ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is made as of December 4,
2001, is by and among:
Henredon Furniture Industries, Inc. ("Henredon"), Drexel Heritage
Furnishings Inc. ("Drexel Heritage"), Xxxxxxxx-Xxxxx, Inc.
("Xxxxxxxx-Xxxxx") and Xxxxxxxx-Xxxxx Pacific, Ltd. ("Pacific") (Henredon,
Drexel Heritage, Xxxxxxxx-Xxxxx and Pacific are collectively referred to as
the "Selling Companies") and LifeStyle Furnishings International Ltd.
("LifeStyle") (the Selling Companies and LifeStyle are collectively
referred to as "Sellers"),
and
HDM Furniture Industries, Inc. ("Buyer") and Furniture Brands
International, Inc. ("Furniture Brands International") (Buyer and Furniture
Brands International are collectively referred to as "Buyers"),
WHEREAS, Buyers desire to purchase and assume from Sellers and Sellers
desire to sell and assign to Buyers, the Acquired Assets and Assumed Liabilities
(as defined in this Agreement), upon the terms and subject to the conditions set
forth in this Agreement;
NOW THEREFORE, intending to be legally bound, the parties to this Agreement
agree as follows:
ARTICLE 1
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Purchase and Sale; Closing
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Section 1.1. Acquired Assets. As used in this Agreement, "Acquired Assets"
shall mean all of the assets, properties, rights, contracts, names, claims,
shares of stock of the Subsidiaries (as defined herein), operations and
businesses of the Selling Companies of every kind and description, wherever
located, whether tangible or intangible, real, personal or mixed, including,
without limitation, the assets described in the following paragraphs (a) through
(m) but excluding the Excluded Assets (as defined in paragraph (n)):
(a) Real Estate. Title in fee simple to the real property owned by the
Selling Companies, and described in Schedule 2.6(a)(i), together with all
improvements, appurtenances, and structures thereon;
(b) Real Property Leases. All interests of the Selling Companies in all
real property Leases including, without limitation, the Leases listed in
Schedule 2.6(a)(ii), together with all prepaid rent, security deposits and
options to renew or purchase thereunder, and subject only to the respective
limitations and obligations set forth in the Leases;
(c) Personal Property. Title to, or the leasehold interests of the Selling
Companies in, all of the Selling Companies' personal property, machinery,
equipment, furniture, fixtures, trucks and automobiles, including without
limitation those listed or referenced in Schedule 2.7;
(d) Inventories. Title to all of the Selling Companies' inventories,
materials and supplies, including all raw materials, work-in-process and
finished goods;
(e) Receivables. All of the Selling Companies' notes receivable (whether
short-term or long-term) and accounts receivable, including accounts receivable
sold to LFI Receivables Corporation (the "Receivables Corp."), as described
below, arising from the Selling Companies' business or operations, together with
any rights to receive unpaid interest accrued thereon and the Selling Companies'
rights with respect to any non-cash security or collateral therefor. The assets
shown on the September Balance Sheet (as defined in Section 2.2) include certain
accounts receivable sold by Sellers to Receivables Corp. as part of a
receivables securitization facility administered by Wachovia Bank, N.A. (the
"Receivables Facility"). The receivables sold through the Receivables Facility
("Securitized Receivables") are maintained, serviced and collected by the
Selling Companies as "Servicers" under the Receivables Facility. The Selling
Companies, in their capacity as Servicers under the Receivables Facility, shall
convey, transfer and assign or shall cause Receivables Corp. to convey, transfer
and assign all Securitized Receivables of the Selling Companies to Buyers as
part of this transaction;
(f) Warranties. All rights of the Selling Companies under or pursuant to
all warranties, representations and guarantees made by suppliers, manufacturers
and contractors in connection with or affecting the Acquired Assets;
(g) Intellectual Property - Trademarks. All rights and interests of the
Selling Companies in any trademarks, trade names, brand names, copyrights,
service marks, trademark licenses, logos and slogans, owned by the Selling
Companies, or owned by an affiliate of the Selling Companies and used primarily
in the business operations of the Selling Companies or the Subsidiaries as of
the Closing Date, and any variations of such names, together with any
registrations or registration applications for any of the foregoing, including
without limitation those listed in Schedules 2.11(a) and (b);
(h) Intellectual Property - Patents. All rights and interests of the
Selling Companies in any domestic and foreign patents, patent registrations,
applications (including all reissues, divisions, continuations, continuations in
part and extensions of any patent or application), patent disclosures, trade
dress and documented conceptions of inventions, whether or not patentable, owned
by the Selling Companies, or owned by an affiliate of the Selling Companies and
used primarily in the business operations of the Selling Companies or the
Subsidiaries as of the Closing Date, including without limitation those listed
in Schedule 2.11(a)and (b);
(i) Assumed Contracts. All right, title and interest of the Selling
Companies in and to all oral or written purchase orders, invoices, distributor
and vendor agreements, sales representative agreements, leases, licenses,
contracts and agreements and other oral or written commitments of the Selling
Companies relating to the Acquired Assets, such contracts, purchase orders,
invoices, distributor and vendor agreements, sales representative agreements,
leases, licenses, contracts and agreements or commitments, or relevant parts
thereof, that are in the name of LifeStyle, are assignable and are used
primarily in the business of the Selling Companies and Subsidiaries, including
without limitation the Xxxxxxx August License and all Material Contracts set
forth on Schedule 2.16 (the "Assumed Contracts"), but excluding any agreements,
contracts or other commitments relating to Excluded Assets or as otherwise
excluded hereunder. With respect to such Assumed Contracts, or relevant parts
thereof, that are in the name of LifeStyle and cannot be assigned, LifeStyle
shall use commercially reasonable efforts to arrange for the benefits thereof to
be provided to Buyers.
(j) Books and Records. All of the Selling Companies' business books and
records, files and papers, including, but not limited to, drawings, building
plans, engineering information, computer programs (including computer modeling
programs), manuals and data, sales and advertising materials, sales,
distribution and purchase correspondence, trade association memberships,
research and development records, lists of present and former customers,
distributors and suppliers, and personnel, employment and other records relating
to their businesses and operations (whether possessed by Sellers or Selling
Companies); except, however, the Selling Companies' stock transfer and minute
books, charters, bylaws, bank records, tax returns and similar corporate
records, and any such records relating primarily to assets or Liabilities
retained by the Selling Companies, including records relating to the Selling
Companies Employee Benefit Plans, Excluded Liabilities and Taxes;
(k) Permits and Licenses. All of the Selling Companies' permits, licenses,
product registrations, filings, authorizations, approvals or indicia of
authority (and any pending applications for any of the foregoing) (i) to conduct
their businesses and operations and/or to own, construct, operate and maintain
any fixture, facility, equipment, vehicle, machinery or installation, and/or
(ii) to store, transport, dispose of, market or sell any goods or any substance
used, handled, produced, disposed of, marketed or sold in their businesses or
operations, as issued by any governmental agency, authority or other
instrumentality of the United States or any state or political subdivision
thereof, or any foreign country, including those listed in Schedule 2.12(a), in
each case to the extent assignable and without cost or expense to the Selling
Companies; and
(l) Subsidiaries. All of the capital stock in Henredon Transportation Co.,
D-H Retail Space, Inc., and Xxxxxxxx-Xxxxx Asia Holdings, Inc., and the two
outstanding shares of Decorative Hardware Solutions, Ltd. owned by Pacific;
(m) Balance Sheet Assets. The Selling Companies interests in all other
assets reflected on the Closing Balance Sheet unless otherwise specifically
excluded as set forth in this Agreement, or the Schedules to this Agreement, or
included within the definition of Excluded Assets.
(n) Excluded Assets. The Acquired Assets shall not include any of the
following ("Excluded Assets"):
(i) any assets associated with the Selling Companies' manufacturing,
support or warehouse facilities which were closed or which were
in the process of closing as of September 30, 2001 as reflected
on Schedule 1.1(n);
(ii) all of the Selling Companies' cash and cash equivalents,
including time deposits, certificates of deposit, marketable
securities and short-term investment;
(iii)any intercompany receivables or payables and loans existing
between LifeStyle or any of its affiliates on the one hand, and
the Selling Companies on the other hand;
(iv) any assets used primarily in the LifeStyle Leather Products
operation of Drexel Heritage; or
(v) the assets set forth as Excluded Assets on Schedule 1.1(n).
Section 1.2. Assumed Liabilities. (a) As used in this Agreement, the term
"Liability" shall mean any and all debts, losses, liabilities, claims, damages,
obligations, payments, costs and expenses, including, without limitation, those
arising out of any demand, assessment, settlement, judgment or compromise
relating to any actual or threatened action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, governmental or other
regulatory or administrative agency or commission ("Action"), and any attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or
defending any Action.
(b) As used in this Agreement, the term "Assumed Liability" shall mean any
Liability which arises out of or in connection with or relating to any of the
businesses, assets, operations or activities of the Selling Companies (including
any predecessor, but only to the extent such was carrying on the past or present
business activities of the Selling Companies) or which relates to the Acquired
Assets, including without limitation:
(i) All Liabilities arising under or related to the Assumed
Contracts;
(ii) All Liabilities for replacement, returns and allowances in the
ordinary course of business for products manufactured and
services provided by the Selling Companies before or after the
Closing (specifically excluding any liability that would be a
Pre-Closing Claim under Section 4.14(b));
(iii)All Liabilities of the Selling Companies reflected on the
Closing Balance Sheet;
(iv) All Liabilities arising on or after the Closing Date with respect
to any of the Acquired Assets other than Liabilities that result
from a breach of a representation, warranty or covenant of this
Agreement by Sellers;
(v) All Liabilities relating to the employment of any employees of
the Selling Companies by Buyers on or after the Hire Date as
defined in Section 5.2 or the termination of such employment by
Buyers;
(vi) All Liabilities of the Selling Companies incurred in the ordinary
course of business consistent with past practice that are not
required by generally accepted accounting principles to be
reflected in the financial statements of the Selling Companies,
other than Liabilities resulting from tort, breach of contract or
violation of laws; and
(vii)All Liabilities set forth as Assumed Liabilities on Schedule
1.2(b)(vii).
provided, however, that Assumed Liabilities shall not include any liability
arising out of or in connection with or relating to the Acquired Assets or the
business and operations of the Selling Companies ("Excluded Liabilities") to the
extent that it:
(1) is a Pre-Closing Claim (as defined in this Agreement), including
deductibles;
(2) arises out of any business, asset, operation, activity or
Subsidiary that has been or is being transferred from the Selling
Companies to LifeStyle, one of its affiliates or a third party
prior to, on or after the Closing Date and therefore is not
included in the Acquired Assets;
(3) except as otherwise provided in Section 5.1(a), arises out of any
of the Selling Companies Employee Benefit Plans (as defined in
this Agreement);
(4) is a Liability associated with the Selling Companies'
manufacturing, support or warehouse facilities which were closed
or which were in the process of closing as of September 30, 2001,
and are Excluded Assets hereunder;
(5) is an intercompany receivable or payable or loan existing between
LifeStyle or any of its affiliates on the one hand, and the
Selling Companies or Subsidiaries on the other hand;
(6) represents short- or long-term debt of the Selling Companies,
other than capital leases included in the Acquired Assets; or
(7) is otherwise expressly retained or assumed by Sellers as set
forth on Schedule 1.2(b)(7).
Section 1.3. Purchase and Sale. (a) On the basis of and in reliance upon
the representations, warranties, obligations and agreements set forth in this
Agreement, and subject to the satisfaction or waiver of the conditions to
Closing set forth in this Agreement, at the Closing, the Selling Companies shall
sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase,
acquire and accept from the Selling Companies the Acquired Assets, free and
clear of all liens, charges, restrictions and encumbrances except those set
forth in this Agreement or in the relevant Schedules to this Agreement.
(b) Subject to the terms and conditions set forth in this Agreement and in
further consideration of the transfer of the Acquired Assets as contemplated
hereby, at the Closing, except as otherwise provided in this Agreement, Buyers
agree to assume, pay, perform and discharge (or cause to be paid, performed and
discharged) in due course, the Assumed Liabilities.
Section 1.4. Purchase Price. (a) At the Closing, Buyer will pay to the
Selling Companies $275 million (the "Purchase Price"), consisting of $175
million in cash, payable in immediately available funds, and $100 million in
shares (the "Shares") of Furniture Brands International common stock ("Common
Stock"), all delivered to the account specified by the Selling Companies
simultaneously with the delivery by the Selling Companies to Buyer of all of the
Selling Companies' right, title and interest in and to all of the Acquired
Assets and the assumption by Buyer of all of the Assumed Liabilities. The number
of shares of Common Stock constituting the Shares will be determined on the
basis of the average of the daily average high and low price of the Common Stock
on the New York Stock Exchange for the ten trading day period ending on the
second trading day immediately preceding the Closing Date, rounded up to the
next highest whole share (the "Average Price"), provided, however, that (i) in
no event shall the number of Shares be greater than five million shares nor less
than four million shares and (ii) in the event the number of Shares that
otherwise would be issued to Sellers pursuant to the foregoing provisions of
this Section 1.4(a), when added to any other voting securities of Furniture
Brands International then owned by Sellers, would represent more than10% of the
issued and outstanding voting securities of Furniture Brands International at
the time of issuance, then Sellers instead shall receive that number of Shares
which would result in Sellers' ownership of 10% of the issued and outstanding
voting securities of Furniture Brands International at the time of issuance,
together with additional cash in lieu of the shares to which Sellers otherwise
would have been entitled (determined on the basis of the Average Price). The
parties acknowledge that this limitation on the number of Shares to be issued to
Sellers reflects the parties' intention that Sellers acquire the Shares solely
for the purpose of investment as contemplated by 16 C.F.R. ss.802.9.
(b) Within 35 days after the Closing Date, Sellers will prepare and deliver
to Buyers a consolidated pro forma balance sheet (the "Closing Balance Sheet")
for the Selling Companies as of the close of business on the Closing Date
(determined on a pro forma basis as though the parties had not consummated the
transactions contemplated by this Agreement, but excluding all Excluded Assets
and Excluded Liabilities). The Closing Balance Sheet will be reviewed by
PricewaterhouseCoopers LLP ("PWC") whose report will be appended thereto. The
Closing Balance Sheet will be prepared in accordance with United States
generally accepted accounting principles applied on a basis consistent with the
preparation of the September Balance Sheet and using the policies, procedures
and practices utilized in preparing the September Balance Sheet. In the event
the parties agree to any changes to Excluded Assets or Excluded Liabilities from
the Excluded Assets and Excluded Liabilities that were taken into account in
preparing the September Balance Sheet, such changes shall be reflected in the
Closing Balance Sheet and the September Balance Sheet shall be adjusted in the
same way.
Representatives from both Buyers and Sellers shall be entitled to
participate in the taking of the physical inventories conducted with respect to
the Acquired Assets. Each party will pay the fees and expenses of its own
professionals for the physical inventory.
(c) On or prior to the date 20 days after delivery to Buyers of the Closing
Balance Sheet, Sellers and Buyers shall mutually agree upon the shareholder's
equity of the Selling Companies reflected on the Closing Balance Sheet (the
"Adjusted Closing Net Worth"). In the event that Sellers and Buyers are unable
to agree on the Adjusted Closing Net Worth within such 20 day period, Sellers
and Buyers shall submit the dispute to Xxxxxx Xxxxxxxx & Co. (the "Arbiter") for
resolution. Promptly, but no later than 20 days after its acceptance of its
appointment as Arbiter, the Arbiter shall determine, based solely on
presentations by Sellers and Buyers, and not by independent review, only those
issues in dispute and shall render a report as to the dispute and the resulting
computation of the Adjusted Closing Net Worth which shall be conclusive and
binding upon the parties. The fees, costs and expenses of the Arbiter shall be
borne by each party in proportion that the aggregate dollar amount of such
disputed items so submitted that are unsuccessfully disputed by such party bears
to the aggregate dollar amount of the items submitted to the Arbiter.
(d) To the extent the Adjusted Closing Net Worth of the Selling Companies
is less than $215,291,811, Sellers shall pay any such deficiency to Buyers, as
an adjustment to the Purchase Price, by wire transfer of immediately available
funds within two business days of the determination of the Adjusted Closing Net
Worth. To the extent the Adjusted Closing Net Worth is equal to or greater than
$215,291,811, no adjustment to the Purchase Price will be made. Subject to the
provisions of Article 6, this Section 1.4 is Buyer's sole remedy with respect to
issues that are or could have been disputed under Section 1.4(c). Buyers shall
have no right to assert any claim with respect to such issues other than in
accordance with this Section 1.4.
(e) Sellers will make the books, records and personnel of the Selling
Companies (and Sellers' books, records and personnel relating to the Acquired
Assets to the extent such information is not available from the Selling
Companies) available to Buyers and their accountants and other representatives,
and Buyers will make their books and records with respect to the Acquired Assets
and the Subsidiaries, and personnel available to Sellers and their accountants
and other representatives, at reasonable times and upon reasonable notice at any
time during (i) the preparation by Sellers of the Closing Balance Sheet and (ii)
the review by Buyers of the Closing Balance Sheet.
(f) Prior to Closing, Buyers shall submit a proposed allocation of the
Purchase Price for approval by Sellers prior to Closing, which approval shall
not be unreasonably withheld. The parties' agreed allocation of the Purchase
Price shall then be attached hereto as Schedule 1.4(f). If the parties cannot
agree on an allocation of the Purchase Price, their dispute shall be resolved by
the Arbiter, whose fees, costs and expenses for such resolution shall be shared
one-half by Sellers and one-half by Buyers.
Section 1.5. Time and Place of Closing. The Closing Ceremony (the
"Closing") shall take place beginning December 27, 2001, or as soon thereafter
as practicable after all conditions to Closing hereunder have been satisfied, at
10:00, a.m., Eastern Time, at the offices of LifeStyle Furnishings
International, 0000 XxxxXxxxx Xxxxx, Xxxx Xxxxx, Xxxxx Xxxxxxxx, or such other
place as the parties may agree and shall be as of the close of business on the
effective date of December 28, 2001, or as soon thereafter as practicable after
all conditions to Closing hereunder have been satisfied (the "Closing Date").
The pre-Closing, if any, will be held at the same place.
Section 1.6. Closing Costs and Prorations.
(a) At Closing, Buyers shall pay all document recording fees pertaining to
the transfer of the Acquired Assets. Buyers shall also be responsible for any
sales, use, transfer or similar taxes assessed as a result of the purchase of
the Acquired Assets and the assumption of the Assumed Liabilities. Sellers shall
be responsible and pay all document recording fees and any sales, use, transfer
or similar fees for the release of all liens and encumbrances in order to
transfer good and marketable title to the Acquired Assets.
(b) At Closing, all documentary or revenue taxes or stamps required in
connection with the recordation of deeds or other documents of transfer required
to transfer the Acquired Assets shall be equally split between the parties.
Sellers shall pay any taxes, fees and expenses in connection with the
prepayment, release, satisfaction or removal of any Liens affecting the Acquired
Assets (other than Permitted Liens).
(c) All contract and lease payments, utilities, service fees and taxes to
the extent related to income or receipts not reflected on the Closing Balance
Sheet will be prorated through the Closing Date, to the extent the underlying
services, instruments or agreements are transferred to Buyer or Buyer is
provided with the benefits thereof following the Closing Date.
ARTICLE 2
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Representations and Warranties of Sellers
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Sellers jointly and severally represent and warrant to Buyers as follows:
Section 2.1. Incorporation; Authorization; No Conflict; etc. (a) Schedule
2.1(a) lists all subsidiaries of the Selling Companies and all lower tier
subsidiaries of those subsidiaries (together, the "Subsidiaries"). Each Selling
Company and each Subsidiary (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization as set forth in Schedule 2.1(a); (ii) has all requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its businesses as they are now being conducted, and (iii) is in good
standing and is duly qualified or licensed to transact business in each
jurisdiction set forth in Schedule 2.1(a), which are the only jurisdictions in
which the character of the properties owned or leased by it or the nature of the
business conducted therein requires it to be so qualified or licensed, except
where the failure to be so existing and in good standing or to have such power
and authority would not in the aggregate have a material adverse effect on the
business, results of operations or financial condition of the Selling Companies
and the Subsidiaries taken as a whole (a "Material Adverse Effect"). Each
Subsidiary noted in Schedule 2.1(a) is 100% beneficially owned by the respective
parent corporation noted on said Schedule. The capital structure of each
Subsidiary is accurately portrayed in Schedule 2.1(a).
(b) Each of the Sellers has full corporate power to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Sellers, the performance of the obligations of Sellers hereunder and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate proceedings on the part of each of the
Sellers and its respective Board of Directors and the adoption of this Agreement
has been duly approved by LifeStyle as the sole stockholder of the Selling
Companies. No other corporate action on the part of either the Selling Companies
or LifeStyle or the stockholders of LifeStyle is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby.
(c) The execution and delivery by Sellers of this Agreement does not, and
the performance by Sellers of their obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:
(i) conflict with or result in a violation of any of the terms,
conditions or provisions of the certificate of incorporation or
by-laws (or other comparable corporate charter documents) of
Sellers or the Subsidiaries;
(ii) subject to obtaining the consents and approvals disclosed on
Schedule 2.1(c), violate any provision of, or be an event that is
(or with the passage of time will result in) a default under (or
give rise to any right of termination, cancellation or
acceleration of) any of the terms, conditions or provisions of
any material note, bond, lease, mortgage, indenture, license,
agreement or other instrument or obligation to which the Selling
Companies or the Subsidiaries are a party, or by which the
Selling Companies, the Subsidiaries or any of the Acquired Assets
may be bound; or
(iii)subject to obtaining the consents and approvals disclosed on
Schedule 2.1(c), result in the creation or imposition of any
lien, security interest or other encumbrance upon the Acquired
Assets or the assets of any Subsidiary under any contract,
agreement (whether written or oral), lease, deed, mortgage,
indenture, evidence of indebtedness, security agreement or other
instrument, or any license, permit, certificate of authority,
authorization, approval, registration or franchise to which
Sellers or Subsidiaries are a party or by which any of the
Acquired Assets is bound.
(d) This Agreement has been duly and validly executed and delivered by each
of Sellers and, assuming the due execution hereof by Buyers, this Agreement
constitutes the legal, valid and binding obligation of Sellers, enforceable
against each of them in accordance with their terms, except to the extent that
such validity, binding effect and enforceability may be subject to or limited by
(i) bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to or
affecting the rights of creditors generally, and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
(e) Except for the filing of a Notification and Report Form pursuant to the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended and the
regulations promulgated thereunder (the "HSR Act"), the Securities Exchange Act
of 1934, as amended, and the regulations promulgated thereunder (the "Exchange
Act"), the Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "Securities Act"), the Delaware General Corporation Law and
foreign and state securities or blue sky laws, and except as set forth on
Schedule 2.1(e), no consent, license, permit, order, approval or action of,
filing with or notice to any federal, state, local or foreign governmental,
judicial or regulatory authority on the part of Sellers is required in
connection with the execution, delivery and performance by the Sellers of this
Agreement and the consummation of the transactions contemplated hereby except
(i) for those that become applicable solely as a result of the specific
regulatory status of Buyers or any of their affiliates, or (ii) where the
failure to make, file, give or obtain would not in the aggregate have a Material
Adverse Effect or prevent the consummation of the transactions contemplated
hereby.
(f) Upon consummation of the sale and purchase of the Acquired Assets and
assignment and assumption of the Assumed Liabilities at the Closing, as
contemplated by this Agreement, the Selling Companies will deliver to Buyer good
title to the Acquired Assets free and clear of any liens, claims, charges,
security interests, options or other legal or equitable encumbrances, other than
Permitted Liens.
Section 2.2. Financial Statements. (a) Attached as Schedule 2.2(a) are true
and complete copies of the following:
(i) the unaudited combined pro forma balance sheet of the Selling
Companies and their Subsidiaries as of September 30, 2001 (the
"September Balance Sheet"), prepared in accordance with United
States generally accepted accounting principles consistently
applied except as set forth in the notes thereto, but excluding
all Excluded Assets and Excluded Liabilities, and
(ii) the unaudited combined statement of earnings of the Selling
Companies and their Subsidiaries for the nine month period ended
September 30, 2001,
((i) and (ii) above, collectively, the "Financial Statements").
(b) Except as set forth in the notes thereto, the Financial Statements
fairly present in all material respects, the pro forma results of operations and
financial position of the Selling Companies and Subsidiaries for the periods and
as of the dates set forth therein, in each case in accordance with United States
generally accepted accounting principles consistently applied except as
specified therein or herein.
Section 2.3. Accounts Receivable. Except as set forth on Schedule 2.3, the
accounts receivable of the Selling Companies and Subsidiaries reflected on the
September Balance Sheet, and all accounts receivable arising subsequent to
September 30, 2001, (i) arose from bona fide sales transactions in the ordinary
course of business and are payable on the Selling Companies' and Subsidiaries
customary or agreed upon trade terms, (ii) to the knowledge of Sellers, are
legal, valid and binding obligations not subject to any valid set-off or
counterclaim, other than discounts, returns and allowances in the ordinary
course of business, (iii) do not represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis, and (iv) are not the
subject of any Actions brought by or on behalf of the Selling Companies and
Subsidiaries. The accounts receivable on the September Balance Sheet also
include the Securitized Receivables. Schedule 2.3 sets forth a description of
any security arrangements and collateral securing the repayment or other
satisfaction of receivables of the Selling Companies and Subsidiaries. The
Selling Companies and Subsidiaries have taken all steps necessary to maintain
for the Selling Companies and Subsidiaries a perfected security interest in the
related collateral. The notes receivable of the Selling Companies and
Subsidiaries reflected on the September Balance Sheet and the notes receivable
arising subsequent to September 30, 2001 are listed on Schedule 2.3.
Section 2.4. Inventories. All inventory of the Selling Companies and the
Subsidiaries reflected on the September Balance Sheet ("Inventory") and all such
inventory acquired since September 30, 2001 is of a quality usable and salable
in the ordinary course of business consistent with past practice, subject to
historical allowances for spoilage, damage and outdated items. The Inventory is
valued in accordance with United States generally accepted accounting principles
consistently applied except as set forth in the notes to the September Balance
Sheet. Except as disclosed in the September Balance Sheet or in the notes
thereto, all Inventory is the property of the Selling Companies and the
Subsidiaries, free and clear of any lien, security interest or other
encumbrance, other than Permitted Liens (as defined below); is not held by the
Selling Companies or Subsidiaries on consignment from others; and conforms in
all material respects to all standards applicable to the Inventory or its use or
sale imposed by governmental or regulatory authorities.
Section 2.5. Assets. The Selling Companies have and will have at the
Closing Date good title to all of the Acquired Assets, except assets held under
capital and financing lease agreements. Such assets are and shall be at the
Closing Date free and clear of any lien, charge or encumbrance, except for
Permitted Liens. The Subsidiaries have and will have at the Closing Date good
title, free and clear of all liens, charges and encumbrances except for
Permitted Liens, to all of the assets reflected upon each Subsidiaries
respective September Balance Sheet.
Section 2.6. Real Properties. (a) Schedule 2.6(a)(i) contains a list
setting forth every piece of real property owned by the Selling Companies
(except properties described as Excluded Assets in Schedule 1.1(n)) and every
piece of real property owned by the Subsidiaries. Schedule 2.6(a)(i) contains
the address, usage, approximate square footage and approximate acreage of each
property. Schedule 2.6(a)(ii) contains a list setting forth each piece of real
property leased by the Selling Companies (except properties described as
Excluded Assets in Schedule 1.1(n)) and every piece of real property leased by
Subsidiaries. Schedule 2.6(a)(ii) includes the address, approximate square
footage and usage of each property. Schedules 2.6(a)(i) and 2.6(a)(ii) include,
without limitation, each piece of real property capitalized on or included or
reflected in the September Balance Sheet and each piece of real property
acquired by the Selling Companies or Subsidiaries since the date of the
September Balance Sheet that would, had it been acquired prior to such date, be
capitalized on or included in the September Balance Sheet. Except as otherwise
set forth in Schedules 2.6(a)(i) and 2.6(a)(ii) , the Selling Companies and
Subsidiaries have or will have as of the Closing Date good and marketable fee
simple title to, or hold by valid and existing lease or license, free and clear
of all mortgages, pledges, liens, charges, options, easements, security
interests or other encumbrances (collectively, "Liens"), each piece of real
property listed in Schedules 2.6(a)(i) and 2.6(a)(ii), except in any of the
foregoing cases for Permitted Liens (as defined in this Agreement). As used in
this Agreement, the term "Permitted Liens" means such Liens as (i) are set forth
in Schedule 2.6(a)(iii), (ii) are expressly reflected and adequately reserved
against in the September Balance Sheet, (iii) arise out of taxes or general or
special assessments not in default and payable without penalty or interest or
the validity of which is being contested in good faith by appropriate
proceedings (sufficient to avoid any foreclosure, forfeiture or penalties) and
which have been adequately reserved against in the September Balance Sheet in
accordance with United States generally accepted accounting principles
consistently applied, (iv) are granted in favor of any governmental entity or
utility company for the current charges of customary provision of utilities and
services to the property or any improvements thereon, (v) represent easements or
other facts of record or are visible on an inspection of the Real Properties, if
any, which do not materially impair the operations of the Selling Companies' or
Subsidiaries' businesses as they have been operated in the past, (vi) are
otherwise expressly disclosed in this Agreement or the Schedules to this
Agreement, or (vii) were incurred in connection with a secured credit agreement,
provided that all mortgages, pledges, liens, encumbrances or security interests
incurred in connection with the secured credit agreement shall be released at or
immediately following the Closing.
(b) Sellers will provide to Buyers copies of all currently effective title
policies (or if no policy the latest title report or opinion) with respect to
each parcel of property listed in Schedule 2.6(a)(i). Any such title insurance
policies with respect to property of Subsidiaries, which will be furnished to
Buyers, are in full force and effect. Sellers have made available to Buyers true
and complete copies of all of the Selling Companies' and Subsidiaries' leases
for the properties listed on Schedule 2.6(a)(ii) (including all amendments and
modifications thereto) (the "Leases"). Except as listed on Schedule 2.6(a)(ii),
each Lease under which the Selling Companies and Subsidiaries are a lessee or
lessor is valid, binding and enforceable against the Selling Companies and the
Subsidiaries in accordance with its terms. Except as listed on Schedule
2.6(a)(ii), there have been no written or oral supplements, amendments, riders,
alterations or modifications in or to such Leases. Except as listed on Schedule
2.6(a)(ii), the Selling Companies or Subsidiaries are in possession and
occupancy under each of their respective Leases, and their peaceful and quiet
enjoyment thereunder has not been disturbed. Except as listed on Schedule
2.6(a)(ii), all of the Leases permit the properties to which they apply to be
used in the manner in which the Selling Companies and Subsidiaries are presently
using them, and the Selling Companies and Subsidiaries are not in default under
any such Lease. Except as listed on Schedule 2.6(a)(ii), the Selling Companies
and Subsidiaries have paid or accrued all rent due to date under the Leases.
Except as listed on Schedule 2.6(a)(ii) and subject to obtaining consents and
approvals disclosed on Schedule 2.1(c), the sale of the Acquired Assets to and
the assumption of Assumed Liabilities by Buyer, or the transfer of the
Subsidiaries' Shares of stock to Buyer, all as contemplated by this Agreement,
will not constitute a default under any of the Leases. To the knowledge of
Sellers, there is no reason why the consent of the landlords to the assignment
of lease or sale of stock, if required under the respective Leases, cannot be
obtained by or promptly following Closing.
(c) Except as listed on Schedule 2.6(a)(ii), there are no pending, or to
the knowledge of Sellers threatened, condemnation or eminent domain proceedings,
special assessments or changes in assessed valuation, other than routine changes
to assessed valuations and tax rates in the ordinary course of business. The
condition of the improvements on the real property identified in Schedules
2.6(a)(i) and 2.6(a)(ii) has been adequate and suitable for the purpose
presently used by Sellers. The Spruce Pine facility of Henredon has adequate
ingress and egress to the nearest public roads and has self-contained steam,
heating, ventilation and sprinkler systems as necessary to operate the
properties.
Section 2.7. Personalty. All of the owned personal property used in the
businesses or reflected upon the Balance Sheets of the Subsidiaries is owned by
the Selling Companies and Subsidiaries, respectively, free and clear of all
mortgages, pledges, liens, encumbrances or security interests other than
Permitted Liens. The Selling Companies have good title to all personal property
included in the Acquired Assets. All leases of personalty included in the
Acquired Assets are set forth in Schedule 2.7, and, except as listed on Schedule
2.7, will be at Closing in good standing with all rentals due to date paid or
accrued. Section 2.8. Environmental Matters. The Selling Companies and
Subsidiaries have obtained all material licenses, permits, authorizations,
approvals and consents which are required in respect of the Acquired Assets and
the Subsidiaries' property, business and operations under applicable
Environmental Laws (as defined in this Agreement) except as listed on Schedule
2.8. Except as listed on Schedule 2.8, the Acquired Assets are in compliance
with the terms and conditions of all such licenses and with any applicable
Environmental Law. Except as listed on Schedule 2.8:
(a) No order, writ, injunction, decree or judgment has been issued, no
complaint has been filed, no penalty has been assessed and, to the Sellers'
knowledge, no investigation or review is pending or threatened by any
governmental or regulatory authority with respect to any alleged failure by the
Selling Companies or Subsidiaries to comply with any Environmental Laws or have
any license, permit, authorization, approval or consent required in connection
with the Acquired Assets or the business, operations or assets of Subsidiaries,
and, to the knowledge of the Selling Companies, there are no facts or
circumstances which could reasonably be expected to form the basis for any such
order, writ, injunction, decree, judgment, complaint, penalty or investigation;
(b) Neither the Selling Companies, the Subsidiaries, nor to the knowledge
of Sellers, any prior owner or lessee of any real property that is included in
the Acquired Assets or owned or leased by the Subsidiaries, have handled any
Hazardous Material, other than as a generator in the ordinary course of
business, on any such property; in addition, to the Sellers' knowledge: (i) no
polychlorinated biphenyl is or has been present, (ii) no asbestos is or has been
present, (iii) there are no underground storage tanks, active or abandoned, and
(iv) no Hazardous Material has been Released in violation of any Environmental
Law, at, on or under any such property;
(c) No written notification of a Release in violation of Environmental Laws
of a Hazardous Material has been filed by or on behalf of the Selling Companies
or Subsidiaries with respect to any property that is included in the Acquired
Assets or owned or leased by the Subsidiaries and, to the knowledge of Sellers,
none of such properties are listed on the National Priorities List promulgated
pursuant to CERCLA or on any similar state or governmental list of sites
requiring investigation or clean-up, or requiring any Remedial Action;
(d) To the knowledge of Sellers, there are no liens, encumbrances or other
security interests other than Permitted Liens arising under or pursuant to any
Environmental Law on any real property that is included in the Acquired Assets
or owned or leased by the Subsidiaries, and no action of any governmental or
regulatory authority has been taken or is in process which could subject any of
such properties to such liens, encumbrances or other security interests, and the
Selling Companies and Subsidiaries are not under any current order to place any
notice or restriction relating to the presence of Hazardous Material at any such
property in any deed to such property; and
(e) There have been no material environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, Sellers in relation to any property that is included in the
Acquired Assets or owned or leased by the Subsidiaries during the past five
years which have not been made available to Buyers prior to the execution of
this Agreement.
(f) For purposes of environmental matters referred to in this Agreement,
the following definitions are used:
"Contaminant" means any pollutant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum or petroleum-derived substance or
waste, regulated under any Environmental Law.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C.ss.9601 et seq.), the Hazardous
Material Transportation Act-(49 U.S.C.ss.1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C.ss.6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C.ss.1251 et seq.), the Clean Air Act (42
U.S.C.ss.7401 et seq.), and the Clean Water Act, as such laws have been amended
or supplemented, and any present federal, state or local statute, law, rule,
regulation, order, ordinance, permit, license, writ, injunction, decree or
judgment relating to protection of the environment or to emissions, discharges,
Releases or threatened Releases of pollutants, Contaminants or Hazardous
Materials in the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata), or otherwise
relating to the treatment, storage, disposal, transport or handling of Hazardous
Materials, or any similar foreign jurisdictions' law with respect to those
properties in foreign jurisdictions.
"Environmental Liabilities" means all Liabilities whether based in
contract, tort, implied or express warranty, strict liability, criminal or civil
statute, including any Environmental Law arising from the presence, use,
disposal, Release or threatened Release of a Contaminant into the environment,
or failure to obtain any Permit, by the Selling Companies or Subsidiaries in
violation of any Environmental Laws.
"Hazardous Material" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs),
(b) any chemicals, materials, substances or wastes which are defined as or
included in the definition of "hazardous substances," hazardous wastes,"
hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar import,
under any Environmental Law, and (c) any other chemical, material, substance or
waste, exposure to which is regulated under any Environmental Law.
"Permit" means any permit, approval, authorization, license variance, or
permission required from a governmental authority under an applicable
Environmental Law or related to any Environmental Liabilities with respect to
the Acquired Assets.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, storage, discharge, dispersal, leaching or migration into the
indoor or outdoor environment or into or out of any real property included in
the Acquired Assets, including the movement of Contaminants through or in the
air, soil, surface water, groundwater or property.
"Remedial Action" means all actions required by law or order to (1) clean
up, remove, treat or in any other way address Contaminants in the indoor or
outdoor environment; (2) prevent the Release or threat of Release or minimize
the further Release of Contaminants so they do not migrate or endanger or
threaten to endanger public health or the environment in violation of
Environmental Laws; or (3) perform preremedial studies and investigations and
post-remedial monitoring and care.
Section 2.9 No Undisclosed Liabilities. All Liabilities of the Selling
Companies and Subsidiaries contingent or otherwise, as of the date of the
September Balance Sheet, required to be shown therein in accordance with U.S.
generally accepted accounting principles consistently applied except as set
forth in the notes thereto, are reflected in said Balance Sheet and any taxes
then due or payable by the Subsidiaries have been paid in full, or adequately
provided for by reserves shown on their respective records and books of account,
except as disclosed in this Agreement, in the schedules to this Agreement, or in
Schedule 2.9.
Section 2.10. Litigation; Orders. Except as disclosed in Schedule 2.10
(other than certain workers compensation claims, none of which is material and
all of which are Pre-Closing Claims), as of the date hereof, there is no Action
pending or, to the knowledge of Sellers, threatened, against or relating to or
affecting the Selling Companies or Subsidiaries which could reasonably be
expected to result in the issuance of any order, writ, injunction or judgment
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or if
determined adversely to the Selling Companies or the Subsidiaries could
reasonably be expected to result in a material adverse effect on any Selling
Company or material Subsidiary. Except as set forth in Schedule 2.10, there are
no orders, writs, judgments, decrees, injunctions stipulations or awards
(whether rendered by a court or administrative agency, or by arbitration)
affecting the Acquired Assets, or outstanding against the Selling Companies or
the Subsidiaries. There is no material litigation pending or, to the knowledge
of Sellers, threatened, against the Selling Companies or the Subsidiaries which
is not adequately covered by insurance.
Section 2.11. Intellectual Property.
(a) Schedule 2.11(a) lists, as of the date hereof, all registered and
material unregistered patents and patent applications ("Patents"), trademarks
(and applications therefor), service marks (and applications therefor), trade
names, brand marks, brand names and logos (collectively, the "Trademarks") which
are owned by the Selling Companies or the Subsidiaries, and all material package
designs and colorings, uniforms, trade dress, inventions, technical know-how and
all other intellectual property and proprietary rights owned by the Selling
Companies and the Subsidiaries, or owned by affiliates of the Selling Companies
and used primarily in the business of the Selling Companies or the Subsidiaries
(collectively referred to in this Agreement as the "Owned Intellectual
Property").
(b) Schedule 2.11(b) lists, as of the date hereof, all patents, trademarks,
trade names, brand marks, brand names and logos licensed by the Selling
Companies or Subsidiaries from third parties ("Licensed Intellectual Property")
together with the name of the licensors. The Owned Intellectual Property and the
Licensed Intellectual Property are collectively referred to in this Agreement as
"Selling Companies Intellectual Property."
(c) Schedules 2.11(a) and (b) list all material Selling Companies
Intellectual Property used in the business of Selling Company and Subsidiaries.
The Selling Companies and Subsidiaries own or possess adequate and enforceable
licenses or other rights to use all Selling Companies Intellectual Property, and
neither Sellers nor any of their affiliates shall have any interest therein
after the Closing Date. Any intellectual property of the Subsidiaries held in
the name of another of Sellers' affiliates will be transferred to the Subsidiary
designated by Buyers prior to Closing. Except as set forth on Schedule 2.11(c),
(i) there are no actions pending or, to the knowledge of Sellers, threatened
against the Sellers or the Subsidiaries based on the use by, or challenging the
Selling Companies' or Subsidiaries' ownership of or rights to, any of the
Selling Companies Intellectual Property, (ii) subject to obtaining all of the
required consents and approvals contained in Schedule 2.1(c) Sellers and
Subsidiaries are not, nor have they received any notice that they are or will be
with the passage of time, in default under any license agreement included in the
Acquired Assets or owned by Subsidiaries. Except as disclosed on Schedule
2.11(c) and subject to obtaining all of the required consents and approvals
contained in Schedule 2.1(c) the Sellers have no knowledge of any default or
facts which through the lapse of time will become a default under any license
relating to the Selling Companies Intellectual Property, and the Sellers have no
knowledge that any other person is in default or through the lapse of time will
be in default under any such license or other enforceable right and to Sellers'
knowledge the Selling Companies and Subsidiaries are not infringing any
intellectual property rights of any other person or entity.
Section 2.12. Licenses, Approvals, Other Authorizations, Consents, Reports,
etc. Except for environmental permits, Schedule 2.12(a) includes all material
governmental licenses, permits, franchises and other authorizations of any
federal, state, local or foreign governmental authority possessed by or granted
to the Selling Companies or Subsidiaries in respect of any of the operations,
assets or businesses of the Subsidiaries or included in the Acquired Assets (the
"Licenses"). Except as noted in Schedule 2.12(a), all Licenses are in full force
and effect. As of the date hereof, except as noted in Schedule 2.12(a), no
proceeding is pending or, to the knowledge of Sellers, threatened, seeking the
revocation or limitation of any License. The Selling Companies and Subsidiaries
are in material compliance in all respects with the applicable terms, conditions
and requirements of the Licenses.
Section 2.13. Labor Matters. (a) The Selling Companies and Subsidiaries
are in compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment, and wages and hours. The Selling Companies have complied with the
Worker Adjustment and Retraining Notification Act and any similar state or local
obligations with respect to any employees that the Selling Companies or the
Subsidiaries have terminated prior to the Closing Date.
(b) Schedule 2.13 sets forth, as of the date hereof, all agreements
(including all amendments and supplements thereto) with labor unions or
associations representing persons employed by the Selling Companies or the
Subsidiaries in their businesses or operations. The Selling Companies and the
Subsidiaries have good working relationships under all of the collective
bargaining, sales representation and other similar agreements of the Selling
Companies or the Subsidiaries necessary to the normal operations of their
businesses. Except as disclosed on Schedule 2.13, the Selling Companies and the
Subsidiaries are not involved in or, to the knowledge of Sellers, threatened
with (i) any labor dispute, arbitration, lawsuit or administrative proceeding
relating to labor matters involving the employees of the Selling Companies and
the Subsidiaries (excluding routine workers' compensation claims covered by
insurance), (ii) any unfair labor practice complaint, (iii) any labor strike,
dispute, slowdown, stoppage or other concerted action, (iv) a petition for a
representation election or union attempt to organize employees, (v) a grievance
or any arbitration proceeding arising out of or under any collective bargaining
agreement or any claim therefor or (vi) charges or complaints against the
Selling Companies or Subsidiaries before the Equal Employment Opportunity
Commission or before any other federal, state, local or foreign civil rights
enforcement agency alleging discrimination or any other civil rights violations
on the part of the Selling Companies or Subsidiaries.
Section 2.14. Compliance with Laws. Except for Pre-Closing Claims or except
as set forth on Schedule 2.14, the Sellers, with respect to the Acquired Assets,
and the Subsidiaries, are not, nor have they received any notice that they are
in violation of or in default under, in any material respect, which has not been
cured, any statute, law, executive order, regulation, ordinance, rule, judgment,
order or decree (collectively, "Law") applicable to the Acquired Assets or the
Subsidiaries, including but not limited to, employment matters under the Civil
Rights Laws and Fair Labor Standards Act, pricing and wage matters under the
Economic Stabilization Act of 1970, as amended, safety standards under the
Federal Occupational Safety and Health Act, employee benefit plans under the
Employee Retirement Income Security Act of 1974, as amended, labeling under the
Flammable Fabrics Act, and reporting under the Consumer Product Safety Act, or
any comparable foreign laws. This representation and warranty shall not apply to
Sellers' and Subsidiaries' compliance with Law that are addressed in other
representations and warranties of Sellers under this Agreement, including,
without limitation, Environmental Law and Law relating to labor, Benefit Plan,
or Tax matters. Sellers' representations and warranties with respect to
compliance with such Law are limited to those set forth in those other
representations and warranties.
Section 2.15. Insurance. (a) As of the date hereof, the Selling Companies
and Subsidiaries are covered by valid and currently effective insurance policies
covering their businesses, operations and employees, that, in the reasonable
business judgment of Sellers, are customary for companies of similar size in the
industry in which the Selling Companies operate. Such insurance includes,
without limitation, coverage against all customarily insured risks of loss or
damage, subject to standard policy exclusions, for casualties affecting the
Acquired Assets. All such policies are in full force and effect, all premiums
due thereon have been paid and the Selling Companies have complied in all
material respects with the provisions of such policies. In the last five years,
the historical and current limits have not been exhausted and there have been no
gaps in coverage.
(b) Schedule 2.15. sets forth each insurance policy currently maintained by
the Selling Companies or the Subsidiaries or their affiliates with respect to
the Acquired Assets and the assets of the Subsidiaries and for each policy, the
name of the insurer, Liabilities covered, coverage amounts, whether "claims
made" or "occurrence" basis and name of company carrying policy. All insurance
policies listed on Schedule 2.15 will be maintained and will not be cancelled
prior to the Closing.
Section 2.16. Material Contracts. (a) Schedule 2.16 sets forth a list of
all Assumed Contracts falling into the categories defined below and a list of
all material contracts of Subsidiaries ("Material Contracts"):
(i) any employment, personal service, deferred compensation,
consulting, severance or any other similar agreement or
arrangement relating to present or future compensation or other
benefits or any agreement obligating the Selling Companies or the
Subsidiaries to pay any severance or other payments or benefits
upon termination of any employee of or consultant to the Selling
Companies or the Subsidiaries or upon any change in control of
the Selling Companies or the Subsidiaries in each case involving
an amount in excess of $100,000;
(ii) any promotional or endorsement contracts or agreements relating
to the promotion of products manufactured or sold by the Selling
Companies or the Subsidiaries;
(iii)any franchise, distributor or manufacturer's representative
contract, which is not terminable on six months (or less), notice
without penalty and which involves payment of amounts in excess
of $100,000 over the next twelve (12) month period;
(iv) any joint venture or similar contract or agreement that would be
assumed by Buyer or continued by Subsidiaries;
(v) any contract that is material to the Selling Companies or the
Subsidiaries which is terminable by the other party thereto upon
a merger or change of control of the Selling Companies or the
Subsidiaries or a sale of their assets;
(vi) any contract for the purchase or sale of merchandise, materials,
products or supplies except those made in the ordinary course of
business; or
(vii)any other contract, agreement or arrangement involving an
estimated total future payment or payments in excess of $100,000
and not terminable upon two months (or less) notice, without
penalty.
(b) Prior to the execution of this Agreement, Sellers have made available
to Buyers true and correct copies of all Material Contracts. As of the date
hereof, there is no existing breach or default, or to the Sellers' knowledge,
any event that, with the giving of notice or the lapse of time or both, would
constitute such a breach or default, except for such breaches, defaults and
events as to which requisite waivers or consents have been or are obtained or
which would not have a material adverse effect on any Selling Company or
material Subsidiary. Except as disclosed on Schedule 2.16, to the knowledge of
Sellers, no party to any contract or agreement identified in Schedule 2.16 is
currently threatening to breach or terminate any such contract or agreement.
Section 2.17. Substantial Customers and Suppliers. Sellers have provided to
Buyers, for each of the Selling Companies, a list of the ten (10) largest
customers on the basis of revenues for goods sold or services provided for the
most recent fiscal year and a list of the ten (10) largest suppliers of the
Selling Companies on the basis of cost of goods or services purchased for the
most recent fiscal year. Except as set forth on Schedule 2.17, as of the date
hereof, no such customer or supplier has ceased or materially reduced their
purchases from or sales or provision of services to the Selling Companies since
September 30, 2001, or to Sellers' knowledge, threatened to cease or materially
reduce such purchases or sales or provision of services after the date hereof.
Section 2.18. Distribution and Loans. The Selling Companies and
Subsidiaries have no outstanding loans, notes, bankers' acceptances, letters of
credit, guaranties or similar obligations constituting Assumed Liabilities
except as reflected in the September Balance Sheet or on Schedule 2.18 and
except in the ordinary course of business since September 30, 2001. The Selling
Companies and the Subsidiaries had outstanding letters of credit aggregating
approximately $4,200,000 as of September 30, 2001.
Section 2.19. Investments and Loans Receivable. Except as set forth on
Schedule 2.19, the Selling Companies and the Subsidiaries do not have any
investments in, and have not made any advances to, any firms, persons or
corporations, other than (a) investments in marketable debt or equity
securities, U.S. government securities, bank deposits, bank certificates of
deposit, (b) investments in and advances to Subsidiaries, (c) loans receivable
from customers under special financing arrangements as set forth in Schedule
2.19 and (d) advances to employees in the ordinary course of business.
Section 2.20. Brokers, Finders, etc. Except for the services of Xxxxxxx
Xxxxx Financial, Inc., Sellers have not employed, nor are they subject to any
valid claim of, any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a fee or commission in connection with such transactions. Sellers
are solely responsible for any payment, fee or commission that may be due to
Xxxxxxx Xxxxx Financial, Inc. in connection with the transactions contemplated
hereby.
Section 2.21. Transactions with Affiliates. Except as set forth in the
notes to the Financial Statements or in Schedule 2.21, the Selling Companies and
the Subsidiaries (a) have no outstanding contract, agreement or other
arrangement with LifeStyle or any of LifeStyle's affiliates, including, without
limitation, any tax sharing agreements, which will continue in effect subsequent
to the Closing Date, and (b) have not engaged in any transaction outside the
ordinary course of business, with LifeStyle or its affiliates since September
30, 2001.
Section 2.22. Conduct of Business. Except as set forth in the notes to the
Financial Statements or in Schedule 2.22, since September 30, 2001 the business
of the Selling Companies and Subsidiaries has been conducted in the ordinary and
usual course and consistent with past practice.
Section 2.23. Ownership of Stock. Sellers do not own any capital stock of
the Buyers.
Section 2.24. Material Information. The representations and warranties of
Sellers contained in this Agreement and all certificates and Schedules to this
Agreement furnished by Sellers to Buyers pursuant to this Agreement or in
connection with the transactions contemplated hereby are accurate and complete
in all material respects.
Section 2.25. Disclaimer of Representations and Warranties. Except as
expressly set forth in this Agreement, it is understood and agreed that Sellers
are not making and specifically disclaim any warranties or representations of
any kind or character, express or implied, with respect to or affecting any
Acquired Assets, including, without limitation: (a) the condition,
merchantability, marketability, profitability, suitability or fitness for a
particular use or purpose of the Acquired Assets, (b) the manner or quality of
the construction or materials incorporated into any of the Acquired Assets and
(c) the manner, quality, state of repair or lack of repair of the Acquired
Assets. Buyers agree that except as expressly set forth herein with respect to
the Acquired Assets, Buyers have not relied upon and will not rely upon, either
directly or indirectly, any representation or warranty of Sellers or any agent
of Sellers. Buyers represent that they are knowledgeable buyers and that they
are relying solely on their own expertise and that of Buyers' consultants and
the express representations and warranties contained in this Agreement and the
Schedules hereto. Buyers acknowledge and agree that upon Closing, except as
expressly set forth herein, Seller shall sell and convey to Buyers and Buyers
shall accept the Acquired Assets "AS IS, WHERE IS," with all faults, and there
are no oral agreements, warranties or representations collateral to or affecting
the Acquired Assets by Sellers, any agent of Sellers or any third party, except
as expressly set forth in this Agreement and the Schedules hereto. With respect
to the real property included in the Acquired Assets, except as expressly set
forth in this Agreement and the Schedules hereto, Sellers are not making and
specifically disclaim any warranties or representations of any kind or
character, express or implied including, but not limited to, warranties or
representations as to matters of zoning, tax consequences, physical or
environmental conditions, availability of access, ingress or egress, operating
history or projections, valuation, governmental approvals, governmental
regulations or any other matter or thing relating to or affecting the property.
The terms and conditions of this Section 2.25 shall expressly survive the
Closing. Sellers are not liable or bound in any manner by any verbal or written
statements, representations, or information pertaining to the Acquired Assets
furnished by any real estate broker, agent, employee, servant or other person,
unless the same are specifically set forth herein.
ARTICLE 3
---------
Representations and Warranties of Buyers
----------------------------------------
Buyers jointly and severally represent and warrant to Sellers as follows:
Section 3.1. Incorporation; Authorization; No Conflict; etc. (a) Each of
Buyers (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of their organization; (ii) has all
requisite corporate power and authority to enter into and complete the
transactions contemplated hereby, to own, lease and operate its properties and
assets and to carry on its businesses as they are now being conducted, and (iii)
is or will be by the Closing Date in good standing and duly qualified or
licensed to transact business in each jurisdiction in which the character of the
transactions contemplated hereby requires it be so qualified or licensed, except
where the failure to be so existing and in good standing or to have such power
and authority would not in the aggregate have a material adverse effect on the
business, results of operations or financial condition of Buyers taken as a
whole.
(b) Each of Buyers has full corporate power to execute and deliver this
Agreement, to perform their obligations hereunder and to consummate the
transactions contemplated hereby, including the issuance and sale of the Shares
to Sellers. The execution and delivery of this Agreement by Buyers, the
performance of the obligations of Buyers hereunder and the consummation of the
transactions contemplated hereby, including the issuance and sale of the Shares
to Sellers, have been duly and validly authorized by all necessary corporate
proceedings on the part of each of Buyers and their respective Boards of
Directors and the adoption of this Agreement has been duly approved by Furniture
Brands International as the sole stockholder of Buyer. No other corporate action
on the part of either Buyer or the stockholders of Furniture Brands
International is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby.
(c) The execution and delivery by Buyers of this Agreement does not, and
the performance by Buyers of their obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:
(i) conflict with or result in a violation of any of the terms,
conditions or provisions of the certificate of incorporation or
by-laws (or other comparable corporate charter documents) of
Buyers;
(ii) violate any provision of, or be an event that is (or with the
passage of time will result in) a default under (or give rise to
any right of termination, cancellation or acceleration of) any of
the terms, conditions or provisions of any note, bond, lease,
mortgage, indenture, license, agreement or other instrument or
obligation to which Buyers are a party, or by which Buyers or any
of their properties or assets may be bound; or
(iii)except as disclosed in Schedule 3.1(c), result in the creation
or imposition of any lien, security interest or other encumbrance
upon Buyers or any of their respective assets and properties
under, any contract, agreement (whether written or oral), lease,
deed, mortgage, indenture, evidence of indebtedness, security
agreement or other instrument, or any license, permit,
certificate of authority, authorization, approval, registration
or franchise to which Buyers are a party or by which any of their
respective assets and properties is bound.
(d) This Agreement has been duly and validly executed and delivered by each
of Buyers and, assuming the due execution hereof by Sellers, this Agreement
constitutes the legal, valid and binding obligation of Buyers, enforceable
against each of them in accordance with their terms, except to the extent that
such validity, binding effect and enforceability may be subject to or limited by
(i) bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to or
affecting the rights of creditors generally, and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity.
(e) Except for the filing of a Notification and Report Form pursuant to the
HSR Act, the Exchange Act, the Securities Act, the Delaware General Corporation
Law and state securities or blue sky laws, and except as set forth on Schedule
3.1(e), no consent, license, permit, order, approval or action of, filing with
or notice to any federal, state, local or foreign governmental, judicial or
regulatory authority on the part of Buyers are required in connection with the
execution, delivery and performance by Buyers of this Agreement and the
consummation of the transactions contemplated hereby, except for (i) those that
become applicable solely as a result of the specific regulatory status of
Sellers or any of their affiliates, (ii) compliance with applicable federal and
state securities laws, and (iii) the failure to make, file, give or obtain which
would not in the aggregate have a material adverse effect on the business,
results of operations or financial condition of the Buyers taken as a whole or
prevent the consummation of the transactions contemplated hereby.
(f) Upon consummation of the sale and purchase of the Acquired Assets and
the assignment and assumption of the Assumed Liabilities at the Closing, as
contemplated by this Agreement, Furniture Brands International will deliver to
the Selling Companies the Purchase Price including title to the Shares free and
clear of any liens, claims, charges, restrictions, security interests, options
or other legal or equitable encumbrances, except as noted in the Registration
Rights Agreement .
Section 3.2. Capitalization; Structure. (a) The authorized capital stock of
Furniture Brands International consists of 100 million shares of $1.00 stated
value Common Stock of which 50,592,530 shares are outstanding as of October 2,
2001. The authorized and outstanding stock will not materially change through
Closing. All such outstanding shares of Common Stock are, and all of the Shares
to be issued in this transaction, when so issued, will be, duly authorized,
validly issued, outstanding, fully paid and nonassessable and free of preemptive
rights, and owned of record and beneficially by the Selling Companies free and
clear of any liens, claims, charges, security interests, options or other legal
or equitable restrictions encumbrances, subject only to the Rights Agreement.
Other than the Rights Agreement and stock options issued in the ordinary course
of business pursuant to Buyer's existing long-term incentive plans, there are
currently no outstanding options, rights, warrants or other securities or
contractual obligations binding upon Furniture Brands International or its
stockholders that enable the holder or holders thereof to purchase or otherwise
acquire shares of the Common Stock.
Section 3.3. Brokers, Finders, etc. Buyers have not employed, and are not
subject to any valid claim of, any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by this Agreement
who might be entitled to a fee or commission in connection with such
transactions.
Section 3.4. Litigation; Orders. Except as disclosed in Schedule 3.4, as of
the date hereof, there is no Action pending or, to the knowledge of Buyers
threatened, against or relating to or affecting the Buyers which could
reasonably be expected to result in the issuance of any order, writ, injunction
or judgment restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or if
determined adversely to the Buyers could reasonably be expected to have a
material adverse effect on the business, results of operations or financial
condition of either of the Buyers. Except as set forth in Schedule 3.4, there
are no material orders, writs, judgments, decrees, injunctions stipulations or
awards (whether rendered by a court or administrative agency, or by arbitration)
affecting the Common Stock outstanding against Buyers. There is no litigation
pending or, to the knowledge of the Buyers, threatened, against the Buyers,
which is not adequately covered by insurance and which if determined adversely
to the Buyers could reasonably be expected to have a material adverse effect on
the business, results of operations or financial condition of the Buyers or
which may restrict or interfere with their ability to perform this Agreement.
Section 3.5. Sufficient Funds. Buyers have sufficient funds available to
pay the Purchase Price in full and to perform all of their obligations
hereunder.
Section 3.6. Material Information. The representations and warranties of
Buyers contained herein, and the Certificates and Schedules to this Agreement
provided by Buyers to Sellers hereunder are accurate and complete. Buyers have
not made any untrue statement of facts to Sellers or omitted to state a fact
necessary to make the statements made by Buyers not misleading.
Section 3.7. SEC Filings. The Annual Report on Form 10-K for the year ended
December 31, 2000 and the Quarterly Report on Form 10-Q for the period ended
September 30, 2001 filed by Furniture Brands International with the Securities
and Exchange Commission (the "SEC"), including all exhibits thereto
(collectively, the "SEC Documents"), complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, as in effect
on the dates so filed. None of the SEC Documents (as of their respective filing
dates) contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Buyers have heretofore made available to Sellers copies of
the SEC Documents.
Section 3.8. Material Adverse Change. Since September 30, 2001 there has
not been any material adverse change in the business condition, results of
operations or financial condition of the Buyers.
ARTICLE 4
---------
Covenants of Sellers and Buyers
-------------------------------
Section 4.1. Investigation of Business; Access to Properties, Records and
Employees. (a) After the date hereof and up to the Closing Date, Sellers shall
afford to representatives of Buyers, including Buyers' legal and financial
advisors, reasonable access to the respective offices, plants, properties, books
and records, files, stock books and minute books, books of account and copies of
tax returns of the Selling Companies and Sellers where appropriate relating to
the Acquired Assets and the Subsidiaries during normal business hours, in order
that Buyers may have full opportunity to make such investigations as they
reasonably desire of the affairs of the Selling Companies and their
Subsidiaries, their financial condition, corporate status, Liabilities,
contracts, business operations, property and title thereto, litigation, patents,
trademarks, copyrights and other matters relating to the business, properties
and assets of the Selling Companies and their Subsidiaries; provided, however,
that such investigation shall be conducted in such a manner that it does not
unreasonably disrupt the personnel or operations of Sellers. Sellers shall cause
their respective personnel to assist Buyers in making such investigation, and to
make their counsel, accountants, employees and other representatives reasonably
available for such purposes. If, after the date hereof, and prior to the
Closing, in the course of any investigation pursuant to this Section 4.1, Buyers
discover any breach of any representation or warranty contained in this
Agreement or any circumstance or condition that upon Closing would constitute
such a breach, Buyers shall promptly so inform Sellers of such fact, provided,
however, that the failure so promptly to inform Sellers shall not constitute a
default under the Agreement, but shall be deemed a waiver of Buyers' right to
claim damages as a result of such breach. In the case where Buyers have given
prompt notice, then notwithstanding the Closing, any damages as a result of such
breach shall be applied to the Indemnification, Basket and Cap under the terms
of Article 9.
(b) During their investigation as aforesaid, Buyers shall have the right to
make copies of any such records, files, tax returns and other materials relating
solely to the business operations of Selling Companies, the Subsidiaries, the
Acquired Assets, and the Assumed Liabilities as they may deem advisable. Prior
to the Closing Date, Buyers and their representatives will protect and maintain
strictly confidential all information relating to the Selling Companies obtained
by them hereunder or otherwise which is not otherwise publicly available and
will not use or disclose such information for any purpose unrelated to the
consummation of the transactions contemplated hereby, unless and until such time
as such information is otherwise publicly available or as Buyers are advised by
counsel that such information is required by law to be disclosed. In the event
this Agreement is terminated, Buyers and their representatives agree to return
promptly, if so requested by Sellers, every document furnished to Buyers and
their representatives by Sellers in connection with the transactions
contemplated hereby and any copies thereof Buyers and their representatives may
have made and to use their best efforts to cause their representatives to whom
such documents were furnished promptly to return or destroy such documents and
any copies thereof any of them may have made. The undertakings of this Section
are of the essence and shall survive any termination or abandonment of the
transaction.
(c) After Closing, the Selling Companies will retain all of the Selling
Companies' books and records not included in the Acquired Assets, including
without limitation those referenced in Section 1.1(n) as being excluded from the
Acquired Assets. All other books and records will be delivered to Buyers at
Buyers' request including without limitation copies of any appropriate documents
contained in the Data Room compiled for due diligence in this matter that have
not been copied previously by Buyers and that relate to the Acquired Assets and
the Subsidiaries. Subject to the foregoing, Buyers agree (i) to hold all of the
books and records included in the Acquired Assets of the Selling Companies
delivered to Buyers on the Closing Date and not to destroy or dispose of any
thereof for a period of seven (7) years from the Closing Date or such longer
time as may be required by law, and thereafter, if it desires to destroy or
dispose of such books and records, to offer first in writing at least 60 days
prior to such destruction or disposition to surrender them to the Selling
Companies, and (ii) following the Closing Date, to afford Sellers, their
representatives, accountants and counsel, during normal business hours, upon
reasonable request, at any time, full access to such books, records and other
data and to the employees of the Selling Companies to the extent that such
access may be requested for any legitimate purpose at no charge to Sellers
(other than for reasonable out-of-pocket expenses); provided, however, that (i)
nothing in this Agreement shall limit any of Sellers' rights of discovery, (ii)
Sellers agree that all such non-public information shall be held strictly
confidential, and (iii) Buyers shall not have any liability for the accidental
loss or destruction of any such records. Buyers shall have the same rights, and
Sellers the same obligations, as are set forth above in this Section 4.1(c) with
respect to the records of the Selling Companies pertaining to the Selling
Companies that are retained by the Selling Companies.
(d) Buyers agree to cooperate with Sellers in the preparation for and
prosecution of the defense of any Action arising out of or relating to any
Excluded Liability, including, without limitation, (i) by affording to
representatives of Sellers reasonable access to their offices, plants,
properties, books and records during normal business hours in order that Sellers
may have full opportunity to make such investigations as may be necessary in
connection therewith; provided, however, that such investigation shall not
unreasonably disrupt the personnel and operations of Buyers, and (ii) by making
available evidence within the control of Buyers and persons needed as witnesses
employed by Buyers in each case as reasonably needed for such defense; provided,
however, that Sellers hereby covenant and agree not to disclose any of such
information that is confidential or proprietary except as may be necessary for
the purposes for which such information is obtained. Sellers shall reimburse
Buyers for their out of pocket costs relating to their cooperation under this
subparagraph.
(e) Sellers agree to cooperate with Buyers in the preparation for and
prosecution of the defense of any Action arising out of or relating to any
Assumed Liability, including, without limitation, (i) by affording to
representatives of Buyers reasonable access to their offices, plants,
properties, books and records during normal business hours in order that Buyers
may have full opportunity to make such investigations as may be necessary in
connection therewith; provided, however, that such investigation shall not
unreasonably disrupt the personnel and operations of Sellers, and (ii) by making
available evidence within the control of Sellers and persons needed as witnesses
employed by Sellers in each case as reasonably needed for such defense;
provided, however, that Buyers hereby covenant and agree not to disclose any of
such information that is confidential or proprietary except as may be necessary
for the purposes for which such information is obtained. Buyers shall reimburse
Sellers for their out of pocket costs relating to their cooperation under this
subparagraph.
(f) The letter agreement dated June 7, 2001 between Sellers and Buyers (the
"Confidentiality Agreement") shall remain binding upon the parties thereto and
in full force and effect, and the terms of the Confidentiality Agreement are
incorporated in this Agreement by reference.
Section 4.2. Best Efforts; Obtaining Consents. (a) Subject to the terms and
conditions in this Agreement, Sellers and Buyers each agree to use their
reasonable best efforts to take or cause to be taken all actions, and to do or
cause to be done all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with the others in connection with the foregoing,
including using their reasonable best efforts:
(i) at no expense to Sellers, to obtain all necessary waivers,
consents and approvals from other parties to loan agreements,
leases and other contracts,
(ii) to obtain all consents, approvals and authorizations that are
required to be obtained under any federal, state, local or
foreign law or regulation,
(iii)to lift or rescind any injunction or restraining order or other
order (except such order as may have been secured by any
governmental agency) adversely affecting the ability of the
parties to this Agreement to consummate the transactions
contemplated hereby, and
(iv) to fulfill all conditions to this Agreement.
Each party further covenants and agrees, with respect to any threatened or
pending preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order (except such orders, decrees, etc.
which may have been secured by any governmental agency) that would adversely
affect the ability of the parties to consummate the transactions contemplated
hereby, to use their best efforts to prevent the entry, enactment or
promulgation thereof, as the case may be.
(b) Without limiting the generality of the foregoing, Buyers shall (i) take
promptly all actions necessary to make the filings required of Buyers under the
HSR Act and seek early termination of the applicable waiting period under the
HSR Act, (ii) comply at the earliest practicable date with any request for
additional information or documentary material received by Buyers from the
Federal Trade Commission or the Antitrust Division of the Department of Justice
pursuant to the HSR Act, and (iii) cooperate with Sellers in connection with any
filing of Sellers under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by this
Agreement commenced by either the Federal Trade Commission or the Antitrust
Division of the Department of Justice or state attorneys general. Buyers will
pay the HSR Act filing fee.
(c) In furtherance and not in limitation of the foregoing, each party shall
use its reasonable best efforts to resolve such objections, if any, as may be
asserted with respect to the transactions contemplated hereby under any
Antitrust Law (as defined in this Agreement). If any suit is instituted
challenging any of the transactions contemplated hereby as violative of any
Antitrust Law, each party shall use all reasonable efforts to take such action
as may be required (i) by the applicable governmental authority in order to
resolve such objections as such governmental authority may have to such
transactions under such Antitrust Law, or (ii) by any court or similar tribunal,
in any suit brought by a private party or governmental authority challenging the
transactions contemplated hereby as violative of any Antitrust Law, in order to
avoid the entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order that has the effect of preventing the
consummation of any of such transactions.
(d) Each party hereto shall promptly inform the others of any communication
from the United States Federal Trade Commission, the Department of Justice or
any other governmental authority regarding any of the transactions contemplated
hereby. If any party hereto or any affiliate thereof receives a request for
additional information or documentary material from any such governmental
authority with respect to the transactions contemplated hereby, then such party
will endeavor in good faith to make or cause to be made as soon as reasonably
practicable and after consultation with the other parties, an appropriate
response in compliance with such request. Buyers and Sellers will advise the
other promptly in respect of any understandings, undertakings or agreements
(oral or written) which Buyers or Sellers, as the case may be, propose to make
or enter into with the Federal Trade Commission, the Department of Justice or
any other domestic or foreign government or governmental authority in connection
with the transactions contemplated hereby.
(e) "Antitrust Law" means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal, state and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
Section 4.3. Lockup; Registration Rights. At Closing, Buyers and Sellers
will enter into a Registration Rights Agreement in the form attached hereto as
Exhibit 4.3.
Section 4.4. Further Assurances; Time of Essence. The parties hereto agree
(a) to furnish upon request to each other such further information, (b) to
execute and deliver to each other such other documents, and (c) to do such other
acts and things, all as the other party may reasonably request for the purpose
of carrying out the intent of this Agreement and to vest Buyers with full right,
title and possession to all Acquired Assets and Assumed Liabilities and Sellers
with full and unrestricted rights to the Shares pursuant to the Registration
Rights Agreement attached hereto and except as therein provided. With regard to
all dates and time periods set forth or referred to in this Agreement, time is
of the essence.
Section 4.5. Conduct of Business. From the date hereof through the Closing
Date, or until the transaction contemplated hereby shall have been terminated as
provided in this Agreement, except as otherwise provided for in or contemplated
by this Agreement, and except as consented to or approved by Buyers in writing,
Sellers covenant as follows:
(a) the Selling Companies and Subsidiaries shall operate their businesses
in the ordinary and usual course in all material respects in accordance with
past practice, and shall maintain their records and books of account in a manner
that fairly and accurately reflects their income, expenses, assets and
Liabilities in accordance with past practice and United States generally
accepted accounting principles consistently applied, and shall use commercially
reasonable efforts to operate and maintain their businesses in such a manner as
is designed to avoid any material adverse effect on any Selling Company;
(b) the Selling Companies and Subsidiaries shall not:
(i) make any investment of a capital nature in any other firm or
corporation, either by the purchase of stock or securities, by
contributions to capital or by property transfers or otherwise,
or purchase any material amount of property or assets of any
other individual, firm or corporation;
(ii) waive or release any rights of material value or allow or effect
any sale, assignment, abandonment or transfer by the Selling
Companies or Subsidiaries of, or any failure to renew any
registration relating to, any rights with respect to the Selling
Companies' or Subsidiaries' Intellectual Property or License
Agreements; or
(iii)close or discontinue operations in any plants or any other
facilities (other than pursuant to plans being implemented as of
the date hereof with respect to facilities not included as
Acquired Assets), or knowingly permit any material change in the
business of the Selling Companies, the Subsidiaries or in
relationships with material suppliers, customers, landlords or
others;
(c) except in the ordinary course of business consistent with past
practice, or as otherwise provided for in or contemplated by this Agreement, the
Selling Companies and the Subsidiaries shall not:
(i) sell, lease, transfer or otherwise dispose of or make any
commitment to sell, lease, transfer or otherwise dispose of
Acquired Assets or assets of the Subsidiaries;
(ii) acquire or make any commitment to acquire any material assets as
to the Subsidiaries, or that would constitute Acquired Assets or
create Assumed Liabilities;
(iii)except for the cancellation of all intercompany accounts with
LifeStyle and its affiliates outstanding at the Closing Date,
cancel, compromise, release or assign any debts owed to it that
are Acquired Assets or those owed to the Subsidiaries;
(iv) create or permit to exist any new security interest, lien or
encumbrance on the Acquired Assets or Assumed Liabilities or the
assets of the Subsidiaries other than Permitted Liens;
(v) (i) incur or assume any long-term debt or, except in the ordinary
course of business or under existing lines of credit, incur or
assume any short-term debt; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for any liability of another party; or
(iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than loans or advances to
the Subsidiaries and customary loans or advances to customers or
employees in accordance with past practices), in each case to the
extent such debt, guaranty, loan or advance would be an Assumed
Liability or a liability of a Subsidiary;
(vi) enter into any contract or commitment of any kind not terminable
on notice of sixty (60) days or less, or enter into any lease,
license, royalty or union agreement, or any joint venture,
partnership or other similar arrangement or form any other new
arrangement for the conduct of their businesses to the extent any
of the foregoing would result in any Assumed Liability hereunder
or a liability of a Subsidiary;
(vii) allow or effect any material change in the historical policies
of the Selling Companies or Subsidiaries regarding the prices,
credit terms or other terms of sale with respect to any of their
merchandise, commodities, products or product lines;
(viii) allow or effect any material change in the level of inventory
of the Selling Companies or Subsidiaries for the time of year
involved;
(ix) allow or effect any material change in (x) any investment,
accounting, financial reporting, inventory or tax practice or
policy of the Selling Companies or Subsidiaries or (y) any method
of calculating any bad debt, contingency or other reserve of the
Selling Companies or Subsidiaries for accounting, financial
reporting or tax purposes;
(x) incur any Liabilities that would be required to be reflected or
reserved against in a consolidated balance sheet of the Selling
Companies prepared in accordance with U.S. generally accepted
accounting principles consistently applied.
(d) except as required by law or contractual obligations or other
understandings or arrangements existing on the date hereof, and other than
salary increases and bonuses consistent with past practice, the Selling
Companies and Subsidiaries shall not:
(1) increase in any manner the compensation or fringe benefits of, or
enter into any new bonus or incentive agreement or arrangement
with, any of their directors or officers or other key employees;
(2) pay or agree to pay any pension, retirement allowance or other
employee benefit to any such director, officer or key employee,
whether past or present if such payment or agreement would be an
Assumed Liability of Buyer hereunder or liability of a
Subsidiary;
(3) enter into any new employment, severance, management, consulting
or other compensation agreement with any director, officer or key
employee, whether past or present; or,
(4) commit itself to any additional bonus, profit sharing,
compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement,
deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements of
or for the benefit or welfare of any employee of the Selling
Companies or Subsidiaries, or (except as may be required by law)
terminate, amend or commit itself to terminate or amend any of
such plans, funds or similar arrangements in existence on the
date hereof if such payment or agreement could become a liability
of Buyer hereunder or a liability of a Subsidiary;
(e) provided, however, that in no event shall Sellers be deemed to have
breached or violated any covenant contained in this Section by reason of any
action taken, other than at the express request of Sellers, by any officer,
director or affiliate of Buyers, or at the request or direction of any such
person.
Section 4.6. Additional Covenants of Buyers. Prior to the Closing Date,
except as otherwise consented to by Sellers in writing, Buyers shall not (a)
repurchase, or permit any of their affiliates or "control persons" (as defined
in Rule 144) to acquire, shares of the Common Stock of Furniture Brands
International; (b) except in the ordinary course of business pursuant to Buyers'
existing long-term incentive plans, and except as required by the terms of the
Rights Agreements, issue any shares of Common Stock or any options, rights,
warrants or other securities or contractual obligations enabling any person to
acquire any shares of Common Stock; or (c) communicate with the employees of the
Selling Companies without the express consent of LifeStyle. Within a reasonably
short transition time after the Closing Date not to exceed thirty (30) days,
Buyers shall remove LifeStyle's names, trade names, logos and similar indicia
from all Acquired Assets, including without limitation, sales, marketing and
shipping materials.
Section 4.7. Acquisition Proposals. Sellers shall not, and shall use their
best efforts to cause their officers, directors and employees, and investment
bankers, attorneys, accountants and other agents retained by Sellers not to, (i)
initiate or solicit, directly or indirectly, any inquiries or the making of any
proposal for the acquisition of the Acquired Assets and/or the Assumed
Liabilities, or (ii) engage in negotiations or discussions with, or furnish any
information or data to, any third party relating to the acquisition of the
Acquired Assets and/or Assumed Liabilities.
Section 4.8. Preservation of Business. Subject to the terms and conditions
of this Agreement, Sellers shall use all reasonable efforts to preserve the
businesses of the Selling Companies and Subsidiaries intact, to keep available
to the Selling Companies and Subsidiaries the services of the employees of the
Selling Companies and Subsidiaries, and to preserve the goodwill of customers
and others having business relations with the Selling Companies and Subsidiaries
other than closure or transfer of those portions of the businesses constituting
any Excluded Asset.
Section 4.9. Public Announcements. Sellers and Buyers will not issue, and
will not permit any agent, affiliate or representative to issue, any press
releases or otherwise make, or permit any agent, affiliate or representative to
make, any public statements with respect to this Agreement or the transactions
contemplated hereby, unless all parties shall have mutually agreed upon the
language of any such statement or release. Sellers and Buyers will consult with
each other concerning the means by which the Selling Companies' employees,
customers, and suppliers and others having dealings with the Selling Companies
will be informed of the transactions contemplated hereby, and Buyers will have
the right to be present for any such communication.
Section 4.10. Non-Solicitation; Trade Secrets. (a) For a period of one year
following the Closing Date, Sellers will not, directly or indirectly, without
the prior written approval of Buyers, initiate the solicitation of any person
who is an officer, executive, agent or employee of the Selling Companies or any
of their subsidiaries as of the Closing Date, to terminate his or her employment
by or services to Buyers; provided, however, that the foregoing shall not
prohibit Sellers from soliciting and hiring through general advertising not
specifically targeted to such an officer, executive, agent or employee.
(b) After the Closing Date, Sellers will, and will cause their respective
subsidiaries to, keep strictly confidential, and not use or disclose, directly
or indirectly, any customer lists, marketing, sales or product strategies or
plans, trade secrets, proprietary rights or other confidential information of
the Selling Companies or their Subsidiaries as the same is related to the
Acquired Assets and/or Assumed Liabilities or Subsidiaries, except (i) as and to
the extent required by applicable law after prior written notice thereof has
been provided to Buyers, or (ii) such information has been publicly disclosed
other than by Sellers or the Subsidiaries.
(c) Sellers and Buyers agree that any remedy at law for any breach by them
of this Section 4.10 and Section 4.1(b) and (f) would be inadequate, and the
non-breaching party would be entitled to injunctive relief in such a case.
(d) Each provision of this Section 4.10 shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Section 4.10 shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision, the remaining provisions
of this Section 4.10 or any other provision of this Agreement. Any such
provision may be reformed by a Court to give such provision as much effect as to
the intent of the provision as the law shall allow.
Section 4.11. Guaranties. (a) With respect to the guaranties and letters of
credit listed in Schedule 4.11 (the "Guaranties"), Buyers shall use their best
efforts (which need not, however, include incurring any cost or agreeing to any
modifications of the terms of the underlying obligations) to cause themselves to
be substituted in all respects for, and to release, Sellers, Masco Corporation
and any other guarantor from any obligations arising under such Guaranties
effective as of the Closing Date. If Buyers are unable to effect such a
substitution and release with respect to any such Guaranty after using best
efforts to do so, (i) at the Closing Buyers will deliver their agreement,
reasonably satisfactory to Sellers, to indemnify such guarantors for any loss or
liability sustained under any such Guaranty on or after the Closing Date, and
(ii) such guarantors shall thereafter have the right to cancel and release all
such Guaranties. To Sellers' knowledge, there are no Guaranties other than those
listed on Schedule 4.11.
(b) Sellers agree to notify Dun & Bradstreet of the termination of Sellers'
ownership of the Acquired Assets and Assumed Liabilities immediately after
Closing. Buyers agree to take such ministerial action as Sellers may reasonably
request to notify any person who is a beneficiary of any such Guaranty of the
termination of Sellers' ownership of the Acquired Assets and Assumed
Liabilities, and to certify to such notification.
Section 4.12. Performance of the Selling Companies' Obligations. Buyers
agree from and after the Closing Date to timely perform and fulfill all of the
obligations and commitments represented by the Assumed Liabilities as and when
due, whether existing as of the Closing Date or arising or incurred thereafter.
Section 4.13. Post-Closing Cooperation. Prior to, at and for ninety (90)
days after the Closing, Sellers shall reasonably cooperate, at no expense to
Sellers and subject to available personnel resources, with Buyers in connection
with the initiation by Buyers of administrative, accounting, tax, personnel,
legal and management functions previously provided by Sellers with respect to
the businesses of the Selling Companies. Such cooperation shall include, but not
be limited to, the provision by Sellers of any documents (or copies thereof)
reasonably requested by Buyers which relate to Acquired Assets or Assumed
Liabilities and the provision to Buyer of reasonable access to Sellers'
personnel with respect to such administrative, accounting, tax, personnel, legal
and management functions.
Section 4.14. Insurance. (a) Sellers shall look solely to the insurance
policies noted in Section 2.15 hereof and those maintained by Sellers over the
past five years (collectively, the "Sellers' Insurance Policies"), with respect
to any loss, liability, claim, damage or expense relating to the assets,
business, operations, conduct, products and employees (including former
employees) of the Selling Companies which is or was covered under Sellers'
Insurance Policies (without regard to deductibles) and which relates to or
arises out of occurrences on or prior to the Closing Date, including, without
limitation, all such workers compensation, general liability, and automobile
liability claims (a "Pre-Closing Claim"). Neither Buyers nor their affiliates
shall have any responsibility for obtaining any insurance or bearing any loss,
liability, claim, damage or expense relating to any Pre-Closing Claims. Sellers
shall receive and retain all reserves related to, shall be solely liable for,
and shall indemnify Buyers against all Pre-Closing Claims.
(b) Buyers shall look solely to the insurance policies maintained by Buyers
after the Closing Date (collectively, the "Buyers' Insurance Policies"), with
respect to any loss, liability, claim, damage or expense relating to the assets,
business, operations, conduct, products and employees (including former
employees) of the Selling Companies which is covered under Buyers' Insurance
Policies (without regard to deductibles) and which relates to or arises out of
occurrences after the Closing Date, including, without limitation, all workers
compensation, general liability, and automobile liability claims (a
"Post-Closing Claim"). Neither Sellers nor their affiliates shall have any
responsibility for obtaining any insurance or bearing any loss, liability,
claim, damage or expense relating to any Post-Closing Claims. Buyers shall
establish all reserves related to, shall be solely liable for, and shall
indemnify Sellers against all Post-Closing Claims.
Section 4.15. Intercompany Accounts. At Closing, any account receivable or
account payable between the Selling Companies and any of their affiliates,
including LifeStyle, and the Subsidiaries or between the Subsidiaries will be
satisfied and cancelled and not forgiven. From and after the Closing Date,
Buyers will have no obligations to Sellers or rights with respect to any such
intercompany accounts.
Section 4.16 Additional Covenants of Sellers. (a) At or prior to Closing,
Sellers shall cause any of their other affiliates to transfer any assets owned
by them and used primarily in the business of the Subsidiaries, including but
not limited to, Selling Companies Intellectual Property, to the Subsidiaries as
directed by Buyers.
(b) As to those contracts held in the name of Lifestyle or another
Lifestyle affiliate wherein the entire contract or a part of the contract is for
the benefit of the operations of Selling Companies or Subsidiaries, Sellers
shall make assignments for these contracts, or the benefits of those parts of
contracts to be assigned to the appropriate Selling Company or Subsidiary prior
to Closing subject to obtaining all the required consents and approvals as
described in Schedule 2.1(c).
(c) Any cash or cash equivalent delivered to the lock boxes and bank
accounts of the Selling Companies after the Closing Date shall be delivered to
the Buyers. Sellers shall use their reasonable best efforts to provide Buyers an
assignment of all lock boxes and bank accounts, maintained for the Selling
Companies and the Subsidiaries in form reasonably satisfactory to Buyers.
Sellers shall advise the banks and financial institutions where the lock boxes
and bank accounts are maintained of the desired assignment and any necessary
instructions as to any withdrawals from the lock boxes and records. New
signature and authorization documents and any other documents reasonably
required by the banks and financial institutions to make the transfer shall be
executed and delivered.
(d) No later than fifty (50) days after the date Buyers file an 8-K with
respect to this transaction (the "8-K"), Sellers shall deliver to Buyers true
and complete copies of the audited consolidating and combined balance sheets,
income statements and cash flow statements with all notes thereto of the Selling
Companies (collectively, "Audited Statements") as of and for the year ended
December 31, 2000. If in connection with the 8-K, the Buyers are required to
file copies of Sellers' Audited Statements as of and for the year ending
December 31, 2001, Sellers shall deliver to Buyers copies of those Audited
Statements not later than three business days prior to the date by which the
Buyers are required to file them.
(e) Between the date hereof and Closing in order that the 10% ownership
limitation provision in Section 1.4 is not triggered, Sellers shall not acquire
any capital stock of Buyers.
ARTICLE 5
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Employee Benefits
-----------------
Section 5.1. Employee Benefit Plans. (a) Except to the extent reflected on
the Closing Balance Sheet (which shall include Liabilities under Selling
Companies Employee Benefits Plans only if such Plans are referenced in Schedule
5.1(a)), Buyers do not assume any Liabilities under any Selling Companies
Employees Benefit Plans as defined herein. Sellers shall retain all such plans,
and Liabilities thereunder. Sellers represent and warrant to Buyers as follows:
(b) Schedule 5.1(b) lists all written compensation and benefit plans,
contracts and arrangements of the Sellers (other than routine administrative
procedures) in effect as of the date hereof including, without limitation, all
written pension, profit sharing, savings and thrift, bonus, incentive, deferred
compensation, equity based compensation, severance pay, medical, life insurance,
and other material welfare plans of the Selling Companies or any of their
affiliates in which any current or former employees of the Selling Companies
("Selling Companies Employees") or their beneficiaries participate, other than
Foreign Benefit Plans (as defined in Section 5.7), (collectively, "Selling
Companies Employee Benefit Plans"). With respect to each Selling Companies
Employee Benefit Plan, the Sellers have made or will make available to Buyers
true, correct and complete copies of all of the following: (i) all documents
which comprise the plan, including the most current version of the plan and any
subsequent amendments (including a description of any such plan that is not in
writing); (ii) any related trust agreements, master trust agreements, pension
contracts, or insurance contracts; (iii) investment management agreements or
custodial agreements; (iv) fiduciary liability insurance policies; (v) all
rulings, determination letters, no-action letters or advisory opinions issued by
the Internal Revenue Service, the United States Department of Labor, the Pension
Benefit Guaranty Corporation ("PBGC") or any other governmental body that
pertain to the plan and any open requests therefor; and (vi) the most recent
actuarial and financial reports (audited and/or unaudited) and the annual
reports filed with each of the three preceding years.
(c) Except as set forth in Schedule 5.1(c), all Selling Companies Employee
Benefit Plans which are "employee benefit plans", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (together with
any successor statute, and any rules or regulations promulgated thereunder,
"ERISA"), in all material respects are in compliance with and have been
administered in compliance with all applicable requirements of law, including
but not limited to the Code and ERISA.
(d) Except as otherwise set forth in Schedule 5.1(d), Sellers do not, nor
have they during the 5-year period ending at the Closing Date, sponsored,
contributed to, or been obligated to contribute to any plan subject to Title IV
of ERISA or any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(e) Assuming compliance by Buyers with their obligations under Sections 5.5
and 5.6, the consummation of the transactions contemplated by this Agreement,
other than by reason of Buyers' actions following the Closing, will not create
any Assumed Liability to pay any current or former Selling Companies Employee
any severance pay, unemployment compensation, or increase in the amount of any
compensation, nor accelerate the time of payment or vesting of any such payment,
except as disclosed on Schedule 5.1(e) or as provided in Section 5.6. Sellers
acknowledge that Selling Companies Employees who decline Buyers' offer of
employment shall not be entitled to severance pay from Sellers.
Section 5.2. Termination of Participation. The plan documents with respect
to the Selling Companies Employee Benefit Plans do not obligate Buyers to
continue any of Selling Companies Employee Benefit Plans or benefits thereunder
for those Selling Companies Employees who become employed with Buyers as a
result of the transactions contemplated herein. The active participation of each
Selling Companies Employee in each Selling Companies Employee Benefit Plan shall
cease as of such Selling Companies Employee's Hire Date pursuant to the terms of
each such Plan. For each Selling Companies Employee who is Actively at Work on
the Closing Date the Hire Date shall be the Closing Date, and for each other
Selling Companies Employee the Hire Date shall be the date on which such Selling
Companies Employee returns to Active Employment with Sellers. Actively at Work
or Active Employment means the performance of work by a Selling Companies
Employee either at his or her customary place of employment or such other place
or places required in the course of performing duties and responsibilities
generally for the regular assigned number of hours and at the base rate of pay
in accordance with the established employment practices of the Selling
Companies. A Selling Companies Employee shall be considered to be Actively at
Work on any regular nonworking day provided that the Selling Companies Employee
had been actively at work on the regular working day immediately preceding such
nonworking day.
Section 5.3. Retirement Plan. The Sellers shall retain all assets and
Liabilities under The LifeStyle Retirement Plan (the "Retirement Plan").
Section 5.4. Sellers' Obligations. (a) The Sellers shall be responsible for
the payment of all wages and other remuneration due to Selling Companies
Employees who are Actively at Work on the Closing Date with respect to their
services as Selling Companies Employees through the close of business of the
Sellers on the Hire Date, and for the payment of all wages and other
remuneration due to each other Selling Companies Employees, through the close of
business on the business day of the Sellers immediately preceding the Hire Date
(in each case except to the extent such payment responsibilities are reflected
on the Closing Balance Sheet, it being acknowledged and agreed that the Closing
Balance Sheet shall reflect Liabilities under Selling Companies Employee Benefit
Plans only if such Plans are referenced in Schedule 5.1(a)) and, subject to
compliance by Buyers with their hiring obligations set forth in Section 5.5, any
and all payments required under the WARN Act for employees terminated by Sellers
prior to the Closing Date.
(b) Sellers shall be responsible for the administration of and shall assume
any and all obligations arising after the date hereof under the continuation
coverage requirements of Section 4980B of the Code (as amended) with respect to
any Selling Companies Employees who are terminated by the Sellers or have a
qualifying event prior to the Hire Date.
(c) Sellers will permit Buyers to have access to the Selling Companies and
the Subsidiaries records for all current employees of the Selling Companies and
the Subsidiaries.
(d) To the knowledge of the Sellers, no current officer, director or
employee of the Selling Companies is bound by any Contract that purports to
limit the ability of such officer, director, or employee to engage in or
continue or perform any conduct, activity, duties or practice relating to the
business of the Selling Companies.
Section 5.5 Buyers' Obligations. On the Closing Date, Buyers shall offer
comparable employment to all current employees of the Selling Companies who are
Actively at Work at the locations included in the Acquired Assets.
Notwithstanding, Buyers have no obligation to hire any employees of the
LifeStyle Leather Products operations of Drexel Heritage, as such operations are
not being sold to Buyers. With respect to Selling Companies Employees who are
not Actively at Work on the Closing Date, Buyers shall offer comparable
employment to such individuals on the date they return to Active Employment.
Buyers agree to waive all pre-existing condition provisions and all waiting
period provisions under their group medical insurance plan for all Selling
Companies Employees who are hired by Buyers, and to recognize all accrued
vacation. On or before the Closing Date, Buyers shall establish a group medical
insurance plan with CIGNA for all Selling Companies Employees who are hired by
Buyers, and such group medical insurance plan shall be substantially similar to
the Selling Companies' existing group medical insurance plan, except that (i)
Buyers shall retain sole and absolute discretion to amend and/or terminate such
plan at any time after the date 90 days after the Closing Date, and (ii) Buyers
shall have no obligation to offer retiree welfare benefits. Buyers assume no
liability or obligation under any Selling Companies Employee Benefit Plan except
to the extent reflected on the Closing Balance Sheet.
Section 5.6. Employee Benefits. (a) Following the Hire Date, Buyers shall
provide the employees of the Selling Companies Employees with employee benefits,
programs, policies and arrangements which are, in the aggregate as generous (or
more generous) than those benefits provided by Buyers to at least one of their
three existing operating companies. Selling Companies Employees who are hired by
Buyers shall be given full credit for past service with the Selling Companies in
determining their eligibility and vesting (but not benefit accrual) under
Buyers' employee benefits, programs, policies and arrangements.
(b) Sellers and Buyers shall give any notices required by law and take
whatever other actions with respect to the plans, programs and policies
described in this Article V as may be necessary to carry out the arrangements
described in this Article V. If any of the arrangements described in this
Article V are determined by the IRS or other governmental body to be prohibited
by law, Sellers and Buyers shall modify such arrangements to as closely as
possible reflect their expressed intent and retain the allocation of economic
benefits and burdens to the parties contemplated herein in a manner that is not
prohibited by law.
Section 5.7 Foreign Benefit Plans. Buyers' shall assume, or the
Subsidiaries shall remain liable for, all Liabilities, contingent or otherwise,
under any written compensation and benefit plans, contracts and arrangements of
Sellers or Subsidiaries (other than routine administrative procedures) in effect
as of the date hereof including, without limitation, all written pension, profit
sharing, savings and thrift, bonus, incentive, deferred compensation, equity
based compensation, severance pay, medical, life insurance, and other material
welfare plans or obligations, be they discretionary, mandated or otherwise, of
Sellers or any of their affiliates in which any current or former employees of
the Selling Companies or the Subsidiaries who are employed outside the United
States ("Non-U.S. Employees") or their beneficiaries participate, or are
entitled to participate (collectively, "Foreign Benefit Plans"). Sellers
represent and warrant to Buyers as follows:
(a) Sellers have endeavored in good faith to deliver or make available to
Buyers, and to the knowledge of Sellers they have delivered or made available to
Buyers, all material, documents and information requested by Buyers with respect
to the Foreign Benefit Plans.
(b) Each Foreign Benefit Plan and related trust agreement, annuity contract
or other funding instrument is a valid and binding obligation of the applicable
Seller or Subsidiary and in full force and effect, and there are no defaults by
a Seller or a Subsidiary thereunder. To the knowledge of Sellers, none of the
rights of Sellers or Subsidiaries thereunder will be impaired by the
consummation of the transactions contemplated by this Agreement, and all the
rights of such Sellers or Subsidiaries thereunder will be enforceable by Buyers
at or after the Closing Date without the consent or agreement of any other
party. To the knowledge of Sellers, the consummation of the transactions
contemplated by this Agreement, other than by reason of Buyers' actions
following the Closing, will not entitle any current or former Non-U.S. Employee
to severance pay, unemployment compensation or any other payment, or accelerate
the time of payment or vesting, or increase the amount of any compensation due
to any current or former Non-U.S. Employee.
(c) To the knowledge of Sellers, each Foreign Benefit Plan and related
trust agreement, annuity contract or other funding instrument complies with and
has been administered, operated and maintained in compliance with its terms and
all applicable requirements of Law and Sellers have no direct or indirect
liability under the requirements provided by Law. To the knowledge of Sellers,
Sellers provide to Non-U.S. Employees all government mandated benefits. To the
knowledge of Sellers, there is no pending or threatened legal action, proceeding
or investigation, suit, grievance, arbitration or other manner of litigation, or
claim against or involving any Foreign Benefit Plan and no facts exist that
would give rise to any legal action, proceeding or investigation, suit,
grievance, or other manner of litigation or claim other than routine claims for
benefits. Sellers have not received any notice that any Seller or any of
Sellers' directors, officers, employees or other fiduciaries have any liability
for failure to comply with applicable Law in acting or failing to act in
connection with the administration or investment of any Foreign Benefit Plan.
(d) All expenses and Liabilities relating to all of the Foreign Benefit
Plans have been, and will on the Closing Date be, properly accrued on Sellers'
books and records and Sellers' financial statements reflect such Liabilities to
the extent required by the requirements of United States generally accepted
accounting principles consistently applied.
ARTICLE 6
---------
Section 6.1. Tax Representations and Warranties. The Sellers represent and
warrant that:
(a) Taking into account all extensions of time granted by the applicable
Taxing authorities, the Selling Companies and Subsidiaries have timely filed (or
have had filed on their behalf), all Tax Returns (as defined in this Agreement)
that were required to be filed by applicable law with respect to the
Subsidiaries and the Acquired Assets. All such Tax Returns were, as of the time
of filing, materially true, complete and correct. Except as set forth on
Schedule 6.1(a), none of the Subsidiaries is currently the beneficiary of any
extension of time within which to file any Income Tax Return or franchise Tax
Return.
(b) The Selling Companies and Subsidiaries have paid (or have had paid on
their behalf), or where payment is not yet due, have established (or have had
established on their behalf and for their sole benefit and recourse), an
adequate accrual for the payment of, all Taxes (as defined in this Agreement)
due with respect to the Subsidiaries and the Acquired Assets.
(c) There are no Liens for Taxes upon the Acquired Assets of the Selling
Companies or the Subsidiaries, except for statutory liens for Taxes not yet due.
The transactions contemplated by this Agreement will not give rise to (i) the
creation of any Liens against the Acquired Assets or the Subsidiaries in respect
of any Taxes or (ii) the assertion of any additional Taxes against the Acquired
Assets or the Subsidiaries.
(d) Except as set forth on Schedule 6.1(d), with respect to the Acquired
Assets and the Subsidiaries, no material adjustments or deficiencies relating to
the Tax Returns referred to in clause (a) of this Section have been proposed,
asserted or assessed in writing by the Internal Revenue Service or the relevant
state, local or foreign Taxing Authority, except for such material adjustments
or deficiencies which have been fully paid or finally settled.
(e) Except as set forth in Schedule 6.1(e), there are no outstanding
waivers extending the applicable statute of limitation with respect to any Tax
Return of the Subsidiaries or of the Selling Companies with respect to the
Acquired Assets for any taxable period.
(f) No consent to the application of Section 341(f)(2) of the Code has been
filed with respect to any property or assets held or acquired or to be acquired
by, or subject to any option to acquire held by the Subsidiaries.
(g) No written notice has been received from any Taxing Authority (as
hereinafter defined) of any jurisdiction in which any Selling Company with
respect to the Acquired Assets or any Subsidiary does not file a Tax Return
asserting that it is or may be subject to taxation in that jurisdiction, except
such claims as have been resolved prior to Closing.
(h) Each of the Selling Companies and the Subsidiaries has complied with
all Law relating to the withholding of Taxes and the payment thereof (including,
without limitation, withholding of Taxes under Sections 1441 and 1442 of the
Code, or any similar provision under foreign, state or local Law), and has
timely and properly withheld from the appropriate party and paid over to the
proper Taxing Authority all amounts required to be withheld and paid over.
(i) None of the Assumed Liabilities is an obligation to make a payment that
will not be deductible under Section 280G of the Code.
(j) None of the Acquired Assets, the assets of any Subsidiary, or the
Assumed Liabilities are subject to, or constitute, a safe harbor lease within
the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by
the Tax Equity and Fiscal Responsibility Act of 1982.
(k) None of the Acquired Assets is tax-exempt use property within the
meaning of Section 168(h) of the Code.
(l) None of the Acquired Assets has been financed with, or directly or
indirectly secures, any industrial revenue bonds or debt, the interest on which
is tax exempt under Section 103(a) of the Code.
(m) Except as set forth on Schedule 6.1(m), none of the Acquired Assets or
the assets of any Subsidiary constitutes a partnership, joint venture or other
arrangement or contract that could be treated as a domestic partnership for
federal income tax purposes. None of the activities of the Selling Companies and
Subsidiaries constitutes or has constituted a permanent establishment in any
foreign country in which they are not currently filing a Tax Return, as the term
"permanent establishment" is defined in any applicable tax treaty or convention
between the United States and such foreign country.
(n) The Sellers have made available to the Buyer correct and complete
copies of all federal Income Tax Returns for the tax years ended December 31,
1998, December 31, 1999, and December 31, 2000, and examination reports, and
statements of deficiencies assessed against or agreed to by any of the Selling
Companies and Subsidiaries for the tax years ended December 31, 1997, December
31, 1998 and December 31, 1999.
(o) Except as set forth on Schedule 6.1(o), for taxable periods beginning
after the Closing Date, none of the Subsidiaries is required to include in
income any adjustment under Section 481(a) of the Code by reason of a change in
accounting method initiated by any such party and the Internal Revenue Service
has not proposed any such adjustment or change in accounting method. None of the
Subsidiaries has any pending private letter ruling request, Technical Advice
Memoranda or Field Service Requests with the Internal Revenue Service.
(p) None of the Subsidiaries has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(q) The Subsidiaries are in all material respects compliant with the
requirements of Section 482 of the Code and the regulations thereunder as they
apply to transfer pricing between controlled entities including the
contemporaneous documentation requirements regarding transfer pricing policies.
The Sellers and the Subsidiaries believe these policies comply with the
requirements of Section 482 of the Code and the regulations thereunder.
(r) The Subsidiaries have evidence of payment of all Taxes of a foreign
country paid from the date of formation of each of them, respectively.
(s) The Sellers represent that they have filed a consolidated federal
Income Tax Return with the domestic Subsidiaries for the taxable year
immediately preceding the current taxable year and that the Sellers are eligible
to make an election under section 338(h)(10) of the Code (and any comparable
election under state, local or foreign tax law) with respect to such
Subsidiaries.
Section 6.2. Tax Covenants by the Sellers and by the Buyers.
(a) The Buyers shall prepare or cause to be prepared and timely file any
Tax Returns required to be filed in connection with transfer Taxes as specified
in Section 1.6, and Sellers shall cooperate with Buyers in such preparation.
(b) The Sellers will, and the Buyers will cause the Subsidiaries to, with
respect to any taxable period of the business that would otherwise include but
does not end on the Closing Date (a "Straddle Period"), to the extent
permissible pursuant to applicable law, take all steps as are or may be
reasonably necessary, including without limitation, the filing of elections or
returns with applicable Taxing Authorities, to cause such period to end on the
Closing Date. All Taxes attributable to Pre-Closing Periods shall be allocated
to the Sellers and all Taxes for Post-Closing Periods shall be allocated to the
Buyers. In the case of any Taxes for a Straddle Period, the portion of such
Taxes that are allocated to the Pre-Closing Period shall (x) be deemed to be the
amount that would be payable if the relevant taxable period ended as of the
Closing Date pursuant to an interim closing of the books in the case of any
Income Taxes and Non-Income Taxes not described in (y) below, and (y) in the
case of Non-Income Taxes (e.g., property or net worth taxes), that cannot be
allocated based upon an interim closing of the books, be deemed to be the amount
of such Tax for the entire taxable period multiplied by a fraction the numerator
of which is the total number of days in such taxable period ending prior to and
including the Closing Date and the denominator of which is the number of days in
such taxable period. Any credits relating to the Straddle Period shall be taken
into account as though the relevant taxable period ended as of the Closing Date.
Except as provided in Section 6.1(a), any Taxes incurred by reason of the
transactions occurring on or before the Closing Date as contemplated by this
Agreement shall be treated as occurring in a Pre-Closing Period.
(c) With respect to any Income Tax Return of a Subsidiary required to be
filed by the Buyers, their Affiliates or a Subsidiary after the Closing Date for
Pre-Closing Periods or Straddle Periods, the Buyers shall provide the Sellers
and their authorized representatives with copies of such completed Income Tax
Return at least 30 days prior to the due date (including extensions) for filing
such Income Tax Return, and the Sellers and their authorized representatives
shall have the right to review such Income Tax Return prior to the filing
thereof. The Buyers and the Sellers agree to consult and resolve in good faith
any issues arising as a result of the review of such Income Tax Return by the
Sellers or their authorized representatives prior to the filing of such Income
Tax Return. The Sellers will pay to the Buyers at least ten (10) days prior to
the due date for filing such Income Tax Return the amount of Taxes shown due on
such return that exceed the amount of such Taxes shown as a liability on the
finally determined Closing Balance Sheet and that relate to (i) a Pre-Closing
Period and (ii) the portion of a Straddle Period allocated to the Sellers
pursuant to Section 6.1(b). With respect to Non-Income Tax Returns in which the
amount of Non-Income Taxes shown as due exceeds the amount of such Non-Income
Taxes shown as a liability on the finally determined Closing Balance Sheet and
that relate to (i) a Pre-Closing Period and (ii) the portion of a Straddle
Period allocated to the Sellers pursuant to Section 6.1(b), the Buyers shall
provide the Sellers and their authorized representatives for their review copies
of such return at least 30 days prior to the due date (including extensions) for
filing such Non-Income Tax Return, and the Sellers shall pay such excess to the
Buyers at least ten (10) days prior to the due date for filing such Non-Income
Tax Return. The Buyers and the Sellers agree to consult and resolve in good
faith any issues arising as a result of the review of such Non-Income Tax
Return.
(d) From and after the Closing Date, to the extent reasonably requested by
the other party and at such party's expense, each of the Sellers and the Buyers
shall assist and cooperate with the other in the preparation and filing of any
Tax Return and shall assist and cooperate with the other in preparing for any
disputes, audits or other litigation relating to Taxes for which the other party
is responsible pursuant to this Agreement. Each of the Sellers and Buyers
further agrees, upon request, to use their best efforts to obtain any
certificate or other document from any Taxing Authority or any other person as
may be necessary to mitigate, reduce or eliminate any Tax that could be imposed.
The Sellers further agree to comply with any notice requirement of any Taxing
Authority and to provide or obtain from any Taxing Authority any certificate or
other document necessary to reduce or eliminate any Taxes that otherwise would
be imposed with respect to the transactions contemplated by this Agreement,
including bulk transfer information.
(e) The Sellers shall furnish to the Buyers, as provided in Section
1445(b)(2) of the Code, an affidavit stating under penalties of perjury what the
Sellers' taxpayer identification numbers are and that none of the Sellers are a
foreign person within the meaning of Section 1445(f)(3) of the Code.
(f) The Sellers and the Buyers shall report the Buyers' purchase of the
Acquired Assets in a consistent manner in accordance with the allocation set
forth on Schedule 1.4(f) and shall take no position inconsistent or contrary
thereto. The Sellers and the Buyers each shall be responsible for the
preparation of any statements and forms to be filed pursuant to Section 1060 of
the Code or in accordance with other applicable law.
(g) The Sellers and the Buyers agree to comply with the standard described
in Section 4 of Revenue Procedure 96-60, 1996-2 C.B. 399. With respect to wages
paid after the Closing Date by the Buyers to employees of the Subsidiaries or to
Selling Companies' employees who are hired by Buyer ("Transferred Employees"),
the Buyers shall, in accordance with Revenue Procedure 96-60, assume all
responsibility for preparing and filing Form W-2, Wage and Tax Statements; Form
W-3, Transmittal of Income and Tax Statements; Form 941, Employer's Quarterly
Federal Tax Returns; Form W-4, Employee's Withholding Allowance Certificates;
and Form W-5, Earned Income Credit Advance Payment Certificates (collectively
the "Employee Withholding Documents"). The Sellers and the Buyers shall
cooperate in good faith to the extent necessary to permit each of them to comply
with the standard procedure.
(h) The Sellers will, at the Buyers' expense, execute such documents as are
necessary in order to transfer and assign to the Buyers all state unemployment
insurance wage bases and experience and tax rates with regard to the calendar
year that includes the Closing Date.
(i) All Tax sharing or similar agreements to which any Subsidiary is a
party shall be terminated as of the day before the Closing Date, and after the
Closing Date, no Subsidiary shall be bound thereby or have any rights or
obligations thereunder.
(j) The Sellers covenant and agree, at the Buyers' request, to timely join
with the Buyers to make an election pursuant to Section 338(h)(10) of the Code
(and any comparable election under any applicable state, local or foreign law)
with respect to the U. S. Subsidiaries and to execute any and all documents
(including without limitation IRS Form 8023 Elections Under Section 338 for
Corporations Making Qualified Stock Purchases) and to take any action as is
necessary to effectuate such election(s). With respect to such elections, the
Buyers shall be responsible for preparing IRS Form 8023 (and any comparable
forms under state, local or foreign law) in a manner that complies with the Code
and this Agreement and shall provide such forms to the Sellers at least thirty
(30) days prior to the due date for filing such forms for the Sellers' review
and consent, which consent shall not be unreasonably withheld or delayed.
(k) The Sellers shall be solely liable for and shall pay all applicable
Taxes that may be imposed upon, or payable, collectible or incurred in
connection with or arising from or attributable to the making of an election
under Section 338(h)(10) of the Code (and any comparable election under any
applicable state, local or foreign law) with respect to the U.S. Subsidiaries
pursuant to this Agreement, and the Sellers shall include in their federal
consolidated Income Tax Return and applicable state, local or foreign Tax
Returns the income attributable to the deemed sale of assets pursuant to any
Section 338(h)(10) election (and any comparable election under any applicable
state, local or foreign law) and any Income Tax liability resulting therefrom.
(l) At least 10 days prior to filing, the Sellers shall deliver to the
Buyers correct and complete copies of all federal, state, and foreign Income Tax
Returns filed by the Sellers for the tax year beginning January 1, 2001, such
Tax Returns having been prepared in accordance with the Sellers' most recent Tax
practices.
(m) Within ten days prior to the Closing, the Sellers shall provide to the
Buyers for all the open tax years of P.T. Xxxxxxxx-Xxxxx Indonesia: (i) a
reconciliation of the difference between the revenue disclosed in its VAT return
and the revenue disclosed in its corporate income tax returns and (ii) a
reasonably detailed explanation of such differences.
Section 6.3 Tax Claims.
(a) Without regard to any other Section of this Agreement, if a claim shall
be made by any Taxing Authority, which, if successful, might result in an
indemnity payment to a Buyer Indemnified Party (as defined in Section 9.2(b))
the Buyers shall give notice to the Sellers in writing of such claim (a "Tax
Claim"); provided, however, the failure to give such notice shall not affect the
indemnification provided hereunder except to the extent the Sellers have been
materially prejudiced as a result of such failure.
(b) With respect to any Tax Claim relating to a taxable period ending on or
prior to the Closing Date, the Sellers shall control all proceedings and may
make all decisions taken in connection with such Tax Claim and, without limiting
the foregoing, may in their sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any Taxing
Authority with respect thereto, and may, in their sole discretion, either pay
the Tax claimed and xxx for a refund where applicable law permits such refund
suits or contest the Tax Claim in any permissible manner. Notwithstanding the
foregoing, the Sellers shall not settle any Tax Claim without the prior written
consent of the Buyers, which consent shall not be unreasonably withheld or
delayed, if such settlement would bind or set any precedent with respect to the
Buyers, any Subsidiary or any of their respective Affiliates in a taxable period
ending after the Closing Date. The Buyers shall control all proceedings with
respect to any Tax Claim relating to a taxable period ending after the Closing
Date.
Section 6.4. Definitions. For purposes of this Article 6, the following
terms shall have the meanings ascribed to them below:
(a) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and/or, where appropriate, its predecessor, the Internal Revenue Code of 1954,
as amended, or any successor thereto.
(b) "Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
(c) "Income Taxes" means any federal, state, local, or foreign tax imposed
upon or measured by net income, gross income or capital including any interest,
penalty, or additions thereto, whether disputed or not.
(d) "Non-Income Taxes" means any Taxes other than Income Taxes.
(e) "Post-Closing Periods" means all taxable periods commencing after the
Closing Date and the portion of any Straddle Period commencing after the Closing
Date.
(f) "Pre-Closing Periods" means all taxable periods ending on or before the
Closing Date and the portion of any Straddle Period ending on or before the
Closing Date.
(g) "Tax Returns" means returns, declarations, statements, reports,
schedules, estimates of Taxes due, forms and information returns and any
amendments thereto required to be filed with any Taxing Authority.
(h) "Taxes" means (i) all taxes (whether federal, state, local or foreign)
based upon or measured by income and any other tax whatsoever, including,
without limitation, gross receipts, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, real estate gains, real estate transfer or property taxes, together with
any interest or penalties or additions to tax imposed with respect thereto and
(ii) any obligations under any agreements or arrangements with respect to any
Taxes described in clause (i) above. Any Taxes, penalties or interest payable as
a result of an audit of any Return or any other adjustment with respect thereto
shall be deemed to have accrued in the period to which such Taxes, penalties or
interest are attributable.
(i) "Taxing Authority" means any governmental authority, domestic or
foreign, having jurisdiction over the assessment, determination, collection, or
other imposition of Tax.
Section 6.5. Tax Indemnification. Notwithstanding any other provisions of
this Agreement, the Sellers agree to hold the Buyer Indemnified Parties harmless
and indemnify each of them from and against the liability for Taxes of or
attributable to the Selling Companies or the Acquired Assets (including the
Subsidiaries) or the liability of the Selling Companies or the Acquired Assets
(including the Subsidiaries) for Taxes of others (for example, by reason of
transferee liability or application of Treas. Reg. Section 1.1502-6), including
but not limited to the Sellers and any affiliate of any of the Sellers or any
losses including damages, judgments, fines, costs, penalties, amounts paid in
settlement and reasonable out-of-pocket costs and expenses payable with respect
to Taxes claimed or assessed against the Selling Companies or the Acquired
Assets (including the Subsidiaries) (i) attributable to the Pre-Closing Period
or allocated to the Pre-Closing Period in Section 6.2(b) (except to the extent
of the aggregate amount of Taxes provided for on the Closing Balance Sheet),
(ii) resulting from the satisfaction or cancellation of intercompany accounts
pursuant to Section 4.15 hereof whether by the Buyers, the Sellers or the
Subsidiaries, or (iii) resulting from a breach of any of the representations or
warranties contained in Section 6.1 hereof relating to a Pre-Closing Tax Period
(with a credit for the aggregate amount of Taxes provided for on the Closing
Balance Sheet); provided, however, that under no circumstances shall the Buyer
Indemnified Parties be entitled to assert a claim against the Sellers with
respect to Taxes payable with respect to Post-Closing Periods (except to the
extent of Taxes payable with respect to Post-Closing Periods that arise out of
Sellers' failure to comply with Section 4.15).
ARTICLE 7
---------
Conditions to Buyers' Obligation to Close
-----------------------------------------
Buyers' obligation to consummate the transactions consummated hereby shall
be subject to the satisfaction or waiver by Buyers on or prior to the Closing
Date of all of the following conditions:
Section 7.1. Representations, Warranties and Covenants of Sellers. The
representations and warranties of Sellers in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, except for representations and warranties that speak as of a specific
date or time other than the Closing Date, which shall be true and correct in all
material respects as of such date or time. The covenants and agreements of
Sellers to be performed on or before the Closing Date in accordance with this
Agreement shall have been duly performed in all material respects. Buyer shall
have received at the Closing a certificate with respect to the foregoing matters
dated the Closing Date, validly executed on behalf of Sellers, which certificate
shall also state that the security interests in the Acquired Assets and Assumed
Liabilities in connection with any secured credit agreement have, as of the
Closing Date, been released.
Section 7.2. Filings; Consents. All material assignments, licenses,
permits, franchises, landlord consents, consents, approvals, waivers,
authorizations, qualifications and orders of governmental authorities as are
necessary to be obtained by Sellers in connection with the transactions
contemplated hereby, including without limitation compliance with the filing and
waiting period requirements of the HSR Act (the "Required Consents"), which are
set forth on Schedule 7.2, shall have been obtained to the reasonable
satisfaction of Buyers.
Section 7.3. No Injunction. At the Closing Date, no statute, rule,
regulation, order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority, and there shall
be no pending or threatened litigation by any governmental authority or third
person to restrain or prohibit the transactions contemplated hereby or to obtain
damages or other relief in connection herewith, which causes Buyers, in good
faith and subject to Buyer's obligations under Section 4.2 to determine that the
transaction has become inadvisable or impractical, except if Sellers offer
reasonable indemnity to Buyers for consummating the transaction.
Section 7.4. Receipt of Certain Documents. At the Closing Date, Buyers
shall have received each of the following: (a) an opinion from Sellers' Counsel
reasonably satisfactory to Buyers (which will be addressed to Buyers), (b) a
copy of resolutions of the respective boards of directors of Sellers,
authorizing the transactions contemplated hereby, certified by the Secretary or
an Assistant Secretary of each such party, and (c) the affidavit referenced in
Section 6.2(e) above.
Section 7.5. UCC Searches. Evidence of official searches by the Secretary
of State of each state in which the Selling Companies conduct their businesses
shall show no effective financing statements filed under the Uniform Commercial
Code against any material assets of the Selling Companies except as disclosed in
this Agreement or in the Schedules to this Agreement.
Section 7.6. Change of Name. The Selling Companies shall have provided
Buyers with such documents as are required under pertinent state laws to change
the names of the Selling Companies to names which are dissimilar and unrelated
to all corporate and trade names theretofore used by the Selling Companies.
Section 7.7. Security Interests. Sellers shall have provided Buyers with
evidence that all mortgages, pledges, liens or other security interests in the
Acquired Assets and Assumed Liabilities (other than Permitted Liens) shall have
been released, or shall be released immediately following Closing.
Section 7.8. Real Property. With respect to each parcel of real estate
owned by the Selling Companies and included in the Acquired Assets, the Buyer
shall have received a recordable general warranty deed (subject to Permitted
Liens) and proper xxxx of sale, each in favor of Buyer, with respect to all such
real estate owned by the Selling Companies together with, for all such real
estate, a commitment of a nationally recognized title insurance company to issue
an owner's title insurance policy on ALTA 1970 Owner's Form B as revised
insuring the fee simple estate of Buyer in each such parcel of real estate,
subject only to Permitted Liens.
Section 7.9. Xxxx of Sale. Buyers shall have received a xxxx of sale in
favor of Buyer for all tangible personal property included within the definition
of the term "Acquired Assets",
Section 7.10 Assignments. Buyer shall have received an appropriate
assignment with respect to all license agreements, Assumed Contracts, leases,
intellectual property, security interests, intangibles and any other Acquired
Assets where an assignment is appropriate to evidence transfer.
Section 7.11 Shares of Stock. Buyer shall receive all shares of outstanding
stock of the Subsidiaries along with proper stock powers duly endorsed, along
with all corporate minute books, stock transfer ledgers, articles of
incorporation and bylaws of the Subsidiaries.
Section 7.12 Facilities. None of the casegoods facilities of Henredon, nor
the three casegoods facilities of Drexel Heritage, nor the distribution facility
of Drexel Heritage shall have been destroyed or suffered any other casualty
preventing it from being operated.
Section 7.13 Officers and Directors. Sellers shall provide written
resignations of all officers and directors of the Subsidiaries as shall be
designated by Buyers.
ARTICLE 8
---------
Conditions to Sellers' Obligation to Close
------------------------------------------
Sellers' obligation to consummate the transactions contemplated hereby is
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
Section 8.1. Representations, Warranties and Covenants of Buyers. The
representations and warranties of Buyers in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, except for representations and warranties that speak as of a specific
date or time other than the Closing Date, which shall be true and correct in all
material respects as of such date or time. The covenants and agreements of
Buyers to be performed on or before the Closing Date in accordance with this
Agreement shall have been duly performed in all material respects. Sellers shall
have received at the Closing a certificate with respect to the foregoing matters
dated the Closing Date, validly executed on behalf of Buyer.
Section 8.2. Filings; Consents. All Required Consents shall have been
obtained and all Guaranties shall have been released or indemnified pursuant to
Section 4.11 to the reasonable satisfaction of Sellers.
Section 8.3. No Injunction. At the Closing Date, no statute, rule,
regulation, order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority, and there shall
be no pending or threatened litigation by any governmental authority or third
person to restrain or prohibit the transactions contemplated hereby or to obtain
damages or other relief in connection herewith, which causes Sellers, in good
faith, to determine that the transaction has become inadvisable or impractical.
Section 8.4. Receipt of Certain Documents. At the Closing Date, Sellers
shall have received each of the following: (a) an opinion from Buyers' General
Counsel reasonably satisfactory to Sellers (which will be addressed to Sellers),
and (b) a copy of resolutions of the respective boards of directors of Buyers,
including actions of Furniture Brands International as sole stockholder of
Buyer, authorizing the transactions contemplated hereby, certified by the
Secretary or an Assistant Secretary of each such party.
Section 8.5. Stock Exchange Listing. The Shares shall have been duly
authorized for listing on the New York Stock Exchange
(upon official notice of issuance).
Section 8.6. Registration Rights Agreement. Buyers and Sellers shall have
entered into, or will enter into at Closing, the Registration Rights Agreement
in the form attached hereto as Exhibit 4.3.
ARTICLE 9
---------
Survival and Indemnification
----------------------------
Section 9.1. Survival Periods. (a) All representations and warranties of
the parties contained in this Agreement or in any Schedule to this Agreement, or
any certificate, document or other instrument delivered in connection herewith
shall survive the Closing until the date twenty-four (24) months after the
Closing Date, except the representations and warranties set forth in Sections
2.2 through 2.7, 2.11, 2.12, and 2.15 through 2.23 shall survive the Closing
until twelve (12) months after the Closing Date and the representations and
warranties set forth in Sections 2.1, 2.24, 3.1 and 3.2 and Article 6 shall
survive the Closing until the expiration of the longest statute of limitations
applicable to each such respective representation and warranty. No action or
proceeding may be brought with respect to any of the representations and
warranties, unless written notice thereof, setting forth in reasonable detail
the claimed misrepresentation or breach of warranty, shall have been delivered
to the party alleged to have breached such representation or warranty prior to
the expiration date of such period.
(b) Notwithstanding any provision to the contrary contained in this
Agreement, Sellers' obligation and liability for any and all breaches of the
representations and warranties set forth in this Agreement, shall not exceed in
the aggregate the amount of $22 million (the "Cap"); provided that Buyers shall
not be entitled to indemnification until the aggregate dollar amount of all such
obligations and liabilities for such breaches shall equal in the aggregate the
amount of $4 million (the "Basket"). Sellers shall be obligated to pay to Buyers
any amount in excess of the Basket up to the Cap. The Cap and Basket set forth
in the preceding sentences shall not apply to Liabilities for Taxes under
Article 6 or for Liabilities under the Retirement Plan.
Section 9.2. Indemnification. (a) From and after the Closing Date, Buyers
shall, jointly and severally, indemnify and hold harmless Sellers, their
affiliates, each of their respective directors, officers, employees and agents,
and each of the heirs, executors, successors and assigns of any of the foregoing
(the "Seller Indemnified Parties") from and against (i) any Assumed Liabilities,
(ii) any Post-Closing Claims, and (iii) any Liabilities arising from or related
to any breach of any representation or warranty which survives the Closing made
by or on behalf of Buyers under this Agreement or in any Schedule to this
Agreement or any certificate, document or other instrument contemplated hereby
and delivered in connection herewith; provided, however, that such
indemnification shall be net of any and all related tax, insurance or other
benefit received by the Seller Indemnified Parties, and shall be net of any
offset that the Indemnifying Party may have resulting from claims against the
Sellers Indemnified Parties hereunder.
(b) From and after the Closing Date, Sellers shall, jointly and
severally, indemnify and hold harmless Buyers, their affiliates, each of their
respective directors, officers, employees and agents, and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Buyer
Indemnified Parties"), from and against (i) any Excluded Liabilities, and (ii)
any Liabilities arising from or related to any breach of any representation or
warranty which survives the Closing made by or on behalf of Sellers under this
Agreement or in any Schedule to this Agreement or any certificate, document or
other instrument contemplated hereby and delivered in connection herewith;
provided, however, that such indemnification shall be net of any and all related
tax, insurance and other benefits received by the Buyer Indemnified Parties, and
shall be net of any offset that the Indemnifying Party may have resulting from
claims against the Buyer Indemnified Parties hereunder; and provided, further,
that this Section 9.2(b) shall not apply to indemnity claims relating to Taxes,
as those claims are governed solely by Section 6.5 above. Buyers acknowledge
that at some time after Closing Sellers may liquidate, and Buyers agree that
Masco Corporation shall have no liability for any indemnity claims of the Buyer
Indemnified Parties hereunder.
Section 9.3. Third Party Claims. If a claim by a third party is made
against an indemnified party, and if such party intends to seek indemnity with
respect thereto under this Article 9, such indemnified party shall promptly
notify the indemnifying party in writing of such claims setting forth such
claims in reasonable detail. The indemnifying party shall have 30 days after
receipt of such notice to undertake, conduct and control, through counsel of
their own choosing and at their own expense, the settlement or defense thereof,
and the indemnified party shall cooperate with it in connection therewith;
provided, however, that the indemnified party may participate in such settlement
or defense through counsel chosen by such indemnified party, provided that the
fees and expenses of such counsel shall be borne by such indemnified party. So
long as the indemnifying party is reasonably contesting any such claim in good
faith, the indemnified party shall not pay or settle any such claim.
Notwithstanding the foregoing, the indemnified party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
to indemnity therefor by the indemnifying party. If the indemnifying party does
not notify the indemnified party within 30 days after the receipt of the
indemnified party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the indemnified party shall have the right to
contest, settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement. The indemnifying party shall not,
except with the consent of the indemnified party, enter into any settlement that
(i) does not include as an unconditional term thereof the giving by the person
or persons asserting such claim to all indemnified parties (i.e. the Seller
Indemnified Party or the Buyer Indemnified Party, as the case may be) of
unconditional release from all liability with respect to such claim or consent
to entry of any judgment, (ii) provides for injunctive relief, and (iii)
subjects any indemnified party to any restrictions or obligations. Any
settlement by the indemnifying party shall not damage the ongoing business of
the indemnified party.
ARTICLE 10
----------
Termination
-----------
Section 10.1. Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of Sellers and Buyers; or
(b) by either Sellers or Buyers if the Closing Date shall not have occurred
by the close of business on January 31, 2002 (unless the only unsatisfied
condition to Closing is that the waiting period under the HSR Act shall not have
terminated or elapsed); provided, that the failure to close on or before such
date did not result from the failure by the party seeking termination to fulfill
any undertaking or commitment or to perform any covenant or agreement provided
for in this Agreement, and provided, further, that Sellers and Buyers may agree
in writing to extend such date prior thereto to any subsequent date or dates
approved by Sellers and Buyers; or
(c) by either Sellers or Buyers if the representations and warranties of
the other shall not, except as affected by transactions contemplated by this
Agreement or changes which individually or in the aggregate shall not have a
Material Adverse Effect on the business, results of operations or financial
condition of the Sellers or Buyers, taken as a whole, be true in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date and if the
other party shall not have delivered at the Closing a certificate to that effect
dated the Closing Date; or
(d) by either Sellers or Buyers if either of them determines in good faith
that this transaction has become inadvisable by reason of pending or threatened
litigation of a material nature by any governmental authority or third party to
restrain or prohibit the Closing or to obtain damages or other relief in
connection with this transaction or the Buyers will not obtain HSR approval of
the transaction; provided that Buyers may not terminate this Agreement on these
grounds if Buyers have not complied with their obligations under Section 4.2; or
(e) by either Sellers or Buyers if any court of competent jurisdiction in
the United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and non-appealable.
Section 10.2. Procedure and Effect of Termination. In the event of
termination or abandonment of this Agreement by either or both of Sellers or
Buyers pursuant to Section 10.1, written notice thereof shall be given by the
terminating party to the other party, and this Agreement shall thereupon
terminate and become void and have no effect, and the transactions contemplated
hereby shall be abandoned without further action by the parties, except that the
provisions of this Section and Sections 4.1(b), (c), (d), (e), (f), 4.9 and 11.5
shall survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party of any liability for any breach of any
covenant or agreement contained in this Agreement. If this Agreement is
terminated, all filings, applications and other submissions made pursuant to
this Agreement shall, to the extent practicable, be withdrawn from the agency or
other persons to which they were made.
ARTICLE 11
----------
Miscellaneous
-------------
Section 11.1. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which,
when taken together, will be deemed to constitute one and the same agreement.
This Agreement shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party.
Section 11.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law) as to all matters, including, without limitation, matters of validity,
construction, effect, performance and remedies.
Section 11.3. Entire Agreement. This Agreement (including agreements
incorporated or referred to in this Agreement) and the Schedules and Exhibits to
this Agreement contain the entire agreement between the parties with respect to
the purchase and sale of the assets between the parties hereto and supersedes
all other prior negotiations, commitments, agreements and understandings, both
written and oral, among the parties or any of them with respect to said
transaction. There are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to in this
Agreement. This Agreement is not intended to confer upon any person not a party
to this Agreement or their successors, assigns and holders of any security
interests any rights or remedies hereunder. The Schedules and Exhibits to this
Agreement shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth in this Agreement.
Section 11.4. Legal Enforceability; Construction. (a) Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without affecting the validity or enforceability of the
remaining provisions hereof. Any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
(b) Neither this Agreement nor any provision hereof shall be construed for
or against any party because the Agreement as a whole, or any provision of the
Agreement, was requested or drafted by such party.
Section 11.5. Expenses. Except as otherwise provided in this Agreement,
whether or not the transactions contemplated hereby are consummated, each party
to this Agreement shall bear its own expenses incident to the preparation,
execution, and performance of this Agreement and the consummation of the
transactions contemplated hereby, including all fees and expenses of agents,
representatives, counsel and accountants. The undertakings of this Section 11.5
shall survive any termination or abandonment of this Agreement.
Section 11.6. Specific Performance. Each of Buyers on the one hand, and
Sellers on the other hand, acknowledge and agree that failure by the other to
perform their obligations under this Agreement would cause such party or parties
to be materially and irreparably injured and to suffer material loss, and that
such injury and loss cannot be fully or adequately compensated by the payment of
money or by an award of damages and each shall be entitled to the specific
performance of this Agreement, in addition to all other remedies that each might
have, and that each of them will not object to and will not hinder or delay the
entry of a decree of specific performance against it in any action or suit
brought under or in respect of this Agreement.
Section 11.7. Notices. All notices and other communications hereunder must
be in writing and will be deemed to have been duly given when delivered
personally, sent by messenger or by documented overnight delivery service,
mailed by registered or certified mail (return receipt requested) or, to the
extent receipt is confirmed, telecopy, telefax or other electronic transmission
service to the appropriate address or number as set forth below. Notices to
Sellers and, prior to the Closing Date, the Selling Companies shall be addressed
to:
LifeStyle Furnishings International
0000 XxxxXxxxx Xxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
with a copy to:
Brooks, Pierce, XxXxxxxx, Xxxxxxxx & Xxxxxxx, L.L.P.
000 X. Xxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx
Fax No.: (000) 000-0000
or at such other address and to the attention of such other person as Sellers
may designate by written notice to Buyer. Notices to Buyers shall be addressed
to:
Furniture Brands International, Inc.
000 Xxxxx Xxxxxx Xxxx, 00xx Xxxxx
Xx. Xxxxx, XX 00000
Attn: Secretary
Fax No.: 000-000-0000
with a copy to:
Furniture Brands International, Inc.
Attn: General Counsel
at the same address
or at such other address and to the attention of such other person as Buyer may
designate by written notice to Sellers.
Section 11.8. Successors and Assigns; No Third Party Beneficiaries. (a)
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns; provided, however, that no party will
assign its rights or delegate its obligations under this Agreement, whether by
operation of law or otherwise, without the express prior written consent of each
other party, except Buyers may assign its right to purchase the Acquired Assets
to a wholly-owned subsidiary of Buyers so long as Buyers remain liable for all
their obligations hereunder and Sellers may assign any of their rights and
obligations hereunder to parents or Masco Corporation.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party, and, nothing in this Agreement, express or implied, is intended to
or shall confer upon any third party any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
Section 11.9. Headings; Definitions. The section and article headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained in this Agreement mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined in this
Agreement are equally applicable to both the singular and plural forms of such
terms. All words used in this Agreement will be construed to be of such gender
or number as the circumstances require. As used in this Agreement, the term
"person" means and includes an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
Section 11.10. Construction of Certain Provisions. It is understood and
agreed that the specification of any dollar amount in the representations and
warranties contained in this Agreement or the inclusion of any specific item in
the Schedules or Exhibits is not intended to imply that such amounts or higher
or lower amounts, or the items so included or other items, are or are not
material, and neither party shall use the fact of the setting of such amounts or
the fact of the inclusion of any such item in the Schedules in any dispute or
controversy between the parties as to whether any obligation, item or matter not
described in this Agreement or included in a Schedule or Exhibit is or is not
material for purposes of this Agreement.
Section 11.11. Amendments and Waivers. (a) This Agreement and the documents
related to this Agreement may not be modified or amended except by an instrument
or instruments in writing signed by the party against whom enforcement of any
such modification or amendment is sought, and expressly stating it to be such
amendment.
(b) Neither the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents referred to in this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise
of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
(c) At any time prior to the Closing Date, the parties may, to the extent
permitted by applicable law, (a) extend the time or the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document, certificate or writing delivered pursuant to this
Agreement or (c) waive compliance with any of the agreements or conditions of
the other parties contained in this Agreement.
Section 11.12. Knowledge. (a) An individual will be deemed to have
"knowledge" of a particular fact or other matter if: (i) such individual is
actually aware of such fact or other matter; or (ii) such individual could have
discovered such fact through a reasonable inquiry concerning the existence of
such fact.
(b) An entity other than an individual will be deemed to have "knowledge"
of a particular fact or other matter if any individual who is currently serving
as an elected officer of such entity (or in any similar capacity) has, or at any
time had, actual knowledge of such fact or other matter; provided, however that
the term "knowledge of the Sellers" or "knowledge of the Selling Companies"
shall not be deemed to include any actual or deemed knowledge of Pacific or any
individual who is an elected officer of Pacific but is not an elected officer of
any other Seller.
Section 11.13. Bulk Transfer Acts. Buyers hereby waive Sellers'
noncompliance with any applicable bulk transfer provisions of the Uniform
Commercial Code as adopted in any state, or any other applicable bulk transfer
laws, in connection with the transactions contemplated by this Agreement.
Sellers agree to satisfy all creditors that come within the protection of the
bulk transfer provisions and whose debts are not Assumed Liabilities so that
Buyers shall never have to pay any such obligations as a result of this waiver.
IN WITNESS WHEREOF, this Agreement has been signed by each of the parties
as of the date first above written.
LifeStyle Furnishings International Ltd. Furniture Brands International, Inc.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxx
-------------------------------- --------------------------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxxxx
Its: Vice President and CFO Its: Vice President
Henredon Furniture Industries, Inc. HDM Furniture Industries, Inc.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxx
--------------------------------- ---------------------------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxxxx
Its: Vice President Its: Vice President
Drexel Heritage Furnishings Inc.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxx
Its: Vice President
Xxxxxxxx-Xxxxx, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx
Its: Vice President
Xxxxxxxx-Xxxxx Pacific, Ltd.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxx
Its: Vice President
