1
EXHIBIT 99.1
ASSET TRANSFER AGREEMENT
Dated as of November 16, 1995
by and among
JPS TEXTILE GROUP, INC. and
JPS CARPET CORP.
as Transferors
and
GULISTAN HOLDINGS INC.
and
GULISTAN CARPET INC.
as Transferees
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
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1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . 13
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2.1 Transfer of Assets; Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Adjustments to Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4 Section 351 Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Conveyances at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Assumption Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 Other Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TRANSFERORS . . . . . . . . . . . . . . . . 20
---------------------------------------------
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Title to Transferred Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Owned Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.7 Litigation, Proceedings and Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.8 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.10 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.11 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.12 Intellectual Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.14 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.15 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.16 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.17 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.18 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.19 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.20 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.21 Subsidiary of Carpet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TRANSFEREES . . . . . . . . . . . . . . . . 29
---------------------------------------------
5.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2 Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3 No Conflict or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.6 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 Subscription Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VI
COVENANTS OF TRANSFERORS AND TRANSFEREES . . . . . . . . . . . . . . . . . . 32
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6.1 Maintenance of Carpet and the Business Prior to Closing. . . . . . . . . . . . . . . . . . . . . . . . 32
6.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.5 Further Assurances; Cooperation and Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.6 Nondisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.7 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.8 Sums Received in Respect of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.9 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.10 Form W-2, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.11 No Other Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VII
CONDITIONS TO TRANSFERORS' OBLIGATIONS . . . . . . . . . . . . . . . . . . 41
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7.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.3 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.6 No Governmental Proceedings or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.7 Solvency Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8 Subscription Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII
CONDITIONS TO TRANSFEREES' OBLIGATIONS . . . . . . . . . . . . . . . . . . 43
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8.1 Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.3 Section 1445 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.4 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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8.5 Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.7 No Governmental Proceedings or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.8 Financing; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE IX
CERTAIN ACTIONS BY TRANSFERORS AND TRANSFEREES
AFTER THE CLOSING . . . . . . . . . . . . . . . . . . . 44
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9.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2 Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.3 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5 Mail Received After Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 50
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10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.2 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.3 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.5 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.6 Entire Agreement; Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.7 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.9 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.10 Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.11 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.12 Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.13 No Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.14 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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I. EXHIBITS
Exhibit A -- Form of GHI Promissory Note
Exhibit B -- Form of Warrant
Exhibit C -- Form of Certificate of Designations of GHI Preferred Stock
Exhibit D -- Excluded Assets
Exhibit E -- Form of ▇▇▇▇ of Transfer
Exhibit F -- Lease Assignment and Assumption Agreements
Exhibit G -- Personal Property Lease Assignment and Assumption Agreement
Exhibit H -- Opinion of Womble, Carlyle, ▇▇▇▇▇▇▇▇▇ & Rice, PLLC
Exhibit I -- Opinion of Weil, Gotshal & ▇▇▇▇▇▇
Exhibit J -- Estimated Balance Sheet of October 28, 1995
Exhibit K -- Memorandum of Agreements, Agreement and Assignment
Exhibit L -- Contract Rights Assignment and Assumption Agreement
Exhibit M -- Assignment of Trademarks
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II. SCHEDULES
Schedule 1.1 -- Exceptions to Title
Schedule 1.2 -- Certain Members of Management
Schedule 2.1 -- Certain Employment Agreements
Schedule 4.3(a) -- Leased Real Property
Schedule 4.3(b) -- Leased Personal Property
Schedule 4.4 -- Exceptions to Title to Transferred Assets
Schedule 4.5 -- Owned Real Property
Schedule 4.6 -- Contracts and Commitments
Schedule 4.7 -- Transferor Legal Proceedings
Schedule 4.8 -- Compliance with Law
Schedule 4.9 -- Taxes
Schedule 4.10 -- Transferor Conflicts and Violations
Schedule 4.11 -- Transferor Consents and Approvals
Schedule 4.12 -- Intellectual Property
Schedule 4.13 -- Insurance
Schedule 4.14 -- Compliance with Environmental Laws
Schedule 4.15 -- Employee Pension and Benefit Plans
Schedule 4.16 -- Labor Relations
Schedule 4.17 -- Transactions with Affiliates
Schedule 4.18 -- Permits
Schedule 5.3 -- Transferee Conflicts and Violations
Schedule 5.4 -- Transferee Consent and Approvals
Schedule 5.5 -- Transferee Legal Proceedings
Schedule 6.1 -- Certain Officers and Employees of Carpet
Schedule 6.7(a) -- Non-Competition
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Schedule 6.7(b) -- Key Employees
Schedule 8.6 -- Transferee Consents
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ASSET TRANSFER AGREEMENT
This ASSET TRANSFER AGREEMENT (the "Agreement"), dated as of
November 16, 1995, is by and among JPS Textile Group, Inc., a Delaware
corporation ("JPS"), JPS Carpet Corp., a Delaware corporation ("Carpet") (and,
hereinafter, JPS and Carpet are sometimes referred to individually as
"Transferor" and collectively as "Transferors"), Gulistan Holdings Inc., a
Delaware corporation ("GHI") and Gulistan Carpet Inc., a Delaware corporation
and wholly-owned subsidiary of GHI ("GCI") (and, hereinafter, GHI and GCI are
sometimes referred to individually as "Transferee" and collectively as
"Transferees").
W I T N E S S E T H :
WHEREAS, JPS owns all of the outstanding capital stock of
Carpet; and
WHEREAS, Carpet is engaged in the business of manufacturing
and designing tufted carpets for sale to the residential, commercial and
hospitality markets (the "Business"); and
WHEREAS, Transferors desire to transfer, and GHI desires to
acquire, substantially all of the properties, rights and assets used by Carpet
in the conduct of the Business upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, on the date hereof, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, C. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (collectively, the "Investors") have entered into subscription
agreements with GHI (each, a "Subscription Agreement") pursuant to which, on
the Closing Date (as defined herein), the Investors shall acquire an aggregate
of 592,105 shares of Common Stock (as defined herein), which immediately after
the Closing (as defined herein) will constitute all of the issued and
outstanding common stock of GHI, in exchange for cash and promissory notes in
an aggregate amount equal to $236,000, which exchange is conditioned upon the
transfer of the Transferred Assets (as defined herein) by Transferors in
exchange for, among other Consideration (as defined herein), the Preferred
Stock (as defined herein), which immediately after the Closing will constitute
all of the issued and outstanding preferred stock of GHI; and
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WHEREAS, it is intended that the transfer of the Transferred
Assets pursuant to this Agreement and the transfer of cash by the Investors
pursuant to the Subscription Agreements qualify as a transfer governed by
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the mutual premises,
covenants, representations and warranties contained herein and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Unless otherwise defined herein, the
following terms as used herein shall have the following respective meanings:
"Affiliate" means, with respect to a specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person.
"Ancillary Agreements" means the other agreements, instruments
and documents to be executed by Transferors or Transferees or their respective
Affiliates, as the case may be, in connection with this Agreement, including,
without limitation, the special warranty deeds, the Bills of Transfer, the
Lease Assignment and Assumption Agreements, the Personal Property Lease
Assignment and the Assumption Agreement, the Contract Rights Assignment, the
Subscription Agreements, the Assumption Agreement and the Memorandum of
Agreements, Agreement and Assignment.
"Assumed Liabilities" shall have the meaning assigned to such
term in Section 2.1(b) hereof.
"Bills of Transfer" means one or more Bills of Transfer made
as of the Closing Date by Transferors substantially in the form of Exhibit F
hereto.
"Books and Records" means all books and records relating to
the Business or pertaining to the Transferred Assets and the customers and
suppliers thereof.
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"Business Day" shall refer to a day, other than a Saturday or
a Sunday, on which commercial banks are not required or authorized to close in
the City of New York.
"Cash Consideration" has the meaning set forth in Section 2.2
hereof.
"Certificate of Designations" means the Certificate of
Designations of the Preferred Stock of GHI, substantially in the form of
Exhibit C hereto, as it may be amended from time to time after the Closing
Date.
"Closing" has the meaning set forth in Section 3.1 hereof.
"Closing Date" means the date which is the fifth Business Day
after all the conditions to Closing set forth in Articles VII and VIII have
been satisfied or waived, or such other date as Transferees and Transferors
shall mutually agree.
"Closing Statement" means the audited statement of Transferred
Assets and Assumed Liabilities, which shall also set forth therein the Net
Assets of Carpet as of the Closing Date, prepared in accordance with GAAP as
consistently applied by Transferors and on a basis consistent with the
Estimated October 28, 1995 Balance Sheet. It is expressly agreed by the
parties hereto that estimates of liabilities and asset valuation accounts in
the Closing Statement shall be made using the best, most recent information
available as of the date of the auditors' report thereon, without regard to
estimation methodologies previously employed by the Transferors.
"Code" has the meaning set forth in the recitals hereof.
"Common Stock" means the authorized shares of common stock,
par value $.01 per share, of GHI.
"Congress" means Congress Financial Corporation, a California
corporation.
"Consideration" means the consideration received by
Transferors for the Transferred Assets as set forth in Section 2.2 hereof.
"Contaminant" means any substance, material or waste whether
in a solid, liquid or gaseous state which is regulated by any Governmental
Agency of the United States or
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other national government, including, without limitation, any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any
provision of Environmental Law, which includes, but is not limited to, used
petroleum, friable asbestos, urea formaldehyde and polychlorinated biphenyls
above 50 ppm.
"Contract Rights" means all of the rights, duties and
obligations of each Transferor under the contracts and commitments set forth on
Schedule 4.6 hereto and all of each Transferor's right, title and interest in
and to (i) all contracts, agreements, leases, notes, purchase orders, sales
orders and other commitments of each Transferor relating to the Business and
(ii) all security and other deposits made by each Transferor with respect
thereto.
"Contract Rights Assignment and Assumption Agreements" means
that certain agreement dated as of the Closing Date among Transferors and GHI
substantially in the form of Exhibit M hereto.
"Covered Employees" means all individuals who participated in
the Transferors' group health or medical plans or were covered by any of
Transferors' payroll arrangements as of the Closing Date by reason of the
employment or former employment of any individual by the Business.
"Employees" means all persons who are employed as current
employees of the Business on the Closing Date, including but not limited to all
Employees on a leave of absence or receiving benefits under any disability plan
or payroll arrangement of Transferors.
"Encumbrance" means any lien, mortgage, pledge, claim,
security interest, charge or encumbrance of any nature whatsoever or any right
or interest whatsoever of any third party, including, without limitation, a
lien, claim or other interest of a Governmental Agency or municipality for
taxes, assessments and other such charges.
"Environmental Claim" means any accusation, allegation, notice
of violation, action, claim, Environmental Lien, demand, abatement or other
order or direction (conditional or otherwise) by any Governmental Agency or any
other Person for personal injury (including sickness, disease or death),
tangible or intangible property damage, damage to
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the environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions resulting from or
based upon (i) the existence, or the continuation of the existence, of a
Release (including, without limitation, sudden or non-sudden accidental or
non-accidental Releases) of, or exposure to, any Contaminant, odor or audible
noise in, into or onto the environment (including, without limitation, the air,
soil, surface water or groundwater) at, in, by, from or related to any of the
Transferred Assets or any activities or operations thereof; (ii) the
transportation, storage, treatment or disposal of Contaminants in connection
with any of the Transferred Assets or any activities or operations thereof; or
(iii) the violation, or alleged violation, of any Environmental Permit of or
from any Governmental Agency relating to environmental matters connected with
any of the Transferred Assets or the Business.
"Environmental Costs and Liabilities" means any and all
losses, liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, costs and expenses (including, without limitation, fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and the costs of investigation and feasibility studies and Remedial Action)
arising from or under any Environmental Law or order.
"Environmental Laws" means all applicable federal, state,
local or foreign laws relating to (i) pollution or protection of the air,
surface, water, ground water or soil; (ii) the generation, treatment, storage,
use, handling, disposal or transportation of Contaminants; (iii) the Release or
exposure to Contaminants; (iv) natural resources; (v) public or community
right-to-know laws; or (vi) employee safety and health including, without
limitation, the Comprehensive Environmental Resource, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Hazardous
Material Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA"), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C.
Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.), the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Section 11001 et seq.), the Safe Drinking Water
Act (42 U.S.C. Section 201 and Section 300f et seq.), the Oil Pollution Act
(33 U.S.C. Section 2701 et seq.) and the Occupational Safety and Health Act
(29 U.S.C. Section 651 et seq.), as such laws have been amended or
supplemented on or before the Closing Date, and all regulations,
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rules or ordinances duly promulgated pursuant thereto and any analogous state,
local or foreign laws.
"Environmental Lien" means any lien in favor of any
Governmental Agency arising under Environmental Laws.
"Environmental Permit" means any permit, approval,
authorization, registration, license, variance or permission required under any
applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Estimated October 28, 1995 Balance Sheet" means that certain
estimated balance sheet dated as of October 28, 1995 which is attached hereto
as Exhibit K.
"Excluded Assets" means the properties and assets of the
Business listed on Exhibit D hereto and which are not being acquired by GHI
hereunder.
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, machinery, tools, supplies, vehicles, equipment and other personal
property owned by Transferors and used in connection with the Business
(wherever located and whether or not carried on Transferors' books), including
all express and implied warranties and licenses received from manufacturers and
sellers of the aforesaid items to the extent assignable by Transferors to GHI
and any related claims, credits and rights of recovery with respect to such
items.
"GAAP" means U.S. generally accepted accounting principles
applicable to financial statements, consistently applied throughout the periods
involved.
"GCI Loan and Security Agreement" means the Loan and Security
Agreement, dated as of November 16, 1995, between GCI and Congress.
"GHI Pledge Agreement" means the Pledge and Security
Agreement, dated as of November 16, 1995, between GHI and Congress.
"Governmental Agency" means (a) any international, foreign,
federal, state, county, local or municipal government or administrative agency
or political sub-division thereof, (b) any governmental agency, authority,
board, bureau, commission, department or instrumentality, (c) any court or
administrative tribunal, (d) any non-governmental
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agency, tribunal or entity that is vested by a governmental agency with
applicable jurisdiction, or (e) any arbitration tribunal or other
non-governmental authority with applicable jurisdiction.
"Intellectual Properties" means those of the following that
are used by Transferors in connection with the Business: all registrations of
trademarks and of other marks and pending applications therefor, all
registrations of trade names, brand names, labels or other trade rights and
pending applications therefor, all registered user entries and all pending
applications for any such registrations or entries; all copyright registrations
and pending applications thereof; all United States and foreign patents and
pending applications therefor; all other registered and unregistered copyrights
and pending applications therefor; and all unregistered trademarks and other
marks, trade names and other trade rights, and all other ideas and know-how,
formulae, treatments, discoveries, improvements, and applications thereof, and
all other know-how and licensing agreements used in connection with the
Business, confidential or secret proprietary and technical information,
inventions, designs and patterns, whether or not patentable, which are used by
Transferors in connection with the Business.
"Inventory" means all of (i) the inventory held for sale to
customers in the ordinary course of the Business, (ii) the raw materials, work
in process, finished products, wrapping, supply and packaging items, and
similar items relating to the Business and (iii) related claims and rights of
recovery with respect to the items listed in clauses (i) and (ii) hereto to the
extent assignable.
"Investors" has the meaning set forth in the recitals hereof.
"Knowledge" shall mean, with respect to either Transferor,
actual knowledge of any member of the management of JPS (and, should any such
person cease to be employed by JPS prior to the Closing Date, any person
acquiring the same or comparable title prior to the Closing Date), provided
that such persons shall not have an obligation of due inquiry (unless otherwise
indicated). For purposes of this definition, (i) ▇▇▇ ▇▇▇▇▇▇ shall be
considered to be a member of the management of JPS, (ii) no member of the
management of Carpet shall be considered to be a member of the management of
JPS unless such person shall continue to be a member of the management of JPS
after the Closing Date,
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and (iii) the persons listed on Schedule 1.2 shall not be considered to be
members of the management of JPS.
"Lease Assignment and Assumption Agreements" means those
certain agreements dated as of the Closing Date among Transferors and GHI
substantially in the form of Exhibit G hereto.
"Leasehold Estates" means all of Transferors' rights and
obligations as lessee or lessor, as the case may be, under the Leases.
"Leasehold Improvements" means all of Transferors' leasehold
improvements situated in or located on the property leased under the Leases.
"Leases" means all leases or subleases of real property used
in connection with the Business as listed on Schedule 4.3(a) hereto.
"Legal Proceedings" means any judicial, administrative or
arbitral actions, suits or adversarial proceedings (public or private),
including adversarial proceedings by a Governmental Agency, undertaken with
actual notice to Transferors.
"Liabilities" shall have the meaning assigned to such term in
Section 2.1(b) hereof.
"Material Adverse Change" or "Material Adverse Effect" means a
material change in, or material effect on, the operations, financial condition,
results of operations, assets or liabilities of the Business or the Transferred
Assets taken as a whole.
"Memorandum of Agreements, Agreement and Assignment" means
that certain agreement dated as of the Closing Date among Transferors and GHI
substantially in the form of Exhibit L hereto.
"Net Assets" means, for purposes of determining the
adjustments to the Cash Consideration set forth in Section 2.3 hereof, the
amount of assets in excess of the liabilities of all Transferred Assets and
Assumed Liabilities as reported in Carpet's balance sheet, determined in
accordance with GAAP as consistently applied by Transferors; provided, however,
that estimates of liabilities and asset valuation accounts in the Closing
Statement shall be made using the best, most recent information available as of
the date of the auditors' report thereon, without regard to
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estimation methodologies previously employed by the Transferors; provided,
further, that the following categories of assets and liabilities shall not be a
part of Net Assets: (i) the portion of the Transferor Credit Agreement which
has been allocated to Carpet, along with the related accrued interest and
deferred financing fees and expenses; (ii) deferred tax assets or liabilities;
(iii) all noncurrent assets and noncurrent liabilities; (iv) any purchase
accounting adjustments, accrual for reorganization costs, or other adjustments
related to the transactions contemplated by this Agreement; (v) assets or
liabilities included in the Closing Statement by virtue of the application of
accounting principles, pronouncements or methodologies not applied in
connection with the Estimated October 28, 1995 Balance Sheet. The Transferors
and Transferees hereby acknowledge and agree that the Net Assets as reflected
on the Estimated October 28, 1995 Balance Sheet is $27,752,000.
"Omnibus Agreement" means that certain Omnibus Real Estate
Closing Agreement dated May 9, 1988.
"Owned Real Property" means the real property used in
connection with the Business owned by Carpet, as listed on Schedule 4.5.
"Permissible Liens" means, with respect to any Transferred
Asset, (i) any minor imperfection of title with respect to such asset which
does not materially affect the full use and enjoyment of such asset for the
purposes for which it is currently used or detract from its value, (ii) the
exceptions to title set forth on the title policies (or title commitments)
identified on Schedule 1.1 hereto and obtained by GHI in connection with the
acquisition of the Owned Real Property and the Leasehold Estates, (iii) Taxes
not yet due and payable, (iv) such matters as set forth on the surveys (if any)
delivered by Transferors to GHI with respect to the Owned Real Property and
Leasehold Estates and (v) mechanics' liens for maintenance or other work that
has been performed on any of the Transferred Assets.
"Permits" means all of Transferors' permits, licenses,
exemptions, certificates and other public, governmental and private third party
authorizations and approvals reasonably necessary to carry on the Business as
presently conducted.
"Person" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or a
government or political subdivision thereof.
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"Personal Property Lease Assignment and Assumption Agreement"
means that certain agreement dated as of the Closing Date among Transferors and
GHI substantially in the form of Exhibit H hereto.
"Personal Property Leases" means all of the leases of personal
property used in connection with the Business.
"Preferred Stock" means 5,000 shares of the preferred stock,
issued in accordance with the Certificate of Designations, par value $.01 per
share, of GHI.
"Promissory Note" means a promissory note of GHI in the
principal amount of $10 million (plus the amount of any deferred interest
thereon) bearing interest at 10-1/2% per annum, substantially in the form of
Exhibit A.
"Release" means any release, spill, emission, leaking,
pumping, emptying, dumping, injection, abandonment, deposit, disposal,
discharge, dispersal, leaching or migration on or into the indoor or outdoor
environment or on, into, above or beneath any property.
"Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by any Governmental Agency or
third party or voluntarily undertaken to (i) clean up, remove, treat, or in any
other way address any Contaminant or other substance; (ii) prevent the Release
or threat of Release, or minimize the further Release of any Contaminant or
other substance so it does not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment; (iii) perform
pre-remedial studies and investigations or post-remedial monitoring and care;
or (iv) bring the Transferred Assets and the Business into compliance with all
Environmental Laws and Environmental Permits.
"Stockholders Agreement" means that certain agreement dated as
of the Closing Date among Carpet, GHI and the Investors.
"Subscription Agreements" has the meaning set forth in the
recitals hereof.
"Taxes" means all federal, state, local and foreign taxes,
charges, fees, levies, imposts, duties or other assessments, including, without
limitation, income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental (including taxes under Code
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section 59A), premium, federal highway use, commercial rent, customs duties,
capital stock, paid up capital, profits, withholding, Social Security, single
business and unemployment, disability, real property, personal property,
registration, ad valorem, value-added, alternative or add-on minimum,
estimated, or other tax or governmental fee of any kind whatsoever, imposed or
required to be withheld by the United States or any state, local, foreign
government or subdivision or agency thereof, including any interest, penalties
or additions thereto. The parties acknowledge that, consistent with the past
practice of the Transferors, the Michigan Single Business Tax is not an income
tax, a franchise tax based on net income, or a transfer tax.
"Transferred Assets" means all of Transferors' rights, title
and interest in and to all of the properties, assets and rights constituting
the Business (other than the Excluded Assets) on the Closing Date, including,
without limitation, the following:
(a) all accounts and notes receivable, refunds and
deposits relating to the Business together, in each case, with all security and
collateral therefor;
(b) all Contract Rights;
(c) all Owned Real Property, including buildings and
other improvements, fixtures and appurtenances located on the Owned Real
Property;
(d) all Leasehold Estates;
(e) all Leasehold Improvements;
(f) all Fixtures and Equipment;
(g) all of Transferors' rights and obligations under the
Personal Property Leases;
(h) all Inventory;
(i) all Intellectual Properties;
(j) to the extent transferable, all Permits;
(k) all Books and Records, including books of account,
budgets, correspondence, records, files, invoices, manuals, sales, marketing
and advertising materials, customer and supplier files, personnel files,
equipment maintenance records, equipment warranty information,
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material, software, specifications and drawings, equipment drawings, customer
specifications, sales, distribution and purchase correspondence, trade
association memberships and all other similar data, computer programs and
software, manuals and data and property relating to the Business;
(l) from and after the Closing Date, all insurance,
condemnation and reimbursement claims and proceeds, if any, received by
Transferors in connection with any damage or casualty to any Transferred
Assets;
(m) all of those prepaid expenses relating to the
Business;
(n) all other tangible assets of Transferors of every
kind and description, real, personal or mixed, wherever located, which are
carried on the books of the Business or which are owned by Transferors and used
in connection with the Business;
(o) all of Transferors' rights to any choses in action,
claims, causes or rights of action arising in connection with the Business;
(p) all other intangible assets of any kind or
description, wherever located, which are carried on the books of the Business
or which are owned by Transferors and used in connection with the Business; and
(q) all of Transferors' rights under the Omnibus
Agreement in and to the Wagram Plant.
(r) all of the issued and outstanding capital stock of
JPS U.K. Limited.
"Transferred Employees" means all Employees who commence
employment with Transferees pursuant to Section 6.3(a) hereof.
"Transferor Credit Agreement" means the Fourth Amended and
Restated Credit Agreement, dated as of June 24, 1994, as amended, restated,
supplemented or modified from time to time, among JPS, Carpet, JPS Converter
and Industrial Corp., JPS Elastomerics Corp., the financial institutions party
thereto (the "Senior Lenders"), Citibank, N.A., as agent and administrative
agent for the Senior Lenders, and General Electric Capital Corporation, in its
capacity as co-agent and collateral agent for the Senior Lenders.
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"Wagram Plant" means the portion of the "▇▇▇ ▇▇▇▇▇▇▇ Plant"
located in Wagram, North Carolina occupied by Carpet under and pursuant to the
Omnibus Agreement, together with Carpet's non-exclusive rights under and
pursuant to the Omnibus Agreement, to common areas, loading docks, steam and
other support facilities and services.
"Warrant Stock" means the shares of Common Stock to be issued
upon exercise of the Warrant.
"Warrant" means a warrant to acquire shares of Common Stock,
substantially in the form of Exhibit B hereto.
ARTICLE II
TRANSFER OF ASSETS
2.1 Transfer of Assets; Assumption of Liabilities. In
reliance upon the covenants, representations and warranties contained herein
and subject to the terms and conditions hereof:
(a) Transferors hereby agree to transfer to GHI, and GHI
hereby agrees to acquire from Transferors, the Transferred Assets on the
Closing Date. Following the Closing, GHI shall transfer the Transferred Assets
to GCI pursuant to an Assignment and Assumption Agreement, dated as of the date
hereof, between GHI and GCI.
(b) On the Closing Date, GHI shall, and shall cause GCI
to (without releasing GHI therefrom), assume and pay, perform and discharge as
and when due all debts, claims, liabilities, obligations, Taxes, damages and
expenses of every kind and nature, whether known, unknown, contingent,
absolute, determined, indeterminable or otherwise arising prior to the Closing
(excluding debts, claims, liabilities, obligations, Taxes, damages and expenses
of Transferors arising under this Agreement) (collectively, the "Liabilities"),
to the extent relating to or arising from the Transferred Assets and/or the
Business, including, without limitation, those claims against, and liabilities
and obligations of, Carpet with respect to (i) any Contract Rights related to
the Business to the extent they remain unsatisfied and are required to be
performed on or after the Closing Date, (ii) accounts payable to third parties,
together with any interest accrued thereon, incurred in connection with the
Business, (iii) the Transferred Employees and the Covered Employees (other than
benefits under the Retirement Pension Plan for Employees of JPS
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Textile Group, Inc.), and (iv) all Environmental Claims and Environmental Costs
and Liabilities; provided, however, Transferees shall not assume or pay any
liabilities relating to (A) the Excluded Assets, (B) income Taxes or franchise
Taxes imposed on net income which are owed or incurred by Transferors (or any
other corporation which is or was included in a consolidated, combined or
unitary group with JPS or Carpet), (C) any withholding tax liability imposed on
JPS or Carpet for an excise tax under Section 4999(c)(1) of the Code in respect
of any payment which is actually made by such Transferor, (D) real and personal
property taxes and state and local ad valorem taxes and assessments, to the
extent that such taxes are to be paid by the Transferors in accordance with
Section 9.4(d), (E) any liability for purchase money debt, debt for borrowed
money or a guaranty in respect thereof (including, but not limited to the
Transferor Credit Agreement), except to the extent such liabilities are
reflected on the Closing Statement, (F) any liability arising out of the
employment agreements listed on Schedule 2.1 hereto, including without
limitation, any liability for severance pay to the extent that such amount is
in excess of the severance pay payable pursuant to JPS's normal severance pay
policy as applied to those individuals, and (G) sales, transfer, use or other
similar taxes incurred, to the extent that such taxes are to be paid by
Transferors in accordance with Section 9.4(c) as a result of the transfer of
the Transferred Assets pursuant to this Agreement (subject to the exceptions
set forth in (A) through (G), collectively, the "Assumed Liabilities").
2.2 Consideration.
(a) On the Closing Date, as consideration (the
"Consideration") for the conveyance, transfer, assignment and delivery of the
Transferred Assets:
(i) GHI shall deliver to Carpet the Preferred
Stock;
(ii) GHI shall pay to Carpet in cash an amount
equal to $22,800,000 (the "Cash Consideration");
(iii) GHI shall deliver to Carpet the Promissory
Note;
(iv) GHI shall deliver to Carpet the Warrant; and
(v) GHI shall assume (and shall cause GCI to
assume) the Assumed Liabilities.
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(b) The Cash Consideration shall be paid at the Closing
by wire transfer of immediately available funds to an account designated in
writing by JPS.
(c) Promptly following the Closing, Transferors shall
prepare and deliver to GHI a schedule which shall set forth the allocation of
the Consideration among the Transferred Assets. Such allocation shall be
subject to GHI's approval (which shall not be unreasonably withheld). Subject
to the requirements of any applicable tax law, all tax returns filed by
Transferees and Transferors shall be prepared consistently with such
allocation. In the event of any adjustment to the Cash Consideration pursuant
to Section 2.3 hereof, GHI and Transferors agree to adjust such allocation to
reflect such adjustment to the Cash Consideration and, subject to the
requirements of any applicable tax laws, to file consistently any tax returns
required as a result of such adjustment to the Cash Consideration. In the
event Transferors and GHI are unable to agree to the allocation of the
Consideration among the Transferred Assets pursuant to this Section 2.2(c),
Transferors and Transferees shall file all tax returns consistent with the
allocation provided by Transferors except with respect to the items that are
the subject of disagreement.
2.3 Adjustments to Cash Consideration.
(a) The Cash Consideration shall be increased or
decreased (on a dollar for dollar basis), as the case may be, for any increase
or decrease in the Net Assets as of the Closing Date as set forth on the
Closing Statement as compared to the Net Assets as of October 28, 1995 included
in the Estimated October 28, 1995 Balance Sheet.
(b) As soon as is reasonably practicable following the
Closing Date, Transferors shall prepare and deliver to GHI the Closing
Statement which shall set forth the adjustments to the Cash Consideration to be
made, if any, in accordance with Section 2.3(a). In connection with the
preparation of the Closing Statement, GHI shall grant Transferors and its
accountants, counsel and other representatives, full and complete access to all
of the books and records of the Business. The Closing Statement shall be
audited by Transferors' independent public accountants and Transferors and
Transferees shall provide such independent public accountants with such
information, certificates and representations (including but not limited to a
management's letter of representation) reasonably requested by such accountants
in order for such accountants to render an unqualified opinion with respect to
the Closing Statement.
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Concurrently with their delivery of the Closing Statement to GHI, Transferors
shall cause reasonable access to be granted to GHI to the work papers,
schedules and other documents prepared or used by Transferors and its
accountants in connection with the preparation of the Closing Statement.
Transferors shall pay all fees and expenses of its accountants in connection
with the preparation of the Closing Statement and the computation of Net
Assets.
(c) Unless GHI, within 20 Business Days after receipt of
the Closing Statement, gives Transferors a notice (the "Dispute Notice") (i)
objecting in good faith to the Closing Statement and (ii) setting forth in
reasonable detail the items being disputed and the reasons therefor, and that
GHI's calculation of Net Assets as of the Closing Date is in an amount which
differs from that reflected in such Closing Statement (the entire amount of
such difference being hereinafter referred to as the "Adjusted Amount"), the
Net Assets as set forth in the Closing Statement and the adjustment to the Cash
Consideration set forth therein shall be binding and final upon the parties.
If a Dispute Notice is given by GHI, the parties shall negotiate in good faith
with a view to agreeing upon the Net Assets as of the Closing Date and the
corresponding amount of the adjustment required by paragraph (a) of this
Section 2.3. In addition, after receipt of a Dispute Notice, Transferors shall
have the right to set forth any additional items which they have determined to
be subject to dispute ("Transferors' Disputed Items"). If negotiations between
GHI and Transferors fail to resolve all disputed items within 30 days after the
Dispute Notice was given to Transferors, the remaining disputed items, which
shall include the remaining Transferors' Disputed Items, shall be submitted to
a nationally recognized firm of independent public accountants which is not
affiliated with either party and is designated jointly by Transferors and GHI.
After affording each of Transferors and GHI and their respective accountants
the opportunity to present its position as to such determination (which
opportunity shall not extend for more than 30 days from the date the
independent public accountants are retained), the accounting firm selected
pursuant to this paragraph shall determine the adjustment pursuant to paragraph
(a) of this Section 2.3 and such determination shall be final and binding. If
a party raising a claim for an adjustment to the Cash Consideration is
successful and the accounting firm selected pursuant to this paragraph agrees
with each and every disputed item raised by such party and none of the disputed
items raised by the other party, then all fees, costs and expenses of such
accounting firm shall be borne by the other party. Otherwise, all
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fees, costs and expenses of such accounting firm shall be subject to pro rata
allocation between the parties based on a percentage calculated by dividing the
total dollar amount of all disputed items raised by a party which were not
recognized by the accounting firm by the total dollar amount of all disputed
items raised by such party. Notwithstanding the foregoing, to the extent that
any amount of the adjustment to the Cash Consideration is not disputed, such
undisputed amount shall be delivered to Transferors or GHI, as the case may be,
in accordance with Section 2.3(d) below.
(d) The amount of any adjustment to the Cash
Consideration required under this Section 2.3 shall be delivered to Transferors
or GHI, as the case may be, with interest thereon (calculated on the basis of a
365 or 366-day year), from and including the Closing Date until paid at an
annual rate equal to the base rate of interest of Citibank, N.A. (as such base
rate is publicly announced from time to time as the base rate of such bank), at
such place in the United States as the party receiving such amount shall
designate in writing to the other party and shall be paid in immediately
available funds within 30 days after the final determination of such
adjustment.
2.4 Section 351 Exchange. It is the intent of the parties
that the transfer of cash to GHI by the Investors pursuant to the Subscription
Agreement and the transfer of the Transferred Assets to GHI by Transferors
pursuant to this Agreement shall constitute mutually interdependent steps in a
single plan. The obligation of Transferors to consummate the transfer of the
Transferred Assets to GHI under this Agreement is subject to the transfer to
GHI, on or prior to the Closing Date, of cash and notes by the Investors, in
exchange for shares of Common Stock representing all of the issued and
outstanding shares of Common Stock immediately following the Closing. The
parties shall report such transfers in a manner consistent with Section 351 of
the Code pursuant to Section 9.4(e).
ARTICLE III
CLOSING
3.1 Closing. The Closing of the transactions contemplated
hereby (the "Closing") shall be held at 10:00 a.m. local time on the Closing
Date at the New York offices of Weil, Gotshal & ▇▇▇▇▇▇, New York, New York, or
at such other time, date or place as the parties hereto may otherwise agree.
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3.2 Conveyances at Closing.
(a) Instruments and Possession. To effect the transfer
referred to in Section 2.1 hereof, Transferors shall, on the Closing Date,
execute and deliver to GHI:
(i) one or more special warranty deeds, in proper
form for recording and mutually and reasonably acceptable to GHI and
Transferors, conveying good title (other than Permissible Liens) to
all Owned Real Property included in the Transferred Assets;
(ii) one or more Bills of Transfer and such other
instruments of transfer as GHI may reasonably request to convey and
vest in GHI all right, title and interest in and to the remaining
Transferred Assets;
(iii) subject to Section 3.4(c) hereof, the Lease
Assignment and Assumption Agreements with respect to the assignment of
the Leases hereunder;
(iv) subject to Section 3.2(c), the Personal
Property Lease Assignment and Assumption Agreement with respect to the
assignment of the Personal Property Leases hereunder;
(v) subject to Section 3.2(c), the Contract
Rights Assignment and Assumption Agreement with respect to the
assignment of the Contract Rights hereunder;
(vi) the Memorandum of Agreements, Agreement and
Assignment with respect to the Wagram Plant;
(vii) the Assignment of Trademarks with respect to
the assignment of the Intellectual Property Rights hereunder;
(viii) such affidavits, certificates or filings as
may be required to convey the Transferred Assets to GHI or as may be
reasonably requested by GHI's title company and agreed to by
Transferors in connection with the issuance of the title policies with
respect to the Owned Real Property and Leasehold Estates, all costs,
charges and premiums of which, shall be paid by GHI; and
(ix) physical possession and control of the
Transferred Assets.
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(b) Form of Instruments. All of the foregoing
instruments shall be in form and substance, and shall be executed and delivered
in a manner, reasonably satisfactory to GHI.
(c) Consents to Assignment. Anything in this Agreement
to the contrary notwithstanding, and subject to the provisions concerning
Leases and Personal Property Leases set forth in Section 3.4 hereof, this
Agreement shall not constitute an assignment of, or an agreement to assign, any
claim, contract, license, lease commitment, sales order, purchase order or any
claim or right or any benefit arising thereunder or resulting therefrom if an
attempted assignment thereof, without the consent of the other party thereto,
would constitute a breach thereof, unless and until such consent shall have
been obtained. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or would affect the rights thereunder so that GHI
would not receive all such rights, then, in accordance with Section 3.4(d)
hereof, Transferors will thereafter take all reasonable actions in order to
provide to GHI the benefits under any such claim, contract, license, lease
commitment, sales order or purchase order, including, without limitation,
enforcement for the benefit of GHI (at Transferors' expense) of any and all
rights of Transferors against such other party thereto arising out of the
breach or cancellation by such other party or otherwise; and any transfer or
assignment to GHI of any property or property rights or any contract or
agreement which shall require the consent or approval of any such other party
shall be made subject to such consent or approval being obtained. Nothing
contained in this Section shall be deemed to require Transferors to make any
payments to obtain a consent or approval from any third party to the assignment
by Transferors to GHI. In addition, Transferors shall not obtain any consent
that will affect GHI to its economic detriment unless GHI expressly approves
the obtaining of such consent.
3.3 Assumption Documents. Upon the terms and subject to the
conditions contained herein, on the Closing Date, Transferees shall deliver to
Transferors instruments of assumption evidencing Transferees' assumption,
pursuant to Section 2.1(b) hereof, of the Assumed Liabilities. All such
instruments shall be in form and substance, and executed in a manner,
reasonably satisfactory to Transferors.
3.4 Other Deliveries at Closing. In addition to the
foregoing matters, at the Closing:
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(a) Memorandum of Agreements, Agreement and Assignment.
GHI agrees to assume the Leases and Personal Property Leases assigned hereunder
by joining with Transferors in the execution of the Lease Assignment and
Assumption Agreement and the Personal Property Lease Assignment and Assumption
Agreements.
(b) Wagram Assignment and Assumption Agreement. GHI
agrees to assume the rights to the Wagram Plant assigned hereunder by joining
with Transferors in the execution of the Memorandum of Agreements, Agreement
and Assignment.
(c) Certificates; Opinions. Transferees and Transferors
shall deliver the certificates, opinions and other instruments described in
Articles VII and VIII hereof.
(d) Leases and Other Third-Party Consents. To the extent
any of the Leases (other than the lease for office space located in New York
City) or any other Contract Right may not be assigned by Transferors without
the written consent of the landlord, any mortgagee, lender or other third party
(collectively, a "Consenting Party"), Transferors shall use their reasonable
efforts to secure and deliver the required consents to GHI within 90 days after
the Closing Date; provided, however, that no modification of any such Leases or
Contract Right shall be made without GHI's prior written consent, which consent
shall not be unreasonably withheld; provided, further, to the extent such
consents are not obtained within 90 days of the Closing Date then Transferors
shall have no further obligations hereunder and such Leases or Contract Rights
shall be deemed to not be a part of the Transferred Assets or Assumed
Liabilities; provided, further, that nothing contained in this Section shall be
deemed to require Transferors to make any payments to a Consenting Party to
obtain a consent or approval from any third party. GHI shall cooperate as
reasonably necessary or desirable to secure the consent of any Consenting
Party, including, without limitation, providing to such Consenting Party
financial information, operating history and information regarding GHI's
intended use or disposition of any Transferred Asset.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TRANSFERORS
Each Transferor hereby represents and warrants to Transferees
as follows:
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4.1 Organization. Each Transferor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on its business as
it is now being conducted and to own, operate and lease all of its properties
and assets. Carpet is duly qualified to do business and is in good standing in
each jurisdiction in which the ownership of its properties or the conduct of
its business requires such qualification, except where the failure so to
qualify would not have a Material Adverse Effect. Subject to the lien under
the Transferor Credit Agreement, JPS is the sole record and beneficial owner of
all of the outstanding capital stock of Carpet.
4.2 Corporate Authorization. Each Transferor has all
necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions described herein
and therein by each of the Transferors have been duly authorized by all
requisite corporate action. This Agreement and the Ancillary Agreements have
been duly executed and delivered by the respective Transferors party thereto
and, assuming the due execution and delivery thereof by Transferees, each is a
valid and binding obligation of each such Transferor, enforceable against each
such Transferor in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratoriums or other similar laws now or hereafter in effect relating to
creditors' rights generally and by general principles of equity (whether
considered in an action at law or in equity) and the discretion of the court
before which any proceeding therefor may be brought.
4.3 Leases.
(a) Real Property. To Transferors' Knowledge, Schedule
4.3(a) hereto contains a complete and correct list of all Leases. Except as
set forth on Schedule 4.3(a), GHI has been provided with true, correct and
complete copies of all such Leases. To Transferors' Knowledge, each Lease is
in full force and effect, Carpet has received no notice of default with respect
to any of the respective Leases, and there are no offsets or defenses by either
landlord or tenant thereunder. To Transferors' Knowledge, there are no
asserted or unasserted defaults thereunder, except for defaults of a party to
any such lease which have been
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consented to or waived in writing by the other party thereto. To Transferors'
Knowledge, except as set forth on Schedule 4.3(a), the assignment of the Leases
by Transferors to GHI will not, with respect to any such Lease, (i) permit the
landlord to accelerate the rent or cause the lease terms to be renegotiated,
(ii) constitute a default thereunder or (iii) require the consent of the
landlord or any third party other than consents provided for on Schedule 4.11
hereto.
(b) Personal Property. To Transferors' Knowledge,
Schedule 4.3(b) hereto contains a complete and correct list of all Personal
Property Leases with respect to the Business, under which (i) Carpet is the
lessee and (ii) the Lease is not cancelable (without liability) within 90 days.
At the request of GHI, Carpet will deliver true, correct and complete copies of
such Personal Property Leases. To Transferors' Knowledge, (a) each Personal
Property Lease is valid, binding and enforceable in accordance with its terms
and is in full force and effect, and there are no offsets or defenses by either
landlord or tenant thereunder; (b) there are no existing defaults, and no
events or circumstances have occurred which, with or without notice or lapse of
time or both, would constitute defaults, under any of the Personal Property
Leases; and (c) the assignment of the Personal Property Leases by Transferors
to GHI will not, with respect to any such Personal Property Lease, (i) permit
the landlord to accelerate the rent or cause the lease terms to be
renegotiated, (ii) constitute a default thereunder or (iii) require the consent
of the landlord or any third party other than consents provided for on Schedule
4.11 hereto.
4.4 Title to Transferred Assets. To Transferors' Knowledge,
except as set forth on Schedule 4.4 hereto, Carpet has title to all of the
Transferred Assets other than the Wagram Plant and other than the Leasehold
Estates, as to which Carpet has its rights as the lessor or lessee, as the case
may be, free and clear of any Encumbrances except for Permissible Liens. To
Transferors' Knowledge, the Transferred Assets include all of the assets,
tangible or intangible, which are presently being used and which are required
to operate the Business in the manner presently operated by Carpet.
4.5 Owned Real Property. Schedule 4.5 hereto contains a
complete and correct list of all Owned Real Property.
4.6 Contracts and Commitments. To Transferors' Knowledge,
Schedule 4.6 hereto lists all of the contracts,
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commitments, arrangements, licenses, obligations (including agreements for the
borrowing of money or extension of credit), agreements and understandings, both
oral and written, other than those relating to real estate, which are material
to the conduct, operations and prospects of the Business and which are being
transferred hereunder (collectively, the "Contracts"). To Transferors'
Knowledge, (a) each of the Contracts is valid, binding and enforceable in
accordance with its terms and is in full force and effect; (b) there are no
existing defaults, and no events or circumstances have occurred which, with or
without notice or lapse of time or both, would constitute defaults under any of
the Contracts; and (c) the assignment of the Contracts by Transferors to GHI
will not, with respect to any Contract, (i) constitute a default thereunder,
(ii) require the consent of any person or party (except as disclosed on
Schedule 4.11) or (iii) affect the continuation, validity and effectiveness
thereof or the terms thereof.
4.7 Litigation, Proceedings and Applicable Law. Except as
set forth on Schedule 4.7 hereto, to Transferors' Knowledge, there are no
claims, actions, suits, arbitration proceedings, inquiries, hearings,
investigations or proceedings pending or threatened against or affecting
Carpet, the Transferred Assets or the Business including any which, if
adversely determined, would impair any of Transferors' ability to consummate
the transactions contemplated hereby, or which question or challenge the
validity of this Agreement or any actions to be taken by Transferors hereunder
or in connection with any of the transactions contemplated hereby. Except as
set forth on Schedule 4.7 hereto, to Transferors' Knowledge, Carpet is not
subject to any judgment, order, writ, injunction or decree of any court or
Governmental Agency, and there are no unsatisfied judgments against Carpet or
the Business.
4.8 Compliance with Law. Except as set forth on Schedule 4.8
hereto, to Transferors' Knowledge, the Business has been operated in compliance
with all applicable laws, statutes, rules, regulations, ordinances, codes,
orders, licenses, permits or authorizations, as such now apply to the Business,
(the "Rules"). To Transferors' Knowledge, there has been no allegation of any
violation of any such Rules, and no investigation or review by a federal, state
or local body or agency is pending, threatened or planned with respect to
Carpet, the Transferred Assets or the Business.
4.9 Taxes. Except as set forth on Schedule 4.9 hereto:
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(a) None of the Transferred Assets is: (1) property
which GHI will be required to treat as owned by another person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954 (as in
effect immediately prior to the Tax Reform Act of 1986); (2) "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code; (3) property
used predominantly outside the United States within the meaning of Prop. Treas.
Reg. Section 1.168-2(g)(5), or (4) "tax-exempt bond financed property" within
the meaning of Section 168(g)(5) of the Code.
(b) The Transferors are not foreign persons within the
meaning of Section 1445(b)(2) of the Code.
4.10 No Conflict or Violation. Except as set forth on
Schedule 4.10 hereto, neither the execution, delivery nor performance of this
Agreement and the Ancillary Agreements nor the consummation of any of the
transactions contemplated hereby will (a) violate or conflict with any
provision of the Certificate of Incorporation or By-laws of either Transferor,
(b) result in a breach of or default (or an event which, with notice, lapse of
time or both, would constitute a breach or default) under, result in the
termination of, accelerate the performance required by, cause the acceleration
of the maturity of any debt or obligation pursuant to, any provision of any
material contract, agreement, lease, commitment, license, franchise, permit,
authorization or concession to which JPS or, to Transferors' Knowledge, Carpet,
is a party or bound or to which the Transferred Assets or the Business is
subject, (c) conflict with or result in a violation by JPS or, to Transferors'
Knowledge, Carpet, of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree, or award (or an event which with notice,
lapse of time, or both, would result in any such conflict or violation) or (d)
to Transferors' Knowledge, result in the creation or imposition of a lien or
encumbrance on the Transferred Assets other than a Permissible Lien.
4.11 Consents and Approvals. Except as set forth on Schedule
4.11 hereto and other than real property recording and filing documents
normally required in connection with the conveyance of title, no notice to,
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Agency or any other person or entity, is required to be
made or obtained by JPS or, to Transferors' Knowledge, by Carpet, in connection
with the execution, delivery and performance of this Agreement or the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby.
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4.12 Intellectual Properties. To Transferors' Knowledge,
Schedule 4.12 sets forth all of the trademark registrations and pending
applications therefor, patents and pending applications therefor, and copyright
registrations and pending applications therefor in the United States and
foreign countries ("Registered Intellectual Property") in which Carpet has any
right, title or interest and which either have been used in connection with or
relate to, the Business or the products or processes of Carpet. To
Transferors' knowledge, Schedule 4.12 sets forth all unregistered trademarks
and invention disclosures in which Carpet has any right, title or interest and
which are material to the conduct of the Business or the manufacture, use or
sale of the products or processes of Carpet. To Transferors' knowledge, no
event has occurred and no fact or circumstance exists that is likely to have a
Material Adverse Effect on the validity of the Registered Intellectual Property
or Carpet's ownership thereof. To Transferors' Knowledge, except for the
transfers contemplated by this Agreement or as otherwise set forth in Schedule
4.12 hereto, Carpet has not granted a license to, nor has an understanding with
any third party and/or has entered into a written agreement, relating in whole
or in part to any of the Intellectual Properties of Carpet used in connection
with the Business and, to Transferors' Knowledge, there has been no assertion
thereof by any person. To Transferors' Knowledge, there is no infringement or
other adverse claim against the rights of Carpet with respect to any of the
Intellectual Properties used or owned by Carpet in connection with the conduct
of the Business.
4.13 Insurance.
(a) Schedule 4.13 hereto contains a list of all policies
of title, liability, fire, workers' compensation and other forms of insurance
insuring the products, properties, assets and operations of the Business. At
GHI's request, Carpet will provide GHI with true, correct and complete copies
of all such insurance policies. Such policies are valid, binding and
enforceable in accordance with their terms, are in full force and effect, and
all premiums due thereon have been paid and will be paid through the Closing.
Neither JPS, nor, to Transferors' Knowledge, Carpet, has been refused any
insurance by any insurance carrier with respect to the products, properties,
assets or operations of the Business within the past two years.
(b) No notice of cancellation, termination or reduction
in coverage has been received by JPS with respect to any policy listed in
Schedule 4.13 hereto.
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4.14 Compliance with Environmental Laws. Except as set forth
on Schedule 4.14 hereto and other than as not reasonably likely to have a
Material Adverse Effect:
(a) To Transferors' Knowledge, (i) Carpet is in material
compliance with all Environmental Permits necessary for Carpet to conduct the
operations of the Business, (ii) there are no Legal Proceedings pending or
threatened that, if adversely determined, would result in the revocation of
each Environmental Permit and (iii) Carpet has not received notice from any
source to the effect that there is not in existence any material Environmental
Permit required for the current use or operation of the Business or the
Transferred Assets.
(b) To Transferors' Knowledge, the operations of the
Business and Carpet's operations with respect to the Transferred Assets are in
material compliance with all applicable Environmental Laws.
(c) To Transferors' Knowledge, after diligent search,
there are no leaking underground storage tanks, as defined under any
Environmental Law, located within any portion of any Transferred Asset, nor
have any liens been placed upon any Transferred Asset in connection with any
actual or alleged liability under any Environmental Law.
(d) To Transferors' Knowledge, there are no Environmental
Claims or Legal Proceedings under Environmental Laws pending or threatened
against Carpet, as a result of Carpet's operation of the Business or ownership
of the Transferred Assets.
(e) To Transferors' Knowledge, Carpet is not required to
give notice of or record or deliver to any Governmental Agency an environmental
disclosure document or statement by virtue of the transactions set forth herein
and contemplated hereby, or as a condition to the recording of any mortgage or
the effectiveness of any of the transactions contemplated hereby.
4.15 Employee Benefit Plans.
(a) Schedule 4.15 sets forth a list of each employee
benefit plan, policy and arrangement which covers or provides benefits to the
Employees.
(b) Carpet has complied in all material respects with the
terms of each plan, policy and arrangement set forth on Schedule 4.15 and with
any applicable provisions of
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ERISA and the Code.
4.16 Labor Relations. Except as set forth on Schedule 4.16
hereto, to Transferors' Knowledge, each Transferor does not have any obligation
under, and there are no Employees covered by, any collective bargaining
agreement and there are no pending or threatened strikes, work stoppages,
slowdowns, material written grievances or other labor disputes with respect to
individuals employed in the Business. Except as set forth on Schedule 4.16
hereto, to Transferors' Knowledge, there are no pending or threatened
complaints or charges with any federal, state or local governmental agency or
court with respect to any individual or group of individuals alleging
employment discrimination by Carpet, or any officer, director or managing agent
of Carpet. To Transferors' Knowledge, (a) no individuals employed in the
Business other than those covered by the collective bargaining agreement listed
in Schedule 4.16 are represented by any labor organization, and (b) no group of
such individuals or labor organization with respect to such individuals have
made a pending demand for recognition or have filed a petition seeking a
representation proceeding with the National Labor Relations Board. Nor to
Transferors' knowledge, are there any organizational efforts by or among any
employees in the Business which has not yet attained the status of such demand
or petition.
4.17 Transactions with Affiliates. Other than in the
ordinary course of business or except as set forth on Schedule 4.17 hereto,
since September 30, 1995 there have been, and prior to the Closing Date there
will be, no transactions, agreements or arrangements between the Business and
(i) Transferors, (ii) any Affiliate of Transferors, (iii) any director or
officer of any Transferor or any Affiliate of Transferors or (iv) any member of
the immediate family of any individual described in clause (ii) or (iii) of
this sentence. Other than in the ordinary course of business and other than
payments being repaid on the Closing Date, Carpet does not owe any indebtedness
to JPS.
4.18 Permits. Schedule 4.18 hereto sets forth a list of all
Permits necessary, to Transferors' Knowledge, to conduct the Business, the
dates such Permits were obtained, the date of renewals thereof and the status
of each Permit. To Transferors' Knowledge, except as set forth on Schedule
4.18 there are no administrative or judicial proceedings pending or threatened
which seek to revoke, cancel or declare such Permits invalid in any respect.
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4.19 Brokers. No Person has acted directly or indirectly as
a broker, finder or financial advisor for the Transferors in connection with
the negotiations relating to or the transactions contemplated by this Agreement
and no Person is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or understandings made by
or on behalf of the Transferors.
4.20 Investment Intent. Carpet is acquiring the Preferred
Stock, the Warrant and the Promissory Note for its own account, for investment
purposes only and not with a view to the distribution (as such term is used in
Section 2(11) of the Securities Act of 1933, as amended (the "Securities Act")
thereof. Carpet understands that the shares of Preferred Stock, the Warrant,
the Warrant Stock and the Promissory Note have not been registered under the
Securities Act and cannot be sold unless subsequently registered under the
Securities Act or an exemption from such registration is available. Carpet is
an "accredited investor", as such term is defined in Regulation D under the
Securities Act. Carpet has no present plan or intention to distribute the
Preferred Stock or the Warrant to JPS or to liquidate.
4.21 Subsidiary of Carpet. To Transferors' Knowledge, (a)
the outstanding shares of capital stock of JPS U.K. Limited are validly issued,
fully paid and non-assessable, and all such shares or other equity interests
represented as being owned by Carpet are owned by it free and clear of any and
all liens, claims and encumbrances, except as set forth in Schedule 4.4 hereto,
(b) there is no existing option, warrant, commitment or agreement to which JPS
U.K. Limited is a party requiring, and there are no convertible securities of
JPS U.K. Limited outstanding which upon conversion would require the issuance
of any additional shares of capital stock or other equity interests of JPS U.K.
Limited or other securities convertible into shares of capital stock or other
equity interests of JPS U.K. Limited or other equity security of JPS U.K.
Limited, and (c) JPS U.K. Limited is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TRANSFEREES
Each Transferee hereby represents and warrants to Transferors
as follows:
5.1 Organization. Each Transferee is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; each Transferee has full corporate power and authority to conduct
the Business as it is now being conducted and to own and lease the Transferred
Assets.
5.2 Corporate Authorization. Each Transferee has all
necessary corporate power and authority to enter into this Agreement and the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Ancillary Agreements and the consummation of the transactions described herein
and therein by each of the Transferees have been duly authorized by all
requisite corporate action. This Agreement and the Ancillary Agreements have
been duly executed and delivered by the respective Transferees party thereto
and, assuming the due execution and delivery thereof by Transferors, each is a
valid and binding obligation of each such Transferee, enforceable against each
such Transferee in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws now or hereafter in effect relating to
creditors' rights generally and by general principles of equity (whether
considered in an action at law or in equity) and the discretion of the court
before which any proceeding therefor may be brought.
5.3 No Conflict or Violation. Except as set forth on
Schedule 5.3 hereto, neither the execution, delivery nor performance of this
Agreement or any of the transactions contemplated hereby will 1. violate or
conflict with any provision of the Certificate of Incorporation or By-laws of
either Transferee, 2. result in a breach of or a default under any provision of
any contract, agreement, lease, commitment, license, franchise, permit,
authorization or concession to which either Transferee is a party or bound or
to which any property or asset of either Transferee is subject or an event
which with notice, lapse of time, or both, would result in any such breach or
default, or (c) result in a violation by Transferees of any
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statute, rule, regulation, ordinance, code, order, judgment, writ, injunction,
decree, or award, or an event which with notice, lapse of time, or both, would
result in any such violation, which breach, default or violation would have a
material adverse effect on Transferees' ability to consummate the transactions
contemplated hereby.
5.4 Consents and Approvals. Except as set forth on Schedule
5.4 and other than real property recording and filing documents required in
connection with the conveyance of title, no consent, approval or authorization
of or declaration, filing or registration with any Governmental Agency, or any
other person or entity, is required to be made or obtained by Transferees in
connection with the execution, delivery and performance of this Agreement or
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby.
5.5 Litigation. Except as set forth on Schedule 5.5 hereto,
there is no claim, action, suit, proceeding or governmental investigation
against Transferees or any of Transferees' subsidiaries which a. seeks to
restrain or enjoin the consummation of the transactions contemplated hereby or
b. if adversely determined, could be expected to have a material adverse effect
on the ability of Transferees to consummate the transactions contemplated by
this Agreement. Except as set forth on Schedule 5.5, neither Transferee is in
violation of any term of any judgment, decree, injunction or order outstanding
against it, which violation could reasonably be expected to have a material
adverse effect on the ability of Transferees to consummate the transactions
contemplated hereby.
5.6 Capitalization.
(a) The authorized capital stock of GHI consists of
1,400,000 shares of Common Stock and 100,000 shares of preferred stock. After
giving effect to the transactions contemplated hereby and by the Subscription
Agreements, there will be 592,105 shares of Common Stock issued and
outstanding and 5,000 shares of Preferred Stock issued and outstanding. Such
shares of Common Stock have been duly authorized for issuance and when issued
in accordance with the Subscription Agreements, will be validly issued, fully
paid and non-assessable. Such shares of Preferred Stock have been duly
authorized for issuance and, when issued in accordance with this Agreement and
the Certificate of Designations, will be validly issued, fully paid and
non-assessable. The shares of Warrant Stock have been duly authorized, and
when issued in accordance with the Warrant,
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will be validly issued, fully paid and non-assessable.
(b) Except for the Warrant, and pursuant to the
Stockholders' Agreement, there is no existing option, warrant, call, right,
commitment or other agreement of any character to which either Transferee is a
party requiring, and there are no securities of either Transferee outstanding
which upon conversion or exchange would require, the issuance, sale or transfer
of any additional shares of capital stock or other equity securities of such
Transferee or other securities convertible into, exchangeable for or evidencing
the right to subscribe for or purchase shares of capital stock or other equity
securities of such Transferee. None of the capital stock of GCI, the Common
Stock, the Preferred Stock, the Warrant or the Warrant Stock is the subject of
any voting trust or other voting agreement or to any agreement relating to the
issuance, sale, redemption, transfer or other disposition of the capital stock
of either Transferee, except for (A) with respect to the capital stock of GCI,
pursuant to the GCI Loan and Security Agreement and the GHI Pledge Agreement,
and (B) with respect to the Common Stock, the Preferred Stock, the Warrant and
the Warrant Stock, pursuant to the Promissory Note and the Stockholders'
Agreement.
5.7 Brokers. No Person has acted directly or indirectly as a
broker, finder or financial advisor for the Transferees in connection with the
negotiations relating to or the transactions contemplated by this Agreement and
no Person is entitled to any fee or commission or like payment in respect
thereof based in any way on agreements, arrangements or understandings made by
or on behalf of the Transferees.
5.8 Subscription Agreements. GHI and the Investors have
executed the Subscription Agreements pursuant to which the Investors will
acquire all of the shares of Common Stock in exchange for cash and promissory
notes in an aggregate amount equal to $236,000.
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ARTICLE VI
COVENANTS OF TRANSFERORS AND TRANSFEREES
Transferors and Transferees each covenant with the other as
follows:
6.1 Maintenance of Carpet and the Business Prior to Closing.
Unless otherwise consented to in writing by GHI, from the date hereof until the
Closing, Transferors shall:
(a) carry on the Business in the ordinary course in
accordance with past practice and not take any action inconsistent therewith or
with the consummation of the transactions contemplated hereby;
(b) except as set forth on Schedule 6.1, use their best
efforts to keep available generally the services of the present officers and
employees of Carpet, and preserve generally the present relationships with
persons having business dealings with Carpet and the Business;
(c) maintain all of the Transferred Assets in good
repair, order and condition (except for ordinary wear and tear);
(d) maintain the books, accounts and records in the
ordinary course consistent with past practice, and comply in all material
respects with all laws applicable to Carpet and to the conduct of the Business;
(e) not change or enter into any agreement to change the
character of the Business, without the prior consent of GHI;
(f) not enter into any employment contract with any
executive officer of Carpet or make any loan to, or enter into any material
transaction of any other nature with, any executive officer of Carpet;
(g) not sell or transfer any of the Transferred Assets,
except inventory in the ordinary course of business, and maintain Inventory at
levels consistent with past practice;
(h) not terminate or modify any lease, license, permit,
contract or other agreement included in the Transferred Assets in a manner
materially adverse to the Business;
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(i) other than in accordance with the Transferor Credit
Agreement, not release, waive, sell or assign any debts, claims, rights or
other intangible rights included in the Transferred Assets;
(j) keep in full force and effect the insurance described
in Section 4.13; provided, however, that Transferors may cancel such insurance
arrangements and enter into other insurance arrangements so long as they
maintain insurance in such amounts and of such kinds as is comparable to that
in effect on the date hereof (with insurers of comparable financial condition);
(k) perform all of its obligations under all Contracts,
Leases and Personal Property Leases, except for such non-performance as is
contested by Transferors in good faith, and not amend, alter or modify any
provision thereof; and
(l) promptly advise GHI of the occurrence of any event or
circumstance which affects the consummation of the transactions contemplated by
this Agreement or which, if in existence on the date of this Agreement, would
have constituted a breach of Transferors' representations and warranties made
by Transferors in this Agreement (unless disclosed in a Schedule to this
Agreement).
6.2 Consents. GHI and Transferors, as applicable, will take
all reasonable action required hereunder to obtain all applicable Permits,
consents, approvals and agreements of, and to give all notices and make all
filings with, public and governmental authorities and third parties (at such
time as the parties mutually determine) as may be necessary to authorize,
approve or permit the full and complete sale, conveyance, assignment and
transfer of the Transferred Assets to GHI; provided, however, nothing contained
in this Section shall be deemed to require either party to make any payments to
obtain a consent or approval from any third party.
6.3 Employees. (a) Employment. Effective as of the Closing
Date, Transferees shall offer employment to the Employees other than those
employees listed in Schedule 6.1 hereto and shall provide such employees who
accept such employment with Transferees with a comparable position and at the
same level of wages and/or salary together with a substantially similar benefit
program asprovided by Transferors immediately prior to the Closing Date (except
that Transferees shall not provide such employees with a defined benefit pension
plan and an employer matching
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contribution under its 401(k) plan as discussed in Section 6.3(d) below). As
of the Closing Date, Transferees shall assume responsibility for payment of
severance benefits to (i) any Transferred Employees terminated on or after the
Closing Date, (ii) any Employees who are not offered employment with
Transferees, and (iii) any former employees of the Business terminated prior to
the Closing Date to the extent any severance benefits remain payable to such
former employees after the Closing Date. However, nothing in this paragraph
shall restrict Transferees from changing the terms and conditions of employment
of any Transferred Employee or of any benefit program maintained for the
benefit of the Transferred Employees or the Covered Employees after the Closing
Date, provided that such change is not prohibited by (i) any other agreement
assumed under this Agreement or (ii) any applicable law.
(b) Health and Welfare Plan Coverage. Effective as of
the Closing Date, Transferees shall provide to any eligible Covered Employee
group health and welfare coverage that contains no (i) pre-existing condition
exclusions or limitations or (ii) eligibility waiting periods, applicable to
Covered Employees or their dependents other than any limitations or waiting
periods that are already in effect and have not been satisfied with respect to
such employees or their eligible dependents prior to the Closing Date.
Transferees shall assume and be responsible for all unpaid liabilities incurred
on or prior to the Closing Date by a Covered Employee (or an eligible dependent
thereof) under either Transferors' group health and welfare plans. As of the
Closing Date, all unpaid liabilities accrued on or prior to the Closing Date
under Transferors' post-retirement group health and life insurance plans with
respect to the Covered Employees shall be reflected in the Closing Statement in
accordance with SFAS No. 106 for purposes of determining the Consideration
adjustments set forth in Section 2.3 hereof. If an event causing a Covered
Employee to be eligible for health care benefits under Part 6 of Title I of
ERISA, 29 U.S.C. Section Section 1161 et. seq., as amended ("COBRA"), occurs
after the Closing Date, the Transferees will be obligated to provide such
health care benefits. If a Covered Employee (or an eligible dependent thereof)
is eligible for health care benefits under COBRA on or prior to the Closing
Date, the remaining portion of any such coverage will be provided under
Transferees' health care plan.
(c) Pension Benefits. Transferors shall cause the
Retirement Pension Plan for Employees of JPS Textile Group, Inc. (the "Textile
Plan") to be amended to provide that Transferred Employees who accept such
employment with
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Transferees will receive, for vesting purposes only, credit for their years of
continuous service with the Transferees and any of its Affiliates after the
Closing Date or, to the extent required by law, Transferors shall cause the
Textile Plan to be amended to provide such employees with full vesting as of
the Closing Date.
(d) Savings Plan. Effective as of the Closing, the
Transferred Employees shall continue, or be eligible, to participate in the
Amended and Restated Savings, Investment and Profit Sharing Plan of JPS Textile
Group, Inc. ("Transferors' Savings Plan") under the terms and conditions of
Transferors' Savings Plan, except that no matching contribution will be made by
Transferees (i) for any pay period beginning after the Closing Date with
respect to employees paid on an hourly basis and (ii) for any pay period ending
after the Closing Date with respect to employees paid on a salaried basis. As
soon as practical but in no event later than one year following the Closing,
Transferees shall establish or provide a tax-qualified savings plan
("Transferees' Savings Plan") for the benefit of the Transferred Employees with
substantially similar features as are provided under Transferors' Savings Plan
(other than with respect to the employer matching contribution). As soon as
practical but in no event later than one year following the Closing and the
establishment of Transferees' Savings Plan and in conjunction with the transfer
of assets provided for below, Transferor shall take all reasonable actions in
order to obtain the agreement of the administrator/recordkeeper of Transferors'
Savings Plan to separately provide administrative and recordkeeping services
for Transferors' Savings Plan and Transferees' Savings Plan (the "Conversion").
Transferees' Savings Plan shall expressly provide that Transferred Employees
who were participants in Transferors' Savings Plan immediately prior to the
Conversion shall participate in Transferees' Savings Plan as of the date of the
Conversion and that all Transferred Employees will have their service with
Transferors and their Affiliates recognized under Transferees' Savings Plan for
eligibility, vesting and any other purpose for which service is taken into
account under Transferors' Savings Plan. Transferors shall cause the accounts
of any current or former employee of the Business who participates in
Transferors' Savings Plan to be valued according to the normal business
practices of the trustee of Transferors' Savings Plan on account of the
Conversion. As of such valuation date, assets equal in value to the amount
credited to each such employee's account under Transferors' Savings Plan will
be transferred to the trust maintained under Transferees' Savings Plan;
provided, however, that
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Transferees provide to Transferors a determination letter or an opinion of
counsel reasonably acceptable to the Transferors that such trust and each plan
associated therewith is qualified as to form under Sections 401(a) and 501(a)
of the Code. At the time of the transfer, Transferors and Transferees shall
confer and agree on the division and allocation of any assets not evidenced by
shares in a mutual fund, such as any separate guaranteed investment contracts.
As of such transfer date, Transferees shall be liable for the payment of the
benefits accrued by and transferred in respect of any current or former
employee of the Business who participated in Transferors' Savings Plan and who
was effected by such transfer. Any employee of the Business whose employment
terminated prior to the Closing Date and to whom severance benefits are paid on
or after the Closing Date shall be entitled to receive as soon as practicable a
payment equal to the amount of the employer matching contribution that would
have been made to such employee's account under the Transferors' Savings Plan
based upon the employee's salary deferral election in effect as of the Closing
Date applied to the severance pay payable to such employee after the Closing
Date, as if the employee had not terminated employment.
(e) Flex Plans. Effective as of the Closing Date,
Transferees will establish a Code Section 125 flexible benefits program
("Transferees' FSA") providing benefits that are the same as those available
under the JPS Textile Group, Inc. Flexible Benefits Program ("Transferors'
FSA"). Effective as of the Closing Date, Transferees shall assume all
obligations to pay all unpaid claims of the Employees and Covered Employees
participating in Transferors' FSA as of the Closing Date. Each Employee and
Covered Employee shall be credited as of the Closing Date under Transferees'
FSA with the remaining amounts available for reimbursement for each elected
benefit equal to such remaining amounts as were credited under Transferors' FSA
with respect to such person immediately prior to the Closing Date. The
Transferees shall give effect under Transferees' FSA to calendar year 1995
salary reduction elections made by Transferred Employees with respect to
Transferors' FSA and no new benefit elections for 1995 will be allowed to the
Transferred Employees except as otherwise provided by Transferees' FSA in the
event of a change in family status. The Closing Statement shall reflect, (i)
as a credit to the Transferors, the excess, if any, of (A) the aggregate claims
paid under Transferors' FSA to Employees and Covered Employees from January 1,
1995 through the Closing Date over (B) the aggregate amount of payroll
withholding related to Transferors' FSA with respect to such persons during
such
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period, and (ii) as a credit to the Transferees, the excess, if any, of (A) the
aggregate amount of payroll withholding related to Transferors' FSA with
respect to Employees and Covered Employees from January 1, 1995 through the
Closing Date over (B) the aggregate claims paid under Transferors' FSA to such
persons during such period.
(f) Nothing herein expressed or implied shall confer upon
any Transferred Employee, Covered Employee or other current or former employee
of Transferors or Transferees, or legal representative thereof, any rights or
remedies, including, without limitation, any right to employment for any
specified period, of any nature or kind whatsoever, under or by reason of this
Agreement. Neither the establishment of the Transferees' Savings Plan, any
welfare or fringe benefit plan nor any employment policy or practice shall be
construed as giving any employee or any other person any legal or equitable
right against the Transferee, or any officer or employee thereof, or its Board
of Directors. Under no circumstances shall the terms of this Agreement or any
plan, policy or practice adopted by the Transferee pursuant to this Agreement
constitute a contract for continuing employment or in any manner obligate the
Transferee to continue or discontinue the employment of any employee.
(g) Transferees shall provide Transferors with a list of
each Transferred Employee who terminated employment with the Transferees during
the calendar year, including such employee's name, social security number and
hours of service with the Transferees during such calendar year upon
Transferors' request in accordance with Section 9.1, (i) within sixty (60) days
following the end of each of the next five calendar years or (ii) in connection
with the confirmation of the termination of employment of a Transferred
Employee.
(h) Transferors shall indemnify and hold harmless
Transferees and their respective successors and assigns from and against any
and all Damages (as hereinafter defined), incurred in connection with, arising
out of, or with respect to, the compliance of Transferors' Savings Plan with
the applicable provisions of the Code, other than with respect to any
non-compliance as a result of any act or omission on the part of the Business
(including any individual with respect thereto).
6.4 Name. From and after the Closing Date and consistent
with the terms hereof, GHI shall possess, to the exclusion of Transferors and
its Affiliates, all rights to
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the use of the names or marks listed on Schedule 4.12 hereto, and all logos
listed on Schedule 4.12 hereto in connection with the business of manufacturing
and distributing the products currently manufactured and distributed by Carpet.
6.5 Further Assurances; Cooperation and Assistance. From
time to time, at GHI's reasonable request, Transferors will (and will cause
their officers, directors, employees, affiliates and agents to) execute and
deliver such other instruments of conveyance and transfer and take such other
actions as GHI may reasonably request in order to (i) perfect and record, if
necessary, the sale, assignment, conveyance, transfer, and delivery to GHI of
the Transferred Assets and (ii) convey, transfer to and vest in GHI and to put
GHI in possession and operating control of all or any part of the Transferred
Assets, including, without limitation, cooperating with and assisting GHI in
the prosecution of any claims and in the collection or reduction to possession
of accounts receivable and all the other Transferred Assets. Transferors
hereby agree that all out-of-pocket expenses incurred in connection with the
matters set forth in clause (ii) above shall be borne by them, and all other
costs incurred in clauses (i) and (ii) shall be borne by GHI.
6.6 Nondisclosure. (a) From and after the Closing Date,
Transferors will not use, divulge, furnish or make accessible to anyone any
knowledge or information with respect to confidential or secret processes,
inventions, discoveries, improvements, formulae, plans, material, devices or
ideas or know-how, whether patentable or not, with respect to any proprietary,
material non-public, confidential or secret aspects of the Business (including,
without limitation, customer lists, supplier lists and pricing and marketing
arrangements with customers or suppliers) and Transferors will cooperate
reasonably with GHI in preserving such proprietary, confidential or secret
aspects of the Business; provided, however, that nothing herein shall prohibit
Transferors from (i) complying with any order or decree of any court of
competent jurisdiction or governmental authority, but Transferors will give GHI
timely notice of the receipt of any such order or decree, or (ii) disclosing
such information to the extent necessary to the lenders under the Transferor
Credit Agreement, as it relates to the Business, and provided, further, that
the foregoing provision shall not apply to any information which is or becomes
generally available to the public through no breach of this Agreement.
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(b) Prior to the Closing Date, Transferors shall cause to
be delivered to GHI a list of all confidentiality agreements entered into by
any of the Transferors with any third party, pursuant to which confidential or
proprietary information relating to the Business was provided to a third party.
After the Closing Date, upon the request of GHI, Transferors shall (i)
cooperate with GHI, at GHI's request, in enforcing the terms of such
confidentiality agreements, and (ii) to the extent any of such confidentiality
agreements are assignable by Transferors thereunder, assign all of Transferors'
rights to GHI.
6.7 Non-Competition. (a) Except as set forth in
Schedule 6.7(a), Transferors agree that for three (3) years from and after the
Closing Date, JPS and its subsidiaries shall not engage in the United States,
the United Kingdom and Canada in any business in direct or indirect competition
with the Business, or own stock or otherwise have an interest in or be
affiliated with, any person, corporation, firm, partnership or other entity
engaged in such business (except as a passive stockholder holding less than 5%
of the stock of a publicly-owned corporation and except for stock in GHI held
by either Transferor or by any Subsidiary of JPS).
(b) None of the Transferors will, for a period of three
(3) years from the Closing Date, solicit for hire any of the persons listed as
"Key Employees" in Schedule 6.7(b), without the prior written consent of GHI.
(c) Transferors agree that a violation or threatened
violation of Section 6.7(a) or 6.7(b) will cause irreparable injury to GHI, and
GHI will be entitled, without limiting or waiving any other rights and remedies
it may have at law or in equity, to immediate injunctive relief enjoining and
restraining Transferors from doing or continuing to do any such act and any
other violations or threatened violations of Section 6.7 hereof. The
Transferors acknowledge and agree that there is no adequate remedy at law for
such breach or threatened breach and, in the event that any proceeding is
brought seeking injunctive relief, agree not to use as a defense thereto that
there is an adequate remedy at law.
(d) Transferors acknowledge and agree that the covenants
set forth in this Section 6.7 are reasonable and valid in geographical and
temporal scope and in all other respects. If any of such covenants are found
to be invalid or unenforceable by a final determination of a court of competent
jurisdiction (i) the remaining terms and
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provisions hereof shall be unimpaired and (ii) the invalid or unenforceable
term or provision shall be deemed replaced by a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision. In the event that, notwithstanding
the first sentence of this paragraph (d), any of the provisions of this Section
6.7 relating to the geographic or temporal scope of the covenants contained
therein or the nature of the business restricted thereby shall be declared by a
court of competent jurisdiction to exceed the maximum restrictiveness such
court deems enforceable, such provision shall be deemed to be replaced herein
by the maximum restriction deemed enforceable by such court.
6.8 Sums Received in Respect of Business. Transferors shall
pay or cause to be paid over to GHI, promptly after the receipt thereof after
the Closing Date, all sums received in respect or on account of the Transferred
Assets or Business other than the consideration received by Transferors as set
forth in Section 2.2 hereof and other than any sums received in respect of the
Excluded Assets.
6.9 Access and Information. Each of the Transferors shall
afford to Transferees and to Transferees' accountants, counsel and other
representatives full access during normal business hours (and at such other
times as the parties may mutually agree) throughout the period prior to the
Closing Date to all of its properties, books, contracts, commitments, records
and personnel and, during such period, Transferors shall furnish promptly to
Transferees (i) a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of federal or state securities
laws, and (ii) all other information concerning its business, properties and
personnel as the other may reasonably request. Transferees shall hold, and
shall cause their employees and agents to hold, in confidence all such
information in accordance with the terms of this Agreement.
6.10 Form W-2, Etc. Transferees shall use the "Alternative
Procedure" provided in Section 5 of Revenue Procedure 84-77 with respect to
filing and furnishing Internal Revenue Service Forms W-2, W-3 and 941 for the
1995 calendar year. Under such "Alternative Procedure", (i) Transferors and
Transferees each shall report on a predecessor-successor basis as set forth in
such Revenue Procedure, (ii) Transferors shall be relieved from furnishing
Forms W-2 to employees of Transferors that become
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employees of Transferees and (iii) Transferees shall assume the obligations of
Transferors to furnish such Forms W-2 to such employees for the full 1995
calendar year. Transferees also shall use such similar procedures and make
similar elections under state or local tax laws. Transferees shall be
responsible for filing and furnishing Internal Revenue Service Forms W-2, W-3
and 941 for the 1995 calendar year.
6.11 No Other Solicitations. Until the earlier of the
Closing or the termination of this Agreement, Transferors and their respective
management and representatives shall not solicit or encourage any offer,
proposal or inquiry from, or engage in any discussion or negotiations with, any
person regarding the sale or lease of the Transferred Assets, the Business or
the stock of Carpet except as contemplated hereby.
6.12 Insurance. Transferors shall leave in effect all
insurance for a period of five (5) years from the Closing Date which insurance
was in effect at the time immediately prior to the Closing Date in respect of
risks and losses relating to the conduct of the Business, prior to the Closing
Date. Subsequent to such period, Transferors shall not surrender, terminate,
or otherwise transfer such insurance without first providing GHI with a right
of first refusal, to the extent Transferors are not prohibited by such
insurance policy to grant such a right. To the extent permitted by applicable
contract and law, Transferors shall assign such insurance policies, and/or all
claims and other rights to enforce or assure insurance coverage to GHI. In
addition, Transferors shall, and shall cause their respective officers,
directors, employees, and agents to cooperate with GHI in adjusting any claim
and take such further actions as GHI may reasonably request in order to secure
the benefit of Transferors' insurance with respect to the Business.
ARTICLE VII
CONDITIONS TO TRANSFERORS' OBLIGATIONS
The obligations of Transferors to consummate the transactions
provided for hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All
representations and warranties of Transferees contained in this Agreement shall
be true and correct in all material
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respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date, except as affected by the transactions
contemplated hereby, and each Transferee shall have performed in all material
respects all covenants and conditions contained in this Agreement to be
performed or complied with by it prior to or on the Closing Date.
7.2 Certificates. Transferees shall have furnished
Transferors with such certificates, dated the Closing Date, of Transferees'
officers to evidence compliance with the conditions set forth in Section 7.1.
7.3 Corporate Documents. Transferors shall have received
from each Transferee certified copies of the resolutions duly adopted by the
respective boards of directors of Transferees approving the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, and such resolutions shall be in full force and effect as
of the Closing Date.
7.4 Legal Opinion. Transferors shall have received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC, counsel to Transferees,
substantially in the form of Exhibit I hereto.
7.5 Consents. All consents, authorizations, approvals and
waivers from governmental authorities, stockholders or other parties required
by law, by Transferors' respective certificates of incorporation or by-laws, or
pursuant to the Transferor Credit Agreement, or specified on Schedule 4.11
which are necessary for Transferors to consummate the transactions contemplated
hereby shall have been obtained.
7.6 No Governmental Proceedings or Litigation. No suit,
action, investigation or other proceeding by any governmental authority or
other person or any other legal or administrative proceeding shall have been
instituted or threatened which would make illegal, or prevent, or question the
validity or legality of, the transactions contemplated hereby or which seeks
material damages in respect thereof.
7.7 Solvency Opinions. JPS shall have received a duly
executed opinion from Houlihan, Lokey, ▇▇▇▇▇▇ & Zukin to the effect that, upon
consummation of the transactions contemplated hereby, the fair value of
Transferees' assets will exceed the sum of their stated and contingent
liabilities.
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7.8 Subscription Agreements. The Investors shall have
transferred to GHI an amount in cash and promissory notes in an aggregate
amount equal to $236,000 in exchange for shares of Common Stock representing
all of the issued and outstanding shares of Common Stock immediately following
the Closing.
ARTICLE VIII
CONDITIONS TO TRANSFEREES' OBLIGATIONS
The obligations of Transferees to consummate the transactions
provided for hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions:
8.1 Representations, Warranties and Covenants. The
representations and warranties of Transferors contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date, and
Transferors shall have performed in all material respects all covenants and
conditions contained in this Agreement to be performed or complied with by them
prior to or on the Closing Date.
8.2 Certificates. Transferors shall have furnished
Transferees with such certificates, dated the Closing Date, of Transferors'
officers, directors and others to evidence compliance with the conditions set
forth in this Article VIII as may be reasonably requested by Transferees.
8.3 Section 1445 Certificate. Each Transferor shall have
furnished GHI with an affidavit, in a form reasonably satisfactory to GHI, that
such Transferor is not a foreign person within the meaning of Section 1445 of
the Code, which affidavit shall set forth all information required by, and
otherwise be executed in accordance with, Treasury Regulation Section
1.1445-2(b).
8.4 Corporate Documents. Transferees shall have received
from Transferors certified copies of the resolutions duly adopted by the
respective boards of directors of Transferors and sole stockholder of Carpet
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby.
8.5 Legal Opinion. Transferees shall have received the
opinion of Weil, Gotshal & ▇▇▇▇▇▇, counsel for
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the Transferors, substantially in the form of Exhibit J hereto.
8.6 Consents. All consents, authorizations, approvals and
waivers from governmental authorities, stockholders or other parties required
by law or by Transferees' respective certificates of incorporation or by-laws
which are necessary for Transferees to consummate the transactions contemplated
hereby which are listed on Schedule 8.6 hereto shall have been obtained.
8.7 No Governmental Proceedings or Litigation. No suit,
action, investigation or other proceeding by any governmental authority or
other person or any other legal or administrative proceeding shall have been
instituted or threatened which would make illegal, or prevent, or question the
validity or legality of, the transactions contemplated hereby or which seeks
material damages in respect thereof.
8.8 Financing; Consents. Transferees shall have entered into
financing arrangements providing for financing sufficient to complete the
transactions contemplated by this Agreement, on terms and conditions reasonably
satisfactory to Transferees. All consents, authorizations, approvals and
waivers listed on Schedule 8.6 shall have been obtained.
ARTICLE IX
CERTAIN ACTIONS BY TRANSFERORS AND TRANSFEREES
AFTER THE CLOSING
9.1 Books and Records. Each party agrees that it will
cooperate with and make available to the other party, subject to Section 10.11
hereof, during normal business hours, all Books and Records, information and
employees (without substantial disruption of employment) retained and remaining
in existence after the Closing Date which are necessary or useful in connection
with any Tax inquiry, investigation or dispute, any litigation or investigation
or any other matter requiring any such Books and Records, information or
employees for any reasonable business purpose. The party requesting any such
Books and Records, information or employees shall bear all of the out-of-pocket
costs and expenses (including, without limitation, attorneys' fees) reasonably
incurred in connection with providing such Books and Records, information or
employees. Transferors may require certain financial information relating to
Carpet for periods prior to the Closing Date for the purpose of filing federal,
state, local and foreign tax
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returns and other governmental reports, and Transferees agree to furnish such
information to Transferors upon reasonable request.
9.2 Indemnifications.
(a) By Transferors. If the Closing shall occur,
Transferors shall jointly and severally indemnify and hold harmless Transferees
(and, in the case of subparagraph (iv) below, Congress Financial Corporation
("Congress")) and their respective officers, directors, agents, stockholders,
affiliates, successors and assigns from and against any and all demands,
claims, actions or causes of action, assessments, deficiencies, damages,
losses, liabilities, obligations, penalties, fines, costs and expenses
(including, without limitation, reasonable expenses of investigation and
attorneys' fees and expenses in connection with any action, suit or proceeding
or investigation brought against an indemnified party) (herein, the "Damages"),
incurred in connection with or arising out of or resulting from (i) any breach
of or inaccuracy in any representation or warranty made by Transferors pursuant
to this Agreement and/or the Ancillary Agreements; (ii) the failure of
Transferors to comply with any of the covenants, agreements or conditions
contained in this Agreement or the Ancillary Agreements which are required to
be performed by Transferors; (iii) the failure by Transferors to pay any
liability other than an Assumed Liability and (iv) any claim made against
Transferees resulting from the waiver of compliance, or the non-compliance,
with any applicable bulk transfer or bulk sales statutes (excluding the Assumed
Liabilities); provided, however, that the indemnification granted by
Transferors directly to Congress in respect of subparagraph (iv) above shall be
subject to any defenses, but shall not be subject to any contractual or common
law right of set-off, counterclaim or recoupment, that Transferors have or may
have against Transferees.
(b) By Transferees. If the Closing shall occur,
Transferees shall indemnify and hold harmless Transferors and their respective
successors and assigns from and against any and all Damages incurred in
connection with or arising out of or resulting from (i) any breach of or
inaccuracy in any representation or warranty made by Transferees pursuant to
this Agreement and/or the Ancillary Agreements; (ii) the failure of Transferees
to comply with any of the covenants, agreements or conditions contained in this
Agreement or in any of the Ancillary Agreements which are required to be
performed by Transferees; (iii) any Assumed Liability; and (iv) the operation
of the Business (other than with respect
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to the Excluded Assets or any liabilities which are not Assumed Liabilities)
from and after the Closing Date.
(c) Claims by Third Parties. Promptly after receipt by
an indemnified party of written notice of the commencement of any
investigation, claim, proceeding or other action in respect of which indemnity
may be sought from the indemnitor (an "Action"), such indemnified party shall
notify the indemnitor in writing of the commencement of such Action; but the
omission to so notify the indemnitor shall not relieve it from any liability
that it may otherwise have to such indemnified party, except to the extent that
the indemnitor is materially prejudiced or forfeits substantive rights or
defenses as a result of such failure. In connection with any Action in which
indemnitor and any indemnified party are parties, the indemnitor shall be
entitled to participate therein, and may assume the defense thereof.
Notwithstanding the assumption of the defense of any such Action by the
indemnitor, each indemnified party shall have the right to employ separate
counsel and to participate in the defense of such Action, and the indemnitor
shall bear the reasonable fees, costs and expenses of such separate counsel to
such indemnified party if: (a) the indemnitor shall have agreed to the
retention of such separate counsel, (b) the defendants in, or target of, any
such Action include more than one indemnified party or both an indemnified
party and the indemnitor, and the indemnified party shall have reasonably
concluded that representation of such indemnified party and the indemnitor by
the same counsel would be inappropriate due to actual or, as reasonably
determined by such indemnified party's counsel, potential differing interests
between them in the conduct of the defense of such Action, or if there may be
legal defenses available to such indemnified party that are different from or
additional to those available to the other indemnified party or to the
indemnitor, or (c) the indemnitor shall have failed to employ counsel
reasonably satisfactory to such indemnified party within a reasonable period of
time after notice of the institution of such Action. If such indemnified party
retains separate counsel in cases other than as described in clauses (a), (b)
or (c) above, such counsel shall be retained at the expense of such indemnified
party. Except as provided above, it is hereby agreed and understood that the
indemnitor shall not, in connection with any Action in the same jurisdiction,
be liable for the fees and expenses of more than one counsel for all such
indemnified parties (together with appropriate local counsel). The party from
whom indemnification is sought shall not, without the written consent of the
party seeking indemnification (which consent shall not be
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unreasonably withheld), settle or compromise any claim or consent to entry of
any judgment that does not include an unconditional release of the party
seeking indemnification from all liabilities with respect to such claim.
(d) Other Claims. In the event one party hereunder
should have a claim for indemnification that does not involve a claim or demand
being asserted by a third party, the party seeking indemnification shall
promptly send notice of such claim to the party from whom indemnification is
sought. If the latter disputes such claim, such dispute shall be resolved by
agreement of the parties.
(e) Limitations on Indemnification. Notwith-standing any
other provision of this Agreement, none of the parties hereto shall be entitled
to indemnification pursuant to this Section 9.2 for any Damages arising out of
the breach of any representation, warranty, covenant or agreement made by the
other party in this Agreement except as follows: (i) with respect to any
Damages resulting from a breach of any of the covenants, representations and
warranties by either party hereto, the other party hereto (an "Indemnitee")
shall be entitled to indemnification for only those Damages which arise out of
such breach and are in excess of $750,000 in the aggregate (it being agreed
that such Indemnitee shall bear the first $750,000 of Damages arising from such
breaches or alleged breaches); provided, however, that such limitations in this
clause (i) shall not apply to (A) Damages resulting from a breach of Sections
4.2, 4.19, 5.2 or 5.7 and (B) Damages resulting from Liabilities other than the
Assumed Liabilities; and (ii) unless the party seeking such indemnification
shall make its claim therefor on or prior to the date on which the relevant
representation or warranty shall expire pursuant to Section 10.2, except that
if a claim arises under a representation or warranty and a notice of such claim
is given prior to the expiration of the survival period, then such
representation or warranty shall not terminate with respect to such claim until
indemnification thereof (if any is owing) shall have been made in accordance
with the provisions of this Agreement. In no event will either party be liable
under or with respect to this Agreement for any Damages or any portion of any
Damages arising out of the breach of any representation or warranty in excess
of the sum of, on the date of determination: (i) the Cash Consideration
(subject to adjustment in accordance with Section 2.3 hereof), (ii) any
payments of principal actually made on the Promissory Note, and (iii) any
payments actually made in whole or partial redemption of the Preferred Stock.
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(f) Subject to the provisions of Section 6.7(c), each
party hereto acknowledges and agrees that, after the Closing Date, its sole and
exclusive legal remedy with respect to any and all claims relating to or
arising out of a breach of any representation, warranty, covenant or agreement
made by the other party in this Agreement shall be pursuant to the
indemnification provisions set forth in this Section 9.2.
(g) In calculating any amounts payable pursuant to this
Section 9.2 or Section 9.4 by the Transferors or the Transferees, as the case
may be, such amounts shall be reduced by (i) any tax benefit actually realized
by the Indemnified Party as a result of the facts giving rise to the claim for
indemnification and (ii) any insurance recoveries received by the Indemnified
Party. All amounts paid pursuant to this Section 9.2 or Section 9.4 by one
party to another party shall be treated by such parties as an adjustment to the
Consideration for the Transferred Assets.
9.3 Bulk Sales. Transferees waive compliance by Transferors
with any applicable bulk sales statutes.
9.4 Tax Matters. (a) Transferors and Transferees shall
cooperate fully with each other and make available or cause to be made
available to each other in a timely fashion such tax data, prior tax returns
and filings and other information as may be reasonably required for the
preparation by Transferees or Transferors of any tax returns, elections,
consents, certificates or other documents required to be prepared or filed by
Transferees or Transferors and any audit or other examination by any taxing
authority, or judicial or administrative proceeding relating to liability for
Taxes. Transferees and Transferors will each retain and provide to the other
party all records and other information which may be relevant to any such tax
return, document, audit or examination, proceeding or determination, and will
each provide the other party with any final determination of any such audit or
examination, proceeding or determination that affects any amount required to be
shown on any tax return of the other party for any period. Transferees will
retain copies of all tax returns, supporting work schedules and other records
relating to tax periods or portions thereof ending prior to or on the Closing
Date.
(b) Transferees shall cause to be prepared and
Transferors, upon timely receipt from Transferees and after review thereof (or
Transferees, with the consent and due
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authorization of Transferors), shall cause to be timely filed with payment of
all Taxes due (as provided by Transferees) all required Tax returns relating to
Taxes assumed by Transferees, but imposed on Transferors, for any period which
ends on or before the Closing Date for which returns shall not have been filed
as of the Closing Date. Not later than five days before the due date for
payment of Taxes with respect to such Tax returns to be filed by Transferors,
Transferees shall deliver to Transferors checks payable to the applicable
taxing authorities in an amount equal to the Taxes shown due on such returns.
Transferees acknowledge and agree that they may be required to pay additional
amounts in respect of such assumed Taxes in the event any such Tax liability is
adjusted by reason of an audit (or any administrative or judicial proceeding)
or the filing of an amended return.
(c) Any sales, recording, transfer, use or other similar
taxes or fees imposed as a result of the transfer of the Business to GHI
pursuant to this Agreement shall be paid by Transferors. At the Closing,
Carpet and GHI shall deliver to each other such properly completed resale
exemption certificates and other similar certificates or instruments as are
necessary to claim available exemptions from the payment of sales, transfer,
use or other similar taxes under applicable law. Notwithstanding the first
sentence of this Section 9.4(c), in the event that GHI fails to comply with the
provisions of the immediately preceding sentence, any sales, recording,
transfer, use or other similar taxes or fees imposed as a result of the
transfer of the Business to GHI pursuant to this Agreement that are due to such
noncompliance shall be paid by GHI.
(d) All real and personal property taxes, state and local
ad valorem taxes and assessments applicable to the Business or the Transferred
Assets shall be prorated by the parties as of the Closing Date, and all such
taxes applicable to periods of time on or prior to the Closing Date shall be
the sole obligation, responsibility and expense of Transferors. All such
assessments and taxes applicable to periods after the Closing Date shall be the
sole obligation, responsibility and expense of Transferees.
(e) Transferors agree to report the transfers made
pursuant to this Agreement, and Transferees agree to report the transfers made
pursuant to this Agreement and the Subscription Agreements as transfers
governed by Section 351 of the Code for federal income tax purposes and by
comparable provisions of state or local income tax law (if any) for state and
local income tax purposes, except to the
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extent otherwise required by law in respect of JPS U.K. Limited. Carpet agrees
to elect out of the installment method as to any gain recognized as a result of
receipt of boot that otherwise would be taken into account on the installment
method under Section 453 of the Code.
9.5 Mail Received After Closing. 4. Following the Closing,
Transferees may receive and open all mail and other communications addressed to
Transferors and deal with the contents thereof in its discretion to the extent
that such mail relates to the Business; provided that (i) Transferees shall
have no right to deal with the contents of any mail or other communication to
the extent that the same are not in respect of the Business or Transferred
Assets and (ii) Transferees shall promptly notify Transferors as to the receipt
thereof and make appropriate arrangements to deliver such materials promptly to
Transferors.
(b) Following the Closing, Transferors shall promptly
notify Transferees of all mail and other communications relating to the
Business addressed to Transferors and received by Transferors, and shall make
appropriate arrangements to deliver such materials promptly to Transferees.
ARTICLE X
MISCELLANEOUS
10.1 Termination. Either party may terminate this Agreement
without the consent of the other party if the Closing Date has not occurred on
or before December 31, 1995 and a reason therefor is because a condition
precedent to such party's obligation to close hereunder is not satisfied. In
the event of the termination of this Agreement by either party in accordance
with this Section 10.1, neither party shall have any liability hereunder of any
nature whatsoever (other than pursuant to Sections 10.8 and 10.11 below) to the
other party, including any liability for damages, unless either party is in
default under its obligations hereunder, in which event the party in default
shall be liable to the other party for such default; provided, however, that no
party shall be liable hereunder for any consequential damages as a result of
such termination. Notwithstanding anything in this Agreement to the contrary,
if any condition precedent specified in Articles VII or VIII is not satisfied,
Transferors or Transferees, as the case may be, in addition to any other rights
which may be available to
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it, shall have the right to waive such condition and require the other party to
proceed with the Closing. Notwithstanding the foregoing, Transferors shall
have the right, at their sole option, to terminate this Agreement if
Transferors shall have been advised by Houlihan, Lokey, ▇▇▇▇▇▇ & ▇▇▇▇▇ that the
solvency opinion to be delivered pursuant to Section 7.7 hereof will not be
affirmatively rendered as provided in such Section.
10.2 Survival of Representations and Warranties. The
respective representations and warranties made by Transferors and Transferees
in this Agreement (including those made in the Exhibits and Schedules hereto)
or in any Ancillary Agreement shall not be deemed waived or otherwise affected
by any investigation made by any party hereto. Each and every such
representation and warranty of Transferors and Transferees shall expire with,
and be terminated and extinguished on, the fourteen month anniversary of the
Closing Date or the termination of this Agreement pursuant to Section 10.1
hereof or otherwise.
10.3 Assignment. No assignment of this Agreement or of any
rights or obligations hereunder may be made by any party (by operation of law
or otherwise) without the prior written consent of each of the other parties
hereto and any attempted assignment without such required consents shall be
void. Notwithstanding the foregoing sentence, (i) the parties hereto hereby
acknowledge that GHI may make the transfers to be made by it to GCI
contemplated hereby, (ii) Transferees hereby acknowledge and agree that
Transferors may collaterally assign their respective rights, title and interest
to any payments under this Agreement to any of their respective financing
sources, including, but not limited to, General Electric Capital Corporation,
as collateral agent (in such capacity, the "Collateral Agent"), pursuant to the
Transferor Credit Agreement and Transferees hereby consent to such assignment,
and (iii) Transferors hereby acknowledge that Transferees may collaterally
assign their respective rights, title and interest under this Agreement to any
of their respective financing sources, and Transferors hereby consent to such
assignment. Furthermore, Transferees hereby acknowledge and agree that upon
receipt of written notice from the Collateral Agent that an "Event of Default"
has occurred pursuant to the Transferor Credit Agreement, Transferees will
tender any payments due under this Agreement to the Collateral Agent in
accordance with the instructions set forth in such notice.
10.4 Notices. Any notice, request, instruction or other
document to be given hereunder by either party to
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the other shall be in writing and shall be deemed to have been duly given if
delivered by hand or sent by facsimile (with confirmation by facsimile answer
back) or mailed by certified or registered mail, postage prepaid, return
receipt requested (such mailed notice to be effective on the third business day
following mailing thereof), as follows:
If to Transferors, addressed to:
JPS Textile Group, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Odyssey Partners, L.P.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
Weil, Gotshal & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Simeon Gold, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Transferees, addressed to:
Gulistan Holdings Inc.
Gulistan Carpet Inc.
▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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or to such other place with such other copies as either party may designate as
to itself by written notice to the others.
10.5 Choice of Law. The Agreement shall be construed and
interpreted, and the rights of the parties determined, in accordance with the
laws of the State of New York (without reference to the choice of law
provisions of New York law).
10.6 Entire Agreement; Amendments and Waivers. This
Agreement and the Ancillary Agreements, together with all Exhibits and
Schedules hereto and thereto, constitute the entire Agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
10.7 Multiple Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
10.8 Expenses. Except as otherwise specified herein, each
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement; provided, however, with respect to costs,
fees or expenses paid in connection with transferring Permits or obtaining new
Permits to enable GHI to operate and continue to operate the Business, such
costs shall be borne solely by GHI.
10.9 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.10 Titles. The titles, captions or headings of the
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a
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part of or to affect the meaning or interpretation of this Agreement.
10.11 Confidential Information. The parties acknowledge that
the transactions described herein are of a confidential nature and shall not be
disclosed except as provided herein or as required by law. Neither
Transferors, Transferees nor their respective Affiliates shall make any public
disclosure of the specific terms of this Agreement without the prior written
consent of the other parties hereto, except as required by law. Transferors
and Transferees shall consult with each other before issuing a press release or
otherwise making any public statements required by law with respect to this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation; provided, however, that Transferors and
Transferees shall respond promptly to the other pursuant to this Section 10.11.
In connection with the negotiation of this Agreement, the preparation for the
consummation of the transactions contemplated hereby, and the performance of
obligations hereunder, each party acknowledges that it will have access to
confidential information relating to the other parties. Each party hereto
shall treat such information as confidential, preserve the confidentiality
thereof and not duplicate or disclose such information in connection with the
transactions contemplated hereby, except to employees, representatives, agents,
advisors, lenders, consultants and affiliates who are expected to be involved
in the transactions contemplated by this Agreement and who also agree to treat
such information as confidential. Transferors, at a time and in a manner which
they reasonably determine and after prior notice to and consultation with
Transferees, may notify employees, unions and bargaining agents of the fact of
the subject transaction. In the event of the termination of this Agreement for
any reason whatsoever, each party shall return to the others all documents,
work papers and other material (including all copies thereof) obtained in
connection with the transactions contemplated hereby and will use all
reasonable efforts, including instructing its employees and others who have had
access to such information, to keep confidential and not to use any such
information, unless such information is now, or is hereafter disclosed, through
no act or omission of such party, in any manner making it available to the
general public.
10.12 Third Parties. Except as specifically set forth or
referred to herein, nothing expressed or implied herein is intended or shall be
construed to confer upon or give to any person or entity other than the parties
hereto,
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and their successors or permitted assigns, any rights or remedies under or by
reason of this Agreement.
10.13 No Set-off. Each party acknowledges that its
obligations under this Agreement are absolute and not subject to any
contractual or common law right of set-off, counterclaim or recoupment (but
remains subject to defenses) against any payments required to be made by such
party pursuant to this Agreement.
10.14 Schedules. Any disclosure on any Schedule hereto shall
be deemed to be a disclosure on each other Schedule to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, in multiple originals, all as of the day
and year first above written.
JPS TEXTILE GROUP, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: EVP-Finance and Secretary
JPS CARPET CORP.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
GULISTAN HOLDINGS INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
GULISTAN CARPET INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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