.10 Secretary's Certificate. The Buyer shall have received
from the Seller a certificate, executed by the Secretary or an Assistant
Secretary of the Seller and dated the Closing Date, with respect to the truth
and correctness and current effectiveness of resolutions adopted by the Board of
Directors of the Seller authorizing this Agreement (and each other agreement
delivered or to be delivered in connection herewith) and the consummation of the
transactions contemplated hereby and thereby, and attaching thereto true and
correct copies of Seller's Certificate of Incorporation as in effect on the date
of such certificate.
7.11 Other Deliveries. The Seller shall have delivered to the
Buyer a bill of sale and any such documents necessary to convey to Buyer all of
its rights, title and interest in and to the name "Kemper" and to permit the
Buyer to use such name on an exclusive basis, including documents evidencing
Seller's discontinuation of the use of such name.
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8.0 Conditions Precedent to the Obligations of the Seller. The
obligations of the Seller under this Agreement are subject to the satisfaction,
prior to or at the Closing, of each of the following conditions, any of which
may be waived by such parties:
8.1 Performance. The Buyer shall have performed and complied
in all material respects with all covenants, obligations and agreements required
by this Agreement to be performed or complied with by it prior to or at the
Closing.
8.2 Accuracy of Representations and Warranties. Each of the
representations and warranties made by the Buyer shall be true and correct in
all material respects on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date (or on the date to which it
relates, in each case of any representation or warranty which specifically
relates to an earlier date).
8.3 Governmental Approvals; Consents. All consents, permits,
approvals, licenses or orders from any Governmental Agency or other third party
required to be obtained for the lawful consummation of the transactions
contemplated by this Agreement (and each other agreement delivered or to be
delivered in connection herewith) shall have been obtained.
8.4 No Action or Proceedings. There shall not have been any
action taken, or any statute, rule, regulation, decree, judgment, order or
injunction proposed, promulgated, enacted, issued or entered by any Governmental
Agency or judicial authority, and there shall be no action, suit or proceeding
pending or threatened which, in the reasonable judgment of the Seller, (a)
makes, or may make, this Agreement (and each other agreement delivered or to be
delivered in connection herewith) or any of the transactions contemplated hereby
or thereby illegal or imposes, or may impose, material damages or penalties in
connection therewith or (b) otherwise prohibits, restricts or delays the
consummation of the transactions contemplated by this Agreement (and each other
agreement delivered or to be delivered in connection herewith); increases, or
may increase, in any material respect the liabilities or obligations of such
party arising out of this Agreement (and each other agreement delivered or to be
delivered in connection herewith) or any of the other transactions contemplated
hereby and thereby; or impairs, or may impair, the contemplated benefits to such
party of any of the transactions contemplated by this Agreement (and each other
agreement delivered or to be delivered in connection herewith).
8.5 Officer's Certificate. The Seller shall have received from
the Buyer a certificate, executed by an executive officer of the Buyer and dated
the Closing Date, satisfactory in form and substance to such parties and their
counsel, certifying as to the satisfaction of the conditions set forth in
Sections 8.1 and 8.2.
8.6 Secretary's Certificate. The Seller shall have received
from the Buyer a certificate, executed by the Secretary or an Assistant
Secretary of the Buyer, dated the Closing Date, with respect to the accuracy and
completeness of the resolutions adopted by the Board of Directors of the Buyer
authorizing this Agreement (and each other agreement delivered or to be
delivered in connection herewith) and the consummation of the transactions
contemplated hereby
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and thereby.
9.0 Actions To be Taken at the Closing.
9.1 Documents to be Delivered by the Seller. At the Closing,
the Seller shall deliver or cause to be delivered to the Buyer all of the
following:
(a) the certificates required to be delivered pursuant to
Sections 7.6 and 7.10;
(b) its financial records and statements and all other
documents and items as shall be necessary for the operation of the Business;
(c) certificates with respect to the incumbency and signatures
of certain officers of the Seller who have executed this Agreement and any other
certificates or documents executed or to be executed in connection herewith;
(d) all bills of sale, deeds, documents and other instruments
of sale, assignment, transfer or conveyance as Buyer shall deem appropriate to
vest in Buyer the Assets free and clear of any and all liens, except the
Permitted Liens, executed by the Seller;
(e) the Leases.
9.2 Documents to be Delivered by the Buyer. At the Closing,
the Buyer shall deliver or cause to be delivered to the Seller, all of the
following:
(a) the certificates required to be delivered pursuant to
Section 8.5;
(b) the certificates required to be delivered pursuant to
Section 8.6;
(c) certificates with respect to the incumbency and signatures
of certain officers of the Buyer who have executed this Agreement and any other
certificates or documents executed or to be executed in connection herewith;
(d) the Purchase Price (by wire transfer of immediately
available funds or certified or official bank check);
10.0 Survival of Representations and Warranties;
Indemnification.
10.1 Survival of Representations and Warranties. Except as
otherwise provided herein, the Seller and the Buyer agree that their respective
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing for a period of two (2) years from the
Closing Date; provided, however, that the representations, warranties, covenants
and agreements made with respect to Taxes and ERISA shall survive until the
applicable statutes of limitations have expired and the representations,
warranties, covenants and agreements made with respect to environmental matters
shall survive indefinitely; provided, further, that with
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respect to any covenant, term or provision to be performed hereunder or in any
of the documents delivered pursuant hereto, the right of indemnification under
this Article 10 shall survive until such covenant, term or provision has been
fully paid, performed and discharged. Anything contained in this Agreement to
the contrary notwithstanding, the parties mutually agree that, notwithstanding
any right of any party to investigate the affairs of any other party hereunder
and notwithstanding any knowledge of facts determined or determinable by any
party pursuant to such investigation or right of investigation, (a) each party
has the right to fully rely upon the representations and warranties of the other
parties contained in this Agreement, (b) any facts so determined or determinable
by the Buyer shall not constitute a defense by the Seller to any claim for loss
or damage made by the Buyer against such parties for any breach of any
representation or warranty or breach of any agreement or covenant made by them
in this Agreement and (c) any facts so determined or determinable by the Seller
shall not constitute a defense by the Buyer to any claim for loss or damage made
by the Seller against the Buyer for any breach of any representation or warranty
or breach of any agreement or covenant made by it in this Agreement.
10.2 Seller's Indemnity
(a) Breach of Representations and Warranties: Seller shall
defend, indemnify, save and hold harmless Buyer from all loss, damage, claim,
injury, cost or expense (including reasonable attorney's fees and court costs)
("Losses") incurred by Buyer by reason of the breach of any representation or
warranty of Seller contained in this Agreement.
(b) Certain Liabilities: Seller will indemnify and hold Buyer
harmless from and against Losses resulting from or arising out of the operation
of the Business prior to the Closing, including, without limitation:
(i) any obligation or liability with respect to any
employee or former employee of Seller or its Subsidiaries and
Affiliates arising out of the Business prior to Closing;
(ii) any fine, penalty or other liability arising
from the violation of any law or government regulation applicable to
the Business prior to Closing or as a result of the operation of the
Business by Seller or its Subsidiaries and Affiliates prior to the
Closing;
(iii) any litigation or claim arising out of or
relating to the conduct of the Kemper Residential Business prior to the
Closing Date, including without limitation, any litigation or claim
arising out of or relating to infringement or alleged infringement of
any Intellectual Property right of any person by the Business on or
prior to the Closing Date; and
(iv) the Unassumed Liabilities.
10.3 Buyer's Indemnity
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(a) Breach of Representations and Warranties: Buyer shall
defend, indemnify, save and hold harmless Seller from all Losses incurred by
reason of the breach of any representation or warranty of Buyer contained in
this Agreement.
(b) Assumed Liabilities: Effective as of the Closing Date,
Buyer shall assume, and hereby agrees to pay, discharge, perform, satisfy and
fulfill when due, and to defend, indemnify, and save and hold harmless Seller
from Losses with respect to Assumed Liabilities including without limitation:
(i) any type of product claim arising with respect to
a product sold by Buyer and/or shipped to a third party subsequent to
Closing;
(ii) any obligation or liability with respect to any
employee of Seller hired by Buyer to the extent arising from services
rendered subsequent to Closing;
(iii) any fine, penalty or other liability to the
extent arising from the violation of any law applicable to the Kemper
Residential Business as a result of the operation of the Kemper
Residential Business by Buyer subsequent to the closing;
(iv) any failure by Buyer to duly perform or observe
any term, provision or covenant of this Agreement to be observed or
performed by Buyer on, prior or subsequent to Closing; and
(v) obligations in respect of periods after the
Closing Date (other than as a result of breaches or defaults occurring
on or prior to the Closing Date) under the Contracts.
10.4 Survival and Limitation of Representations and Warranties
and Indemnification Provisions
(a) All representations and warranties under Article 4 and the
indemnity obligations under Sections 10.2 and 10.3 with respect thereto shall
survive the closing for the periods set forth in Section 10.1 and shall apply to
all notices of claims and/or liabilities for which a party is put on notice on
or before the expiration of such period, regardless of whether the actual costs
and expenses are incurred or assessed after the expiration of such period.
(b) When the Buyer has knowledge of facts that Buyer believes
will give rise to indemnification under Section 10.2 and when the Seller has
knowledge of facts that could potentially give rise to indemnification under
Section 10.3, the knowledgeable Party shall promptly notify the other Party of
such facts in writing and provide the other Party with the opportunity to
undertake such investigation and remedial actions as that other party deems
necessary.
(c) Notwithstanding anything to the contrary herein, the
indemnification by an indemnifying party under Sections 10.2 and 10.3 shall be
available only in the event such Losses
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exceed Twenty-Five Thousand U.S. dollars (US $25,000.00) in the aggregate for
all claims made for indemnification by the indemnified party, in which case,
such party shall be entitled to indemnification for all of such Losses (subject
to subparagraph (d) below).
(d) Notwithstanding anything to the contrary herein, Seller
shall not be required to indemnify Buyer pursuant to Section10.2 (other than
under Section 10.2(a)) and Buyer shall not be required to indemnify Seller
pursuant to Section 10.3 for Losses which in the aggregate exceed the Purchase
Price.
11.0 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing, as follows:
(i) By mutual agreement of all of the parties
hereto;
(ii) By the Buyer if on the Closing Date any of the
conditions specified in Section 7 have not been met or fulfilled;
(iii) By the Seller if on the Closing Date any of the
conditions specified in Section 8 have not been met or fulfilled; or
(iv) By any party hereto if the Closing has not
occurred on or before July 31, 1999.
(b) In the event of the termination of this Agreement as
provided above, this Agreement shall forthwith become void and there shall be no
further liability on the part of any of the parties hereto or the Buyer's
officers, directors or employees except for any liability resulting from the
breach of this Agreement prior to its termination or as otherwise provided
herein.
12.0 Confidential Information. The Buyer and the Seller, each
agree, one with the other, that it will not, at any time, directly or
indirectly, or permit any of its affiliates, associates, directors, officers or
agents to, disclose or furnish to any other person, firm, partnership,
corporation or any other entity, except (i) in the course of the proper
performance of such Person's duties to each and its affiliates hereunder and
(ii) to its counsel (provided that such counsel shall treat any Confidential
Information (as defined below) disclosed or furnished with the same degree of
care as such counsel uses with respect to confidential information of other
clients of such counsel which is disclosed or furnished to such counsel), any
Confidential Information (as defined below) pertaining to the Business, unless
required to do so by a court of competent jurisdiction, by any governmental
agency having supervisory authority over the business and operations of either
party, or by any administrative body or legislative body (including a committee
thereof) with jurisdiction to order such Person to divulge, disclose or make
accessible such information; provided, however, that such Person shall provide
each party with notice of the requirement of such disclosure promptly after such
Person is notified thereof
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and prior to his disclosure thereof so as to enable the other to challenge the
order compelling such disclosure. At the Closing, the other shall, and shall
cause its affiliates, associates, directors, officers, employees and agents to,
give the Buyer all Confidential Information and all other documents, drawings,
work papers, lists, memoranda, notes, records and other data (including copies
thereof) constituting or pertaining to any of the Confidential Information.
For purposes of this Agreement, "Confidential Information"
shall mean non-public information concerning any of the Business' financial
data, statistical data, strategic business plans, product development (or other
proprietary product data), customer and supplier lists, customer and supplier
information, information relating to practices, processes, techniques,
procedures, methods, trade secrets and marketing plans and all other non-public,
proprietary and confidential information of the Business, that, in any case, (i)
is not otherwise generally available to the public, (ii) is not generally known
in any industry in which either party is or was involved and (iii) has not been
disclosed to others not subject to confidentiality agreements.
Each party agrees that any breach or threatened breach of the
covenants contained in this Article 12 would irreparably injure the other and
that there is no adequate remedy at law for any such breach or threatened
breach. Accordingly, each party agrees that the other in addition to pursuing
any other remedies it may have in law or in equity, may obtain injunctive relief
in any court, foreign or domestic, having the capacity to grant such relief, to
restrain any such breach or threatened breach and to enforce the provisions of
this Article 12.
13.0 Non-Competition. The Seller agrees that for a period of
five years after the Closing Date (the "Non-Competition Period"), it will not,
in any manner, directly or indirectly, except as specifically contemplated by
the terms of this Agreement (i) be engaged in or participate in the ownership,
management, operation or control of, or act in any advisory or other capacity
for, any entity (a "Competing Entity") which now or at any time during the
NonCompetition Period engages in the retail sale of floor coverings to the
residential markets in Virginia, Washington D.C. and Maryland, (ii) solicit or
divert any business or any customer or supplier from the Business or assist any
person, firm or corporation in doing so or attempting to do so or (iii) on its
own behalf or on behalf of any person or entity, directly or indirectly, hire or
solicit the employment of any employee who was employed by the Business at any
time during the twelve (12) months immediately preceding such date of hiring or
solicitation; provided, however, that, notwithstanding the foregoing, (x) Seller
and its affiliates may make solely passive investments in any class or series of
equity securities of a Competing Entity which is publicly traded so long as such
Person shall not own or control, directly or indirectly, either as principal,
manager, partner, investor, lender or in any other capacity, equity securities
which constitute five percent (5%) or more of the voting rights or equity
ownership of such Competing Entity, (y) Seller may purchase and/or operate
businesses which are primarily engaged in the sale of floor coverings to the
commercial market in the Virginia, Washington D.C. and Maryland, even if such
businesses engage, to an "incidental degree" (as defined below), in the retail
sale of floor coverings to the residential market and (z) Seller's franchisees
shall be disregarded in determining compliance with this Article 13. For the
purpose of this Article 13, a business shall be deemed to be engaged in the
retail sale of floor coverings to the residential market to an "incidental
degree" if less than 60% of its revenues are derived from such sales.
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The Seller and the Buyer hereby agree that the covenants
contained in this Article 13 are reasonable and necessary covenants for the
protection of the Buyer and the Business under the circumstances, and further
agree that if, in the opinion of any court of competent jurisdiction such
covenants are not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of these
covenants which to the court shall appear not reasonable and to enforce the
remainder of these covenants as so amended. The Seller agrees that any breach or
threatened breach of the covenants contained in this Article 13 would
irreparably injure the Buyer and that there is no adequate remedy at law for any
such breach or threatened breach. Accordingly, the Seller agrees that the Buyer
in addition to pursuing any other remedies it may have in law or in equity, may
obtain injunctive relief in any court, foreign or domestic, having the capacity
to grant such relief, to restrain any such breach or threatened breach by the
Seller and to enforce the provisions of this Article 13.
14.0 Miscellaneous.
14.1 Notices. All notices which are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be deemed
to have been duly given when delivered in person, or upon receipt when
transmitted by telecopy or telex, or three (3) days after dispatch by certified
or registered first class mail, postage prepaid, return receipt requested, to
the party to whom the same is made or given:
If to the Buyer: Carpet Barn, Inc.
c/o Branin Investments, Inc.
100 Maiden Lane
New York, New York 10005
Attention: Philip A. Herman
Telephone: (212) 898-8888
Telecopy: (212) 898-8800
With a Copy to: Herzfeld & Rubin, P.C.
40 Wall Street
New York, New York 10038
Attention: Andrew J. Levinson, Esq.
Telephone: (212) 344-5500
Telecopy: (212) 344-3333
[email protected]
If to the Seller: DuPont Flooring Systems, Inc.
175 TownPark Drive, Suite 400
Kennesaw, GA 30144
Attention: James E. Dentzer, CFO
Telephone: 770-420-7915
Telecopy: 770-420-7751
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With a Copy to: Pete Bennett, General Counsel
175 Town Park Drive, Suite 400
Kennesaw, GA 30144
Telephone: (770) 792-4060
Telecopy: (770) 420-7751
[email protected]
-----------------------------------
14.2 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.3 Assignment. This Agreement shall not be assignable by the
Seller or the Buyer; however, either party may assign its rights and remedies,
and delegate its obligations, to any one or more of its affiliates, provided
that no such assignment shall relieve either party of any of its obligations
hereunder.
14.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware without
regard to the conflict of laws principles thereof.
14.5 Jurisdiction; Service. Each of the parties hereto by its
execution hereof:
(a) irrevocably submits to the non-exclusive jurisdiction of
the state courts of the States of New York and Delaware and of the United States
District Courts for the Southern District of New York and Northern District of
Delaware for the purpose of any suit, action or other proceeding arising out of
or based on this Agreement (and each other agreement delivered or to be
delivered in connection herewith) or the subject matter hereof or thereof; and
(b) waives, to the extent not prohibited by applicable law,
and agrees not to assert, by way of motion, as a defense or otherwise, in any
such proceeding brought in any of the above-named courts, any claim that it is
not subject personally to the jurisdiction of such courts, that its property is
exempt or immune from attachment or execution, that any such proceeding is
brought in an inconvenient forum, that the venue of such proceeding is improper,
or that this Agreement (and each other agreement delivered or to be delivered in
connection herewith) or the subject matter hereof or thereof may not be enforced
in or by such court.
The parties hereto hereby agree that any action brought under
this Agreement (and each other agreement delivered or to be delivered in
connection herewith) shall be brought exclusively in one of the above-mentioned
courts.
The parties hereto hereby consent to service of process in any
such proceeding in any manner permitted by the laws of the State of Delaware and
agree that service of process by registered or certified mail, return receipt
requested, at its address specified in or pursuant to Section 14.1 is reasonably
calculated to give actual notice.
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14.6 Entire Agreement. This Agreement, the schedules and
exhibits attached hereto, and any other agreement, exhibit, schedule, or
instrument to be delivered expressly pursuant to the terms hereof constitute the
entire Agreement between the parties hereto. There are no side or other
agreements between the Buyer and the Seller or any of its affiliates other than
as set forth herein.
14.7 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by each of the parties hereto or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
right, power or privilege.
14.8 Binding Effect. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors,
assigns, heirs and personal representatives.
14.9 Headings. The headings of the various articles and
sections of this Agreement are inserted for convenience of reference only, and
shall not affect in any way the meaning or interpretation of this Agreement.
14.10 Severability. If any provision of this Agreement or the
application thereof shall for any reason be invalid or unenforceable, such
provision shall be limited only to the extent necessary in the circumstances to
make such provision valid and enforceable and its partial or total invalidity or
unenforceability shall in any event not affect the remaining provisions of this
Agreement which shall continue in full force and effect.
14.11 Pronouns. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the day and year first above written.
CARPET BARN, INC.
By: /s/ William Poccia
------------------------------
Name: William Poccia
Title: Chief Financial Officer
DUPONT FLOORING SYSTEMS, INC.
By: /s/ James E. Dentzer
------------------------------
Name: James E. Dentzer
Title: Chief Financial Officer
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