SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 2, 1999
Commission file number 1-13970
CHROMCRAFT REVINGTON, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 35-1848094
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
1100 North Washington Street, Delphi, IN 46923
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(Address, including zip code of Registrant's principal executive offices)
(317) 564-3500
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(Registrant's telephone number, including area code)
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Item 2. Acquisition of Assets
Effective as of September 2, 1999, CRI Corporation-Sumter (the
"Purchaser") purchased all of the outstanding shares of common stock
(the "Shares") of Korn Industries, Incorporated ("Korn Industries")
pursuant to a Stock Purchase Agreement (the "Agreement") by and among
the Purchaser, Korn Industries and the shareholders of Korn Industries
(the "Selling Shareholders"). The Purchaser is a wholly-owned
subsidiary of Chromcraft Revington, Inc. (the "Registrant").
The Purchaser acquired all of the Shares directly from the
Selling Shareholders for a purchase price of $7.4 million, payable in
cash in accordance with the Agreement. The ultimate source of funds
was the Registrant's line of credit facility provided by Bank One,
Indiana, N.A.
Korn Industries' corporate headquarters and manufacturing
facilities are located in Sumter, South Carolina and it will operate
as a wholly-owned subsidiary of the Purchaser. Korn Industries
manufactures and sells solid wood bedroom and dining room furniture
through its Sumter Cabinet Company division. The Purchaser intends to
continue the use of Korn Industries' plant, machinery and equipment
predominately in the manufacture and sale of such furniture.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
(1) The financial statements of Korn Industries required to be
filed in response to Item 7(a)(1) will be filed with the
Securities and Exchange Commission as soon as practicable
but not later than 60 days after the date that this Form 8-K
must be filed with the Commission.
(2) The accountant's report required to be filed in response to
Item 7(a)(2) will be filed with the Securities and Exchange
Commission at the same time that the financial statements of
Korn Industries required by Item 7(a)(1) are filed with the
Commission.
(b) Pro forma financial information
The pro forma financial information required to be filed in
response to Item 7(b)(1) will be filed with the Securities
and Exchange Commission as soon as practicable but not later
than 60 days after the date that this Form 8-K must be filed
with the Commission.
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(c) Exhibits
2 Stock Purchase Agreement dated September 3, 1999 by and
among the Purchaser, Korn Industries and the Selling
Shareholders.
23 Consent of Independent Auditor of Korn Industries (to be
filed at the same time that financial statements of Korn
Industries are filed with the Securities and Exchange
Commission pursuant to Item 7(a)(1)).
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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.
CHROMCRAFT REVINGTON, INC.
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(Registrant)
Date: September 17, 1999 /s/ Frank T. Kane
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Frank T. Kane
Vice President-Finance
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EXHIBIT 2
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is made and
entered into as of the 3rd day of September, 1999, by and among CRI
CORPORATION-SUMTER ("CRI"), a Delaware corporation, KORN INDUSTRIES,
INCORPORATED (the "Company"), a South Carolina corporation, and the
following shareholders of the Company (each individually, a "Selling
Shareholder" and collectively, the "Selling Shareholders"):
William Melton Tisdale, Jr.
Tisdale Family Limited Partnership
C. Arnold Decker, Jr.
C. Arnold Decker, Jr., life tenant with William Melton Tisdale, Jr.,
as remainderman
Dr. G. Clifford and Florence B. Decker Foundation
Bonnie Lee D. Decker
Sidney Keith, Jr.
Susan D. Keith
First Presbyterian Church of Sumter, S.C.
Lloyd Ogilvie Ministries
In Touch Ministries
Coral Ridge Ministries, Inc.
Ben Haden Ministries
Society for the Prevention of Cruelty to Animals and Humane
Education Center for Sumter, Inc.
W I T N E S S E T H:
WHEREAS, the Company is a corporation organized and existing
under the laws of the State of South Carolina, maintains its principal
office at Sumter, South Carolina and is engaged in the business of
manufacturing and selling furniture (the "Business");
WHEREAS, CRI is a corporation organized and existing under the
laws of the State of Delaware, maintains its principal office at
Delphi, Indiana and is a wholly-owned subsidiary of Chromcraft
Revington, Inc., a Delaware corporation;
WHEREAS, the Selling Shareholders own all of the issued and
outstanding shares of all capital stock of the Company (the "Shares");
and
WHEREAS, the Selling Shareholders desire to sell and transfer to
CRI, and CRI desires to purchase and accept from the Selling
Shareholders, all of the Shares upon the terms and subject to the
conditions stated herein and such that the Company will become a
wholly-owned subsidiary of CRI;
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NOW, THEREFORE, in consideration of the foregoing premises, the
representations, warranties, covenants, agreements and mutual
obligations contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, CRI,
the Company and the Selling Shareholders hereby agree as follows:
SECTION 1
PURCHASE AND SALE OF THE SHARES
1.01. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing
(as hereinafter defined), the Selling Shareholders shall sell,
transfer, assign and deliver to CRI, and CRI shall purchase and
acquire from the Selling Shareholders, all right, title and interest
in and to the Shares, free and clear of any and all liens, pledges,
security interests, charges, claims, options, rights of first refusal,
transfer restrictions, rights of conversion or exchange, adverse
claims or rights of any third party and other restrictions or
limitations whatsoever (the "Transaction").
1.02. The Closing. The closing of the Transaction
contemplated by this Agreement (the "Closing") shall take place at the
offices of Krieg DeVault Alexander & Capehart, LLP, One Indiana
Square, Suite 2800, Indianapolis, Indiana and shall be effective as of
11:59 p.m., Indianapolis time, on September 2, 1999. The date on
which the Closing occurs shall be referred to herein as the "Closing
Date." Subject to the provisions of Section 7, failure to close the
Transaction on the date and time and at the place determined pursuant
to this Section 1.02 shall not result in the termination of this
Agreement and shall not relieve any party of any obligation under this
Agreement.
1.03. Purchase Price. The aggregate purchase price to be
paid by CRI to the Selling Shareholders for all of the Shares shall be
Seven Million Four Hundred Thousand Dollars ($7,400,000) (the
"Purchase Price"), or One Hundred Sixty-Two and 50.5/100 Dollars per
Share ($162.505).
1.04. Method of Payment. At the Closing, CRI shall pay in
immediately available funds by wire transfer to the Shareholder
Representative, in trust for the Selling Shareholders, in respect of
the Shares held by each of the Selling Shareholders on the Closing
Date an amount equal to the Purchase Price of $7,400,000 (less the
Escrow Fund in the amount of $3,500,000) divided by the 45,537 Shares
outstanding on the Closing Date. Immediately following the Closing,
the Shareholder Representative shall distribute to the Selling
Shareholders the Purchase Price less the aggregate escrow funds as
follows:
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Portion of
Shareholder Purchase Price
William Melton Tisdale, Jr. $ 3,511.43
Tisdale Family Limited Partnership 1,438,829.96
C. Arnold Decker, Jr. 44,963.44
C. Arnold Decker, Jr., life tenant with
William Melton Tisdale, Jr., as remainderman 32,116.74
Dr. G. Clifford and Florence B. Decker Foundation 179,853.76
Bonnie Lee D. Decker 44,963.44
Sidney Keith, Jr. 44,963.44
Susan D. Keith 44,963.44
First Presbyterian Church of Sumter, S.C. 43,038.14
Lloyd Ogilvie Ministries 43,038.14
In Touch Ministries 43,038.14
Coral Ridge Ministries, Inc. 43,038.14
Ben Haden Ministries 43,038.14
Society for the Prevention of Cruelty to
Animals and Humane Education Center
for Sumter, Inc. 1,850,643.65
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Total $ 3,900,000.00
Each of the Selling Shareholders understands, acknowledges and
agrees that, once CRI pays the Purchase Price less the Escrow Fund to
the Shareholder Representative on the Closing Date, CRI shall have no
further liability, obligation or responsibility to any of the Selling
Shareholders with respect to the payment at the Closing of the
Purchase Price less the aggregate escrow funds.
The parties hereto understand, acknowledge, and agree that CRI
shall not be obligated to pay to the Selling Shareholders or any other
party any amount in addition to the Purchase Price for the Shares. In
the event that any shares of capital stock of the Company in addition
to those reflected in Section 2.03(f) hereof are delivered to CRI
following the Closing Date, the proportionate amount of the Purchase
Price to which each Selling Shareholder is entitled to receive
pursuant to this Agreement shall be reduced and then reallocated by
the Selling Shareholders, and not CRI, to take into account the
existence of such additional shares of capital stock.
1.05. Escrow Fund. Simultaneous with the execution of this
Agreement, CRI shall deposit Three Million Five Hundred Thousand
Dollars ($3,500,000) ("Escrow Fund") into an escrow account pursuant
to the terms and provisions set forth in an escrow agreement (the
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"Escrow Agreement") dated as of the same date hereof in a form to be
mutually agreed upon by the parties and to be executed at the Closing.
The Escrow Fund shall be used to satisfy the obligations of the
Selling Shareholders to indemnify CRI and the Company pursuant to
Section 8 hereof and for the indemnification obligations provided in
paragraph 3 of the Escrow Agreement; provided, however, that the
Escrow Fund shall not limit in any manner such indemnification
obligations of the Selling Shareholders.
1.06. Delivery of Stock Certificates. The Selling
Shareholders shall deliver to CRI, at the Closing, the certificates
representing the Shares, duly endorsed in blank or accompanied by
stock powers duly endorsed in blank, in proper form for transfer.
1.07. Further Assurances. The Selling Shareholders from time
to time after the Closing, at CRI's request, shall execute,
acknowledge and deliver such other documents, instruments and writings
and shall take such other actions as CRI may request in order to give
effect to the Transaction or otherwise as may be necessary to carry
out or evidence the transactions contemplated by this Agreement.
1.08. Designation of Shareholders. The following shareholders
of the Company are sometimes hereinafter referred to collectively as the
"Family Shareholders":
William Melton Tisdale, Jr.
Tisdale Family Limited Partnership
C. Arnold Decker, Jr.
C. Arnold Decker, Jr., life tenant with William Melton
Tisdale, Jr., as remainderman
Bonnie Lee D. Decker
Sidney Keith, Jr.
Susan D. Keith
The following shareholders of the Company are sometimes hereinafter
referred to collectively as the "Charity Shareholders":
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Dr. G. Clifford and Florence B. Decker Foundation
First Presbyterian Church of Sumter, S.C.
Lloyd Ogilvie Ministries
In Touch Ministries
Coral Ridge Ministries, Inc.
Ben Haden Ministries
Society for the Prevention of Cruelty to Animals and
Humane Education Center for Sumter, Inc.
Both the Family Shareholders and the Charity Shareholders are
sometimes hereinafter referred to collectively as the "Selling
Shareholders".
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE FAMILY SHAREHOLDERS
The Company and each of the Family Shareholders, jointly and
severally, hereby represent and warrant to CRI as of the date of this
Agreement and as of the Closing Date as follows:
2.01. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of South Carolina. The Company is duly qualified to do business
and is in good standing in each state and jurisdiction set forth on
Schedule 2.01 hereto, which are the only states and jurisdictions in
which the character or location of the properties owned or leased by
it or the nature of the business conducted by it makes such
qualification necessary. The Company possesses full power and
authority (corporate and otherwise) and all licenses, permits and
authorizations necessary to own and lease its properties as presently
owned and leased and to conduct its business in the manner and by the
means utilized as of the date hereof. The Company has no subsidiaries
and owns no stock, securities or any other interest in any
corporation, partnership, limited liability company, joint venture or
other entity.
2.02. Authority; No Violations. (a) The Company and each of
the Selling Shareholders that are entities have the requisite
corporate power and authority, and each of the individual Selling
Shareholders has the capacity and authority, to enter into this
Agreement and to perform its respective obligations hereunder, subject
to the fulfillment of the conditions precedent set forth in Section
6.02 hereof. This Agreement and its execution and delivery by the
Company have been duly authorized and approved by the Board of
Directors of the Company and the Board of Directors or Trustees of
each of the Charity Shareholders. This Agreement constitutes a valid
and binding obligation of the Company and each of the Selling
Shareholders and is enforceable against the Company and the Selling
Shareholders in accordance with its terms.
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(b) Neither the execution of this Agreement nor the consummation
of the Transaction (with or without notice or lapse of time)
(i) conflicts with or violates the Company's Articles of Incorporation
or By-Laws; (ii) conflicts with or violates any law, statute,
ordinance, rule, regulation or governmental requirement or any court
or administrative judgment, order, injunction, writ, directive or
decree; (iii) conflicts with, results in a breach of or constitutes a
default under any note, bond, indenture, mortgage, deed of trust,
license, lease, contract, agreement, understanding, arrangement,
commitment, instrument or other writing to which the Company or any of
the Selling Shareholders is a party or by which the Company or any of
the Selling Shareholders is subject or bound; (iv) results in the
creation of or gives any person, proprietorship, partnership, limited
liability company, corporation or other entity the right to create any
lien, charge, claim, encumbrance, mortgage, security interest or
option, or results in the creation of any other rights or claims of
any third party, upon any right, property or asset of the Company; or
(v) terminates or gives any person, proprietorship, partnership,
limited liability company, corporation or other entity the right to
terminate, accelerate, amend, modify or refuse to perform under any
note, bond, indenture, mortgage, deed of trust, license, lease,
contract, agreement, understanding, arrangement, commitment,
instrument or other writing to which the Company or any of the Selling
Shareholders is a party or is subject or bound or with respect to
which the Company or any of the Selling Shareholders is to perform any
duties or obligations or receive any rights or benefits.
2.03. Capital Stock. (a) The entire authorized capital stock
of the Company (the "Company Common Stock") consists of 2,000 shares
of One Dollar ($1.00) par value voting common stock, of which 626
shares are issued and outstanding, and 198,000 shares of One Dollar
($1.00) par value non-voting common stock, of which 44,911 shares are
issued and outstanding. There are no other authorized, issued or
outstanding shares of capital stock of the Company other than as
described in this Section 2.03(a). The Shares have been duly and
validly authorized by all necessary corporate action of the Company,
are validly issued, fully paid and nonassessable, and have not been
issued in violation of any pre-emptive rights of any present or former
Company shareholder. The Company has no treasury shares and no
capital stock authorized or issued other than as described in this
Section 2.03(a). Such 45,537 shares of outstanding voting and non-
voting common stock of the Company are referred to collectively herein
as the "Shares".
(b) Except with respect to that certain Agreement dated as of
December 31, 1992, by and among the Company, the Society for the
Prevention of Cruelty to Animals and Humane Education Center of
Sumter, South Carolina and the "Listed Charities", a copy of which is
included in Schedule 2.03(b) hereto, there are no outstanding or
authorized options, warrants, commitments, calls, puts, agreements,
understandings, commitments, arrangements or subscription rights
relating to any shares of the Company Common Stock or any of the
Shares that are binding upon the Company, nor are there any securities
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convertible into or representing the right to purchase or otherwise
acquire any capital stock or other securities of the Company. There
are no outstanding or authorized stock appreciation, phantom stock,
profit participation or similar rights with respect to the Company.
(c) Except with respect to that certain Agreement dated as of
December 31, 1992 by and among the Company, the Society for the
Prevention of Cruelty to Animals and Humane Education Center of
Sumter, South Carolina and the "Listed Charities", a copy of which is
included in Schedule 2.03(b) hereto, the Company is not a party to
any agreement and does not have any contractual or other obligation
(i) to repurchase, redeem or otherwise acquire any Shares, or (ii) to
issue any shares of Company Common Stock which are not issued and
outstanding on the date of this Agreement.
(d) The Company does not have a class of securities registered
under, and is not subject to any reporting requirements of, the
Securities Exchange Act of 1934, as amended.
(e) Except as set forth in Schedule 2.03(e) hereto, each of the
Selling Shareholders owns his respective Shares free and clear of any
and all liens, pledges, security interests, charges, claims, options,
rights of first refusal, transfer restrictions, rights of conversion
or exchange, adverse claims or rights of any third party and any other
restriction or limitation whatsoever. Each of the Selling
Shareholders holds his respective Shares as his sole and separate
property. No consent, approval, authorization or waiver of any
person, proprietorship, partnership, limited liability company,
corporation or other entity or any third party is required for the
execution, delivery and performance of this Agreement, or the
consummation of the Transaction, by any of the Selling Shareholders.
(f) Set forth below is a true, accurate and complete list of the
name and number of voting and non-voting Shares currently owned by
each shareholder of the Company.
Voting Shareholders
Number of
Name Voting Shares
William Melton Tisdale, Jr. 41
Tisdale Family Limited Partnership 168
C. Arnold Decker, Jr. 21
C. Arnold Decker, Jr., life tenant with William Melton
Tisdale, Jr. as remainderman 375
Dr. G. Clifford and Florence B. Decker Foundation 21
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Total 626
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Non-Voting Shareholders
Number of
Name Non-Voting Shares
Tisdale Family Limited Partnership 16,632
C. Arnold Decker, Jr. 504
Dr. G. Clifford Decker and Florence B. Decker Foundation 2,079
Bonnie Lee Decker 525
Sidney Keith, Jr. 525
Susan D. Keith 525
First Presbyterian Church of Sumter, S.C. 502.52
Lloyd Ogilvie Ministries 502.52
In Touch Ministries 502.52
Coral Ridge Ministries, Inc. 502.52
Ben Haden Ministries 502.52
Society for the Prevention of Cruelty to Animals and
Humane Education Center of Sumter, Inc. 21,608.40
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Total 44,911.00
(g) The parties hereto agree that CRI will not incur any
liability relating to any sales, purchases or transfers (or any facts,
circumstances or disclosures in connection therewith) of the Shares or
of shares of Company Common Stock having occurred on or prior to the
Closing Date.
2.04. Articles of Incorporation and By-Laws. A true,
accurate and complete copy of the Articles of Incorporation and By-
Laws of the Company, including all amendments thereto, in effect as of
the date of this Agreement is set forth in Schedule 2.04 hereto.
2.05. Financial Statements. The Company has delivered to CRI
copies of the following financial statements:
(a) The Company's audited balance sheets as of November 28, 1998
and November 29, 1997 and related statements of income, stockholders'
equity and cash flows for the fiscal years ended November 28, 1998,
November 29, 1997 and November 30, 1996, including the notes contained
therein or annexed thereto (collectively, the "Company Audited Financial
Statements"); and
(b) The Company's unaudited interim balance sheet as of June 26,
1999 and its related unaudited statements of income and cash flow for
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the seven months then ended (collectively, the "Company Interim Financial
Statements").
The Company Audited Financial Statements and the Company Interim
Financial Statements are collectively referred to herein as the
"Company Financial Statements". The Company Financial Statements
present fairly and accurately the financial position of the Company as
of and at the dates shown and the results of operations for the
periods covered thereby in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP"). The
Company Interim Financial Statements contain all adjustments necessary
to present fairly and accurately the financial position and results of
operation of the Company as of and for the interim periods presented
therein. Except as set forth in Schedule 2.05 hereto, the Company
Financial Statements do not include any assets, liabilities or
obligations which should not be included in accordance with GAAP or
omit any assets, liabilities or obligations (whether absolute,
contingent, fixed, matured, unmatured or otherwise) which should be
included in accordance with GAAP and which, in either case, would
render any of the Company Financial Statements false, misleading or
inaccurate in any respect. Except for the losses incurred by the
Company for the seven month period ended June 26, 1999, there has been
no adverse change in the capitalization, assets, liabilities,
business, prospects, gross margin, profitability or methods of doing
business of the Company since November 28, 1998, other than changes in
the ordinary course of business.
2.06. Absence of Undisclosed Liabilities. There are no (and
there is no basis for) liabilities, debts or obligations of, or claims
against, the Company of any nature (whether absolute, contingent,
accrued, unaccrued, fixed, matured, unmatured or otherwise) except (a)
as and to the extent reflected on the Company Financial Statements,
and (b) as set forth in Schedule 2.06 hereto.
2.07. Accounts Receivable. Except as set forth on Schedule
2.07 hereto, the Company's accounts receivable reflected on the
Company Financial Statements (a) are valid and genuine, (b) are
current and collectible in the ordinary course of business in
accordance with the terms thereof, (c) represent bona fide obligations
resulting from sales or deliveries of goods or products in the
ordinary course of business, (d) are not subject to defenses, set-offs
or counterclaims, and (e) with respect to the accounts receivable
existing as of November 28, 1998, are properly reflected on the Company
Financial Statements in accordance with GAAP and, with respect to the
accounts receivable recorded or arising since November 28, 1998, are
properly reflected on the books and records of the Company. The
allowance for doubtful accounts and other reserves as reflected on the
Company Financial Statements are adequate and in accordance with GAAP.
2.08. Inventories; Machinery and Equipment. (a) Except as
set forth on Schedule 2.08 hereto, all inventories of the Company,
including, without limitation, raw materials, work-in-process and
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finished goods, (i) were acquired for adequate consideration and have
been maintained in the ordinary course of business, (ii) are of good
and merchantable quality and are not damaged, obsolete or slow-moving,
(iii) are not subject to any write-down or write-off and have been
valued at the lower of cost or market on a FIFO inventory method of
accounting in accordance with GAAP, (iv) are currently usable on a
non-discounted basis in the ordinary course of business, and (v) can
be sold or used in the ordinary course of the Company's business
without discount, other than normal trade discounts regularly offered
by the Company in the ordinary course of its business. The quantities
of each type of inventory maintained by the Company are in an amount
consistent with the Company's past practices and are reasonable in the
present circumstances of the Company. The Company has not consigned
any of its inventory to any third party.
(b) Except as set forth in Schedule 2.08 hereto, the machinery
and equipment owned or leased by and used in the Company's business
are in good operating condition, have been and are being maintained
and repaired in the ordinary course of business so as to preserve
their usefulness and value and are reflected on the Company Financial
Statements in accordance with GAAP.
2.09. Suppliers and Customers. Set forth in Schedule 2.09
hereto is a true, accurate and complete list of the names and dollar
volume of sales of the twenty-five (25) largest customers of the
Company for each of the fiscal years ended November 28, 1998 and
November 29, 1997 and for the eight months ended July 31, 1999. The
Company and the Selling Shareholders have no knowledge of (a) any
person or entity providing any products, components, materials,
supplies or other items or any services to the Company who intends to
cease selling such products, components, materials, supplies or other
items or services to the Company or to limit, reduce or materially
alter the terms or conditions of any such sales to the Company, (b)
any inadequacy or shortage of any raw materials, products, components,
materials, supplies, items or services necessary or required for the
Company to carry on its business as it has historically been
conducted, or (c) any customer of the Company which individually
represented or accounted for at least Fifty Thousand Dollars
($50,000.00) of the Company's total sales for the fiscal year ended
November 28, 1998, or any of the other customers of the Company that
taken together in the aggregate represent a material portion of the
Company's business, who intends or intend to terminate, limit, reduce
or change its or their order volume or business relations with the
Company. Set forth in Schedule 2.09 hereto is a true, accurate and
complete description of the terms of all selling arrangements between
the Company and any customer, including, without limitation, any
advertising allowances, discounts, consignments, rebates or other
incentive programs or plans.
2.10. Properties, Contracts and Other Agreements. Set forth
in Schedules 2.10(a), (b), (c), (d), (f), (g) and (h) hereto is a
true, accurate and complete list or description of the following (all
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of which the Company has previously delivered true, accurate and
complete copies to CRI):
(a) The location of all real property owned or leased by the
Company and the principal buildings located thereon, together with
copies of the title insurance policies relating to such real property,
which policies contain a legal description of such real property;
(b) All loan or credit agreements, lines of credit, letters of
credit, promissory notes, land or conditional sales contracts, other
title retention agreements, security agreements, mortgages, deeds of
trust, indentures, bonds and guaranties of the debts or obligations of
a third party relating to the Company or to which the Company is a
party;
(c) All agreements, contracts, understandings, commitments or
obligations of the Company which:
(i) involve payments by the Company of more than $5,000,
whether individually or in the aggregate;
(ii) relate to the purchase of goods, products, supplies,
materials or other items or services in excess of
$5,000, whether individually or in the aggregate;
(iii) involve payments based on profits of the Company;
(iv) were not made in the ordinary course of business; or
(v) may not be terminated without penalty within one (1)
year from the date of this Agreement;
(d) All leases of real, personal and other property to which the
Company is a party or is subject or bound;
(e) All agreements involving any partnership, joint venture or
ownership interest of the Company;
(f) All agreements concerning confidentiality or noncompetition
with respect to any of the directors, officers, employees, agents or
representatives of the Company involving the furniture business
generally;
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(g) All profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, or other plan or arrangement for
the benefit of its current or former directors, officers and
employees; and
(h) All operations or lines of business engaged in by the
Company, all subsidiaries or divisions of the Company and all current
or prior affiliates of the Company during the past ten (10) years.
2.11. No Defaults. Except for certain trade accounts payable
of the Company which are not being paid in a timely manner, (a) the
Company has not breached or violated and is not in default under any
contract, agreement, document, lease, license, promissory note,
mortgage, deed of trust, indenture, bond, understanding, arrangement
or commitment to which it is a party, (b) no breach, violation or
default under any of the foregoing by any other party thereto has
occurred, and (c) no event has occurred which, with notice or lapse of
time or both, would constitute a breach, violation or default thereof.
2.12. Title to Assets and Leasehold Interests. (a) The
Company has good and marketable title to all of the Company's assets
and properties (whether real, personal, mixed or otherwise),
including, without limitation, all such properties reflected in the
Company Audited Financial Statements for the fiscal year ended
November 28, 1998, other than personal property disposed of in the
ordinary course of business since November 28, 1998; good and
marketable title to or right to use by valid and enforceable lease or
contract all other properties and assets (whether real, personal or
otherwise) which the Company purports to own or which the Company uses
in its business; and good and marketable title to all property and
assets acquired and not disposed of since November 28, 1998. Except
as set forth in Schedule 2.12(a) hereto, all of such properties and
assets are owned by the Company free and clear of any and all land or
conditional sales contracts, mortgages, deeds of trust, liens,
pledges, restrictions, security interests, charges, claims,
encumbrances or rights of any third party (other than the right of any
owner of any asset or property leased by the Company).
(b) All real property owned or leased by the Company is in
compliance with all applicable zoning, land use, public health, fire
safety, building code and other similar laws, statutes, ordinances,
rules, regulations and government requirements applicable thereto or
relating to the ownership, occupancy or operation thereof.
(c) With respect to each lease of real or personal property to
which the Company is a party, (i) the Company has a valid leasehold
interest in such real or personal property, (ii) such lease is in full
force and effect and enforceable against the parties thereto in
accordance with its terms, (iii) all rents and other monetary amounts
that have become due and payable thereunder have been paid in full,
(iv) no waiver, indulgence, release, extension or postponement of any
obligations thereunder has been granted by any party thereto,
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(v) there exists no default or breach (or an event that, with notice or
lapse of time or both, would constitute a default or breach) under
such lease, and (vi) the transactions contemplated by this Agreement
will not constitute a default or breach, or cause the termination or
any modification, of such lease.
(d) All real property owned or leased by the Company is
accurately described on Schedule 2.12(d) hereto.
(e) All real property sold, transferred or otherwise disposed of
or owned, leased or used by the Company during the past ten (10) years
is accurately described on Schedule 2.12(e) hereto.
(f) All buildings and improvements located on any real property
owned by the Company (i) is structurally sound, (ii) is free of
defects, and (iii) has been and is currently being maintained and
repaired in the ordinary course of business. There are no
condemnation or eminent domain proceedings pending or threatened
against any real property owned by the Company (or any buildings or
improvements thereon). There are no public improvements currently
being made or proposed which may result in a special assessment
against or otherwise affect such real property.
2.13. Litigation and Pending Proceedings. (a) Except as set
forth in Schedule 2.13 hereto, there are no claims, actions, suits,
proceedings, arbitrations, mediations or investigations pending or
threatened in any court or before any government agency or authority,
arbitration panel, mediator or otherwise (nor has any event occurred
or circumstance arisen that may give rise to or serve as a basis for
any claim, action, suit, proceeding, litigation, arbitration,
mediation or investigation) against, by or affecting the Selling
Shareholders or the Company or any of its directors or officers.
(b) The Company and the Selling Shareholders are not (i) subject
to any outstanding judgment, order, writ, injunction, directive or
decree of any court, arbitration panel or governmental agency or
authority, (ii) presently charged with or under governmental
investigation with respect to any actual or alleged violations of any
law, statute, rule, regulation, ordinance or other governmental
requirement, or (iii) the subject of any pending or threatened
proceeding by any government regulatory agency or authority having
jurisdiction over its business, properties or operations.
2.14. Taxes, Returns and Reports. (a) The Company has (i)
timely, accurately and duly filed all federal, state, county, local
and foreign Tax returns of every type and kind required to be filed by
or on behalf of the Company, and each such return is true, accurate
and complete, (ii) paid all Taxes due or claimed to be due from it or
upon any of its income, properties or assets, (iii) not requested an
extension of time for any such payments (which extension is still in
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force), and (iv) not granted any extension of the limitation period
applicable to any claim for Taxes. Except for Taxes not yet due and
payable until after the Closing Date, the liability for Taxes in the
Company Audited Financial Statements as of November 28, 1998 is
adequate to pay all of the Company's Tax liabilities that may become
payable in future years with respect to all of its tax years through
the tax year ended November 28, 1998. The Company has no liability
for Taxes of any nature for or with respect to the operation of its
business, or ownership of its assets, except to the extent set forth
in the Company Financial Statements.
(b) The Company is not currently under audit by any federal,
state, local or other taxing authority and there is not currently
pending, or likely to occur, any investigation, examination or
proceeding by any taxing authority with respect to its Taxes. Except
as set forth in Schedule 2.14(b) hereto, no federal, state, local or
other tax returns of the Company have been audited by any taxing
authority during the past five (5) years.
(c) With respect to the Company and its business, operations,
affairs, and ownership of assets (i) all material elections with
respect to any Taxes affecting the Company are set forth in Schedule
2.14(c) hereto, (ii) all Taxes that the Company is required by law to
withhold or collect have been duly withheld or collected and have been
timely paid over to the Internal Revenue Service (the "IRS") or
appropriate governmental authorities to the extent due and payable and
are not subject to any Tax Liability in connection with amounts paid
or owing to any employee, creditor, independent contractor or other
third party, (iii) all deficiencies of Taxes which have been claimed,
proposed or asserted against the Company have been fully paid or
finally settled, and no issue has been raised in any examination which
may be expected to result in the proposal or assertion of a deficiency
of Taxes for any other year not so examined, (iv) no facts or
circumstances exist that would constitute the basis for the proposal
or assertion of any deficiencies of Taxes against the Company for any
unexamined year or for the recharacterization of any item of income,
expense or deduction set forth on any income tax return filed by the
Company resulting in any Taxes payable by the Company, (v) the Company
has complied in all respects with all laws, statutes, rules,
regulations and requirements relating to all federal, state, county,
local and foreign Taxes, (vi) no claim exists or has been asserted,
threatened or discussed by a government authority for a jurisdiction
where the Company does not file Tax returns to the effect that the
Company is or may be subject to taxation by that governmental
authority, and (vii) the Company has not agreed, nor is it required,
to make any adjustment under Section 481(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or any comparable provision of
state or local law, by reason of a change in accounting method or
otherwise.
(d) The Company has never been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code. The
Company has never been a "United States real property holding
corporation" (as defined in Section 897(c) of the Code) during the
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applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. The transactions contemplated by this Agreement are not subject
to the tax withholding provisions of the Code or any other law. The
Company has disclosed on its federal, state, county, local and foreign
income Tax returns all positions taken therein that could reasonably
give rise to an accuracy-related penalty under Section 6662 of the
Code (or any corresponding provision of state, county, local or
foreign tax law).
(e) The Company has timely paid all Taxes due and payable by the
Company for all Tax periods (or portion thereof) ending on or before
the date of this Agreement and shall timely pay all taxes due and
payable by it for all Tax periods (or portion thereof) ending on the
Closing Date. No Tax liens have been filed against the Company and
there are no liens for Taxes (other than for current Taxes not yet due
and payable) on the Company assets.
(f) All federal, state, county, local, foreign and other Taxes
resulting from or imposed by virtue of the Transaction shall be paid
by the Selling Shareholders.
(g) For purposes of this Agreement, the term "Tax" (or "Taxes"
where applicable) shall mean any and all federal, state, county,
local, foreign or other income, gross receipts, capital stock,
franchise, employee income withholding, foreign withholding, other
withholding, social security, unemployment, disability, environmental
(including under Section 59A of the Internal Revenue Code of 1986, as
amended (the "Code")), real property, personal property, sales, use,
transfer, value added, alternative or add-on minimum or other tax,
assessment, fee or charge, including any interest, penalties or
additions to tax in respect of the foregoing, whether disputed or not.
The term "Tax Liability" shall mean any liability (whether known,
unknown, absolute, fixed, matured, unmatured, contingent, liquidated
or unliquidated, and whether due or to become due) with respect to any
Taxes, including, without limitation, any liability to indemnify,
assume or succeed to a Tax Liability of a third party.
2.15. Transactions with Related Parties. (a) Except as set
forth in Schedule 2.15 hereto, there are no contracts, agreements,
leases, commitments, understandings, arrangements, transactions or
business relationships involving, or for the benefit of, any present
or former shareholder, director, officer, employee, agent or
representative of the Company or any of their respective parents,
spouses, siblings, children, grandchildren, family members, relatives,
affiliates, agents, trusts, corporations or other entities on the one
hand (collectively, the "Affiliated Parties"), and the Company, on the
other hand, including, but not limited to, (i) any debtor or creditor
relationship, (ii) any sale, other transfer or lease of any asset or
any real or personal property, (iii) purchases or sales of any assets
or any products or services, and (iv) any interest in any assets used
in the Company's business.
(b) Except as set forth in Schedule 2.15 hereto, there are (i)
no agreements or claims of any nature that any of the Affiliated
Parties has with or against the Company as of the date of this
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Agreement or which may arise subsequent to the date of this Agreement,
other than any claims for directors' fees, salary or other
compensation and employee benefits payable in the ordinary course of
business in accordance with past practices to the directors and
employees of the Company, and (ii) no agreements or claims of any
nature that the Company has with or against any of the Affiliated
Parties as of the date of this Agreement or which may arise subsequent
to the date of this Agreement.
(c) No Affiliated Party has any direct or indirect personal or
economic interest in (i) any entity which does business with the
Company or is competitive with the Company or (ii) any property, asset
or right which is used by the Company in the conduct of its business.
2.16. Environmental Matters. With respect to all real
property presently or formerly owned, leased or used by the Company,
the Company and each of the prior owners, lessees, occupants and
operators of such real property have conducted their respective
business and have used such real property in compliance with all
federal, state, county, municipal and other laws, statutes, rules,
regulations, ordinances, orders, restrictions, requirements and common
law duties relating to, without limitation, responsible property
transfer, underground storage tanks, petroleum products, chemicals,
air pollutants, water pollutants or process waste water or otherwise
relating to the environment, air, water, soil or toxic, contaminated
or hazardous wastes, substances or materials, or to the manufacturing,
recycling, handling, processing, distribution, use, generation,
treatment, storage, disposal or transport thereof (including, without
limitation, the Clean Air Act, the operating permit requirements of
Title V of the 1990 Clean Air Act amendments, Clean Water Act,
Occupational Safety and Health Act, Resource Conservation and Recovery
Act, Comprehensive Environmental Response, Compensation and Liability
Act, Federal Insecticide, Fungicide and Rodenticide Act, Safe Drinking
Water Act, Toxic Substances Control Act, Solid Waste Disposal Act,
Emergency Planning and Community Right-To-Know Act or any comparable,
similar or related laws, statutes, rules, regulations, ordinances,
orders, restrictions and requirements (collectively, the
"Environmental Laws"). There are no pending, anticipated or
threatened claims, actions or proceedings by any federal, state, local
or other governmental agency or authority against the Company or any
of its predecessors with respect to the Environmental Laws and there
is no basis or grounds for any such claim, action or proceeding.
Neither the Selling Shareholders nor the Company has received any
communication (written or oral) that alleges that the Company or any
of its predecessors is not or was not in compliance with all
Environmental Laws. Set forth in Schedule 2.16 hereto is a true,
accurate and complete list of all environmental permits or other
governmental authorizations held by the Company that are required for
the conduct of the Company's business (collectively, the
"Environmental Permits"). Other than the Environmental Permits, there
are no environmental permits or governmental authorizations necessary
for the conduct of the Company's business. Except as expressly
provided by their terms, all of such Environmental Permits shall
remain in full force and effect in accordance with their terms without
any modification or limitations on and after the Closing Date and will
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not be terminated, revoked or withdrawn as a result of the
transactions contemplated by this Agreement. The Company is not and
has not been the owner or operator of any property on which any
substances or materials have been used, stored, deposited, treated,
recycled or disposed of, which substances or materials require clean-
up, removal or some other remedial action under any Environmental Law.
With respect to the real property presently or formerly owned, leased
or used by the Company, neither the Selling Shareholders nor the
Company is aware of the existence or removal of any underground
storage tanks on or from such real property; any releases, spills,
leaks or contamination on, from or affecting such real property; or
any other actions, omissions, events, facts or circumstances on, from
or affecting such real property which requires or required any action
under any of the Environmental Laws.
2.17. Employee Benefit Plans. (a) With respect to the
employee benefit plans, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (whether
written or oral) sponsored, contributed to or otherwise maintained by
the Company, including, without limitation, employee benefit plans for
which the Company acts as administrator, trustee or fiduciary or with
respect to which the Company has any liability and any such plans
which have been terminated, merged into another plan, frozen or
discontinued (collectively, the "Company Plans"):
(i) all such Company Plans have, on a continuous basis
since their adoption, been maintained in compliance
with the requirements prescribed by all applicable
laws, statutes, rules, regulations, orders and other
governmental requirements, including, without
limitation, ERISA, the Code and the Department of
Labor (the "DOL") and the U.S. Treasury regulations
promulgated thereunder;
(ii) all Company Plans intended to constitute tax-qualified
plans under the Code have complied, in form and in
operation, since their adoption with all applicable
requirements of the Code and the U.S. Treasury
regulations promulgated thereunder, and favorable
determination letters with respect to the Tax Reform
Act of 1986 have been received from the IRS with
respect to each such Company Plan stating that each,
in its current form (or at the time of its disposition
if it has been terminated, merged, frozen or
discontinued), is qualified under and satisfies all
applicable provisions of the Code and U.S. Treasury
regulations;
(iii) no Company Plan (or its related trust) holds any
Company Common Stock or any stock of a related or
affiliated person or entity;
(iv) the Company has no liability to the DOL, the IRS or
the Pension Benefit Guaranty Corporation (the "PBGC")
with respect to any Company Plan;
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(v) the Company has not engaged in any transaction that
may subject the Company or any Company Plan to a civil
penalty imposed by Section 502 of ERISA;
(vi) no prohibited transaction (as defined in Section 406
of ERISA or as defined in Section 4975(c) of the Code)
has occurred with respect to any Company Plan;
(vii) no participant or beneficiary or non-participating
employee has been denied any benefit due or to become
due under any Company Plan or has been misled as to
his or her rights under any Company Plan;
(viii) all obligations required to be performed by the
Company under any provision of a Company Plan have
been performed by it, and the Company is not in
default under or in violation of any provision of a
Company Plan;
(ix) there are no actions, suits, proceedings or claims
pending or threatened against the Company, any Company
Plan, any trustee, fiduciary or committee of a Company
Plan or the assets of any Company Plan;
(x) all reports, notices and information required to be
given to any individual or entity or any governmental
agency or authority in connection with a Company Plan
has been given in a complete and timely fashion;
(xi) the Company does not maintain, participate in or
contribute to any multiemployer plan, as defined in
Sections 3(37) and 4001(a)(3) of ERISA, and has no
actual or asserted withdrawal liability with respect
to such a plan;
(xii) no Company Plan has incurred an "accumulated funding
deficiency," as determined under Code Section 412 and
ERISA Section 302; and
(xiii) with respect to any Company Plan sponsored,
participated in or contributed to by the Company or
with respect to which the Company is responsible for
complying with the reporting and disclosure
requirements of ERISA or the Code, there has been no
violation of the reporting and disclosure requirements
imposed either under ERISA or the Code for which a
penalty has been or may be imposed.
(b) With regard to any Company Plan intended to be a tax-
qualified plan under Section 401(a) of the Code, no director, officer,
employee or agent of the Company has engaged in any action or failed
to act in such a manner that, as a result of such action or failure to
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act, the IRS could revoke or deny any Company Plan's qualification
under the Code or the exemption under Section 501(a) of the Code for
any trust or annuity contract related to such Company Plan.
(c) Set forth in Schedule 2.17(c) hereto is a true,
accurate and complete list of all of the following with respect to
which the Company maintains, contributes, administers or is subject or
bound, or which otherwise relates to the Company (all of which the
Company has delivered true, accurate and complete copies to CRI): (i)
pension, retirement, profit-sharing, savings, stock purchase, stock
bonus, stock ownership, stock option and stock appreciation or
depreciation right plans or agreements and all amendments thereto,
(ii) all employment, deferred compensation (whether funded or
unfunded), salary continuation, consulting, bonus, severance and
collective bargaining agreements, plans, programs, arrangements or
understandings, (iii) all executive and other incentive compensation
agreements, plans, programs, arrangements or understandings, (iv) all
group and/or individual insurance and health, hospitalization,
disability, life, dental and similar insurance, contracts, policies or
plans, (v) medical reimbursement agreements, commitments, policies or
plans and (vi) all other incentive, welfare or employee benefit
plans, understandings, arrangements or agreements, maintained or
sponsored, participated in or contributed to by the Company for its
current or former directors, officers or employees. All of the
foregoing have been, since their inception, drafted, implemented,
administered and, where applicable, amended or terminated, in
accordance with their terms and with applicable law. The Company does
not maintain, contribute or administer and is not bound by any
agreement, plan, program, arrangement, understanding or commitments
referenced in this Section 2.17(c) that have not been reduced to
writing.
(d) Set forth in Schedule 2.17(d) hereto is a true,
accurate and complete list of each contract, agreement, understanding,
commitment, arrangement, policy or plan (written or oral) providing
for compensation, monetary payments, securities or benefits (all of
which the Company has provided true, accurate and complete copies to
CRI) that (i) is not an employee benefit plan, (ii) is or was entered
into, maintained or contributed to by the Company or by which the
Company is bound and (iii) covers any current or former director,
officer or employee of the Company (collectively, "Benefit
Arrangements"). Each of the Benefit Arrangements has been maintained
in compliance with its terms and with the requirements prescribed by
any and all laws, statutes, orders, rules, regulations and other
governmental requirements which are applicable to such Benefit
Arrangements. Except as otherwise provided in Schedule 2.17 hereto,
there are no collective bargaining, employment, management,
consulting, deferred compensation, reimbursement, indemnity,
retirement, early retirement, severance, bonus, salary continuation or
similar plans, agreements, commitments or understandings or any other
plan, agreement, commitment or understanding providing currently or in
the future for any compensation, monetary payment, securities,
property or benefit to any present or former director, officer or
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employee of the Company, and no such agreement, commitment,
understanding or plan is under discussion or negotiation by management
with any employee or group of employees, any member of management or
any other person.
(e) Except as set forth in Schedule 2.17(c) hereto, no
current or former director, officer or employee of the Company is
entitled to any benefit under any employee welfare benefit plans (as
defined in Section 3(1) of ERISA) after termination of employment with
the Company, except that such individuals may be entitled to continue
their group health care coverage pursuant to Section 4980B of the Code
if they pay the cost of such coverage pursuant to the applicable
requirements of the Code with respect thereto.
(f) With respect to any group health plan (as defined in
Section 607(1) of ERISA) sponsored or maintained by the Company, in
which the Company participates as a participating employer or to which
the Company contributes, no director, officer, employee or agent of
the Company has engaged in any action or failed to act in such a
manner that, as a result of such action or failure to act, would cause
a Tax to be imposed upon the Company under Section 4980B(a) of the
Code. With respect to all such plans, all applicable provisions of
Section 4980B of the Code and Section 601 of ERISA have been complied
with by the Company.
(g) For purposes of this Section 2.17, references to the
Company are deemed to include (i) all predecessors of the Company and
(ii) any entity related to or affiliated with the Company.
(h) Set forth in Schedule 2.17(h) hereto is a true,
accurate and complete list of each "employee benefit plan" (as defined
in Section 3(3) of ERISA) of the Company which has been terminated,
merged into another plan, frozen or discontinued.
2.18. Employee Matters. (a) Except for the employees
identified in Schedule 2.18(b) hereto, all employees of the Company
are employees-at-will and may be terminated by the Company at any time
with or without cause.
(b) The Company has provided to CRI a true, accurate and
complete list containing the name, title, current annual salary,
compensation or wages, as the case may be (including bonuses,
commissions and overtime), of (i) each person who is an employee of
the Company on the date of this Agreement, and (ii) each person who
was an employee of the Company during the calendar years 1999 and
1998. Except as set forth in Schedule 2.18(b) hereto, all salaries,
wages and other compensation (including, without limitation, deferred
compensation, bonuses, commissions and overtime), sick leave,
severance pay and vacation pay or benefits for all employees of the
Company for all periods ending on the Closing Date will be fully paid
on or prior to the Closing Date. The Company has previously provided
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to CRI copies of all employee policies, handbooks and manuals in
effect and currently used by the Company.
(c) The Company has maintained and continues to maintain
true, accurate and complete payroll, personnel and time records for
purposes of compliance with all federal and state minimum wage and
overtime laws and right to work laws, including, without limitation,
adequate documentation of the applicability of exemptions under such
laws. Except as set forth in Schedule 2.18(d) hereto, the Company is
in compliance with all applicable laws, statutes, rules, regulations,
requirements and common law duties with respect to (i) employment and
employment practices, (ii) terms and conditions of employment, (iii)
wages and hours and (iv) occupational safety and health.
(d) The Company is not and has not engaged in any unfair
labor practice within the meaning of Section 8 of the National Labor
Relations Act, as amended, and there is no proceeding or investigation
pending or threatened against it with respect thereto. Except as set
forth in Schedule 2.18(d) hereto, there are no, and during the last
five (5) years have not been any, formal, informal or internal charges
or complaints of, or any proceedings or lawsuits pending or threatened
involving, discrimination or harassment (including, but not limited
to, discrimination or harassment based upon gender, age, marital
status, race, religion, color, creed, national origin, sexual
preference, handicap or veteran status), nor is there any
investigation pending or threatened before the Equal Employment
Opportunity Commission or any other federal, state or local agency or
authority with respect to alleged or actual discrimination or
harassment by the Company or any of its present or former directors,
officers, employees, agents or representatives.
(e) There is no strike, dispute, slowdown, work stoppage,
arbitration proceeding or grievance pending or threatened involving
any of the current, former or prospective employees of the Company.
There are no labor unions or other organizations representing,
purporting to represent or attempting to represent any of the
employees of the Company. No collective bargaining agreement is
currently in effect for or being negotiated by or on behalf of any
employees of the Company. Except as set forth in Schedule 2.18(e)
hereto, the Company has not experienced any work stoppage or any other
material labor difficulty during the five (5) years immediately
preceding the date of this Agreement.
(f) The Company is in compliance with the Family and
Medical Leave Act, the Americans With Disabilities Act, as amended,
the Age Discrimination in Employment Act of 1967, as amended, the
Civil Rights Acts of 1968 and 1991, as amended, and all laws, rules
and regulations relating to occupational health and safety.
2.19. Obligations to Employees. All obligations and
liabilities of and all payments by the Company to its present or
former directors, officers, employees or agents, whether under or
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pursuant to all Company Plans and all Benefit Arrangements, whether
arising by operation of law, by contract, by past custom or otherwise,
have been paid to the extent required by applicable law or by the
plan, trust, agreement, past custom or practice or otherwise to the
applicable trusts or other funds, to any government agency or
authority or to any present or former director, officer, employee or
agent of the Company (or his heirs, legatees or legal
representatives). Adequate actuarial accruals, if applicable, and
reserves for payments have been and are being made by the Company in
accordance with GAAP applied on a consistent basis, applicable law
and, if applicable, actuarial methods with respect to the following:
(a) withholding taxes, unemployment compensation and social security
or other government benefits, (b) all Company Plans and Benefits
Arrangements, (c) all employment, deferred compensation (whether
funded or unfunded), salary continuation, consulting, severance and
bonus agreements, (d) all group insurance and health or
hospitalization contracts or policies and (e) all other incentive,
welfare, pension, retirement or employee benefit plans or agreements
maintained, sponsored, participated in or contributed to by the
Company for, and all other compensation paid by the Company to, its
current or former directors, officers, employees and agents. Set
forth in Schedule 2.19 hereto is a true, accurate and complete list
containing the name and number of days of accrued but unused vacation
to which each employee of the Company is entitled to use as of the
date of this Agreement.
2.20. Insurance. Set forth in Schedule 2.20 hereto is a
list and brief description of all policies of insurance (including,
but not limited to, product liability insurance, property and casualty
insurance, group health or hospitalization insurance and other
insurance providing benefits for employees) owned or held by the
Company on the date hereof or with respect to which the Company pays
any premiums. Each such policy is in full force and effect, all
premiums due thereon have been paid when due, and a true, accurate and
complete copy thereof has been previously delivered to CRI. True and
complete copies of all pending applications for policies of insurance
and all statements by the auditor of the Company's Financial
Statements with regard to the adequacy of such coverage or of the
reserve for claims have previously been delivered to CRI.
2.21. Intellectual Property. Set forth in Schedule 2.21
hereto is an accurate and complete list of all patents, trademarks,
service marks, trade names, computer programs and software and
copyrights (collectively, the "Intellectual Property") owned,
possessed, licensed or used by the Company and all applications
therefor and registrations thereof owned or controlled by the Company
and, in the case of any such rights that are so owned, the
jurisdictions in which such rights have been registered, filed or
issued. The Intellectual Property constitutes all of the intellectual
property that the Company uses in the operation of its business. The
Company has filed all affidavits, renewals and other documents
necessary to keep the Intellectual Property in full force and effect
and is the sole and exclusive owner of the Intellectual Property with
the sole and exclusive right to use and license such property. No
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claim has been asserted or threatened seeking cancellation or
concurrent use of the Intellectual Property.
2.22. Dividends. Since November 28, 1998, the Company has
paid no dividends or other distributions to the Selling Shareholders.
2.23. Compliance with Laws. The Company has not engaged in
any activity nor has it taken or failed to take any action which has
resulted in the violation of any federal, state, local, foreign or
other law, statute, rule, regulation, ordinance, requirement or common
law duty or obligation. The Company is not in violation of any
judgment, order, injunction, ruling, directive, writ or decree of any
court, arbitration panel or government agency or authority.
2.24. Licenses and Permits. The Company possesses and holds
all licenses, franchises, permits, certificates and other
authorizations (including, but not limited to, all Environmental
Permits (collectively, the "Permits")) necessary for the continued
conduct of its business without interference or interruption. A copy
of each such Permit is set forth in Schedule 2.24 hereto and shall
remain in full force and effect in accordance with their respective
terms from and after the Closing Date without any restrictions or
limitations thereon or the need to obtain any consents or approvals of
any government agencies or authorities or any other third parties. No
such Permit, or any renewal thereof, will be terminated, revoked,
suspended, limited or modified in any respect as a result of the
transactions contemplated by this Agreement. The Company has been in
compliance with all such Permits and neither the Company nor the
Selling Shareholders have received notice of any violation or alleged
violation of and is subject to no liability for past or continuing
violation of, any Permit.
2.25. No Third Party Consents. No consent, approval,
authorization, clearance or waiver of or any filing with or notice to
any person, partnership, corporation, limited liability company or
other entity or third party or any government agency or authority is
required for the execution, delivery and performance of this Agreement
or the consummation of the transactions contemplated hereby by the
Company or any of the Selling Shareholders, except for any filing
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act").
2.26. No Adverse Agreements. Except for any contract
disclosed in Schedule 2.26 hereto, neither the Company nor any of its
directors, officers, employees, agents or representatives is a party
to or bound by (a) any oral or written agreement, contract,
understanding or commitment containing any covenant or restriction
which limits its or his freedom or ability to engage in any line of
business or to compete with any person, partnership, corporation,
limited liability company or other entity, or (b) any oral or written
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agreement, contract, understanding or commitment that is or may be
adverse to the Company's financial condition, results of operations,
business or prospects.
2.27. Warranties. Except as may be provided by applicable
law (whether statutory, case law or common law), the Company does not
provide any warranties with respect to any products or goods that it
sells. The amount of all reserves for the Company's warranty
obligations and product returns and allowances as reflected on its
books and records are adequate in accordance with GAAP.
2.28. Financial Records. The financial books and records of
the Company are true, accurate and complete and accurately reflect the
financial condition and results of operations in accordance with GAAP
of the Company set forth in the Company Financial Statements.
2.29. Industry Standards. The Company is in compliance with
all applicable industry and government standards, guidelines and
requirements relating to the design, manufacture, advertising and sale
of its products. Except as set forth on Schedule 2.29 hereto, there
are no disputes pending between the Company and any third party with
respect to the Company's compliance with relevant industry and
government standards, guidelines and requirements. There are no
circumstances presently existing that would constitute the basis for
any such dispute.
2.30. Interim Events. Since November 28, 1998, the Company
has conducted the Business only in the ordinary and usual course of
business, and neither the Company nor any of the Selling Shareholders
have, with respect to the Business:
(a) except for any mortgage, pledge, lien or security interest
of Foothill Capital Corporation ("Foothill"), sold, assigned,
transferred, leased, mortgaged, pledged or otherwise disposed of
or subjected to any lien or security interest any asset of the Company
(other than sales and dispositions in the ordinary and usual course of
business) or any of the Shares;
(b) materially amended, waived, released, disposed of or
permitted to lapse any material right relating to the Company;
(c) transferred or granted any material rights under any
contracts, agreements, leases or obligations of the Company;
(d) except as set forth in Schedule 2.30(d) hereto, granted
to any shareholder, director, officer, employee, consultant,
representative or agent any increase in compensation or benefits
in any form, any stay bonus or any severance or termination pay or
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varied the terms of employment of any such person or of any
employee benefit plan, program, policy or arrangement;
(e) except for the refinancing as of December 22, 1998 of
the Company's bank indebtedness by Foothill, refinanced or
restructured any of the Company's indebtedness for borrowed
money or other debts or obligations or amended, modified, terminated
or changed the terms of any promissory note, bond, indenture or
other evidence of indebtedness, any mortgage, deed of trust or other
collateral document or any agreement with any bank, financial
institution or other lender;
(f) except as set forth in Schedule 2.30(f) hereto, increased
or incurred any indebtedness for borrowed money to any bank,
financial institution or other lender, except for advances under
the Company's existing revolving credit facilities provided by
Foothill;
(g) except for certain trade accounts payable of the Company
which are not being paid in a timely manner, failed to timely pay
and accrue the Company's accounts payable, trade or other payables,
indebtedness to third parties, Taxes (including, without limitation,
withholdings from employees), interest and other obligations in a
timely manner in the ordinary course of business in accordance with
their respective terms and conditions;
(h) incurred or recorded any accounts payable, indebtedness
or other obligation or created, recorded or collected any accounts
receivable, except in the ordinary course of business and on terms and
conditions that are generally acceptable to parties in similar
circumstances;
(i) amended, modified or terminated, or granted any waiver
or concession under, any contract, agreement, lease, understanding
or commitment, except in the ordinary course of business consistent
with past practices and not material in amount, whether individually
or in the aggregate;
(j) amended, modified or terminated, or forgiven, canceled,
released, compromised or granted any waiver or concession under,
any debt, obligation, claim or receivable owed to the Company,
except in the ordinary course of business consistent with past
practices and not material in amount, whether individually or in
the aggregate;
(k) guaranteed any indebtedness or other obligation of any
third party;
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(l) except as set forth in Schedule 2.30(l) hereto, entered
into any transaction, agreement, contract, commitment or
understanding, except in the ordinary course of business consistent
with past practices;
(m) agreed, whether in writing or not, to do any of the foregoing;
(n) conducted its business in any manner other than substantially
as it was being conducted on November 28, 1998; or
(o) except for the losses incurred by the Company for the seven
month period ended June 26, 1999, undergone or suffered any change in
its financial condition, results of operation, business, customer,
supplier or employee relationships, assets, liabilities or prospects
which is, individually or in the aggregate, materially adverse to the
Company or the Business.
2.31. Broker's, Finder's and Other Fees. Except as set
forth in Schedule 2.31 hereto, no agent, broker, investment banker,
consultant, representative or other person acting on behalf of the
Company or any of the Selling Shareholders or under any authority of
the Company or any of the Selling Shareholders is or shall be entitled
to any commission, broker's or finder's fee or any other form of
compensation or payment from the Company or any of the Selling
Shareholders relating to this Agreement and the Transaction. Set
forth in Schedule 2.31 hereto are the engagement letters and the fees
paid on or prior to the Closing Date to all attorneys, accountants,
investment bankers, consultants and other advisors used by the Company
or any of the Selling Shareholders in connection with this Agreement
or the Transaction.
2.32. Accuracy of Statements Made and Materials Provided to
CRI. No representation or warranty made by the Company or any of the
Selling Shareholders in this Agreement and no statement or information
contained in any Schedule attached hereto or in any written report,
list, materials or other document furnished or to be furnished by the
Company or any of the Selling Shareholders to CRI in connection with
this Agreement or the Transaction contains or will contain any untrue,
inaccurate or misleading statement of material fact or omits or will
omit to state a material fact necessary to make the statements
contained herein or therein not false or misleading.
2.33. Equipment Data Processing Technology. Except as set
forth in Schedule 2.33 hereto, all assets of any kind or nature owned,
leased or used by the Company on the Closing Date (including, without
limitation, computer hardware, computer software and building
equipment that utilizes or includes, either internally or via a
network system, microprocessors, central processing units, or other
computer or computer related technology) are capable (without upgrade
modification, alteration, adjustment, additional equipment, repair or
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replacement), with respect to any function utilizing, containing,
referring to or calling on a calendar function (including, without
limitation, any function indexed to a CPU clock, if any, and any
function providing or calculating specific dates or days, or
calculating spans of dates or days), of (a) recording, storing,
processing, providing and inserting true and accurate calculations of
dates and days and spans of dates and days on, before and after
January 1, 2000, and not producing incorrect or abnormally ending
results involving such dates or days (whether used in any forward or
regression date-based functions or otherwise), (b) providing that all
date-related functions and date-fields include the indication of the
correct century and millennium, and (c) performing calculations that
involve an appropriate date field, (d) handling consistently all date
and day information on, before and after January 1, 2000, and (e)
responding to two-digit date input in a way that is unambiguous as to
century or millennium.
The Company has made inquiry of each of its material suppliers,
customers and vendors with respect to their respective operations
relating to, and readiness for matters dealing with, the Year 2000 and
has determined that the operations and readiness of such suppliers,
customers and vendors will not have a material adverse effect upon the
Company or its operations based upon Year 2000 matters.
2.34. Bring-Down of Representations and Warranties on the
Closing Date. All representations and warranties of the Company and
the Selling Shareholders contained in this Agreement shall be true,
accurate and complete, and shall be made again, on and as of the
Closing Date.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF CRI
CRI hereby represents and warrants to the Company and the Selling
Shareholders as of the date of this Agreement as follows:
3.01. Organization. CRI is a corporation duly organized and validly
existing under the laws of the State of Delaware.
3.02. Authority. CRI has the requisite corporate power and authority
to enter into this Agreement and to carry out its obligations
hereunder subject to the fulfillment of the conditions precedent set
forth in Section 6.01 hereof. This Agreement and its execution and
delivery by CRI have been duly authorized and unanimously approved by
the Board of Directors of CRI and constitutes a valid and binding
obligation of CRI, enforceable in accordance with its terms, except to
the extent limited by general principles of equity and public policy
and by bankruptcy, insolvency, reorganization, liquidation,
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moratorium, readjustment of debt or other laws of general application
relating to or affecting the enforcement of creditors' rights.
3.03. No Third Party Consents. No consent, approval, authorization,
clearance or waiver of or any filing with or notice to any person,
corporation, other entity or third party or any government agency or
authority is required for the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated
hereby by CRI, except for any under the HSR Act.
SECTION 4
COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS
The Company and each of the Selling Shareholders, jointly and
severally, covenant to and agree with CRI as follows:
4.01. Hart-Scott-Rodino Filing; Other Approvals. (a) The
Company and the Selling Shareholders shall file and prosecute to a
favorable conclusion, all notices and other documents required to be
filed under the HSR Act with the U.S. Federal Trade Commission (the
"FTC") and the U.S. Department of Justice (the "DOJ"). The Company
shall provide CRI with a copy of all such notices and other documents
filed under the HSR Act prior to the filing thereof and shall promptly
provide CRI with copies of all correspondence and other documents
received from the FTC or DOJ in connection with such filings.
(b) Prior to the Closing Date, the Company and the Selling
Shareholders shall proceed to (i) obtain all consents, authorizations
and approvals of third parties, on terms and conditions acceptable to
CRI, to the transactions contemplated by this Agreement, and (ii)
satisfy all requirements prescribed by law, and all conditions set
forth in this Agreement, for the consummation of the Transaction.
4.02. Employee Benefit Plans. The Company and the Selling
Shareholders understand, acknowledge and agree that CRI shall have
primary responsibility for the preparation and filing of all documents
relating to the freezing, termination, merger or other disposition of
the Company Plans; provided, however, that no such filing of documents
or freezing, termination, merger or other disposition of any the
Company Plans shall be made or become effective prior to the Closing
Date. The Company, and its employees and agents, shall cooperate with
CRI in the preparation and filing of any such documents relating to
the freezing, termination, merger or other disposition of the Company
Plans.
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4.03. Conduct of Business Prior to the Closing Date. On and
after the date of this Agreement and until the Closing Date or until
this Agreement shall be terminated as herein provided, the Company
shall not, without the prior written consent of CRI:
(a) make any changes in its capital stock accounts or declare,
authorize, approve issue or effect any stock split or stock dividend
or any recapitalization or reclassification of its capital stock;
(b) authorize a class of stock or issue, or authorize the issuance
of, securities or options other than or in addition to the Shares;
(c) declare, authorize, approve, issue or pay any distribution
or dividend to any of the Selling Shareholders;
(d) redeem any of the Shares;
(e) merge, consolidate, affiliate, effect a share exchange
or otherwise combine with, sell a material portion of its assets
to or sell any of its securities to any third party or enter into
a new line of business or change in any material respect any of
its operations or existing lines of business;
(f) acquire or dispose of any property or assets in excess
of $5,000 individually or $10,000 in the aggregate, except for
purchases in the ordinary course of business of raw materials
inventory and sales in the ordinary course of business of finished
goods inventory;
(g) refinance or restructure any of its indebtedness for
borrowed money or other debts or obligations; or amend, modify
or terminate, or change the terms or conditions of, any agreement
with any bank, financial institution or other lender or any
promissory note, bond, indenture or other evidence of indebtedness;
(h) increase or incur any new or additional indebtedness to
any bank, financial institution or other lender, except for any
advances under its existing revolving credit facilities provided
by Foothill, or pay any fee to Foothill Bank or any other bank,
financial institution or lender;
(i) fail to timely pay and accrue its accounts payable,
indebtedness to third parties, Taxes (including, but not limited
to, withholdings from employees), interest and other obligations
in the ordinary course of business in accordance with the respective
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terms and conditions of such accounts payable, indebtedness and
other obligations or as otherwise are required to be paid;
(j) incur any accounts payable, indebtedness or other
obligation, or create, record or collect any accounts receivable,
except in the ordinary course of business and on terms and
conditions that are generally acceptable to parties in similar
circumstances;
(k) amend, modify or terminate, or grant any waiver or
concession under, any contract, agreement, lease, understanding
or commitment, except in the ordinary course of business
consistent with past practices of the Company and not material
in amount, whether individually or in the aggregate;
(l) amend, modify or terminate, or forgive or grant any
waiver or concession under, any debt, obligation or claim owed
to the Company or any accounts receivable of the Company, except
in the ordinary course of business consistent with past
practices of the Company and not material in amount, whether
individually or in the aggregate;
(m) guaranty any indebtedness or other obligation of any
third party;
(n) place or allow to exist on any of its assets or
properties any security interest, pledge, mortgage, deed of trust,
encumbrance, charge, claim or other lien, except as permitted
under Section 2.12 hereof;
(o) amend, modify or restate the Company's Articles of
Incorporation or By-Laws;
(p) promote to a new position or increase the rate of
compensation of any director, officer or employee of the Company;
(q) hire or employ any new or additional employees, except
for employees hired to replace presently existing employees of
the Company whose employment has been terminated subsequent to
the date hereof;
(r) create, institute, amend, modify or terminate any
employment policy or practice affecting any present or former
directors, officers or employees of the Company;
(s) create, institute, amend, modify or terminate any
Company Plan or Benefit Arrangement; any stock purchase, stock
bonus, stock option or stock appreciation plan or agreement;
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any savings, profit sharing, retirement or employee pension
benefit plan; any insurance plan, policy or agreement or other
employee welfare benefit plan; or any employment, deferred
compensation, consulting, bonus, incentive, severance or
collective bargaining agreement; or change the level of
benefits or payments under any of the foregoing which are
in effect or existing as of the date of this Agreement or
under any Company Plan;
(t) fail to maintain its accounting and other books and
records in the ordinary course of business and in the usual
manner on a basis consistent with that heretofore maintained;
(u) purchase, expand, renovate or materially change or
alter, or make any material improvements to, any of its plants,
warehouses or other facilities;
(v) enter into any contract, agreement, lease, commitment,
understanding or transaction, or incur any liability or
obligation, other than in the ordinary course of business;
(w) violate any law, statute, rule, regulation, order,
decree, directive or other governmental requirement in
any material respect;
(x) compromise or settle any pending or threatened claim,
action, suit, proceeding, litigation, arbitration, mediation or
investigation involving the Company or any of its shareholders,
directors, officers, employees, representatives or agents;
(y) enter into any contract, agreement, commitment,
understanding or arrangement to indemnify or reimburse any
shareholder, director, officer, employee, representative, agent
or other party for any liabilities, costs, expenses or other
amounts; or
(z) enter into any contract, agreement, commitment,
understanding or arrangement with respect to any of the
foregoing specified in this Section 4.03.
4.04. Reserved.
4.05. Preservation of Business. On and after the date of
this Agreement and until the Closing Date or until this Agreement is
terminated as herein provided, the Company shall:
(a) carry on its business substantially in the manner as is
presently being conducted and in the ordinary course of business;
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(b) use its best efforts to preserve for the benefit of
CRI, its business, operations and affairs, and its employees,
customers and persons having business dealings with it, in the
same manner as presently exists;
(c) maintain all of its machinery, equipment, real property
and other assets that it owns or leases in good condition,
ordinary wear and tear excepted;
(d) maintain in full force and effect insurance on its
assets, properties, operations, employees and directors in the
same manner as they are currently insured as of the date of
this Agreement; and
(e) not take any action or fail to take any action which
will cause a breach of or default under this Agreement or any
contract, agreement, lease, indenture, bond, obligation,
commitment or understanding to which the Company is a party.
4.06. Press Releases. Neither the Company nor any of the
Selling Shareholders shall issue any news or press releases or make
any other public announcements or disclosures to the press or other
media or to any third party relating to this Agreement or the
transactions contemplated hereby without the prior written consent
of CRI.
4.07. Update to Schedules. The Selling Shareholders or the
Company shall promptly (a) supplement, amend and update any and all of
the Schedules attached to this Agreement provided pursuant to Section
2 hereof and any and all lists, letters, documents, written
information and other writings provided by the Selling Shareholders or
the Company to CRI pursuant to this Agreement to reflect each and
every change to each Schedule and each such list, letter, document,
written information and other writing and to reflect each and every
document, action, matter, fact or event occurring or arising after the
date of this Agreement and prior to the Closing Date which would make
any Schedule or any such list, letter, document, written information
or other writing incomplete or inaccurate or which, if in existence or
having occurred as of or prior to the date of this Agreement, would
have been required to be set forth or described in any Schedule to
this Agreement or in any list, letter, document, written information
or other writing provided to CRI pursuant to this Agreement
(collectively, the "Updated Schedules and Materials"), and (b)
disclose in writing to CRI each and every document, action, matter,
fact, event or other information which, if existing or known as of the
date hereof, would have made any of the representations or warranties
of the Company or the Selling Shareholders contained herein
inaccurate, untrue or misleading. No Updated Schedule or Material and
no disclosure pursuant to this Section will be deemed to amend, modify
or limit, or to provide any exceptions with respect to, any
representation or warranty or any original Schedule, list, letter,
document, written information or other writing without the prior
written consent of CRI.
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4.08. Subsequent Financial Statements. Prior to the Closing
Date and as soon as they are available, the Selling Shareholders shall
deliver to CRI (a) the Company's unaudited balance sheet as of June
26, 1999 and its related statements of income and cash flows for the
seven-month period then ended and (b) its unaudited interim balance
sheets and related statements of income and cash flows that are
prepared for subsequent periods. Each of such balance sheets and
income and cash flow statements shall be included within the
definition of the Company Interim Financial Statements upon delivery
thereof to CRI.
4.09. Certain Access and Due Diligence Matters. CRI, and its
respective officers, employees, attorneys, accountants,
representatives and agents, shall, at all times during normal business
hours prior to the Closing Date, have full and continuing access to
the properties, facilities, operations, employees, books and records
of the Company. No investigation by CRI or its parent company or
affiliates (whether conducted before or after the date hereof) shall
affect the representations and warranties made by the Company and the
Selling Shareholders in this Agreement or the information contained in
any Schedule attached hereto or in any list, letter, document, written
information or other writing provided by the Company or any of the
Selling Shareholders to CRI or its parent company or affiliates, and
CRI shall be entitled to rely on such representations, warranties,
Schedules, lists, letters, documents, written information and other
writings notwithstanding any such investigation. CRI shall be
entitled to rely on the representations and warranties made by the
Company and the Selling Shareholders in this Agreement or in any
Schedule attached hereto or in any list, letter, document, written
information or other writing provided by the Company or any of the
Selling Shareholders to CRI or its parent company or affiliates
notwithstanding CRI's decision to consummate the Transaction and the
Closing having occurred.
4.10. Certain Actions. The Company and the Selling
Shareholders shall not take any action or fail to take any reasonable
action, and shall not permit any directors, officers, employees,
representatives or agents of the Company to take or fail to take, any
action which will result in (a) a misrepresentation or a breach of any
covenant or warranty of the Selling Shareholders in this Agreement,
(b) CRI having the right to terminate this Agreement, or (c) a
condition to the obligation of CRI to consummate the Transaction not
being fulfilled.
4.11. No Solicitations. On and after the date of this
Agreement and until the Closing Date or until this Agreement is
terminated as provided herein, the Company and the Selling
Shareholders shall not, and shall not authorize or permit any of the
directors, officers, employees, attorneys, accountants, investment
bankers, consultants, representatives or agents of the Company to,
directly or indirectly initiate, solicit, encourage, engage or
participate in inquiries, discussions or negotiations with, or provide
any information to, any person, group, corporation or other entity
concerning any merger, consolidation, combination, affiliation, share
exchange, tender offer, sale of substantial assets or securities or
any other similar transaction relating to the Company or any shares of
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the Company Common Stock (collectively, "Acquisition Transactions").
The Company shall promptly notify CRI in writing of (i) the existence
and terms of any proposal or offer which it may receive with respect
to any Acquisition Transaction and (ii) any request by or indication
of interest on the part of any third party with respect to the
initiation of any Acquisition Transaction or any discussions with
respect thereto.
4.12. Break-up Fee. (a) The Company and the Selling
Shareholders hereby acknowledge and agree that CRI has committed and
will commit substantial time, effort, resources and expenses, and will
forgo other acquisition opportunities, in pursuing the Transaction.
The Company further agrees that it shall pay to CRI a break-up fee
(the "Break-up Fee") in the amount of Five Hundred Thousand Dollars
($500,000) in immediately available funds in the event that (i) the
Company enters into an agreement or letter of intent to merge,
consolidate or combine or affiliate with or sell a material portion of
its assets or a material portion of the Company Common Stock to a
party other than CRI, (ii) the Selling Shareholders enter into an
agreement or letter of intent to sell a majority of the voting Shares
to a party other than CRI, or (iii) the holders of the voting Shares
of the Company refuse or decide not to consummate the Transaction.
(b) The Break-up Fee shall be immediately paid to CRI upon
the occurrence of the above specified events. If the Break-up Fee is
not immediately paid as provided, then CRI shall be entitled to
recover interest at the highest prime rate set forth in The Wall
Street Journal (Midwest Edition) under the section entitled "Money
Rates" on the unpaid amount of the Break-up Fee from such time until
paid-in-full, together with all costs of collection thereof,
including, but not limited to, reasonable attorneys' fees and
expenses.
(c) The Selling Shareholders hereby acknowledge and agree
that the Break-up Fee shall compensate CRI for (i) the value of the
lost business opportunity which would have inured to CRI if the
Transaction had been consummated, (ii) expenses incurred for
attorneys, accountants, financial advisors and consultants of CRI in
structuring, developing and negotiating the Transaction and drafting
this Agreement, (iii) CRI's management time and expense in
investigating, analyzing, developing and pursuing the Transaction,
(iv) expenses relating to CRI's due diligence efforts, and (v) the
value of the acquisition opportunities lost by CRI in pursuing the
Transaction instead of other acquisitions. The Selling Shareholders
further acknowledge and agree that the amount of the Break-up Fee is
fair, reasonable and not a penalty and that its obligation to pay the
Break-up Fee shall survive any termination of this Agreement by CRI.
4.13. Title Insurance. The Company shall obtain and deliver
to CRI, prior to the Closing Date, with respect to each parcel of real
estate that the Company owns, an ALTA Owners' Policy of Title
Insurance Form B-1987 (or equivalent policy acceptable to CRI if the
real property is located in a state in which an ALTA Owners' Policy of
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Title Insurance Form B-1987 is not available) issued by a title
insurer satisfactory to CRI (and, if requested by CRI, reinsured in
whole or in part by one or more insurance companies and pursuant to a
direct access agreement acceptable to CRI), in such amount as CRI may
determine to be the fair market value of such real property (including
all improvements located thereon), insuring title to such real
property to be in the Company as of the Closing.
Each title insurance policy delivered under the provisions set
forth above shall (i) insure title to the real property and all
recorded easements benefitting such real property, (ii) contain an
"extended coverage endorsement" insuring over the general exceptions
contained customarily in such policies, (iii) contain an ALTA Zoning
Endorsement 3.1 (or equivalent), (iv) contain an endorsement insuring
that the real property described in the title insurance policy is the
same real estate as shown on the Survey (as defined below) delivered
with respect to such property, (v) contain an endorsement insuring
that each street adjacent to the real property is a public street and
that there is direct and unencumbered pedestrian and vehicular access
to such street from the real property, (vi) if the real property
consists of more than one record parcel, contain a "contiguity"
endorsement insuring that all of the record parcels are contiguous to
one another, (vii) contain a "non-imputation" endorsement to the
effect that title defects known to the officers, directors, and
shareholders of the Company prior to the Closing shall not be deemed
"facts known to the insured" for purposes of the policy, and (viii)
confirm an 8.1 environmental lien endorsement.
4.14. Surveys. With respect to each parcel of real property
that the Company owns and as to which a title insurance policy is to
be procured pursuant to Section 4.13 above, the Company shall procure
in preparation for the Closing a current survey of the real property
certified to CRI, prepared by a licensed surveyor and conforming to
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing
the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters shown customarily on such
surveys, and showing access affirmatively to public streets and roads
(the "Survey"). The Survey shall not disclose any survey defect or
encroachment from or onto the real property which has not been cured
or insured over prior to the Closing.
4.15. U.C.C. Searches. U.C.C. financing statement searches
(local and state, and including fixtures) and federal and state tax
lien and judgment searches with respect to the Company (collectively,
the "U.C.C. Searches"), shall be obtained by the Company, and
delivered to CRI at least twenty (20) days prior to Closing. The
results shall also be updated to Closing.
4.16. Release of Selling Shareholders. The Company and each
of the Selling Shareholders hereby (a) agree that Paragraph 6A of the
Company's Articles of Incorporation shall not apply to the Transaction
and (b) release, relinquish and waive any and all rights that each has
or may have pursuant to Paragraph 6A of the Company's Articles of
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Incorporation in connection with the Transaction. The Selling
Shareholders, jointly and severally, hereby further release,
relinquish and forever discharge the Company (and any and all present
or future parent companies, affiliates, predecessors, successors and
assigns) and its present, former and future directors, officers,
employees, agents and representatives from any and all claims, rights,
demands, liabilities, causes of action and suits that any or all of
the Selling Shareholders may now have or may have had or which any or
all of the Selling Shareholders may hereafter have against the Company
(and any and all present or future parent companies, affiliates,
predecessors, successors and assigns) and its present, former or
future directors, officers, employees, agents and representatives
relating to ownership of the Shares, the financial condition, results
of operation, business or affairs of the Company on or prior to the
Closing Date, this Agreement or the Transaction.
SECTION 5
COVENANTS OF CRI
5.01. Hart-Scott-Rodino Filing; Other Approvals. (a) CRI
shall proceed to file and prosecute to a favorable conclusion, all
notices and other documents required to be filed under the HSR Act
with the FTC and DOJ; provided, however, that CRI shall not be
required to accept any conditions that may be imposed by the FTC or
the DOJ in connection with such filings that would require the
divestiture of any assets or which would otherwise have a material
adverse effect on CRI. CRI shall provide the Company with a copy of
all such notices and other documents filed under the HSR Act prior to
the filing thereof and shall provide the Company with copies of all
correspondence and other documents received from the FTC or DOJ in
connection with such filings.
(b) Following the date of this Agreement, CRI shall proceed
to (i) obtain all consents, authorizations and approvals of third
parties, if any, to the transactions contemplated by this Agreement,
and (ii) satisfy all requirements prescribed by law, and all
conditions set forth in this Agreement, for the consummation of the
Transaction.
5.02. Certain Actions. CRI shall not take any action or fail
to take any reasonable action, and shall not permit its directors,
employees or agents to take or fail to take, any action which would
result in (a) a misrepresentation or a breach of any covenant or
warranty of CRI in this Agreement, (b) the Selling Shareholders having
the right to terminate this Agreement, or (c) a condition to the
obligation of the Selling Shareholders to consummate the Transaction
not being fulfilled.
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SECTION 6
CONDITIONS PRECEDENT TO CLOSING
6.01. CRI. The obligation of CRI to consummate the
Transaction is subject to the satisfaction and fulfillment of each of
the following conditions on or prior to the Closing Date, unless
waived in writing by CRI:
(a) Delivery of Stock Certificates. The Selling Shareholders
shall have delivered to CRI, at the Closing, the certificates
representing the Shares, duly endorsed in blank or accompanied by
stock powers duly endorsed in blank, in proper form for transfer.
(b) Representations and Warranties of the Family Shareholders
at Closing Date. Each of the representations and warranties of the
Company and the Family Shareholders contained in this Agreement shall
be true, accurate and complete at and as of the Closing Date.
(c) Representations and Warranties of the Charity Shareholders
at Closing Date. Each of the representations and warranties of the
Charity Shareholders contained in this Agreement shall be true,
accurate and complete at and as of the Closing Date.
(d) No Material Adverse Change. There shall not have occurred
any material adverse change in the financial condition, results of
operations, business, operations, affairs or prospects of the Company
from the date of the Company Interim Financial Statements through and
until the Closing Date.
(e) Consents and Approvals. All third-party and governmental
consents and approvals necessary to permit the consummation of the
Transaction, or to permit the continued operation of the Business
in substantially the same manner after the Closing Date as before,
shall have been received.
(f) Corporate Action. The Company's Board of Directors and
the Charity Shareholders shall have approved this Agreement, and CRI
shall have received certified copies of resolutions adopted by the
directors of the Company and the Charity Shareholders in connection
with the foregoing, in form and content satisfactory to CRI.
(g) No Restraining Actions. No action, suit or proceeding
before any court or governmental or regulatory authority shall be
pending, and no investigation by any governmental or regulatory
authority shall have been commenced or threatened, against the
Company, CRI, any of the principals, officers or directors of any of
them or any of the Selling Shareholders, seeking to restrain, prevent
or change the transactions contemplated hereby or questioning the
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legality or validity of any such transactions or seeking damages in
connection with any such transactions.
(h) Compliance with Covenants. The Company and the Selling
Shareholders shall have complied with all of their covenants and
agreements set forth in Section 4 of this Agreement and elsewhere
herein.
(i) Resignation of Directors and Officers. CRI shall have
received satisfactory evidence of the resignation of all directors and
officers of the Company in office on the Closing Date.
(j) Shareholders List. CRI shall have received a list of the
Company's shareholders as of the Closing Date, certified by the
Executive Vice President; the Vice President, Secretary and Treasurer;
and the Vice President-Finance and Chief Financial Officer of the
Company.
(k) Opinion of Counsel. CRI shall have received from counsel to
the Company and the Selling Shareholders, an opinion, dated as of the
Closing Date, substantially in the form attached hereto as Exhibit A.
(l) Certificates from Government Authorities. The Company
shall have delivered to CRI, each dated as of a date not earlier than
fifteen (15) days prior to the Closing Date, (i) copies of the
Company's Articles of Incorporation, including all amendments thereto,
certified by the Secretary of State of South Carolina or other
appropriate government official, (ii) a certificate from the
appropriate government official to the effect that the Company is in
good standing in the State of South Carolina, and (iii) a certificate
from the appropriate government official from each jurisdiction in
which the Company is qualified to do business to the effect that the
Company is in good standing in such jurisdiction.
(m) HSR Act. The waiting periods (and any extensions thereof)
applicable to the Agreement and the Transaction shall have expired
or been terminated, and no conditions shall have been imposed upon
CRI or the Company that would require the divestiture of any assets
of CRI or the Company or that would otherwise have a material adverse
effect on CRI or the Company.
(n) Termination of Employment Agreement. The Employment
Agreement between the Company and William M. Tisdale, Jr. dated
January 18, 1994 (the "Employment Agreement") shall have been
terminated to the satisfaction of CRI prior to the Closing.
(o) Letters Regarding Status of Employees. The Company
shall have delivered to CRI at the Closing, (i) a letter dated as of
the Closing Date from Charles Arnold Decker, Jr. confirming his
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retirement from active employment with the Company, and (ii) a letter
dated as of the Closing Date from Ronnie Hudson regarding the
termination of his employment with the Company due to a disability.
(p) Escrow Agreement. The Selling Shareholders shall have
executed and delivered to CRI the Escrow Agreement.
(q) Environmental Certificate. CRI shall have received a
certificate executed by William M. Tisdale, Jr., as the Company's Vice
President, Secretary and Treasurer, certifying that, after having had
discussions with appropriate employees of the Company and after other
appropriate due inquiry, he has no knowledge of (i) the existence or
removal of any underground storage tanks on or from any real property
presently or formerly owned, leased or used by the Company, (ii) any
spills, leaks or contamination on such real property, or (iii) any
actions, omissions, events, facts or circumstances on or affecting
such real property that requires or required, or may require, any
action under any of the Environmental Laws.
(r) CRI's Parent Company. All third party and governmental
consents and approvals relating to Chromcraft Revington, Inc.
necessary to permit the consummation of the Transaction, or to permit
the continued operation of the Business in substantially the same
manner after the Closing Date as before, shall have been received.
6.02. Company and the Selling Shareholders. The obligation
of the Company and the Selling Shareholders to consummate the
Transaction is subject to the satisfaction and fulfillment of each of
the following conditions on or prior to the Closing Date, unless
waived in writing by each of the Selling Shareholders:
(a) Representations and Warranties at Closing Date. Each of the
representations and warranties of CRI contained in this Agreement shall
be true, accurate and complete in all material respects at and as of
the Closing Date.
(b) Consents and Approvals. All third-party and governmental
consents and approvals relating to CRI necessary to permit the
consummation of the Transaction shall have been received.
(c) Corporate Action. CRI's Board of Directors shall have approved
this Agreement and the Transaction and CRI shall have taken all corporate
action necessary to effect the Transaction, and CRI shall have furnished
the Selling Shareholders with certified copies of resolutions adopted by
its directors in connection with the foregoing, in form and content
satisfactory to the Selling Shareholders.
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(d) Compliance with Covenants. CRI shall have complied with all
of its covenants and agreements set forth in Section 5 of this Agreement
and elsewhere herein.
(e) Reserved.
(f) HSR Act. The waiting periods (and any extensions thereof)
applicable to the Agreement and the Transaction under the HSR Act shall
have expired or been terminated.
(g) Opinion of Counsel. The Selling Shareholders shall have
received from Krieg DeVault Alexander & Capehart, LLP, counsel to CRI,
an opinion, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit B.
SECTION 7
TERMINATION OF AGREEMENT
7.01. Manner of Termination. This Agreement may be
terminated and the Transaction contemplated hereby abandoned at any
time prior to the Closing Date, as follows:
(a) By CRI or the Selling Shareholders, if:
(i) the Transaction contemplated by this Agreement has not
been consummated by September 30, 1999; or
(ii) the Selling Shareholders and the Board of Directors of
CRI mutually agree in writing to terminate this
Agreement.
(b) By CRI, if:
(i) there has been a misrepresentation or a breach of any
warranty by or on the part of the Selling Shareholders
in their representations and warranties set forth in
this Agreement or in any document delivered pursuant
hereto which has had or would be expected to have an
adverse effect on the financial condition, results of
operations, business, operations or prospects of the
Company; provided, however, that CRI shall have the
absolute right to terminate this Agreement without
regard to materiality for any inaccuracy in the
representations and warranties contained in Section
2.03(a) hereof with respect to the Shares; or
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(ii) there has been a breach of or a failure to comply with
any covenant set forth in this Agreement by or on the
part of the Selling Shareholders; or
(iii) any condition set forth in Section 6.01 hereof to its
obligation to consummate the Transaction has not been
satisfied or fulfilled immediately prior to the Closing
Date; or
(iv) the commencement or threat of any action, claim,
litigation or proceeding (A) relating to this Agreement
or the Transaction or (B) which is likely to have an
adverse effect on the financial condition, results of
operation, business, operations or prospects of the
Company; or
(v) any document, action, matter, event or other
information set forth in any Updated Schedules and
Materials has had or would be expected to have, in the
reasonable discretion of CRI, an adverse effect on the
financial condition, results of operation, business,
operations or prospects of the Company; or
(vi) there has been a material adverse change in the
financial condition, results of operation, business,
operations or prospects of the Company at the Closing
Date as compared to that in existence as of and for the
seven month period ended June 26, 1999; or
(vii) if the Break-Up Fee becomes due and payable hereunder.
(c) By the Selling Shareholders, if:
(i) there has been a material misrepresentation or a
material breach of any warranty by or on the part of
CRI in its representations and warranties set forth in
this Agreement; or
(ii) there has been a material breach of or material failure
to comply with any covenant set forth in this Agreement
by or on the part of CRI; or
(iii) any condition set forth in Section 6.02 hereof to their
obligation to consummate the Transaction has not been
satisfied or fulfilled immediately prior to the Closing
Date.
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7.02. Effect of Termination. Upon termination of this
Agreement in accordance with Section 7.01 hereof, this Agreement shall
be of no further force or effect and the Transaction shall be deemed
to be abandoned, and there shall be no obligation of or liability to
any party hereto, or their respective shareholders, directors,
officers, employees, representatives or agents (other than payment of
the Break-up Fee, if applicable); provided, however, that if such
termination was the result of an intentional breach of any
representation, warranty, covenant or other provision in this
Agreement, or an intentional act or omission which resulted in any
representation, warranty, covenant or other provision in this
Agreement to be breached, then the party or parties who breached the
representation, warranty, covenant or other provision or who committed
the intentional act or omission (and, with respect to an intentional
breach, act or omission by the Company or any of the Selling
Shareholders, then the Company and the Selling Shareholders, jointly
and severally) shall be liable to the other parties hereto for damages
and all costs and expenses incurred in connection with the
preparation, negotiation and execution of this Agreement, including,
without limitation, reasonable attorneys' fees and disbursements,
reasonable fees and disbursements of accountants and tax advisors and
reasonable fees and costs of environmental consultants. The
obligation of the Company to pay the Break-up Fee in accordance with
Section 4.13 hereof and any damages, fees, costs, expenses and other
amounts pursuant to this Agreement shall survive any termination of
this Agreement.
SECTION 8
INDEMNIFICATION
8.01. Indemnification by CRI. CRI hereby agrees to
reimburse, indemnify, defend and hold harmless the Selling
Shareholders for, from and against each and every "Loss" (as
hereinafter defined) based upon, arising out of, for, in respect of or
relating to (a) any inaccuracy in or breach of any representation or
warranty of CRI contained in this Agreement, and (b) any breach of any
covenant or agreement of CRI contained in this Agreement.
As used in this Section 8 and in the Escrow Agreement, "Loss"
and "Losses" mean any and all actual or threatened losses, claims,
demands, damages, awards, liabilities, obligations, judgments,
settlements, orders, fines, penalties, taxes, interest, forfeitures,
costs and expenses (including, without limitation, reasonable
attorney, accountant, consultant and other professional fees, costs
and disbursements of every kind, nature and description and management
time of CRI, the Company and their respective parent companies,
affiliates, successors and assigns).
8.02. Indemnification by the Selling Shareholders. (a) Each
of the Family Shareholders, jointly and severally, hereby agrees to
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reimburse, indemnify, defend and hold harmless the Company, CRI and
their respective parent companies, affiliates, successors, permitted
assigns, directors, officers, employees and agents for, from and
against each and every Loss incurred by the Company, CRI and their
respective parent companies, affiliates, successors, permitted
assigns, directors, officers and employees based upon, arising out of,
in respect of or relating to (i) any inaccuracy in or breach of any
representation or warranty of the Company or the Selling Shareholders
made pursuant to this Agreement, the Schedules attached hereto and the
certificates and other documents delivered to CRI or its parent
company, (ii) the matters set forth in paragraph 3 of the Escrow
Agreement, (iii) any breach of any covenant or agreement of the
Selling Shareholders contained in this Agreement, and (iv) any
liability incurred in connection with or in any way arising out of, or
related to, the Business or any of the assets, operations or
activities of the Company or the Business for all periods prior to the
Closing.
(b) Each of the Charity Shareholders, not jointly and
severally, hereby agrees to reimburse, indemnify, defend and hold
harmless the Company, CRI and their respective parent companies,
affiliates, successors, permitted assigns, directors, officers,
employees and agents for, from and against each and every Loss
incurred by the Company, CRI and their respective parent companies,
affiliates, successors, permitted assigns, directors, officers,
employees and agents based upon, arising out of, in respect of or
relating to (i) any inaccuracy in or breach of any representation or
warranty of such Charity Shareholder made pursuant to this Agreement,
and (ii) the matters set forth in paragraph 3 of the Escrow Agreement.
(c) In addition to the reimbursement and indemnification
obligations set forth in Section 8.02(a) hereof, and not in limitation
thereof, each of the Family Shareholders, jointly and severally,
agrees to reimburse, indemnify, defend and hold harmless the Company,
CRI and their respective parent companies, affiliates, successors,
permitted assigns, directors, officers, employees and agents for, from
and against each and every Loss to which the Company, CRI and their
respective parent companies, affiliates, successors, permitted
assigns, directors, officers, employees and agents may incur arising
out of or based upon (i) personal injury, property damage, product
liability or other monetary, injunctive or other relief made, asserted
or prosecuted by or on behalf of any third party, including, without
limitation, any governmental entity, citizens' group, employee or
former employee of the Company, or their respective legal
representatives, heirs, beneficiaries and estates, relating to the
Business or any of the assets, operations or activities of the Company
or arising or alleged to arise under any Environmental Law, to the
extent arising from acts, omissions, facts, conditions or
circumstances occurring prior to or as of the Closing Date, (ii) any
nature whatsoever incurred in connection with the investigation,
study, testing, monitoring, assessment, containment, removal,
disposal, remedy, clean-up, treatment or abatement of any pollution or
contamination of the environment (including, without limitation,
asbestos or asbestos-containing material, and other chemical
substances or hazardous materials) arising or alleged to arise from or
on the Business or any of the activities, operations or properties of
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the Company, to the extent arising from acts, omissions, facts,
circumstances or conditions occurring prior to or as of the Closing
Date, (iii) any nature whatsoever as a result of non-compliance with
any Environmental Laws occurring prior to or as of the Closing Date
(including, without limitation, any fines, penalties or costs)
necessary to enable the Company to comply with all applicable
Environmental Laws in effect and requiring compliance as of the
Closing Date, or (iv) any and all Taxes imposed on the Company in
respect of its income, Business, assets, properties, activities or
operations or for which the Company may otherwise be liable or
otherwise imposed upon the Selling Shareholders (A) for any period
ending prior to or on the Closing Date, or (B) with respect to a
breach of the representations and warranties contained in Section 2
hereof.
8.03. Notice and Opportunity to Defend Third-Party Claims.
Promptly after (a) receipt by any party hereto of notice of the
assertion of any claim against such party by a person not a party to
this Agreement or (b) the discovery by such party of any Loss giving
rise to indemnification hereunder, in each case with respect to which
such party hereto expects to make a request for indemnification
hereunder, such party (the "Indemnified Party") shall give the party
or parties that may become obligated to provide indemnification
hereunder (the "Indemnifying Party") written notice describing such
claim or Loss in reasonable detail (an "Indemnification Notice"). If
the Indemnified Party fails to give the Indemnification Notice in a
timely manner and the Indemnifying Party is materially prejudiced in
its defense by such failure, the Indemnifying Party's liability in
respect of such claim or Loss shall be reduced to the extent of such
prejudice. Except as otherwise provided in this Section 8, such
Indemnifying Party shall have the right, at its option, to defend, at
its own expense and through counsel of its own choosing, any such
claim involving the asserted liability of the Indemnified Party as to
which the Indemnifying Party shall have acknowledged its obligation to
indemnify the party seeking indemnification hereunder; provided,
however, that such counsel shall be satisfactory to the Indemnified
Party in the exercise of the Indemnified Party's absolute and sole
discretion. If counsel satisfactory to the Indemnified Party is not
selected by the Indemnifying Party within thirty (30) days of any
Indemnification Notice, then the Indemnified Party may select counsel
to defend any such claim and, in such event, the Indemnifying Party
shall be responsible for and pay all attorney fees, costs and expenses
of such counsel and all Losses arising from or relating to such claim
and the Indemnifying Party shall no longer be entitled to select
counsel with respect to such claim. If any Indemnifying Party shall
undertake to defend a claim asserted by a person not a party to this
Agreement, it shall give a notice (a "Defense Election Notice") to the
Indemnified Party of its intention to do so within ten (10) business
days of the Indemnification Notice to which it relates.
Whether or not the Indemnifying Party does choose so to defend such
claim, the parties hereto shall cooperate in the defense thereof and
shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested in connection therewith. So long as the
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Indemnifying Party is defending in good faith any such claim, the
Indemnified Party shall not compromise or settle such claim without
the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld. Notwithstanding an election by an
Indemnifying Party to assume the defense of such action or proceeding,
such Indemnified Party shall have the right to employ separate counsel
and to participate in the defense of such action or proceeding, and
the Indemnifying Party shall bear the reasonable fees, costs and
expenses of such separate counsel (and shall pay such fees, costs and
expenses at least quarterly), if (a) the use of counsel chosen by the
Indemnifying Party to represent such Indemnified Party would present
such counsel with a conflict of interest; (b) the defendants in, or
targets of, any such action or proceeding include both an Indemnified
Party and the Indemnifying Party, and such Indemnified Party shall
have reasonably concluded that there may be legal defenses available
to it or to other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense
of such action or proceeding on behalf of the Indemnified Party); (c)
the Indemnifying Party shall not have employed counsel satisfactory to
such Indemnified Party in the exercise of the Indemnified Party's
reasonable judgment to represent such Indemnified Party within a
reasonable time after notice of the institution of such action or
proceeding; or (d) the Indemnifying Party shall authorize such
Indemnified Party to employ separate counsel at the Indemnifying
Party's expense. All out-of-pocket costs and expenses incurred in
connection with an Indemnified Party's cooperation shall be borne by
the Indemnifying Party. In any event, the Indemnified Party shall
have the right at its own expense to participate in the defense of
such asserted claim or loss.
Notwithstanding anything to the contrary herein, if the Indemnifying
Party does not give a Defense Election Notice within ten (10) business
days of the Indemnification Notice, the Indemnified Party shall be
free, in its sole discretion, to defend, compromise or settle the
claim for which indemnification is sought, and the Indemnifying Party
shall pay all Losses incurred by the Indemnified Party arising from or
relating to such Losses.
8.04. Non-Third Party Claims, Costs and Expenses. If any
Indemnification Notice delivered pursuant to Section 8.03 does not
relate to a claim or Loss or the commencement of any action or
proceeding by a third party, the Indemnifying Party shall promptly pay
to the Indemnified Party the full amount of the claim or Loss set
forth in such notice. In any case where an Indemnifying Party is
obligated to pay costs or other expenses, such Indemnifying Party
shall promptly pay to the Indemnified Party, upon the request of the
Indemnified Party, the amount of such costs or expenses.
8.05. Limitations on Indemnification. Notwithstanding
anything contained herein to the contrary, (i) the Selling
Shareholders, jointly and severally, shall have no liability or
obligation to the Company, CRI or their respective parent companies,
affiliates, successors, permitted assigns, directors, officers,
employees or agents for or with respect to any claim for
indemnification pursuant to paragraph 3(a) of the Escrow Agreement in
excess of One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) and pursuant to paragraph 3(b) of the Escrow Agreement in
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excess of One Million Seven Hundred Fifty Thousand Dollars
($1,750,000), (ii) each of the Charity Shareholders shall have no
liability to the Company, CRI or their respective parent companies,
affiliates, successors, permitted assigns, directors, officers,
employees or agents for or with respect to any indemnification
obligations pursuant to Sections 8.02(b)(i) hereof which are, in the
aggregate, in excess of its proportionate share of the Purchase Price,
and (iii) each of the Family Shareholders shall have no liability to
the Company, CRI or their respective parent companies, affiliates,
successors, permitted assigns, directors, officers, employees or
agents for or with respect to any indemnification obligations pursuant
to Sections 8.02(a)(i), (iii) and (iv) and Section 8.02(c) hereof
which are, in the aggregate, in excess of his proportionate share of
the Purchase Price.
8.06. Set-off Against Escrow Fund. Notwithstanding anything
contained herein to the contrary, CRI shall have the right, at any
time and from time to time, to set-off against and apply the entire
amount or any portion of the Escrow Fund to satisfy any and all claims
for indemnification hereunder that it may have against any of the
Selling Shareholders, whether pursuant to this Agreement or pursuant
to paragraph 3 of the Escrow Agreement, regardless of whether any such
claims exceed any Selling Shareholder's proportionate interest in the
Escrow Fund and regardless of which Selling Shareholder may have
caused a claim for indemnification to be made hereunder or under the
Escrow Agreement. Such right of CRI shall be available regardless of
whether the Selling Shareholders are defending CRI, the Company or
their respective parent companies, affiliates, successors, assigns,
directors, officers, employees or agents in good faith against any
claim or Loss or whether such claim or Loss is actual or threatened.
8.07. Duration. Any claim for indemnification hereunder
shall be made during the periods of time set forth in Section 9.01
hereof and as set forth in the Escrow Agreement. Once a claim for
indemnification hereunder has been timely made, the indemnification
obligations of the Selling Shareholders shall remain in full force and
effect and binding upon each of them, notwithstanding that the periods
of time specified in Section 9.01 hereof or in the Escrow Agreement
have expired.
SECTION 9
MISCELLANEOUS
9.01. Survival. All representations and warranties of the
Company and/or the Selling Shareholders contained in this Agreement
and in the Schedules attached hereto and the certificates and other
documents delivered pursuant to this Agreement shall survive the
Closing for a period of eighteen (18) months following the Closing
Date; provided, however, that the representations and warranties of
the Selling Shareholders contained in Sections 2.14, 2.16 and 2.17
hereof shall survive and continue in full force and effect until
ninety (90) days following the expiration of the applicable statute of
limitations with respect to the matters, acts, events or information
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covered by such Sections; and provided further, however, that the
foregoing survival periods shall not limit or have any effect on the
indemnification obligations of the Selling Shareholders under the
Escrow Agreement or on the length of time that such indemnification
obligations under the Escrow Agreement shall remain binding upon the
Selling Shareholders.
9.02. Notices. All notices, requests and other
communications hereunder shall be in writing (which shall include
telecopier communication) and shall be deemed to have been duly given
if (a) delivered by hand and receipted for, (b) sent by certified
United States Mail, return receipt requested, first class postage pre-
paid, (c) delivered by overnight receipted delivery service or (d)
telecopied if confirmed immediately thereafter by also mailing a copy
of such notice, request or other communication by certified United
States Mail, return receipt requested, first class postage pre-paid,
as follows:
If to CRI: with a copy to (which shall not
constitute notice):
CRI Corporation - Sumter Krieg DeVault Alexander & Capehart, LLP
c/o Chromcraft Revington, Inc. One Indiana Square, Suite 2800
1100 North Washington Street Indianapolis, Indiana 46204
Delphi, Indiana 46923 ATTN: Nicholas J. Chulos, Esq.
ATTN: Frank T. Kane, Vice President Telephone: (317) 636-4341
Telephone: (765) 564-3500 Telecopier: (317) 636-1507
Telecopier: (765) 564-6673
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If to Company: with a copy to (which shall not
constitute notice):
Korn Industries, Incorporated Lee, Erter, Wilson, Holler & Smith, L.L.C.
P.O. Box 100 126 North Main Street
Sumter, South Carolina 29151 Sumter, South Carolina 29150
Telephone: (803) 778-5444 ATTN: Jack W. Erter, Jr., Esq.
Telecopier: (803) 773-6959 Telephone: (803) 778-2471
Telecopier: (803) 778-1643
If to any of the Selling Shareholders:
Jack W. Erter, Jr., Esq., Shareholder Representative
Lee, Erter, Wilson, Holler & Smith, L.L.C.
126 North Main Street
Sumter, South Carolina 29150
Telephone: (803) 778-2471
Telecopier: (803) 778-1643
or such substituted address or person as any party has given to the
other parties in writing.
All such notices, requests and other communications shall be
effective (a) if delivered by hand, when delivered, (b) if mailed in
the manner provided herein, two (2) business days after deposit with
the United States Postal Service, (c) if delivered by overnight
express delivery service, on the next business day after deposit with
such service, and (d) if by telecopier, on the next business day if
also confirmed by mail in the manner provided herein.
9.03. Shareholder Representative. Each of the Selling
Shareholders hereby designates and appoints Jack W. Erter, Jr., as
their shareholder representative (the "Shareholder Representative")
effective as of the date of this Agreement. The Shareholder
Representative shall (a) receive any and all notices and other
communications to be given under this Agreement to any of the Selling
Shareholders, (b) have the responsibility of sending each such notice
and other communication to the appropriate Selling Shareholder, (c)
distribute the Purchase Price less the Escrow Fund in accordance with
Section 1.04 hereof, and (d) have such other duties, power and
authority specified in this Agreement. The Shareholder Representative
shall have the requisite power and authority to compromise, defend,
release or settle any claims for indemnification for the liabilities
described in the Escrow Agreement. Any replacement of the Shareholder
Representative shall be effective only if in writing signed by all of
the Selling Shareholders and delivered to CRI. If the Shareholder
Representative resigns or is unwilling or unable to continue to serve
as the Shareholder Representative under this Agreement or the Escrow
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Agreement, then the Selling Shareholders shall, within thirty (30)
days after the date that the Shareholder Representative resigns or
becomes unwilling or unable to continue serving, designate and appoint
a replacement Shareholder Representative who shall have the same
duties, power and authority as his predecessor under this Agreement
and the Escrow Agreement. If the Selling Shareholders fail for any
reason to designate and appoint a replacement Shareholder
Representative, CRI may, but is not obligated to do so, designate and
appoint, in its sole discretion, a person or entity to act as the
Shareholder Representative under this Agreement and the Escrow
Agreement.
9.04. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, representatives, successors and assigns; provided,
however, that no party hereto may assign this Agreement without the
prior written consent of the other parties except that CRI may assign
this Agreement and its rights and obligations hereunder to any
subsidiary or affiliate of CRI without the prior consent of the
Selling Shareholders.
9.05. Benefits. Nothing in this Agreement, express or
implied, is intended to confer upon any person other than the parties
hereto and their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
9.06. Waiver; Amendment. (a) The parties hereto may by an
instrument in writing signed by all of the parties: (i) waive any
inaccuracies in the representations or warranties of any party hereto
contained in this Agreement or in any document delivered pursuant
hereto or thereto; (ii) waive the performance by any party of any of
the covenants or agreements to be performed by such other party under
this Agreement; or (iii) waive the satisfaction or fulfillment of any
condition, the nonsatisfaction or nonfulfillment of which is a
condition to the right of the party so waiving to consummate the
Transaction. The waiver by any party hereto of a breach of or
noncompliance with any provision of this Agreement shall not operate
or be construed as a continuing waiver or a waiver of any other or
subsequent breach or noncompliance hereunder.
(b) This Agreement may be amended, modified or supplemented
only by a written agreement executed by the parties hereto.
9.07. Headings. The headings in this Agreement have been
inserted solely for ease of reference and should not be considered in
the interpretation or construction of this Agreement.
9.08. Severability. In case any one or more of the
provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of
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this Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision or provisions had never
been contained herein.
9.09. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute one and the same instrument.
9.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, without
giving effect to any choice or conflict of law provisions, principles
or rules (whether the State of Indiana or any other jurisdiction) that
would cause the application of any laws of any jurisdiction other than
the State of Indiana.
9.11. Entire Agreement. This Agreement, the Escrow Agreement
and the other agreements and documents referenced herein supersede all
other prior understandings, commitments, representations, negotiations
or agreements, whether oral or written, among the parties hereto or
between CRI and the Selling Shareholders relating to the Transaction,
this Agreement and the matters contemplated hereby and thereby and
constitute the entire agreement among the parties hereto relating to
the subject matter hereof and thereof. The parties hereto agree that
the letter dated July 16, 1999 from CRI's parent company to the
Company, the letter dated July 19, 1999 from the Company to CRI's
parent company and the supplemental letter dated July 26, 1999 from
the Company to CRI's parent company are hereby terminated and of no
force or effect.
9.12. Expenses. In the event that the transactions
contemplated by this Agreement are not consummated, each party hereto
shall pay its own respective expenses related to this Agreement and
the Transaction.
9.13. Certain References. Whenever in this Agreement a
singular word is used, it also shall include the plural wherever
required by the context and vice-versa. All references to the
masculine, feminine or neuter genders shall include any other gender,
as the context requires.
9.14. Construction. This Agreement is the product of
negotiation by the parties hereto and shall be deemed to have been
drafted by the parties hereto. This Agreement shall be construed in
accordance with the fair meaning of its provisions and its language
shall not be strictly construed against, nor shall ambiguities be
resolved against, any party.
9.15. Schedules. The Schedules attached hereto and the
Updated Schedules and Materials are intended to be and hereby are
specifically made a part of this Agreement and are deemed to be
representations and warranties of the Company and the Selling
Shareholders.
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9.16. Jurisdiction and Venue. The parties hereto hereby
agree that all claims, actions, suits and proceedings between or among
the parties relating to this Agreement shall be filed, tried and
litigated only in the Circuit Court or Superior Courts of Marion
County or the United States District Court for the Southern District
of Indiana, Indianapolis Division. In connection with the foregoing,
the parties hereto consent to the jurisdiction of such courts and
expressly waive any claims or defenses of lack of jurisdiction of or
proper venue by such courts.
9.17. Termination of Certain Agreement. The parties hereto
agree that the Agreement dated as of December 31, 1992, a copy of
which is included in Schedule 2.03(b) hereto, is terminated and of no
further force or effect as of the date hereof.
SECTION 10
REPRESENTATIONS AND WARRANTIES OF THE CHARITY SHAREHOLDERS
Each of the Charity Shareholders hereby represents and warrants to
CRI as to only itself as of the date of this Agreement and as of the
Closing Date as follows:
10.01. Organization. The Charity Shareholder is a corporation
or, with respect to the Dr. G. Clifford and Florence B. Decker
Foundation only, a trust. The Charity Shareholder is duly organized,
validly existing and in good standing under the laws of its state of
incorporation or formation.
10.02. Authority; No Violations. (a) The Charity Shareholder
has the requisite power and authority to enter into this Agreement and
to perform its respective obligations hereunder, subject to the
fulfillment of the conditions precedent set forth in Section 6.02
hereof. This Agreement and its execution and delivery by the Charity
Shareholder has been duly authorized and approved by the Board of
Directors or Trustees of the Charity Shareholder. This Agreement
constitutes a valid and binding obligation of the Charity Shareholder
and is enforceable against the Charity Shareholder in accordance with
its terms.
(b) There are no outstanding or authorized options, warrants,
commitments, calls, puts, agreements, understandings, commitments,
arrangements or subscription rights relating to any Shares owned by
the Charity Shareholder, nor are there any securities convertible into
or representing the right of the Charity Shareholder to purchase or
otherwise acquire any capital stock or other securities of the Company.
There are no outstanding or authorized stock appreciation, phantom stock,
profit participation or similar rights of the Charity Shareholder with
respect to the Company.
(c) Except as set forth in Schedule 10.02(c) hereto, the
Charity Shareholder owns its respective Shares free and clear of any
and all liens, pledges, security interests, charges, claims, options,
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rights of first refusal, transfer restrictions, rights of conversion
or exchange, adverse claims or rights of any third party and any other
restriction or limitation whatsoever. The Charity Shareholder holds
its respective Shares as its sole and separate property. No consent,
approval, authorization or waiver of any person, proprietorship,
partnership, limited liability company, corporation or other entity or
any third party is required for the execution, delivery and
performance of this Agreement by the Charity Shareholder.
10.03. Certain Claims. There are (a) no agreements or claims
of any nature that the Charity Shareholder has with or against the
Company or any of its directors, officers, employees or agents as of
the date of this Agreement or which may arise subsequent to the date
of this Agreement, and (b) no agreements or claims of any nature that
the Company or any of its directors, officers employees or agents has
with or against the Charity Shareholder as of the date of this
Agreement or which may arise subsequent to the date of this Agreement.
10.04. No Third Party Consents. Other than the approval of
the Board of Directors or other appropriate officer or person at the
Charity Shareholder, no consent, approval, authorization, clearance or
waiver of or any filing with or notice to any foundation, person,
partnership, corporation, limited liability company or other entity or
third party or any government agency or authority is required for the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby by the Charity
Shareholder.
10.05. Bring-Down of Representations and Warranties on the
Closing Date. All representations and warranties of the Charity
Shareholder contained in this Agreement shall be true, accurate and
complete, and shall be made again, on and as of the Closing Date.
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IN WITNESS WHEREOF, CRI, the Company and the Selling Shareholders
have made, entered into and executed this Agreement as of the day and
year first above written.
CRI:
CRI CORPORATION-SUMTER
By: /s/ Michael E. Thomas
-----------------------------
Michael E. Thomas, President
COMPANY:
ATTEST: KORN INDUSTRIES, INCORPORATED
By: By: /s/ Joseph G. Frank
- - ------------------------------- ------------------------------
Printed: Joseph G. Frank
Its Title: Vice President
- - -------------------------------
SELLING SHAREHOLDERS:
TISDALE FAMILY LIMITED PARTNERSHIP
By: /s/ Jane F. Tisdale
-------------------------------
Jane F. Tisdale, co-general
partner
By: /s/ W. M. Tisdale, Sr.
-------------------------------
W. M. Tisdale, Sr., co-general
partner
/s/ C. Arnold Decker, Jr.
- - ------------------------------ -------------------------------
Witness C. Arnold Decker, Jr.
/s/ C. Arnold Decker, Jr.
- - ------------------------------ -------------------------------
Witness C. Arnold Decker, Jr., as life
tenant
/s/ William Melton Tisdale, Jr.
- - ------------------------------ -------------------------------
Witness William Melton Tisdale, Jr.
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/s/ William Melton Tisdale, Jr.
- - ------------------------------ -------------------------------
Witness William Melton Tisdale, Jr., as
remainderman
/s/ Bonnie Lee D. Decker
- - ------------------------------ -------------------------------
Witness Bonnie Lee D. Decker
/s/ Sidney Keith, Jr.
- - ------------------------------ -------------------------------
Witness Sidney Keith, Jr.
/s/ Susan D. Keith
- - ------------------------------ -------------------------------
Witness Susan D. Keith
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FIRST PRESBYTERIAN CHURCH OF
ATTEST: SUMTER, S.C.
By: By: /s/ Lad F. Owens, Jr.
- - ------------------------------- ------------------------------
Printed: Lad F. Owens, Jr.
Its Title: Trustee
- - -------------------------------
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ATTEST: LLOYD OGILVIE MINISTRIES
By: By: /s/ Lloyd Ogilvie
- - ------------------------------- ------------------------------
Printed: Lloyd Ogilvie
Its Title: President
- - -------------------------------
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ATTEST: IN TOUCH MINISTRIES
By: By: /s/ Thomas E. Rogeberg
- - ------------------------------- ------------------------------
Printed: Thomas E. Rogeberg
Its Title: Executive Vice President
- - -------------------------------
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ATTEST: CORAL RIDGE MINISTRIES
By: By: /s/ Gail A. Brown
- - ------------------------------- ------------------------------
Printed: Gail A. Brown
Its Title: Director of Finance
- - -------------------------------
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ATTEST: BEN HADEN MINISTRIES
By: By: /s/ Ben Haden
- - ------------------------------- ------------------------------
Printed: Ben Haden
Its Title: President
- - -------------------------------
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SOCIETY FOR THE PREVENTION OF
CRUELTY TO ANIMALS AND HUMANE
EDUCATION CENTER OF SUMTER,
ATTEST: INC.
By: By: /s/ Cindy Cook
- - ------------------------------- ------------------------------
Printed: Cindy Cook
Its Title: President
- - -------------------------------
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DR. G. CLIFFORD AND FLORENCE B.
ATTEST: DECKER FOUNDATION
By: By: /s/ Ferris G. Akel
- - ------------------------------- ------------------------------
Printed: Ferris G. Akel
Its Title: Chairperson
- - -------------------------------
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The undersigned, Jack W. Erter, Jr., hereby accepts the designation
and appointment by the Selling Shareholders as the Shareholder
Representative under this Agreement and the Escrow Agreement and
agrees to perform as required under this Agreement and the Escrow
Agreement (including, without limitation, pursuant to Sections 1.04
and 9.03 hereof). By executing this Agreement below, the undersigned
does not make any of the representations, warranties or covenants of
any of the Selling Shareholders contained in this Agreement or become
bound by the indemnification obligations of the Selling Shareholders
provided in Section 8.02 hereof.
/s/ Jack W. Erter, Jr.
--------------------------------
Jack W. Erter, Jr., as Share-
holder Representative
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