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UNITED STATES 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) May 20, 1996
GALEY & LORD, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1593207
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
980 Avenue of the Americas
New York, New York 10018
(Address of principal executive offices) Zip Code
212/465-3000
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year, if changed
since last report.
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Item 5. Other Events.
Incorporated by reference herein and attached as an exhibit hereto is the press
release of Galey & Lord, Inc. (the "Company") dated May 20, 1996, announcing
that the Company had signed a definitive agreement to purchase the outstanding
capital stock of Dimmit Industries, S.A. de C.V. ("Dimmit") and certain related
assets from Farah Incorporated ("Farah") for approximately $22.5 million in
cash.
The proposed acquisition of Dimmit is scheduled to close in early June 1996 and
is subject to customary closing conditions including obtaining consents of the
lenders of the Company and Farah.
Exhibit
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1. Press Release of Galey & Lord, Inc., dated May 20, 1996.
2. Asset Purchase Agreement, dated as of May 20, 1996, among Galey & Lord,
Inc., Galey & Lord Industries, Inc., Farah Incorporated, Farah U.S.A.,
Inc. and Dimmit Industries, S.A. de C.V. (Excluding Schedules and
Exhibits).
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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.
Galey & Lord, Inc.
(Registrant)
/s/ Michael R. Harmon
Michael R. Harmon
Executive Vice-President,
Chief Financial Officer
(Principal Financial and
Accounting Officer),
Treasurer and Secretary
May 31, 1996
Date
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Exhibit 1
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PRESS RELEASE
Contacts: Arthur C. Wiener
(212) 465-3000
Michael R. Harmon
(910) 665-3037
GREENSBORO, N.C., MAY 20, 1996/PRNewswire - Galey & Lord, Inc. (NYSE:GNL) today
announced that it has signed a definitive agreement to purchase Dimmit
Industries, S.A. de C.V. from Farah Incorporated (NYSE:FRA) for approximately
$22.5 million in cash. Dimmit is composed of six manufacturing facilities in
Piedras Negras, Mexico and sews and finishes pants and shorts for the men's
casual wear market. Galey & Lord is extending its franchise as a manufacturer
through its newly formed subsidiary G&L Service Company, North America, Inc. and
will produce finished garments made from the Company's fabric and sell these
garments to the Company's current customers. Mr. Arthur C. Wiener, Chairman and
CEO of Galey & Lord, indicated that "there has been a trend by our customers to
outsource portions of their overall garment production. Mexico, because of
NAFTA, has presented an alternative option to imports from the Pacific Rim. By
being able to offer one-stop shopping and make the manufacturing chain more
efficient, we believe we will be able to reduce our customers lead time, as well
as eliminating some of the difficulties that exist in coordinating the movement
of products between multiple contractors. This more efficient system should
enable us to continue to mitigate the effects of garments from the Pacific Rim
and expand our core fabric business. We also believe that our expertise in the
finishing of fabrics can be translated into new and better products in the
finishing of garments."
Mr. Wiener also emphasized that "the Company's customer base will remain the
same and that we will not become a competitor of our customers."
The proposed acquisition of Dimmit is scheduled to close in early June 1996 and
is conditioned upon consents of the lenders of Galey & Lord and Farah.
Galey & Lord is a leading manufacturer of high-quality woven cotton and
cotton-blended apparel fabrics, sold principally to manufacturers of sportswear
and commercial uniforms. The Company also manufactures fabrics used in home
furnishings, including comforters, bedspreads and curtains.
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Exhibit 2
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of May 20,
1996, by and among Galey & Lord, Inc., a Delaware corporation ("Parent"), and
Galey & Lord Industries, Inc., a Delaware corporation and wholly owned
subsidiary of Parent ("Industries"); and Farah Incorporated, a Texas corporation
("Farah"), Farah U.S.A., Inc., a Texas corporation ("Seller"), and Dimmit
Industries, S.A. de C.V., a Mexican corporation and subsidiary of Seller
("Dimmit") (collectively, the "Seller Parties").
RECITALS:
1. Dimmit is a Mexican maquiladora engaged in the business of sewing and
finishing men's, women's and boys' apparel (the "Business");
2. The Buyer Parties wish to purchase from Farah and Seller certain assets
of Seller used in the Business and all of the issued and outstanding capital
stock of Dimmit through the acquisition of such assets and capital stock of
Dimmit by New Subsidiary, which subsidiary will be organized for the purpose of
consummating the transactions contemplated hereby, on the terms and subject to
the conditions set forth herein; and
3. Farah and Seller wish to sell, transfer, assign and deliver to New
Subsidiary certain assets of Seller used in the Business and all of the issued
and outstanding capital stock of Dimmit, on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements stated herein, the parties agree as
follows:
ARTICLE I
GENERAL DEFINITIONS
For purposes of this Agreement, the terms set forth below in this Article I
shall have the meanings ascribed to them below:
Affiliate: with respect to any person, means any person that directly or
indirectly controls, is controlled by or is under common control with such
person.
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Assembly Services Agreement: has the meaning set forth in Section 8.3(b) of
this Agreement.
Auditors: has the meaning set forth in Section 2.8(b) of this Agreement.
best efforts: means a party's efforts in accordance with reasonable
commercial practice and consistent with its past practice.
Business: has the meaning set forth in the Recitals hereof.
Buyer Parties: means, collectively, Parent, Industries and New Subsidiary
Claim Notice: has the meaning set forth in Section 7.4(a) of this
Agreement.
Closing: has the meaning set forth in Section 2.4 of this Agreement.
Closing Adjustment Amount: has the meaning set forth in Section 2.8(a) of
this Agreement.
Closing Date: has the meaning set forth in Section 2.4 of this Agreement.
Code: means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute thereto.
Contracts: has the meaning set forth in Section 4.12 of this Agreement.
Dimmit Assets: has the meaning set forth in Section 2.9 of this Agreement.
Dimmit Stock: has the meaning set forth in Section 2.1(a) of this Agreement
Documents: has the meaning set forth in Section 4.2 of this Agreement.
Eagle Pass Warehouse: means the warehouse located in Eagle Pass, Texas
leased by Seller pursuant to the lease agreement dated as of March 13, 1996
between A&S Trading Inc. and Seller.
Election Period: has the meaning set forth in Section 7.4(a) of this
Agreement.
Employee Plans: has the meaning set forth in Section 6.2(b) of this
Agreement.
Environment: means soil, surface waters, ground waters, land, stream
sediments, surface or subsurface strata, and ambient air.
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Environmental Audit: has the meaning set forth in Section 6.12 of this
Agreement.
Environmental Condition: means any condition with respect to the
Environment on or affecting the Piedras Factory or the Eagle Pass Warehouse,
whether or not yet discovered, which constitutes a violation of any
Environmental Law or which results in any damage, loss, cost, expense, claim,
demand, order or liability to or against any of the Buyer Parties or the Seller
Parties, directly or indirectly as a result of the ownership or use of the
Piedras Factory or the Eagle Pass Warehouse and/or the operation of the
Business.
Environmental Indemnification Matters: has the meaning set forth in Section
7.7(a) of this Agreement.
Environmental Laws: means (a) any Governmental Rule regulating or relating
or pertaining to the Environment or the protection of human health implemented
as of the date hereof, previously enforced or subsequently enacted, (b) any
Governmental Rule implemented as of the date hereof, previously enforced or
subsequently enacted, that asserts jurisdiction over the Piedras Factory or the
Eagle Pass Warehouse or the operations or activity at the Piedras Factory or the
Eagle Pass Warehouse that relates or pertains to the Environment, including
without limitation, those which regulate the presence, release, emission, threat
of release, use, handling, manufacturing, generation, production, storage,
treatment, processing, transportation or disposal of any Hazardous Substance,
including without limitation (i) requiring any permit, license, approval,
consent or authorization, or the renewal thereof, (ii) regulating the amount,
form, manner of storage, transport and/or disposal of Hazardous Substances, or
(iii) requiring any reporting, inspection report, business plan, notification,
or any other dissemination of or access to information regarding Hazardous
Substances to a Governmental Body, including warnings or notices to tenants,
subtenants, employees, occupants, invitees or consumers.
Environmental Permit: means any Permit required as of the date hereof by
any Environmental Law.
Excluded Assets: has the meaning set forth in Section 2.2 of this
Agreement.
Farah Assets: has the meaning set forth in Section 2.1(b) of this
Agreement.
Final Adjusted Purchase Price: has the meaning set forth in Section 2.6 of
this Agreement.
Final Balance Sheet: has the meaning set forth in Section 2.8 of this
Agreement.
Final Statement: has the meaning set forth in Section 2.8 of this
Agreement.
Financial Statements: has the meaning set forth in Section 4.9 of this
Agreement.
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Finished Good: means any garment that is 100% complete and packed in a
shipping carton awaiting shipment to Seller.
GAAP: means United States generally accepted accounting principles in
United States Dollars.
Governmental Body: means any United States federal, state, local or Mexican
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof (including without limitation, environmental protection,
planning and zoning), or any quasi-governmental or private body asserting,
exercising or empowered to assert or exercise any regulatory authority
thereunder and any person directly or indirectly owned by and subject to the
control of any of the foregoing, or any court, arbitrator or other judicial or
quasi-judicial tribunal.
Governmental Rule: means any statute, law, treaty, rule, code, ordinance,
regulation, permit, certificate or order of any Governmental Body or any
judgment, decree, injunction, writ, order or like action of any Governmental
Body.
Hazardous Substances: means (a) any pollutant, toxic substance,
contaminant, chemical, hazardous waste, hazardous material, petroleum product,
oil, or radioactive material; (b) any substance, gas material or chemical which
is defined as or included in the definition of "hazardous substances," "toxic
substances," "hazardous materials," "hazardous wastes," or words of similar
import under any Governmental Rule or Environmental Law; (c) radon gas,
asbestos, urea formaldehyde foam insulation or polychlorinated biphenyls in
excess of federal, state, local, or Mexican safety guidelines, whichever are
more stringent; (d) any other chemical, material, gas or substance, the exposure
to or release of which is or may be prohibited, limited or regulated by any
Governmental Body, or (e) any other chemical, material, gas or substance that
does or may pose a hazard to health and/or safety of the occupants of the
Piedras Factory or the Eagle Pass Warehouse, or the owners and/or occupants of
property adjacent to or surrounding the Piedras Factory or the Eagle Pass
Warehouse.
Indemnified Amounts: has the meaning set forth in Section 7.1 of this
Agreement.
Indemnified Party: has the meaning set forth in Section 7.4(a) of this
Agreement.
Indemnifying Party: has the meaning set forth in Section 7.4(a) of this
Agreement.
Indemnity Notice: has the meaning set forth in Section 7.4(b) of this
Agreement.
Initial Adjusted Purchase Price: has the meaning set forth in Section 2.6
of this Agreement.
Lien: means any lien, pledge, claim, charge, mortgage, security interest or
other encumbrance, option or other rights of any kind or nature whatsoever.
Materials: means cut fabric, Trim, raw materials, shipping boxes and related
materials.
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New Subsidiary: means a newly formed and wholly owned subsidiary of
Industries.
Permit: means any permit, license, approval, consent or authorization
issued by a Governmental Body or required by any Governmental Rule.
Permitted Liens: means (a) Liens for current taxes and assessments not yet
due, (b) inchoate workmen, repairmen, warehousemen, customer, employee and
carriers Liens arising in the ordinary course of business, in each case with
respect to obligations or claims which are either not delinquent, or are being
contested in good faith and by appropriate proceedings conducted with due
diligence, and (c) Liens on the office equipment under the leases set forth on
Schedule 1 to this Agreement.
person: means any individual, firm, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, government or agency or subdivision thereof or any other entity.
Piedras Factory: has the meaning set forth in Section 2.1(b) of this
Agreement.
Pre-Closing Adjustment Amount: has the meaning set forth in Section 2.7(a)
of this Agreement.
Pre-Closing Balance Sheet: has the meaning set forth in Section 2.7(a) of
this Agreement.
Pre-Closing Statement: has the meaning set forth in Section 2.7(a) of this
Agreement.
Pre-Closing Taxes: has the meaning set forth in Section 6.9 of this
Agreement.
Purchase Price: has the meaning set forth in Section 2.5 of this Agreement.
Purchased Assets: has the meaning set forth in Section 2.1 of this
Agreement.
Subsidiary: of any person, means any entity, more than 50% of the
outstanding voting interests of which are owned, directly or indirectly, by such
person, by one or more other Subsidiaries of such person or by such person and
one or more other Subsidiaries of such person.
Survival Period: has the meaning set forth in Section 7.3 of this
Agreement.
Tax: has the meaning set forth in Section 4.16(b) of this Agreement.
Third Party Claim: has the meaning set forth in Section 7.4(a) of this
Agreement.
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Trim: means thread, buttons, fusibles, lining, pocketing, waste band
materials, zippers, labels, hanging tags, plastic bags, hangers and such other
items used in the manufacture of apparel.
Water Treatment Equipment: has the meaning set forth in Section 7.7(e) of
this Agreement.
WIP: means any garment physically located at the Piedras Factory on the
Closing Date regardless of the state of completion of such garment, except for
any garment classified as a Finished Good.
ARTICLE II
PURCHASE, SALE AND DELIVERY
Section 2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, at the Closing Farah and Seller shall sell, transfer, convey, assign
and deliver to New Subsidiary, and New Subsidiary shall acquire and purchase
from Farah and Seller, all right, title and interest in and to the Purchased
Assets. For purposes of this Agreement, but subject to Section 2.2, the term
"Purchased Assets" shall mean all of the following assets, properties and rights
of Farah and Seller owned by them immediately prior to the Closing:
(a) All of the capital stock owned by Farah and Seller in Dimmit,
representing 100% of the outstanding capital stock of such corporation
("Dimmit Stock") free and clear of all Liens;
(b) All of Seller's tools, machinery, equipment, furniture, fixtures,
replacement and spare parts, computer systems, owned software and hardware,
and other assets ("Farah Assets") physically located at Dimmit's facility
located in Piedras Negras, State of Coahuila, Mexico (the "Piedras
Factory") and the Eagle Pass Warehouse, used or held for use in and
necessary for the operation of the Business as presently conducted free and
clear of all Liens other than Permitted Liens. A list of all Farah Assets
as of March 31, 1996 is attached hereto as Schedule 2.1(b); and
(c) All of Seller's rights in the contracts, leases, agreements or
commitments listed on Schedule 2.1(c) for the purchase, sale or rental of
goods and services that relate to the operation of the Business at the
Piedras Factory free and clear of all Liens other than Permitted Liens.
Section 2.2 Excluded Assets. Notwithstanding Section 2.1, the Purchased
Assets shall not include, and the Buyer Parties will not acquire or purchase any
right, title or interest in any of the following (collectively, the "Excluded
Assets"):
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(a) Seller's WIP, Finished Goods, Materials and chemicals inventories
at the Piedras Factory on the Closing Date;
(b) Seller's "Scan-Pack" computer system, software, hardware,
intellectual property and related peripherals; provided, however, that from
and after the Closing, Seller Parties agree to make available to Buyer
Parties and Dimmit, Seller's "Scan-Pack" computer system, software,
hardware, intellectual property and related peripherals as necessary for
the continuing operations of the Business and for such reasonable period of
time necessary for Buyer Parties to replace such system.
(c) Any other assets listed on Schedule 2.2;
(d) All rights of any nature whatsoever in the trademarks, trade
names, logos or other rights that utilize the names Farah(R), Savane(R),
John Henry(R), Farah Clothing Company(R), PROCESS 2000(R) or any other
trademarks owned or licensed by Seller or any of it Affiliates; and
(e) All chemical formulations, technical processes, including without
limitation, soft washes and enzyme treatments and washes, valuable trade
secrets and know-how, including PROCESS 2000 (the "Farah Processes");
provided, however, that Farah and Seller acknowledge that, after the
Closing, Buyer Parties and Dimmit will produce products using "dip" or
"immersion" finishing processes which are either independently developed or
acquired by the Buyer Parties which may be substantially similar to the
Farah Processes or may contain chemical formulations, technical processes
or other know-how which may be substantially similar to the chemical
formulations, technical processes or know-how comprising the Farah
Processes.
Section 2.3 No Assumption of Liabilities. Except as set forth on Schedule
2.3, Buyer Parties are not assuming, and shall not be deemed to have assumed,
any liabilities or obligations of Farah or Seller of any kind, character, nature
or description whatsoever, whether known or unknown, direct or indirect,
absolute or contingent. Without limiting the generality of the foregoing, it is
hereby agreed and acknowledged that Buyer Parties are not assuming, and shall
not have any obligation for or with respect to, any liability or obligation of
Farah or Seller (a) under any Employee Plans, (b) in respect of any Taxes or
other governmental charges or assessments of whatever kind or nature,(c) to any
employees or former employees of Farah or Seller for wages, salary, vacation
pay, sick leave pay or any other pay for time not worked, back pay and damages
payable under make whole remedies pursuant to any Governmental Rule governing
employment practices, or severance pay, unemployment compensation or any other
payment, and (d) any liabilities arising under any Environmental Laws, as a
result of any Environmental Condition (irrespective of whether such
Environmental Condition is known to any of the Seller Parties or is described or
referred to herein).
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Section 2.4 Closing. The closing of the purchase and sale provided for
herein (the "Closing") shall take place on June 5, 1996 at 10:00 a.m., or at
such other time and on such other date as are mutually agreed to by the Buyer
Parties and the Seller Parties, at the offices of Baker & McKenzie, 2001 Ross
Avenue, Suite 4500, Dallas, Texas. The date on which the Closing is held is
referred to in this Agreement as the "Closing Date."
Section 2.5 Purchase Price. Subject to the adjustments provided in this
Agreement, the purchase price to be paid at the Closing for the Purchased Assets
is US$22,505,000 (the "Purchase Price"). The Purchase Price shall be adjusted
pursuant to Section 2.8 below and Parent shall cause New Subsidiary to pay at
the Closing the aggregate sum of US$22,505,000 plus or minus the Pre-Closing
Adjustment Amount to Seller by wire transfer in immediately available funds to
the account(s) designated in writing by Seller.
Section 2.6 Purchase Price Adjustment.
(a) The Purchase Price to be paid at the Closing shall be adjusted by
the Pre-Closing Adjustment Amount in accordance with the provisions of
Section 2.7. The Purchase Price, as adjusted pursuant to Section 2.7, is
referred to herein as the "Initial Adjusted Purchase Price." After the
Closing Date, the Purchase Price will be further adjusted by the Closing
Adjustment Amount in accordance with the provisions of Section 2.8. The
Purchase Price, as adjusted pursuant to Section 2.8, is referred to herein
as the "Final Adjusted Purchase Price."
(b) Seller has provided the Buyer Parties Schedule 2.1(b) which lists
all Farah Assets based on a physical inventory as of March 31, 1996, and
has provided Buyer Parties the aggregate book value of the Farah Assets.
The Seller Parties and the Buyer Parties agree that no adjustments will be
made to the Purchase Price pursuant to Sections 2.7 or 2.8 for the
aggregate valuation of the Farah Assets set forth on Schedule 2.1(b).
Section 2.7 Pre-Closing Adjustment.
(a) No later than May 22, 1996, Seller shall prepare and deliver to
Buyer Parties a balance sheet with respect to Dimmit (the "Pre-Closing
Balance Sheet") as of March 31, 1996 and a statement (the "Pre-Closing
Statement") reflecting the calculation of the Pre-Closing Adjustment
Amount, accompanied by a certificate of an officer of each of the Seller
Parties to the effect that the Pre-Closing Balance Sheet and the
Pre-Closing Statement have, to his/her knowledge, been prepared in
accordance with the terms of this Agreement. The Pre-Closing Balance Sheet
shall be prepared in accordance with GAAP (without footnotes and year-end
adjustments) applied on a consistent basis with prior periods. The
Pre-Closing Adjustment Amount shall be the difference between the current
assets and current liabilities (as determined in accordance with GAAP
applied on a consistent basis with prior periods) of Dimmit reflected on
the Pre-Closing Balance Sheet. Any excess of current liabilities over
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current assets will decrease the Purchase Price and any excess of current
assets over current liabilities will increase the Purchase Price.
(b) Buyer Parties shall be given the opportunity to review the
Pre-Closing Balance Sheet and the Pre-Closing Statement at least ten (10)
business days prior to the Closing Date and make any reasonable objections
it may have in writing to Farah and Seller so that the parties may resolve
any differences prior to Closing. During such review period and the period
of any dispute referred to in the preceding sentence, the Seller Parties
shall provide the Buyer Parties full access to the books, records,
facilities and employees of Dimmit and the Seller (with respect to the
Business) and the Seller Parties shall cooperate fully with the Buyer
Parties, in each case to the extent required by the Buyer Parties in order
to investigate the basis for the preparation of the Pre-Closing Statement
or for any such dispute; provided, however, that any such investigation
shall be conducted in such a manner as not to interfere unreasonably with
the operation of the Business. If no written objections are made by any of
the Buyer Parties prior to Closing, then the Pre-Closing Balance Sheet and
the Pre-Closing Statement shall be deemed acceptable for purposes of
calculating the Pre-Closing Adjustment Amount; provided, however, Buyer
Parties shall not be deemed to have waived any rights they may have to
object to the Final Balance Sheet and Final Statement provided in Section
2.8.
Section 2.8 Closing Adjustment.
(a) Within ninety (90) calendar days following the Closing Date, Farah
and Seller shall prepare and deliver to Buyer Parties a balance sheet with
respect to Dimmit (the "Final Balance Sheet") as of the Closing Date (prior
to the effects of the transactions occurring at the Closing) and a
statement (the "Final Statement") reflecting the calculation of the Closing
Adjustment Amount, accompanied by a certificate of an officer of each of
Farah and Seller to the effect that the Final Balance Sheet and the Final
Statement have, to his/her knowledge, been prepared in accordance with the
terms of this Agreement. The Final Balance Sheet shall be prepared in
accordance with GAAP (without footnotes and year-end adjustments) applied
on a consistent basis with prior periods. As used herein, "Closing
Adjustment Amount" means the difference between the current assets and
current liabilities of Dimmit reflected on the Final Balance Sheet (as
determined in accordance with GAAP applied on a consistent basis with prior
periods). Any excess of current liabilities over current assets will
decrease the Purchase Price and any excess of current assets over current
liabilities will increase the Purchase Price.
(b) Buyer Parties shall have a period of thirty (30) calendar days
after delivery of the Final Balance Sheet and the Final Statement to review
such documents and make any objections they may have in writing to Seller.
If written objections are delivered to Seller by any of the Buyer Parties
within such thirty-day period, then the parties shall attempt to resolve
the matter or matters in dispute. If no written objections are made within
such thirty-day period, then the Final Balance Sheet and the Final
Statement shall be final and binding on the
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parties hereto. If disputes with respect to the Final Balance Sheet or the
Final Statement cannot be resolved by Buyer Parties and Seller within
thirty (30) calendar days after the delivery of the objections thereto,
then, at the request of either any of the Buyer Parties or Seller, the
specific matters in dispute shall be submitted to the Dallas office of a
"Big Six" accounting firm, other than Coopers & Lybrand, LLP or Ernst &
Young, L.L.P. (the "Auditors") as may be approved by Seller and Buyer
Parties, which firm shall render its opinion as to such matters. Based on
such opinion, such independent accounting firm will then send to the
parties its determination of the specified matters in dispute, which
determination shall be final and binding on the parties hereto. The fees
and expenses of the Auditors shall be allocated between the Seller and New
Subsidiary in the same proportion that the aggregate amount of such
remaining disputed items so submitted to the Auditors that is
unsuccessfully disputed by each (as finally determined by the Auditors)
bears to the total amount of such remaining disputed items so submitted
(without taking into account any deduction pursuant to Section 2.8(c)
below).
(c) If the Final Adjusted Purchase Price exceeds the Initial Adjusted
Purchase Price, then within five (5) days following the final determination
thereof, New Subsidiary shall pay Seller by wire transfer in immediately
available funds to the account or accounts designated by Seller the excess
amount. If the Initial Adjusted Purchase Price exceeds the Final Adjusted
Purchase Price, then within five (5) days following the final determination
thereof, Seller shall pay New Subsidiary by wire transfer in immediately
available funds to the account or accounts designated by New Subsidiary the
excess amount. Any payment by New Subsidiary or Seller under this Section
2.8(c) shall bear interest at a rate per annum equal to the prime rate of
interest charged by Citibank, N.A., from time to time, calculated from the
Closing Date to the date of such payment.
Section 2.9 Allocation Reporting. The Buyer Parties and the Seller Parties
agree to report the allocation of the Purchase Price among the Purchased Assets
and, if the Buyer Parties make an election under Section 338 of the Code with
respect to the acquisition of the Dimmit Stock hereunder, among the assets of
Dimmit (the "Dimmit Assets"), in each case as set forth in Schedule 2.9. As soon
as practicable after the Closing Date, but in no event later than December 31,
1996, the Buyer Parties and the Seller Parties, as appropriate, shall jointly
prepare IRS Form 8594 or any other forms required under Sections 338 or 1060 of
the Code to report the allocation of the Purchase Price and any adjustments
thereto in conformity with the preceding sentence which reflects, among other
things, the agreed fair market value of the Purchased Assets and the Dimmit
Assets. Each party hereto agrees not to assert, in connection with any Tax
return, Tax audit or similar proceeding, any allocation that differs from that
set forth in this Section 2.9.
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ARTICLE III
[INTENTIONALLY LEFT BLANK]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FARAH AND SELLER
Each of Farah and Seller, jointly and severally, represent and warrant to
each of Buyer Parties the following:
Section 4.1 Corporate Status and Good Standing. Each of Farah, Seller and
Dimmit is a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, with full corporate power
and authority to own and lease its properties and to conduct business as the
same exists. Each of Farah, Seller and Dimmit is duly licensed or qualified to
do business as a foreign corporation in all states or jurisdictions in which the
nature of its business requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on such party or the
Purchased Assets, the Dimmit Assets or the Business.
Section 4.2 Authorization. Each of Farah, Seller and Dimmit has full
corporate power and authority, and its board of directors and shareholders have
taken all necessary action to authorize it, to execute and deliver this
Agreement or any documents executed in connection herewith (collectively, the
"Documents"), to consummate the transactions contemplated herein and therein and
to take all actions required to be taken by it pursuant to the provisions hereof
and thereof, and each of this Agreement and the Documents constitutes the valid
and binding obligation of each of Farah, Seller and Dimmit that is a party
thereto, enforceable in accordance with its terms, except as enforceability may
be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally.
Section 4.3 Non-Contravention. Dimmit is not in violation of any term of
its Articles of Association or its bylaws. Except as set forth on Schedule 4.3,
neither the execution and delivery of this Agreement or any Document, nor the
consummation of the transactions contemplated herein or therein, does or will
(a) constitute a violation or breach of the Articles of Incorporation or
Articles of Association (or other charter document) or the bylaws of Farah,
Seller or Dimmit, (b) conflict with or violate any Governmental Rule applicable
to Farah, Seller or Dimmit or which is applicable to the Business or by which
any of the Purchased Assets or the Dimmit Assets are bound or affected, (c)
constitute a default under or a breach of, or result in acceleration of any
obligation
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under, any provision of any contract, lease, mortgage or other instrument to
which Farah, Seller or Dimmit is a party or by which the Business or any of the
Purchased Assets or the Dimmit Assets may be affected or secured, which default,
breach or acceleration has not been waived, (d) result in the creation of any
Lien on any of the Purchased Assets or the Dimmit Assets, or (e) result in the
termination of any license, franchise, lease or Permit to which Farah, Seller or
Dimmit is bound or which binds or affects the Business.
Section 4.4 Consents and Approvals. Except as set forth in Schedule 4.4,
no authorization, approval, order, license, Permit, franchise or consent and no
registration, declaration, notice or filing by or with any Governmental Body or
other party is required for the execution and delivery by any of the Seller
Parties of this Agreement or any Document or the consummation by any of the
Seller Parties of the transactions contemplated hereby and thereby.
Section 4.5 Validity. There are no pending or threatened judicial or
administrative actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by Farah, Seller
or Dimmit or in connection with this Agreement.
Section 4.6 Title. Farah and Seller are the true and lawful owners of the
Dimmit Stock, free and clear of any and all Liens, liabilities and assignments
of any kind. Except as set forth on Schedule 4.6, Seller is the true and lawful
owner of the Farah Assets, free and clear of any and all Liens, liabilities and
assignments of any kind, other than Permitted Liens. Farah and Seller have the
full right to sell and transfer to New Subsidiary good and marketable title to
the Purchased Assets, free and clear of any and all Liens, other than Permitted
Liens with respect to Farah Assets. The execution and delivery to New Subsidiary
of the instruments of transfer of ownership contemplated by this Agreement will
vest good and marketable title to the Purchased Assets in New Subsidiary, free
and clear of all Liens, other than Permitted Liens with respect to Farah Assets.
Except for the Water Treatment Equipment, the Purchased Assets and the Dimmit
Assets (a) are adequate and suitable for the conduct of the Business, and (b)
comprise all of the assets and properties of the Seller Parties used in and
necessary for the conduct of the Business as it is currently being conducted
other than the Excluded Assets. Schedule 4.6(a) sets forth a correct and
complete list of the Dimmit Assets in all material respects. Dimmit is the true
and lawful owner of the Dimmit Assets, free and clear of any and all Liens,
other than Permitted Liens.
Section 4.7 Liabilities. Except as set forth in Schedule 4.7, or the
Pre-Closing Balance Sheet or the Final Balance Sheet, there is no existing,
contingent or threatened material liability, obligation, Lien or claim of any
nature (absolute, accrued, contingent or otherwise) that relates to or has been
or may be asserted against Dimmit or the Purchased Assets, the Dimmit Assets or
the Business.
Section 4.8 Employees and Related Matters. Schedule 4.8 is a complete list
of all employees of Dimmit, and employees of Seller working at the Piedras
Factory, listing the title or position held, base salary, any commissions or
other compensation paid or payable, and all employee benefits received by such
employees. Dimmit has no material liability and has operated its Business
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in compliance with all Governmental Rules with respect to all employee benefit
or other labor-related contributions for its present and former employees,
including without limitation the payment of any severance, salaries, bonuses,
vacation premiums, social security contributions and worker housing fund
contributions, except where such non-compliance would not have a material
adverse effect on Dimmit, the Purchased Assets, the Dimmit Assets or the
Business. Since March 31, 1996, neither Seller nor Dimmit has (i) increased the
compensation payable or to become payable by the Seller or Dimmit to any
employee of the Business, except for increases in salary or wages of its
employees in the ordinary course of business in accordance with past practice,
(ii) granted any severance or termination pay to (except as may be required by
existing arrangements), or entered into any employment or severance agreement
with, any such employees or (iii) established, adopted or entered into any
collective bargaining agreement with respect to any such employees.
Section 4.9 Financial Statements; No Material Change. Annexed hereto as
Schedule 4.9 are true and complete copies of (a) the unaudited balance sheet of
Dimmit as of October 31, 1995, and the related unaudited statement of income for
the year then ended (the "Year-End Financial Statements"), (b) the unaudited
balance sheet of Dimmit as of March 31, 1996 and the related statement of income
for the five (5) months then ended (the "Interim Financial Statement") (the Year
End Financial Statements and the Interim Financial Statements are collectively
referred to herein as the "Financial Statements"), and (c) the "Expense Element
Summary for Location 42" provided by Seller for each of the three months ended
September 30, 1995, October 31, 1995 and November 30, 1995 (the "Monthly General
Ledger"). The Financial Statements have been, and the Pre-Closing Balance Sheet
and the Final Balance Sheet will be, prepared from the books and records of
Dimmit in accordance with GAAP (without footnotes and year-end adjustments)
applied on a consistent basis with prior periods and the Financial Statements
fairly present the financial position of Dimmit as of such dates and the results
of its operations as of the dates or throughout the periods indicated, and the
Pre-Closing Balance Sheet and the Final Balance Sheet will fairly present the
financial position of Dimmit as of the dates indicated thereon. The Monthly
General Ledger has been prepared from the books and records of Dimmit and
Seller, and the Monthly General Ledger fairly presents the operating expenses of
the Business throughout the periods indicated thereon in all material respects.
There has been no material adverse change in the Business since the date of the
most recent Interim Financial Statement, and no event has occurred which could
be expected to lead to or cause such a material adverse change.
Section 4.10 Capitalization; Ownership. The total authorized capital stock
and the issued and outstanding capital of Dimmit is set forth on Schedule 4.10.
All of the shares of Dimmit Stock have been duly authorized and are validly
issued, fully paid and nonassessable and are owned of record by Farah and Seller
free and clear of all Liens, except as set forth on Schedule 4.10. At the
Closing, Farah and Seller will convey to the New Subsidiary good and marketable
title to the Dimmit Stock, free and clear of all Liens. There are no outstanding
subscriptions, options, warrants, rights or privileges, preemptive or
contractual, to acquire any shares of capital stock of Dimmit, or agreements
therefor, or any securities or obligations of any kind convertible into any
class of capital stock of Dimmit. Dimmit has no Subsidiaries and does not own
any shares of stock or any other
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securities of any corporation and does not have any interest in any limited
liability company, firm, partnership, association, joint venture, trust or other
entity.
Section 4.11 Litigation. Except as set forth in Schedule 4.11, (a) there
are no legal actions, suits, proceedings, arbitrations, controversies or
investigations (whether or not purportedly on behalf of or against any of the
Seller Parties) pending or, to the knowledge of each of the Seller Parties,
threatened or contemplated, by any Governmental Body or other party against any
of the Seller Parties which relates to or affects Dimmit or the Purchased
Assets, the Dimmit Assets or the Business or the transactions contemplated by
this Agreement and (b) neither Farah, Seller nor Dimmit is a party to or subject
to any judgment, order, writ, injunction or decree which relates to or affects
Dimmit or the Purchased Assets, the Dimmit Assets or the Business or the
transactions contemplated by this Agreement.
Section 4.12 Contracts. Schedule 4.12 contains a complete and correct list
of all of the contracts, leases, agreements and commitments (the "Contracts")
relating to or affecting Dimmit or the Purchased Assets, the Dimmit Assets or
the Business which by its terms or is currently expected to result in the
payment or receipt by any of the Seller Parties of more than $10,000 and the
Seller Parties have heretofore delivered or made available to Buyer Parties true
and complete copies of each such written Contract and a true and complete
summary of each such oral Contract. The Contracts are valid and binding
obligations of Seller or Dimmit, as the case may be, and are enforceable by and
against Seller or Dimmit, as the case may be, in accordance with their
respective terms, and the Contracts listed in Schedule 4.12 have not been
modified or amended except as disclosed in Schedule 4.12 or in any other
Schedule to this Agreement and neither Farah, Seller nor Dimmit is a party or
subject to or bound by, directly or indirectly, any other Contract which should
be described in Schedule 4.12. Seller and Dimmit have performed all obligations
required to be performed by them, have paid all amounts required to be paid by
them and are not in default in any material respect, under any Contract and no
event has occurred thereunder in each case which, with the lapse of time or the
giving of notice or both, would constitute such a default and, to the knowledge
of the Seller Parties, no other party to any Contract is in default in any
material respect thereunder. Except as set forth on Schedule 4.4, none of the
Contracts (including without limitation, the Contracts set forth on Schedule
2.1(c)), requires the consent of or the assignment by a third party in
connection with the transactions contemplated hereby.
Section 4.13 Compliance with Laws. Schedule 4.13 sets forth a correct and
complete list of all material Permits of any Governmental Body presently held by
any of the Seller Parties in connection with the Business. The Permits listed in
Schedule 4.13 constitute all material Permits which are required in order to
allow Seller and Dimmit to continue to carry on the Business and use the Dimmit
Assets and the Farah Assets with respect thereto as now conducted. The Seller
Parties are in compliance in all material respects with such Permits and all
applicable Governmental Rules required to be complied with in order to allow
Seller and Dimmit to continue to carry on the Business and use the Farah Assets
and the Dimmit Assets as now being conducted and used by it, and neither Farah,
Seller or Dimmit has received any written notification of, or is aware of, any
asserted failure to comply with any such Permits or Governmental Rules. The
Farah Assets were temporarily
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imported into Mexico by Dimmit and are of United States of America origin, and
to the knowledge of the Seller Parties the Farah Assets were imported in
compliance in all material respects with Mexican customs law and regulations.
Section 4.14 Employee Disputes. Except as set forth on Schedule 4.14,
neither Farah, Seller nor Dimmit has any agreements, whether or not expired,
with any union, trade association or other employee organization with respect to
the Business or its operations and there are no unions, trade associations or
other organizations representing or purporting to represent or attempting to
represent any employees of Seller (who are involved in the Business) or Dimmit.
There are no pending or threatened disputes, grievances, charges, complaints,
petitions or proceedings involving the employees of Seller (who are involved in
the Business) or Dimmit or any collective bargaining representatives, and there
is not pending or threatened, any strike, lockouts or general work stoppages
which would cause a cessation of operations of the Business or any facility of
the Business, and neither Seller nor Dimmit has been the subject of any orders
to show cause, notices of debarment or administrative proceedings relating to
its employment practices with respect to the Business.
Section 4.15 Insurance. The Seller Parties have adequate insurance coverage
for the Purchased Assets, the Dimmit Assets and the operation of the Business.
Set forth on Schedule 4.15 is a complete and correct list of all policies of
insurance carried by any of the Seller Parties or pursuant to which any of the
Seller Parties (only as such insurance policies relate to Dimmit, the Purchased
Assets, the Dimmit Assets or the Business) is named beneficiary or pursuant to
which the Purchased Assets, the Dimmit Assets or the Business are insured. All
of such policies are in full force and effect; all premiums due and payable in
respect of such policies have been paid in full; and there exists no default or
other circumstance which would create the substantial likelihood of the
cancellation or non-renewal of any such policy. The Seller Parties have notified
such insurers of any material claim known to any of the Seller Parties which
they believe is covered by any such insurance policy and have delivered or made
available to the Buyer Parties, a copy of any such claim.
Section 4.16 Taxes.
(a) Each of Farah, Seller and Dimmit have timely and duly filed (giving
effect to extensions duly taken) all federal, state, local or foreign Tax
returns or reports required to be filed by, or with respect to, Dimmit, the
Purchased Assets, the Dimmit Assets, or the Business on or prior to the date
hereof, and will have so filed all such returns or reports required to be filed
by them on or prior to the Closing Date.
(b) The Tax returns and reports described in subparagraph (a) above reflect
or will reflect accurately all liability for taxes, charges, fees, levies or
other assessments of any nature whatsoever (including without limitation, all
federal, state, local and foreign income taxes, estimated taxes, value added
taxes, excise taxes, sales taxes, use taxes, transfer taxes, gross receipts
taxes, franchise taxes, employment and payroll related taxes, ad valorem taxes,
property taxes and import and export duties, whether or not measured in whole or
in part by net income), together with any related penalties,
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interest and additions to taxes (any of the foregoing being referred to herein
as a "Tax"), for the periods covered thereby. Farah, Seller and Dimmit have paid
or will pay all Taxes required to be paid by each of them with respect to the
periods and/or the returns and reports described in subparagraph (a) above. All
Taxes with respect to Dimmit, the Purchased Assets, the Dimmit Assets or the
Business not yet due but incurred on or before the Closing Date (including
without limitation, Taxes arising out of the transactions hereby contemplated)
are or will be adequately disclosed and fully provided for on the books and
records and the financial statements of Farah, Seller and Dimmit. Farah, Seller
and Dimmit have fully and timely collected, withheld and/or paid over all Taxes
with respect to Seller, Dimmit or any of their respective employees (including,
without limitation, income and social security Taxes) or with respect to the
Purchased Assets, the Dimmit Assets or the Business that are required to be
collected, withheld and/or paid over to a Governmental Body or taxing authority.
(c) Except as set forth in Schedule 4.16(c), neither Farah, Seller or
Dimmit are currently being audited by any Governmental Body or taxing authority
with respect to the periods and/or the returns and reports described in
subparagraph (a) above, and there are no claims or assessments pending against
Farah, Seller or Dimmit with respect to Dimmit, the Purchased Assets, the Dimmit
Assets or the Business. Neither Farah, Seller nor Dimmit has agreed to waive or
extend the statute of limitations with respect to any such Taxes or Tax returns
or reports or is a party to any agreement providing for the allocation or
sharing of any such Taxes or has a contractual obligation to indemnify any other
person with respect to any such Taxes. No written claim has ever been made by a
Governmental Body or taxing authority in a jurisdiction where Farah, Seller or
Dimmit does not presently file Tax returns or reports with respect to Dimmit,
the Purchased Assets, the Dimmit Assets or the Business that Farah, Seller or
Dimmit is or may be subject to taxation by that jurisdiction. True, correct and
complete copies of all Tax returns and reports filed by Farah, Seller or Dimmit
with respect to Dimmit, the Purchased Assets, the Dimmit Assets or the Business
(including, without limitation, any transfer pricing studies or reports prepared
for or submitted to the Mexican taxing authorities) have been made available to
Parent and Industries. True, correct and complete copies of any closing
agreements with respect to Dimmit, the Purchased Assets, the Dimmit Assets or
the Business which were entered into with any Governmental Body or taxing
authority have heretofore been furnished to Parent and Industries.
Section 4.17 Finder's Fees. Neither Farah, Seller nor Dimmit has incurred
any liability for finder's or brokerage fees or agent's commissions in
connection with this Agreement or the transactions hereby contemplated.
Section 4.18 Environmental Compliance. Except as set forth in Schedule
4.18:
(a) There are no pending, and the Seller Parties have no actual knowledge
of any threatened, litigations or proceedings before any Governmental Body in
which any person or entity alleges (i) the violation of any Environmental Law,
or (ii) any Environmental Condition at, from or caused by operations now or
previously conducted at the Piedras Factory or the Eagle Pass Warehouse, and
none of the Seller Parties has (i) received any written notice of and has actual
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knowledge that any third party, Governmental Body or any employee or agent
thereof, has determined or has alleged, or requires an investigation to
determine that there exists any Environmental Condition or any violation of any
Environmental Law; (ii) received any written notice under the citizen suit
provision of any Environmental Law in connection therewith; or (iii) received
any written request for inspection or request for information, notice, demand,
administrative inquiry or any formal or informal complaint or claim with respect
to or in connection with any Environmental Condition or as a result of any
violation of any Environmental Law.
(b) No Lien has been imposed or asserted on any of the Seller Parties'
assets by any Governmental Body or other person in connection with any
Environmental Law or Environmental Condition.
(c) Each of the Seller Parties (i) has all Environmental Permits necessary
for the activities and operations of the Business and for any past or ongoing
alterations or improvements at the Piedras Factory or the Eagle Pass Warehouse,
and (ii) is not in violation of any such Environmental Permits and has applied
for renewals where necessary.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER PARTIES
Each of Parent and Industries, jointly and severally, represent and warrant
to each of Farah, Seller and Dimmit the following:
Section 5.1 Corporate Status and Good Standing. Each of Parent and
Industries is, and on the Closing Date the New Subsidiary will be, a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to own
and lease its properties and to conduct its business as the same exists on the
date hereof and on the Closing Date. Each of Parent and Industries is, and on
the Closing Date the New Subsidiary will be, duly qualified to do business as a
foreign corporation in all states in which the nature of its business requires
such qualification. except where the failure to be so qualified would not have a
material adverse effect on such party.
Section 5.2 Authorization. Each of Parent and Industries has, and on the
Closing Date the New Subsidiary will have, full corporate power and authority
and its board of directors and stockholders have taken, and on the Closing Date
the New Subsidiaries' Board of Directors and its stockholders will have taken,
all necessary action to authorize it, to execute and deliver this Agreement and
the Documents, to consummate the transactions contemplated herein and to take
all actions required to be taken by it pursuant to the provisions hereof or
thereof, and each of this Agreement and the Documents constitutes, and with
respect to the New Subsidiary will constitute as of the Closing Date, the valid
and binding obligation of each of Parent, Industries and New Subsidiary that is
a party hereto, enforceable in accordance with its terms, except as
enforceability
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may be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally.
Section 5.3 Non-Contravention. Neither the execution and delivery of this
Agreement or any Document, nor the consummation of the transactions contemplated
herein or therein, does or will violate, conflict with or result in breach of or
require notice or consent under any law, the charter or bylaws of either Parent,
Industries or New Subsidiary or any provision of any agreement or instrument to
which either Parent, Industries or New Subsidiary is a party, except for that
certain Credit Agreement dated April 28, 1995, as amended, among Parent,
Industries, First Union National Bank of North Carolina, as agent for the
lenders thereunder, and the various lenders thereunder.
Section 5.4 Validity. There are no pending or threatened judicial or
administrative actions, proceedings or investigations which question the
validity of this Agreement or any action taken or contemplated by either Parent
and Industries in connection with this Agreement.
Section 5.5 New Subsidiary. On the Closing Date and prior to the
consummation of the transactions contemplated herein, New Subsidiary will not
have any business, will not conduct any business and will not have any operating
assets, and Industries will own all of the issued and outstanding capital stock
of New Subsidiary.
Section 5.6 Environmental Investigation. Buyer Parties acknowledge having
inspected the Piedras Factory and Farah Assets, and having obtained a report of
such investigations prepared by RMT, Inc. dated as of April, 1996.
ARTICLE VI
COVENANTS
Section 6.1 Conduct of the Business Pending the Closing. (a) Each of the
Seller Parties covenants and agrees that, between the date hereof and the
Closing Date, the Business shall be conducted only in the ordinary course of
business and in a manner consistent with the current practice of the Business;
and each of the Seller Parties shall use its best efforts to preserve
substantially intact the business organization of Dimmit and the Business, to
keep available the services of the employees of Seller and Dimmit currently
engaged in the Business so that they will be available to Buyer Parties and
Dimmit after the Closing.
(b) Except as contemplated by this Agreement, between the date hereof and
the Closing Date, the Seller Parties shall not, without the consent of the Buyer
Parties:
(i) incur any liability or obligation with respect to Dimmit, the
Purchased Assets, the Dimmit Assets or the Business, absolute or contingent,
except for any thereof in the ordinary course
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of business and in a manner consistent with current practice, or mortgage,
pledge, subject to Lien or encumber any of the Purchased Assets or the Dimmit
Assets;
(ii) increase the compensation payable or to become payable by the
Seller or Dimmit to any employee of the Business, except for increases in salary
or wages of its employees in accordance with past practices, or grant any
severance or termination pay to (except as may be required by existing
arrangements), or enter into any employment or severance agreement with, any
such employee or establish, adopt or enter into any collective bargaining
agreement, with respect to any such employees;
(iii) enter into any new material transaction, contract or agreement
with respect to the Business;
(iv) sell, assign, lease or transfer or otherwise dispose of any of
the Purchased Assets or the Dimmit Assets, except sales in the ordinary course
of the Business consistent with past practice;
(v) materially amend, modify or terminate any Contract affecting the
Business other than in the ordinary course of the Business or permit any
Environmental Permit or any Permit of any of the Seller Parties with respect to
the Business to terminate or expire;
(vi) materially alter or revise the manner of keeping its books,
accounts or records or the accounting practices, procedures or methods of Dimmit
or the Business therein reflected;
(vii) fail to maintain Dimmit's status as a corporation existing under
the laws of Mexico;
(viii) make any investment of a capital nature or any commitment
therefor;
(ix) declare or make any dividend or any distribution or transfer of,
or on, any of the Purchased Assets or the Dimmit Assets;
(x) create, suffer or incur any damage, destruction or loss (whether
or not covered by insurance) or any other event or condition of any character
which would have a material adverse effect on the Purchased Assets, the Dimmit
Assets, Dimmit or the Business;
(xi) fail to maintain in full force and effect all insurance policies
of any of the Seller Parties that relate to the Purchased Assets, the Dimmit
Assets, Dimmit or the Business;
(xii) authorize for issuance, issue or sell any shares of Dimmit's
capital stock or other securities; acquire directly or indirectly, by redemption
or otherwise, any such capital stock, reclassify or split-up any such capital
stock, or grant or enter into any options, warrants, calls or commitments of any
kind with respect thereto; or
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(xiii) fail to maintain all Farah Assets and Dimmit Assets material to
the conduct of the Business in customary repair, order and condition, reasonable
wear and tear excepted.
Section 6.2 Employees.
(a) Each of Parent and Industries agrees that prior to the Closing it
will take no action which might encourage or cause employees of Seller or
Dimmit employed at the Piedras Factory to cease their employment at the
Piedras Factory. At or prior to the Closing, Industries or New Subsidiary
will offer the employees of Seller presently employed at the Piedras
Factory and set forth on Schedule 6.2(a) continued employment on such terms
as Industries or New Subsidiary deems appropriate. Following the Closing,
Dimmit employees will be allowed to continue to be employed at the Piedras
Factory at the same level of seniority, wages and benefits presently
offered Dimmit employees. Neither Parent, Industries or New Subsidiary nor
any Affiliates thereof will be permitted to hire Dimmit's Import/Export
manager at the time of Closing; provided, however, that from and after the
Closing, the Seller Parties covenant and agree to make available to Buyer
Parties and Dimmit Dimmit's Import/Export manager to assist with the
continuing operations of Dimmit and the training of a new Import/Export
manager until such time as a new Import/Export manager is adequately
trained. A list of those people not eligible to be hired by Parent,
Industries or New Subsidiary or Affiliates thereof is found on Schedule
6.2(b). Seller Parties covenant and agree that any employees of Seller or
Dimmit who are not eligible to be hired by any of the Buyer Parties or
their respective Affiliates (including without limitation, Dimmit's
Import/Export manager) if terminated at or prior to Closing, will be
terminated by Seller Parties in compliance with any severance obligations
payable under Mexican law or otherwise and neither Buyer Parties or Dimmit
shall assume or be responsible for any such severance obligations. From the
date hereof, Seller Parties agree not to transfer or relocate employees to
or from the Piedras Factory prior to the Closing, other than those
employees set forth on Schedule 6.2(b). In carrying out their obligations
under this Section 6.2(a), Buyer Parties and Seller Parties agree they will
use their best efforts to minimize any severance obligations payable to
employees of Seller or Dimmit at the time of Closing that any party may
become responsible for under Mexican law as a result of the transactions
contemplated hereby.
(b) Neither the Buyer Parties nor Dimmit shall assume any pension,
retirement or employee stock ownership plans or any disability, medical,
dental or other health plan, life insurance or other death benefit plans,
profit sharing, deferred compensation, incentive compensation or severance
plans, including without limitation, any employee benefit plan (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended), covering any present or former employees of Farah or
Seller employed in the Business and maintained or sponsored by Farah or
Seller or to which Farah or Seller makes contributions (collectively, the
"Employee Plans").
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(c) Each of Farah, Seller, Dimmit, Parent and Industries agrees that
for a period of three (3) years following the Closing, it will not, and
will cause its Affiliates not to, employ, offer employment to, solicit,
encourage, or entice any person employed by the other or an Affiliate of
the other to terminate his employment with the other or take employment
with it or its Affiliates.
Section 6.3 Consents. After the Closing, the Seller Parties and Buyer
Parties will use their best efforts to obtain any consents required in
connection with the transactions contemplated hereby that are necessary to
effect the transactions contemplated hereby and that have not been previously
obtained.
Section 6.4 Governmental Filings. As promptly as practicable after the
execution of this Agreement, each party shall, in cooperation with the other,
file any reports or notifications that may be required to be filed by it under
applicable law, and shall furnish to the other all such information in its
possession as may be necessary for the completion of the reports or
notifications to be filed by the other.
Section 6.5 Access to Information. Prior to the Closing, Buyer Parties may
make such investigation of the business and properties of Seller and Dimmit as
is reasonable and, upon reasonable notice, Seller Parties shall give to Buyer
Parties and their counsel, accountants and other representatives reasonable
access, during normal business hours throughout the period prior to the Closing,
to the property, books, commitments, agreements, records, files and personnel of
each of Seller and Dimmit, and Seller and Dimmit shall furnish to Buyer Parties
during that period all copies of documents and information concerning the
Business as Buyer Parties may reasonably request, subject to applicable law.
Buyer Parties shall hold, and shall cause its counsel, accountants and other
agents and representatives to hold, all such information and documents in
confidence.
Section 6.6 Non-competition. For a period of three (3) years following the
Closing, each of Buyer Parties agrees that it will not, either on its own
account or in conjunction with or on behalf of any other person, directly or
indirectly, and it will cause its Affiliates, officers, directors, agents and
employees not to, solicit, entertain proposals from, bid on, or accept business
from private label customers of Seller or its Affiliates listed on Schedule 6.6
(with the exception of The GAP).
Section 6.7 Other Action. Each of the parties shall use its reasonable
efforts to cause the fulfillment at the earliest practicable date but, in any
event, prior to the Closing Date of all of the conditions to their respective
obligations to consummate the transactions under this Agreement.
Section 6.8 Access to Books and Records/Preparation of Reports. After
Closing, Buyer Parties shall permit Seller Parties access, upon reasonable
notice and during normal business hours, to and the right to make copies of any
books, records and files related to Dimmit or the Business or that constitute
part of the Purchased Assets or Dimmit Assets for any reasonable purpose,
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such as for use in litigation, environmental or financial reporting, Tax return
preparation, or Tax compliance matters.
Section 6.9 Tax Returns. Farah and Seller will be responsible for the
preparation and filing of all Tax returns or reports required to be filed by, or
with respect to, Farah, the Seller, the Purchased Assets, the Dimmit Assets,
Dimmit or the Business, but in the case of the Purchased Assets, the Dimmit
Assets, Dimmit or the Business only for Tax periods ending on or prior to the
Closing Date, and Farah or Seller will make all payments required to be made
with respect to such Tax returns or reports. Buyer Parties shall be responsible
for the preparation and filing of all Tax returns or reports required to be
filed by, or with respect to, the Purchased Assets, the Dimmit Assets, Dimmit or
the Business for Tax periods ending after the Closing Date. Buyer Parties will
make all payments required to be made with respect to such Tax returns or
reports; provided, however, that Farah and Seller shall pay to Buyer Parties
within five (5) days prior to the due date (or extended due date) of such Tax
returns and reports the amount of any Pre-Closing Taxes required to be made with
respect to such Tax returns and reports to the extent not accrued on the
Pre-Closing Balance Sheet or the Final Balance Sheet. For purposes of this
Agreement, "Pre-Closing Taxes" means any Taxes attributable to (a) the
operations of Dimmit or the Business (including, without limitation, Taxes in
respect of the payment of wages, food coupons or other compensation to employees
of Dimmit or Seller engaged in the Business), (b) the property or assets owned
or used by Dimmit, (c) transactions engaged in by Dimmit or in connection with
the Business, or (d) the ownership, use or possession of the Dimmit Assets or
the Purchased Assets, in each case on or prior to the Closing Date. For purposes
of this Agreement, Pre-Closing Taxes shall be determined by closing the books of
the Business and/or Dimmit and/or the relevant Tax period as of the end of the
Closing Date on an actual basis (if the relevant Tax period actually ends on the
Closing Date) or on a pro forma basis as of the end of the Closing Date (if the
relevant Tax period does not actually end on the Closing Date).
Section 6.10 Transfer Taxes. Any sales, use, stock transfer or other like
Taxes or recording fees payable as a result of the transactions contemplated
hereby shall be paid by Farah and Seller, and Farah and Seller shall, at their
expense, timely file all necessary Tax returns and other documentation with
respect to all such Taxes or fees and deliver copies of such Tax returns and
other documentation to Buyer Parties promptly after filing. In furtherance and
not in limitation of the foregoing, any income, gains or transfer Taxes that
become payable in connection with the transactions contemplated by this
Agreement (including, without limitation, any Mexican income or gains Taxes
payable in connection with the sale of the Dimmit Stock hereunder) shall be paid
by Farah and Seller.
Section 6.11 Cooperation and Exchange of Information. The Seller Parties
and the Buyer Parties agree to provide each other with such cooperation and
information as either of them reasonably may request or need of the other in
connection with (a) the preparation of any Tax return of Dimmit or with respect
to the Business, the Dimmit Assets or the Purchased Assets, (b) determining any
Taxes or right to a refund of Taxes of Dimmit or with respect to the Business,
the Dimmit Assets or Purchased Assets, (c) responding to any examination of Tax
returns of Dimmit or
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with respect to the Business, the Dimmit Assets or Purchased Assets, (d)
defending or prosecuting any proceeding in respect of Taxes assessed or proposed
to be assessed against Dimmit or with respect to the Business, the Dimmit Assets
or Purchased Assets and (e) the defense of any litigation or other proceeding
relating to Dimmit, the Business, the Dimmit Assets or the Purchased Assets
whether existing on the Closing Date or arising thereafter out of, or relating
to, an occurrence or event happening before or after the Closing Date.
Section 6.12 Environmental Inspection, Audit and Testing. The Buyer Parties
shall have the right to cause an independent environmental consultant chosen by
the Buyer Parties in their sole discretion, to inspect, audit, and test the
Eagle Pass Warehouse for the existence of any and all Environmental Conditions
and any and all violations of Environmental Laws (the "Environmental Audit") and
to deliver a report describing the findings and conclusions of the Environmental
Audit. The scope and sequence of the Environmental Audit shall be at the sole
discretion of the Buyer Parties, and the Environmental Audit may be commenced on
or after the date hereof. If the Environmental Audit reveals, or if at any time
prior to Closing, the Buyer Parties otherwise become aware of the existence of
any Environmental Condition on, at, under or about the Eagle Pass Warehouse or
any violation of an Environmental Law, the Buyer Parties shall have, in their
sole discretion, the right and option not to assume the lease for the Eagle Pass
Warehouse.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Seller Parties' Indemnity Obligations. Each of Farah and
Seller, jointly and severally, shall indemnify each of Buyer Parties and Dimmit
(including their officers, directors, employees and agents) against, and hold
harmless from and against, any and all claims, actions, causes of action,
arbitrations, proceedings, losses, damages, liabilities, judgments and expenses
(including without limitation, reasonable attorneys' fees) ("Indemnified
Amounts") incurred by Buyer Parties or Dimmit or any of their respective
Affiliates as a result of (a) any error, inaccuracy, breach or misrepresentation
in any of the representations and warranties made by or on behalf of Farah,
Seller or Dimmit in this Agreement, (b) any violation or breach by Farah, Seller
or Dimmit of or default by Farah, Seller or Dimmit under the terms of this
Agreement, (c) any and all liabilities arising out of or related to Taxes of
Farah or Seller (including without limitation, any and all Taxes that may be
imposed on Farah or Seller pursuant to Treasury Regulation Section 1.1502-6 or
any corresponding provision of any state, local or foreign Governmental Rule or
otherwise by virtue of Farah or Seller being a member of an affiliated,
consolidated, combined or unitary group), (d) any and all liabilities or
obligations of Farah or Seller of any kind, character, nature or description
whatsoever, whether known or unknown, direct or indirect, absolute or
contingent, whether or not accruing or arising with respect to the period of
time prior to, after or on the Closing Date, (e) any and all Pre-Closing Taxes,
(f) any and all liabilities or obligations of any kind, character, nature or
description whatsoever, whether known or unknown, direct or indirect, absolute
or contingent, that relates to or arises as a result of the ownership, use,
possession or operation of the Purchased Assets, the
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Dimmit Assets, Dimmit or the Business at or prior to the Closing to the extent
not reflected on the Pre-Closing Balance Sheet or the Final Balance Sheet, (g)
any payments required to be made by Farah or Seller under Section 6.9 or 6.10,
and (h) any claims or causes of action brought by the seller of the Water
Treatment Equipment for unpaid amounts or otherwise. Each of Buyer Parties and
Dimmit shall be entitled to recover its reasonable and necessary attorneys' fees
and litigation expenses incurred in connection with successful enforcement of
its rights under this Section 7.1.
Section 7.2 Buyer Parties' Indemnity Obligations. Each of the Buyer
Parties shall indemnify each of Farah and Seller (including their officers,
directors, employees and agents) against, and hold them harmless from and
against, any and all Indemnified Amounts incurred by Farah or Seller or any of
their Affiliates as a result of (a) any material error, inaccuracy, breach or
misrepresentation in any of the representations and warranties made by or on
behalf of Buyer Parties in this Agreement, (b) any violation or breach by Buyer
Parties of or default by Buyer Parties under the terms of this Agreement, (c)
any and all liabilities relating to or arising as a result of the ownership,
use, possession or operation of the Purchased Assets, the Dimmit Assets, Dimmit
or the Business after the Closing, and (d) any payments required to be made by
Buyer Parties under Section 6.9. Each of Farah and Seller shall be entitled to
recover its reasonable and necessary attorneys' fees and litigation expenses
incurred in connection with successful enforcement of its rights under this
Section 7.2.
Section 7.3 Survival; Threshold and Limits of Liability. All
representations and warranties made hereby by the parties to this Agreement
shall, unless waived in writing, notwithstanding any examination by or on behalf
of any party hereto and notwithstanding the consummation of the transactions
hereby contemplated, survive the Closing for a period of eighteen (18) months
from the Closing Date, other than the representations and warranties made in
Sections 4.16 and 4.17 which shall survive for the statute of limitations
applicable thereto (the period during which the representations and warranties
shall survive being referred to herein with respect to such representations and
warranties as the "Survival Period"). Any claim for indemnification made in
writing during the Survival Period shall remain in effect for purposes of such
indemnification notwithstanding such claim may not be resolved within the
Survival Period. All covenants and agreements made hereby by the parties to this
Agreement shall, unless waived in writing, survive the Closing without
limitation. No party shall be liable for indemnification pursuant to Section
7.1(a), Section 7.2(a) or Section 7.7 (other than for breach of any
representation or warranty contained in Sections 4.16 and 4.17) unless and until
the aggregate amount of such liability (for all such claims) exceeds US$250,000,
in which event the Indemnifying Party (defined below) shall be fully liable
without regard to such threshold. Any liability under this Section 7 shall be
limited in the aggregate to a maximum amount equal, in the case of the Seller
Parties, to the Purchase Price.
Section 7.4 Indemnification Procedures. All claims for indemnification
under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall with reasonable promptness (i) notify the party
from whom indemnification is
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sought (the "Indemnifying Party") of any third-party claim or claims
asserted against the Indemnified Party ("Third Party Claim") for which
indemnification is sought and (ii) transmit to the Indemnifying Party a
copy of all papers served with respect to such claim (if any) and a written
notice ("Claim Notice") containing a description in reasonable detail of
the nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which
estimate shall not be conclusive of the final amount of such claim) and the
basis of the Indemnified Party's request for indemnification under this
Agreement.
Within ten (10) days after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the Indemnified Party whether
the Indemnifying Party disputes its potential liability to the Indemnified
Party with respect to such Third Party Claim and, if the Indemnifying Party
does not dispute its potential liability to the Indemnified Party with
respect to such Third Party Claim, whether the Indemnifying Party elects to
defend the Indemnified Party with respect to such Third Party Claim.
If the Indemnifying Party does not dispute its potential liability to
the Indemnified Party within the Election Period and notifies the
Indemnified Party that it elects to defend such Third Party Claim, the
Indemnifying Party shall control negotiations toward resolution of such
claim without the necessity of litigation, and if litigation ensues, to
defend the same with counsel reasonably acceptable to the Indemnified
Party, at the Indemnifying Party's expense, and the Indemnified Party shall
extend reasonable cooperation in connection with such defense. The
Indemnified Party shall be entitled to participate in, but not to control,
the defense of any Third Party Claim resulting in litigation, at its own
cost and expense; provided, however, that if the parties to any suit or
proceeding shall include the Indemnifying Party as well as the Indemnified
Party and the Indemnified Party shall have been advised in writing by
counsel that one or more legal defenses may be available to it that may not
be available to the Indemnifying Party, then the Indemnified Party shall be
entitled to elect to control such suit or proceeding, but the Indemnifying
Party shall be obligated to bear the fees and expenses of counsel of the
Indemnified Party, which shall be selected by the Indemnified Party in its
complete and sole discretion. If the Indemnifying Party does not dispute
its potential liability to the Indemnified Party within the Election Period
and the Indemnifying Party fails to assume control of the negotiations
prior to litigation or to defend such action within a reasonable time, the
Indemnified Party shall be entitled, but not obligated, to assume control
of such negotiations or defense of such action, and the Indemnifying Party
shall be liable to the Indemnified Party for its expenses reasonably
incurred or amounts paid in connection therewith. If the Indemnifying Party
disputes its potential liability to the Indemnified Party within the
Election Period or does not elect to defend such Third Party Claim, then
the Indemnified Party shall be entitled to assume control of such
negotiations or defense of action and the liability for the expense
thereof, as well as any liability with respect to such Third Party Claim,
shall be determined as provided in Section 7.5 below. If the Indemnifying
Party disputes its potential liability to the Indemnified Party within the
Election Period, and, if it is determined as provided in Section 7.5 that
the Indemnifying Party is liable to the Indemnified
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Party with respect to such to such Third Party Claim, the Indemnifying
Party may then assume the defense of such Third Party Claim.
If the Indemnifying Party fails to notify the Indemnified Party within
the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to the preceding paragraph, or if the
Indemnifying Party elects to defend the Indemnified Party but fails to
prosecute or settle the Third Party Claim as herein provided, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted
by the Indemnified Party to a final conclusion or settled. The Indemnified
Party shall have full control of such defense and proceedings.
Notwithstanding the foregoing, if the Indemnifying Party has delivered a
written notice to the Indemnified Party to the effect that the Indemnifying
Party disputes its potential liability to the Indemnified Party under this
Section 7 and if such dispute is resolved in favor of the Indemnifying
Party, the Indemnifying Party shall not be required to bear the costs and
expenses of the Indemnified Party's defense pursuant to this Section or of
the Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party
in full for all costs and expenses of such litigation. The Indemnifying
Party may participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section, and the
Indemnifying Party shall bear its own costs and expenses with respect to
such participation.
Neither the Indemnifying Party nor the Indemnified Party shall settle,
compromise, or make any other disposition of any Third Party Claim which
would or might result in any liability to the Indemnified Party or the
Indemnifying Party under this Section 7 without the written consent of such
other party.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice
(the "Indemnity Notice") describing in reasonable detail the nature of the
claim, an estimate of the amount of damages attributable to such claim to
the extent feasible (which estimate shall not be conclusive of the final
amount of such claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not
notify the Indemnified Party within fifteen (15) days from its receipt of
the Indemnity Notice that the Indemnifying Party disputes such claim, the
claim specified by the Indemnified Party in the Indemnity Notice shall be
deemed a liability of the Indemnifying Party hereunder.
Section 7.5 Disputes. If the Indemnifying Party disputes, either as to the
amount or liability, that any claim described in a Claim Notice or an Indemnity
Notice, as the case may be, is covered by such Indemnifying Party's covenant to
indemnify contained in this Section 7, then the Indemnifying Party and the
Indemnified Party agree to promptly negotiate in good faith to resolve
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their differences and to mutually agree upon an amount, if any, owed to
Indemnified Party by the Indemnifying Party hereunder. If Indemnifying Party and
Indemnified Party fail to resolve the dispute within thirty (30) days
thereafter, the dispute shall be referred to non-binding mediation by a single
mediator mutually agreed to by the Buyer Parties and Seller and conducted in
Dallas, Texas. The cost of the mediator shall be paid one half by the Buyer
Parties and one half by Seller. If the Indemnifying Party and Indemnified Party
fail to agree within forty-five (45) days after the date such matter was
referred to the mediator, the matter shall be resolved by binding and final
arbitration of a single arbitrator mutually agreed to by the Buyer Parties and
Seller conducted in Dallas, Texas in accordance with the rules of commercial
arbitration of the American Arbitration Association. The prevailing party in any
such arbitration proceeding shall be entitled to attorney's fees and other
out-of-pocket expenses reasonably and necessarily incurred in connection with
such proceeding, the amounts of which shall be contained in the award of the
arbitrator.
Section 7.6 General. Except as contemplated by Section 7.3, the covenants
and agreements entered into pursuant to this Agreement to be performed after the
Closing shall survive the Closing without limitation. The rights of the parties
to indemnification under this Section 7 shall not be limited due to any
investigations heretofore made by such parties or their representatives,
regardless of negligence in the conduct of any such investigations.
7.7 Environmental Indemnification.
(a) Except as set forth in this Section 7.7, the parties agree that
all matters of, or relating to indemnification for liabilities and claims
for environmental protection, compliance, non-compliance and violations
("Environmental Indemnification Matters") are dealt with exclusively in
this Section 7.7 and are excluded from all other sections of this
Agreement. Any other indemnification sections outside of Section 7.7 apply
after the Closing to Environmental Indemnification Matters only if and to
the extent that they are specifically referenced in this Section 7.7. All
claims for Indemnified Amounts related to Environmental Indemnification
Matters shall be asserted and resolved pursuant to the limitations and
procedures stated in Sections 7.3, 7.4 and 7.5.
(b) Buyer Parties and Seller Parties agree that this Section 7.7
merges and states all of their respective rights, risks, duties and
obligations, causes of action, remedies, claims, exposures, liabilities and
the like to one another and to their respective present and future
Affiliates with respect to any claims for Indemnified Amounts related to
Environmental Indemnification Matters.
(c) Farah and Seller, jointly and severally, shall indemnify and hold
each of the Buyer Parties and Dimmit harmless from and against any and all
Indemnified Amounts which may be incurred by any of Buyer Parties or Dimmit
by reason of, resulting from, in connection with or arising in any manner
whatsoever from any Environmental Condition or violation or claimed
violation of any Environmental Laws relating to or arising as a result of
the
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ownership, use, possession or operation at or prior to the Closing of the
Purchased Assets, the Dimmit Assets, Dimmit or the Business.
(d) Buyer Parties and Dimmit, jointly and severally, shall indemnify
and hold Seller Parties harmless from and against any and all Indemnified
Amounts which may be incurred by Seller Parties by reason of, resulting
from, in connection with or arising in any manner whatsoever from any
Environmental Condition or violation or claimed violation of any
Environmental Laws relating to or arising as a result of ownership, use,
possession or operation of the Purchased Assets, the Dimmit Assets, Dimmit
or the Business after the Closing.
(e) Notwithstanding any other term in this Agreement, Buyer Parties
acknowledge that the water treatment equipment supplied to the Piedras
Plant by Water Technologies Incorporated pursuant to an agreement to
purchase dated November 15, 1994 ("Water Treatment Equipment") is not
operating as represented and warranted by Water Technologies Incorporated.
After the Closing, Buyer Parties assume all responsibility for the
operation, repair and maintenance of the Water Treatment Equipment and
hereby release Seller Parties from and against any and all claims for
Indemnified Amounts related to the operation, repair and maintenance of the
Water Treatment Equipment after the Closing.
7.8 Subrogation. Each indemnitor is subrogated to the rights, claims,
remedies, defenses and causes of action against all other persons or entities
that are or may be available to each indemnitee; and each indemnitee claiming
hereunder, upon making a claim for defense and/or indemnification, shall tender
to its indemnitor all such rights, claims, remedies and causes of action.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions Precedent to Obligations of the Buyer Parties. The
obligation of the Buyer Parties to consummate the purchase under this Agreement
is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions (any or all of which may be waived by the Buyer Parties in
their sole discretion):
(a) all representations and warranties of the Seller Parties contained
in this Agreement shall, if specifically qualified by materiality, be true
and correct, and, if not so qualified, be true and correct in all material
respects at and as of the time of the Closing with the same effect as
though made again at, and as of, that time;
(b) the Seller Parties shall have performed and complied in all
material respects with all obligations and covenants required by this
Agreement to be performed or complied with by the Seller Parties prior to
or at the Closing;
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(c) the Buyer Parties shall have been furnished with a certificate,
dated the Closing Date, executed by an officer of each of Farah, Seller and
Dimmit certifying to the fulfillment of the conditions specified in
Sections 8.1(a) and 8.1(b) hereof;
(d) no provision of any applicable Governmental Rule shall prohibit,
and there shall not be in effect any injunction, restraining order,
judgment or decree issued by a court of competent jurisdiction in any
action or proceeding against, the consummation of this Agreement;
(e) Seller shall have paid-in-full all obligations under the leases
for the leased equipment set forth on Schedule 8.1(e) attached hereto such
that Seller will have obtained the full right to sell and transfer to Buyer
good and marketable title to such leased equipment, free and clear of any
and all Liens other than Permitted Liens, and all Liens on the Farah Assets
and the Dimmit Assets other than Permitted Liens shall have been released;
(f) Since March 31, 1996, there shall not have occurred any damage,
destruction or loss relating to the Business or any of the Purchased Assets
or Dimmit Assets, whether or not covered by insurance, which has had or may
reasonably be expected to have a material adverse effect on the Purchased
Assets, the Dimmit Assets, Dimmit or the Business, nor shall there have
occurred any other event or condition (other than an event or condition
relating to the industry of the Business, the financial markets or the
economy generally) which has had or which reasonably may be expected to
have a material adverse effect on the Purchased Assets, the Dimmit Assets,
Dimmit or the Business;
(g) all documents required to be executed and/or delivered by Seller
Parties pursuant to Section 9.1 shall have been so executed and/or
delivered;
(h) the Assembly (Maquila) and Technical Assistance Agreement between
Seller (as successor in interest to Radco Sportswear, Inc.) and Dimmit
shall have been terminated;
(i) Buyer Parties shall have received an opinion of Baker &
McKenzie-Juarez, with respect to Dimmit, in form and substance reasonably
satisfactory to the Buyer Parties;
(j) the Seller Parties shall have obtained all consents and approvals
required by the Seller Parties to consummate the transactions as
contemplated hereby; and
(k) the Buyer Parities shall have received written confirmation in
form and substance reasonably satisfactory to them that each of the options
to extend the terms of each of the real property leases for the real
property comprising the Piedras Factory (which original terms expired on
April 30, 1995) have been duly exercised in accordance with the terms
thereof and that the terms of each such lease has been duly and validly
extended as provided therein.
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Section 8.2 Conditions Precedent to Obligations of the Seller Parties. The
obligation of the Seller Parties to consummate the sale under this Agreement is
subject to the fulfillment, prior to or at the Closing, of each of the following
conditions (any or all of which may be waived by the Seller Parties in their
sole discretion):
(a) all representations and warranties of the Buyer Parties contained
in this Agreement shall, if specifically qualified by materiality, be true
and correct, and if not so qualified, be true and correct in all material
respects at and as of the time of the Closing with the same effect as
though made again at, and as of, that time;
(b) Buyer Parties shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to
be performed or complied with by Buyer Parties prior to or at the Closing;
(c) Seller Parties shall have been furnished with a certificate, dated
the Closing Date, executed by an officer of each of Parent, Industries and
New Subsidiary certifying to the fulfillment of the conditions specified in
Sections 8.2(a) and 8.2(b) hereof;
(d) no provision of any applicable Governmental Rule shall prohibit,
and there shall not be in effect any injunction, restraining order,
judgment or decree issued by a court of competent jurisdiction in any
action or proceeding against, the consummation of this Agreement;
(e) All documents required to be executed and/or delivered by Buyer
Parties pursuant to Section 9.2 shall have been so executed and/or
delivered;
(f) New Subsidiary shall have become a party to this Agreement and
shall have agreed to be bound by the terms hereof as a Buyer Party; and
(g) Buyer Parties shall have obtained all consents and approvals
required by the Buyer Parties to consummate the transactions contemplated
hereby.
Section 8.3 Mutual Conditions. The obligation of the Buyer Parties to
consummate the purchase, and the Seller Parties to consummate the sale, under
this Agreement is subject to the occurrence prior to or at the Closing of each
of the following conditions (any of which may be waived by the parties):
(a) Approval by all necessary U.S. and Mexican governmental and
regulatory entities being received and the obtaining of all necessary
consents and permits for the transactions contemplated hereby by all
parties; and
(b) Industries and New Subsidiary having entered into an Assembly
Services Agreement substantially in the form of Exhibit A annexed hereto
(the "Assembly Services
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Agreement") wherein Industries and New Subsidiary will cause Dimmit to
produce garments for Seller or its Affiliates for a period of time
following the purchase and sale contemplated hereby. In the event of a
conflict between the terms of this Agreement and the terms of the Assembly
Services Agreement, this Agreement shall control.
ARTICLE IX
DELIVERIES AT CLOSING
Section 9.1 Documents to be Delivered by the Seller Parties. At the
Closing, the Seller Parties shall deliver, or cause to be delivered, to the
Buyer Parties the following:
(a) a copy of resolutions of the board of directors of each of Farah,
Seller and Dimmit authorizing the execution, delivery and performance of
this Agreement by each such party and a certificate of the secretary or
assistant secretary of each such party, dated the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(b) the officer's certificate referred to in Section 8.1(c);
(c) such bills of sale and deeds, assignments and any other necessary
instruments, satisfactory in form and content and approved prior to the
Closing by Buyer Parties, conveying good and marketable title to all the
Purchased Assets to Buyer Parties;
(d) a stock certificate or certificates representing all outstanding
shares of Dimmit Stock, duly endorsed in blank or accompanied by an
irrevocable stock power duly endorsed in blank;
(e) the Assembly Services Agreement duly executed and delivered by
Seller;
(f) such opinions, consents of third parties and other certificates
required pursuant to Sections 8.1 and 8.3; and
(g) a duly sworn affidavit of Seller dated as of the Closing Date that
the Seller is not a "foreign person," setting forth Seller's taxpayer
identification number and otherwise meeting the requirements of Section
1445(b)(2) of the Code and the Treasury Regulations promulgated thereunder.
Section 9.2 Documents to be Delivered by the Buyer Parties. At the Closing,
the Buyer Parties shall deliver, or cause to be delivered, to the Seller Parties
the following:
(a) the wire transfer referred to in Section 2.5;
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(b) a copy of resolutions of the board of directors of each of Parent,
Industries and New Subsidiary authorizing the execution, delivery and
performance of this Agreement by each such party and a certificate of the
secretary or assistant secretary of each such party, dated the Closing
Date, that such resolutions were duly adopted and are in full force and
effect;
(c) the officer's certificate referred to in Section 8.2(c); and
(d) the Assembly Services Agreement duly executed and delivered by
Industries and New Subsidiary.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written agreement executed by the Seller Parties and
Buyer Parties;
(b) by Buyer Parties, if any of the conditions specified in Section
8.1 hereof shall not have been satisfied or waived in writing by the Buyer
Parties on or before July 31, 1996; or
(c) by the Seller Parties, if any of the conditions specified in
Section 8.2 hereof shall not have been satisfied or waived in writing by
the Seller Parties on or before July 31, 1996;
provided, however, that a party shall not be allowed to exercise any
right of termination pursuant to this Section 10.1 if the event giving
rise to such termination right shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe in any
material respect any of the covenants or agreements set forth herein to
be performed or observed by such party.
Upon such termination, none of the parties nor any other person shall
have any liability or further obligation arising out of this Agreement
except for any liability resulting from its breach of this Agreement prior
to termination, except that the provisions of Sections 10.2, 10.4, and 10.8
shall continue to apply.
Section 10.2 Confidentiality; Publicity; Books and Records.
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(a) Neither Farah, Seller nor its Affiliates will, directly or
indirectly, disclose or provide to any other person any non-public
information of a confidential nature concerning the business or operations
of any of the Buyer Parties or Dimmit or an Affiliate thereof, including
without limitation, any process, chemical formulations or other proprietary
information of any of the Buyer Parties or Dimmit or an Affiliate thereof
used in the Piedras Factory, which becomes known to Farah, Seller or an
Affiliate thereof after the Closing, except as is required in governmental
filings or judicial, administrative or arbitration proceedings. In the
event that Farah, Seller or an Affiliate of either becomes legally required
to disclose any such information in any governmental filings or judicial,
administrative or arbitration proceedings, such party shall, and shall
cause any Affiliate to, provide Buyer Parties with prompt notice of such
requirement so that Buyer Parties may seek a protective order or other
appropriate remedy. In the event that such protective order or other remedy
is not obtained, such party shall, and shall cause any Affiliate to,
furnish only that portion of the information that such party or any
Affiliate, as the case may be, is advised by its counsel is legally
required and such disclosure shall not result in any liability hereunder
unless such disclosure was caused by or resulted from a previous disclosure
by such party or any Affiliate that was not permitted by this Agreement.
(b) None of the Buyer Parties nor its Affiliates will, directly or
indirectly, disclose or provide to any other person any non-public
information of a confidential nature concerning the business or operations
of Seller or Dimmit or an Affiliate thereof, including without limitation,
any processes, chemical formulations or other proprietary information of
Seller or Dimmit or its Affiliates known or which becomes known to any of
the Buyer Parties or Affiliates thereof as a result of the transactions
contemplated hereby or Dimmit's operation of the Piedras Factory after the
Closing, except as is required in governmental filings or judicial,
administrative or arbitration proceedings. In the event that any Buyer
Party or any Affiliate thereof becomes legally required to disclose any
such information in any governmental filings or judicial, administrative or
arbitration proceedings, such party shall, and shall cause any Affiliate
to, provide Seller Parties with prompt notice of such requirements so that
Seller Parties may seek a protective order or other appropriate remedy. In
the event that such protective order or other remedy is not obtained, such
party shall, and shall cause any Affiliate to, furnish only that portion of
the information that such party or Affiliate, as the case may be, is
advised by its counsel as legally required, and such disclosure shall not
result in any liability hereunder unless such disclosure was caused by or
resulted from a previous disclosure by such party or any Affiliate that was
not permitted by this Agreement.
(c) Subject to applicable securities law or stock exchange
requirements, the parties hereto will promptly advise, and obtain the
approval of, the other parties before issuing any press release with
respect to this Agreement or the transactions contemplated hereby.
(d) For a period of five years after the Closing Date, Buyer Parties
will preserve and retain the books and records of Seller and Dimmit
constituting part of the Purchased Assets and make such books and records
available at the then current administrative
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headquarters of Buyer Parties to each of Seller and Dimmit and its
officers, employees and agents, upon reasonable notice and at reasonable
times, at Seller Parties' cost and expense, it being understood that Seller
Parties shall be entitled to make copies of any such books and records as
they deem reasonable.
Section 10.3 Expenses. Buyer Parties and Seller Parties shall pay their own
respective expenses, including the fees and disbursements of their respective
counsel in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated herein, except
as otherwise provided herein.
Section 10.4 Entire Agreement. This Agreement, including all schedules and
exhibits hereto, constitutes the entire agreement of the parties with respect to
the subject matter hereof, and may not be modified, amended or terminated except
by a written instrument specifically referring to this Agreement signed by all
the parties hereto.
Section 10.5 Waivers and Consents. All waivers and consents given hereunder
shall be in writing. No waiver by any party hereto of any breach or anticipated
breach of any provision hereof by any other party shall be deemed a waiver of
any other contemporaneous, preceding or succeeding breach or anticipated breach,
whether or not similar.
Section 10.6 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been received only if and when (i)
personally delivered; (ii) on the first day after transmission of a confirmed
facsimile sent to the other party at the facsimile number below; (iii) one
business day after deposit thereof for overnight delivery with a nationally
recognized overnight courier service; or (iv) on the third day after mailing, by
United States mail, first class, postage prepaid, by certified mail return
receipt requested, addressed in each case as follows (or to such other address
as may be specified by like notice):
(a) If to Buyer Parties, to:
Galey & Lord, Inc.
7736 McCloud Rd.
Greensboro, NC
Attn: Mike Harmon
910-665-3037
910-665-3113 (fax)
With a copy to (which shall not constitute notice):
Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Attn: Howard S. Jacobs
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212-940-8800
212-940-8776 (fax)
(b) If to Seller Parties, to:
Farah U.S.A., Inc.
8889 Gateway West
El Paso, Texas 79925
Attention: Timothy B. Page
(915) 593-4500
(915) 593-4545 (fax)
With a copy to (which shall not constitute notice):
Baker & McKenzie
4500 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Daniel W. Rabun
(214) 978-3000
(214) 978-3099 (fax)
Section 10.7 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, legal representatives and assigns. No third party shall have any
rights hereunder. No assignment shall release the assigning party.
Section 10.8 Choice of Law; Section Headings; Table of Contents. This
Agreement shall be governed by the internal laws of the State of New York
(without regard to the choice of law provisions thereof). The United Nations
Convention on the International Sale of Goods is hereby excluded from
application to this Agreement and any transaction pursuant to this Agreement.
The section headings and any table of contents contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
Section 10.9 English Controlling. For purposes of convenience,
this Agreement may be translated into Spanish, but it is understood that the
English version of this Agreement (and the schedules and exhibits) will control
for all purposes. In case of a conflict in meaning between the two versions, the
parties are responsible for performing in accordance with the English version
hereof.
Section 10.10 Severability. If any term or provision of this Agreement or
the application thereof to any person or circumstance shall be deemed invalid,
illegal or unenforceable to any extent or for any reason, such provision shall
be severed from this Agreement and the
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remainder of this Agreement and the application thereof shall not be affected
and shall be enforceable to the fullest extent permitted by law. A provision
which is valid, legal and enforceable shall be substituted for the severed
provision.
Section 10.11 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Section 10.12 Force Majeure. No Buyer or Seller shall be liable for loss or
damage or deemed to be in breach of this Agreement if its failure to perform its
obligations results from: (1) acts of God; or (2) fires, strikes, embargoes,
war, or riot. Any delay resulting from any of these causes shall extend
performance accordingly or excuse performance, in whole or in part, as may be
reasonable.
Section 10.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
GALEY & LORD, INC.
By: /s/ Arthur C. Wiener
Arthur C. Wiener, Chairman of the Board,
President and Chief Executive Officer
GALEY & LORD INDUSTRIES, INC.
By: /s/ Arthur C. Wiener
Arthur C. Wiener, Chairman of the Board,
President and Chief Executive Officer
FARAH INCORPORATED
By: /s/ Timothy B. Page
Timothy B. Page, Executive Vice President
FARAH U.S.A., INC.
By: /s/ Timothy B. Page
Timothy B. Page, Executive Vice President
DIMMIT INDUSTRIES, S.A. de C.V.
By: /s/ Richard C. Allender
Richard C. Allender, President
