Exhibit 99.1
PURCHASE AND SALE AGREEMENT
DATED AS OF JUNE 12, 2000
among
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & CO., INC.,
▇▇▇▇▇▇, PEABODY CANADA, INC.,
ARROW FACTORY STORES INC.,
▇▇▇▇▇▇ DESIGNER GROUP, INC.,
CONSUMER DIRECT CORPORATION,
▇▇▇▇▇▇, PEABODY HOLDING CORP.,
and
▇▇▇▇▇▇▇▇-VAN HEUSEN CORPORATION
TABLE OF CONTENTS
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ARTICLE 1.
DEFINITIONS...............................................................................................2
1.1 Definitions.....................................................................................2
ARTICLE 2.
PURCHASE AND SALE OF ASSETS...............................................................................5
2.1 Assets to be Transferred........................................................................5
2.2 Excluded Assets.................................................................................6
2.3 Shares to be Transferred........................................................................7
2.4 Other Transactions..............................................................................7
2.5 Assignment of Assets............................................................................8
2.6 Transfer and Delivery of the Purchased Shares...................................................8
2.7 Obtaining Permits and Licenses..................................................................8
ARTICLE 3.
CONSIDERATION.............................................................................................9
3.1 Purchase Price..................................................................................9
3.2 Inventory.......................................................................................9
3.3 CAT Purchase Price Adjustment..................................................................12
3.4 Allocation of Purchase Price...................................................................13
ARTICLE 4.
LIABILITIES, OBLIGATIONS AND INDEMNITIES.................................................................14
4.1 Liabilities and Indemnity......................................................................14
4.2 Indemnification Procedure......................................................................17
4.3 Other Indemnification Provisions...............................................................18
ARTICLE 5.
EMPLOYEES AND EMPLOYEE BENEFITS..........................................................................19
5.1 Employee Relations and Benefits................................................................19
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF CP.....................................................................22
6.1 Organization and Corporate Power...............................................................22
6.2 Due Authorization; No Breach...................................................................22
6.3 Real Property..................................................................................23
6.4 Personal Property..............................................................................24
6.5 Title and Condition of Assets other than Real Property.........................................24
6.6 Consents.......................................................................................24
6.7 Compliance With Laws...........................................................................24
6.8 Permits and Licenses...........................................................................24
6.9 Environmental Matters..........................................................................25
6.10 Contracts......................................................................................26
6.11 Tax Matters....................................................................................27
6.12 CAT Stock......................................................................................28
6.13 Labor Matters..................................................................................28
6.14 Finders; Brokers...............................................................................28
6.15 Litigation, Claims and Proceedings.............................................................28
6.16 Affiliate Transactions.........................................................................29
6.17 1999 CAT Agreement.............................................................................29
6.18 Survival of Representations and Warranties.....................................................29
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF BUYER..................................................................29
7.1 Corporate Existence............................................................................29
7.2 Due Authorization; No Breach...................................................................30
7.3 Consents.......................................................................................30
7.4 Finders; Brokers. ............................................................................31
7.6 Availability of Funds..........................................................................31
7.7 No Other Representations or Warranties.........................................................31
7.8 Survival of Representations and Warranties.....................................................31
ARTICLE 8.
COVENANTS................................................................................................32
8.1 Conduct of the Business........................................................................32
8.2 Access to Books, Records and Facilities........................................................32
8.3 Best Efforts and Alternative Proposals.........................................................32
8.4 1999 CAT Agreement.............................................................................33
8.5 Notification...................................................................................33
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8.6 Letter of Credit...............................................................................33
8.7 Accounts Receivable............................................................................34
8.8 1999 CAT Agreement.............................................................................35
8.9 Returned Inventory.............................................................................35
8.10 U.S. AFS Cash Registers........................................................................36
8.11 Break-Up Fee...................................................................................36
8.12 ▇▇▇▇▇▇ Designer Group..........................................................................36
8.13 Trademark License Agreement....................................................................37
ARTICLE 9.
CONDITIONS OF CLOSING....................................................................................38
9.1 Mutual Conditions..............................................................................38
9.2 Additional Conditions of CP....................................................................39
9.3 Additional Conditions of Buyer.................................................................39
ARTICLE 10.
TERMINATION; SURVIVAL....................................................................................40
10.1 Termination by Buyer or CP.....................................................................40
10.2 Survival.......................................................................................40
ARTICLE 11.
CLOSING..................................................................................................41
11.1 Closing........................................................................................41
11.2 CP, CP Canada and FS Obligations and Closing Deliveries........................................41
11.3 Buyer's Obligations and Closing Deliveries.....................................................42
11.4 Minority CAT Shareholder's Obligations and Closing Deliveries..................................42
ARTICLE 12.
EXPENSES AND POST CLOSING OBLIGATIONS....................................................................42
12.1 Taxes and Other Charges........................................................................42
12.2 Further Assurances.............................................................................43
12.3 Access to Books, Records and Facilities........................................................43
ARTICLE 13.
BULK SALES LAW...........................................................................................44
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13.1 Waiver.........................................................................................44
ARTICLE 14.
PUBLICITY, CONFIDENTIALITY...............................................................................44
14.1 Publicity......................................................................................44
14.2 Confidentiality................................................................................44
ARTICLE 15.
NOTICES..................................................................................................45
15.1 Notices........................................................................................45
ARTICLE 16.
MISCELLANEOUS............................................................................................46
16.1 Binding Effect; Assignment.....................................................................46
16.2 Exhibits and Schedules.........................................................................46
16.3 Specific Performance...........................................................................47
16.4 Counterparts...................................................................................47
16.5 Headings; Interpretation.......................................................................47
16.6 Waiver.........................................................................................47
16.7 Severability...................................................................................48
16.8 Governing Law and Forum........................................................................48
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EXHIBITS
Exhibit 2.4(a) Transition Services Agreement
Exhibit 2.4(b) Trademark License Agreement
Exhibit 2.4(c) ▇▇▇▇ of Sale and Assignment
Exhibit 2.4(d) Assumption Agreement
Exhibit 2.4(e) Escrow Agreement
Exhibit 2.4(g) Waiver and Consent
Exhibit 8.12 Hosiery Term Sheet
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SCHEDULES
Schedule 2.1(a) - U.S. Arrow Factory Stores
Schedule 2.1(c) - Staple Dress Shirts
Schedule 2.1(d) - Contracts
Schedule 3.2(a) - Average Sales Price of Goods Sold at Discounted
Prices
Schedule 3.3 - Working Capital Closing Date Statement
Schedule 4.1(a) - Material Assumed Liabilities
Schedule 5.1(b) - Transitional Employees
Schedule 6.5 - Encumbrances
Schedule 6.6 - CP Required Consents
Schedule 6.7 - Compliance with Laws
Schedule 6.8 - Permits and Licenses
Schedule 6.9 - Environmental Matters
Schedule 6.10 - Contracts in Default
Schedule 6.12 - CAT Stock
Schedule 6.13 - Employment Contracts
Schedule 6.15 - Litigation, Claims and Proceedings
Schedule 6.16 - Affiliate Transactions
Schedule 7.2 - Due Authorization; No Breach
Schedule 7.3 - Buyer's Required Consents
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "AGREEMENT"), dated as of June
12, 2000, is among ▇▇▇▇▇▇, PEABODY & CO., INC., a Delaware corporation ("CP"),
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ CANADA, INC., a Canadian corporation ("CP CANADA"), ARROW
FACTORY STORES INC., a Delaware corporation ("FS"), ▇▇▇▇▇▇ DESIGNER GROUP, INC.,
a Delaware corporation ("CDG"), CONSUMER DIRECT CORPORATION, a Delaware
corporation ("CDC"), ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ HOLDING CORP., a Delaware corporation ("CP
HOLDING" and, collectively with FS, CDG and CDC, the "MINORITY CAT
SHAREHOLDERS") and ▇▇▇▇▇▇▇▇-VAN HEUSEN CORPORATION, a Delaware corporation
("BUYER"). CP, FS, CP Canada and Buyer are referred to collectively as the
"PARTIES," and individually as a "PARTY."
W I T N E S S E T H:
WHEREAS, CP and FS are engaged, among other things, in the business of
manufacturing and selling dress shirts and sportswear with the Arrow label and
private label dress and sport shirts and in the operation of retail stores in
the United States, such stores (as opposed to the corporate operations in
support thereof) collectively referred to as "U.S. ARROW FACTORY STORES" or
"U.S. AFS", and CP Canada is engaged, among other things, in the business of
selling in the United States apparel in the "Career Apparel" channel of
distribution (I.E., apparel bearing the name or logo of corporate entities or
other organizations) ("U.S. CAREER APPAREL"). The aforementioned businesses of
CP, FS and CP Canada are collectively referred to as the "U.S. BUSINESS";
WHEREAS, CP and the Minority CAT Shareholders own all of the
outstanding shares of C.A.T. Industrial S.A. de C.V., a corporation organized
under the laws of Honduras ("CAT") which is engaged in the manufacture of
mens' apparel (the "HONDURAN BUSINESS") at a factory in Honduras (the
"HONDURAN FACILITY") leased by CAT (the "HONDURAN FACILITY LEASE");
WHEREAS, concurrently with this Agreement, CP, Buyer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Resources Corporation, a Delaware corporation ("RESOURCES"), are entering into
the Trademark License Agreement (defined below);
WHEREAS, CP Canada owns the U.S. Career Apparel inventory being
purchased by Buyer hereunder;
WHEREAS, Buyer wishes to purchase, and CP and the Minority CAT
Shareholders are willing to sell, all of the outstanding shares of capital stock
of CAT (the "CAT SHARES") on the terms and conditions of this Agreement; and
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WHEREAS, Buyer wishes to purchase, and CP, CP Canada and FS are willing
to sell, all of CP's and FS's right, title and interest in and to certain of the
other assets of CP and FS used primarily by CP and FS in the conduct of the U.S.
Business and all of CP Canada's right, title and interest in and to the U.S.
Career Apparel inventory owned by CP Canada, and as part of such purchase and
sale of such assets, Buyer is willing to assume certain of the obligations and
liabilities of CP, CP Canada and FS related to such assets, all in the manner
and subject to the terms set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 DEFINITIONS. The following terms are defined in the Section
indicated:
Term Section
---- -------
1999 CAT Agreement 8.4
Agreement Introduction
Allocation 3.4(a)
Alternative Proposal 8.3
Amount of Royalties 8.13(a)
Ancillary Agreements 2.4
Arbiter 3.2(d)
Arrow Inventory 2.1(c)
Assets 2.1
Assignment and Assumption Instruments 11.2(b)
Assumed Liabilities 4.1(a) and 4.1(b)
BTC 8.12
Buyer Introduction
Buyer Indemnified Parties 4.1(b)
Buyer Plans 5.1(c)
Buyer's 401(k) Plan 5.1(h)
CAT Recitals
CAT Employees 5.1(a)
CAT Shares Recitals
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Term Section
---- -------
CDC Introduction
CDG Asset Purchase Agreement 8.12
CDG Share Purchase Agreement 8.12
Claim 4.2
Closing 11.1
Closing Date 11.1
Code 3.4(a)
Confidentiality Agreement 14.2
Contingent Period 5.1(a)
Contracts 2.1(d)
Corporate Employees 5.1(a)
CP Introduction
CP Canada Introduction
CP Employees 5.1(a)
CP Holding Introduction
CP Indemnified Parties 4.1(c)
CP's 401(k) Plan 5.1(g)
CP's Cost 3.2(a)
CP's Knowledge 6.3(c)
Current Arrow Inventory 2.1(c)
Damages 4.1(b)
Encumbrances 2.1
Environment 6.9(b)
Environmental Claim 6.9(b)
Environmental Laws 6.9(d)
Escrow Agreement 2.4(e)
Estimated Inventory Purchase Price 3.2(a)
Excepted Event 8.13(a)
Excluded Assets 2.2
Excluded Claims 6.15
Excluded Liabilities 4.1(e)
Fair Market Value 3.2(a)
Final Inventory Purchase Price 3.2(d)
FS Introduction
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Term Section
---- -------
Hazardous Materials 6.9(b)
Honduran Business Recitals
Honduran Environmental Laws 6.9(d)
Honduran Facility Recitals
Honduran Facility Lease Recitals
Hosiery Agreement 8.12
HSR Act 6.6
Indemnified Party 4.2
Indemnifying Party 4.2
Interests 2.5
Inventory Closing Date Statement 3.2(b)
Inventory Escrow 3.2(a)
IRS 3.4(a)
Issuing Bank 8.6
Items 16.2
July 9 Count 3.2(c)
KCPL 8.12
KCPL Shirt License Agreement 8.12
Liability 4.1(a)
Minority CAT Shareholders Introduction
Non-Current Arrow Inventory 2.1(c)
Non-Retained Employees 5.1(a)
Party Introduction
Pension Plan 5.1(f)
Permits 6.8
Pre-Closing Mervyn's Event 8.13(a)
Pre-Closing Sears Event 8.13(a)
Purchase Price 3.1
Real Property 6.3(a)
Release 6.9(b)
Resources Recitals
Retained Employees 5.1(a)
Returned Inventory 8.9
Sales Plans 5.1(i)
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Term Section
---- -------
Securities Act 7.5
Sourcing Commitments 8.6
Tax 6.11(d)
Tax Authority 6.11(d)
Tax Returns 6.11(d)
Termination Costs 5.1(a)
Trademark License Agreement 2.4(b)
Transferred Employees 5.1(a)
Transitional Employees 5.1(b)
Trim 3.2(a)
U.S. AFS Recitals
U.S. AFS Employees 5.1(a)
U.S. AFS FF&E 2.1(b)
U.S. Arrow Factory Stores Recitals
U.S. Business Recitals
U.S. Career Apparel Recitals
U.S. Environmental Laws 6.9(a)
WARN 5.1(j)
Working Capital Closing Date Statement 3.3(a)
ARTICLE 2.
PURCHASE AND SALE OF ASSETS
2.1 ASSETS TO BE TRANSFERRED. Subject to the terms and
conditions of this Agreement, and except as otherwise expressly provided in
Section 2.5 hereof, at the Closing (as defined in Section 11.1 hereof), CP, CP
Canada and FS shall sell, assign, transfer, convey and deliver to Buyer, and
Buyer shall purchase, acquire and accept from CP, CP Canada and FS, all of CP's,
CP Canada's and FS's right, title and interest in and to each of the following
assets used by CP, CP Canada and FS in the conduct of the U.S. Business, in each
case except as otherwise expressly provided in Section 2.2 hereof, free and
clear of all mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever ("ENCUMBRANCES"), with
such changes, deletions or additions thereto as may occur from the date hereof
to the Closing in accordance with the terms and conditions of this Agreement and
any Ancillary Agreement (as defined herein) executed in connection herewith
(collectively, the "ASSETS"):
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(a) all U.S. Arrow Factory Store leasehold interests in real
property leased by CP or FS and set forth in Schedule 2.1(a), including
all buildings, structures and other improvements located on such real
property and any additions, fixtures, replacements and alterations
thereto between the date hereof and the Closing Date;
(b) all tangible personal property and interests therein
located in the U.S. Arrow Factory Stores, including all furniture,
fixtures and equipment, but not including any computer software (the
"U.S. AFS FF&E");
(c) all raw materials, work in process, Trim and finished
goods inventory relating to the U.S. Business (including, without
limitation, the private label, U.S. Career Apparel and U.S. AFS
businesses) that (i) in the case of staple dress shirts (as set forth
in Schedule 2.1(c)) and U.S. Career Apparel inventory, can reasonably
be expected to be sold within the next nine months based on prior sales
history over the previous twelve (12) months of similar products
adjusted for current customers' sales plans and (ii) in the case of
fancy dress shirts and sportswear, relate to seasons subsequent to
Spring 2000 and goods for open orders for the Spring 2000 season, in
each case including, without limitation, any of such items in transit
from manufacturing facilities of CP and its affiliates or third parties
or warehouses of CP and its affiliates (such finished goods inventory,
the "CURRENT ARROW INVENTORY") and non-current raw materials,
non-current work in progress, non-current Trim and non-current finished
goods inventory relating to the U.S. Business, including, without
limitation, any of such items in transit from manufacturing facilities
of CP and its affiliates or third parties or warehouses of CP and its
affiliates (such finished goods inventory, the "NON-CURRENT ARROW
INVENTORY" and, together with the Current Arrow Inventory, the "ARROW
INVENTORY");
(d) all rights under all material contracts, leases, licenses,
commitments, sales orders, purchase orders, invoices and other
agreements relating to the U.S. Business (the "CONTRACTS") as listed on
Schedule 2.1(d); and
(e) originals or copies of all records, files, supplier lists
and other relevant data relating to the Assets, the operations of the
U.S. Business that support the Assets and the Assumed Liabilities,
provided that CP, CP Canada and FS shall retain originals of any such
items which relate primarily to the Excluded Assets or the Excluded
Liabilities.
2.2 EXCLUDED ASSETS. The parties to this Agreement expressly
understand and agree that notwithstanding anything herein or in the Ancillary
Agreements to the contrary, CP, CP Canada and FS are not hereunder selling,
assigning, transferring or conveying to Buyer, and the Assets shall not include,
any of the assets, rights and properties of CP, CP Canada or FS not expressly
set forth in Section 2.1 (the "EXCLUDED ASSETS").
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2.3 SHARES TO BE TRANSFERRED. Subject to the terms and
conditions of this Agreement, at the Closing (as defined in Section 11.1
hereof), CP and the Minority CAT Shareholders shall sell, assign, transfer,
convey and deliver to Buyer and/or its designees free and clear of all
Encumbrances, and Buyer shall purchase, acquire and accept the CAT Shares and
all of the certificates representing the CAT Shares, and such transfer shall be
registered in the CAT shareholders' registration book.
2.4 OTHER TRANSACTIONS. In addition to the transactions
contemplated above, the following acts or transactions shall also occur at or
before the Closing:
(a) Buyer, FS and CP each shall execute and deliver a
Transition Services Agreement substantially in the form attached hereto
as Exhibit 2.4(a);
(b) Buyer, Resources and CP each shall execute and deliver a
Trademark License Agreement substantially in the form attached hereto
as Exhibit 2.4(b), as such form is revised pursuant to Section 8.13
hereto (the "TRADEMARK LICENSE AGREEMENT"), and all documents required
thereby;
(c) FS, CP Canada and CP each shall execute and deliver a ▇▇▇▇
of Sale and Assignment substantially in the form attached hereto as
Exhibit 2.4(c);
(d) Buyer shall execute and deliver an Assumption Agreement
substantially in the form attached hereto as Exhibit 2.4(d);
(e) Buyer, CP and The Bank of New York, as escrow agent, shall
each execute and deliver an Escrow Agreement substantially in the form
attached hereto as Exhibit 2.4(e) (the "ESCROW AGREEMENT");
(f) CP, CP Canada and FS shall deliver UCC-3 partial releases
and/or termination statements and such other instruments as are
required to release all Encumbrances of the lenders and other creditors
of CP, CP Canada and FS on the Assets; and
(g) CP shall execute and deliver, and shall use its reasonable
efforts to cause its subcontractors, contractors and warehousemen to
deliver, Waivers and Consents substantially in the form attached hereto
as Exhibit 2.4(g).
The agreements set forth in paragraphs (a) through (g) of this
Section 2.4 are hereinafter referred to as the "ANCILLARY AGREEMENTS."
2.5 ASSIGNMENT OF ASSETS. (a) To the extent that any Asset to
be sold, assigned, transferred or conveyed to Buyer, or any claim, right or
benefit arising thereunder or
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resulting therefrom (the "INTERESTS"), cannot be sold, assigned, transferred or
conveyed without the approval, consent or waiver of, or filing with, the issuer
thereof or the other party thereto or any third person (including a government
or governmental unit), the Parties will cooperate jointly to obtain such
approval, consent or waiver or make such filing. To the extent that such sale,
assignment, transfer or conveyance or attempted sale, assignment, transfer or
conveyance of any such Interest would constitute a breach thereof or a violation
of any law, decree, order, regulation or other governmental edict, this
Agreement shall not constitute a sale, assignment, transfer or conveyance
thereof or an attempted sale, assignment, transfer or conveyance thereof.
(b) Notwithstanding anything to the contrary contained herein,
CP, CP Canada and FS are not obligated to sell, assign, transfer or convey to
Buyer, and Buyer is not obligated to purchase hereunder, any of CP's, CP
Canada's and FS's rights and obligations in and to an Interest without first
having the necessary approvals, filings, consents or waivers required to effect
the sale, assignment, transfer or conveyance of such Interest.
(c) To the extent that any of the approvals, consents,
filings, waivers, or other authorizations referred to in Section 2.5(a) hereof
have not been obtained as of the Closing, CP, CP Canada or FS, as the case may
be, shall, during the remaining term of such Interest, use all reasonable
efforts, to (i) obtain the consent of any such third person (including a
government or governmental unit), (ii) cooperate with Buyer in any reasonable
and lawful arrangement designed to provide the benefits of such Interest to
Buyer and (iii) enforce, at the request of Buyer and for the benefit of Buyer,
any rights of CP, CP Canada or FS arising from such Interest against such issuer
thereof or the other party or parties thereto (including the right to elect to
terminate any such Interest in accordance with the terms thereof upon the
written request of Buyer). The out-of-pocket expenses incurred by CP, CP Canada
and FS and Buyer in connection with any such efforts pursuant to this Section
2.5(c) shall be shared equally by CP and Buyer.
2.6 TRANSFER AND DELIVERY OF THE PURCHASED SHARES. CP and the
Minority CAT Shareholders shall transfer and deliver to Buyer share certificates
representing the CAT Shares duly endorsed, or accompanied by stock powers duly
executed, with all necessary stock transfer stamps attached thereto and
canceled, or such other assignments, deeds, share transfer forms, endorsements,
notarial deeds of transfer or other instruments or documents, duly stamped where
necessary, as required by the jurisdiction of organization of CAT. CP and the
Minority CAT Shareholders hereby waive any preferential right they may have
under applicable law to acquire the CAT Shares owned by any other person.
2.7 OBTAINING PERMITS AND LICENSES. Buyer shall use all
reasonable efforts to obtain as of the Closing or as soon thereafter as may be
practicable all permits and licenses required by any governmental agency with
respect to the Assets. CP, CP Canada and FS, as the case may be, shall provide
any cooperation reasonably requested by Buyer to assist Buyer in obtaining such
permits and licenses.
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ARTICLE 3.
CONSIDERATION
3.1 PURCHASE PRICE. Buyer shall pay CP, CP Canada and FS as
follows:
(a) Buyer shall pay CP, on behalf of itself and FS, $1.00 for
the Assets (other than the Assets referred to in Section 2.1(c));
(b) Buyer shall pay CP, on behalf of itself and CP Canada, the
Final Inventory Purchase Price (as defined in Section 3.2(a)) for the
Arrow Inventory;
(c) Buyer shall pay CP $7 million in consideration of the
execution and delivery of this Agreement and the Ancillary Agreements;
and
(d) Buyer shall pay CP, on behalf of itself and the Minority
CAT Shareholders, $1.00 for the CAT Shares, subject to adjustment as
provided in Section 3.3.
All payments made to CP pursuant to this Section 3.1 (all such payments,
collectively, the "PURCHASE PRICE") shall be made by wire transfer of
immediately available funds to an account designated in writing by CP at least
five business days prior to the Closing Date. All payments made to CP pursuant
to this Section 3.1 shall be made at Closing, except as expressly provided
otherwise in Section 3.2.
3.2 INVENTORY. (a) Ten days prior to the Closing Date CP shall
deliver to Buyer its good faith estimates, prepared on a basis consistent with
CP's and CP Canada's past practices, of: (i) CP's Cost of the Current Arrow
Inventory (excluding Current Arrow Inventory located in the U.S. Arrow Factory
Stores); (ii) the Fair Market Value of the Non-Current Arrow Inventory
(excluding Non-Current Arrow Inventory located in the U.S. Arrow Factory
Stores); (iii) CP's Cost of raw materials to be used for any current
merchandise; (iv) 50% of CP's Cost of all other raw materials; (v) CP's Cost of
all trim (including, without limitation, packing, labels, buttons, zippers and
hang tags (collectively, "TRIM")) to be used in connection with any current
merchandise; (vi) CP's Cost of raw material plus 100% of cut labor and overhead
standard cost, 50% of sew labor and overhead standard cost and 100% of
southbound freight to CAT (as reflected in their standard costing sheets) of
work in process; and (vii) the value of the Arrow Inventory located in the U.S.
Arrow Factory Stores as calculated in accordance with generally accepted
accounting principles applied in a manner consistent with the preparation of the
audited financial statements of ▇▇▇▇▇▇ American Corp. for the fiscal year ended
December 31, 1999; in each case as of the close of business on the Closing Date.
The aggregate estimate referred to in the preceding sentence is referred to as
the "ESTIMATED INVENTORY PURCHASE PRICE"; it being understood and agreed that
all Trim not referred to in clause (v) of the preceding sentence shall be valued
at $0. Buyer shall pay CP (on behalf of itself, FS and CP Canada) at Closing 95%
of the
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Estimated Inventory Purchase Price. The balance of the Estimated Inventory
Purchase Price (the "INVENTORY ESCROW") shall be deposited in escrow by Buyer in
accordance with the Escrow Agreement. For purposes hereof, "CP'S COST" shall
mean CP's or CP Canada's cost as calculated in accordance with generally
accepted accounting principles consistent with CP's past practice. For purposes
hereof, "FAIR MARKET VALUE" shall mean the lower of CP's Cost or the average
selling price of similar goods sold to Off-Price Retail Outlets (as defined in
the Trademark License Agreement) in the past six months; provided that staple
dress shirts and U.S. Career Apparel inventory included in the Non-Current Arrow
Inventory that can reasonably be expected to be sold within the next twelve
months based on prior sales history over the previous twelve (12) months of
similar products adjusted for current customers' sales plans shall be deemed to
have a Fair Market Value equal to 90% of CP's Cost thereof; and provided further
that if the Non-Current Arrow Inventory (excluding any Non-Current Arrow
Inventory located in the U.S. Arrow Factory Stores) constitutes more than 13% of
the aggregate value of the Arrow Inventory (excluding any Arrow Inventory
located in the U.S. Arrow Factory Stores) as reflected on CP's and CP Canada's
books and records, the Fair Market Value of the portion of the Non-Current Arrow
Inventory in excess of such 13% threshold (other than staple dress shirts and
U.S. Career Apparel referred to in the preceding proviso) shall be reduced by
10% for purposes hereof (it being agreed that the Fair Market Value of such
portion of the Non-Current Arrow Inventory prior to the application of such 10%
discount shall be deemed to be the average Fair Market Value of all of the
Non-Current Arrow Inventory (excluding any Non-Current Arrow Inventory located
in the U.S. Arrow Factory Stores)). Set forth in Schedule 3.2(a) is the average
sales price of goods sold at Discounted Prices (as defined in the Trademark
License Agreement) from January 1, 2000 to April 30, 2000. The price of goods
sold to Off-Price Retail Outlets will be calculated by Style Code and consistent
with the average sales price of goods sold at Discounted Prices, summarized by
season and product line from January 1, 2000 to April 30, 2000, as set forth in
Schedule 3.2(a). Notwithstanding anything to the contrary in the foregoing,
Arrow Inventory in transit will be treated pursuant to this Section 3.2(a) based
on the date of receipt and the condition upon receipt. The Parties agree to
cooperate in resolving any disputes with third party vendors with respect to
such Arrow Inventory.
(b) As soon as practicable following the Closing Date and in
any event within 60 calendar days thereof, CP shall prepare and deliver to Buyer
a statement of each of the items referred to in Section 3.2(a)(i) through (vii)
as of the close of business on the Closing Date (including the notes thereto,
the "INVENTORY CLOSING DATE STATEMENT"), together with the work papers used by
CP (and, subject to the execution and delivery by Buyer of a customary
accountants' access letter, including all work papers used by CP's independent
public accountants) in the preparation thereof. There shall be attached to the
Inventory Closing Date Statement an annex setting forth in reasonable detail the
computation of each of the items referred to in Section 3.2(a)(i) through (vii).
(c) The Inventory Closing Date Statement shall be based upon a
full physical count of all Assets referred to in Section 2.1(c) as of the close
of business on July 9, 2000, which
11
shall be conducted by CP and observed and participated in by Buyer and its
representatives (the "JULY 9 COUNT"), as adjusted for items sold after the July
9 Count, items received after the July 9 Count and items manufactured after the
July 9 Count. Buyer and CP shall share equally the cost of the July 9 Count. As
promptly as practicable following the July 9 Count, CP shall deliver to Buyer
copies of all work papers used by CP (and, subject to the execution and delivery
by Buyer of a customary accountants' access letter, including all work papers
used by CP's independent public accountants) in connection with the July 9
Count. CP shall, and shall cause CP's independent public accountants to, be
available to Buyer and its representatives to answer questions regarding the
July 9 Count or such work papers.
(d) Unless Buyer delivers written notice to CP on or prior to
the 45th day following Buyer's receipt of the Inventory Closing Date Statement
and the work papers used in the preparation thereof of Buyer's objection to any
amount set forth in the Inventory Closing Date Statement, specifying in
reasonable detail all disputed amounts and the basis therefor, Buyer shall be
deemed to have accepted and agreed to the Inventory Closing Date Statement. If
Buyer so notifies CP, CP and Buyer shall have 15 business days thereafter to
resolve their differences, and each of Buyer and CP shall make a good faith
effort to resolve their differences. If any amount remains in dispute, all such
amounts remaining in dispute shall be submitted for resolution to a "Big 5"
accounting firm mutually agreed upon by Buyer and CP which has not had a
material relationship with either Buyer and its subsidiaries or CP and its
subsidiaries within the two years preceding the appointment. If Buyer and CP
cannot agree on the arbiter, they shall request that their respective
independent certified public accountants jointly designate the arbiter, and such
appointment shall be binding and conclusive on the parties hereto. The arbiter
designated by Buyer and CP or their respective independent certified public
accountants, as the case may be, is hereinafter referred to as the "ARBITER".
Within 30 business days after the Arbiter's acceptance of its appointment under
this Section 3.2(d) as Arbiter, each of CP and Buyer shall submit to the Arbiter
(and each other) a single presentation setting forth its proposed resolution of
the dispute and the basis therefor and the resulting computation of the
Inventory Closing Date Statement, and each of the items referred to in Section
3.2(a)(i) through (vii) (collectively, the "FINAL INVENTORY PURCHASE PRICE").
Within 20 business days after the earlier to occur of (1) the Arbiter's receipt
of the presentations referred to in the preceding sentence or (2) the expiration
of the 30 business day period referred to in the preceding sentence, the Arbiter
shall accept either Buyer's or CP's proposed resolution of the dispute and the
resulting computation of the Inventory Closing Date Statement and each of the
items referred to in Section 3.2(a)(i) through (vii), and shall notify each of
Buyer and CP of its decision in writing. Such decision shall be final, binding
and conclusive on all parties hereto. The party whose proposed resolution is not
accepted shall pay all of the Arbiter's fees and expenses with respect to its
engagement under this Section 3.2(d). Each party agrees to execute, if requested
by the Arbiter, a reasonable engagement letter with the Arbiter with respect to
its engagement under this Section 3.2(d).
(e) If the Final Inventory Purchase Price as determined above
equals or exceeds the Estimated Inventory Purchase Price, the Inventory Escrow
shall be delivered to CP
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and Buyer shall pay CP by wire transfer of immediately available funds to an
account designated in writing by CP an amount equal to any excess, together with
interest on such excess at an annual rate equal to the reference rate from time
to time of The Chase Manhattan Bank from and including the Closing Date to but
not including the date of payment. If the Final Inventory Purchase Price is less
than the Estimated Inventory Purchase Price but greater than 95% thereof, the
portion of the Inventory Escrow equal to any such excess shall be delivered to
CP and the balance shall be delivered to Buyer. If the Final Inventory Purchase
Price's is equal to 95% of the Estimated Inventory Purchase Price, the Inventory
Escrow shall be delivered to Buyer. If the Final Inventory Purchase Price is
less than 95% of the Estimated Inventory Purchase Price, the Inventory Escrow
shall be delivered to Buyer, and CP shall pay Buyer an amount equal to such
difference between 95% of the Estimated Inventory Purchase Price and the Final
Inventory Purchase Price by wire transfer of immediately payable funds to an
account designated in writing by Buyer, together with interest on such amount at
an annual rate equal to the reference rate from time to time of The Chase
Manhattan Bank from and including the Closing Date to but not including the date
of payment. All Net Investment Proceeds in the Inventory Escrow Fund (as those
terms are defined in the Escrow Agreement) shall be disbursed to Buyer and CP,
respectively, in the same proportion that the Inventory Escrow is disbursed. Any
amounts payable pursuant to this Section 3.2(e) in addition to the Inventory
Escrow Fund shall be made on the third business day following (i) the 30th day
after the delivery to Buyer of the Inventory Closing Date Statement and the work
papers used in the preparation thereof, to the extent that there shall have been
no dispute between CP and Buyer with respect to any or all of the items referred
to in Section 3.2(a)(i) through (vii) and the Inventory Closing Date Statement,
and/or (ii) if a dispute with respect to any or all of the items referred to in
Section 3.2(a)(i) through (vii) and the Inventory Closing Date Statement is
settled by the parties without resort to arbitration, the date of such
settlement and/or (iii) the issuance of the Arbiter's written decision under
Section 3.2(d).
3.3 CAT PURCHASE PRICE ADJUSTMENT. (a) As soon as practicable
following the Closing Date and in any event within 60 calendar days thereof, CP
shall prepare and deliver to Buyer a working capital statement of CAT in
Honduran Lempiras as of the close of business on the Closing Date ("WORKING
CAPITAL CLOSING DATE STATEMENT") and the work papers used in the preparation
thereof. The Working Capital Closing Date Statement will be prepared consistent
with the unaudited March 31, 2000 CAT pro forma balance sheet set forth in
Schedule 3.3 in regards to current assets and current liabilities, excluding
intercompany obligations.
(b) Unless Buyer delivers written notice to CP on or prior to
the 45th day following Buyer's receipt of the Working Capital Closing Date
Statement and the work papers used in the preparation thereof of Buyer's
objection to any amount set forth in the Working Capital Closing Date Statement,
specifying in reasonable detail all disputed amounts and the basis thereof,
Buyer shall be deemed to have accepted and agreed to the Working Capital Closing
Date Statement. If Buyer so notifies CP, CP and Buyer shall have 15 business
days thereafter to resolve their differences, and each of them shall make a good
faith effort to resolve their differences. If any amount remains in dispute, all
such amounts remaining in dispute shall be
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submitted for resolution to the Arbiter. Within 30 business days after the
Arbiter's acceptance of its appointment hereunder as Arbiter, each of CP and
Buyer shall submit to the Arbiter (and each other) a single presentation setting
forth its proposed resolution of the dispute and the basis therefor and the
resulting computation of the Working Capital Closing Date Statement. Within 20
business days after the earlier to occur of (1) the Arbiter's receipt of the
presentations referred to in the preceding sentence or (2) the expiration of the
30 day period referred to in the preceding sentence, the Arbiter shall accept
either Buyer's or CP's proposed resolution of the dispute and the resulting
computation of the Working Capital Closing Date Statement, and shall notify each
of Buyer and CP of its decision in writing. Such decision shall be final,
binding and conclusive on all parties hereto. The party whose proposed
resolution is not accepted shall pay all of the Arbiter's fees and expenses with
respect to its engagement under this Section 3.3(b). Each party agrees to
execute, if requested by the Arbiter, a reasonable engagement letter with the
Arbiter with respect to its engagement under this Section 3.3(b).
(c) If current assets minus current liabilities as shown on
the Working Capital Closing Date Statement is less than negative 250,000
Honduran Lempiras, CP shall pay Buyer an amount equal to any shortfall by wire
transfer of immediately payable funds to an account designated in writing by
Buyer, together with interest on such amount at an annual rate equal to the
reference rate from time to time of the Chase Manhattan Bank from and including
the Closing Date to but not including the date of payment. Any amount payable
shall be made on the third business day following (i) the 30th day after the
delivery to Buyer of the Working Capital Closing Date Statement and the work
papers used in the preparation thereof, to the extent that there shall have been
no dispute between CP and Buyer with respect thereto, or (ii) if a dispute with
respect to the Working Capital Closing Date Statement is settled by the parties,
the date of such settlement or (iii) the issuance of the Arbiter's written
decision under 3.3(b).
3.4 ALLOCATION OF PURCHASE PRICE. (a) Buyer, CP, CP Canada and
FS agree that they shall allocate the Purchase Price among the Assets as of the
Closing Date on Internal Revenue Service ("IRS") Form 8594, in accordance with
Section 1060 of the Internal Revenue Code of 1986, as amended (the "CODE"), and
the Treasury regulations promulgated thereunder. CP shall provide Buyer with a
copy of CP's , CP Canada's and FS's proposed fair market value allocation (the
"ALLOCATION"), which shall be based on the Inventory Closing Date Statement as
finally determined, as promptly as reasonably practicable. The Allocation shall
be based upon (i) the allocation provided for in Section 3.1 and (ii) to the
extent further allocation is required, the fair market value of the Assets as of
the Closing Date; provided that the portion of the Allocation relating to
inventory shall be based on the valuation thereof pursuant to Section 3.2. In
the event that Buyer and CP are unable to agree on the Allocation with respect
to Assets other than inventory within 90 days of the date on which CP provides
Buyer with a copy of the Allocation, a third-party appraiser jointly selected by
Buyer and CP, the cost of which shall be borne equally by Buyer, on the one
hand, and CP on the other hand, shall resolve all items with respect to the
Allocation to which there is a dispute between the parties.
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(b) Buyer and CP shall timely file with the appropriate Tax
authorities copies of the agreed upon IRS Form 8594 and shall use the Allocation
in the preparation of all Tax Returns (as defined in Section 6.11(e)), including
any attachments thereto, and for all other Tax purposes. In the event any party
hereto receives notice of an audit in respect of the Allocation, such party
shall notify the other party in writing as to the date and subject of such audit
as promptly as reasonably practicable.
(c) If any Tax Return filed by Buyer or CP relating to the
transactions contemplated hereby is challenged by the Tax authority with which
such Tax Return was filed on the basis of the Allocation, as finally adjusted,
the party filing such Tax Return shall keep the other party generally apprised
of its decisions and the current status and progress of all administrative and
judicial proceedings, if any, that are undertaken at the election of such party
with respect thereto.
(d) Any adjustment to the Purchase Price or the amount of
Assumed Liabilities shall result in an appropriate adjustment to the Allocation
and the IRS Form 8594 described above.
ARTICLE 4.
LIABILITIES, OBLIGATIONS AND INDEMNITIES
4.1 LIABILITIES AND INDEMNITY. (a) Effective as of the
Closing, Buyer shall absolutely and irrevocably assume and be solely liable and
responsible for, and from and after the Closing Date shall pay, perform and
discharge when due, any and all of the Liabilities arising under, relating to or
in connection with the Assets (collectively, the "ASSUMED LIABILITIES"). Set
forth on Schedule 4.1(a) hereof are all of the material Assumed Liabilities.
The term "LIABILITY" shall mean and include any direct or
indirect indebtedness, liability, claim, loss, damage, deficiency, cost of
environmental investigation or remediation, obligation or responsibility, of
whatever kind or nature, whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured, accrued or
unaccrued, absolute, contingent or otherwise.
(b) Notwithstanding anything to the contrary contained in
Section 4.1(a) hereof, the term "ASSUMED LIABILITIES" shall not mean or include,
or be deemed to mean or include, and CP hereby agrees to indemnify and hold
harmless each of Buyer and its affiliates and their respective directors,
shareholders, partners, officers, employees, agents, consultants,
representatives, successors, transferees and assigns (hereinafter sometimes
collectively referred to as "BUYER INDEMNIFIED PARTIES") against (i) any
Liabilities which are satisfied or discharged prior to the Closing or any
Liabilities (other than Liabilities of CAT) that by their terms were due
15
and payable prior to Closing and (ii) any Excluded Liabilities (as defined
below) and any liability, loss, damage (excluding consequential damages
(including, without limitation, lost business profits)) and other out-of-pocket
costs (including reasonable fees and expenses of outside counsel) incident to
proceedings or investigations or the prosecution or defense of any claim
(collectively, "DAMAGES") incurred by any of them relating to any Excluded
Liability. Notwithstanding the foregoing, Buyer agrees to cooperate with CP and
to take all other reasonable actions to avoid or minimize Damages relating to
Section 4.1(e)(vii) hereof.
(c) Buyer shall indemnify and hold harmless CP, CP Canada, FS,
the other Minority CAT Shareholders and their respective affiliates and the
directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees and assigns of any thereof (hereinafter
sometimes collectively referred to as "CP INDEMNIFIED PARTIES"), against all
Damages incurred by any of them relating to any Assumed Liability. It is agreed
and understood that claims under this Section 4.1(c) or 4.1(d) may be brought by
CP Indemnified Parties at any time and shall not be limited as to dollar amount.
(d) Buyer shall also indemnify and hold harmless the CP
Indemnified Parties against any Damages which are caused by or arise out of any
breach of any covenant or agreement of Buyer hereunder or under any Ancillary
Agreement.
(e) Except for the Assumed Liabilities or as may be expressly
agreed upon in any Ancillary Agreement, Buyer is not assuming, and is not
responsible for, any Liability of any of CP, CP Canada and FS, whether or not
related to the Assets ("EXCLUDED LIABILITIES"), including without limitation,
the following:
(i) Except as expressly provided otherwise in Section 8.8,
Liabilities of CP, CP Canada, FS or CAT under any bond, note, debenture
or similar instrument or any other indebtedness for borrowed money or
Liabilities of CAT to CP or any of its affiliates;
(ii) Any cash overdrafts;
(iii) Liabilities of CP, CP Canada and FS related to Excluded
Assets;
(iv) Liabilities of CP, CP Canada and FS under this Agreement
or any Ancillary Agreement;
(v) Liabilities of CP, CP Canada and FS to the extent arising
out of or as a consequence of (A) injury or death of any person as a
consequence of any event occurring prior to the Closing Date, (B)
damage to the property of any third party as a consequence of any event
occurring prior to the Closing Date or (C) workers' compensation claims
relating to events which occurred prior to the Closing Date;
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(vi) Liabilities arising from any claim, action, suit,
investigation or proceeding (whether initiated prior to or after
Closing) relating to CP's, CP Canada's or FS's ownership of the Assets,
CP's, CP Canada's or FS's conduct of the U.S. Business or CP's or the
Minority CAT Shareholders' ownership of any CAT Shares (excluding
Liabilities relating to the conduct of the Honduran Business), in each
case prior to the Closing, including without limitation, claims with
respect to defective products or services, alleged improper sales
practices, warranty claims, or claims for any loss, damage or cost
arising out of any property damage or personal injury, in each case to
the extent due to the use of any product manufactured or sold by or
services furnished by CP, CP Canada and FS prior to the Closing Date;
(vii) Liabilities under Environmental Laws (as defined in
Section 6.9(d) hereof) concerning any Asset, in each case to the extent
arising out of or as a consequence of a violation of Environmental Law
or a Release of Hazardous Material occurring or existing prior to the
Closing;
(viii) Liabilities relating to the U.S. Business resulting
from or relating to the failure of CP, CP Canada or FS to qualify to do
business as a foreign corporation in any jurisdiction;
(ix) Any obligations or liabilities arising out of or relating
to all claims and causes of action under United States federal, state
and/or municipal civil rights and/or employment law statutes including,
but without limitation, Title VII of the Civil Rights Acts of 1964, the
Americans with Disabilities Act, the Age Discrimination in Employment
Act, the Fair Labor Standards Act, the Occupational Health & Safety
Act, or the National Labor Relations Act, in each case to the extent
arising out of acts and events that occurred prior to the Closing Date;
(x) Liabilities of CP, FS, CP Canada or CAT accruing prior to
Closing to the extent that CP, CP Canada or FS actually is reimbursed
therefor under its insurance policies;
(xi) Liabilities set forth on Schedule 6.10; and
(xii) Excluded Claims (as defined in Section 6.15).
(f) CP shall also indemnify and hold harmless each Buyer
Indemnified Party against any Damages (i) which are caused by or arise out of
any breach of any covenant or agreement of any of CP, FS, CP Canada and the
Minority CAT Shareholders hereunder or under any Ancillary Agreement or (ii)
which are caused by or arise out of any breach of any representation or warranty
of any of CP, FS, CP Canada and the Minority CAT Shareholders hereunder. No
claim for breach of a representation or warranty shall be asserted under Section
17
4.1(f)(ii) after the expiration of the survival period of the relevant
representation or warranty under Section 6.18. No Buyer Indemnified Party shall
be entitled to indemnification for claims for breaches of representations and
warranties under Section 4.1(f)(ii) unless and until the aggregate amount of
such claims exceeds $100,000 and the Buyer Indemnified Parties may claim
indemnification only for the portion of such claims which in the aggregate are
in excess of said $100,000. The maximum amount recoverable by Buyer Indemnified
Parties for indemnification for breaches of representations and warranties under
Section 4.1(f)(ii) shall be (x) in respect of breaches relating to Assets
referred to in Section 2.1(c), the purchase price therefor as finally determined
under Section 3.2, and (y) in respect of breaches relating to the CAT Shares or
the Honduran Business and all other breaches not referred to in clause (x)
above, $1,000,000. It is agreed and understood that claims under Section
4.1(f)(i) may be brought by Buyer Indemnified Parties at any time and shall not
be limited as to dollar amount. No claim for indemnification for breaches
relating to inventory may be made to the extent duplicative of the valuation of
such inventory pursuant to Section 3.2. No claim for indemnification for
breaches relating to CAT may be made to the extent duplicative of the working
capital calculation made in accordance with Section 3.3.
(g) Any indemnification amounts payable to Buyer Indemnified
Parties or CP Indemnified Parties hereunder shall be paid to them by wire
transfer of immediately available funds to a bank account designated by them in
writing.
(h) The indemnification obligations of CP and Buyer set forth
in this Section 4.1 shall constitute the sole and exclusive remedy of the Buyer
Indemnified Parties and the CP Indemnified Parties for the recovery of any
Liabilities or Damages, except for Liabilities or Damages which are caused by or
arise out of the fraud of the other party.
(i) All Buyer Indemnified Parties hereby waive any rights and
remedies that any of them may otherwise have against any CP Indemnified Party
under any Environmental Law, including without limitation any claims for
contribution under the Comprehensive Environmental Response Compensation and
Liability act or any similar Environmental Laws.
4.2 INDEMNIFICATION PROCEDURE. The obligation of a party (the
"INDEMNIFYING PARTY") to indemnify any person or entity (the "INDEMNIFIED
PARTY") under Section 4.1 hereof is conditioned upon receiving from the
Indemnified Party written notice of the assertion or institution of a claim
arising from or related to any liability set forth in Section 4.1 hereof (a
"CLAIM") or of the occurrence of an event which the Indemnified Party reasonably
believes could lead to the assertion of a Claim, specifying in reasonable detail
the nature and amount of such Claim, promptly after the Indemnified Party
becomes aware of such Claim or event; provided, however, that the failure of the
Indemnifying Party to receive such notice on a timely basis shall relieve the
Indemnifying Party of its obligation to indemnify hereunder only if and to the
extent that such failure is prejudicial to its ability to defend such Claim.
Subject to the terms hereof, the Indemnifying Party shall have the absolute
right, in its sole discretion and at its
18
sole expense, to elect to defend, settle or otherwise protect against any Claim
with legal counsel of its own selection reasonably satisfactory to the
Indemnified Party, provided, however, that no Claim may be settled by the
Indemnifying Party without the consent of the Indemnified Party, which consent
shall not be unreasonably withheld. The Indemnified Party shall have the right,
but not the obligation, to participate, at its own expense, in the defense of
any Claim through counsel of its own and the fees and expenses of such counsel
will be at the expense of such Indemnified Party unless (i) the Indemnifying
Party specifically authorized the employment of such counsel and specifically
agreed to pay such counsel's fees, (ii) based on the advice of counsel, there is
a conflict of interest between the position of the Indemnifying Party on the one
hand and the Indemnified Party on the other hand, or (iii) the Indemnifying
Party fails to assume the defense or fails to contest such action in good faith,
in any which case, if the Indemnified Party notifies the Indemnifying Party that
it elects to employ separate counsel, the Indemnifying Party will not have the
right to assume the defense of such Claim on behalf of the Indemnified Party and
the reasonable fees and expenses of such separate counsel shall be borne by the
Indemnifying Party. The Indemnified Party shall, and shall cause its affiliates
to, at all times cooperate in all reasonable ways with, make its relevant files
and records available for inspection and copying by, and make (subject to
assertion of attorney-client and other applicable privileges) its employees
available or otherwise render reasonable assistance to the Indemnifying Party in
connection with its defense of any Claim. Subject to the next sentence, if the
Indemnified Party, without the prior consent of the Indemnifying Party (which
shall not be unreasonably withheld or delayed), makes any settlement with
respect to any Claim, the Indemnifying Party shall be discharged from all
obligations under Section 4.1 hereof with respect to such Claim. In the event
the Indemnifying Party does not undertake the defense against, settlement of or
protection against any Claim in accordance with this Section 4.2, the
Indemnified Party shall have the right, but not the obligation, to defend,
contest, assert cross claims or counterclaims or otherwise protect against the
same, to make any compromise or settlement thereof, with the consent of the
Indemnifying Party which shall not be unreasonably withheld or delayed, and to
recover from the Indemnifying Party and be indemnified by the Indemnifying Party
for the entire cost thereof, including, without limitation, legal expenses,
disbursements and all amounts paid as a result of such Claim or the compromise
or settlement thereof.
4.3 OTHER INDEMNIFICATION PROVISIONS. The Parties shall make
appropriate adjustments for insurance proceeds actually recovered by or on
behalf of an Indemnified Party in respect of an indemnifiable liability in
determining the amount of Damages pursuant to any Claims asserted under this
Article 4. All indemnification payments made pursuant to this Article 4 shall be
considered adjustments to the Purchase Price for federal income tax purposes.
ARTICLE 5.
EMPLOYEES AND EMPLOYEE BENEFITS
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5.1 EMPLOYEE RELATIONS AND BENEFITS. (a) The parties hereto
intend that there shall be continuity of employment with respect to all
employees of CAT (the "CAT EMPLOYEES"). CP will submit a list of all dedicated
Arrow corporate employees in the sales, marketing, product development,
operations, merchandise and administrative areas in its New York office and all
dedicated Arrow corporate employees in the Hong Kong and Smyrna, Georgia
offices, excluding employees in the human resources and MIS departments
("CORPORATE EMPLOYEES"), and all U.S. Arrow Factory Stores employees ("U.S. AFS
EMPLOYEES" and, together with the Corporate Employees, the "CP EMPLOYEES") to
Buyer on the date hereof and at least fifteen (15) business days prior to the
Closing Date. At any time prior to the Closing Date, Buyer may notify CP of any
CP Employee that Buyer would not intend to hire on or after the Closing Date;
PROVIDED, HOWEVER, that such notice shall be given no later than the Monday
which is at least five business days prior to the Closing Date. Commencing on or
prior to the Closing Date, on each Monday after the Closing Date and through
sixty (60) days following the Closing Date (the "CONTINGENT PERIOD"), Buyer will
provide CP with a list of all CP Employees it does not wish to hire and whose
services Buyer will no longer need as of the end of such week. The CP Employees
that Buyer does not hire are referred to herein as the "NON-RETAINED EMPLOYEES."
For all Non-Retained Employees, CP will be responsible for the payment of all
severance benefits, if any, and other costs related to any termination of the
Non-Retained Employees' employment with CP and FS ("TERMINATION COSTS"). At any
time during the Contingent Period, but no later than the last day of the
Contingent Period, Buyer shall offer employment, which shall commence and be
effective (assuming the employee accepts the offer) on either the first day
following the Contingent Period or, if Buyer offers employment to any CP
Employee prior to the end of the Contingent Period, the date such employee
accepts such offer, all CP Employees who are offered employment by Buyer or are
retained on the last day of the Contingent Period ("RETAINED EMPLOYEES"). CAT
Employees and Retained Employees shall collectively be referred to as
"TRANSFERRED EMPLOYEES."
(b) CP will use its reasonable efforts to continue to employ
employees of the Arrow Austell Cutting Facility, Arrow Austell Distribution
Center and the Arrow Albertville Sewing Plant as identified on Schedule 5.1(b)
and employees in the human resources and MIS departments (the "TRANSITIONAL
EMPLOYEES"), and such employees will perform certain services for Buyer on terms
and conditions set forth in the Transition Services Agreement. Prior to Closing,
CP shall provide to the Arrow Austell Cutting Facility and the Arrow Albertville
Sewing Plant employees the required notice under WARN (as defined in Section
5.1(j)) and any other applicable law and to otherwise comply with any such
statute with respect to any "plant closing" or "mass layoff" (as defined in
WARN) or similar event affecting such employees. CP will be responsible for
Termination Costs, if any, with respect to the Transitional Employees.
(c) Each Retained Employee shall participate in employee
benefit plans, agreements, programs, policies and arrangements of Buyer that are
no less favorable in the aggregate than those that cover similarly situated
employees of Buyer ("BUYER PLANS").
20
(d) CP shall or shall cause the applicable plan to retain
responsibility for and continue to pay all medical, life insurance, disability
and other welfare plan expenses and benefits for each Transferred, Non-Retained
Employee and Transitional Employee with respect to claims incurred by such
employees or their covered dependents subject to and in accordance with the
terms of the applicable plan for payment of such expenses and benefits prior to
and on and after the Closing Date, except as provided in the following sentence.
Expenses and benefits with respect to claims incurred by Transferred Employees
or their covered dependents on or after the date they become employees of Buyer
shall be the responsibility of Buyer. For purposes of this paragraph, a claim is
deemed incurred when the services that are the subject of the claim are
performed; in the case of life insurance, when the death occurs, in the case of
long-term disability benefits, when the disability occurs and, in the case of a
hospital stay, when the employee first enters the hospital.
(e) With respect to any Buyer Plan that is a "welfare benefit
plan" (as defined in Section 3(1) of ERISA) or any Buyer Plan that would be a
"welfare benefit plan" (as defined in Section 3(1) of ERISA) if it were subject
to ERISA, Buyer shall (i) cause there to be waived any pre-existing condition
applicable to the Transferred Employees, to the extent waived under CP's similar
welfare benefit Plan, (ii) give effect for the year in which the Closing Date
occurs, in determining any deductible and maximum out-of-pocket limitations, to
claims incurred and amounts paid by, and amounts reimbursed to, such Transferred
Employees with respect to similar CP Plans, as in effect immediately prior to
the Closing Date and (iii) recognize all credited service to the same extent
such service was recognized under similar CP Plans immediately prior to the
Closing Date.
(f) Upon the termination of employment with CP with respect to
each Transferred Employee, CP shall cause the participation by each such
employee in the ▇▇▇▇▇▇ Retirement Plan (the "PENSION PLAN") to cease. Upon the
termination of employment with CP with respect to each Transferred Employee, CP
shall cause the accrued benefit of each such Transferred Employee in the Pension
Plan to fully vest. No assets or liabilities with respect to the Transferred
Employees shall be transferred as a result of this Agreement from the Pension
Plan to any plan or arrangement established by Buyer or any other employer for
the benefit of the Transferred Employees (other than pursuant to an eligible
rollover distribution). Benefits payable to the Transferred Employees under the
Pension Plan through the termination of employment of each such employee shall
be payable to such Transferred Employees pursuant to the terms of, and at the
time and in the amounts provided under the Pension Plan based upon such
Transferred Employees' years of service with, and compensation received from, CP
through the date of termination of their employment with CP (including periods
of employment with any other employer which is taken into account under the
Pension Plan). No period of service by any Transferred Employee with Buyer or
any other employer and no compensation earned by any Transferred Employee for
services performed for Buyer or any other employer shall be taken into account
under the Pension Plan as a result of this Agreement except as expressly
provided above.
21
(g) Upon the termination of employment with CP with respect to
each Transferred Employee, CP shall (i) cause the account balance of each
Transferred Employee in the ▇▇▇▇▇▇ Savings Plan ("CP'S 401(k) Plan") to fully
vest, (ii) cause the participation by each Transferred Employee in the CP's
401(k) Plan to cease and (iii) make distributions to such Transferred Employees
in accordance with the terms of the CP's 401(k) Plan and applicable law.
(h) Buyer shall take all steps necessary to permit each such
Transferred Employee who has received an eligible rollover distribution (as
defined in Section 402(c)(4) of the Code) from the Pension Plan or CP's 401(k)
Plan, if any, to roll such eligible rollover distribution into an account under
the Buyer's Associate Investment Plan (the "BUYER'S 401(k) PLAN"). Periods of
employment by Transferred Employees with CP and FS for which credit was given
under the CP's 401(k) Plan shall be taken into account for purposes of
eligibility and vesting (but not benefit accrual) under the Buyer's 401(k) Plan
and any Buyer Plan that is a "pension plan" (as defined in section 3(2) of
ERISA).
(i) With respect to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Account Executive Sales
Bonus Plan and the ▇▇▇▇▇▇ Peabody Specialty Store Sales Bonus Plan (the "SALES
PLANS"), CP and Buyer agree to prorate all responsibilities, liabilities and
obligations under the Sales Plans for the period commencing on January 1, 2000
and ending on December 31, 2000 based on the number of days participants in the
Sales Plans are employed by CP and Buyer, respectively, during the year;
provided, however, that all Transferred Employees who participate in the Sales
Plans shall, only for purposes of the determination of CP's and Buyer's
respective obligations under the Sales Plans, be deemed employed by Buyer
commencing on the Closing Date.
(j) Buyer agrees to provide any required notice under the
Worker Adjustment and Retraining Notification Act of 1988, as amended ("WARN"),
and any other applicable law and to otherwise comply with any such statute with
respect to any "plant closing" or "mass layoff" (as defined in WARN) or similar
event affecting any Transferred Employees and occurring on or after the date
such person becomes a Transferred Employee. Buyer shall indemnify and hold
harmless the CP Indemnified Parties with respect to any liability under WARN or
other applicable law arising from the actions (or inactions) of Buyer or its
affiliates with respect to the termination of the Transferred Employees by Buyer
on or after the Closing Date.
(k) Nothing herein, expressed or implied, shall confer upon
any employee or former employee of CP, Buyer or any of their affiliates
(including, without limitation, the Transferred Employees), any rights or
remedies (including, without limitation, any right to employment or continued
employment for any specified period) of any nature or kind whatsoever, under or
by reason of this Agreement.
ARTICLE 6.
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REPRESENTATIONS AND WARRANTIES
OF CP
CP hereby represents and warrants to Buyer that:
6.1 ORGANIZATION AND CORPORATE POWER. Each of CP and FS is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and CP Canada is a corporation duly organized, validly existing and
in good standing under the laws of Canada. CP, CP Canada and FS have all
requisite power and authority to own, lease and operate the Assets owned, leased
and/or operated by them and CP and the Minority CAT Shareholders have all
requisite power and authority to own the CAT Shares. CAT is a corporation duly
organized, validly existing and in good standing under the laws of Honduras,
with all requisite power and authority to own, lease and operate the assets and
properties owned, leased and/or operated by it and to conduct the Honduran
Business as it is now being conducted. CAT does not, directly or indirectly, (i)
own, of record or beneficially, any outstanding voting securities or other
equity interests in any other person or (ii) otherwise control any other person.
CP, CP Canada, FS and the other Minority CAT Shareholders each has full
corporate power and authority to enter into and perform this Agreement and each
Ancillary Agreement to which it is a party.
6.2 DUE AUTHORIZATION; NO BREACH. The execution, delivery and
performance by each of CP, CP Canada, FS and the other Minority CAT Shareholders
of this Agreement and each Ancillary Agreement to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been
approved by its Board of Directors and no further corporate action is required
to be taken by it and its affiliates in order to execute, deliver and perform
this Agreement and the Ancillary Agreements to which it is a party and to
transfer the CAT Shares and Assets to Buyer. This Agreement is a valid and
legally binding obligation of each of CP, CP Canada, FS and the other Minority
CAT Shareholders, enforceable against each of them in accordance with its terms
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity), and each Ancillary Agreement and other agreement or instrument
contemplated by this Agreement, when executed and delivered by each of CP, CP
Canada, FS and the other Minority CAT Shareholders that are parties thereto in
accordance with the provisions thereof, will be a valid and legally binding
obligation of each such party, enforceable against each such party in accordance
with its terms subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity). All persons who have executed this Agreement on
behalf of CP, CP Canada, FS and the other Minority CAT Shareholders or who will
execute on behalf of CP, CP Canada, FS and the other Minority CAT Shareholders,
any agreement or instrument contemplated by this Agreement, have been duly
authorized to do so by all necessary corporate action. Neither the execution and
23
delivery of this Agreement, any Ancillary Agreement and the other agreements and
documents to be executed or delivered pursuant hereto, nor the consummation of
the transactions contemplated hereby and thereby, will (i) violate, or conflict
with, any provision of the articles of incorporation or by-laws (or other
governing documents) of CP, CP Canada, FS or the other Minority CAT
Shareholders, (ii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event of default which with notice
or lapse of time or both would become a default) under, or result in the
termination (or grant a right of termination) of, cancellation, amendment or
accelerate (or grant the right to accelerate) the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the CAT Shares or Assets under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
agreement, lease, Permit or other material instrument to which CP, CP Canada, FS
or the other Minority CAT Shareholders is a party or by which any of them or any
of the Assets or CAT Shares are bound or (iii) violate, or conflict with, any
order, writ, injunction, arbitration award, judgment or decree of any court,
governmental body or arbitrator applicable to CP, CP Canada, FS or the other
Minority CAT Shareholders or any applicable statute, law, rule or regulation,
except, in the case of clause (ii) or (iii), as would not have a material
adverse effect on the U.S. Business, the Honduran Business, the CAT Shares and
the Assets taken as a whole.
6.3 REAL PROPERTY. (a) True and complete copies of the
Honduran Facility Lease and the U.S. Arrow Factory Store leases (the "REAL
PROPERTY") have previously been delivered to Buyer.
(b) CAT does not own any real property or interests in real
property. CAT does not lease or sublease any real property other than pursuant
to the Honduran Facility Lease. (i) The Honduran Facility Lease is a valid
agreement, in full force and effect and constitutes a valid and binding
obligation of CAT and, to CP's Knowledge (as defined below), of any other party
thereto, and is legally enforceable against CAT and, to CP's Knowledge, any
other party thereto, (ii) CAT has not received any written notice from any other
party to the Honduran Facility Lease of the termination thereof or alleging a
material default thereunder by CAT, (iii) there is no default or event which,
with notice or lapse of time or both, would constitute a material default on the
part of CAT (nor, to CP's Knowledge, on the part of any other party thereto)
under the Honduran Facility Lease, and (iv) CAT has not transferred, assigned,
hypothecated, pledged or encumbered any of its rights or interest thereunder.
(c) CP and FS do not lease or sublease any real property
included in the Assets other than pursuant to the U.S. Arrow Factory Store
Leases. (i) Each Arrow Factory Store Lease is a valid agreement, in full force
and effect and constitutes a valid and binding obligation of CP and/or FS that
is a party thereto and, to CP's Knowledge, of any other party thereto, and is
legally enforceable against each of CP and FS that is a party thereto and, to
CP's Knowledge, any other party thereto, (ii) CP has not received any written
notice from any other party to the Arrow Factory Store Leases of the termination
thereof or alleging a material default thereunder by any of CP and/or FS that is
a party thereto, (iii) there is no default or event which, with notice or lapse
of
24
time or both, would constitute a material default on the part of any of CP
and/or FS that is a party thereto (nor, to CP's Knowledge, on the part of any
other party thereto) under the Arrow Factory Store Leases, and (iv) neither CP
nor FS has transferred, assigned, hypothecated, pledged or encumbered any of
their rights or interest thereunder. For the purposes of this Agreement, "CP'S
KNOWLEDGE" shall mean any fact or set of facts of which any director or officer
of any of CP, CP Canada, FS and the Minority CAT Shareholders has actual
knowledge.
6.4 PERSONAL PROPERTY. All of the fixtures, plants, buildings,
structures and improvements on the Real Property and all machinery, equipment
and other tangible personal property included in the Assets are being purchased
by Buyer "AS IS, WHERE IS."
6.5 TITLE AND CONDITION OF ASSETS OTHER THAN REAL PROPERTY.
CP, CP Canada and FS have good and marketable title to, or hold by valid and
existing lease or license, all of the Assets (not including the Real Property,
which is covered in Section 6.3) and will transfer same to Buyer at the Closing.
Except for Encumbrances created by, or arising as a result of the ownership of
the Assets by, Buyer, the Assets (not including the Real Property, which is
covered in Section 6.3) are free and clear of all Encumbrances, except
Encumbrances set forth on Schedule 6.5 hereto.
6.6 CONSENTS. Schedule 6.6 hereto sets forth all actions,
approvals, permits, consents or authorizations required to be obtained by any of
CP, CP Canada, FS and the Minority CAT Shareholders in order to consummate the
transactions contemplated hereby, other than the expiration of any applicable
waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (the "HSR
ACT").
6.7 COMPLIANCE WITH LAWS. Except (i) as set forth in Schedule
6.7 hereto and (ii) as to Environmental Laws, which are covered by Section 6.9
hereof, CP, CP Canada, FS, CAT and the Minority CAT Shareholders are not, with
respect to the conduct of the Honduran Business as presently conducted or the
ownership or use of the Assets as presently used or the ownership of the CAT
Shares, in default under or in violation of any United States federal, state or
local or Honduran statute, law or regulation which would give rise to a material
Liability or which is reasonably likely to materially and adversely affect the
Assets or the CAT Shares or their ability to own the Assets or the CAT Shares or
operate and use the Assets as presently used.
6.8 PERMITS AND LICENSES. Schedule 6.8 attached hereto sets
forth all governmental licenses, permits and other governmental authorizations
(collectively "PERMITS") which are issued to, held or used by CP, CP Canada, FS,
CAT and the Minority CAT Shareholders in respect of the use of the Assets or the
conduct of the Honduran Business as presently conducted, including the dates of
issuance and expiration thereof and, except as set forth on Schedule 6.8 hereto,
there are no other governmental licenses, permits, franchises or authorizations
which are material to the operation of either the U.S. Business or the Honduran
Business, in each case as presently conducted. Except as set forth on Schedule
6.8 hereto and for
25
environmental matters, which are exclusively addressed in Section 6.9, within
the past 24 months, CP, CP Canada, FS, CAT and the Minority CAT Shareholders
have not received any written warning, notice of violation or probable
violation, notice of revocation or other written communication from or on behalf
of any governmental entity, which violation has not been corrected or otherwise
settled, alleging (i) any material violation of any Permit listed on Schedule
6.8, (ii) that CP, CP Canada, FS, CAT and/or the Minority CAT Shareholders need
a Permit to use the Assets as presently used or to conduct the Honduran Business
as presently conducted which Permit is not currently held by CP, CP Canada, FS,
CAT and/or the Minority CAT Shareholders or (iii) any current violation, with
respect to the use of the Assets as presently used or the conduct of the U.S.
Business or the Honduran Business as presently conducted, of any United States
federal, state or local or Honduran laws, statutes or regulations.
6.9 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule
6.9, and except as would not, individually or in the aggregate, reasonably be
expected to result in a material adverse effect on the Assets or the Honduran
Business:
(a) CP, CP Canada and FS are in material compliance with all
U.S. Environmental Laws (as defined below) affecting the U.S. Business. For
purposes of this Agreement, "U.S. ENVIRONMENTAL LAWS" shall mean any and all
currently applicable United States federal, state or local laws, statutes or
regulations now in effect relating to the protection of the Environment.
(b) CP, CP Canada and FS have not received any written notice
of any Environmental Claim (as hereinafter defined) and, to CP's Knowledge, no
such Environmental Claim is threatened. For purposes of this Agreement,
"ENVIRONMENTAL CLAIM" means any notice, claim, demand, action, suit, complaint,
proceeding or other communication by any person alleging liability or potential
liability (including, without limitation, liability or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or penalties) relating
to (x) the Release of any Hazardous Materials (as hereinafter defined) at any
Arrow Factory Store, or (y) circumstances forming the basis of any violations by
CP, FS, CP Canada or CAT in respect of the Assets of any U.S. Environmental Laws
or in respect of the Honduran Business of any Honduran Environmental Law. For
purposes of this Agreement, "RELEASE" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the Environment; "HAZARDOUS MATERIALS" means any and all
hazardous or toxic substances, wastes, materials or chemicals, petroleum
(including crude oil or any fraction thereof) and petroleum products, friable
asbestos and friable asbestos-containing materials, pollutants and
polychlorinated biphenyls, in each case regulated pursuant to, as applicable,
U.S. Environmental Laws or Honduran Environmental Laws (as defined in Section
6.9(d)(i) hereof); and "ENVIRONMENT" shall mean soil, surface waters, ground
waters, land stream sediments, surface or subsurface strata and ambient air.
26
(c) No Hazardous Materials have been Released by CP or FS or,
to CP's Knowledge, any other person at any Arrow Factory Store in material
violation of, or in a manner that would reasonably be expected to give rise to
material liability relating to the Assets under, any U.S. Environmental Laws.
(d) The Honduran Facility is not currently being used by CP,
CAT or the Minority CAT Shareholders to, nor to CP's Knowledge, has the Honduran
Facility ever been used to, make, store, handle, treat, dispose of, generate or
transport Hazardous Materials in violation of any Honduran Environmental Laws
(as defined below) nor, to CP's Knowledge, has any use of the Honduran Facility
by any person resulted in the generation of Hazardous Materials. The Honduran
Facility is currently being operated, and to CP's Knowledge has at all times,
been operated in compliance with Honduran Environmental Laws in all material
respects. "HONDURAN ENVIRONMENTAL LAWS" (and, together with U.S. Environmental
Laws, the "ENVIRONMENTAL LAWS") shall mean any and all currently applicable
Honduran federal, state or local laws, statutes or regulations now in effect
relating to the environment. To CP's Knowledge, there has never been a Release,
or threatened Release, of Hazardous Materials on, from or migrating onto the
Honduran Facility. There are no above or below ground storage tanks presently in
use, or to CP's Knowledge, formerly used for the storage of any Hazardous
Materials at the Honduran Facility.
(e) To CP's Knowledge, there have been no reports, studies,
analyses, tests or monitorings pertaining to (i) hazardous activities conducted
by CP, CAT or the Minority CAT Shareholders or by any other person at, in or on
the Honduran Facility, or (ii) Hazardous Materials in, on, removed from or
under, the Honduran Facility, or (iii) compliance with any Honduran
Environmental Laws. There have been no written notices received by CP or the
Minority CAT Shareholders, or since July 13, 1999 by CAT or, to CP's Knowledge,
by CAT prior to July 13, 1999, from any governmental body with respect to the
Release of Hazardous Materials in, on or under the Honduran Facility.
(f) The representations and warranties contained in this
Section 6.9 are the only representations and warranties being made by CP herein
with respect to the Environment and no other representation or warranty
contained in this Agreement or any Ancillary Agreement, express or implied, is
being made with respect thereto.
6.10 CONTRACTS. Except as set forth in Schedule 6.10, with
respect to the Contracts listed in Schedule 2.1(d), (i) each Contract is a valid
agreement, in full force and effect and constitutes a valid and binding
obligation of CP, CP Canada or FS, as the case may be, and, to CP's Knowledge,
of any other party thereto, and is legally enforceable, (ii) none of CP, CP
Canada and FS has received any written notice from any other party to a Contract
of the termination thereof or alleging a material default thereunder by CP, CP
Canada or FS and (iii) there is no material default or event which, with notice
or lapse of time or both, would constitute a material default on the part of CP,
CP Canada or FS (nor, to CP's Knowledge, on the part of any other party thereto)
under any Contract.
27
6.11 TAX MATTERS. (a) CAT has filed or caused to be filed all
Tax Returns with the D.E.I. (Direccion Ejecutivo de Ingresos) of the Government
of Honduras that are or were required to be filed by it pursuant to applicable
Honduran law, and CAT has paid, or made provision for the payment of, all Taxes
that have become due and payable by it, regardless of whether or not shown on
such Tax Returns. For tax periods beginning on or after July 13, 1999 and, to
CP's Knowledge, for tax periods prior to July 13, 1999, CAT is not, and has
never been, (i) required to file Tax Returns in any Taxing jurisdiction other
than Honduras, and (ii) liable for Taxes in any Taxing jurisdiction other than
Honduras. For tax periods beginning on or after July 13, 1999 and, to CP's
Knowledge, for tax periods prior to July 13, 1999, CAT is not, has never been,
owns no interest in, and has never owned an interest in, a "United States real
property holding corporation" within the meaning of Section 897 of the Code, a
"personal holding company" within the meaning of Section 542 of the Code, a
"foreign personal holding company" within the meaning of Section 552 of the
Code, a "passive foreign investment company" within the meaning of Section 1297
of the Code, a "FSC" within the meaning of Section 922 of the Code, or a
"foreign investment company" within the meaning of Section 1246 of the Code. For
tax periods beginning on or after July 13, 1999 and through the Closing and, to
CP's Knowledge, for tax periods prior to July 13, 1999, CAT has no "earnings and
profits" within the meaning of Section 986 of the Code.
(b) Since January 1, 1998 there has been no audit commenced
against CAT regarding Taxes of any type or nature.
(c) None of the Assets is property that is required to be
treated as owned by any other person pursuant to section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, as in effect immediately prior to the
enactment of the Tax Reform Act of 1986, is "tax-exempt use property" within the
meaning of section 168(h) of the Code or is "tax-exempt bond financed property"
within the meaning of section 168(g) of the Code. There are no Encumbrances for
Taxes on any Assets or any of the CAT Shares that arose in connection with any
failure (or alleged failure) to pay any Tax or otherwise, except for
Encumbrances for Taxes described on Schedule 6.5.
(d) For purposes of this Agreement, (i) the term "TAX" or
"TAXES" shall mean all Honduran or United States federal, state and local and
all foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, excise, value added, net worth, intangible,
privilege, business, license, transfer, estimated, stamp, alternative or add-on
minimum, environmental, withholding and any other taxes, Honduran social
security, Honduran RAP FOSOVI, duties, assessments or other similar governmental
charges, together with all interest, penalties and additions imposed with
respect to such amounts, (ii) the term "TAX RETURNS" shall mean any return
(including any consolidated combined or unitary return), declaration, estimated,
installment, report, claim for refund or information return or statement
relating to Taxes which is required to be filed with any governmental agency or
other Tax authority, including any schedule
28
or attachment thereto, and including any amendment thereof and (iii) the term
"TAX AUTHORITY" shall mean any authority having jurisdiction over Taxes.
6.12 CAT STOCK. All of the CAT Shares are duly authorized,
validly issued and outstanding, registered, fully paid and nonassessable and are
owned, of record and beneficially, by CP and the Minority CAT Shareholders free
and clear, except for the obligation to make the payments referred to in Section
8.8 hereof, of all liens, claims, charges, security interests, options or other
legal or equitable encumbrances. Schedule 6.12 sets forth (i) the authorized
capital stock of CAT and (ii) the number of shares of each class of such capital
stock that is outstanding and the name of the holder of record thereof. The CAT
Shares constitute all of the outstanding shares of capital stock of CAT. There
are no outstanding options, warrants, commitments or other rights of any kind
relating to the sale, issuance, redemption, registration, purchase or voting of
any shares of capital stock of CAT or any outstanding securities or other
obligations convertible into, exchangeable for or evidencing the right to put,
subscribe for, register, purchase or otherwise acquire any shares of capital
stock of CAT.
6.13 LABOR MATTERS. CAT is not a party to or bound by any
labor contract. Neither CP nor FS is a party to or bound by any labor contract
affecting the U.S. AFS Employees or Corporate Employees. The CAT Employees, U.S.
AFS Employees and/or the Corporate Employees are not represented by any union or
other employee organization. There has not been, there is not presently pending
or existing and, to CP's Knowledge, there is not threatened (a) any strike,
slowdown, picketing, work stoppage or lockout in respect of any CAT Employees,
U.S. AFS Employees and/or Corporate Employees or (b) any organizational activity
against or affecting CAT. CAT is not a party to any employment agreement except
as set forth on Schedule 6.13 and neither CP nor FS is a party to any employment
contract being assumed by Buyer.
6.14 FINDERS; BROKERS. With the exception of fees and expenses
payable to Bear, ▇▇▇▇▇▇▇ & Co. Inc., which shall be CP's sole responsibility, CP
is not party to any agreement with any finder or broker, or in any way obligated
to any finder or broker for any commissions, fees or expenses in connection with
the origin, negotiation, execution or performance of this Agreement or the
Ancillary Agreements.
6.15 LITIGATION, CLAIMS AND PROCEEDINGS. Except as set forth
in Schedule 6.15 attached hereto, there are no judgments, orders, writs or
injunctions of any foreign or U.S. federal, state or local court or governmental
authority presently pending or, to CP's Knowledge, threatened against any of CP,
CP Canada, FS and the Minority CAT Shareholders relating to the Assets or the
CAT Shares or by which the Assets or CAT Shares are or would be bound, and there
are no lawsuits, actions, arbitrations, claims, governmental proceedings or
notices of violation presently pending or, to CP's Knowledge, threatened to
which any of CP, CP Canada, FS, the Minority CAT Shareholders and CAT is a party
(as plaintiff, defendant or otherwise) which relate to the Assets or the CAT
Shares or the Honduran Business, except for routine litigation, claims or
proceedings (including, without limitation, product liability and warranty
claims or litigation, and
29
workers compensation claims) in which the amount in controversy does not exceed
$10,000 for any individual matter or $100,000 in the aggregate for any related
matters (the "EXCLUDED CLAIMS").
6.16 AFFILIATE TRANSACTIONS. Except as set forth on Schedule
6.16, CAT is not a party to any agreement or arrangement with CP or any of CP's
affiliates which shall survive the Closing.
6.17 1999 CAT AGREEMENT. CP has made all of the payments due
under Section 2.2(b) of the 1999 CAT Agreement (as defined below) as the same
have become due and payable.
6.18 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a) None of
the representations and warranties made by CP, CP Canada, FS and/or the Minority
CAT Shareholders shall survive the Closing, except as provided in this Section
6.18. All representations and warranties made by CP in Article 6 (other than
those contained in Sections 6.4 and 6.11) shall survive until the 12-month
anniversary of the Closing and shall thereupon expire together with any right to
indemnification for breaches thereof (except to the extent a claim for
indemnification for breach thereof has been made prior to the expiration of such
period). The representations and warranties contained in Section 6.11 shall
survive the Closing for a period of 60 days following the expiration of all
applicable statutes of limitation (after giving effect to any extensions or
tollings thereof) and shall thereupon expire together with any right to
indemnification for breach thereof (except to the extent a claim for
indemnification has been made prior to the expiration of such period). The
representations and warranties contained in Section 6.4 shall not survive the
Closing.
(B) EXCEPT AS SET FORTH IN THIS AGREEMENT AND IN OTHER
CERTIFICATES DELIVERED PURSUANT TO THIS AGREEMENT, NONE OF CP AND ITS AFFILIATES
MAKES ANY REPRESENTATION OR WARRANTY TO BUYER WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO THE U.S. BUSINESS, THE HONDURAN BUSINESS, THE ASSETS OR THE
ASSUMED LIABILITIES.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to CP that:
7.1 CORPORATE EXISTENCE. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Buyer has all requisite power and authority
to own, lease and operate the Assets, and to own the CAT Shares. Buyer is duly
authorized, qualified or licensed to do business as a foreign corporation and in
good
30
standing in every jurisdiction wherein, by reason of the character of the
Assets, the failure to be so
qualified would have a material adverse effect on the ability of Buyer to
consummate the transactions contemplated hereby. Buyer has full corporate power
and authority to enter into and perform this Agreement and each Ancillary
Agreement to which it is a party.
7.2 DUE AUTHORIZATION; NO BREACH. (a) The execution and
performance by Buyer of this Agreement and each Ancillary Agreement to which it
is a party and the transactions contemplated hereby and thereby have been
approved by its Board of Directors, and no further corporate action is required
to be taken by it in order to execute, deliver and perform this Agreement. Each
of this Agreement and the Ancillary Agreements to which it is a party is a valid
and legally binding obligation of Buyer, and each agreement or instrument
contemplated by this Agreement, when executed and delivered by Buyer in
accordance with the provisions hereof, will be a valid and legally binding
obligation of Buyer in each case enforceable against Buyer in accordance with
its terms subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity). All persons who have executed this Agreement on
behalf of Buyer or who will execute on behalf of Buyer any agreement or
instrument contemplated by this Agreement, have been duly authorized to do so by
all necessary corporate action. Except as set forth on Schedule 7.2 hereto,
neither the execution and delivery of this Agreement, the Ancillary Agreements
and all other agreements and documents to be executed or delivered hereunder,
nor the consummation of the transactions contemplated hereby and thereby, will
(i) violate, or conflict with, any provision of Buyer's certificate of
incorporation or by-laws or other governing documents, (ii) violate, or conflict
with, or result in a breach of any provisions of, or constitute a default (or an
event of default which with notice or lapse of time or both would because a
default) under, or result in the termination (or grant a right of termination)
of, cancellation, amendment or accelerate (or grant the right to accelerate) the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Buyer
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, agreement, lease, Permit or other material
instrument to which Buyer is a party or by which it or any of the Assets are
bound or (iii) violate, or conflict with, any order, writ, injunction,
arbitration award, judgment or decree of any court, governmental body or
arbitrator applicable to Buyer or any applicable statute, law, rule or
regulation, except, in the case of clause (ii) or (iii), as would not have a
material adverse effect on the ability of Buyer to perform its obligations
hereunder or any Ancillary Agreement to which it is a party.
7.3 CONSENTS. Buyer is not subject to any order, judgement or
decree which would prevent the consummation of the transactions contemplated
hereby. No claim, legal action, suit, arbitration, governmental investigation,
action, or other legal or administrative proceeding is pending or, to the
knowledge of Buyer, threatened against Buyer which would enjoin or delay the
transactions contemplated hereby. Except as set forth in Schedule 7.3 hereto, no
consent,
31
approval, order or authorization of, license or permit from, notice to or
registration, declaration or filing with, any governmental authority or entity,
domestic or foreign, or of any third party, is or has been required on the part
of Buyer in connection with the execution and delivery of this Agreement or the
Ancillary Agreements or any of the transaction documents, or the consummation of
the transactions contemplated hereby and thereby, except for such consents,
approvals, orders or authorizations of, licenses or permits, filings or notices
the failure of which to obtain or make would not have a material adverse effect
on the ability of Buyer to consummate the transactions contemplated hereby.
7.4 FINDERS; BROKERS. Buyer is not party to any agreement with
any finder or broker, or in any way obligated to any finder or broker for any
commissions, fees or expenses in connection with the origin, negotiation,
execution or performance of this Agreement or the Ancillary Agreements.
7.5 PURCHASE FOR INVESTMENT. Buyer is aware that the CAT
Shares have not been registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), or under any state or foreign securities laws. Buyer is
not an underwriter, as such term is defined under the Securities Act, and is
purchasing such shares solely for investment, with no present intention to
distribute any such shares to any person, and Buyer will not sell or otherwise
dispose of shares except in compliance with the registration requirements or
exemption provisions under the Securities Act and the rules and regulations
promulgated thereunder, or any other applicable securities laws.
7.6 AVAILABILITY OF FUNDS. Buyer has (i) in hand or (ii) the
right to borrow under legally valid and binding definitive agreements all funds
necessary to enable Buyer to consummate the transactions contemplated by this
Agreement.
7.7 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Section 7, neither Buyer nor
any other person makes any other express or implied representation or warranty
on behalf of Buyer.
7.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties contained in this Article 7 shall survive the
Closing, except for those representations and warranties contained in Sections
7.1, 7.2, 7.4 and 7.5, which shall survive until the 12-month anniversary of the
Closing.
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ARTICLE 8.
COVENANTS
8.1 CONDUCT OF THE BUSINESS. From the date hereof until the
Closing, or termination of this Agreement in accordance with Article 10 hereof,
CP and FS will:
(a) operate the U.S. Business and the Honduran Business only
in the usual and ordinary course of business consistent with past practice and
do all acts and things as may be necessary to preserve, protect and maintain
intact the U.S. Business and the Honduran Business as a going concern;
(b) refrain from taking any action which reasonably could be
expected to render any representation or warranty of CP contained herein untrue
or incorrect in any material respect (except to the extent a representation or
warranty is qualified by materiality, in which case CP will refrain from taking
any action which would render such representation or warranty untrue or
incorrect) as of the Closing;
(c) comply in all material respects with all laws applicable
to the U.S. Business, the Honduran Business and the Assets;
(d) refrain from making any disposition of any Assets other
than in the ordinary course of business consistent with past practice; and
(e) make timely all payments due under Section 2.2(b) of the
1999 CAT Agreement.
8.2 ACCESS TO BOOKS, RECORDS AND FACILITIES. CP, CP Canada and
FS agree that prior to the Closing, they will permit Buyer and its
representatives full access during normal business hours and working days and
upon reasonable notice to all of their properties, books, contracts, records and
employees relating to the Assets, the CAT Shares, CAT, the conduct of the
Honduran Business or the operations of the U.S. Business that support the Assets
and will furnish Buyer and its representatives during such period, upon
reasonable notice, with all such financial, operating and other information
concerning the Assets, the CAT Shares, CAT, the conduct of the Honduran Business
and the operations of the U.S. Business that support the Assets as Buyer or its
representatives may reasonably request.
8.3 BEST EFFORTS AND ALTERNATIVE PROPOSALS. Each Party and
each of the Minority CAT Shareholders will use all reasonable best efforts to
take all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements (without payment of money, commencement of
litigation, the assumption of any material obligation or the entering of any
agreement to divest or hold separate any assets). CP agrees that (a) neither it
nor any of its
33
affiliates shall, and it shall direct and use its reasonable best efforts to
cause its officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer to consummate any transaction similar to the transactions contemplated by
this Agreement and the Ancillary Agreements involving the Assets or CAT Shares
that would prevent, delay or impede the consummation of the transactions
contemplated hereby (any such proposal or offer being hereinafter referred to as
an "ALTERNATIVE PROPOSAL") or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions or otherwise
cooperate in any way with, any person relating to an Alternative Proposal, or
otherwise facilitate or encourage any effort or attempt to make or implement an
Alternative Proposal and (b) upon execution and delivery of this Agreement, CP
will (and shall direct and use its best efforts to cause its officers,
directors, employees, agents and representatives to) immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
8.4 1999 CAT AGREEMENT. If Buyer notifies CP in writing that
Buyer believes in good faith that CP is entitled to claim indemnification under
Section 9 of the Share Purchase Agreement, dated June 23, 1999, among CP, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇) (the "1999 CAT
AGREEMENT") and that CP is entitled to exercise its right of set-off under
Section 9.5 of the 1999 CAT Agreement, CP shall promptly make and use its
reasonable best efforts to pursue in good faith such claim and to exercise such
right of set-off. If CP receives after the date hereof any cash indemnification
payment under Section 9 of the 1999 CAT Agreement, CP shall pay an amount in
cash to Buyer equal to such payment less any reasonable out-of-pocket expenses
or costs incurred by CP relating to or in respect of CP's claim for the recovery
of such payment. CP represents and warrants that it has not made any claim for
indemnification under the 1999 CAT Agreement prior to the date hereof and, to
CP's Knowledge, has no basis for any such claim. CP will not make any claim for
indemnification under the 1999 CAT Agreement without the written consent of
Buyer, which consent shall not be unreasonably withheld.
8.5 NOTIFICATION. CP shall provide Buyer with written notice
prior to Closing of any material damage or destruction of the Assets, material
adverse change in the U.S. Business, the Assets or the Honduran Business the
commencement of any lawsuit, action, arbitration or governmental proceeding to
which any of CP and its affiliates is a party which seeks to prevent the
consummation, or otherwise challenges the validity, of the transactions
contemplated hereby, or breaches of Article 6 that constitute a failure to
satisfy Section 9.3(b), in each case of which CP acquires actual knowledge prior
to the Closing Date.
8.6 LETTER OF CREDIT. Buyer shall use all reasonable efforts
to replace at Closing all outstanding letters of credit pertaining to the orders
which CP, CP Canada and FS
34
have with third party manufacturers for the manufacture of goods for use in the
U.S. Business ("SOURCING COMMITMENTS") to which any of CP, CP Canada and FS is a
party. If Buyer is unable to replace at Closing any such outstanding letters of
credit, in whole or in part, Buyer will use all reasonable efforts to provide at
Closing "back-to-back" letters of credit to each of the banks that issued each
of the letters of credit that are not being replaced (each, an "ISSUING BANK")
in a form satisfactory to the relevant Issuing Bank (in its sole discretion)
issued by a bank satisfactory to the relevant Issuing Bank (in its sole
discretion), in an amount equal to 100% of the then undrawn stated amount of the
outstanding letters of credit issued by such Issuing Bank that are not being
replaced. The notice of reimbursement with respect to any drawdown on any such
"back-to-back" letter of credit shall state the amount of the drawdown and the
purchase orders to which it relates. If Buyer is unable to provide such
"back-to-back" letters of credit, Buyer will reimburse CP, FS or CP Canada, as
the case may be, for all amounts drawn down under outstanding letters of credit
that are not being replaced and for which "back-to-back" letters of credit are
not being provided within five business days after receipt by Buyer of
reasonable evidence of such drawdown. Such evidence shall include the letter of
credit number, the latest ship date, product description, product cost, price
per unit and a copy of the funding message and such other documentation that
Buyer may reasonably request. On the date hereof and at least ten business days
prior to Closing CP will provide Buyer with a list of each outstanding letter of
credit, stating the letter of credit number, the issuing bank, the name, address
and country of the beneficiary, the purchase orders covered, the expiration date
and the amount outstanding on the day the list is compiled with respect to each
outstanding letter of credit. If Buyer offers to provide a "back-to-back" letter
of credit to an Issuing Bank issued by Chase Manhattan Bank, N.A., Citibank,
N.A. or The Bank of New York in customary form in an amount equal to 100% of the
then undrawn stated amount of the relevant outstanding letter of credit, and the
Issuing Bank states that any such issuing bank or such form is not satisfactory
to the Issuing Bank, Buyer shall be deemed to have satisfied its obligations
under the second sentence of this Section 8.6 with respect to such outstanding
letter of credit.
8.7 ACCOUNTS RECEIVABLE. (a) After the Closing Date, CP and FS
shall have the sole right and authority to collect, for their own account and
sole benefit, all monies receivable in respect of the Assets for any period
prior to the Closing Date, and Buyer shall have the sole right and authority to
collect, for its own account and sole benefit, all monies payable in respect of
the Assets for any period on or following the Closing Date. Buyer and CP shall
jointly send a letter on the Closing Date to each customer of the U.S. Business
announcing the transaction contemplated hereby and describing the customer's
obligations to each of CP and Buyer, including specific instructions for the
remittance of payments to each of CP and Buyer. The form and substance of such
letter shall be agreed upon at or prior to the Closing.
(b) If CP, FS or any of their affiliates (or their successors)
shall receive any such monies with respect to any period on or following the
Closing Date, it shall hold all such monies in trust for the sole benefit of
Buyer and its affiliates. If Buyer or any of its affiliates (or their
successors) shall receive any such monies with respect to any period prior to
the Closing Date, it shall hold all such monies in trust for the sole benefit of
CP and its affiliates. On the first and fifteenth day of each calendar month
(or, if such day is not a business day, the first business
35
day thereafter), CP and FS (or their successors) or Buyer and its affiliates (or
their successors), as the case may be, shall cause the transfer and delivery to
the other of any such monies which they (or their successors) may receive after
the Closing Date. No Party will take any action that compromises the ability of
the other Party and its affiliates (or their successors) to collect, for its own
account and sole benefit, all monies payable to it as provided herein. Each of
CP, FS and Buyer will use all reasonable efforts to collect its own receivables
and to assist the other in the collection of their respective accounts
receivable; provided, however, that nothing in this Agreement, shall be deemed
to require any of them (i) to take any action that such Party believes, in its
sole discretion, would be detrimental to such Party's business relationship with
any customer or (ii) to incur any out-of-pocket expenses or allocate any
significant employee resources to the collection of the other's accounts
receivable.
(c) All disputed items and deductions taken from payments for
invoices, arising from, but not limited to, markdown and other allowances,
returns, NSF checks, vendor guide violations, shortages, discounts and price
relating to pre-Closing accounts receivable and shipments are the responsibility
of CP or FS, as the case may be, and CP and FS shall have sole authority to make
decisions regarding the same. All disputed items and deductions taken from
payments for invoices, arising from, but not limited to, markdown and other
allowances, returns, NSF checks, vendor guide violations, shortages, discounts
and price relating to post-Closing accounts receivable and shipments are the
responsibility of Buyer, and Buyer shall have sole authority to make decisions
regarding the same. Each of CP, FS and Buyer will identify to the other all such
disputes and deductions that come to its attention but are the responsibility of
the other and provide any documentation in its possession to the responsible
entity. In the event that a deduction has been taken against the wrong Party,
such Party shall provide all documentation provided by the customer to the
responsible party. Settlement in the form of a cash reimbursement of deductions
taken against the wrong Party shall be made on the first and fifteenth day of
each calendar month (or, if such day is not a business day, the first business
day thereafter).
8.8 1999 CAT AGREEMENT. Buyer agrees that it shall make timely
on CP's behalf all payments required to be made by CP after the date hereof
under Section 2.2(b) of the 1999 CAT Agreement. If such payment obligation is
reduced as a result of CP exercising its right of set-off under the 1999 CAT
Agreement as a result of a claim for indemnification thereunder made in
accordance with Section 8.4 hereof, Buyer shall reimburse CP for any reasonable
out-of-pocket expenses or costs incurred by CP relating to or in respect of CP's
claim pursuant to Section 8.4 that resulted in such reduction.
8.9 RETURNED INVENTORY. Buyer and CP agree (a) to minimize all
returns of Arrow Inventory sold by CP or FS to third parties prior to Closing
and any such return needs to be authorized by CP, (b) if such returns cannot be
avoided as a practical manner consistent with the past practice of the U.S.
Business, Buyer agrees to purchase all such inventory which is returned to CP or
FS within 180 days after Closing (the "RETURNED INVENTORY"). Buyer shall pay CP
for the Returned Inventory which is Current Arrow Inventory an amount equal to
fifty percent (50%) of Buyer's average selling price therefor.
36
8.10 U.S. AFS CASH REGISTERS. Buyer agrees that upon the
expiration or termination of any U.S. Arrow Factory Store lease (as it may be
extended or renewed from time to time) it shall deliver to CP, at CP's expense
and for no other consideration, each cash register located in such U.S. Arrow
Factory Store on the Closing Date.
8.11 BREAK-UP FEE. If Buyer does not obtain the rights of CDG
under the KCPL Shirt License Agreement (including without limitation due to the
issuance of a restraining order or termination of such agreement due to action
by KCPL) or enter into a new shirt license agreement with KCPL in conjunction
with the termination of the KCPL Shirt License Agreement in connection with the
consummation of the transactions contemplated by the CDG Share Purchase
Agreement or the CDG Asset Purchase Agreement (as defined in Section 8.12), CP
shall wire transfer to a bank account designated in writing by Buyer $7 million
within five business days after such transactions have been abandoned by CP and
Buyer in accordance with the terms of this Agreement, the CDG Share Purchase
Agreement and/or the CDG Asset Purchase Agreement or Buyer is prevented from
exercising CDG's rights under the KCPL Shirt License Agreement.
8.12 ▇▇▇▇▇▇ DESIGNER GROUP. Each of CP, CDG and Buyer agrees
to negotiate in good faith and to use its reasonable best efforts to execute and
deliver, and/or to cause its relevant affiliates to execute and deliver, as soon
as practicable after the date hereof (and in no event later than June 30, 2000)
(a) a Purchase and Sale Agreement between CDG and Buyer (the "CDG ASSET PURCHASE
AGREEMENT") providing for (i) either (1) the termination of the License
Agreement dated as of August 1, 1997 between K.C.P.L., Inc. ("KCPL") and CDG, as
amended (the "KCPL SHIRT LICENSE AGREEMENT") and the execution and delivery by
Buyer and KCPL of a new shirt license agreement or (2) the assignment of CDG's
rights and obligations under the KCPL Shirt License Agreement to Buyer, (ii) the
sale to Buyer by CDG of all inventory of CDG related to the business conducted
by it pursuant to the KCPL Shirt License Agreement and all rights under certain
scheduled agreements, (iii) the assumption by Buyer of certain scheduled
liabilities, (iv) the payment by Buyer to CDG of an amount in cash equal to
CDG's cost (calculated in the manner agreed upon by the parties in the CDG Asset
Purchase Agreement) of the inventory being sold, subject to adjustment based on
a full physical count thereof, and (v) the escrow of 5% of the estimated
purchase price referred to in clause (a)(iv) above, and (b) a Share Purchase
Agreement among Bidermann Tailored Clothing, Inc. ("BTC"), CP and Buyer (the
"CDG SHARE PURCHASE AGREEMENT") providing for (i) the sale of all outstanding
shares of capital stock of CDG to Buyer, (ii) the payment by Buyer to CP and BTC
of the same amount in cash referred to in clause (a)(iv) above, subject to the
same adjustment and escrow arrangements referred to in clauses (a)(iv) and
(a)(v) above, (iii) the transfer to affiliates of CDG of all assets of CDG not
to be sold to Buyer pursuant to the CDG Asset Purchase Agreement and (iv) the
indemnification of Buyer and its affiliates against all pre-closing liabilities
of CDG not to be assumed by Buyer pursuant to the CDG Asset Purchase Agreement
(such indemnification shall not be subject to any deductible or maximum amount).
Each of the CDG Asset Purchase Agreement and the CDG Share Purchase Agreement
shall (i) have attached as an exhibit thereto
37
an agreement (the "HOSIERY AGREEMENT") with terms consistent in all material
respects with the term sheet attached hereto as Exhibit 8.12 and shall provide
that the execution and delivery of the Hosiery Agreement by Buyer shall be a
condition precedent to the obligations of CP, BTC and CDG to close under the CDG
Asset Purchase Agreement and the CDG Share Purchase Agreement, (ii) provide that
none of the representations and warranties of Buyer, CP, BTC and CDG contained
therein shall survive the closing thereof and (iii) have a provision identical
to Section 10.1(b) hereof. Neither the CDG Asset Purchase Agreement nor the CDG
Share Purchase Agreement shall have a provision similar to Section 9.3(c)
hereof. If all consents and agreements required to be obtained from KCPL and its
affiliates under the KCPL Shirt License Agreement, or otherwise, in connection
with the execution and delivery of the CDG Asset Purchase Agreement and the
consummation of the transactions contemplated thereby have been obtained
irrevocably in writing on or before July 15, 2000, the transactions contemplated
by the CDG Asset Purchase Agreement will be consummated on the terms and subject
to the conditions set forth therein as soon as practicable and the CDG Share
Purchase Agreement will thereafter have no force or effect. If all such consents
and agreements are not obtained from KCPL on or before July 15, 2000, the
transactions contemplated by the CDG Share Purchase Agreement will be
consummated on the terms and subject to the conditions set forth therein as soon
as practicable and the CDG Asset Purchase Agreement will thereafter have no
force or effect.
8.13 TRADEMARK LICENSE AGREEMENT. (a) If, prior to the Closing
Date, either of the retailers Mervyn's or Sears (i) changes its format of
distribution to that of a lower-level retailer which is unacceptable to CP; (ii)
changes its format of distribution in any other manner that is unacceptable to
CP; (iii) ceases carrying or selling Licensed Products that display the Licensed
Trademarks or, in the reasonable opinion of CP, changes its format of
distribution resulting in a material decrease in the amount of selling space
dedicated to men's sportswear and dress shirts; (iv) is liquidated; or (v)
reduces the number of Mervyn's or Sears stores, respectively, in operation by
more than twenty-five (25) percent of the number of such stores in operation as
of the date hereof (any one of which shall constitute either a "PRE-CLOSING
MERVYN'S EVENT" or a "PRE-CLOSING SEARS EVENT"); then the Parties shall revise
the form of Trademark License Agreement attached hereto as Exhibit 2.4(b) prior
to the Closing Date as follows: (x) except upon the occurrence of an event
described in clause (v) hereof (such an event, an "EXCEPTED EVENT"), the
definition of the "Base Amount" as set forth in Section 4(a)(i) of the form of
Trademark License Agreement attached hereto as Exhibit 2.4(b) shall be revised
to equal $5 million MINUS the greater of (A) any royalties that would be payable
as determined pursuant to the method of formulation set forth in Section
4(a)(ii) thereof based on net sales by Licensor (as defined in the form of
Trademark License Agreement attached hereto as Exhibit 2.4(b)) to Mervyn's (in
the event of a Pre-Closing Mervyn's Event) or Sears (in the event of a
Pre-Closing Sears Event) during the four calendar quarters immediately preceding
the date upon which such Pre-Closing Mervyn's Event or Pre-Closing Sears Event
occurs or (B) any royalties that would be payable as determined pursuant to the
method of formulation set forth in Section 4(a)(ii) thereof based on net sales
of Licensor to Mervyn's (in the event of a Pre-Closing Mervyn's Event) or Sears
(in the event of a Pre-Closing Sears Event) during the 1999 calendar year (the
greater of which shall be
38
referred to as the "AMOUNT OF ROYALTIES"); in the event that an Excepted Event
occurs, the definition of the "Base Amount" as set forth in Section 4(a)(i) of
the form of Trademark License Agreement attached hereto as Exhibit 2.4(b) shall
be revised to equal $5 million MINUS a percentage of the Amount of Royalties,
which percentage shall be the percentage of Mervyn's or Sears stores closed that
is referred to in clause (v) hereof; (y) in the event that a Pre-Closing
Mervyn's Event other than one based on clause (v) hereof occurs, the text of
Section 4(d) shall be stricken and replaced with the following text: "[This
section purposely left blank]"; and (z) in the event that a Pre-Closing Mervyn's
Event other than one based on clause (v) hereof occurs, the term "Readjusted
Minimum Royalty" shall be stricken in its entirety.
(b) In the event that a Pre-Closing Mervyn's Event or a
Pre-Closing Sears Event is based on the occurrence of an event described in
clause (v) hereof, on each anniversary of the Readjustment Date for such
Pre-Closing Mervyn's Event or Pre-Closing Sears Event, Licensor shall further
adjust the Readjusted Minimum Royalty to take into account any additional
decrease during the previous year in the number of Mervyn's stores in operation.
(c) Notwithstanding the foregoing, for purposes of this
Agreement, the provisions of Section 8.13(a) and (b) shall not apply to a
Pre-Closing Mervyn's Event or Pre-Closing Sears Event that occurs as a result of
the purchase by either Mervyn's or Sears of Licensed Products from Buyer or any
one of Buyer's affiliates instead of from CP.
ARTICLE 9.
CONDITIONS OF CLOSING
9.1 MUTUAL CONDITIONS. The obligations of each Party and each
of the Minority CAT Shareholders to consummate the transactions contemplated by
this Agreement and the Ancillary Agreements are, unless waived by each Party and
the Minority CAT Shareholders, subject to the fulfillment on or before the
Closing, of each of the following conditions:
(a) No statute, rule, regulation, injunction or restraining
order shall be in effect to forbid or enjoin the consummation of the
transactions contemplated by this Agreement or the Ancillary
Agreements;
(b) The transactions contemplated by this Agreement and the
Ancillary Agreements to be completed before the Closing shall have been
consummated upon the terms and subject to the conditions set forth
therein; and
(c) All waiting periods under the HSR Act shall have expired
or been terminated.
39
9.2 ADDITIONAL CONDITIONS OF CP. The obligations of CP to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements are, unless waived by CP, subject to the fulfillment, on or before
the Closing of each of the following additional conditions:
(a) Buyer and each other party thereto other than CP and its
affiliates shall have executed and delivered each of the Ancillary
Agreements to which it is a party; and
(b) All covenants of Buyer under this Agreement and the
Ancillary Agreements to be performed prior to the Closing shall have
been performed in all material respects, and the representations and
warranties of Buyer contained in this Agreement and the Ancillary
Agreements shall be true and correct on and as of the Closing in all
material respects (except to the extent qualified by materiality, in
which event such representations and warranties shall be true and
correct) with the same effect as though such representations and
warranties had been made on and as of such date.
9.3 ADDITIONAL CONDITIONS OF BUYER. The obligations of Buyer
to consummate the transactions contemplated by this Agreement and the Ancillary
Agreements are, unless waived by Buyer, subject to the fulfillment, on or before
the Closing, of each of the following additional conditions:
(a) CP and each other party thereto other than Buyer shall
have executed and delivered each of the Ancillary Agreements to which
it is a party;
(b) All covenants of CP, CP Canada, FS and the Minority CAT
Shareholders under this Agreement and the Ancillary Agreements to be
performed prior to the Closing shall have been performed, and the
representations and warranties of CP contained in this Agreement and
the Ancillary Agreements shall be true and correct on and as of the
Closing in all material respects (except to the extent qualified by
materiality in which event such representations and warranties shall be
true and correct) with the same effect as though such representations
and warranties had been made on and as of such date; and
(c) There shall not have occurred since the date hereof any
damage to, or destruction or loss of, Arrow Inventory that constitutes
a material adverse change to the Arrow Inventory.
40
ARTICLE 10.
TERMINATION; SURVIVAL
10.1 TERMINATION BY BUYER OR CP. Anything herein or elsewhere
to the contrary notwithstanding, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to or at the
Closing by:
(a) mutual written consent of CP and Buyer;
(b) CP or Buyer, by written notice to the other, if the
transactions contemplated hereby are not consummated on or before
July 31, 2000 and if the failure to consummate such transactions on
or before such date did not result from a breach prior to or on the
Closing Date of any representation, warranty or covenant of the Party
seeking such termination; provided that if the condition set forth in
Section 9.1(c) has not been satisfied prior to July 31, 2000, CP may in
its reasonable discretion elect to extend the July 31, 2000 deadline
referred to above to October 31, 2000; and provided further that Buyer
may not terminate this Agreement and abandon the transactions
contemplated hereby because the condition set forth in Section 9.3(c)
has not been satisfied (i) until the twelve month anniversary of the
material adverse change referred to in Section 9.3(c) and (ii) unless
CP and its affiliates have not cured such material adverse change on or
prior to such twelve month anniversary; and provided further that if CP
extends the July 31, 2000 deadline referred to above, it must similarly
extend the corresponding deadlines in the CDG Asset Purchase Agreement
and the CDG Share Purchase Agreement.
(c) CP or Buyer, by written notice to the other, if a court of
competent jurisdiction or governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or
taken any other action, in each case, permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby and such order, decree, ruling or other action
shall have become final and nonappealable; or
(d) either Party, by written notice to the other Party, if the
other Party is in breach in any material respect of any of its
representations or warranties made in this Agreement or the Ancillary
Agreements, or is in violation or default in any material respect of
any of its covenants or agreements in this Agreement or the Ancillary
Agreements, if such breach, violation or default is not cured within
twenty (20) business days after written notice by the notifying Party
to the other Party;
10.2 SURVIVAL. If this Agreement is terminated pursuant to
Section 10.1 hereof, this Agreement shall become void and of no further force
and effect, except for the provisions of Article 4 and Sections 12.1(a), 14.1,
14.2 and 16.8 hereof; PROVIDED that such termination shall not relieve any party
for liability for Damages resulting from its breach of this Agreement. Promptly
41
following termination of this Agreement each party will destroy or return to the
other parties all documents received from such parties in connection with the
contemplated transaction, except documents which have been publicly distributed
or publicly filed.
ARTICLE 11.
CLOSING
11.1 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ as soon as
practicable after all the conditions to Closing set forth in Article 9 hereof
shall be satisfied or duly waived, or at such other time and place as Buyer and
CP may mutually agree (the date of the Closing referred to herein as the
"CLOSING DATE").
11.2 CP, CP CANADA AND FS OBLIGATIONS AND CLOSING DELIVERIES.
At the Closing, CP, CP Canada and FS shall deliver, or cause to be delivered, to
Buyer:
(a) ▇▇▇▇ of Sale and Assignment substantially in the form
attached as Exhibit 2.4(c) hereto executed by CP, CP Canada and FS;
(b) Such other instruments of sale, transfer, conveyance and
assignment, in form and substance reasonably satisfactory to Buyer's
counsel, as shall be effective to vest in Buyer good title, rights and
interest to the Assets (the instruments referred to in Sections 10.2(a)
and 10.2(b) being collectively referred to herein as the "ASSIGNMENT
AND ASSUMPTION INSTRUMENTS") and such other documents to facilitate the
transfer of the Real Property as Buyer or Buyer's counsel may
reasonably request;
(c) Each of the other Ancillary Agreements (other than the
Assumption Agreement) executed by each of CP, FS and CP Canada, as
applicable, and, in the case of the Trademark License Agreement,
Resources and, in the case of the Waivers and Consents, CP and its
contractors, subcontractors and warehousemen that agree to sign after
CP uses its reasonable efforts to cause them to sign;
(d) Written receipt executed by CP of payment of the portion
of the Purchase Price paid at Closing;
(e) Certificate of the President or any Vice President of CP
that the conditions set forth in Section 9.3(b) have been satisfied;
and
42
(f) the certificates representing CP's CAT Shares, duly
endorsed or accompanied by stock powers duly executed and with all
necessary tax stamps affixed thereto, as described in Article 2 hereof.
11.3 BUYER'S OBLIGATIONS AND CLOSING DELIVERIES. At the
Closing, Buyer shall deliver, or cause to be delivered:
(a) to CP, the Purchase Price (except as expressly provided
otherwise in Section 3.2);
(b) to CP, each of the Ancillary Agreements (other than the
▇▇▇▇ of Sale and Assignment) executed by Buyer;
(c) to the Escrow Agent, the Inventory Escrow;
(d) to CP, a Certificate of the President or any Vice
President of Buyer to the effect that the conditions set forth in
Section 9.2(b) have been satisfied.
11.4 MINORITY CAT SHAREHOLDER'S OBLIGATIONS AND CLOSING
DELIVERIES. At the Closing, the Minority CAT Shareholders shall deliver, or
cause to be delivered, to Buyer:
(a) the certificates representing the Minority CAT
Shareholders' CAT Shares, duly endorsed or accompanied by stock powers
duly executed and with all necessary tax stamps affixed thereto, as
described in Article 2 hereof.
ARTICLE 12.
EXPENSES AND POST CLOSING OBLIGATIONS
12.1 TAXES AND OTHER CHARGES. (a) Except as specifically
provided for otherwise in Section 3.2(c), and regardless of whether or not the
transactions contemplated hereby are consummated each party to this Agreement
shall pay all expenses incurred by it or on its behalf in connection with the
preparation, authorization, execution and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby, including, but not limited to, all fees and expenses of all
consultants, brokers, investment bankers, agents, representatives, counsel and
accountants engaged by such party. Any liability for all sales, documentary
stamp, transfer and similar Taxes (including, without limitation, all recording
fees and related charges and real property gains tax) arising from or
attributable or related to the sale, transfer or assignment to Buyer of any of
the Assets or CAT Shares shall be paid by the party that is primarily
responsible for such Taxes under applicable law and such party shall, at its
expense, file all Tax Returns and other documentation with respect to
43
all such Taxes. Buyer shall provide to CP any resale certificate required with
respect to the transfer of the Assets to Buyer.
(b) CP and Buyer shall cooperate regarding the filing of any
Tax Returns with respect to Taxes addressed in Section 12.1(a) relating to the
Assets and the CAT Shares that cover a period which includes the date of the
Closing. Property Tax Returns will be filed by the party which owns the property
subject to the return on the assessment date for the property tax.
(c) CP, at its option, shall have sole control over any
contest or other proceeding (including claims for refund or challenges of tax
assessments) which relates to liability for taxes for periods or portions
thereof ending on or prior to the Closing Date, subject to approval of Buyer
(not to be unreasonably withheld) relating to any Liability reasonably likely to
be imposed on or otherwise likely to be the sole responsibility of Buyer,
provided, that the approval of Buyer shall not be required if CP is obliged, and
acknowledges its obligation, to indemnify Buyer therefor pursuant hereto. In any
event, any refunds of taxes which become available on or after the date of the
Closing but which relate to tax periods or portions thereof ending on or prior
to the Closing shall belong to CP.
12.2 FURTHER ASSURANCES. At any time after the Closing, the
Parties and the Minority CAT Shareholders agree to cooperate with one another to
execute and deliver such other documents, instruments of transfer or assignment,
files, books and records and do all such further acts and things as may be
reasonably required to carry out the transactions contemplated by this Agreement
or the Ancillary Agreement.
12.3 ACCESS TO BOOKS, RECORDS AND FACILITIES. CP, CP Canada
and FS agree that on and after the Closing it will permit Buyer and its
representatives, during normal business hours and working days and upon
reasonable advance notice, (i) to have access to and to examine and make copies
of all books and records of CP, CP Canada and FS (except books and records
protected by attorney-client or other privilege which any of CP, CP Canada and
FS may be entitled to assert against Buyer in any pending or threatened
proceeding, suit or action) which relate to the Assets, the CAT Shares, CAT, the
conduct of the Honduran Business or the operations of the U.S. Business that
support the Assets to the extent that the events reflected therein relate to
transactions or events occurring prior to the Closing or to transactions or
events occurring subsequent to the Closing which arise out of transactions or
events occurring prior to the Closing and (ii) to have access to and to examine
and make copies of all documents listed in the Schedules attached hereto and all
files, records and papers of any and all proceedings and matters listed in the
Schedules attached hereto. All books and records of CP, CP Canada and FS
relating to the Assets, the CAT Shares, CAT, the conduct of the Honduran
Business or the operations of the U.S. Business that support the Assets will be
preserved by CP, CP Canada and FS in accordance with their records retention
policy, but in no event for a period of less than three years following the
Closing. Prior to any destruction or disposition by any of CP, CP Canada and FS
of any such books and records, one of them will notify Buyer in writing and
Buyer shall have the right to receive and retain such books and records at its
expense. Buyer agrees that, after the
44
Closing, it will permit, and will cause its subsidiaries to permit, CP, CP
Canada and FS and their representatives full access during normal business hours
and working days and upon reasonable advance notice to have access to the books
and records of Buyer and its subsidiaries (except records protected by
attorney-client or other privilege which Buyer or its affiliates may be entitled
to assert against any of CP, CP Canada and FS in any pending or threatened
proceeding, action or suit), relating to the Assets, the CAT Shares, CAT, the
conduct of the Honduran Business or the operations of the U.S. Business that
support the Assets, to the extent that any of the foregoing relates to periods
prior to the Closing, and is reasonably necessary in connection with any then
pending or threatened litigation, claim, liability, or judicial or
administrative matters in which any of CP, CP Canada and FS is involved.
ARTICLE 13.
BULK SALES LAW
13.1 WAIVER. Buyer hereby waives compliance by CP, CP Canada
and FS with any bulk sales laws (including any applicable bulk sales provision
of any state sales tax law) which may be applicable. CP agrees to indemnify and
hold Buyer harmless against any and all claims, losses, damages, liabilities,
costs and expenses (including, without limitation, any Taxes) incurred by Buyer
or any of its affiliates as a result of any failure to comply with any such bulk
sales laws.
ARTICLE 14.
PUBLICITY, CONFIDENTIALITY
14.1 PUBLICITY. The Parties and the Minority CAT Shareholders
agree that no publicity, release or announcement concerning (a) the execution of
this Agreement or the Ancillary Agreements, (b) any of the provisions of this
Agreement or the Ancillary Agreements or the transactions contemplated hereby or
thereby or (c) the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements shall be issued without the advance
written approval of the form and content of the same by the Parties and the
Minority CAT Shareholders; provided, however, that no such consent shall be
required when such disclosure is required by applicable law, although the
Parties and the Minority CAT Shareholders agree to consult with each other as to
the content of any release so required and consider in good faith the comments
of the other thereon.
14.2 CONFIDENTIALITY. Buyer and CP confirm that they and their
affiliates are bound by the terms of the confidentiality agreement, dated
December 9, 1998, as amended (the "CONFIDENTIALITY AGREEMENT"), between ▇▇▇▇▇▇
American Investment Corp. and ▇▇▇▇▇▇▇▇-Van Heusen Corporation and that they will
keep and treat the evaluation material and all other items of
45
confidential information exchanged hereunder by Buyer and its affiliates, on the
one hand, and CP and its affiliates, on the other hand, in accordance with the
terms of that confidentiality agreement.
ARTICLE 15.
NOTICES
15.1 NOTICES. Any notices or communications permitted or
required hereunder shall be deemed sufficiently given if hand-delivered, or sent
by (i) registered or certified mail return receipt requested, (ii) telecopy or
other electronic transmission service (to the extent receipt is confirmed) or
(iii) by overnight courier, in each case to the Parties at their respective
addresses and telecopy numbers set forth below, or to such other address of
which any Party may notify the other Party in writing.
If to Buyer, to
▇▇▇▇▇▇▇▇-Van Heusen Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇-Van Heusen Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to CP, FS, CP Canada or any Minority CAT Shareholder, to
▇▇▇▇▇▇, Peabody & Co., Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
46
with copies to:
Vestar Capital Partners
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE 16.
MISCELLANEOUS
16.1 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon, and inure to the benefit of, all the Parties and Minority CAT
Shareholders and their respective successors, legal representatives and assigns
permitted in accordance with this Section 16.1. Nothing herein shall create or
be deemed to create any third party beneficiary rights in any person or entity
not a party hereto. No assignment of this Agreement or of any rights or
obligations hereunder may be made by any Party or Minority CAT Shareholder (by
operation of law or otherwise) without the prior written consent of the other
Parties and Minority CAT Shareholders, and any attempted assignment without the
required consents shall be void; provided, however, that no such consent shall
be required for Buyer to assign part or all of its rights and obligations under
this Agreement prior to the Closing to one or more subsidiaries of Buyer, or
after the Closing to any third party.
16.2 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
attached hereto and the documents and agreements referred to herein to be
delivered and the acts to be performed at or subsequent to the Closing
(collectively, the "ITEMS") are incorporated herein and expressly made a part of
this Agreement as fully as though completely set forth herein.
16.3 SPECIFIC PERFORMANCE. CP, CP Canada, FS, the Minority CAT
Shareholders, on the one hand, and Buyer, on the other hand, acknowledge that
the other will have
47
no adequate remedy at law if it fails to perform any of its obligations under
this Agreement and the Ancillary Agreements. In such event, the performing party
shall have the right, in addition to any other rights it may have, to seek
specific performance of this Agreement and the Ancillary Agreements and/or
injunctive relief.
16.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, of the Parties and the Minority CAT Shareholders. In pleading or
proving any provision of this Agreement, it shall not be necessary to produce
more than one such counterpart.
16.5 HEADINGS; INTERPRETATION. (a) The headings contained in
this Agreement are inserted for convenience of reference only and shall not
otherwise affect the meaning or interpretation or be deemed a substantive part
of this Agreement.
(b) Except to the extent that the context otherwise requires
"include," "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement will refer to this Agreement as a
whole, including the Exhibits and Schedules attached hereto, and not to any
particular provision of this Agreement, and section and subsection references
are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein will be equally
applicable to both the singular and plural forms of such terms.
(e) All matters to be agreed to by any party hereunder must be
agreed to in writing by such party unless otherwise indicated herein.
16.6 WAIVER. The failure of any Party or Minority CAT
Shareholder at any time or times to enforce or require performance of any
provision hereof shall in no way operate as a waiver or affect the right of such
Party or Minority CAT Shareholder at a later time to enforce the same. No waiver
by any Party or Minority CAT Shareholder of any condition or the breach of any
term, covenant, representation or warranty contained in this Agreement, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or a waiver of any other
condition or of any term, covenant, representation or warranty contained in this
Agreement. Any agreement on the part of a Party or Minority CAT Shareholder
hereto to a waiver shall be valid only if set forth in an instrument in writing
signed by such Party or Minority CAT Shareholder.
48
16.7 SEVERABILITY. If any provision of this Agreement shall
hereafter be held to be invalid or unenforceable for any reason, that provision
shall be reformed to the maximum extent permitted to preserve the original
intent of the Parties and the Minority CAT Shareholders, failing which, it shall
be severed from this Agreement with the balance of this Agreement continuing in
full force and effect. Such occurrence shall not have the effect of rendering
the provision in question invalid in any other jurisdiction or in any other case
or circumstances, or of rendering invalid any other provisions contained herein
to the extent that such other provisions are not themselves actually in conflict
with any applicable law.
16.8 GOVERNING LAW AND FORUM. This Agreement and the Ancillary
Agreements and the rights and duties of the Parties and the Minority CAT
Shareholders hereunder and thereunder shall be governed by, and construed in
accordance with, the law of the State of New York applicable to contracts made
and to be performed therein. Each of the Parties and the Minority CAT
Shareholders waives any objection that it may have to the venue of any suit,
action or proceeding with respect to this Agreement and the Ancillary Agreements
or the transactions contemplated hereby or thereby in the courts of the State of
New York or the courts of the United States of America, in each case located in
the Borough of Manhattan, City of New York and State of New York, or that such
suit, action or proceeding brought in the courts of the State of New York or the
courts of the United States of America, in each case located in the Borough of
Manhattan, City of New York and State of New York, was brought in an
inconvenient court and agrees not to plead or claim the same. Each of the
Parties and the Minority CAT Shareholders agrees to service of process by
registered mail, return receipt requested, or by any other manner provided by
New York law.
49
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
▇▇▇▇▇▇▇▇-VAN HEUSEN CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇, PEABODY & CO., INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ CANADA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
ARROW FACTORY STORES INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇ DESIGNER GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
2
50
CONSUMER DIRECT CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ HOLDING CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
GUARANTEE
▇▇▇▇▇▇ American Corp., a Delaware corporation ("CAC"), hereby
irrevocably and unconditionally guarantees the payment of any amount payable by
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co., Inc., a Delaware corporation ("CP"), under the Purchase
and Sale Agreement (defined below) to ▇▇▇▇▇▇▇▇-Van Heusen Corporation, a
Delaware corporation ("Buyer"), which is not paid by CP when due. For purposes
of this Guarantee, the "PURCHASE AND SALE AGREEMENT" refers to the Purchase and
Sale Agreement dated as of June 12, 2000 among CP, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Canada, Inc.,
a Canadian corporation, Arrow Factory Stores Inc., a Delaware corporation,
▇▇▇▇▇▇ Designer Group, a Delaware corporation, Consumer Direct Corporation, a
Delaware corporation, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Holding Corp., and Buyer. Notwithstanding
the foregoing, if (i) CAC and its affiliates cease to be affiliates of CP, (ii)
the entity that controls CP upon the occurrence of the event described in clause
(i) executes and delivers to Buyer a guarantee identical in all material
respects to this Guarantee (the "SUBSTITUTE GUARANTEE") and (iii) the entity
referred to in clause (ii) is not less creditworthy than CAC, Buyer shall accept
the Substitute Guarantee and this Guarantee thereafter shall have no force or
effect.
▇▇▇▇▇▇ AMERICAN CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
