Exhibit 2
PURCHASE AGREEMENT
dated as of
June 12, 2003
by and between
▇▇▇▇▇▇ A.S.L., LTD.
and
KELLWOOD COMPANY
relating to the purchase and sale
of
NEW COMMON STOCK
of
▇▇▇▇▇▇ A.S.L., LTD.
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS..........................................................................................2
Section 1.01. Certain Definitions...................................................................2
Section 1.02. Other Definitional and Interpretive Matters...........................................8
ARTICLE 2 PURCHASE AND SALE....................................................................................9
Section 2.01. Purchase and Sale.....................................................................9
Section 2.02. Unadjusted Purchase Price.............................................................9
Section 2.03. Adjustment of Purchase Price.........................................................10
Section 2.04. Closing..............................................................................11
Section 2.05. Stock Certificates...................................................................11
Section 2.06. Assumed Liabilities..................................................................11
Section 2.07. Excluded Liabilities.................................................................12
Section 2.08. Employee Matters.....................................................................13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................14
Section 3.01. Corporate Existence and Power........................................................14
Section 3.02. Corporate Authorization..............................................................14
Section 3.03. Consents and Authorizations..........................................................14
Section 3.04. Noncontravention.....................................................................14
Section 3.05. Capitalization.......................................................................15
Section 3.06. Valid Issuance of Securities.........................................................15
Section 3.07. Subsidiaries.........................................................................15
Section 3.08. Financial Statements.................................................................16
Section 3.09. Conduct of Business; Absence of Certain Changes......................................16
Section 3.10. No Undisclosed Material Liabilities..................................................17
Section 3.11. Material Contracts...................................................................17
Section 3.12. Litigation...........................................................................18
Section 3.13. Compliance with Laws and Court Orders................................................19
Section 3.14. Properties...........................................................................19
Section 3.15. Intellectual Property................................................................20
Section 3.16. Insurance Coverage...................................................................21
Section 3.17. Permits..............................................................................21
Section 3.18. Inventories..........................................................................21
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 3.19. Finders' Fees........................................................................21
Section 3.20. Labor Matters........................................................................21
Section 3.21. Employee Benefit Plans...............................................................22
Section 3.22. Environmental Matters................................................................23
Section 3.23. Agreed-to Working Capital............................................................23
Section 3.24. Accounts Receivables.................................................................24
Section 3.25. Officers, Directors, Employees and Consultants.......................................24
Section 3.26. Books and Records....................................................................24
Section 3.27. Factories............................................................................24
Section 3.28. Company SEC Documents................................................................24
Section 3.29. ▇▇▇▇▇▇ ▇▇▇ Settlement................................................................25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER.........................................................25
Section 4.01. Corporate Existence and Power........................................................25
Section 4.02. Corporate Authorization..............................................................25
Section 4.03. Consents and Authorizations..........................................................25
Section 4.04. Noncontravention.....................................................................25
Section 4.05. Financing............................................................................25
Section 4.06. Purchase for Investment..............................................................25
Section 4.07. Litigation...........................................................................26
Section 4.08. Scope of Representations and Warranties of the Company...............................26
Section 4.09. Capital Structure....................................................................26
Section 4.10. Buyer SEC Documents; No Undisclosed Liabilities......................................27
Section 4.11. Absence of Certain Changes or Events.................................................27
Section 4.12. Compliance with Laws.................................................................28
Section 4.13. Voting Requirements..................................................................28
Section 4.14. Brokers and Other Advisors...........................................................28
ARTICLE 5 COVENANTS OF THE COMPANY............................................................................28
Section 5.01. Conduct of the Company...............................................................28
Section 5.02. Access to Information................................................................29
Section 5.03. Notices of Certain Events............................................................29
Section 5.04. Disclosure Statement and Plan........................................................30
ii
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE 6 COVENANTS OF THE BUYER..............................................................................31
Section 6.01. Confidentiality......................................................................31
Section 6.02. Bankruptcy Court Approvals...........................................................31
ARTICLE 7 COVENANTS OF THE BUYER AND THE COMPANY..............................................................32
Section 7.01. Conditions Precedent to Effectiveness of Agreement; Bid Protection...................32
Section 7.02. Further Assurances...................................................................33
Section 7.03. Certain Filings......................................................................33
Section 7.04. Public Announcements.................................................................34
Section 7.05. Supplementation and Amendment of Schedules...........................................34
Section 7.06. Preservation of and Access to Books and Records; Cooperation.........................34
Section 7.07. Administrative Claim Bar Date........................................................35
ARTICLE 8 TAX MATTERS.........................................................................................35
Section 8.01. Representations and Warranties.......................................................35
Section 8.02. Preparation of Tax Returns; Payment of Taxes.........................................36
Section 8.03. Closing Covenants....................................................................38
Section 8.04. Tax Controversy......................................................................38
ARTICLE 9 CONDITIONS TO CLOSING...............................................................................39
Section 9.01. Conditions to Obligations of the Parties.............................................39
Section 9.02. Conditions to Obligation of the Buyer................................................40
Section 9.03. Conditions to Obligation of the Company..............................................41
ARTICLE 10 SURVIVAL AND INDEMNIFICATION........................................................................41
Section 10.01. Survival.............................................................................41
Section 10.02. Indemnification of Buyer.............................................................41
Section 10.03. Indemnification of the Estate Representative.........................................42
Section 10.04. Limitations..........................................................................42
Section 10.05. Notice of Claim......................................................................42
Section 10.06. Right to Contest Claims of Third Persons.............................................42
Section 10.07. Exclusive Remedy.....................................................................43
ARTICLE 11 TERMINATION.........................................................................................43
Section 11.01. Grounds for Termination..............................................................43
iii
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 11.02. Effect of Termination................................................................44
ARTICLE 12 MISCELLANEOUS.......................................................................................44
Section 12.01. Notices..............................................................................44
Section 12.02. Amendments and Waivers...............................................................45
Section 12.03. Expenses.............................................................................45
Section 12.04. Successors and Assigns...............................................................46
Section 12.05. Governing Law........................................................................46
Section 12.06. Retention of Bankruptcy Court Jurisdiction...........................................46
Section 12.07. WAIVER OF JURY TRIAL.................................................................46
Section 12.08. Counterparts.........................................................................46
Section 12.09. Entire Agreement; Third Party Beneficiaries..........................................46
Section 12.10. Buyer Elections......................................................................47
iv
Exhibit A Form of Stipulation of Settlement of IRS Claim
Exhibit B Capital Budget
Schedule 2.07 Excluded Contracts
Schedule 2.08(a) Employee Plans
Schedule 3.03 Consents and Authorizations
Schedule 3.07(a) Subsidiaries
Schedule 3.09 Conduct of Business; Absence of Certain Changes
Schedule 3.10(b) Undisclosed Liabilities
Schedule 3.11(a)(x) Contracts
Schedule 3.11(a)(y) Executory Contracts Rejected by the Company
Schedule 3.12 Litigation
Schedule 3.14(a) Properties
Schedule 3.14(c) Permitted Liens
Schedule 3.15(a) Intellectual Property
Schedule 3.15(b) Specified Registrations
Schedule 3.15(c) Intellectual Property Rights
Schedule 3.15(e) Intellectual Property - Employee Work Product
Schedule 3.16 Insurance
Schedule 3.20(a) Labor Matters
Schedule 3.20(b) Collective Bargaining Agreements
Schedule 3.21(a) Employee Benefit Plans and Employment Agreements
Schedule 3.21(d) Multiemployer Plans
Schedule 3.23 Net Working Capital as of the Balance Sheet Date
Schedule 3.24(a) Consolidated Accounts Receivables
Schedule 3.24(b) Reconciliation of CIT Group Client Aged Accounts
Receivable Summary
Schedule 3.24(c) CIT Group Client Aged Accounts Receivable Summary
Schedule 3.25 Officers, Directors, Employees and Consultants
Schedule 3.27 Factories
Schedule 5.01 Permitted Conduct Outside Ordinary Course of Business
between Signing Date and Closing Date
Schedule 8.01 Exceptions to Tax Representations
v
PURCHASE AGREEMENT
AGREEMENT dated as of June 12, 2003 between Kellwood Company, a
Delaware corporation (the "BUYER"), and ▇▇▇▇▇▇ A.S.L., Ltd., a Delaware
corporation (the "COMPANY").
W I T N E S S E T H :
WHEREAS, on February 5, 2002 (the "PETITION DATE"), each of the
Company and certain of the Company's U.S. Subsidiaries (each a "DEBTOR" and
collectively the "DEBTORS") commenced a case (collectively, the "REORGANIZATION
CASES") under chapter 11 of title 11 of the United States Code (as amended, the
"BANKRUPTCY CODE") in the United States Bankruptcy Court for the Southern
District of New York (the "BANKRUPTCY COURT"), which cases are jointly
administered under No. 02-10497 (ALG);
WHEREAS, pursuant to Sections 1107(a) and 1108 of the Bankruptcy
Code, the Debtors continue to operate their respective businesses and manage
their respective properties as debtors in possession, and are administering
their respective estates, as defined in Section 541 of the Bankruptcy Code (the
"ESTATES");
WHEREAS, the Board of Directors of each of the Debtors has determined
that it is advisable and in the best interests of the Estates and the
beneficiaries of such Estates to consummate, subject to confirmation of a Second
Amended and Restated Joint Plan of Reorganization incorporating the transactions
contemplated by this Agreement (the "PLAN") by the Bankruptcy Court and
effectiveness of such Plan, the transactions contemplated by this Agreement,
upon the terms and conditions provided for herein;
WHEREAS, pursuant to the Plan and upon consummation of the
transactions contemplated thereby, (i) all of the Old Common Stock (and any
rights to acquire Old Common Stock or other equity interests in the Company)
shall be discharged, canceled, or otherwise terminated and (ii) the Company
shall issue the New Common Stock, all of which shall be purchased by the Buyer
pursuant to this Agreement;
WHEREAS, the Plan will be consistent with the terms and conditions of
this Agreement and in form and substance reasonably acceptable to Buyer;
WHEREAS, the Plan will provide for an adequate reserve for payment
and satisfaction of all Excluded Liabilities;
WHEREAS, in furtherance thereof and pursuant to Section 5.04 hereof,
the Company has agreed to, and to cause the other Debtors to (i) prepare and
transmit the Disclosure Statement, once approved by the Bankruptcy Court, to
holders of claims and equity interests in the Reorganization Cases, (ii) solicit
acceptance of the Plan, and (iii) seek entry of an order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code (the
"CONFIRMATION ORDER") (the date on which the Confirmation Order is entered is
hereinafter referred to as the "CONFIRMATION DATE"); and
WHEREAS, the Company desires to issue and sell the Shares to the
Buyer, and the Buyer desires to purchase the Shares from the Company, upon the
terms and subject to the conditions hereafter set forth.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Certain Definitions. (a) The following terms, as used
herein, have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that none of the Company nor any of the Subsidiaries shall
be considered an Affiliate of the Buyer.
"AGREED-TO WORKING CAPITAL" means $51,259,000.
"BALANCE SHEET" means the audited consolidated balance sheet of the
Company and the Subsidiaries as of the Balance Sheet Date.
"BALANCE SHEET DATE" means December 28, 2002.
"BUSINESS DAY" means any day of the year on which national banking
institutions in New York are open to the public for conducting business and are
not required or authorized to close.
"BUYER MATERIAL ADVERSE EFFECT" means, with respect to the Buyer, a
material adverse effect on the ability of the Buyer to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby or
on the condition (financial or otherwise), business, assets or results of
operations of the Buyer and its subsidiaries, taken as a whole, other than the
effects of changes relating to (a) changes or conditions affecting the
industries in which the Buyer and its subsidiaries operate generally, (b)
changes in economic, regulatory or political conditions generally; (c) any
act(s) of war or terrorism; (d) any generally applicable change in GAAP or the
interpretation thereof; or (e) any breach of this Agreement by the Company.
"CLOSING DATE" means the date of the Closing.
"CODE" means the United States Internal Revenue Code of 1986, as
amended.
"COMPANY" means (i) prior to the Effective Date, ▇▇▇▇▇▇ A.S.L., Ltd.,
a Delaware corporation, as debtor and debtor in possession and (ii) on and after
the Effective Date, ▇▇▇▇▇▇ A.S.L., Ltd. (as reorganized pursuant to the Plan), a
Delaware corporation, and, in each case, any successors thereto by merger,
consolidation, or otherwise.
"COMPANY'S U.S. SUBSIDIARIES" means, collectively, A.S.L. Retail
Outlets, Inc.; ASL/K Licensing Corp.; AKC Acquisition, Ltd.; Lion Licensing,
Ltd.; ▇▇▇▇▇▇ A.S.L. Europe, Ltd.; and ▇▇▇▇▇▇ Holdings, Inc.
"CONFIDENTIALITY OBLIGATIONS" shall mean any confidentiality
obligations set forth herein or in any other agreement to which the parties
hereto are parties or by which they are bound, including the Confidentiality
Agreement.
2
"CONFIDENTIALITY REGULATIONS" shall mean Treasury Regulation Section
1.6011-4(b)(3) or any successor provision of the Treasury Regulations
promulgated under Section 6011 of the Code.
"CONTRACT" shall mean any agreement, contract, lease or license
(whether written or oral).
"EFFECTIVE DATE" means the business day, after the Confirmation Date,
on which all of the conditions to the effectiveness of the Plan have been
satisfied or waived.
"ENVIRONMENTAL LAWS" means any applicable federal, state, local or
foreign law (including, without limitation, common law), treaty, judicial
decision, regulation, rule, judgment, order, decree, injunction, permit or
governmental restriction or requirement or any agreement with any governmental
authority or other third party relating to the environment or the effect of the
environment on human health and safety, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901, et
seq., the Toxic Substances Control Act, 15 U.S.C. 2601, et seq., the Clean Air
Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C.
1251, et seq., the Safe Drinking ▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇, et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. 1802 et seq., and the
Emergency Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq. and
all rules and regulations promulgated pursuant thereto or published thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
"ESTATE REPRESENTATIVE" means the Person designated as such under the
Plan. After the Closing, the Estate Representative shall be entitled to act in
the name of and on behalf of the Estates with respect to all matters relating to
this Agreement and the transactions contemplated hereunder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED TAXES" means all Taxes of the Company or its Subsidiaries
for a Pre-Closing Tax Period, including any liability of the Company or its
Subsidiaries for Taxes of others (for example, by reason of transferee liability
or application of Treas. Reg. section 1.1502-6) or any losses including damages,
judgments, fines, costs, penalties, amounts paid in settlement and reasonable
out-of-pocket costs and expenses payable with respect to Taxes claimed or
assessed against the Company or its Subsidiaries if such Taxes or losses are
attributable to the Pre-Closing Tax Period; provided, however, that
notwithstanding anything contained herein to the contrary, Excluded Taxes shall
not include (w) any Taxes in an amount reflected as an "accrued expense and
other" liability in the calculation of the Final Working Capital, (x) Taxes that
arise as a result of an election by the Buyer as provided in Section 12.10
hereof; (y) Taxes that arise as a result of (i) the Buyer filing, or causing to
be filed, an amended Tax Return on or after the Closing Date or (ii) an election
(including, but not limited to, an election under Section 338 of the Code) made,
or caused to be made, by the Buyer on or after the Closing Date, and (z) Taxes
resulting from transactions or actions taken by the Company or any of its
Subsidiaries after the Closing on the Closing Date that are outside the ordinary
course of business.
"FINAL ORDER" means an order of the Bankruptcy Court or any other
court of competent jurisdiction as to which the time to appeal, petition for
certiorari, or move for reargument or rehearing has expired and as to which no
3
appeal, petition for certiorari, or other proceedings for reargument or
rehearing shall then be pending or as to which any right to appeal, petition for
certiorari, reargue, or rehear shall have been waived in writing in form and
substance satisfactory to the Debtors or, on and after the Effective Date, the
Reorganized Debtors, or, in the event that an appeal, writ of certiorari, or
reargument or rehearing thereof has been filed or sought, such order of the
Bankruptcy Court or other court of competent jurisdiction shall have been
determined by the highest court to which such order was appealed, or certiorari,
reargument or rehearing shall have been denied and the time to take any further
appeal, petition for certiorari or move for reargument or rehearing shall have
expired; provided, however, that the possibility that a motion under Rule 59 or
Rule 60 of the Federal Rules of Civil Procedure or any analogous rule under the
Bankruptcy Rules or applicable state court rules of civil procedure, may be
filed with respect to such order shall not cause such order not to be a Final
Order.
"FORM 10-K" means the Form 10-K of the Company for the year ended
December 28, 2002 filed with the Securities and Exchange Commission.
"FORM 10-Q" means the Form 10-Q of the Company for the quarter ended
March 29, 2003 filed with the Securities and Exchange Commission.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any other country or any domestic or foreign state, county,
city or other political subdivision.
"HAZARDOUS MATERIALS" means any material, substance or waste
classified, characterized or regulated as "hazardous," "toxic," "pollutant,"
"contaminant," or words of similar meaning under any Environmental Laws,
including, without limitation, petroleum and petroleum products,
asbestos-containing materials, polychlorinated biphenyls, and urea formaldehyde
foam insulation.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"INTELLECTUAL PROPERTY RIGHT" means any United States or Canadian
Trademark, trade name, application for trademark or service ▇▇▇▇ registration,
patent, patent application, domain name, URL, trade secret, software, source
codes, object codes, copyright, copyright registration, application for
copyright registration or any other similar type of proprietary intellectual
property right.
"INTERIM BALANCE SHEET" means the interim unaudited balance sheet of
the Company and the Subsidiaries as of the Interim Balance Sheet Date.
"INTERIM BALANCE SHEET DATE" means March 29, 2003.
"IRS STIPULATION" means that certain Stipulation and Settlement of
IRS Claim substantially in the form attached hereto as Exhibit A.
4
"KELLWOOD STOCK VALUE" means the average closing price on the New
York Stock Exchange of a share of Kellwood Stock for the ten trading days ending
three business days prior to the Closing.
"KNOWLEDGE OF THE COMPANY," "COMPANY'S KNOWLEDGE" or any other
similar knowledge qualification in this Agreement means to the knowledge of ▇▇▇▇
▇. Idol, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
ability of the Company to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby or on the condition (financial
or otherwise), business, assets or results of operations of the Company and the
Subsidiaries, taken as a whole, other than effects or changes relating to (a)
changes or conditions generally affecting the women's apparel industry (except
to the extent that any such change or condition has a material adverse effect on
the Company that is materially greater than the adverse effect on comparable
entities operating in such industry), (b) changes in economic, regulatory or
political conditions generally; (c) any act(s) of war or terrorism; (d) any
generally applicable change in GAAP or the interpretation thereof; or (e) any
breach of this Agreement by the Buyer.
"MULTIEMPLOYER PLAN" has the meaning specified in Section 3(37) of
ERISA.
"NEW COMMON STOCK" means the common stock, par value $0.01 per share,
of the Company to be issued at the Closing.
"NON-DEBTOR AFFILIATES" means, collectively, ▇▇▇▇▇▇ A.S.L. Europe,
Ltd.; Asia Expert Limited; Tomwell Limited; ▇▇▇▇▇▇ Canada ULC; and ▇▇▇▇ ▇▇▇▇▇
ULC.
"OLD COMMON STOCK" means the common stock, par value $0.01 per share,
of the Company outstanding on the Petition Date which will be discharged,
cancelled or otherwise terminated pursuant to the Plan and upon consummation of
the transactions contemplated hereby.
"ORDER" means any writ, judgment, ruling, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"POST-PETITION BANK CREDIT AGREEMENT" means that certain Secured
Super-Priority Debtor-In-Possession Revolving Credit Agreement, dated as of
January 30, 2003, among the Company, as borrower, certain of the Company's U.S.
Subsidiaries, as guarantors, and Citicorp USA, Inc., as administrative agent,
arranger and book manager and the lenders and issuers party thereto, and any and
all of the documents, instruments and agreements relating thereto, including,
without limitation, all guarantees and security documents, instruments and
5
agreements executed and delivered in connection with the Post-Petition Bank
Credit Agreement, as the same may have been amended, restated, supplemented or
otherwise modified from time to time.
"PRE-CLOSING TAX PERIOD" means, with respect to the Company or its
Subsidiaries, any Tax period (or portion thereof) ending on or before the
Closing Date. For purposes of this Agreement, with respect to any taxable year
or period of the Company or any of its Subsidiaries which includes the Closing
Date (but does not end on that day), Excluded Taxes for the Pre-Closing Tax
Period shall be computed as if such taxable year or period ended as of the close
of business on the Closing Date; provided, that exemptions, allowances or
deductions that are calculated on an annual basis (including, but not limited
to, depreciation and amortization deductions) shall be allocated between the
period ending on the Closing Date and the period after the Closing Date in
proportion to the number of days in each such period.
"REORGANIZED DEBTORS" means the Debtors, and any successor of any
such debtors by merger, consolidation or otherwise, on and after the Effective
Date.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means 100 shares of New Common Stock to be issued to the
Buyer pursuant hereto, which, immediately following the Closing, shall be and
constitute all of the duly issued and outstanding capital stock of the Company.
"STRADDLE PERIOD RETURN" shall mean any Tax Return required to be
filed by the Company or any Subsidiary relating to a taxable year or period
beginning on or before and ending after the Closing Date.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Company.
"TAX" means all federal, state, provincial, territorial, municipal,
local or foreign income, profits, franchise, gross receipts, environmental
(including taxes under Code Section 59A), customs, duties, net worth, sales,
use, goods and services, withholding, value added, ad valorem, employment,
social security, disability, occupation, pension, real property, personal
property (tangible and intangible), stamp, transfer, conveyance, severance,
production, excise and other taxes, withholdings, duties, levies, imposts and
other similar charges and assessments (including any and all fines, penalties
and additions attributable to or otherwise imposed on or with respect to any
such taxes, charges, fees, levies or other assessments, and interest thereon)
imposed by or on behalf of any Taxing Authority, whether disputed or not, in
each case whether such Tax arises by law, contract or otherwise and including
any obligation to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.
"TAX RETURNS" means any report, return, declaration, claim for
refund, information report or return or statement required to be supplied to a
Taxing Authority in connection with Taxes, including any schedule or attachment
thereto or amendment thereof.
"TAXING AUTHORITY" means any Governmental Authority exercising any
authority to impose, regulate, levy, assess or administer the imposition of any
Tax.
6
"TRADEMARK" means any trademark, service ▇▇▇▇ or trade dress rights
developed or acquired by the Company or any of its Subsidiaries (or their
predecessors), through use or registration, in particular words, logos, stylized
lettering, and other designs.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
Accounting Referee 2.03
Action 3.12
Admin Bar Date 7.07
Administrative Claim Bar Date Order 7.07
Approval Hearing 7.01
Approval Order 7.01
Assumed Liabilities 2.06
Auction 7.01
Bankruptcy Code Recitals
Bankruptcy Court Recitals
Bid Procedures Order 7.01
Breakup Fee 11.02
Buyer Preamble
Buyer Indemnified Losses 10.02
Buyer Indemnified Persons 10.02
Buyer SEC Documents 4.10
Closing 2.04
Closing Statement 2.03
Closing Working Capital 2.03
Company Preamble
Company SEC Documents 3.28
Company Securities 3.05
Confidentiality Agreement 6.01
Confirmation Date Recitals
Confirmation Order Recitals
Debtors Recitals
Disclosure Statement 5.04
Employee Agreement 3.21
Employee Plan 3.21
Estates Recitals
Estate Indemnified Losses 10.03
Estate Indemnified Persons 10.03
Excluded Contracts 2.07
Excluded Liabilities 2.07
Final Working Capital 2.03
Indemnified Losses 10.02
Indemnified Party 10.05
Indemnity Account 2.02
Indemnifying Party 10.01
Intellectual Property Contracts 3.15
Kellwood Stock 2.02
Leases 3.14
Losses 10.02
7
TERM SECTION
Net Working Capital 2.03
Other Property 3.14
Pension Plan 3.21
Permits 3.17
Permitted Liens 3.14
Petition Date Recitals
Plan Recitals
Purchase Price 2.02
Reorganization Cases Recitals
SEC 3.28
Specified Registrations 3.15
Subsidiary Securities 3.07
Third Person 10.06
Third Person Claim 10.06
Unadjusted Purchase Price 2.02
Working Capital Adjustment Account 2.02
Section 1.02. Other Definitional and Interpretive Matters.
(a) Unless otherwise expressly provided, for purposes of this
Agreement, the following rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of time
before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Dollars. Any reference in this Agreement to $ shall mean U.S.
dollars.
Exhibits/Schedules. The Exhibits and Schedules to this Agreement are
hereby incorporated and made a part hereof and are material to and an integral
part of this Agreement. All Exhibits and Schedules annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any matter or item disclosed on one schedule (i) shall be
deemed to have been disclosed on each other schedule and (ii) is not an
acknowledgement that such matter or item is material. Any capitalized terms used
in any Schedule or Exhibit but not otherwise defined therein shall be defined as
set forth in this Agreement.
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.
Headings. The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
8
Herein. The words such as "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
(b) The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
ARTICLE 2
PURCHASE AND SALE
Section 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Company agrees to issue and sell to the Buyer,
and the Buyer agrees to purchase from the Company at the Closing, the Shares.
The purchase price to be paid by the Buyer for the Shares shall be paid to the
Estate Representative as provided in Sections 2.02 and 2.03.
Section 2.02. Unadjusted Purchase Price.
(a) At the Closing, the consideration to be paid by Buyer for the
Shares shall be equal to One Hundred and Fifty-one Million Dollars
($151,000,000) (the "UNADJUSTED PURCHASE PRICE"), subject to adjustment as
provided in Section 2.03 (as adjusted, the "PURCHASE PRICE"). The Unadjusted
Purchase Price is comprised of: (i) cash in an amount equal to One Hundred and
Eleven Million Dollars ($111,000,000) plus (ii) the number of shares of Kellwood
common stock, par value $.01 per share ("KELLWOOD STOCK") that is determined by
dividing Forty Million Dollars ($40,000,000) by the Kellwood Stock Value. The
cash portion of the Unadjusted Purchase Price shall be paid by wire transfer of
immediately available funds to such account as shall have been designated by the
Estate Representative to the Buyer in writing prior to the Closing. The Kellwood
Stock shall be delivered to the Estate Representative at the Closing.
Notwithstanding the foregoing, the Buyer shall have the option to deliver cash
to the Estate Representative in lieu of all or a portion of the Kellwood Stock
contemplated as purchase price consideration above and may exercise such option
by delivering to the Company written notice of such election not less than three
business days prior to Closing.
(b) The Estate Representative shall hold Ten Million Dollars
($10,000,000) of the cash portion of the Unadjusted Purchase Price in an
interest bearing segregated account (the "WORKING CAPITAL ADJUSTMENT ACCOUNT")
for purposes of any adjustment provided for in Section 2.03 and until such time
as the Final Working Capital has been determined and any payment due to Buyer as
a result of any adjustment provided for in Section 2.03 has been made.
(c) Further, the Estate Representative shall hold Seven Million
Dollars ($7,000,000) of the cash portion of the Unadjusted Purchase Price in an
interest bearing segregated account (the "INDEMNITY ACCOUNT") for a period of
six months following the Closing for the purpose of satisfying claims by Buyer
for Buyer Indemnified Losses.
9
Section 2.03. Adjustment of Purchase Price.
(a) As promptly as practicable, but no later than forty-five (45)
days after the Closing Date, the Buyer shall cause to be prepared and delivered
to the Estate Representative the Closing Statement (as defined below) and a
certificate based on such Closing Statement setting forth the Buyer's
calculation of Closing Working Capital. The closing statement (the "CLOSING
STATEMENT") shall fairly present in all material respects the consolidated Net
Working Capital of the Company as of the end of business on the Closing Date
("CLOSING WORKING CAPITAL"). "NET WORKING CAPITAL" means, with respect to the
Company and the Subsidiaries: (i) cash and restricted cash (for purposes of
clarity, cash includes cash equivalents); plus, (ii) accounts receivable, net of
appropriate reserves; plus, (iii) inventory (for purposes of clarity, for
finished goods, net of reserves); plus, (iv) piece goods at contractor (for
purposes of clarity, net of reserves); plus, (v) piece goods at AEL (for
purposes of clarity, net of reserves); plus, (vi) prepaid and other current
assets (for purposes of clarity, not including income tax refund, deferred tax
asset, or any Federal or state income tax asset); less, (vii) accounts payable
(for purposes of clarity, post-petition); less, (viii) accrued expenses and
other (for purposes of clarity, not including (a) interest payable, (b) deferred
income or current portion of deferred income, and (c) income tax payable,
deferred tax liability, or any Federal or state income tax accrual); less, (ix)
revolver (for purposes of clarity, under the Post-Petition Bank Credit
Agreement, cash borrowings only, and whether or not the revolver is classified
as a short term or long term liability), in each case as determined in
accordance with GAAP (to the extent applicable) and the Company's historical
internal reporting accounting practices, consistently applied between the
Balance Sheet Date and the Closing Date, and as reflected as a line item on the
Company's internal reporting balance sheets.
(b) If the Estate Representative disagrees with the Buyer's
calculation of Closing Working Capital delivered pursuant to Section 2.03(a),
the Estate Representative may, within thirty (30) days after delivery of the
Closing Statement, deliver a notice to the Buyer disagreeing with such
calculation and setting forth the Estate Representative's calculation of such
amount. Any such notice of disagreement shall specify those items or amounts as
to which the Estate Representative disagrees, and the Estate Representative
shall be deemed to have agreed with all other items and amounts contained in the
Closing Statement and the calculation of Closing Working Capital delivered
pursuant to Section 2.03(a).
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 2.03(b), the Buyer and the Estate Representative shall, during the
fifteen (15) days following such delivery, use their best efforts to reach
agreement on the disputed items or amounts in order to determine, as may be
required, the amount of Closing Working Capital, which amount shall not be less
than the amount thereof shown in the Buyer's calculation delivered pursuant to
Section 2.03(a) nor more than the amount thereof shown in the Estate
Representative's calculation delivered pursuant to Section 2.03(b). If during
such period, the Buyer and the Estate Representative are unable to reach such
agreement, they shall promptly thereafter cause KPMG LLP (the "ACCOUNTING
REFEREE") to review this Agreement and the disputed items or amounts for the
purpose of calculating Closing Working Capital. In making such calculation, the
Accounting Referee shall consider only those items or amounts in the Closing
Statement and the Estate Representative calculation of Closing Working Capital
as to which the Estate Representative has disagreed. The Accounting Referee
shall deliver to the Buyer and the Estate Representative, as promptly as
practicable (but in any case no later than thirty (30) days from the date of
engagement of the Accounting Referee), a report setting forth such calculation.
Such report shall be final and binding upon the Buyer and the Estates. The cost
of such review and report shall be borne equally by the Buyer and the Estates.
10
(d) The Buyer and the Estate Representative shall, and shall cause
their respective representatives to, cooperate and assist in the preparation of
the Closing Statement and the calculation of Closing Working Capital and in the
conduct of the review referred to in this Section 2.03, including, without
limitation, the making available to the extent necessary of books, records, work
papers and personnel.
(e) If Final Working Capital exceeds the Agreed-to Working Capital,
the Buyer shall pay to the Estate Representative, in the manner and with
interest as provided in Section 2.03(f), the amount of such excess. If the
Agreed-to Working Capital exceeds Final Working Capital, the Estate
Representative shall pay to the Buyer as an adjustment to the Purchase Price, in
the manner and with interest as provided in Section 2.03(f), the amount of such
excess. Any payment made to the Estate Representative pursuant to this Section
2.03 shall be made solely from the Working Capital Adjustment Account under the
Plan. The Working Capital Adjustment Account shall be the Buyer's sole source of
recovery for any adjustment made pursuant to this Section 2.03. "FINAL WORKING
CAPITAL" means Closing Working Capital (i) as shown in the Buyer's calculation
delivered pursuant to Section 2.03(a) if no notice of disagreement with respect
thereto is duly delivered pursuant to Section 2.03(b); or (ii) if such a notice
of disagreement is delivered, (A) as agreed by Buyer and the Estate
Representative pursuant to Section 2.03(c) or (B) in the absence of such
agreement, as shown in the Accounting Referee's calculation delivered pursuant
to Section 2.03(c); provided, however, that in no event shall Final Working
Capital be more than the Estate Representative's calculation of Closing Working
Capital delivered pursuant to Section 2.03(b) or less than the Buyer's
calculation of Closing Working Capital delivered pursuant to Section 2.03(a).
(f) Any payment pursuant to Section 2.03 shall be made at a mutually
convenient time and place within three Business Days after Final Working Capital
has been determined by wire transfer by the Buyer or the Estate Representative,
as the case may be, of immediately available funds to the account of such other
party as may be designated in writing by such other party. The amount of any
payment to be made pursuant to this Section 2.03 shall bear interest from and
including the Closing Date to but excluding the date of payment at a rate per
annum equal to the rate of interest announced by Bank of America, N.A. from time
to time as its base rate in New York City in effect from time to time during the
period from the Closing Date to the date of payment. Such interest shall be
payable at the same time as the payments to which it relates and shall be
calculated daily on the basis of a year of three hundred sixty five (365) days
and the actual number of delays elapsed.
Section 2.04. Closing. The closing (the "CLOSING") of the purchase
and sale of the Shares hereunder shall take place at the offices of Weil,
Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, as soon as
practicable after, but in no event later than five (5) business days after,
satisfaction of the conditions set forth in Article 9 (other than those
conditions which will be satisfied on the Closing Date), or at such other time
or place as the Buyer and the Company may agree.
Section 2.05. Stock Certificates. At the Closing, the Company shall
deliver to the Buyer a certificate for the Shares, duly registered in the name
of the Buyer or such other name as the Buyer shall have requested, which request
shall be made not later than two Business days prior to the Closing Date.
Section 2.06. Assumed Liabilities. The Plan shall provide that the
only liabilities of the Company and the Subsidiaries relating to the period
prior to the Closing Date that shall survive and remain liabilities of the
11
Company and the Subsidiaries on and after the Closing Date shall be the
following (the "ASSUMED LIABILITIES"):
(a) ordinary course of business liabilities of the Company and the
Subsidiaries including those reflected within the determination of Net Working
Capital; provided, however, for purposes of this Agreement the term "ordinary
course of business" shall not be deemed to include liabilities for any material
breach or violation of any Law or any liabilities related to tortious conduct by
the Company, any Subsidiary or any employees of the Company or any Subsidiary;
(b) ordinary course of business obligations under the Contracts of
the Company and the Subsidiaries other than the Excluded Contracts;
(c) liabilities for the Company's (i) documentary letters of credit
related to goods ordered or to be ordered and outstanding at Closing (including
any amendments required) and (ii) standby letters of credit outstanding at
Closing;
(d) non-cash liabilities consisting of deferred income including the
current portion of deferred income;
(e) subject to Section 2.08 and the proviso set forth in Section
2.06(a) and except as set forth in Sections 2.07(a) and (c), any and all
obligations and liabilities (contingent or otherwise) arising from or relating
to the employment or services, or termination of employment or services, of any
individual with respect to the Company and the Subsidiaries, including without
limitation (i) the Employee Plans and any trusts, insurance contracts or other
agreements relating thereto, except as set forth in Section 2.07(f), (ii) the
Employee Agreements, except as listed on Schedule 2.07 as an Excluded Contract,
(iii) accrued and unpaid vacation, sick days and personal days, (iv) workers'
compensation benefits (whether accrued before, on or after the Closing Date),
(v) obligations under Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA with respect to the current or former employees of the Company
and the Subsidiaries and their qualified beneficiaries, (vi) any obligations to
employees terminated on or before the Closing Date under the Worker Adjustment
Retraining and Notification Act or similar state law by reason of the number of
employees terminated after the Closing Date and (vii) any liability (contingent
or otherwise) under Title IV of ERISA with respect to any Multiemployer Plan to
which the Company or any Subsidiary contributes or is required to contribute;
and
(f) the Tax liabilities of the Company other than Excluded Taxes.
Section 2.07. Excluded Liabilities. Neither Buyer, the Company nor
the Subsidiaries shall be liable following the Closing for any liabilities of
the Company or any Subsidiary relating to the period prior to the Closing Date
other than the Assumed Liabilities (the "EXCLUDED LIABILITIES"). All of the
Excluded Liabilities, pursuant to the Plan, shall be the responsibility of the
Estate Representative. The "EXCLUDED LIABILITIES" shall include, by way of
example and not limitation, all obligations or liabilities of the Company and
the Subsidiaries arising out of, relating to or otherwise in respect of:
(a) the Pre-Petition claims and liabilities of the Company and the
Subsidiaries set forth in the Plan (other than any liability (contingent or
otherwise) under Title IV of ERISA with respect to any Multiemployer Plan to
which the Company or any Subsidiary contributes or is required to contribute);
12
(b) the Post-Petition Bank Credit Agreement (except for cash
borrowings and as provided in Section 2.06(c));
(c) the Excluded Taxes;
(d) the Contracts listed on Schedule 2.07 (the "EXCLUDED CONTRACTS");
(e) the net fees and expenses payable to the financial and legal
advisors of the Estates, the Company and the Official Committee of the Unsecured
Creditors of the Estates including ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Company Limited, Weil,
Gotshal & ▇▇▇▇▇▇ LLP and ▇▇▇▇▇▇▇▇, Kill & Olick, P.C.; and
(f) any equity-based plan or compensation program related to Old
Common Stock or other Company Securities including without limitation the ▇▇▇▇▇▇
A.S.L., Ltd. 1997 Management Stock Option Plan and ▇▇▇▇▇▇ A.S.L., Ltd. 1999
Share Incentive Plan.
Section 2.08. Employee Matters.
(a) With respect to each non-represented employee of the Company or
any Subsidiary who is not a party to an Employee Agreement set forth on Schedule
3.21(a), Buyer shall cause the Company and Subsidiaries, with respect to each
such employee, (i) to continue the employment of such employee immediately after
the Closing at the same salary or hourly wage rate and position in effect
immediately prior to the Closing and (ii) for a period of one year, to cover
such employee under employee benefit and compensation plans, programs and
arrangements that are substantially similar in the aggregate to those maintained
by the Company and its Subsidiaries in effect immediately prior to the Closing
Date (other than the ▇▇▇▇▇▇ A.S.L., Ltd. 1997 Management Stock Option Plan, the
▇▇▇▇▇▇ A.S.L., Ltd. 1999 Share Incentive Plan and any other stock based plan)
applicable to such employee; provided, Buyer agrees to cause the Company and
Subsidiaries to maintain, and not amend, terminate or discontinue, the Employee
Plans set forth on Schedule 2.08(a), except to the extent required to comply
with applicable laws. Subject to applicable laws, (x) notwithstanding the above
provisions of this Section 2.08(a), the Company and the Subsidiaries shall have
the right to dismiss any or all employees who are not represented by a labor
union (subject to any written employment agreements with the Company or any
Subsidiary) at any time, with or without cause, and (y) subject to clause (ii)
above, to change the terms and conditions of their employment (including
compensation and employee benefits provided to them).
(b) With respect to each employee of the Company or any Subsidiary
who is a party to an Employee Agreement set forth on Schedule 3.21(a), except
for the individuals with Excluded Contracts listed on Schedule 2.07, Buyer shall
cause the Company and Subsidiaries to honor their obligations under the Employee
Agreements.
(c) Buyer agrees that, with respect to all of its employee benefit
plans, programs and arrangements covering or otherwise benefiting any employee
of the Company or any Subsidiary on or after the Closing, service with the
Company and its Subsidiaries shall be recognized for purposes of eligibility to
participate, vesting, and level of benefits, but excluding benefit accruals, to
the same extent such service (including prior service with any predecessor of
the Company or any Subsidiary) is recognized under the corresponding Employee
Plans, provided that such recognition does not result in any duplication of
benefits.
13
(d) Pursuant to the Plan, the Company shall terminate all
equity-based plans and compensation programs related to Old Common Stock or
other Company Securities, including without limitation the ▇▇▇▇▇▇ A.S.L., Ltd.
1997 Management Stock Option Plan and ▇▇▇▇▇▇ A.S.L., Ltd. 1999 Share Incentive
Plan.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer as of the date
hereof and as of the Closing Date (except as otherwise provided herein) that:
Section 3.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and, subject to any necessary
authority from the Bankruptcy Court, has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which has not
had, and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified has not had, and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The Company
has heretofore delivered or made available to the Buyer true and complete copies
of the certificate of incorporation and bylaws of the Company, as currently in
effect.
Section 3.02. Corporate Authorization. The execution, delivery and,
upon entry of the Confirmation Order, the performance of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, are
within the Company's corporate powers and have been duly authorized by all
necessary corporate action on the part of the Company. Subject to the entry of
the Confirmation Order, this Agreement constitutes a valid and binding agreement
of the Company.
Section 3.03. Consents and Authorizations. The execution, delivery
and performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby by the Company require no material action,
consent or approval by or in respect of, or filing with, any Person or any
Governmental or Regulatory Authority other than (i) compliance with any
applicable requirements of the HSR Act; (ii) consents, approvals or actions of,
or filings with or notice to, the Bankruptcy Court; and (iii) as provided on
Schedule 3.03.
Section 3.04. Noncontravention. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby by the Company do not and will not (i) violate
the certificate of incorporation or bylaws of the Company or of any Subsidiary,
as now in effect or as may be amended pursuant to the Plan, (ii) assuming
compliance with the matters referred to in Section 3.03, violate any applicable
law, rule, regulation or Order, except for any such violations which have not
had, and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or (iii) require any material consent or
other material action by any Person under, constitute a material default under,
or give rise to any material right of termination, cancellation or acceleration
of any right or obligation of the Company or any Subsidiary or to a loss of any
14
material benefit to which the Company or any Subsidiary is entitled under any
provision of any material agreement or other material instrument binding upon
the Company or any Subsidiary or (iv) result in the creation or imposition of
any Lien on any asset of the Company or any Subsidiary, other than Permitted
Liens.
Section 3.05. Capitalization. (a) (i) As of the date hereof, the
authorized capital stock of the Company consists of 20,000,000 shares of Old
Common Stock and 1,000,000 shares of preferred stock. As of the date hereof,
there are outstanding 6,800,000 shares of Old Common Stock and no shares of
preferred stock.
(ii) As of the date hereof, all outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable. Except as set forth in this Section 3.05(a) or as disclosed
in the Form 10-K or Form 10-Q, as of the date hereof, there are no outstanding
(A) shares of capital stock or voting securities of the Company, (B) securities
of the Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company or (C) options or other rights to acquire from
the Company, or other obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company (the items in clauses 3.05(a)(ii)(A),
3.05(a)(ii)(B) and 3.05(a)(ii)(C) being referred to collectively as the "COMPANY
SECURITIES"). There are no outstanding obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any the Company
Securities.
(b) Pursuant to the Plan, all of the outstanding Company Securities
shall be canceled immediately prior to the Closing with no further rights and
obligations relating thereto. As of the Closing (and giving effect to the
Closing), (A) the authorized capital stock of the Company will consist of 1,000
shares of New Common Stock and (B) there will be outstanding 100 shares of New
Common Stock. As of the Closing (and giving effect to the Closing), the Buyer
will be the sole owner of the New Common Stock.
Section 3.06. Valid Issuance of Securities. The Shares which are
being issued to the Buyer hereunder will be duly and validly authorized and,
when issued, sold and delivered in accordance with the terms hereof and upon
payment of the Purchase Price as provided herein, will be fully paid and
non-assessable, free of preemptive rights and free and clear of all Liens.
Section 3.07. Subsidiaries. (a) Each Subsidiary is a corporation duly
incorporated, validly exiting and in good standing under the laws of its
jurisdiction of incorporation, and has, subject to any necessary authority from
the Bankruptcy Court, all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted except for those licenses, authorizations, permits,
consents and approvals the absence of which has not had, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Each Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. All Subsidiaries
and their respective jurisdictions of incorporation are identified on Schedule
3.07(a). The Company has heretofore delivered or made available to the Buyer
true and complete copies of the formation documents and bylaws of each
Subsidiary as currently in effect.
(b) Except for Liens that will be released or discharged at or prior
to Closing pursuant to the Plan or the Confirmation Order, all of the
outstanding capital stock or other voting securities of each Subsidiary is, and
on the Closing Date will be, owned by the Company, directly or indirectly, free
15
and clear of any Lien and free of any other limitation or restriction on the
right to vote, sell or otherwise dispose of such capital stock or other voting
securities, and nothing in the Plan or Confirmation Order reduces, dilutes,
restricts, or otherwise affects in any way the Company's direct or indirect
ownership of, or interest in, each Subsidiary. There are no outstanding (i)
securities of any Subsidiary convertible into or exchangeable for shares of
capital stock or voting securities of any Subsidiary or (ii) options or other
rights to acquire from any Subsidiary, or other obligation of any Subsidiary to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of any Subsidiary (the items
in clauses 3.07(b)(i) and 3.07(b)(ii) being referred to collectively as the
"SUBSIDIARY SECURITIES"). There are no outstanding obligations of any Subsidiary
to repurchase, redeem or otherwise acquire any outstanding Subsidiary
Securities.
Section 3.08. Financial Statements. Subject to the qualifications
expressed in the opinion of the Company's auditors, dated March 17, 2003, the
Balance Sheet and the related audited consolidated statement of income and cash
flows for the year ended December 28, 2002 and the Interim Balance Sheet and the
related unaudited interim consolidated statements of income and cash flows for
such period fairly present in all material respects, in conformity with GAAP
applied on a consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and the Subsidiaries as of
the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject to normal year-end adjustments and the
absences of footnotes in the case of any unaudited interim financial
statements).
Section 3.09. Conduct of Business; Absence of Certain Changes. Except
as approved by the Bankruptcy Court or as set forth on Schedule 3.09, since the
Balance Sheet Date, there has not been:
(a) any change, which would have a Material Adverse Effect, in (i)
the business, financial condition, or operations of the Company or any
Subsidiary, or (ii) the condition of the assets and property, real and personal,
tangible and intangible, of the Company or any Subsidiary;
(b) any declaration, setting aside, or payment of any dividend or any
distribution (in cash or in kind) to any shareholder of the Company or any
Subsidiary with respect to any securities of the Company or any Subsidiary, or
any direct or indirect redemption, purchase, or other acquisition by the Company
of any Company Securities;
(c) any increase in compensation or other remuneration payable to or
for the benefit of or committed to be paid to or for the benefit of any
shareholder, director, officer, agent, or employee of the Company or any
Subsidiary, or in any benefits granted under any Employee Plan with or for the
benefit of any such shareholder, director, officer, agent, or employee, other
than in the ordinary course of business;
(d) any transaction entered into or carried out by the Company or any
Subsidiary other than in the ordinary course of business;
(e) other than in the ordinary course of business, (i) any borrowing
or incurrence of any other indebtedness, contingent or other, by or on behalf of
the Company or any Subsidiary or (ii) any endorsement, assumption, or guarantee
of payment or performance of any loan or obligation of any other Person by the
Company or any Subsidiary;
16
(f) any change made by the Company or any Subsidiary in its methods
of doing business or of accounting;
(g) any grant by the Company or any Subsidiary of any mortgage,
security interest, or other encumbrance with respect to its property, other than
Permitted Liens;
(h) any sale, lease, or disposition of, or any agreement to sell,
lease, or dispose of, any of its property other than arm's-length sales, leases,
or dispositions in the ordinary course of business of the Company or any
Subsidiary, other than Permitted Liens;
(i) any material modification or termination of any material contract
described on Schedule 3.11 or any material term thereof;
(j) any purchase by the Company or any Subsidiary of capital assets
other than in accordance with the capital budget attached hereto as Exhibit B,
which budget is consistent with the overall budget of the Company for fiscal
year 2003 that has been approved by the Board of Directors of the Company (it
being understood that expenditures for particular line items in excess of the
amounts budgeted therefor shall nonetheless be in accordance with the capital
budget so long as the aggregate capital expenditures do not exceed the aggregate
amount budgeted therefor);
(k) other than in the ordinary cause of business and other than loans
between the Company and the Subsidiaries, any loan or advance made by the
Company or any Subsidiary to any Person; or
(l) any binding commitment or agreement by the Company or any
Subsidiary to do any of the foregoing items (a) through (k).
Section 3.10. No Undisclosed Material Liabilities. Other than in the
ordinary course of business, there are no material liabilities of the Company or
any Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
(a) liabilities disclosed in the Form 10-K or Form 10-Q or provided
for in the Balance Sheet or disclosed in the notes thereto or in the Interim
Balance Sheet or disclosed in the notes thereto;
(b) liabilities disclosed on Schedule 3.10(b); or
(c) performance and payment obligations (but not liabilities for
breach or violation) lawfully incurred under arm's length Contracts for goods or
services.
Section 3.11. Material Contracts. (a) Except (x) as disclosed in
Schedule 3.11(a)(x) and (y) for executory Contracts that have been or will be
rejected by the Company or the Subsidiaries by Order of the Bankruptcy Court (as
listed in Schedule 3.11(a)(y) or as specifically contemplated by the Plan) or
will be rejected by the Company or the Subsidiaries with the written consent of
the Buyer on or prior to the Effective Date, neither the Company nor any
Subsidiary is a party to or bound by:
(i) any lease (whether of real or personal property) providing
for annual rentals of $125,000 or more;
17
(ii) other than in the ordinary course of business, any
agreement for the purchase of materials, supplies, goods, services, equipment or
other assets (other than purchase orders for piece goods and finished goods in
the ordinary course of business) providing for aggregate payments by the Company
and the Subsidiaries of $125,000 or more;
(iii) other than in the ordinary course of business, any sales,
distribution or other similar agreement providing for the sale by the Company or
any Subsidiary of materials, supplies, goods, services, equipment or other
assets that provides for aggregate payments to the Company and the Subsidiaries
of $125,000 or more;
(iv) any partnership, joint venture or other similar agreement
or arrangement;
(v) any agreement relating to the acquisition or disposition of
any business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money
or the deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset), except any such agreement with an
aggregate outstanding principal amount not exceeding $100,000 and which may be
prepaid on not more than 30 days notice without the payment of any penalty;
(vii) any material option, license, franchise or similar
material agreement;
(viii) any material agency, dealer, sales representative,
marketing or other similar agreement;
(ix) any agreement that limits the freedom of the Company or any
Subsidiary to compete in any line of business or with any Person or in any area
or which would so limit the freedom of the Company or any Subsidiary after the
Closing Date; or
(x) any other agreement not made in the ordinary course of
business consistent with past practices that is material to the Company and the
Subsidiaries, taken as a whole, or to any of the Company, Lion Licensing, Ltd.,
A.S.L. Retail Outlets, Inc. or ▇▇▇▇▇▇ Partnership, G.P., taken individually.
(b) Except for any executory Contracts that may be rejected by the
Company or the Subsidiaries with the written consent of the Buyer, each Contract
disclosed in any Schedule to this Agreement or required to be disclosed pursuant
to this Section is a valid and binding agreement of the Company or a Subsidiary,
as the case may be, and is in full force and effect, and none of the Company,
any Subsidiary or, to the Knowledge of the Company, any other party thereto is
in default or breach in any material respect under the terms of any such
material Contract, and, to the Knowledge of the Company, no event or
circumstance has occurred that, with notice or lapse of time or both, would
constitute any material default thereunder. True and complete copies of each
such Contract have been delivered or made available to the Buyer.
Section 3.12. Litigation. As of the date hereof, except for the
Reorganization Cases or as set forth on Schedule 3.12, (a) there is no material
suit, litigation, proceeding (administrative, judicial, or in arbitration,
mediation or alternative dispute resolution), government or other action
18
pending, (b) to the Knowledge of the Company, there is no material claim or
grand jury investigation pending or (c) to the Knowledge of the Company, there
is no material suit, claim, litigation, proceeding (administrative, judicial, or
in arbitration, mediation or alternative dispute resolution), grand jury
investigation, government or other action (any of the foregoing, an "ACTION")
threatened against or affecting the Company or any Subsidiary or any of their
respective businesses or properties, or, in connection with their respective
businesses, any of their shareholders, directors, officers, agents, or other
personnel, including without limitation any Action which seeks to restrain or
prohibit or otherwise challenges the consummation, legality or validity of the
transactions contemplated hereby. As of the date hereof, except for the
Reorganization Cases or as set forth on Schedule 3.12, (x) neither the Company
nor any Subsidiary is or has been, since January 1, 2002, subject to any
material Order other than Orders of general applicability or Orders of the
Bankruptcy Court and (y) neither the Company nor any Subsidiary has been (or, to
the Knowledge of the Company, threatened to be) a party or subject to any
material Action or Order relating to personal injury, death, or property or
economic damage arising from the conduct of either of the Company's or any
Subsidiary's business.
Section 3.13. Compliance with Laws and Court Orders. Neither the
Company nor any Subsidiary is in violation of, and has not since January 1, 2002
violated, and to the Knowledge of the Company is not under investigation with
respect to and has not been threatened to be charged with or given notice of any
violation of, any applicable law, rule, regulation or Order, except for
violations that have not had, individually or in the aggregate, a Material
Adverse Effect.
Section 3.14. Properties.
(a) Neither the Company nor any Subsidiary owns any real property.
The Company and the Subsidiaries have a valid leasehold interest in all leases
of real property to which any of them is a party (collectively, the "LEASES"). A
true and correct list of each such Lease is contained on Schedule 3.14(a). Each
such Lease is a valid and binding agreement of the Company or a Subsidiary, as
the case may be, and is in full force and effect. None of the Company, any
Subsidiary or, to the Knowledge of the Company, any other party thereto is in
default or breach in any material respect under the terms of any such material
Lease, and, to the Knowledge of the Company, no event or circumstance has
occurred that, with notice or lapse of time or both, would constitute a material
default thereunder.
(b) With respect to all property and assets other than real property
("OTHER PROPERTY"), the Company and the Subsidiaries have good and valid title
to, or a valid leasehold interest in, the Other Property (whether personal,
tangible or intangible) used by them, located on their premises or reflected on
the Balance Sheet or acquired after the Balance Sheet Date, except for any Other
Property sold since the Balance Sheet Date in the ordinary course of business
consistent with past practices and except for defects in title or in the
validity of leasehold interests that would not result in a material liability to
the Company and the Subsidiaries.
(c) No Lease or Other Property is subject to any Lien, except:
(i) as of the date hereof, Liens disclosed on the Balance Sheet
or on the Interim Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been established on the
Balance Sheet);
19
(iii) Liens created by operation of law;
(iv) Liens under the Post-Petition Bank Credit Agreement (which
will be released at Closing);
(v) Liens disclosed on Schedule 3.14(c) hereto; and
(vi) Liens which do not materially detract from the value or
materially interfere with any present or intended use of such property or assets
(clauses (i) through (vi) of this Section 3.14 are, collectively, the "PERMITTED
LIENS").
Section 3.15. Intellectual Property.
(a) The Company and the Subsidiaries have no material patent
registrations or applications or copyright registrations or applications.
Schedule 3.15(a) contains a complete and accurate list of all of the Trademark
registrations and applications of the Company and the Subsidiaries and all
material Contracts relating to the other Intellectual Property Rights, and the
Company has delivered or caused to be delivered to Buyer accurate and complete
copies of all such Contracts ("INTELLECTUAL PROPERTY CONTRACTS"), except for any
license implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $1,000 under
which the Company or any Subsidiary is the licensee. All Intellectual Property
Contracts are valid and binding agreements of the Company or a Subsidiary, as
the case may be, and are in full force and effect, and none of the Company, any
Subsidiary or, to the Knowledge of the Company, any other party thereto is in
default or breach in any material respect under the terms of any such material
Intellectual Property Contract, and, to the Company's Knowledge, no event or
circumstance has occurred that, with notice or lapse of time or both, would
constitute a material default thereunder.
(b) The Company and the Subsidiaries collectively have ownership or
valid and legally enforceable rights to use all material Intellectual Property
Rights necessary for the conduct of the business of the Company and its
Subsidiaries as currently conducted, free and clear of all Liens (other than
Permitted Liens). To the Company's Knowledge, none of the Intellectual Property
Rights used by the Company or the Subsidiaries conflicts with or infringes the
rights of any Person. The Company and the Subsidiaries collectively have sole,
full, and clear title (except with respect to Permitted Liens) to the trademark
registrations set forth on Schedule 3.15(b) (the "SPECIFIED REGISTRATIONS") for
the goods and services named therein, and the Specified Registrations are valid
and subsisting and in full force and effect. There is no action or proceeding
pending or, to the Knowledge of the Company, threatened challenging the validity
or ownership of any Specified Registration.
(c) No Intellectual Property Right used or held for use by the
Company or any of the Subsidiaries, or necessary for the conduct of the business
of the Company and the Subsidiaries as currently conducted, is subject to any
outstanding claim, audit, demand, Order, stipulation or agreement restricting
the use thereof by the Company or any of the Subsidiaries or restricting the
licensing thereof by the Company or any of the Subsidiaries to any Person,
except as set forth on Schedule 3.15(c) and except for any claim, audit, demand,
Order, stipulation or agreement which has not had, individually or in the
aggregate, a Material Adverse Effect.
(d) To the Knowledge of the Company, no Person is infringing,
misappropriating or violating any Intellectual Property Right of the Company or
any Subsidiary.
20
(e) Substantially all current non-union, non-retail employees of the
Company and each of the Subsidiaries, and any other persons who have created any
material portion of the Intellectual Property Rights, have executed a written
acknowledgement to the Company containing a provision in the form set forth on
Schedule 3.15(e) hereto.
Section 3.16. Insurance Coverage. The Company and its Subsidiaries
have at all times maintained: (i) general comprehensive liability insurance
against such risks as are customarily insured against by companies similar to
the Company and the Subsidiaries and in at least such amounts as are usually
carried by persons engaged in the same or a similar business, and (ii) insurance
as required by law or under any agreement to which the Company and the
Subsidiaries is or has been a party, including without limitation, unemployment
and workers' compensation coverage. A list of each such insurance policy is set
forth on Schedule 3.16. All such insurance policies and fidelity bonds relating
to the assets, business, operations, employees, officers or directors of the
Company and the Subsidiaries have been in effect since January 1, 2003 and
remain in full force and effect.
Section 3.17. Permits. The Company and the Subsidiaries have all
material governmental licenses, franchises, permits, certificates, approvals or
other similar authorizations ("PERMITS") required for the ownership or occupancy
of its properties and assets and the carrying on of its business. The Permits
are valid and in full force and effect, neither the Company nor any Subsidiary
is in default in any material respect under, and no condition exists that with
notice or lapse of time or both would constitute a material default under, the
Permits and none of the Permits will be terminated or impaired or become
terminable, in whole or in part, as a result of the transactions contemplated
hereby, except as is not material.
Section 3.18. Inventories. The inventories set forth in the Balance
Sheet and the Interim Balance Sheet were properly stated therein at the lesser
of cost or fair market value determined in accordance with GAAP consistently
applied. Since the Interim Balance Sheet Date, the inventories of the Company
and its Subsidiaries have been maintained in the ordinary course of business
consistent with past practice. Neither the Company nor any Subsidiary is in
possession of any inventory not owned by it, including goods already sold, other
than goods held on consignment having a value not exceeding $416,726 (as of May
5, 2003) in the aggregate or as is immaterial in amount.
Section 3.19. Finders' Fees. Except for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Company,
whose fees will be paid by the Estates, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Company or any Subsidiary who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
Section 3.20. Labor Matters. (a) Except as disclosed in Schedule
3.20(a), neither the Company nor any Subsidiary is a party to any collective
bargaining or other labor union contract covering any employees of the Company
or any Subsidiary, and no employee of the Company or any Subsidiary is
represented by any labor union. Except as has not had, individually or in the
aggregate, a Material Adverse Effect, the Company and the Subsidiaries are, and
at all times have been, in compliance with the terms and requirements of, and
are not currently in default under, any collective bargaining or other labor
union contract covering any employees of the Company or any Subsidiary.
(b) There is no labor strike, dispute, slowdown, or stoppage pending
or, to the Knowledge of the Company, threatened against the Company or any
Subsidiary which, individually or in the aggregate, would reasonably be expected
21
to result in a Material Adverse Effect. Except as set disclosed in Schedule
3.20(b), no collective bargaining agreement is currently being negotiated and no
organizing effort is currently being made with respect to the Company's or any
Subsidiary's employees.
(c) The Company and the Subsidiaries are in compliance in all
material respects with all currently applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and are not engaged in any unfair labor practice, failure to comply with which
or engagement in which, as the case may be, has had, individually or in the
aggregate, a Material Adverse Effect. There is no unfair labor practice
complaint pending or, to the Knowledge of the Company, threatened against the
Company or any Subsidiary before the National Labor Relations Board.
Section 3.21. Employee Benefit Plans. (a) Schedule 3.21(a) lists each
"employee benefit plan" (as defined in Section 3(3) of ERISA) and each profit
sharing, deferred compensation, bonus or other incentive compensation, stock
option, stock purchase, retirement, health, vacation, severance, disability,
life insurance, tuition reimbursement, leave of absence, company car and club
dues plan, program or policy maintained by the Company or any Subsidiary except
as required to be maintained by law (each, an "EMPLOYEE PLAN"). Schedule 3.21(a)
also lists each material employment agreement maintained by the Company or any
Subsidiary (each, an "EMPLOYEE AGREEMENT"). The Company has made available to
the Buyer correct and complete copies of (i) each Employee Plan and each
Employee Agreement (or, in the case of any such Employee Plan or Employee
Agreement that is unwritten, descriptions thereof), (ii) the most recent annual
reports on Form 5500 required to be filed with the Internal Revenue Service with
respect to each Employee Plan (if any such report was required), (iii) the most
recent summary plan description for each Employee Plan for which such summary
plan description is required and (iv) each trust agreement and insurance or
group annuity contract relating to any Employee Plan. Each Employee Plan and
each Employee Agreement has been administered in all material respects in
accordance with their terms. Each Employee Plan is, and the Company and its
Subsidiaries in respect of such Employee Plan are, in compliance in all material
respects with the applicable provisions of ERISA, the Code and all other
applicable laws, including Section 4980B of the Code, Part 6 of Subtitle B of
Title I of ERISA and Section 1862(b)(4)(A)(i) of the Social Security Act. To the
Knowledge of the Company, the Subsidiaries in respect of each employee benefit
plan required by law to be maintained or contributed to by the Subsidiaries with
respect to any non-U.S. employees are in compliance in all material respects
with applicable laws, except where failure thereof would not have a Material
Adverse Effect.
(b) To the Knowledge of the Company, (i) each Employee Plan which is
an "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
intended to be tax qualified under Section 401(a) of the Code (each, a "PENSION
PLAN") is so qualified, (ii) the trust maintained pursuant thereto is exempt
from federal income taxation under Section 501(a) of the Code, (iii) each such
Pension Plan has received a favorable determination letter from the Internal
Revenue Service, and (iv) no event has occurred since the date of the most
recent determination letter or application therefor relating to any such Pension
Plan that would adversely affect the qualification of such Pension Plan or the
exemption of such trust. The Company has made available to the Buyer a correct
and complete copy of the most recent determination letter received with respect
to each Pension Plan, as well as a correct and complete copy of each pending
application for a determination letter, if any. No Pension Plan is subject to
Title IV of ERISA.
22
(c) All contributions, premiums and benefit payments under or in
connection with the Employee Plans and Multiemployer Plans to which the Company
or any Subsidiary contributes or is required to contribute that are required to
have been made as of the date hereof in accordance with the terms of such plans
have been timely made. No Pension Plan has an "accumulated funding deficiency"
(as such term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived.
(d) Except as set forth on Schedule 3.21(d), neither the Company nor
any Subsidiary contributes to any Multiemployer Plan. Except as set forth on
Schedule 3.10(b) and, to the Knowledge of the Company, no Multiemployer Plan has
made a claim for withdrawal liability against the Company or any Subsidiary.
(e) To the Knowledge of the Company, neither the Company nor any
Subsidiary nor any "party in interest" or "disqualified person" with respect to
an Employee Plan has engaged in any non-exempt "prohibited transaction" in
violation of Section 4975 of the Code or Section 406 of ERISA which would result
in a material liability to the Company.
(f) The Company has not terminated any Pension Plan subject to Title
IV of ERISA since January 1, 2002.
Section 3.22. Environmental Matters.
(a) Each of the Company and the Subsidiaries (including each of their
respective assets, operations and real estate) is in compliance in all material
respects with all Environmental Laws, which compliance includes obtaining,
maintaining and complying with all material permits, registrations, licenses or
authorizations required by Environmental Laws.
(b) (x) There is no suit, claim, action or proceeding pending, (y) to
the Knowledge of the Company, there is no investigation pending, and (z) to the
Knowledge of the Company, there is no suit, claim, action, proceeding or
investigation threatened against or affecting the Company or any of the
Subsidiaries or any real property owned, operated or leased by the Company or
any of the Subsidiaries alleging material non-compliance with or potential
material liability under Environmental Laws.
(c) Except with respect to matters that have been resolved in
compliance with Environmental Laws, neither the Company nor any of the
Subsidiaries has received any notice of or knowingly entered into or assumed by
contract any material obligation, material liability, Order, settlement,
judgment, injunction or decree relating to or arising under Environmental Laws.
(d) To the Knowledge of the Company, there has been no spill,
discharge, leak, leaching, emission, migration, injection, disposal, escape,
dumping, or release of any Hazardous Materials at any property owned or leased
by the Company or the Subsidiaries which could reasonably be expected to result
in the Company incurring material liabilities under Environmental Laws.
This Section 3.22 contains the sole and exclusive representations and warranties
of the Company regarding environmental matters.
Section 3.23. Agreed-to Working Capital. Agreed-to Working Capital is
equal to the Net Working Capital as of the Balance Sheet Date, calculated as set
forth on Schedule 3.23.
23
Section 3.24. Accounts Receivables. Set forth in Schedule 3.24(a) is
a list of sub-accounts, which, in the aggregate, comprise the consolidated
accounts receivable of the Company. Set forth in Schedule 3.24(b) is a
reconciliation of the CIT Group/Commercial Services, Inc. Client Aged Accounts
Receivable Summary to the A/R - Regular Trade (Factored) general ledger balance.
Set forth in Schedule 3.24(c) is the CIT Group/Commercial Services, Inc. Client
Aged Accounts Receivable Summary. Except as set forth on Schedule 3.24, the
accounts receivable set forth in the Balance Sheet and the Interim Balance Sheet
were properly stated therein in accordance with GAAP consistently applied. Such
accounts receivable of the Company and its Subsidiaries have arisen in good
faith in the ordinary course of business consistent with past practice.
Section 3.25. Officers, Directors, Employees and Consultants. Set
forth on Schedule 3.25 is a list of: (a) all current directors of the Company
and each Subsidiary, (b) all current officers (with office held) of the Company
and each Subsidiary, (c) all employees (active or other) of the Company and each
Subsidiary, who receive annual compensation of $100,000 or more, and (d) all
current paid consultants to the Company and each Subsidiary who receive annual
compensation of $100,000 or more or who may not be terminated by the Company on
60 days' notice without a penalty being incurred by the Company.
Section 3.26. Books and Records. The books of account, stock record
books, minute books, bank accounts, and other corporate records of the Company
and each Subsidiary are true, correct, and complete in all material respects,
and have generally been maintained in accordance with good business practices.
Section 3.27. Factories. Except as set forth on Schedule 3.27,
neither the Company nor any Subsidiary relies on any single mill for more than
15.0% of its piece goods or factory for more than 10.0% of its finished goods
(by aggregate volume purchased). The Company's Contractor Manual, which has been
provided to Buyer, is the only manual of the Company relating to compliance by
each manufacturing facility operated by the Company or any Subsidiary or any
manufacturing facility operated by a third party which supplies products to the
Company or any Subsidiary, with all applicable foreign and domestic national,
federal, provincial, state, county and municipal statutes, laws, ordinances,
regulations, rules or orders regarding use of child labor, safety for workers,
human rights and similar concepts.
Section 3.28. Company SEC Documents.
(a) The Company has filed all reports, schedules, forms, statements
and other documents (including exhibits and other information incorporated
therein) with the Securities and Exchange Commission ("SEC") required to be
filed by the Company since January 1, 2001 (collectively, the "COMPANY SEC
DOCUMENTS"). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents, and, as of
their respective dates, none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The financial statements of the Company included in the Company
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates, were prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of
24
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented in all material
respects the financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Section 3.29. ▇▇▇▇▇▇ ▇▇▇ Settlement. The Commonwealth of Pennsylvania
has received the settlement payment contemplated by that certain Stipulation for
Judgment dated August 27, 2002 regarding the case ▇▇▇▇▇▇ ▇▇▇ Co Inc vs.
Commonwealth of Pennsylvania in the Commonwealth Court of Pennsylvania, No. 0578
Finance & Revenue, 2000.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company, as of the date
hereof and as of the Closing Date, that:
Section 4.01. Corporate Existence and Power. The Buyer is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all powers (corporate, partnership or
otherwise) and all material governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted.
Section 4.02. Corporate Authorization. The execution, delivery and,
performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby are within the powers (corporate, partnership
or otherwise) of the Buyer and have been or will have been duly authorized by
all necessary action on the part of the Buyer. This Agreement constitutes a
valid and binding agreement of the Buyer.
Section 4.03. Consents and Authorizations. The execution, delivery
and performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby require no action, consent or approval by or in
respect of, or filing with, any Person or Governmental Regulatory Authority
other than (i) compliance with any applicable requirements of the HSR Act and
(ii) consents, approvals or actions of, and filings with or notice to the
Bankruptcy Court.
Section 4.04. Noncontravention. The execution, delivery and
performance by the Buyer of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) violate the
organizational documents of the Buyer or (ii) assuming compliance with the
matters referred to in Section 4.03, violate any applicable law, rule,
regulation or Order, except for any such violations which have not had,
individually or in the aggregate, a Buyer Material Adverse Effect.
Section 4.05. Financing. The Buyer has access to the capital
necessary to fund the cash portion of the Unadjusted Purchase Price and any
other amounts to be paid by it hereunder.
Section 4.06. Purchase for Investment. The Buyer is purchasing the
Shares for investment and not with a view to, or for sale in connection with,
any distribution thereof. The Buyer (either alone or together with its advisors)
has sufficient knowledge and experience in financial and business matters so as
25
to be capable of evaluating the merits and risks of its investment in the Shares
and is capable of bearing the economic risks of such investment.
Section 4.07. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Buyer threatened against
or affecting, the Buyer before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement, or
that has had, individually or in the aggregate, a Buyer Material Adverse Effect.
Section 4.08. Scope of Representations and Warranties of the Company.
The Buyer acknowledges that neither the Company nor any of its Affiliates, nor
their agents, representatives, employees and officers, makes or has made any
representation or warranty, either express or implied, with respect to the
Company, the Shares or otherwise or with respect to any information provided or
made available to the Buyer or any of its Affiliates, representatives or agents,
except as and only to the extent expressly set forth in Article 3 and Article 8
(which are qualified by, and subject to the limitations and restrictions
contained in this Agreement).
Section 4.09. Capital Structure.
(a) As of the date hereof, the authorized capital stock of Buyer
consists of 50,000,000 shares of Kellwood Common Stock and 500,000 shares of
preferred stock ("KELLWOOD PREFERRED STOCK"). As of May 30, 2003, (i) 26,355,159
shares of Kellwood Common Stock were issued and outstanding, (ii) 6,563,477
shares of Kellwood Common Stock were held by Buyer in its treasury and (iii)
5,382,473 shares of Kellwood Common Stock were reserved for issuance pursuant to
the 1995 Stock Option Plan for Nonemployee Directors, as amended, the 1995
Omnibus Incentive Stock Plan, the 1990 Stock Option Plan for Nonemployee
Directors, the 1990 Omnibus Incentive Stock Plan, the Corporate Development
Incentive Plan, as amended, and the Restricted Stock Compensation Plan of 1969
(collectively, the "BUYER STOCK PLANS") (of which 4,326,997 shares of Kellwood
Common Stock were subject to outstanding options to purchase shares of Kellwood
Common Stock granted under the Buyer Stock Plans). As of the date hereof (x) no
shares of Kellwood Preferred Stock were issued or outstanding and (y) 160,000
shares of Kellwood Preferred Stock designated as Series A Junior Preferred Stock
("Series A Preferred Stock") were reserved for issuance in connection with the
rights to purchase Series A Preferred Stock issued pursuant to the Rights
Agreement, dated as of June 11, 1986, as amended, between Buyer and American
Stock Transfer & Trust Company, Inc., as rights agent. Except as set forth above
in this Section 4.09(a), as of the date hereof, no shares of capital stock or
other voting securities of Buyer are issued, reserved for issuance or
outstanding. There are no outstanding stock appreciation rights, rights to
receive shares of Kellwood Common Stock on a deferred basis or other rights that
are linked to the value of Kellwood Common Stock, granted under Buyer Stock
Plans or otherwise by Buyer.
(b) As of the date hereof, all outstanding shares of capital stock of
Buyer are, and all shares to be issued in accordance with this Agreement will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except as set forth above in Section
4.09(a), there are no bonds, debentures, notes or other indebtedness of Buyer
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of Buyer may
vote. Except as set forth above in Section 4.09(a), (i) there are not issued,
reserved for issuance or outstanding (A) any securities of Buyer or any of its
subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of Buyer or (B) any warrants, calls, options
26
or other rights to acquire from Buyer or any of its subsidiaries, or any
obligation of Buyer or any of its subsidiaries to issue, any capital stock,
voting securities or securities convertible into or exchangeable or exercisable
for capital stock or voting securities of Buyer and (ii) there are not any
outstanding obligations of Buyer or any of its subsidiaries to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Neither Buyer nor
any of its subsidiaries is a party to any voting agreement with respect to the
voting of any such securities.
Section 4.10. Buyer SEC Documents; No Undisclosed Liabilities.
(a) Buyer has filed all reports, schedules, forms, statements and
other documents (including exhibits and other information incorporated therein)
with the SEC required to be filed by Buyer since January 1, 2001 (collectively,
the "BUYER SEC DOCUMENTS"). As of their respective dates, the Buyer SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Buyer SEC
Documents, and, as of their respective dates, none of the Buyer SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The financial statements of Buyer included in the Buyer SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates, were prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented in all material
respects the financial position of Buyer and its consolidated subsidiaries as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(c) Except as set forth in the most recent financial statements
included in the Buyer SEC Documents filed by Buyer and publicly available prior
to the date of this Agreement (the "Filed Buyer SEC Documents") or for
liabilities incurred in connection with this Agreement or in the ordinary course
of business since the date of the most recent financial statements included in
the Filed Buyer SEC Documents, neither Buyer nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required by GAAP to be reflected in, or reserved
against or otherwise described in the consolidated balance sheet of Buyer
(including the notes thereto) which, individually or in the aggregate, have had
or would reasonably be expected to have a Buyer Material Adverse Effect.
Section 4.11. Absence of Certain Changes or Events. Except for
actions undertaken in connection with this Agreement, since the date of the most
recent audited financial statements included in the Filed Buyer SEC Documents,
Buyer and its subsidiaries have conducted their respective businesses in all
material respects only in the ordinary course consistent with past practice, and
there has not been:
(a) any amendment to Buyer's certificate of incorporation, by-laws
(other than an amendment to increase the number of directors on the Buyer's
board of directors) or similar organizational documents;
27
(b) any change or effect that individually or in the aggregate has
had or would reasonably be expected to have a Buyer Material Adverse Effect;
(c) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
Buyer's capital stock (other than payment of Buyer's regular quarterly cash
dividend on shares of Kellwood Common Stock);
(d) any split, combination or reclassification of any of Buyer's
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock;
(e) any change in accounting methods, principles or practices by
Buyer materially affecting the assets, liabilities or businesses of Buyer and
its subsidiaries, taken as a whole, except insofar as may have been required by
a change in GAAP; or
(f) any agreement, whether or not in writing, to do any of the
foregoing.
Section 4.12. Compliance with Laws. Each of Buyer and its
subsidiaries is in compliance with all laws, rules, regulations or Orders
applicable to it, its properties or other assets or its business or operations,
except for instances of noncompliance that individually or in the aggregate have
not had and would not reasonably be expected to have a Buyer Material Adverse
Effect.
Section 4.13. Voting Requirements. This Agreement and the
transactions contemplated hereby, including the issuance of shares of Kellwood
Common Stock pursuant to Article 2 hereof, do not require the approval of the
holders of any shares of capital stock of Buyer.
Section 4.14. Brokers and Other Advisors. No broker, investment
banker, financial advisor or other person, other than Financo, Inc., the fees
and expenses of which will be paid by Buyer, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Buyer.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
Section 5.01. Conduct of the Company. Except as set forth on Schedule
5.01, from the date hereof until the Closing Date, the Company shall, and shall
cause the Subsidiaries to, conduct its businesses in the ordinary course of
business consistent with past practice and to use its reasonable best efforts to
preserve intact its business organizations and relationships with third parties
and to keep available the services of its present officers and employees.
Without limiting the generality of the foregoing, from the date hereof until the
Closing Date, the Company, except as set forth on Schedule 5.01, will not, and
will not permit any Subsidiary to:
28
(a) adopt or propose any change in its certificate of incorporation
or bylaws, except, as contemplated by this Agreement, upon the confirmation of
the Plan by the Bankruptcy Court;
(b) merge or consolidate with any other Person or (other than in the
ordinary course of business) acquire a material amount of assets from any other
Person;
(c) sell, lease, license or otherwise dispose of any material assets
or property except (i) pursuant to existing Contracts or commitments not
rejected by the Company or any Subsidiary prior to the date hereof and (ii) in
the ordinary course of business consistent with past practice;
(d) declare, set aside or pay any dividend or other distribution of
cash or other property with respect to any shares of capital stock of such
Person, or repurchase, redeem or otherwise acquire any outstanding shares of
capital stock or other securities of such Person; or
(e) without the written consent of the Buyer, assume or reject any
contract, lease or other agreement under Section 365 of the Bankruptcy Code.
Section 5.02. Access to Information. From the date hereof until the
Closing Date, the Company will (i) upon reasonable prior notice, give, and will
cause each Subsidiary to give, the Buyer, its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of the Company and
the Subsidiaries, (ii) furnish, and will cause each Subsidiary to furnish, to
the Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information relating
to the Company or any Subsidiary as such Persons may reasonably request and
(iii) instruct the employees, counsel and financial advisors of the Company or
any Subsidiary to cooperate with the Buyer in its investigation of the Company
or any Subsidiary. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Company and the Subsidiaries. Notwithstanding the foregoing, the Buyer
shall not have access to personnel records of the Company and the Subsidiaries
relating to individual performance or evaluation records, medical histories or
other information which in the Company's good faith opinion is sensitive or the
disclosure of which could subject the Company or any Subsidiary to risk of
liability.
Section 5.03. Notices of Certain Events. The Company shall promptly
notify Buyer of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental or
Regulatory Authority in connection with the business operations of the Company
or the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings pending
or, to its Knowledge, threatened against or relating to the Company or any
Subsidiary that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.12 or that would
29
reasonably be expected to affect the consummation of the transactions
contemplated by this Agreement;
(d) any objection to, or appeal from the (i) Bid Procedures Order,
(ii) Approval Order, (iii) Administrative Claim Bar Date Order, (iv) approval of
the Disclosure Statement or (v) entry of the Confirmation Order; and
(e) any event or occurrence that would cause any representation or
warranty of the Company to be untrue in any material respect.
Section 5.04. Disclosure Statement and Plan. (a) Not later than five
(5) Business Days after the Bankruptcy Court enters the Approval Order, the
Company and the other Debtors shall file the Plan with the Bankruptcy Court and
seek approval from the Bankruptcy Court of a Second Amended and Restated
Disclosure Statement, consistent with the terms and conditions set forth in this
Agreement and subject in form and substance to the reasonable approval of the
Buyer (the "DISCLOSURE STATEMENT"), recommending the approval of the Plan.
Without limiting the foregoing, the Plan will provide for payment and
satisfaction of all Excluded Liabilities. All Old Common Stock and any rights to
purchase Old Common Stock will be discharged, cancelled or otherwise terminated
pursuant to the Plan and upon consummation of the transactions contemplated
hereby. All information concerning the Company and the other Debtors provided by
the Company and/or the other Debtors and contained in the Disclosure Statement
shall be, as applicable, accurate in all material respects and shall comply with
the requirements of the Bankruptcy Code and other applicable law. The Company
shall promptly notify the Buyer if at any time before the Effective Date it
becomes aware that the Disclosure Statement contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. In such event, the
Company shall make the appropriate filings with the Bankruptcy Court regarding
such misstatement or omission and take such other actions to address such
misstatement or omission as required by the Bankruptcy Court.
(b) Upon approval of the Disclosure Statement by the Bankruptcy
Court, the Company and the other Debtors shall transmit the Disclosure Statement
to holders of claims and equity interests in the Reorganization Cases. The
Company shall use, and cause each of the other Debtors to use, their reasonable
best efforts to solicit acceptance of the Plan and obtain the entry of the
Confirmation Order (including by seeking confirmation of the Plan pursuant to
Section 1129(b) of the Bankruptcy Code in the event any class of claims or
interests shall have failed to accept the Plan or in the event any such class is
deemed to have rejected the Plan) as soon as practicable after approval of the
Disclosure Statement. Prior to the filing by Debtors of any amendment or
supplement to the Plan or the Disclosure Statement, or any motion or other
pleading describing or affecting the transactions contemplated by this
Agreement, the Company shall provide a copy thereof to the Buyer and its
counsel, and the Buyer and its counsel shall be given a reasonable opportunity
to review and comment on such amendment, supplement, motion or pleading. The
Company shall provide to the Buyer and to counsel for the Buyer copies of any
and all pleadings filed by the Debtors (or any of them) with respect to the
Reorganization Cases.
(c) If the Confirmation Order or any other Order of the Bankruptcy
Court relating to (i) this Agreement, (ii) the Disclosure Statement, (iii) the
solicitation of acceptance of the Plan, or (iv) confirmation of the Plan, shall
be appealed by any party (or a petition for certiorari or motion for rehearing
or reargument shall be filed with respect thereto), the Company agrees to take
such steps, if any, as may be reasonable and appropriate to prosecute in good
30
faith such appeal, petition or motion, or defend against such appeal, petition
or motion, at the cost and expense of the Company, and to use reasonable efforts
to obtain an expedited resolution of any such appeal, petition or motion, all
with the objective of effecting the transactions contemplated by this Agreement;
provided that nothing herein shall require the Company to appeal from an Order
as to which the Company does not believe bona fide grounds for appeal exist.
(d) The Estate Representative shall not, without the prior written
consent of the Buyer (which consent shall not be unreasonably withheld) file any
pleading or take other action in the Bankruptcy Court with respect to this
Agreement, the Plan or the consummation of the transactions contemplated hereby
or thereby that is inconsistent with the full performance and implementation of
the provisions of this Agreement, subject to the fiduciary duties of the
Company; provided, however, that nothing contained in the foregoing shall be
construed to limit in any way the Estate Representative's rights under this
Agreement, including the Estate Representative's rights under Article 11 hereof,
or to limit the Estate Representative's rights to advocate for the approval of
this Agreement and against any alternative transaction or plan of reorganization
that does not effectuate the transactions contemplated by this Agreement.
ARTICLE 6
COVENANTS OF THE BUYER
The Buyer agrees that:
Section 6.01. Confidentiality. Prior to the Closing and after any
termination of this Agreement, the provisions of the Confidentiality Agreement,
dated January 20, 2003, between the Company and the Buyer (the "CONFIDENTIALITY
AGREEMENT") shall continue in full force and effect. Notwithstanding anything to
the contrary contained herein or in the Confidentiality Agreement, the
Confidentiality Obligations as they relate to the transactions contemplated by
this Agreement shall not apply to the "tax structure" or "tax treatment" of such
transactions (as these terms are used in the Confidentiality Regulations) and
each party hereto (and any employee, representative, or agent of any party
hereto) may disclose to any and all persons, without limitation of any kind, the
"tax structure" and "tax treatment" of the transactions contemplated by this
Agreement and any materials of any kind (including any tax opinions or other tax
analyses) that relate to the "tax treatment" and "tax structure." In addition,
each party hereto acknowledges that it has no proprietary or exclusive rights to
any tax matter or tax idea related to the transactions contemplated by this
Agreement. The preceding sentence is intended to ensure that the transactions
contemplated by this Agreement shall not to be treated as having been offered
under conditions of confidentiality for purposes of the Confidentiality
Regulations and shall be construed in a manner consistent with such purpose.
Section 6.02. Bankruptcy Court Approvals. (a) The Buyer shall assist
and cooperate with the Debtors in seeking approval of the Disclosure Statement
and confirmation of the Plan. The Buyer shall not, without the prior written
consent of the Company (which consent shall not be unreasonably withheld) file
any pleading or take other action in the Bankruptcy Court with respect to this
Agreement, the Plan or the consummation of the transactions contemplated hereby
or thereby that is inconsistent with the full performance and implementation of
the provisions of this Agreement; provided, however, that nothing contained in
the foregoing shall be construed to limit in any way the Buyer's rights under
this Agreement, including the Buyer's rights under Article 11 hereof, or to
limit the Buyer's or its Affiliates' rights to advocate for the approval of this
Agreement and against any alternative transaction or plan of reorganization that
does not effectuate the transactions contemplated by this Agreement.
31
(b) All information concerning the Buyer provided in writing to the
Company by the Buyer expressly for inclusion in the Disclosure Statement is or
shall be accurate in all material respects. The Buyer shall promptly notify the
Company and the other Debtors if at any time before the Effective Date it
becomes aware that the Disclosure Statement contains any untrue statement of a
material fact with respect to the Buyer or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein with respect to the Buyer, in light of the circumstances under which
they were made, not misleading.
(c) If the Confirmation Order or any other Orders of the Bankruptcy
Court relating to (i) this Agreement, (ii) the Disclosure Statement, (iii) the
solicitation of acceptance of the Plan, or (iv) confirmation of the Plan, shall
be appealed by any party (or a petition for certiorari or motion for rehearing
or reargument shall be filed with respect thereto), the Buyer agrees to take
such steps, if any, as may be reasonable and appropriate to join in and
prosecute such appeal, petition or motion or defend against such appeal,
petition or motion and to use reasonable efforts to obtain an expedited
resolution of any such appeal, petition or motion, with the objective of
effecting the transactions contemplated by this Agreement; provided, that such
reasonable efforts obligation shall not obligate the Company to expend monies or
to pay a disputed claim against the Company.
ARTICLE 7
COVENANTS OF THE BUYER AND THE COMPANY
The Buyer and the Company agree that:
Section 7.01. Conditions Precedent to Effectiveness of Agreement; Bid
Protection. The Debtors shall submit a motion to approve procedures for any
competitive bidding under Bankruptcy Code Section 363 (or other applicable
Bankruptcy Code Section) within five (5) days after execution of the Agreement
and shall request that such motion be heard by the Bankruptcy Court on expedited
notice as soon as reasonably practicable. The Agreement shall not be enforceable
against Buyer until such time as the Bankruptcy Court shall have entered an
order approving bid procedures (the "BID PROCEDURES ORDER"). The Bid Procedures
Order shall approve, among other things, the Breakup Fee contemplated by Section
11.02 and each of the following terms and conditions:
(a) any competitive bidding for the Shares shall be conducted at an
auction ("AUCTION") either at an approval hearing ("APPROVAL HEARING") at which
the Bankruptcy Court will enter an Order formally approving this Agreement and
the transactions contemplated by this Agreement ("APPROVAL ORDER") or at a time
and place to be approved by the Bankruptcy Court following which the Approval
Order will be entered;
(b) the Approval Hearing will be held not later than 45 days after
the entry of the Bid Procedures Order;
(c) if the Company, its officers, agents or representatives should
receive a proposal with respect to a competitive bid or other acquisition
proposal or any inquiry regarding any such proposal from a third party, the
Company shall promptly inform Buyer of such proposal and any information
received related to the terms and conditions of such proposal;
32
(d) each competitive bidder to be qualified to bid must first make a
cash deposit of not less than Five Million Dollars ($5,000,000) in a client
trust account of Weil, Gotshal & ▇▇▇▇▇▇ LLP by 5:00 p.m. on the day prior to the
Auction;
(e) any competitive bid at the Auction shall be for the Shares and
shall be on terms and conditions that are substantially the same or no less
favorable to the Company than those set forth in the Agreement;
(f) the first incremental competitive bid at the Auction shall begin
at least Five Million Dollars ($5,000,000) over the Unadjusted Purchase Price,
with any subsequent increases of bids by Buyer or any competing bidders to be
made in at least subsequent One Million Dollar ($1,000,000) increments or such
lesser amount as the Company may establish in its sole direction;
(g) at and during the Auction, Buyer shall have the opportunity to
increase its bid to a level equal to at least One Million Dollars ($1,000,000)
in excess of any competing qualifying bid (provided that Buyer shall be entitled
to credit its Breakup Fee (as defined in Section 11.02) in the purchase price
reflected in such bid) and if Buyer increases its bid to greater than the
purchase price proposed by a competing, qualifying bid, the Bankruptcy Court
will enter an order directing the sale of the Shares to Buyer only after all
bidding at the Auction has concluded;
(h) any and all bids must contain a requirement that the purchase
price for the Shares shall be payable on no less favorable terms to the Company
than those set forth in the Agreement;
(i) the offers of all competing bidders shall be irrevocable until
the earlier of (i) the closing of the sale of the Shares to a party other than
such bidder, (ii) the withdrawal of the Shares for sale by the Company, or (iii)
ninety (90) days following the Approval Hearing; and
(j) after entry of the Approval Order, the Shares shall not be
offered to any Person other than the successful purchaser at the Approval
Hearing unless such purchaser fails to perform its material obligations under
this Agreement.
Section 7.02. Further Assurances. Subject to the terms and conditions
of this Agreement, the Buyer and the Company will use their reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. The Company and the
Buyer agree, and the Company, prior to the Closing, and the Buyer, after the
Closing, agree to cause the Company and each Subsidiary, to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement. If
following the Closing Date there exists any Lien upon any asset of the Company
that arose by operation of law and that relates to an Excluded Liability, the
Estate Representative shall, reasonably promptly upon notification thereof by
the Buyer, discharge such liability or otherwise cause such Lien to be released.
Section 7.03. Certain Filings. (a) Promptly following the issuance of
the Approval Order, the Estates and the Buyer will each prepare and file a
notification with the United States Department of Justice and the Federal Trade
Commission, as required by the HSR Act. The Estates and the Buyer will cooperate
with each other in connection with the preparation of such notification,
33
including sharing information concerning sales and ownership and such other
information as may be needed to complete such notification, and providing a copy
of such notification to the other prior to filing. Each of the Estates and the
Buyer will keep confidential all information about the other obtained in
connection with the preparation of such notification. In addition, each party
agrees to make promptly any filing that may be required under any other
antitrust or competition law or by any other antitrust or competition authority.
Buyer and Seller will cooperate to respond to all inquiries and requests for
further information associated with the HSR Act filing and any filing that may
be required under any other antitrust or competition law or by any other
antitrust or competition authority. The Buyer and the Estates shall each have
responsibility for one-half of the aggregate filing fees associated with the HSR
Act filings and any other similar filings required in any other jurisdictions.
(b) The Estates and the Buyer shall cooperate with one another (i) in
determining whether any action by or in respect of, or filing with, any
Governmental or Regulatory Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (ii) in taking such actions or making any such filings,
furnishing information required in connection therewith and seeking timely to
obtain any such actions, consents, approvals or waivers.
Section 7.04. Public Announcements. The parties agree to consult with
each other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
for any press releases and public statements the making of which may be required
by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
Section 7.05. Supplementation and Amendment of Schedules. From time
to time prior to the Closing, the Company shall have the right to supplement or
amend the Schedules with respect to any matter hereafter arising or discovered
after the delivery of the Schedules pursuant to this Agreement that, if existing
or known at, or occurring prior to, the date of this Agreement, would have been
required to be set forth or described in such Schedules. No such supplement or
amendment shall have any effect on the satisfaction of the condition to closing
set forth in Section 9.02(a); provided, however, if the Closing shall occur,
then, unless otherwise agreed to in writing, the Buyer shall be deemed to have
waived any right or claim pursuant to the terms of this Agreement or to
otherwise with respect to any and all matters disclosed pursuant to any such
supplement or amendment and delivered to Buyer at least two Business Days prior
to the Closing.
Section 7.06. Preservation of and Access to Books and Records;
Cooperation. The Buyer agrees that, for a period of one year from the Closing
Date (or for such longer period of time not to exceed six (6) additional months
as the Estates may reasonably require), it shall cause the Company, without cost
or expense to the Estates, to (i) preserve and keep intact the Company's books
and records as in existence as of the Closing Date, (ii) make such books and
records, and the Company's officers, employees, consultants, agents,
accountants, attorneys and other representatives, available to the Estates, at
reasonable times, upon reasonable prior notice, under reasonable circumstances
and as may be reasonably required by the Estates, in connection with the filing
of any Tax Returns pursuant to Section 8.02 hereof, the consummation of the
Plan, the resolution of all claims against the Company that are disputed by the
Company, the distribution of all funds to which creditors of the Company are
entitled under the Plan, the wind down of the Estates and the closing of the
Reorganization Cases, (iii) allow the Estates to make extracts and copies of
34
such books and records, (iv) provide office space for one person for the use of
the Estates (at a reasonable location and under reasonable circumstances) and
(v) cooperate reasonably, and cause its officers, employees, consultants,
agents, accountants, attorneys and other representatives to cooperate
reasonably, with the Estates in connection with the foregoing. Notwithstanding
the foregoing, the Buyer shall be entitled to reasonable compensation for the
time expended by the Company's officers, employees, consultants, agents,
accountants, attorneys and other representatives if the time required to comply
with the foregoing covenants is unreasonably excessive.
Section 7.07. Administrative Claim Bar Date. The Estates shall seek
and obtain an administrative claims bar date from the bankruptcy court (the
"ADMIN BAR DATE") with respect to any and all claims having priority for payment
from the Estates under Bankruptcy Code ss. 503 (other than claims for goods and
services provided to the Company in the ordinary course of business prior to the
Effective Date, compensation claims of employees under contract, professional
fees and expense claims and claims by parties seeking cure for executory
contracts and unexpired leases assumed pursuant to the Plan or Section 365 of
the Bankruptcy Code) (the "ADMINISTRATIVE CLAIM BAR DATE ORDER"), which Admin
Bar Date shall be set no later than thirty (30) days prior to Closing.
Immediately following the Admin Bar Date, the Buyer and Estates shall determine
which of the administrative claims filed against the Estates shall constitute
Assumed Liabilities.
ARTICLE 8
TAX MATTERS
Section 8.01. Representations and Warranties. Except to the extent
set forth on Schedule 8.01, the Company represents and warrants to Buyer as of
the date hereof and as of the Closing Date that:
(a) All Tax Returns required to be filed by, or with respect to, the
Company or the Subsidiaries have been filed (or requests for extension of time
to file have been properly filed) and all Taxes that were shown to be due on
such Tax Returns have been paid (or adequate reserves have been established on
the Company's books and records), except where the failure to file such Tax
Returns or to pay such Taxes would not reasonably be expected to be material.
(b) Other than any Taxes as to which a proof of claim has been filed
by a Taxing Authority in the Reorganization Cases, all material Excluded Taxes
due and owing by the Company and its Subsidiaries (whether or not reflected on
any Tax Return) have been paid.
(c) The Company and its Subsidiaries have withheld and paid all
material Excluded Taxes required to have been withheld and paid in connection
with any amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party, including any material Excluded
Taxes related to the cancellation or satisfaction of intercompany obligations
between the Company and its affiliates and the Subsidiaries.
(d) The Company has given, or otherwise made available to Buyer,
correct and complete copies of those portions of all Tax Returns, examination
reports and statements of deficiencies relating to the Company and any of its
Subsidiaries for periods ending, or transactions consummated, after December 31,
1999.
35
(e) There are no outstanding agreements extending or waiving the
statutory period of limitation applicable to any claim for, or the period for
the collection or assessment or reassessment of, Taxes due from the Company or
any of its Subsidiaries for any taxable period, and no power of attorney is
currently in force with respect to any matter relating to Taxes of the Company
or any of its Subsidiaries.
(f) No federal, state, local or foreign Tax audits or administrative
or judicial Tax proceedings are pending or being conducted with respect to the
Company or any of its Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries has received from
any federal, state, local or foreign Taxing Authority (including jurisdictions
where the Company or the Subsidiaries have not filed a Tax Return) any (i)
written notice indicating an intent to open an audit or other review; (ii)
written request for information related to Tax matters; or (iii) notice of
deficiency or proposed adjustments for any amount of Tax proposed, asserted, or
assessed by any Taxing Authority against the Company or its Subsidiaries.
(h) The Company has not received any written notice from a Taxing
Authority in a jurisdiction where either the Company or any of its Subsidiaries
does not file Tax Returns that such returns are required.
(i) There are no Liens for Taxes upon the assets or properties owned
by the Company or any of its Subsidiaries, except for Permitted Liens.
(j) Neither the Company nor any of its Subsidiaries (other than
A.S.L. Retail Outlets, Inc. and ▇▇▇▇▇▇ A.S.L. Europe Ltd.) has ever been a
member of an affiliated group filing a consolidated federal income tax return
other than a group in which the common parent is the Company.
(k) Neither the Company nor any of its Subsidiaries is (or ever has
been) a party to or bound by any Tax indemnity, Tax sharing, or Tax allocation
agreement or arrangement and has not assumed the Tax liability of any other
person under contract.
(l) Neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in a payment that would not be fully deductible
as a result of Section 162(m) or Section 280G of the Code or any similar
provision of foreign, state, or local law.
Section 8.02. Preparation of Tax Returns; Payment of Taxes.
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement, if any, shall be borne equally by the Estates
and the Buyer; provided, however, that if any such Taxes are reflected as an
"accrued expense and other" liability in the calculation of the Final Working
Capital or arise as a result of Section 12.10, the Buyer shall be responsible
for all such Taxes. All Taxes referred to in this Section 8.02 shall be paid by
the Company when due, and the Company shall file, or cause to be filed, all
necessary Tax Returns and other documentation with respect to any such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees. The
Estates or the Estate Representative shall promptly pay the portion of such
Taxes for which it is responsible pursuant to this Section 8.02(a) to the Buyer
36
after the Buyer furnishes the Estates or the Estate Representative with a copy
of the applicable Tax Return and any other supporting documentation.
(b) Preparation and Filing of Tax Returns.
(i) The Company shall prepare and file, or cause to be prepared
and filed, all Tax Returns for the Company and the Subsidiaries that are
required to be filed on or prior to the Closing Date. The Company shall pay, or
shall cause to be paid, all Taxes shown due on such Tax Returns.
(ii) The Estates shall prepare, or cause to be prepared, the
Company's and each Subsidiary's Tax Returns for all taxable periods ending on or
prior to the Closing Date that are required to be filed after the Closing Date.
The Estates shall deliver copies of such Tax Returns to the Buyer for review and
approval (such approval shall not be unreasonably withheld) at least twenty (20)
days prior to the due date for filing such returns. The Estates shall be
responsible for the payment of the portion of such Taxes shown due on such Tax
Returns to the extent any such Taxes constitute Excluded Taxes and shall pay
such amounts to Buyer within five (5) days prior to the due date for filing such
Tax Returns. The Buyer shall cause the Company and the Subsidiaries to timely
file such Tax Returns and to remit all Taxes shown due on such Tax Returns.
(iii) The Buyer shall prepare, or cause to be prepared, each
Straddle Period Return. The Buyer shall deliver copies of each Straddle Period
Return to the Estates for review and approval (such approval shall not be
unreasonably withheld) at least twenty (20) days prior to the due date for
filing such return (accompanied, where appropriate, by an accounting for the
portion of such Taxes that constitutes Excluded Taxes). The Estates shall be
responsible for the portion of the Taxes shown due on such Tax Returns to the
extent any such Taxes constitute Excluded Taxes and shall pay such amounts to
Buyer within five (5) days of the due date for filing such Straddle Period
Return and Buyer shall be responsible for the balance. The Buyer shall cause the
Company and the Subsidiaries to timely file such Tax Returns and to remit all
Taxes shown due on such Tax Returns.
(iv) Notwithstanding anything to the contrary herein, if a
dispute arises (and is not resolved within ten (10) days prior to the due date
of the Tax Return) with regard to the amount of Excluded Taxes that the Estates
owe in respect of any Tax Return described in Section 8.02(b)(ii) or
8.02(b)(iii), the Estates shall pay to the Buyer the amount that the Estates
believe is owing and the parties shall resolve their dispute through the
Accounting Referee. The Accounting Referee's determination shall be final and
binding on both parties and its expenses shall be borne equally by both parties.
Within five (5) days following resolution of the dispute, any amounts determined
to be due upon final resolution of the dispute shall be promptly paid.
(v) To the extent permitted by applicable Law or the
administrative practice of any Taxing Authority, the taxable year of the Company
and each Subsidiary shall close as of the close of business on the Closing Date.
The parties hereto, the Company and the Subsidiaries shall not take any position
inconsistent with the preceding sentence on any Tax Return.
37
(vi) All Tax Returns described in this Section 8.02 shall be
prepared in a manner consistent with past practice unless a past practice has
been finally determined to be incorrect by the applicable Taxing Authority or a
contrary treatment is required by applicable Tax Laws (or the judicial or
administrative interpretations thereof).
(vii) Notwithstanding anything contained herein to the contrary,
the Estates (and the Company and/or its Subsidiaries prior to the Closing) may
take any actions necessary to reduce or eliminate Taxes for any Tax Returns
described in Section 8.02(b)(i) or 8.02(b)(ii) without the consent of the Buyer,
including, but not limited to, the defense, compromise or settlement of any
audit or any administrative or court proceeding relating to Taxes for periods
prior to or ending on the Closing Date or filing an amended Tax Return to obtain
a refund for an Excluded Tax; provided, however, if the Estates amend or agree
to an audit adjustment on a Tax Return of the Company or its Subsidiaries for a
period ending on or prior to the Closing Date and such amendment or adjustment
affects the Tax liability of the Company or its Subsidiaries for a period after
the Closing, then the Estates or the Estate Representative shall obtain the
consent of the Buyer before filing such amendment or agreeing to such adjustment
(such consent shall not be unreasonably withheld); provided, however, that in no
event shall the Estates (or the Estate Representative) be required to obtain the
consent of the Buyer (or the Company or its Subsidiaries after the Closing) to
settle or compromise the IRS claim consistent with the terms of the IRS
Stipulation attached hereto as Exhibit A. The Buyer, the Estates, the Estate
Representative, the Company and its Subsidiaries shall cooperate and take those
actions necessary to reduce or eliminate Taxes for any Straddle Period Returns
described in Section 8.02(b)(iii). To the extent any of the foregoing requires
action to be taken by the Company or any of its Subsidiaries after the Closing
Date, the Buyer, Company and its Subsidiaries shall cooperate with the Estates
to realize the applicable tax benefit or reduction in Taxes, including the
filing of amended Tax Returns (prepared by the Estates or the Estate
Representative in the case of amendments to Tax Returns described in Section
8.02(b)(i) or 8.02(b)(ii)).
(viii) The Company and/or its Subsidiaries shall promptly pay to
the Estates any refunds (including interest thereon) received in respect of
Excluded Taxes (determined without regard to clause (w) in the definition of
Excluded Taxes).
Section 8.03. Closing Covenants.
(a) Tax Sharing Agreements. Any tax sharing agreement with the
Company, its Subsidiaries and any other Person will have been terminated as of
the Closing Date and will have no further effect for any taxable year (whether
the current year, a future year, or a past year).
(b) The Plan shall provide for the expeditious payment of all allowed
claims for Taxes and no deferral of payment under Section 1129(a)(9)(C) of the
Bankruptcy Code shall be sought.
(c) Except as provided in Section 12.10 hereof, the Company shall not
cause any intercompany obligations of the Company and/or its Subsidiaries to be
eliminated prior to the Closing Date.
38
Section 8.04. Tax Controversy.
(a) The Estates shall have the right, but not the obligation, to
exclusively represent the interests of the Company and/or its Subsidiaries in
any Tax audit or administrative or court proceeding relating to Taxes for all
periods ending on or prior to the Closing Date. Buyer agrees that it will
cooperate fully, and shall cause the Company and/or its Subsidiaries to
cooperate fully, with the Estates and their counsel in the defense against or
compromise of any claim in any such proceeding.
(b) The Estates (or the Estate Representative) shall have the right,
but not the obligation, to jointly represent the interests of the Company and/or
its Subsidiaries in any Tax audit or administrative or court proceeding relating
to Straddle Period Returns. Buyer agrees that it will cooperate fully, and shall
cause the Company and/or its Subsidiaries to cooperate fully, with the Estates
and their counsel in the joint defense against or compromise of any claim in any
such proceeding. Neither the Estates, on the one hand, nor the Buyer, on the
other hand, shall settle any dispute relating to a Tax liability attributable to
the Company or any Subsidiary, as the case may be, for a Straddle Period Return
without the consent of the other; provided, however, that, if the Estates
propose to accept a settlement and the Buyer does not consent thereto, the
Estates' liability under Article X in respect of such Tax liability shall be
limited to the portion of the proposed settlement amount attributable to the
portion of such Straddle Period Return that constitutes an Excluded Tax. The
Estates and the Buyer shall each bear their own costs, fees and expenses paid to
third parties in the course of such proceeding.
(c) If any Taxing Authority asserts a claim, makes an assessment or
otherwise disputes or affects any Taxes for which the Estates are responsible
hereunder, the Buyer shall, promptly upon receipt by the Buyer, the Company or
the Subsidiaries of notice thereof, inform the Estates. The failure of Buyer to
timely forward such notification in accordance with the immediately preceding
sentence shall not relieve the Estates of their obligation to pay such liability
for Taxes except and to the extent that the failure to timely forward such
notification actually prejudices the ability of the Estates to contest such
liability for Taxes or increases the amount of such Taxes.
ARTICLE 9
CONDITIONS TO CLOSING
Section 9.01. Conditions to Obligations of the Parties. The
obligations of each party to consummate the Closing are subject to the
satisfaction or waiver of the following conditions:
(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
(b) No provision of any applicable law or regulation and no Order
shall prohibit the consummation of the Closing.
(c) (i) All conditions to the Effective Date set forth in the Plan
(including the entry of the Confirmation Order by the Bankruptcy Court) shall
have been satisfied or duly waived in accordance with the applicable provisions
of the Plan and (ii) the transactions contemplated by the Plan to occur on or
prior to the Closing shall have been or shall be consummated simultaneously with
the Closing in accordance with the Plan.
39
(d) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of the
Closing shall have been taken, made or obtained, except for such actions or
filings, the absence of which has not had and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.
(e) The Administrative Claim Bar Date Order and the Confirmation
Order (in a form reasonably satisfactory to the Buyer and providing for the
effectuation of all of the transactions contemplated by this Agreement and the
Plan in accordance with the terms and provisions hereof and thereof) shall each
have become a Final Order.
Section 9.02. Conditions to Obligation of the Buyer. The obligation
of the Buyer to consummate the Closing is subject to the satisfaction or waiver
of the following further conditions:
(a) (i) The Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it on or prior to the
Closing Date, (ii) the representations and warranties of the Company in this
Agreement and in any certificate or other writing delivered by the Company
pursuant hereto (A) that are qualified by materiality or Material Adverse Effect
shall be true at and as of the Closing Date as if made at and as of such date
(except to the extent expressly made as of an earlier date, in which case, as of
such date), and (B) that are not qualified by materiality or Material Adverse
Effect shall be true in all material respects at and as of the Closing Date as
if made at and as of such date (except to the extent expressly made as of an
earlier date, in which case, as of such date), and (iii) the Buyer shall have
received a certificate signed by the chief financial officer of the Company to
the foregoing effect.
(b) There shall not be instituted or pending any action or proceeding
by any governmental authority or agency, domestic or foreign, or before any
court or governmental authority or agency, domestic or foreign, seeking to
restrain, prohibit or otherwise interfere with the ownership or operation by the
Buyer of all or any material portion of the business or assets of the Company.
(c) Since the date hereof, no event or condition shall have occurred
that results in, or would reasonably be expected to result in, individually or
in the aggregate, a Material Adverse Effect.
(d) The Company shall have delivered to Buyer a stock certificate
representing the Shares, as described in Section 2.05.
(e) The Approval Order and the Confirmation Order shall expressly
provide: (i) that the Estates and the Company are authorized to consummate the
transactions contemplated by the Agreement and to perform any other act that is
necessary or appropriate for the consummation of the transactions contemplated
by the Agreement, (ii) that the Shares shall be delivered to Buyer or its
designee upon Closing; (iii) that Buyer has acted in "good faith" in connection
with the transactions contemplated herein, as provided in Section 363(m) of the
Bankruptcy Code and that all conditions and terms of Section 363(f) of the
Bankruptcy Code and the Bankruptcy Rules that are applicable thereto have been
satisfied; and (iv) any commissions or fees due to the Company's brokers and
investment bankers shall be paid out of the net proceeds of the sale of the
Shares.
40
(f) Buyer shall have received from the Company such other documents
as may be required by the Bankruptcy Court for consummation of the transactions
contemplated hereby.
(g) The IRS Stipulation shall have been executed by all of the
parties thereto, approved by the Bankruptcy Court and delivered by the Company
to the appropriate Person for submission to the Joint Committee on Taxation of
the Congress of the United States.
(h) The Liens under the Post-Petition Bank Credit Agreement shall
have been released (or shall be released concurrently with the Closing) (except
in connection with cash borrowings and the letters of credit referred to in
Section 2.06(c)).
Section 9.03. Conditions to Obligation of the Company. The obligation
of the Company to consummate the Closing is subject to the satisfaction or
waiver of the following further conditions:
(a) (i) The Buyer shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of the Buyer contained in
this Agreement and in any certificate or other writing delivered by the Buyer
pursuant hereto (A) that are qualified by materiality or Material Adverse Effect
shall be true at and as of the Closing Date as if made at and as of such date
(except to the extent expressly made as of an earlier date, in which case, as of
such date), and (B) that are not qualified by materiality or Material Adverse
Effect shall be true in all material respects at and as of the Closing Date as
if made at and as of such date (except to the extent expressly made as of an
earlier date, in which case, as of such date), and (iii) the Company shall have
received a certificate signed by an executive officer in the case of the Buyer.
(b) The Company shall have received all documents it may reasonably
request relating to the existence of the Buyer and the authority of the Buyer to
execute, deliver and perform this Agreement (such as organizational documents,
bankruptcy related documents, secretarial certificates and the like), all in
form and substance reasonably satisfactory to the Company.
(c) Since the date hereof, no event or condition shall have occurred
that results in, or would reasonably be expected to result in, individually or
in the aggregate, a Buyer Material Adverse Effect.
ARTICLE 10
SURVIVAL AND INDEMNIFICATION
Section 10.01. Survival. The representations and warranties of the
parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing for a period of six months. Any and all claims for indemnification for
breach of a representation or warranty hereunder must be made pursuant to this
Article 10 prior to such date against the party responsible for indemnification
hereunder (the "INDEMNIFYING PARTY").
Section 10.02. Indemnification of Buyer. The Plan shall provide that
the Estate Representative shall hold Buyer, and, from and after the Closing, the
Company, and the shareholders, directors, officers, successors, assigns, and
agents of each of them (the "BUYER INDEMNIFIED PERSONS"), harmless and indemnify
41
each of them from and against, and waives any claim for contribution or
indemnity with respect to, any and all claims, losses, damages, liabilities,
expenses or costs ("LOSSES"), plus reasonable attorneys' fees and expenses
incurred in connection with Losses and/or enforcement of this Agreement, plus
interest from the date incurred through the date of payment at two percent above
the prime lending rate of Bank of America, N.A. from time to time prevailing (in
all, "INDEMNIFIED LOSSES") incurred or to be incurred by any of them ("BUYER
INDEMNIFIED LOSSES") to the extent resulting from or arising out of (i) any
breach or violation of the Company's representations, warranties, covenants, or
agreements contained in this Agreement or (ii) the Excluded Liabilities.
Section 10.03. Indemnification of the Estate Representative. From and
after the Closing, the Buyer shall hold the Estate Representative and its
members, managers, directors, officers, successors, assigns, and agents (the
"ESTATE INDEMNIFIED PERSONS"), harmless and indemnify each of them from and
against, and waives any claim for contribution or indemnity with respect to, any
and all Indemnified Losses incurred or to be incurred by any of them ("ESTATE
INDEMNIFIED LOSSES") to the extent resulting from or arising out of (i) any
breach or violation of Buyer's representations, warranties, covenants, or
agreements contained in this Agreement or (ii) the Assumed Liabilities.
Section 10.04. Limitations.
(a) The Buyer Indemnified Persons shall not be entitled to recover
Buyer Indemnified Losses for breaches or violations of the Company's
representations or warranties contained in this Agreement unless such Buyer
Indemnified Losses exceed $1,000,000 in the aggregate, and only to the extent
such Buyer Indemnified Losses exceed such amount, up to a maximum recovery of
$7,000,000 (plus any accrued interest in the Indemnity Account).
(b) The Estate Indemnified Persons shall not be entitled to recover
Estate Indemnified Losses for breaches or violations of Buyer's representations
or warranties contained in this Agreement unless such Estate Indemnified Losses
exceed $1,000,000 in the aggregate, and only to the extent such Estate
Indemnified Losses exceed such amount, up to a maximum recovery of $7,000,000.
(c) For purposes of this Article 10, "Buyer Indemnified Losses" and
"Estate Indemnified Losses" shall not include or be recoverable by any person to
the extent insurance proceeds have been recovered with respect to the
indemnified matter.
Section 10.05. Notice of Claim. In the event that Buyer seeks
indemnification on behalf of a Buyer Indemnified Person, or the Estate
Representative seeks indemnification on behalf of an Estate Indemnified Person,
such party seeking indemnification (the "INDEMNIFIED PARTY") shall give written
notice to the Indemnifying Party specifying the facts constituting the basis for
such claim and the amount, to the extent known, of the claim asserted. The
Indemnifying Party shall pay the amount of any non-disputed claim not more than
ten days after the Indemnified Party provides notice to the Indemnifying Party
of such amount.
Section 10.06. Right to Contest Claims of Third Persons. If an
Indemnified Party is entitled to indemnification hereunder because of a claim
asserted by any claimant (other than an indemnified person hereunder) ("THIRD
PERSON"), the Indemnified Party shall give the Indemnifying Party reasonably
prompt notice thereof after such assertion is actually known to the Indemnified
Party; provided, however, that the right of a person to be indemnified hereunder
in respect of claims made by a Third Person shall not be adversely affected by a
42
failure to give such notice unless, and then only to the extent that, an
Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the
right, upon written notice to the Indemnified Party, to investigate, secure,
contest, or settle the claim alleged by such Third Person (a "THIRD PERSON
CLAIM"), provided that the Indemnifying Party has unconditionally acknowledged
to the Indemnified Party in writing his or its obligation to indemnify the
persons to be indemnified hereunder with respect to such Third Person Claim; the
Indemnified Party may thereafter participate (but not control) the defense of
any such Third Person Claim with its own counsel at its own expense, unless
separate representation is necessary to avoid a conflict of interest, in which
case such representation shall be at the expense of the Indemnifying Party. If
the Indemnifying Party so acknowledges its obligation to indemnify, the
Indemnified Party shall be entitled to be reimbursed by the Indemnifying Party
for any reasonable costs of the defense the Indemnified Party had theretofore
incurred. If the Indemnifying Party does not so acknowledge its obligation to
indemnity and assume the defense of any such Third Person Claim, (a) the
Indemnified Party shall defend against such claim, provided that any settlement
of such claim shall require the prior written consent of the Indemnifying Party,
such consent not to be unreasonably withheld or delayed, and (b) the
Indemnifying Party may participate in (but not control) the defense of such
claim, with its own counsel at its own expense. The parties hereto shall make
available to each other all relevant information in their possession relating to
any such Third Person Claim and shall cooperate in the defense, negotiation or
settlement thereof.
Section 10.07. Exclusive Remedy. The provisions of this Article 10
shall constitute the exclusive remedy of the parties hereto with respect to any
claims for Indemnified Losses resulting from or arising out of the provisions of
this Agreement which may be asserted after the Closing; provided, that the
foregoing shall not preclude any claim for fraud.
ARTICLE 11
TERMINATION
Section 11.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of the Company and the Buyer;
(b) by Buyer on the Closing Date if the conditions to Buyer's
obligations to close shall not have been fulfilled, provided that Buyer is not
in breach of its obligations hereunder;
(c) by the Company on the Closing Date if the conditions to the
Company's obligations to close shall not have been fulfilled, provided that the
Company is not in breach of its obligations hereunder;
(d) by either the Company or the Buyer if the Closing shall not have
been consummated on or before October 31, 2003; provided that the Company and
the Buyer shall each have the right to extend such date by up to 30 days upon
notice given to the other party by October 31, 2003;
(e) by either the Company or the Buyer if there shall be any law or
regulation that makes consummation of the transactions contemplated hereby
illegal or otherwise prohibited or if consummation of the transactions
contemplated hereby would violate any nonappealable final Order of any court or
governmental body having competent jurisdiction (other than the Bankruptcy
Court); or
43
(f) by either the Company or the Buyer if the Bankruptcy Court shall
have issued an Order which has become final and nonappealable restricting or
restraining in a material manner or enjoining or otherwise prohibiting or making
illegal the effectuation of the transactions contemplated by this Agreement or
by the Plan (including an Order denying confirmation of the Plan or confirming a
plan of reorganization other than the Plan).
(g) by Buyer or the Company if a competing bidder other than Buyer
shall acquire the Shares or the assets of the Company under competitive bidding
pursuant to the terms described in Section 7.01 of this Agreement; or
(h) by the Buyer or the Company if the Plan is not approved by the
Bankruptcy Court.
The party desiring to terminate this Agreement pursuant to this
Section 11.01 shall give notice of such termination to the other party hereto.
Section 11.02. Effect of Termination. If this Agreement is terminated
as permitted by Section 11.01, this Agreement will forthwith become null and
void, and there will be no liability or obligation on the part of either party
thereto (or their respective directors, officers, employees, agents,
consultants, advisors, other representatives, or Affiliates); provided, however,
that (i) the provisions of this Article 11 and the provisions of Section 6.01
and Article 12 will continue to apply following any such termination; (ii)
nothing contained in this Agreement will relieve any party from any liability
arising from such party's (A) willful failure to fulfill a condition to the
performance of the obligations of the other party, (B) failure to perform a
covenant of this Agreement, or (C) breach of any representation or warranty or
agreement contained herein; (iii) if a competing bidder other than Buyer shall
acquire the Shares or the assets of the Company under competitive bidding
pursuant to the terms described in Section 7.01 of this Agreement, Buyer shall
be entitled to a cash break-up fee of Four Million Dollars ($4,000,000) (the
"BREAKUP FEE"), which shall be paid to Buyer concurrent with the Closing Date
with the winning bidder, (iv) if a stand-alone plan of reorganization is
confirmed within twelve (12) months from the date hereof, then thereupon the
Buyer shall be entitled to the Breakup Fee, which shall be paid on the effective
date of such plan, and (v) if Buyer shall terminate this Agreement as a result
of an intentional breach of the Agreement by the Company or the Company shall
file a plan of reorganization or an amended plan of reorganization as a result
of which a party other than the Buyer is the purchaser of the Shares or the
assets of the Company, then Buyer shall be entitled to the Breakup Fee upon the
occurrence of such intentional breach or upon the effective date of such plan,
as the case may be.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given,
44
if to the Buyer, to:
Kellwood Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior VP & General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company, to:
▇▇▇▇▇▇ A.S.L. Ltd.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5:00 p.m. in
the place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
Section 12.02. Amendments and Waivers. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 12.03. Expenses. Except as otherwise provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
all costs and expenses incurred by the Estates, the Company and the Subsidiaries
45
in connection with this Agreement shall be paid by the Estates and all costs and
expenses incurred by the Buyer in connection with this Agreement shall be paid
by the Buyer; provided, that the Estates and the Buyer shall share equally the
costs incurred in connection with approval under the HSR Act and similar
competition laws as provided in Section 7.03(a).
Section 12.04. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except (i) that Buyer
may transfer or assign, in whole or from time to time in part, to one or more of
its Affiliates, the right to purchase all or a portion of the Shares and (ii) as
set forth in Section 12.10, but, in each case, no such transfer or assignment
will relieve the Buyer of its obligations hereunder.
Section 12.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state, except to the extent that the laws of
such state are superceded by the Bankruptcy Code.
Section 12.06. Retention of Bankruptcy Court Jurisdiction. The
parties hereto agree that, without limiting the right of any party to appeal any
Order issued by the Bankruptcy Court or any other court, any suit, action or
proceeding seeking to enforce or construe any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought exclusively in the Bankruptcy Court, and
each of the parties hereby irrevocably consents to the jurisdiction of the
Bankruptcy Court (and of the appropriate appellate courts therefrom) in any such
suit, action or proceeding and irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding in the Bankruptcy Court or
that any such suit, action or proceeding that is brought in the Bankruptcy Court
has been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of the Bankruptcy Court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 12.01 shall be deemed effective service of process on such party.
Section 12.07. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 12.08. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other party hereto.
Section 12.09. Entire Agreement; Third Party Beneficiaries. This
Agreement, including the exhibits and schedules, and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement. No provision of this Agreement is intended to
46
confer upon any person other than the parties hereto and the Estate
Representative any rights or remedies hereunder.
Section 12.10. Buyer Elections. Buyer may elect to (i) transfer or
assign to one or more of its direct or indirect wholly-owned subsidiaries the
right to purchase directly all or a portion of the shares of the foreign
Subsidiaries, (ii) require the Company to cause any or all intercompany
obligations of the Company and/or its Subsidiaries to be eliminated prior to the
Closing Date, and/or (iii) make an election under section 338 of the Code;
provided, in each case, that Buyer shall be responsible for any costs, expenses
or liabilities (including without limitation Taxes) incurred by either party in
connection therewith.
[Signatures Follow]
47
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
▇▇▇▇▇▇ A.S.L., Ltd.
By:
---------------------------------
Name:
Title:
Kellwood Company
By:
--------------------------------
Name:
Title:
48
Exhibit A
---------
Form of Stipulation of Settlement of IRS Claim
(see attached)
Exhibit B
---------
Capital Budget
(see attached)