ASSET PURCHASE AGREEMENT
BY AND AMONG
GENERAL FELT INDUSTRIES, INC.,
FOAMEX L.P.,
BRETLIN, INC.
AND
THE ▇▇▇▇▇ GROUP, INC.
DATED AS OF AUGUST 29, 1997
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS
1.1. Definitions..........................................................1
1.2. Plurals, Etc.........................................................7
1.3. Headings.............................................................7
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Purchase of Assets....................................................7
2.2. Excluded Assets......................................................10
2.3. Absence of Liens; Instruments of Conveyance and Transfer.............11
ARTICLE III.
PURCHASE PRICE OF ASSETS
3.1. Purchase Price......................................................11
3.2. Inventory Valuation.................................................12
3.3. Payment of Purchase Price...........................................13
3.4. Allocation of Purchase Price........................................13
ARTICLE IV.
CLOSING
ARTICLE V.
LIABILITIES
5.1. Assumed Liabilities.................................................14
5.2. Waiver of Bulk Sales Compliance.....................................15
ARTICLE VI.
SALES AND TRANSFER TAXES, PROPERTY TAXES,
RECORDING FEES, AND PROFESSIONAL FEES
6.1. Sales and Transfer Taxes............................................15
6.2. Recording or Filing Fees............................................15
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF GFI AND FLP
7.1. Corporate Existence and Authority...................................15
7.2. Financial Statements................................................16
7.3. Liens and Good Title................................................16
7.4. Authority...........................................................16
7.5. Inventory Locations.................................................17
7.6. Compliance with Laws................................................17
7.7. Condition and Use of the Purchased Assets...........................17
7.8. Absence of Change...................................................17
7.9. Licenses and Permits................................................18
7.10. Suppliers and Customers.............................................18
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7.11. Contracts and Commitments...........................................19
7.12. Change in Business..................................................20
7.13. Business Records....................................................20
7.14. Real Property/Leased Property.......................................20
7.15. Litigation..........................................................21
7.16. Labor Relations.....................................................21
7.17. Benefit Plans.......................................................22
7.18. Intentionally Omitted...............................................23
7.19. Insurance...........................................................23
7.20. Environmental, Health and Safety Status.............................23
7.21. Intellectual Property...............................................24
7.22. Product Warranty....................................................26
7.23. Product Liability...................................................26
7.24. No Broker or Finder.................................................26
7.25. No Material Omission................................................26
7.26. Disclaimer of Additional Representations and Warranties; Schedules..26
ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES
OF BUYER AND ▇▇▇▇▇
8.1. Incorporation, Good Standing and Power..............................27
8.2. Authority...........................................................27
8.3. No Broker or Finder.................................................28
8.4. No Material Omission................................................28
ARTICLE IX.
REAL PROPERTY
9.1. Delivery of Preliminary Information.................................28
9.2. Title Search........................................................28
9.3. Real Estate Instruments.............................................29
9.4. Damage, Destruction and Condemnation................................29
9.5. Closing Costs For Real Property.....................................30
9.6. Adjustments and Prorations..........................................30
ARTICLE X.
COVENANTS OF GFI
10.1. Conduct of Business Through the Closing Date........................30
10.2. Completion of Transactions..........................................31
10.3. Approvals, Consents.................................................31
10.4. Access to Properties and Records....................................32
10.5. Advise of Changes...................................................32
10.6. No Shop ............................................................32
10.7. Termination of Employees............................................33
10.8. Transition Cooperation..............................................33
10.9. Soil Remediation....................................................33
10.10. Payment of Termination Fee..........................................33
10.11. Delivery of Interim Financial Statements............................33
ARTICLE XI.
COVENANTS OF BUYER
11.1. Representations and Warranties......................................34
11.2. Completion of Transactions..........................................34
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11.3. Nondisclosure of Proprietary Information Prior to Closing...........34
11.4. Use and Limited License of GFI's Name...............................34
ARTICLE XII.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
12.1. Accuracy of Representations and Warranties..........................35
12.2. Performance of Covenants............................................35
12.3. No Damage to Purchased Assets.......................................35
12.4. Licenses and Permits and Consents Necessary For Buyer to
Conduct Business....................................................35
12.5. Regulatory Approval.................................................35
12.6. Noncompetition Agreement............................................35
12.7. Delivery of Documents...............................................35
12.8. Operating Performance...............................................36
12.9. Customers...........................................................37
12.10. Scheduled Events....................................................37
ARTICLE XIII.
CONDITIONS PRECEDENT TO GFI'S OBLIGATION TO CLOSE
13.1. Payment of Purchase Price...........................................37
13.2. Licenses and Permits Necessary For Buyer to Conduct Business........37
13.3. Regulatory Approval.................................................37
13.4. Delivery of Documents...............................................37
13.5. Accuracy of Representations and Warranties..........................38
13.6. Performance of Covenants............................................38
ARTICLE XIV.
TERMINATION
14.1. Conditions of Termination...........................................38
14.2. Effect of Termination...............................................39
ARTICLE XV.
INDEMNIFICATION
15.1. Bulk Transfer Indemnity.............................................39
15.2. Mutual Indemnification Obligation...................................39
15.3. GFI's Indemnification Obligations...................................39
15.4. Buyer's Indemnification Obligations.................................40
15.5. [Intentionally Omitted].............................................40
15.6. Limitation..........................................................40
15.7. Buyer's Third Party Claims; Notice of Claims........................41
15.8. GFI's Third Party Claims; Notice of Claims..........................42
15.9. Certain Additional Provisions Relating to Indemnification...........43
ARTICLE XVI.
OTHER POST-CLOSING COVENANTS
16.1. GFI's Employees.....................................................43
16.2. Employee Benefit Plans..............................................44
16.3. Delivery of Mail, Etc...............................................45
16.4. Access to Records...................................................45
16.5. Motor Vehicles......................................................45
16.6. Confidentiality.....................................................45
16.7. Litigation Support..................................................46
16.8. Accounts Receivable Application.....................................46
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16.9. Removal of Purchased Assets.........................................47
16.10. Customer Claims; Rebates............................................47
16.11. AT&T Agreements.....................................................47
16.12. Customer Letter.....................................................48
ARTICLE XVII.
MISCELLANEOUS
17.1. Simultaneous Closing................................................48
17.2. Survival of Representations and Warranties..........................48
17.3. Arbitration.........................................................48
17.4. Counterparts........................................................49
17.5. Notices.............................................................49
17.6. Press Releases and Public Announcements.............................50
17.7. Entire Agreement, Modification......................................50
17.8. Construction........................................................50
17.9. Specific Performance................................................51
17.10. Assignment..........................................................51
17.11. Binding Effect and Benefit..........................................51
17.12. Further Assurances..................................................51
17.13. Partial Invalidation................................................51
17.14. Waiver..............................................................52
17.15. Exhibits and Schedules..............................................52
17.16. No Third Party Beneficiaries........................................52
17.17. Governing Law.......................................................52
ARTICLE XVIII.
FLP GUARANTY
18.1. Guaranty............................................................52
18.2. Nature of Guaranty..................................................52
18.3. Limitation on Guaranty..............................................52
ARTICLE XIX.
▇▇▇▇▇ GUARANTY
19.1. Guaranty............................................................53
19.2. Nature of Guaranty..................................................53
19.3. Limitation on Guaranty..............................................53
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of August 29,
1997 is made by and among GENERAL FELT INDUSTRIES, INC., a Delaware corporation
("GFI"), FOAMEX L.P., a Delaware limited partnership ("FLP"), and BRETLIN, INC.,
a Georgia corporation, ("Buyer") and THE ▇▇▇▇▇ GROUP, INC., a Tennessee
corporation ("Dixie").
W I T N E S S E T H:
WHEREAS, GFI is engaged in the business of manufacturing, distributing and
selling needlepunch carpeting, tufted carpeting and artificial grass products at
its facilities located in Dalton, Georgia (the "Business"); and
WHEREAS, FLP is joining in the execution of this Agreement as guarantor of
GFI's obligations hereunder, and ▇▇▇▇▇ is joining in the execution of this
Agreement as guarantor of Buyer's obligations; and
WHEREAS, in consideration for the payment of the Purchase Price (as defined
herein) and the assumption of the Assumed Liabilities (as defined herein) by
Buyer, GFI desires to sell, assign, transfer, convey and deliver to Buyer and
Buyer desires to purchase all of GFI's right, title and interest in and to
certain assets related to the Business to the extent and pursuant to the terms
and conditions of this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual promises and
conditions contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. The following capitalized terms used herein and in
the agreements and other documents collateral hereto which incorporate the terms
set forth below by reference shall have the meanings set forth opposite such
term below:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Arbiter" shall have the meaning set forth in Section 3.2(d).
"Assignment and Assumption Agreement" shall mean that certain
Assignment and Assumption Agreement to be executed on the Closing Date,
substantially in the form of Exhibit A.
"Assumed Liabilities" shall have the meaning set forth in Section
5.1(b) hereof.
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"Benefit Plan" shall have the meaning set forth in Section 7.17(a).
"▇▇▇▇ of Sale" shall have the meaning set forth in Section 12.7(vi).
"Business" shall have the meaning set forth in the prefatory language
hereinabove.
"Business Day" shall mean any day other than (1) a Saturday or Sunday
or (2) a day on which the Federal Reserve Bank of Atlanta is not open.
"Buyer Obligations" shall have the meaning set forth in Section 19.1.
"Buyer's Third Party Claims" shall have the meaning set forth in
Section 15.7(a).
"Closing" shall mean the delivery of the Purchase Price pursuant to
Section 3.3 hereof; the assumption of the Assumed Liabilities pursuant to
Section 5.1(b) hereof; the sale, transfer, assignment and delivery of the
Purchased Assets pursuant to Section 2.1 hereof and the delivery of the other
instruments, certificates and legal opinions required hereunder.
"Closing Date" shall have the meaning set forth in Article IV.
"Closing Date Inventory Payment" shall have the meaning set forth in
Section 3.3.
"COBRA" shall mean the provisions for the continuation of health care
enacted by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, as set forth in Section 4980B of the Code (and any predecessor
provisions) and Sections 601 through 608 of ERISA.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts" shall have the meaning set forth in Section 2.1(l).
"Cost of Remediation" shall have the meaning set forth in Section
15.6(c).
"Customer Claims" shall have the meaning set forth in Section 16.10.
"Customers" shall have the meaning set forth in Section 2.1(h).
"▇▇▇▇▇▇ Facility" shall mean the approximately 448,000 square foot
building and approximately 24 acres of land owned by GFI and located at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ as more particularly shown in the Survey.
"Deadline Date" shall have the meaning set forth in Section 14.1.
"Disqualified Employees" shall have the meaning set forth in Section
16.1(b).
"▇▇▇▇▇ 401(k) Plan" shall have the meaning set forth in Section 16.2.
"Employees" shall have the meaning set forth in Section 16.1(a).
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"Environmental, Health and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances, rules,
orders, regulations and other provisions having the force or effect of law, all
judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety (including,
but not limited to, the Occupational Safety and Health Act, as amended ("OSHA"),
its implementing regulations and any similar state laws and regulations), worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect.
"Environmental Losses" shall have the meaning set forth in Section
15.6(b).
"Environmental Permits" shall mean permits, licenses, certificates and
approvals required by the Environmental, Health and Safety Requirements for the
operation of the Business.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Estimated Inventory Value" shall have the meaning set forth in
Section 3.2(a).
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Facilities" shall mean the ▇▇▇▇▇▇ Facility and the Tufting Facility,
collectively.
"Financial Statements" shall mean (i) the selected historical
financial information of GFI relating to the Business as of and for the year
ended December 29, 1996 and attached hereto as Exhibit B and (ii) the monthly
unaudited interim financial statements for each month during 1997 through the
last full month ending more than fifteen (15) days prior to the date hereof as
included in Exhibit B or delivered pursuant to Section 10.11.
"Fixed Assets" shall have the meaning set forth in Section 2.1(g).
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.
"GFI Inventory Calculation" shall have the meaning set forth in
Section 3.2(b).
"GFI Obligations" shall have the meaning set forth in Section 18.1.
"GFI's Third Party Claims" shall have the meaning set forth in Section
15.8(a).
"Gross Profit" shall mean the gross profit from operations of the
Business for the indicated period determined in accordance with GAAP applied in
a manner consistent with, and utilizing the
3
same accounting principles, policies and practices applied in, the determination
of gross profit in the Financial Statements. "Habitat" shall have the meaning
set forth in Section 5.1(c).
"Habitat APA" shall have the meaning set forth in Section 5.1(c).
"Hazardous Materials" shall mean and include any hazardous or toxic
substance or waste or any contaminant or pollutant including, but not limited
to, "hazardous substances" as defined by the Comprehensive Environmental
Response Compensation and Liability Act, as amended ("CERCLA"), a "hazardous
waste" as defined by the Resource Conservation and Recovery Act ("RCRA"), as
amended, polychlorinated biphenyl's, petroleum products or byproducts, solvents,
chemicals, pesticides, waste oil, grease, lead based paint, asbestos, noise,
radiation or any other material which is known to cause injury to the health of
humans.
"HSR Filing" shall mean the filings made pursuant to the ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ Antitrust Improvements Act of 1976 relating to the transactions
contemplated hereby.
"Improvements" shall have the meaning set forth in Section 2.1(a).
"Initial Title Search" shall have the meaning set forth in Section
9.2.
"Intellectual Property" shall mean (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), and (g) all copies and tangible embodiments thereof (in whatever
form or medium).
"Inventory" shall mean product inventory of the Business, wherever
located, comprised of (a) all first quality raw materials, work in process and
finished inventories categorized and valued pursuant to GFI's standard costing
method ("First Inventory") and (b) all other raw material, work in process and
finishing inventory including excess, aged or off quality raw materials, work in
process and finished inventories categorized and valued as set forth in Schedule
1.1(a) ("Other Inventory") wherever located.
"Inventory Value" shall have the meaning set forth in Section 3.2(d).
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"Knowledge" shall mean actual knowledge, of the persons listed on
Schedule 1.1(b) who are the officers responsible for the subject matter of the
representation and who have made inquiry of their relevant subordinates.
"Land" shall have the meaning set forth in Section 2.1(a).
"Leased Property" shall mean the parcels of land and all improvements,
fixtures and attachments thereon under tenancy as set forth in the Leases.
"Leases" shall have the meaning set forth in Section 2.1(b).
"Losses" shall have the meaning set forth in Section 15.2.
"Major Customers" shall have the meaning set forth in Section 7.10.
"Major Suppliers" shall have the meaning set forth in Section 7.10.
"Material Adverse Change" shall mean a material adverse change to the
Purchased Assets taken as a whole, or to the financial condition or results of
operations of the Business.
"Material Adverse Effect" shall have the meaning set forth in Section
7.12.
"Motor Vehicles" shall have the meaning set forth in Section 2.1(f).
"Name" shall have the meaning set forth in Section 11.4(a).
"Noncompetition Agreement" shall have the meaning set forth in Section
12.6.
"Objection Notice" shall have the meaning set forth in Section 3.2(c).
"Ordinary Course of Business" shall mean the ordinary course of
business consistent with past custom and practice (including, where relevant,
with respect to quantity and frequency).
"Permitted Encumbrances" shall have the meaning set forth in Section
2.3.
"Permitted Exceptions" shall have the meaning set forth in Section
9.2.
"Phase I Environmental Audit" shall mean that certain Phase I
Environmental Site Assessment prepared by Consolidated Technologies, Inc. and
dated June, 1997, a copy of which is attached hereto as Exhibit C.
"Price Adjustment Increases" shall have the meaning set forth in
Section 16.10(c).
"Price Adjustments" shall have the meaning set forth in Section
16.10(c).
"Purchase Price" shall have the meaning set forth in Section 3.1.
"Purchase Proposal" shall have the meaning set forth in Section 10.6.
5
"Purchased Assets" shall have the meaning set forth in Section 2.1.
"Real Estate Instruments" shall have the meaning set forth in Section
9.3.
"Real Property" shall have the meaning set forth in Section 2.1(a).
"Reasonably Necessary Costs of Remediation" shall have the meaning set
forth in Section 15.6(c).
"Recalls" shall have the meaning set forth in Section 7.23.
"Receivables" shall mean (i) accounts receivable incurred in the
Ordinary Course of Business, including, all rights to payment created by or
arising from sales of goods, leases of goods, or the rendition of services prior
to the Closing Date, (ii) all rights to any goods or merchandise represented by
the foregoing after creation of the foregoing, including returned or repossessed
goods, (iii) all reserves and credit balances with respect to any such account
receivable or account debtors, (iv) all collection or deposit accounts, letters
or credit, security or guarantees for any of the foregoing, (v) all proceeds of
the foregoing, and (vi) all books and records relating to the foregoing.
"Related Documents" shall have the meaning set forth in Section 7.1.
"Security Interest" shall mean any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Supplies" shall have the meaning set forth in Section 11.4(b).
"Supply Agreement" shall have the meaning set forth in Section 10.10.
"Survey" shall have the meaning set forth in Section 9.1(a).
"Tax" or "Taxes" shall mean all income, gross receipt, gains, sales,
use, payroll, employment, franchise, license, school, profits, property, ad
valorem, excise, severance, occupation, premium, windfall projects,
environmental, capital stock, unemployment, disability, alternative or add-on
minimum or other taxes, estimated taxes, import duties, fees, stamp taxes and
assessments or charges of any kind whatsoever (whether payable directly or by
withholding), together with any additional charges, interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority with
respect thereto, or any charges, interest or penalties imposed by any taxing
authority as the result of the failure to file any return whether disputed or
not.
"Tufting Facility" shall mean the approximately 63,000 square foot
tufting facility leased by GFI and located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
"WARN Laws" shall have the meaning set forth in Section 16.1(b).
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"Wire Transfer Instructions" shall have the meaning set forth in
Section 3.3.
"YTD Gross Profit" shall have the meaning set forth in Section
12.8(b).
"1997 Interim Statement" shall have the meaning set forth in Section
12.8(b).
"1997 Monthly Projections" shall mean the forecasted monthly
projections for the 1997 calendar year, copies of which are attached hereto as
Exhibit D.
1.2. Plurals, Etc. As used herein or in any document which
incorporates the terms hereof:
(a) the plural form of the noun shall include the singular and
the singular shall include the plural, unless the context requires
otherwise;
(b) each of the masculine, neuter and feminine forms of any
pronoun shall include all forms unless the context otherwise requires;
and
(c) words of inclusion shall not be construed as terms of
limitation, so that references to included matters shall be regarded
as non-exclusive, non-characterizing illustrations.
1.3. Headings. The table of contents and article and section headings
contained herein and in any document which incorporates the terms hereof are for
convenience only and shall not control or affect the meaning or construction of
any provisions of this Agreement or such document.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Purchase of Assets. At the Closing and upon the terms and
conditions contained herein, GFI shall sell, assign, convey and transfer to
Buyer, and Buyer shall purchase and acquire from GFI, all of GFI's right, title
and interest in and to all of the assets of GFI on the Closing Date that are
located at the Facilities or used primarily in the Business, whether tangible,
intangible, real, personal, mixed, booked or unbooked, other than the Excluded
Assets (hereinafter collectively referred to as the "Purchased Assets"). The
Purchased Assets include, without limitation, all of GFI's right, title and
interest in the following property used primarily in the Business wherever
located:
(a) all of GFI's right, title and interest in the parcels of land
described in Schedule 2.1(a) (including land lying in the bed or right
of way of any street, road, avenue or railroad right of way opened,
closed or proposed, public or private, in front of or adjoining the
land; any strips or gores in front of or leased to the land; any
waterways, courses, streams or ditches in front of or adjoining the
land; and any reversionary rights
7
which GFI may have in any easement or license granted with respect to
the foregoing) (the "Land"), together with all of GFI's right, title
and interest in (i) improvements, fixtures, equipment (including
without limitation all plumbing, electrical, heating and air
conditioning systems), fittings and each and every type of other
physical improvement located at, on, under or affixed to the Land to
the full extent such items constitute, or are or may be construed as,
realty or fixtures under the laws of the jurisdiction in which the
land is located (the "Improvements"); (ii) all oil, gas, water, and
mineral rights; (iii) all easements, rights of way and any and all
other rights appurtenant thereto; (iv) all transferable licenses,
permits, appurtenances, drawings, plans, specifications, development
rights, certificates of occupancy, records and all other items used in
the ownership and/or operation of the Real Property (as hereinafter
defined). The Land and Improvements, and such other rights, easements,
rights of way and other items as described above are hereinafter
collectively referred to as the "Real Property";
(b) all of GFI's right, title and interest in and to the real
property leaseholds and subleaseholds evidenced by the leases set
forth in Schedule 2.1(b) (the "Leases");
(c) all prepaid expenses other than those relating to the
Excluded Assets or liabilities other than the Assumed Liabilities;
(d) Inventory;
(e) all supplies, product supplies, product samples, repair parts
and miscellaneous items used primarily in connection with the
Facilities or other Purchased Assets, including but not limited to all
repair, instruction, safety and maintenance manuals which are
necessary or convenient to the operation and utilization of the
Purchased Assets;
(f) all of GFI's owned motor vehicles and trailers listed on
Schedule 2.1(f) attached hereto (the "Motor Vehicles");
(g) all of GFI's tangible assets located on the Real Property or
the Leased Property whether or not reflected in the Financial
Statements (excluding tangible assets that are Excluded Assets),
including all machinery and equipment, furniture and furnishings and
other assets set forth in the list attached hereto as Schedule 2.1(g)
(all such assets are hereinafter collectively referred to as the
"Fixed Assets");
(h) all of the Business' customer lists, (the "Customers") and
all records (including pricing and available rebate records) relating
thereto (including, without limitation, credit files except to the
extent constituting confidential client information); provided,
however, that GFI shall be entitled to make and retain copies of such
records to the extent related to Excluded Assets or other businesses
of GFI or its Affiliates;
(i) all of GFI's owned or licensed Intellectual Property and
other intangible assets used primarily in the Business, including but
not limited to (i) the rights under computer software license
agreements permitted to be assigned (with or without consent) under
the terms of such agreements, (ii) all agreements not to compete with
the Business which are
8
transferable by the terms thereof, (iii) all nondisclosure agreements
with GFI which are transferable by the terms thereof and which relate
primarily to the Business, and (iv) to the extent transferable, all
third party product warranties that relate to the Purchased Assets;
excluding, however, any and all of GFI's employment agreements and
agreements pertaining to GFI's employee welfare benefit plans, stock
option plans or bonus plans or any other similar employee benefit,
bonus or compensation plans or similar items;
(j) whether or not reflected on GFI's books and records and
except for those items constituting Excluded Assets, (i) all of GFI's
rights in trademarks, tradenames, copyrights, or service marks
currently used primarily in connection with the Business, and listed
on Schedule 2.1(j), and the goodwill of the Business in connection
therewith, (ii) the going concern value of the Business and (iii) all
of the GFI's rights in the patents, patent registrations and
applications, inventions, trade secrets, secret processes, formulae,
know-how and other proprietary data and information, and Intellectual
Property relating solely to the Business, licenses and sublicenses
obtained with respect thereto and rights thereunder, remedies against
infringement thereof and rights to protection of interests therein
under the laws of all jurisdictions.
(k) all of GFI's financial, business and other records,
regardless of location, relating primarily to the Business or the
Purchased Assets that Buyer considers useful (or copies of those
portions of other records to the extent related to the Business
containing useful information), including, but not limited to, all
personnel files and records with respect to the Employees (as
hereinafter defined) employed by Buyer, supplier lists and files,
sales listings, advertising and promotional materials, files and
records, inventory records and reports to any governmental or
regulatory agency; provided, however, that GFI may retain a copy (or,
if required by law, may retain the original and provide a copy to
Buyer) of such documents as needed for legal or business purposes and
except to the extent related to the Excluded Assets, liabilities other
than Assumed Liabilities or other businesses of GFI or its Affiliates;
(l) all of GFI's rights under (i) the contracts, personal
property leases, licenses and other agreements listed on Schedule
2.1(l), (ii) purchase orders of GFI relating to the Business for raw
materials and necessary replacement parts (subject to Buyer's consent
for replacement parts in excess of $10,000) in the Ordinary Course of
Business having terms not extending beyond ninety (90) days following
the Closing Date, (iii) purchase orders of others relating to the
purchase of goods from the Business in the Ordinary Course of Business
having terms not extending beyond ninety (90) days following the
Closing Date and (iv) all additional contracts relating primarily to
the Business which both (x) are not listed on the Schedules to the
Agreement, and (y) do not in the aggregate provide for annual payments
in excess of $75,000 (collectively, the "Contracts");
(m) all of GFI's other claims, reports, prepayments, refunds,
rebates, causes of action, choses in action, rights of recovery,
rights of set-off and rights of recoupment (excluding any such item
relating to the payment of Taxes) to the extent they relate to the
Business and any other assets includable in Other Current Assets
(except to the extent
9
related to Excluded Assets) as such item is determined in a manner
consistent with the Financial Statements.
(n) all of GFI's unemployment tax ratings relating to the
Business to the extent assignment thereof to Buyer is required or
permitted by applicable law;
(o) all of GFI's federal, state and local licenses required for
the conduct of the Business (including, but not limited to,
environmental discharge permits) to the extent assignment or transfer
thereof to Buyer is permitted by applicable law;
(p) all of GFI's rights to all of the Business' telephone
numbers, facsimile numbers and post office boxes except for those set
forth on Schedule 2.1(p) attached hereto; and
(q) all other assets of GFI other than the Excluded Assets, used
primarily in the Business and whether or not reflected on GFI's books
and records.
2.2. Excluded Assets. Notwithstanding anything contained herein to the
contrary, the parties acknowledge and agree that the Purchased Assets expressly
exclude the following (collectively, the "Excluded Assets"):
(a) cash and cash equivalents;
(b) Receivables;
(c) Benefit Plans, including any accounts, trusts or other assets
held in connection therewith;
(d) any rights of GFI or any of its Affiliates to any Tax refund
with respect to periods prior to the Closing Date;
(e) any property, casualty, workers' compensation or other
insurance policy or related insurance services contract relating to
the Purchased Assets, the Business, GFI or any of its Affiliates and
any rights of GFI or any of its Affiliates under such insurance policy
or contract, other than rights under such insurance policies or
contracts with respect to any Assumed Liability or any casualty
affecting any of the Purchased Assets;
(f) any rights of GFI under this Agreement, the Related
Documents, or under any other agreement between GFI and Buyer;
(g) any books, records and information related primarily to any
of the Excluded Assets, liabilities other than the Assumed Liabilities
or other businesses of GFI or its Affiliates; provided, however, that
Buyer shall be entitled to make copies thereof to the extent related
to the Purchased Assets or Assumed Liabilities;
10
(h) any and all assets, properties, rights, contracts, operations
and businesses of GFI relating primarily to assets other than the
Purchased Assets or businesses other than the Business;
(i) any assets of GFI that would constitute a Purchased Asset if
owned by GFI on the Closing Date that is conveyed or otherwise
disposed of during the period from the date hereof until the Closing
Date in the Ordinary Course of Business, not in violation of the terms
of this Agreement and, as to all such assets other than inventory or
assets to be disposed of pursuant to the express terms of contracts
set forth on Schedule 7.11, consented to in writing by Buyer;
(j) all centralized management information systems and accounting
systems;
(k) the name and ▇▇▇▇ "Foamex", "General Felt", "GFI" and all
variations thereof;
(l) to the extent any of the following primarily relate to any
Excluded Assets, liabilities (other than Assumed Liabilities) or other
businesses of GFI or its Affiliates: claims, deposits, prepayments,
prepaid assets, refunds, causes of action, rights of recovery, rights
of setoff and rights of recoupment of GFI as of the Closing Date; and
(m) those certain assets listed on Schedule 2.2 hereto.
All Excluded Assets shall be removed from the Real Property by GFI as
soon as practicable, but in no event later than thirty (30) days following the
Closing Date.
2.3. Absence of Liens; Instruments of Conveyance and Transfer All of
the Purchased Assets will be conveyed to Buyer on the Closing Date free and
clear of all liens, encumbrances, Security Interests, and charges except the
following ("Permitted Encumbrances"): (i) liens for taxes and assessments not
yet due and payable or for taxes that the taxpayer is contesting in good faith
and diligently pursuing through appropriate proceedings; (ii) unfiled
materialmen's, mechanics and similar liens incurred in connection with the
ordinary course of operating, repairing and maintaining the Purchased Assets;
(iii) for such state of facts that are shown by the Survey; (iv) other defects,
unviolated restrictive covenants and encumbrances, which do not materially
affect the present use or fair market value of the Real Property; (v) applicable
zoning and building laws or ordinances provided they do not prohibit the use of
each parcel of the Real Property and Improvements thereon for their existing use
in the Business; (vi) statutory liens of landlords and suppliers; (vii)
Permitted Exceptions; and (vii) UCC filings with respect to true leases.
ARTICLE III.
PURCHASE PRICE OF ASSETS
3.1. Purchase Price. The purchase price for the Purchased Assets,
shall be (i) Thirty Three Million Six Hundred and Nine Thousand Dollars
($33,609,000) plus (ii) the value of the
11
Inventory (not to exceed $10,750,000 in the aggregate) as determined pursuant to
this Agreement (the "Purchase Price"). For purposes of this Agreement, Inventory
shall be valued in accordance with GFI's historical standard costing method
subject to the pricing schedule set forth on Schedule 1.1(a). Notwithstanding
anything to the contrary required by GAAP applied on a basis consistent with
that used in, and in accordance with the same accounting principles, policies,
and practices applied in the preparation of the Financial Statements, all
products existing on the Closing Date which have not yet been shipped to
customers, whether or not subject to order, shall be deemed to be Inventory and
shall be included in the Inventory Value. The parties shall, immediately prior
to the Closing Date, take a joint physical inventory of the Inventory for
determining the value of the Inventory. Items found during the physical
inventory but not listed on computer records shall be subject to the review
noted in Schedule 1.1(a).
3.2. Inventory Valuation.
(a) Not less than two (2) Business Days prior to the Closing
Date, GFI shall deliver to Buyer its reasonable, good faith estimate
of the Inventory Value, based on GFI's historical standard costing
method subject to the pricing schedule set forth in Schedule 1.1(a)
(the "Estimated Inventory Value").
(b) As soon as practicable following the Closing Date, GFI shall
deliver to Buyer its calculation of the Inventory Value as of the
Closing Date, based on the joint physical inventory described in
Section 3.1 (the "GFI Inventory Calculation"). In connection with the
preparation of the GFI Inventory Calculation, Buyer shall grant GFI's
accountants and other representatives reasonable access to all of the
books and records of the Business.
(c) Within thirty (30) days after receipt of the GFI Inventory
Calculation, Buyer may, by written notice to GFI, object to the GFI
Inventory Calculation. If Buyer objects in good faith to the GFI
Inventory Calculation, Buyer shall within such thirty (30) day period
deliver written notice of its objection (the "Objection Notice") to
GFI: (i) objecting in good faith to the GFI Inventory Calculation,
(ii) setting forth the items being disputed and the reasons therefor,
and (iii) specifying Buyer's calculation of the Inventory Value.
(d) For thirty (30) days after delivery of the Objection Notice,
GFI and Buyer shall attempt to resolve all disputes between them
regarding the Inventory Value. If GFI and Buyer cannot resolve all
such disputes within such thirty (30) day period, the matters in
dispute shall be determined by a nationally recognized independent
public accounting firm mutually satisfactory to GFI and Buyer (the
"Arbiter"). Promptly, but not later than thirty (30) days after the
acceptance of its appointment, the Arbiter shall determine (based
solely on presentations by Buyer and GFI to the Arbiter and not by
independent review) only those items in dispute and shall render a
report as to its resolution of such items and the resulting
calculation of the Inventory Value. For purposes of calculating the
Inventory Value, the amounts to be included shall be the appropriate
amounts from the GFI Inventory Calculation as to items that are not in
dispute, and the amounts determined
12
by the Arbiter, as to items that are submitted for resolution by the
Arbiter. In resolving any disputed item, the Arbiter may not assign a
value to such item greater than the greatest value for such item
claimed by either party in the GFI Inventory Calculation or Objection
Notice or less than the lowest value for such item claimed by either
party in the GFI Inventory Calculation or Objection Notice. GFI and
Buyer shall cooperate with the Arbiter in making its determination and
such determination shall be conclusive and binding upon GFI and Buyer.
GFI and Buyer shall each bear one-half of the fees and expenses of the
Arbiter. The value of the Inventory as finally determined pursuant to
this Section 3.2 shall be deemed to be the "Inventory Value".
3.3. Payment of Purchase Price. Of the Purchase Price, (i)
Thirty-three Million Six Hundred and Nine Thousand Dollars ($33,609,000) shall
be paid by Buyer to GFI in immediately available funds at Closing pursuant to
the wire transfer instructions delivered by GFI to Buyer not less than one (1)
Business Day prior to the Closing Date ("Wire Transfer Instructions") and (ii)
an amount equal to the Estimated Inventory Value shall be paid by Buyer to GFI
in immediately available funds at Closing pursuant to the Wire Transfer
Instructions ("Closing Date Inventory Payment"). Within ten (10) Business Days
following final determination of the Inventory Value pursuant to Section 3.2,
(a) if the Closing Date Inventory Payment is less than the Inventory Value,
Buyer shall pay to GFI the amount of such deficiency or (b) if the Closing Date
Inventory Payment exceeds the Inventory Value, GFI shall pay to Buyer the amount
of such excess.
3.4. Allocation of Purchase Price. An allocation of the Purchase Price
shall be proposed by Buyer and shall be delivered to GFI within six months
following the Closing Date. GFI and Buyer agree that the Purchase Price shall be
allocated among the Assets as agreed upon between GFI and Buyer within 30 days
following delivery by Buyer. GFI and Buyer agree to use such allocation for all
federal, state and local income tax purposes, including without limitation on
Internal Revenue Service Form 8594 (Asset Acquisition Statement under Internal
Revenue Code Section 1060) which form each of GFI and ▇▇▇▇▇ is required to file
in connection with the transactions contemplated hereby and which form each of
GFI and Buyer hereby covenants and agrees to timely and properly file with its
federal income tax return.
ARTICLE IV.
CLOSING
The Closing shall take place at the offices of ▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.,
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ at 9:00 A.M. Eastern Time on
the first Monday at least five (5) Business Days after all of the conditions
precedent set forth in Articles XII and XIII have been satisfied or waived or on
such other date or at such other time or place as the parties hereto shall agree
in writing (the date and time of the Closing being referred to herein as the
"Closing Date"). At the Closing, (a) GFI shall convey the Purchased Assets to
Buyer by delivery of warranty deeds, bills of sale and instruments of transfer
and assignment, as shall be reasonably necessary and effective to vest in Buyer
good and legal title in and to any property sold, transferred, conveyed or
delivered under this Agreement subject to the Permitted Encumbrances and shall
deliver all
13
certificates, opinions of counsel and other instruments and documents required
to be delivered pursuant to the terms of this Agreement all in form and
substance reasonably satisfactory to GFI and GFI's counsel, and (b) Buyer shall
deliver to GFI the Purchase Price, the Accounts Receivable Agreement, the
instruments of assumption pertaining to GFI's liabilities and obligations to be
assumed hereunder and all certificates, opinions of counsel and other
instruments and documents contemplated hereby, required to be delivered pursuant
to the terms of this Agreement.
ARTICLE V.
LIABILITIES
5.1. Assumed Liabilities.
(a) Buyer expressly assumes no liabilities or obligations of GFI
whatsoever, whether known or unknown, contingent or otherwise except
for the Assumed Liabilities.
(b) On the terms and subject to the conditions set forth in this
Agreement, at the Closing Buyer shall assume and become responsible
for the following liabilities and obligations of Seller relating to or
arising from the Purchased Assets and/or the Business (the "Assumed
Liabilities"):
(i) Obligations of GFI under the Contracts accruing from and
after the Closing Date;
(ii) as provided in this Agreement or the Assignment and
Assumption Agreement;
(iii) obligations arising with respect to the performance
after the Closing Date of the Contracts and the Leases, excluding
any liability or obligation resulting from any breach thereof by
GFI on or prior to the Closing Date;
(iv) arising in connection with the matters set forth on
Schedule 5.1;
(v) subject to GFI's indemnity obligations in Article XV
hereof, all liability or obligation of GFI arising under any
Environmental, Health and Safety Requirements relating to the
Business; and
(vi) liabilities arising after the Closing Date as a result
of the operation of the Business by Buyer or the sale of goods on
or after the Closing Date.
(c) Without limiting the foregoing, Buyer specifically does not
assume any liability of GFI (except for the Assumed Liabilities) with
respect to (i) obligations for any Taxes (other than prorated amounts
described in Section 9.6); (ii) obligations to GFI employees including
obligations for pension, profit-sharing or other employee benefit
programs or termination or unemployment benefits, whether funded or
unfunded; (iii) obligations made by GFI for rebates, advertising
expenses, markdown money or
14
marketing support to any customer for sales made prior to the Closing
Date; (iv) any ongoing worker's compensation liability, claims or
other related expense in connection with occurrences regarding
Employees or former Employees prior to the Closing Date; (v) all
accounts payable of the Business as of the Closing Date; (vi) any
successor liability which may hereinafter be imposed upon Buyer
relating to the operation of the Business prior to the Closing Date,
and which are not Assumed Liabilities or (vii) any liability of GFI to
Habitat International, Inc. ("Habitat") under Section 2.4 of that
certain Asset Purchase Agreement between Habitat and GFI dated as of
October 31, 1996 (the "Habitat APA").
(d) GFI and Buyer will pay their own expenses, including legal
and accounting expenses in connection herewith; provided however that
the cost of the Phase I Environmental Audit (not to exceed $3,000)
shall be shared equally by GFI and Buyer.
5.2. Waiver of Bulk Sales Compliance. In consideration of the
indemnification provided in Article XV, Buyer waives compliance with the Bulk
Sales Act of the State of Georgia and any other state, if and to the extent such
acts are applicable. Nothing contained in this Section, however, shall be
construed to be a determination by any of the parties hereto that any of such
acts are applicable to the transactions contemplated by this Agreement.
ARTICLE VI.
SALES AND TRANSFER TAXES, PROPERTY TAXES,
RECORDING FEES, AND PROFESSIONAL FEES
6.1. Sales and Transfer Taxes. GFI shall be responsible for payment to
the appropriate state or local governmental authorities of all transfer taxes,
whether for personal property or real property, with respect to the sale
contemplated herein. Buyer shall be responsible for all sales and use taxes with
respect to the sale contemplated herein.
6.2. Recording or Filing Fees The party receiving a conveyance by
deed, lease, assignment or otherwise shall pay any applicable recording or
filing fees thereon or any other document that is recorded in addition thereto.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF GFI AND FLP
As a material inducement to Buyer entering into this Agreement and
consummating the transactions contemplated hereby, GFI and FLP hereby make the
following representations and warranties to Buyer:
7.1. Corporate Existence and Authority. GFI is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction in which it is incorporated, and is in good standing as a foreign
corporation in each jurisdiction in which such qualification or authorization is
necessary for the conduct of the Business and in which the failure to qualify
15
would have a Material Adverse Effect. FLP is a limited partnership, duly
organized and in good standing under the laws of the State of Delaware. GFI has
full power and authority to own its properties and conduct the Business as now
being conducted. GFI has full corporate power and authority to execute this
Agreement and consummate the transactions contemplated hereby, and GFI's board
of directors has properly approved the transactions contemplated by this
Agreement. FLP has full partnership power and authority to execute and deliver
this Agreement and the execution and delivery by FLP and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary partnership action on the part of FLP. Upon execution and delivery,
this Agreement, and the Assignment and Assumption Agreement, the Real Estate
Instruments, the Noncompetition Agreement and all other instruments or documents
delivered in connection herewith or therewith (collectively, the "Related
Documents") shall be valid and legally binding documents, enforceable against
GFI or FLP, as the case may be, in accordance with their terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditor's rights, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceedings therefor may be brought
forth.
7.2. Financial Statements. Prior to the date hereof, GFI has delivered
to Buyer those Financial Statements attached hereto as Exhibit B, all of which,
together with notes thereto, if any, reflect the books and records of the
Business and have, except as noted therein, been prepared in accordance with
GAAP consistently applied in each of the periods indicated and, to GFI's
Knowledge, respectively present fairly the financial condition of the Business
as of the respective dates and the results of operations for the respective
periods of the statements and include all adjustments, consisting solely of
normal recurring accruals, necessary for a fair presentation of the Business's
financial position as of the dates thereof and results of operations for the
periods covered; provided, however, that the unaudited monthly interim financial
statements contained therein are subject to normal year-end adjustments and lack
footnotes and other presentation items.
7.3. Liens and Good Title. GFI owns, of record, legal title and
beneficial and equitable interest in and to all of the Purchased Assets, free
and clear of any and all mortgages, deeds of trust, liens, Security Interests,
pledges, equities, encumbrances, easements, leases, agreements, covenants,
charges, defects in title, restrictions, options, joint ownership or adverse
claims or rights whatsoever except for (i) Permitted Encumbrances and (ii) in
the case of the representation and warranty made as of the date of this
Agreement, those additional matters set forth on Schedule 7.3.
7.4. Authority. Except as otherwise set forth in Schedule 7.4, neither
the execution and delivery of this Agreement and the Related Documents, nor the
consummation by GFI or FLP of the transactions contemplated hereby and thereby
and the fulfillment and compliance with the terms and provisions hereof and
thereof by GFI and FLP, will violate, conflict with or constitute a breach of or
default under any of the terms, conditions or provisions of or require any
consent pursuant to any law or regulation (other than the expiration of the
waiting period under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended) presently applicable to GFI or
16
FLP, their respective articles of incorporation, bylaws or limited partnership
agreement (as applicable), or any order of any court, regulatory body or
tribunal or any material loan, note, bond, mortgage, lease, indenture, license,
agreement, or other instrument or obligation to which either GFI or FLP is a
party or by which any of the Purchased Assets are bound.
7.5. Inventory Locations. Schedule 7.5(a) contains a list of all
facilities outside of Dalton, Georgia at which Inventory is located. Schedule
7.5(b) contains a list of all consigned stock locations at which consigned
Inventory is located as of the Closing Date.
7.6. Compliance with Laws. Except as set forth on Schedule 7.6,
neither GFI nor the Business is in violation of any applicable federal, state or
local law, statute, ordinance, order, rule or regulation which would reasonably
be expected to have a Material Adverse Effect on the ownership of the Purchased
Assets or the operation or conduct of the Business.
7.7. Condition and Use of the Purchased Assets. Except as set forth on
Schedule 7.7, all of the tangible Purchased Assets are generally in good working
order and condition, normal wear and tear excepted, and are fit and suitable for
the purpose for which such Purchased Assets are being used. The use of the
Purchased Assets conforms in all material respects to all applicable building,
zoning, platting, subdivision, land use and fire and other laws, ordinances,
rules or regulations, except for such nonconformity which would not reasonably
be expected to result in a Material Adverse Effect, and no notice of any such
non-conformity with respect thereto has been received by GFI since January 1,
1996. Along with the Excluded Assets, the contracts and leases not assumed by
Buyer, the customer and distributor discount, incentive and rebate programs not
assumed by Buyer, centralized headquarters functions (including treasury,
finance, receivables and payables processing and management information systems)
and the Leased Property, the Purchased Assets are all of the assets reasonably
necessary to operate the Business as it has been conducted by GFI prior to the
Closing Date.
7.8. Absence of Change. Except as otherwise set forth on Schedule 7.8,
since January 1, 1997 and except as otherwise contemplated by the terms of this
Agreement or consented to by Buyer:
(a) GFI has operated the Business in the Ordinary Course of
Business.
(b) GFI has not sold, contracted to sell, conveyed, transferred,
assigned, distributed or otherwise disposed of any of the Purchased
Assets, or any rights thereto, except for the sale of Inventory in the
Ordinary Course of Business and pursuant to the express terms of
contracts set forth on Schedule 7.11.
(c) GFI has not mortgaged, pledged, or granted any Security
Interests in, and has not encumbered or otherwise caused a lien to be
placed against, any of the Purchased Assets except for Permitted
Encumbrances.
(d) The Business has not incurred any loss, damage, liability or
destruction of property which would reasonably be expected to result
in a Material Adverse Effect on the Business.
17
(e) GFI has not (i) granted a general wage increase, (ii) except
in accordance with its normal historical practice, granted an increase
in any salary, bonus, fringe benefits, incentive or other compensation
payable, or to become payable, to any employee or agent of the
Business, or (iii) made any commitment to adopt any bonus incentive
compensation, deferred compensation, profit sharing, pension, or other
employee benefit plan.
(f) GFI has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and
licenses) outside the Ordinary Course of Business.
(g) GFI has not canceled, compromised, waived, or released any
material right or claim (or series of related rights and claims)
relating to the Business.
(h) GFI has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property.
(i) GFI has not committed to perform any of the foregoing.
7.9. Licenses and Permits. To GFI's Knowledge, GFI and the Business
possess all approvals, authorizations, consents, licenses, orders, franchises,
rights, registrations and permits, including Environmental Permits, from all
governmental and quasi-governmental agencies and authorities which are required
to permit the operation of the Business as presently conducted except for those
approvals, authorizations, consents, licenses, orders, franchises, rights,
registrations and permits the failure to possess in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
7.10. Suppliers and Customers. Schedule 7.10 lists the fifty (50)
largest Customers and the twenty largest suppliers (measured by dollar volume)
of the Business during the last fiscal year ("Major Customers" and "Major
Suppliers" respectively) and the amount of business done with each Major
Customer and Major Supplier in such year. As of the date of this Agreement,
except as set forth on Schedule 7.10 and, with respect to the 21st through 50th
Major Customers as set forth in a letter to be delivered within five (5)
Business Days following the date of this Agreement, (i) GFI is not engaged in a
material dispute with any Major Customer or Major Supplier, (ii) there has been
no Material Adverse Change in the business relationship of GFI with any Major
Customer or Major Supplier with respect to the Business since January 1, 1997,
and (iii) no Major Customer or Major Supplier has threatened any material
modification or change in the Business relationship with the Business. Within
five (5) Business Days after the date of this Agreement GFI will deliver to
Buyer a complete list of all blanket purchase orders from Customers in effect.
Except as set forth on Schedule 7.11 hereto, GFI has no material volume
incentive programs, rebate programs, advertising or marketing agreements or
consignment or special return arrangements with any Customer.
7.11. Contracts and Commitments. Schedule 7.11 contains a complete and
accurate list of all contracts, agreements or commitments or understandings,
whether oral or written, to
18
which the Business or the Purchased Assets are subject and which are material to
the conduct and operations of the Business, including but not limited to any:
(a) contract or commitment relating to the Business outside the
scope of the Ordinary Course of Business;
(b) bonus, incentive compensation, retirement agreement, deferred
compensation agreement, vacation plan, sick leave plan, group
insurance plan, or other employee benefit or welfare plan of any
nature whatsoever which could reasonably be expected to impose a
transferee liability on Buyer;
(c) agreement with any labor union, group of employees or other
employee representatives, or employment contract, agreement, or
commitment to or with any individual employees or agents;
(d) agreements for the purchase of goods, materials, supplies,
machinery, or capital assets in excess of $50,000, except for purchase
orders for raw materials in the Ordinary Course of Business issued
subsequent to the date of this Agreement;
(e) agreement with any sales agent or representative except any
such agreement that is terminable at will, or by giving notice of
thirty (30) days or less;
(f) franchise agreement;
(g) agreement with any manufacturer or supplier with respect to
discounts, allowances or extended payment terms, or warranty agreement
with any Customer outside the Ordinary Course of Business;
(h) agreement guaranteeing, indemnifying, or otherwise causing
the Purchased Assets to be subject to or liable for the obligations or
liabilities of another;
(i) agreement giving any party the right to negotiate or require
a reduction in prices or the repayment of any amount previously paid;
(j) partnership or joint venture agreement;
(k) contract or commitment requiring payment based in any manner
upon revenues, expenses, or net or gross income of the Business;
(l) license or royalty agreement;
(m) indenture, mortgage, note or credit agreement or other
contract or obligation pertaining to the borrowing of money by GFI
which relates to the Business;
(n) leases of property, personal or real, whether as lessor or
lessee involving annual payments in excess of $10,000;
19
Each of the Contracts is valid, in full force and effect, and
enforceable against GFI and to GFI's Knowledge the other parties thereto in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy insolvency, reorganization, moratorium or other similar laws or
hereafter in effect relating to creditor's rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceedings therefor may be brought forth. GFI is not in default nor has GFI
received any notice of default under any of the Contracts. Except as noted on
Schedule 7.11 , all Contracts are assignable to Buyer without the consent of the
other party thereto.
7.12. Change in Business. For purposes of this Agreement, a "Material
Adverse Effect" shall mean a material adverse effect on the Purchased Assets
taken as a whole or to the financial condition or results of operations of the
Business. GFI has no Knowledge of any significant changes in the Business since
January 1, 1997, including but not limited to, changes with respect to its
products, Customers, employees, equipment needs or suppliers, which would or
could reasonably be expected to have a Material Adverse Effect and other than
those resulting from general economic conditions, conditions affecting the
carpeting industry generally or from matters listed on Schedule 7.8.
7.13. Business Records. All of the financial records of the Business
have been maintained in accordance with good and sound accounting and business
practices in the Ordinary Course of Business.
7.14. Real Property/Leased Property.
(a) General. Except for the Real Property, the Leased Property
and the property listed on Schedule 7.14(a), there is no real property
owned or continuously occupied by GFI and used in or connected with
the Business.
(b) Alterations, Repairs or Improvements. No material alteration,
repair, improvement or other work has been performed in respect of the
Improvements within the last 120 days that is not being paid for in
the Ordinary Course of Business or with Excluded Assets.
(c) No Notice of Violations. Except as otherwise indicated in
Schedule 7.14(c), GFI has not received any notice of violations of any
federal, state or local laws, ordinances, rules, regulations or orders
relating to Real Property or Leased Property, except for such notices
of violations which would not reasonably be expected to result in a
Material Adverse Effect.
(d) Utility Connections. To GFI's Knowledge, all public utility
connections located on the Real Property and Leased Property have been
completed, installed, activated, paid for. GFI has available to it on
the Real Property and Leased Property sufficient power, natural gas
connections and water supplies and adequate sewage and waste disposal
systems for the operation of the Business as presently conducted and,
to GFI's Knowledge, such utilities are provided via public roads or
via permanent, irrevocable, appurtenant easements benefiting the Real
Property and the Leased Property.
20
(e) Taxes and Utilities. GFI has no Knowledge of, nor has GFI
received, any notice or information of any condition which would
reasonably be expected to result in an increase in the assessments
covering the Real Property or Leased Property or utility rates
affecting the Real Property, Leased Property or the Business.
(f) Right of Use. Except for the Leases, there are no leases,
subleases, licenses, concessions, or other agreements, written or
oral, granting to any party or parties the right of use or occupancy
of any portion of the parcel of Real Property or Leased Property and
there are no outstanding options or rights of first refusal to
purchase any parcel or portion thereof of the Real Property, or any
portion thereof or interest therein;
(g) Leases/Leaseholds. With respect to each Lease listed in
Schedule 2.1(b) hereof:
(i) GFI is not and, to GFI's Knowledge, no other party to the
lease is in breach or default, and no event has occurred which,
with notice or lapse of time, would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(ii) GFI has not and, to GFI's Knowledge no other party to
the lease has repudiated any provision thereof; and
(iii) GFI has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold
except, in the case of this representation and warranty when made
as of the date of this Agreement, as set forth in Schedule 7.3.
7.15. Litigation. Except as set forth on Schedule 7.15, there is no
governmental or private litigation, proceeding, claim, suit or audit of any kind
whatsoever pending before any court or quasi-judicial or administrative agency
of any federal, state, local or foreign jurisdiction or before any arbitrator
or, to the Knowledge of GFI, threatened against GFI, nor any outstanding
injunction, judgment, order, decree, ruling or, to the knowledge of GFI,
investigation which relates to the Business, or any of the Purchased Assets and
which would reasonably be expected to result in a Material Adverse Effect.
7.16. Labor Relations. Neither GFI nor the Business is, or has been
since January 1, 1996, involved in any labor discussion with any unit or group
seeking to become the bargaining unit for any of its employees at the
Facilities, nor does GFI have any notice or Knowledge that any such unit or
group has announced an intention to commence any organizational activities among
the employees of the Business. Except as otherwise set forth on Schedule 7.15,
since January 1, 1997, GFI has not been accused, notified or made aware of any
unfair labor or employment practice, discriminatory acts or omissions relating
to a group of employees, nor is there any pending or threatened strike, work
stoppage, or other labor dispute affecting GFI or the Business and which would
reasonably be expected to result in a Material Adverse Effect .
7.17. Benefit Plans.
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(a) Schedule 7.17 accurately and completely lists each Benefit
Plan. None of the Benefit Plans is a "multiemployer plan," as such
term is defined in Section 3(37) of ERISA. Neither GFI nor any trade
or business which is under common control or treated as a trade or
business with GFI under Section 4001(a) (14) of ERISA maintains or
contributes to any employee benefit plan that is intended to be
qualified under Section 401(a) of the Code except: (i) the Foamex/GFI
401(k) Savings Plan, (ii) the Foamex L.P. Salaried Pension Plan, (iii)
the Teamsters Pension Trust Fund of Philadelphia and Vicinity and (iv)
the Foamex L.P. Hourly Pension Plan.
"Benefit Plan" shall mean all "employee benefit plans", as
defined in Section 3(3) of ERISA, and all other material employee
benefit arrangements or payroll practices, including, without
limitation, any such arrangements or payroll practices providing
severance pay, sick leave, vacation pay, salary continuation for
disability, retirement benefits, deferred compensation, bonus pay,
incentive pay, stock options, hospitalization insurance, medical
insurance, life insurance, scholarships or tuition reimbursements,
maintained by GFI or any Affiliate or to which the GFI or any
Affiliate is obligated to contribute thereunder for current or former
employees of the Business.
(b) Complete and accurate copies of the following documents, with
respect to each of the Benefit Plans, as applicable, have been
delivered to Buyer by GFI: (i) all provisions of the plan and related
trust documents, and amendments thereto, (ii) the most recent IRS
Forms 5500 and 990 and (iii) summary plan descriptions and all
subsequent summary of material modifications.
(c) GFI and its Affiliates have complied, and are now in
compliance, in all respects with all provisions of ERISA, the Code and
all laws and regulations applicable to the Benefit Plans, except for
any noncompliance which, individually or in the aggregate, will not
have a Material Adverse Effect. Except in the case of any liability
expressly assumed by Buyer as provided in Article XVI hereof, neither
GFI nor any of its Affiliates has incurred, or will incur, any
liability under ERISA, the Code or other applicable law in respect of
any employee benefit plan as defined in Section 3(3) of ERISA , or any
similar program, policy or arrangement that is maintained by GFI or
its Affiliates for their respective employees for which Buyer will
become liable. Except in the case of any liability expressly assumed
by Buyer as provided in Article XVI hereof, Buyer will not incur as a
result of any event or condition or the consummation of the
transactions contemplated by this Agreement, any liability under
ERISA, the Code or other applicable law in respect of any employee
benefit plan. as defined in Section 3(3) of ERISA, or any similar
program, policy or arrangement maintained by GFI or its Affiliates;
and Buyer is specifically free from any obligation under this
Agreement or under the terms of any Benefit Plan to continue any
Benefit Plan after the Closing Date.
(d) Except as otherwise provided by applicable law or unless
expressly provided by this Agreement, the consummation of the
transactions contemplated by this Agreement will not result in any
increase in the amount of compensation or benefits or
22
accelerate the vesting or timing of payment of any compensation or
benefits payable to or in respect of any Employee.
7.18. Intentionally Omitted
7.19. Insurance. Attached hereto as Schedule 7.19 is a summary of
insurance policies insuring the Purchased Assets including the following
information:
(i) the name of the insurer;
(ii) the policy number and the period of coverage; and
(iii) the scope and amount and limit of coverage.
All policies are occurrence policies. GFI or its Affiliates maintain general
commercial, general liability and product liability coverage for the Business.
7.20. Environmental, Health and Safety Status. Except or as set forth
in Schedule 7.20 or as would not reasonably be expected to result in a Material
Adverse Effect:
(a) As of the Closing, neither the Real Property nor the Leased
Property are in violation of Environmental, Health and Safety
Requirements.
(b) To the Knowledge of GFI:
(i) There has been no release, threatened release,
application, spill, leak, discharge or emission of any Hazardous
Material to the air, surface water, groundwater or soil of the
Real Property or Leased Property requiring corrective action and
which is a violation of, any of the Environmental, Health and
Safety Requirements.
(ii) GFI and the owners of the Leased Property have duly
complied in all respects with, and the Real Property and Leased
Property are in compliance with, the Environmental, Health and
Safety Requirements.
(iii) Neither GFI nor the owners of the Leased Property have
any documents or information relating to or disclosing any
release, threatened release, application, spill, leak, discharge
or emission of any Hazardous Material to the air, surface water,
groundwater or soil of the Real Property requiring corrective
action and which is a violation of any Environmental, Health and
Safety Requirements at the Real Property or the Leased Property.
(iv) GFI has provided Buyer and its environmental consultants
with true and accurate information pertaining to the
environmental history of the Real Property and the Leased
Property.
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(v) GFI and the owners of the Leased Property have been
issued or have applied for all Permits, a complete list of which
is set forth on Schedule 7.20. To the extent permissible, GFI
shall maintain such Permits for the Real Property and Leased
Property, even after the Closing, until Buyer can secure similar
Permits in its name, provided that Buyer acts with diligence to
secure such Permits promptly.
(vi) GFI has no Knowledge of any complaint, order, directive,
claim, citation, notice, information request or investigation by
any governmental authority or any other person or entity with
respect to any release, threatened release, application, spill,
leak, discharge or emission of any Hazardous Material to the air,
surface water, groundwater or soil of the Real Property requiring
corrective action and which is a violation or alleged violation
of any Environmental, Health and Safety Requirement at the Real
Property or Leased Property.
(vii) Non-hazardous solid waste materials have not been
disposed of or buried at the Real Property or Leased Property.
7.21. Intellectual Property.
(a) Except as set forth in Schedule 7.21, GFI owns or has the
right to use in the Business pursuant to license, sublicense,
agreement, or permission the Intellectual Property included in the
Purchased Assets. Except as set forth in Schedule 7.21, each item of
Intellectual Property included in the Purchased Assets will be owned
or available for use by the Buyer on identical terms and conditions
immediately subsequent to the Closing hereunder. GFI has taken all
necessary action to protect each registered trademark included in the
Purchased Assets.
(b) With respect to Intellectual Property included in the
Purchased Assets, GFI has not, to its Knowledge, interfered with,
infringed upon, or misappropriated, any Intellectual Property rights
of third parties, or has not ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation of any Intellectual Property rights of
a third party (including any claim that GFI must license or refrain
from using any Intellectual Property rights of any third party) which
has not been resolved. To the Knowledge of GFI, no third party has
interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights included in the
Purchased Assets.
(c) Schedule 7.21(c) identifies each patent, trademark or
copyright registration in the United States which has been issued to
GFI with respect to any of the Intellectual Property included in the
Purchased Assets, identifies each pending patent application or
application for registration in the United States which GFI has made
with respect to any of the Intellectual Property included in the
Purchased Assets, and identifies each license, agreement, or other
permission which GFI has granted to any third party in the United
States with respect to any of the Intellectual Property included in
the Purchased Assets (together with any exceptions). GFI has delivered
to the Buyer correct and complete
24
copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date) and has made
available to the Buyer correct and complete copies of all other
written documentation evidencing ownership and prosecution (if
applicable) of each such item. Schedule 7.21(c) also identifies each
material trade name or unregistered trademark used by GFI in the
United States primarily in connection with the Business. With respect
to each item of Intellectual Property included in the Purchased Assets
required to be identified in Schedule 7.21(c) and except as set forth
in such Schedule:
(i) GFI possesses all right, title, and interest in and to
the item, free and clear of any Security Interest, license, or
other restriction except, in the case of this representation and
warranty when made as of the date of this Agreement as set forth
in Schedule 7.3;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, charge,
complaint, claim, or demand is pending or, to GFI's Knowledge,
threatened or under investigation which challenges the legality,
validity, enforceability, use, or ownership of the item; and
(iv) GFI has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(d) Schedule 7.21(d) identifies each license, sublicense,
agreement, or permission (other than software) relating to the
Intellectual Property included in the Purchased Assets. GFI has
delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required to
be identified in Schedule 7.21(d):
(i) except as set forth in Schedule 7.21(d) GFI is not and,
to GFI's Knowledge, no other party to the license, sublicense,
agreement, or permission is in breach or default, and to GFI's
Knowledge no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(ii) GFI has not and, to GFI's Knowledge, no other party to
the license, sublicense, agreement, or permission has repudiated
any provision thereof;
(iii) with respect to each sublicense, to GFI's Knowledge,
the representations and warranties set forth in subsections (i)
and (ii) above are true and correct with respect to the
underlying license;
25
(iv) to GFI's Knowledge, the underlying item of Intellectual
Property is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(v) to GFI's Knowledge, no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or
is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property;
and
(vi) GFI has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, or permission.
7.22. Product Warranty. Schedule 7.22 sets forth the aggregate product
warranty claims paid by the Business for each of the past three complete fiscal
years.
7.23. Product Liability. There has not been, nor is there under
consideration or investigation by GFI, any product recall, rework, retrofit or
post-sale warning (collectively, recalls, reworks, retrofits and post-sale
warnings are referred to in this Agreement as "Recalls") conducted by or on
behalf of GFI concerning any products of the Business manufactured, produced,
distributed or sold by or on behalf of GFI or, to the Knowledge of GFI, any
Recall conducted by or on behalf of any entity as a result of any alleged defect
in any product of the Business supplied by GFI. There is no product claim
pending or, to GFI's Knowledge threatened, on behalf of a customer of the
Business or any governmental agency which individually or in the aggregate has
had or would reasonably be expected to result in a Material Adverse Effect.
7.24. No Broker or Finder. GFI has not had discussions with,
negotiated with, been represented by, or employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees to
any individual or entity in connection with this Agreement or any of the
transactions contemplated hereby.
7.25. No Material Omission. To the Knowledge of GFI, no representation
or warranty contained in this Agreement or in any Schedule, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading.
7.26. Disclaimer of Additional Representations and Warranties;
Schedules.
(a) Except as expressly set forth in this Agreement, the
Schedules and Exhibits hereto, the Related Documents, and any other
certificate or instrument delivered pursuant to the terms hereof or
thereof, (i) GFI makes no representations or warranties with respect
to the Business, or its operations, assets (including, without
limitation, the Purchased Assets), liabilities, or conditions,
including, with respect to the Purchased Assets, any representation or
warranty of merchantability, suitability or fitness for a particular
purpose, or quality as to the Purchased Assets, or any part thereof,
or as to the condition or workmanship thereof, or the absence of any
defects therein, whether latent or patent.
26
(b) Notwithstanding anything to the contrary contained in this
Agreement, no matter primarily relating to any of the Excluded Assets
or liabilities other than Assumed Liabilities is required to be
disclosed on any Schedule. Disclosure of an item in any Schedule shall
not be deemed to be an admission that such item is material.
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES OF BUYER AND ▇▇▇▇▇
As a material inducement to GFI entering into this Agreement and
consummating the transactions contemplated hereby Buyer and ▇▇▇▇▇ hereby make
the following representations and warranties to GFI:
8.1. Incorporation, Good Standing and Power. Each of Buyer and ▇▇▇▇▇
is a corporation duly organized, validly existing, and in good standing under
the laws of the respective jurisdictions in which they are incorporated, with
full power and authority to execute this Agreement and consummate the
transactions contemplated hereby. Buyer's and Dixie's Boards of Directors (or
authorized Executive Committees thereof) have properly approved the execution of
this Agreement and the consummation of the transactions contemplated hereby.
Upon execution, this Agreement, the Related Documents and all other instruments
and documents delivered by Buyer and ▇▇▇▇▇ to GFI shall be valid, legal and
binding, enforceable in accordance with their terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditor's rights,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceedings therefor may be brought forth.
8.2. Authority. Neither the execution and delivery of this Agreement
and the Related Documents, nor the consummation by Buyer and ▇▇▇▇▇ of the
transactions contemplated hereby and thereby and the fulfillment and compliance
with the terms and provisions hereof and thereof by Buyer or ▇▇▇▇▇, will
violate, conflict with or constitute a breach of or default under any of the
terms, conditions or provisions of or require any consent pursuant to any law or
regulation presently applicable to Buyer or ▇▇▇▇▇, their respective articles of
incorporation or bylaws (other than the expiration of the waiting period under
the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of 1976 as amended) any order
of any court, regulatory body or tribunal or any loan, note, bond, mortgage,
lease, indenture, license, agreement, or other instrument or obligation to which
either Buyer or ▇▇▇▇▇ is a party or by which their respective assets are bound.
8.3. No Broker or Finder. Except for Lazard Freres & Co. LLC, whose
fee will be paid by ▇▇▇▇▇, neither ▇▇▇▇▇ nor Buyer has had discussions with,
negotiated with, been represented by, or employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees to
any individual or entity in connection with this Agreement or any of the
transactions contemplated hereby.
8.4. No Material Omission. To the knowledge of the executive officers
of ▇▇▇▇▇ and Buyer, no representation or warranty contained in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
27
ARTICLE IX.
REAL PROPERTY
9.1. Delivery of Preliminary Information. GFI has delivered to Buyer
copies of the items described in clause (a), (b) and (c) directly relating to
the Real Property that are in GFI's possession or control:
(a) Surveys. That certain survey made by ▇▇▇▇▇▇-▇▇▇▇▇▇▇ &
Associates, dated May 19, 1997, as revised on June 9, 1997 (the
"Survey").
(b) Title Policies. The most recently issued title insurance
policies presently in GFI's possession with respect to the title for
each parcel of the Real Property as set forth in Schedule 2.1(a); and
(c) Environmental Reports. All third party environmental studies,
environmental reports, reports of remediation work or repairs relating
to the handling and disposal of Hazardous Materials conducted since
February 8, 1993.
9.2. Title Search. GFI and Buyer shall share equally in the cost and
expense to conduct a title search of the Real Property (the "Initial Title
Search") and obtain and deliver to Buyer a commitment or binder for issuance of
a title insurance policy issued by the title insurance insurer for each parcel
of the Real Property, and Buyer will provide to GFI within ten (10) days
following delivery of the title commitment or binder a letter setting forth all
of Buyer's objections to GFI's title to each parcel of the Real Property other
than Permitted Encumbrances. After the receipt of such letter, GFI shall have
until the Closing Date to correct or make such arrangements as are reasonably
satisfactory to Buyer to correct such defects in title objected to by Buyer. If
GFI is unwilling or unable to correct or make arrangements for such defects on
or before the Closing Date, Buyer may seek indemnity for such defects following
the Closing Date, or if such defects would reasonably be expected to result in a
Material Adverse Effect, Buyer shall have the option to terminate this Agreement
as provided in Article XIV without further liability of GFI to Buyer or Buyer to
GFI. Title exceptions not specifically objected to by Buyer as permitted under
this Section 9.2 shall be deemed and referred to as "Permitted Exceptions";
provided, however, Buyer may object to such exceptions to title, other than the
Permitted Encumbrances, as are discovered after the Initial Title Search but
prior to Closing.
9.3. Real Estate Instruments. At the Closing, GFI shall deliver or
cause to be delivered to Buyer the following items (all documents will be duly
executed and acknowledged as required) (collectively, "Real Estate
Instruments"):
(a) Warranty Deed. A general warranty deed for each parcel of the
Real Property executed by GFI, conveying to Buyer good and marketable
fee simple title to each parcel of the Real Property, free and clear
of all liens, restrictions and encumbrances subject only to the
Permitted Encumbrances.
28
(b) Owner's Affidavit. An affidavit in the form reasonably
acceptable to the title insurer certifying that each parcel of the
Real Property is free from claims for mechanics', materialmen's and
laborers' liens other than Permitted Encumbrances.
(c) Non-Foreign Affidavit. An affidavit, in the form of Exhibit
H, stating GFI's U.S. Taxpayer's Identification Number, that GFI is a
"United States Person" as defined by Section 7701(a)(30) of the Code.
(d) Closing Affidavit. An affidavit, in form reasonably
acceptable to Buyer, stating that subject to the Permitted
Encumbrances, there are no other parties entitled to possession of any
parcel of the Real Property other than Buyer as of the Closing Date.
9.4. Damage, Destruction and Condemnation.
(a) If any of the Improvements are damaged by fire or other
casualty before the Closing Date to such extent that the damages
result in a Material Adverse Effect, then, unless such damage is
repaired by GFI no later than ten (10) days prior to Closing, Buyer
shall have the right to terminate this Agreement by delivering written
notice to GFI of such desire to terminate within five (5) days
following the determination of damages resulting from such Material
Adverse Effect. Should Buyer not elect to terminate this Agreement
within said five (5) day period, GFI shall hold any such insurance
proceeds for payment to Buyer following the Closing Date. GFI will
maintain all insurance coverage currently existing and covering the
Real Property in full force and effect through the Closing.
(b) If after the date hereof and prior to the Closing Date, GFI
receives official government notice of the commencement or impending
commencement of eminent domain or other like proceedings against the
Real Property or any portion thereof which is likely to result in a
taking of Real Property resulting in a Material Adverse Effect, GFI
shall notify Buyer. In such event, the Buyer shall, within five (5)
days of the receipt of such notice from GFI, have the option to (i)
terminate this Agreement or (ii) close transactions contemplated
hereby in accordance with its terms but subject to such proceedings,
in which event the Purchase Price shall not be reduced, and GFI shall
assign to Buyer GFI's rights in any condemnation award or proceeds.
9.5. Closing Costs For Real Property. GFI shall pay for the cost of
preparation of each deed for each parcel of the Real Property. Buyer shall pay
the premiums for the issuance of the owner's title insurance policies, the cost
of recording each deed for each parcel of the Real Property and any other
instruments under the terms of this Agreement with respect to the Real Property.
9.6. Adjustments and Prorations. All utility charges and operating
expenses of the Real Property incurred through the day prior to the Closing Date
shall be the obligation of GFI. All such charges and expenses, and all real and
personal property taxes and assessments on the Purchased Assets shall be
prorated between Buyer and GFI as of the Closing Date; provided, however, that
GFI shall not be responsible for any increased assessments on real or personal
29
property resulting from the transactions contemplated hereby. All such
prorations shall be allocated so that items relating to time periods ending
prior to the Closing Date shall be allocated to GFI and items related to time
periods beginning on or after the Closing Date shall be allocated to Buyer;
provided, however, that any real property tax shall be allocated in accordance
with Section 164(d) of the Code. The amount of all such prorations shall be
settled and paid on the Closing Date, provided that final payments with respect
to prorations which are not able to be calculated as of such time shall be
calculated and paid as soon as practicable thereafter.
ARTICLE X.
COVENANTS OF GFI
GFI covenants and agrees with Buyer as follows:
10.1. Conduct of Business Through the Closing Date. From the date
hereof, and through the Closing Date:
(a) GFI shall operate the Business in the Ordinary Course of
Business and use commercially reasonable efforts to preserve its
present business organizations intact so as to keep available the
services of its present employees and agents, and to preserve its
present business relationships and goodwill with Customers, suppliers
and others having business dealings with the Business.
(b) GFI shall maintain all properties necessary for the conduct
of the Business, whether owned or leased, real or personal in the
Ordinary Course of Business;
(c) GFI shall not enter into any contract, commitment, lease or
sublease relating to or affecting the Business, other than in the
Ordinary Course of Business, without the prior written approval of
Buyer.
(d) GFI will pay all claims for labor, materials, supplies, and
defective product or other property which, if unpaid, might by law
become a lien or charge (other than a Permitted Encumbrance) upon the
Purchased Assets or a liability of Buyer, before the same shall become
delinquent.
(e) GFI shall maintain insurance upon the Purchased Assets until
Closing, comparable in amount and scope to coverage maintained by it
(or on behalf of GFI) on the date hereof.
(f) GFI shall take all commercially reasonable action necessary
to maintain the utility services being provided to the Real Property
and Leased Property.
(g) GFI will not create or assume any mortgage, pledge, lien,
encumbrance or charge of any kind (including vendor's rights under
conditional sales agreements or other
30
title retention agreements) upon the Purchased Assets, whether owned
or hereafter acquired, except for Permitted Encumbrances and such
mortgages, liens, pledges, encumbrances or charges, if any, as are
consented to in writing by the Buyer in advance.
(h) GFI shall not sell or remove any of the Purchased Assets from
the Real Property or Leased Property except for dispositions of
Inventory and pursuant to the express terms of contracts set forth in
Schedule 7.11.
10.2. Completion of Transactions. GFI shall use commercially
reasonable efforts to assure that the conditions set forth in Article XII hereof
are satisfied on or prior to the Closing Date.
10.3. Approvals, Consents.
(a) GFI shall use commercially reasonable efforts prior to and
after the Closing Date to obtain all third party consents that are
required in connection with the transactions contemplated by this
Agreement. GFI shall not obtain any consent that will affect Buyer to
its material economic detriment, including any modification of any
Contract or Lease, unless Buyer expressly approves the obtaining of
such consent. Buyer shall cooperate as reasonably necessary or
desirable to secure the third party consents, including, without
limitation, providing to such third party information regarding
Buyer's intended use of the Purchased Assets.
(b) To the extent that any Contract or Lease is not capable of
being transferred by GFI to Buyer pursuant to this Agreement without
the consent of a third party (including a governmental agency) and
such consent is not obtained prior to Closing, or if such transfer or
attempted transfer would constitute a breach or a violation of such
Contract or Lease or of any law, nothing in this Agreement will
constitute a transfer or an attempted transfer thereof.
(c) In the event that any consent is not obtained or on prior to
the Closing Date, and notwithstanding any waiver by Buyer of the
condition set forth in Section 12.4 hereof, GFI shall use commercially
reasonable efforts (i) to provide to Buyer at GFI's expense the
benefits of the applicable Contract or Lease, (ii) to cooperate in any
reasonable and lawful arrangement designed to provide such benefits to
Buyer and (iii) to enforce at the request of Buyer and for the account
of Buyer, at GFI's expense, any rights of GFI arising from any such
Contract or Lease.
(d) Buyer will perform at its expense, the obligations arising
under all Contracts and Leases referred to in Section 10.3(c) for the
benefit of GFI and the other party or parties thereto, to the extent
Buyer shall receive the benefits of the applicable Contract or Lease.
10.4. Access to Properties and Records. Through the Closing Date, GFI
shall give to Buyer and to its counsel, accountants, and other representatives
reasonable access during normal business hours to all of the properties and
records of the Business as Buyer or its representatives
31
may reasonably request and as shall be necessary to effectuate full disclosure
to Buyer of all facts affecting the financial condition, business operations and
assets of the Business; provided, however, that Buyer shall not be allowed to
perform any environmental testing and Buyer shall not have access to Customer or
employee confidential materials. No investigation by Buyer shall, however,
diminish or limit in any way the representations or warranties of GFI as set
forth in Article VII hereof.
10.5. Advise of Changes. From the date hereof through the Closing
Date, GFI shall advise Buyer promptly in writing of any of the following of
which it acquires Knowledge: (i) damage to or diminution in value of the
Purchased Assets or the Business which could reasonably be expected to result in
a Material Adverse Effect, (ii) any condition or event that would cause any
representation or warranty of GFI to be untrue in any material respect, or (iii)
any other fact that, if obtained or known on the date hereof, would have been
required to be set forth or disclosed pursuant to this Agreement.
10.6. No Shop. Each of FLP, GFI and their respective subsidiaries and
Affiliates shall not, directly or indirectly, take (nor shall either FLP or GFI
authorize or permit any of its subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to take) any action to (i) encourage, solicit or initiate the
submission of any Purchase Proposal (as defined below) (provided, however, that
any public disclosure permitted pursuant to Section 17.6 shall not be deemed a
breach of this provision); (ii) enter into any agreement with respect to any
Purchase Proposal, or (iii) participate in any way in discussion or negotiations
with, or furnish any information to, any person in connection with, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Purchase Proposal.
For purposes of this Agreement, "Purchase Proposal" shall mean, with respect to
the Business, any proposal or offer regarding purchase of all or substantially
all of the Business or the Purchased Assets; provided, however, that any such
proposal or offer relating to the sale of all or substantially all of the assets
of, or equity interests in, GFI or any direct or indirect equity holder of GFI
shall not be deemed to be a Purchase Proposal, so long as GFI or such direct or
indirect equity holder informs such offeror or party submitting such proposal
that consideration of such offer or proposal is subject to the terms of this
Agreement.
10.7. Termination of Employees. On the Closing Date, GFI shall
terminate the employment of all Employees so as to make the services of such
persons as Buyer elects to employ available to Buyer. GFI shall indemnify and
hold Buyer harmless from any and all liabilities costs or expenses (including
court costs and reasonable attorneys fees) relating to the termination of the
Employees. Buyer may, subject to the provisions of Section 16.1, at its sole
discretion, employ such persons under arrangements which are terminable at will.
Buyer expressly reserves the right to terminate the employment of any employee
employed by it following the Closing at any time.
10.8. Transition Cooperation. To facilitate the transition of
ownership of the Business from GFI to Buyer on the Closing Date, GFI shall
reasonably cooperate with Buyer and provide Buyer with such information and
assistance as Buyer may reasonably request for a period of time
32
not to exceed six (6) months from the Closing Date not to exceed the level of
support that was usual and customary support of the ▇▇▇▇▇▇ operations prior to
the date of this Agreement to assist Buyer in establishing Buyer's sales,
management information systems and administrative systems with respect to the
Business. GFI will not take any action that is designed or intended to have the
effect of discouraging any lessor, licensor, customer, supplier, or other
business associate from terminating the business relationship with respect to
the Business with the Buyer after the Closing as it maintained with GFI prior to
the Closing. GFI will refer all customer inquiries relating to the Business to
the Buyer from and after the Closing.
10.9. Soil Remediation. Prior to Closing, GFI shall remediate the soil
contamination on the Real Property resulting from compressor blowdown as
described in the Phase I Environmental Audit.
10.10. Payment of Termination Fee. In the event that a Triggering
Event, as such term is defined in the Supply Agreement in the form of Exhibit S
("Supply Agreement"), shall occur prior to Closing then commencing on the
Closing Date GFI shall pay the Monthly Termination Fee (as defined in the Supply
Agreement) accrued since the date of such Triggering Event to Buyer on the terms
and conditions set forth in Section 2.4 of the Supply Agreement. Notwithstanding
anything to the contrary contained in this Agreement, such Triggering Event (and
the basis therefor) shall not constitute a Material Adverse Change or a Material
Adverse Effect.
10.11. Delivery of Interim Financial Statements. From and after the
date hereof and prior to Closing, GFI shall deliver to Buyer all monthly
unaudited interim Financial Statements within fifteen (15) days following the
end of each calendar month.
ARTICLE XI.
COVENANTS OF BUYER
Buyer hereby covenants and agrees as follows:
11.1. Representations and Warranties. Buyer shall cause the
representations and warranties of Article VIII to be true and correct at all
times.
11.2. Completion of Transactions. Buyer shall use commercially
reasonable efforts to assure that the conditions set forth in Article XIII
hereof are satisfied on or before the Closing Date.
11.3. Nondisclosure of Proprietary Information Prior to Closing. Prior
to the Closing all proprietary and confidential information of GFI or the
Business made available to Buyer shall remain the property of GFI. Buyer and its
agents shall not reproduce, use, or disclose to others any proprietary
information of GFI or the Business without the prior written consent of GFI.
Nevertheless, Buyer may make such proprietary information available to its board
of directors, officers, counsel, accountants and other advisors who may use such
33
information as necessary in the performance of their functions in the
transactions contemplated by the Agreement.
11.4. Use and Limited License of GFI's Name.
(a) Except to the extent constituting Purchased Assets, Buyer
shall not, except as set forth in this Section, have any right, title
or interest in and to any name or trademark of GFI for any use
whatsoever, including without limitation the names "General Felt",
"GFI" and derivatives thereof (collectively, the "Name").
(b) To the extent that the Name, or any other trade name,
trademark or logo of GFI or any of its Affiliates appears on (i) any
Inventory included in the Purchased Assets, Buyer may use or sell such
Inventory without removing such Name, trade name, trademark or logo
for a period of six (6) months following the Closing Date whereupon
Buyer shall place on any such remaining Inventory a sticker indicating
that they are products of Buyer, (ii) any sample board and sample
package in existence on the Closing Date, Buyer may continue to use
such sample board or sample package for a period of two years from the
Closing Date, or (iii) any letterhead, advertising, or marketing
material, packaging or similar supplies (collectively, "Supplies"),
Buyer may use such Supplies for a period not exceeding one month after
the Closing Date without removing such Name, trade name, trademark or
logo. Except as set forth in the immediately preceding sentence Buyer
shall not use any such Name, trade name, trademark or logo, in any
manner whatsoever.
(c) Buyer shall not engage in any activity which could reasonably
be expected to harm or malign the Name.
ARTICLE XII.
CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to complete the Closing are subject to the
satisfaction on or before the Closing Date of each of the following conditions
precedent; provided, however, that the election of Buyer to waive any such
condition and complete the Closing, notwithstanding that any such condition is
not fulfilled by such time, shall not preclude Buyer from seeking redress from
GFI for breach of the terms of this Agreement:
12.1. Accuracy of Representations and Warranties. The representations
and warranties of GFI set forth in Article VII shall be true and correct in all
material respects on the Closing Date. Buyer shall have received a certificate
to that effect signed by a duly authorized officer of GFI in the form attached
hereto as Exhibit J.
12.2. Performance of Covenants. GFI shall have performed and complied
in all material respects with all the covenants, obligations, and conditions
required to be performed or complied with by GFI on or before the Closing Date
pursuant to this Agreement. Buyer shall
34
have received a certificate to that effect signed by a duly authorized officer
of GFI in the form attached hereto as Exhibit K.
12.3. No Damage to Purchased Assets. There shall not have occurred a
Material Adverse Change as the result of any fire, accident, act of war,
casualty, labor disturbance, legislation, regulation, or any other adverse
circumstance.
12.4. Licenses and Permits and Consents Necessary For Buyer to Conduct
Business. Buyer shall have received the licenses, permits and consents set forth
on Schedule 12.4; provided, however, that his condition shall only apply if
Buyer shall have used commercially reasonable efforts to obtain such permits.
12.5. Regulatory Approval. All applicable waiting periods (and any
extensions thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act Antitrust Improvements Act
of 1976 shall have expired or otherwise been terminated and GFI and the Buyer
shall have received all other authorizations, consents, and approvals set forth
on Schedule 12.5.
12.6. Noncompetition Agreement. At the Closing, GFI, FLP and certain
Affiliates thereof shall enter into a noncompetition agreement with the Buyer
(the "Noncompetition Agreement") in the form of Exhibit L attached hereto.
12.7. Delivery of Documents. GFI shall have delivered, or caused to be
delivered, to the Buyer at the Closing each of the following, in form and
substance reasonably satisfactory to the Buyer:
(i) Certified copies of the charter and bylaws of GFI and the
limited partnership agreement of FLP;
(ii) Certificates of Existence or Good Standing as to GFI
issued by the Secretary of State of Delaware as of a recent date;
(iii) Certificates of Qualification issued by the Secretaries
of State (or other appropriate official) of the respective
jurisdictions in which Purchased Assets are located and GFI is
required to so qualify in order to conduct the Business and in
which the failure to so qualify would result in a Material
Adverse Effect on the operations and financial condition of GFI,
all of a recent date;
(iv) Certified copies of resolutions of the board of
directors and, to the extent required, the shareholder of GFI
approving the transactions set forth herein;
(v) A signature and incumbency certificate for each of GFI
and FLP;
(vi) A ▇▇▇▇ of Sale substantially in the form of Exhibit M
attached hereto (the "▇▇▇▇ of Sale"), and such other bills of
sale, assignments or other certificates necessary to transfer
title to the Purchased Assets to the Buyer;
35
(vii) A duly executed Assignment and Assumption Agreement and
Supply Agreement;
(viii) Duly executed Real Estate Instruments;
(ix) The favorable opinion, dated as of the Closing Date, of
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to GFI and FLP, substantially
in the form and substance attached hereto as Exhibit N;
(x) Evidence that GFI has paid the 1996 ad valorem taxes
levied on the Purchased Assets.
12.8. Operating Performance.
(a) Since the date of this Agreement there shall not have
occurred any event which has resulted in a Material Adverse Effect.
(b) The forecasted Gross Profit projected in the 1997 Monthly
Projections for the portion of the 1997 fiscal year commencing on
January 1, 1997 and ending on the last day of the last full calendar
month preceding the Closing Date by at least ten (10) days shall not
exceed the actual Gross Profit for such period (the "YTD Gross
Profit") by more than an amount equal to 7.5% of such forecasted Gross
Profit. As promptly as practicable after such month end, GFI shall
prepare the income statement of the Business for the period commencing
January 1, 1997 and ending on such date (the "1997 Interim Statement")
and determine the YTD Gross Profit. The 1997 Interim Statement shall
be prepared in accordance with GAAP applied on a basis consistent with
that used in, and in accordance with the same accounting principles,
policies, and practices applied in the preparation of the Financial
Statements. During the preparation of the 1997 Interim Statement and
the determination of the YTD Gross Profit, Buyer and its accountants
shall be permitted to review the details of any item in which a
judgmental decision is required. Pursuant to such review, Buyer and
its accountants shall be entitled from time to time to examine the
working papers of GFI prepared in connection therewith and the books
and records of the Business, and discuss with GFI the 1997 Interim
Statement and the YTD Gross Profit. Such discussions shall be held by
telephone or at places mutually agreeable to GFI and Buyer.
12.9. Customers. No individual Customer or group of Customers shall
have indicated, or GFI shall not have otherwise been informed that any such
Customers intend to reduce their purchases from GFI or Buyer or otherwise intend
not to purchase an amount of products from Buyer following the Closing in an
amount that would reasonably be expected to result in a Material Adverse Effect.
12.10. Scheduled Events. None of the events on Schedule 12.10 shall
have occurred.
36
ARTICLE XIII.
CONDITIONS PRECEDENT TO GFI'S OBLIGATION TO CLOSE
The obligations of GFI to complete the Closing are subject to the
satisfaction on or before the Closing Date of each of the following conditions
precedent; provided, however, that the election by GFI to complete the Closing
notwithstanding that any such condition is not fulfilled by such time shall not
preclude GFI from seeking redress from Buyer for breach of the terms of this
Agreement:
13.1. Payment of Purchase Price. The Buyer shall have satisfied and
paid the Purchase Price at the Closing.
13.2. Licenses and Permits Necessary For Buyer to Conduct Business.
Buyer shall have received the licenses and permits set forth on Schedule 12.4.
13.3. Regulatory Approval. All applicable waiting periods (and any
extensions thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act Antitrust Improvements Act
of 1976 shall have expired or otherwise been terminated and GFI and the Buyer
shall have received all other authorizations, consents, and approvals set forth
on Schedule 12.5 hereof.
13.4. Delivery of Documents. The Buyer shall have delivered or caused
to be delivered to GFI at the Closing each of the following, in form and
substance reasonably satisfactory to GFI:
(i) Articles of incorporation and bylaws of Buyer and ▇▇▇▇▇;
(ii) Certificate of Good Standing and a Certificate of
Existence for the Buyer and ▇▇▇▇▇ issued by the Secretary of
State of the states of Georgia and Tennessee respectively;
(iii) Certified copies of resolutions adopted by Buyer's and
Dixie's boards of directors approving the transactions set forth
herein;
(iv) A signature and incumbency certificate for Buyer and
▇▇▇▇▇;
(v) An opinion, dated as of the Closing Date, of ▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C., counsel to Buyer substantially in the
form and substance attached hereto as Exhibit O;
(vi) An executed Assignment and Assumption Agreement and
Supply Agreement.
13.5. Accuracy of Representations and Warranties. The representations
and warranties of Buyer set forth in Article VIII shall be true and correct in
all respects on the Closing Date. GFI shall have received a certificate to that
effect signed by a duly authorized officer of Buyer in the form attached hereto
as Exhibit P;
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13.6. Performance of Covenants. Buyer shall have performed and
complied with all the covenants, obligations, and conditions required to be
performed or complied with by Buyer on or before the Closing Date pursuant to
this Agreement. GFI shall have received a certificate to that effect signed by a
duly authorized officer of Buyer in the form attached hereto as Exhibit Q;
ARTICLE XIV.
TERMINATION
14.1. Conditions of Termination. The obligations of the parties with
respect to the Closing shall terminate:
(a) At the election of Buyer if the Closing shall not have
occurred by the Deadline Date by reason of the failure of any
condition precedent under Article XII hereof (unless the failure
results primarily from Buyer itself breaching any representation,
warranty or covenant contained in this Agreement).
(b) At the election of GFI if the Closing shall not have occurred
by the Deadline Date by reason of the failure of any condition
precedent under Article XIII hereof (unless the failure results
primarily from GFI itself breaching any representation, warranty or
covenant contained in this Agreement).
(c) By mutual written consent of GFI and Buyer.
For purposes hereof, the "Deadline Date" shall mean (i) October 15,
1997 or (ii) in the event the Federal Trade Commission has made a second request
for information with respect to the HSR Filing, November 15, 1997.
14.2. Effect of Termination. In the event of termination in accordance
with Section 14.1: (i) this Agreement shall become null and void and of no
further force or effect, except as otherwise provided herein, (ii) this
Agreement shall be deemed to be rescinded, (iii) each party shall pay all costs
and expenses incurred by it in connection with this Agreement and the
transactions contemplated herein, and (iv) no party shall have any further
liability to any other party because of the failure to consummate the
transactions contemplated hereby.
ARTICLE XV.
INDEMNIFICATION
15.1. Bulk Transfer Indemnity. Buyer has waived GFI's compliance with
the bulk transfer statutes in force in the jurisdictions in which the Purchased
Assets are located. As a result, GFI hereby agrees to indemnify and hold
harmless Buyer against any and all claims, loss, costs or expenses, including
reasonable attorneys' fees, which Buyer may sustain as a result of
38
any payment which may be required to be made or any liability of any kind which
may be imposed upon Buyer as a result of any claim, loss, cost or expense or
reasonable attorneys' fees which may be required of or incurred by Buyer
whatsoever arising out of noncompliance with any bulk transfer laws to the
extent such claims are not related to an Assumed Liability.
15.2. Mutual Indemnification Obligation. GFI hereby agrees to
indemnify and hold harmless Buyer and ▇▇▇▇▇, and Buyer hereby agrees to
indemnify and hold harmless GFI and FLP, against any and all liability, claims,
damages, losses, costs or expenses, including reasonable attorneys' fees
("Losses"), relating to any breach of, noncompliance with or misrepresentation
contained in any representation, warranty or covenant by such party contained
herein or in any certificate delivered pursuant to this Agreement provided that
a written claim for indemnification by the party seeking indemnification is made
within the applicable survival period.
15.3. GFI's Indemnification Obligations. GFI hereby agrees to defend,
indemnify and hold harmless Buyer from and against any and all Losses which
Buyer may sustain as a result of any claims, actions or damages of any nature
whatsoever relating to (i) the liabilities set forth in Section 5.1(c) or any
successor liability imposed upon Buyer relating to the operation of the Business
prior to the Closing and which are not Assumed Liabilities other than any
liability arising out of Section 2.1(n); (ii) products sold by GFI prior to the
Closing Date; (iii) the existence of any lien or encumbrance on or Security
Interest in the Purchased Assets at the Closing Date including any Permitted
Encumbrance included with Section 2.3(i) (subject to the allocation set forth in
Section 9.6), (ii) and (vi) (to the extent it is not an Assumed Liability) other
than a Permitted Exception; (iv) the termination of any Employees by GFI other
than any liability arising out of Section 2.1(n) and (v) the enforcement of the
noncompetition restrictions of Section 7.4 of the Habitat APA upon Buyer.
15.4. Buyer's Indemnification Obligations. Buyer hereby agrees to
defend, indemnify, and hold GFI harmless from and against any and all Losses
which GFI may sustain as a result of any claims, actions or damages of any
nature whatsoever relating to (i) Buyer's or its Affiliate's operation of the
Business or use of the Purchased Assets on and after the Closing Date including,
but not limited to, any Losses relating to products manufactured, sold, or
distributed by Buyer or an affiliate thereof on and after the Closing Date
(except for products sold by GFI prior to the Closing Date) and all general
liability claims arising out of or relating to occurrences of any nature
relating to Buyer's or its Affiliate's business on and after the Closing Date;
(ii) the failure of Buyer or any of its Affiliates to pay, perform, and
discharge when due and owing any of the Assumed Liabilities and (iii) any third
party claim arising directly out of Buyer's employment screening procedures.
15.5. [Intentionally Omitted]
15.6. Limitation.
(a) Subject to the provisions of Section 15.6(b) and
notwithstanding anything else contained herein to the contrary, GFI
shall not be required to indemnify Buyer pursuant to this Article 15
for any breach of or noncompliance with any representation,
39
warranty or covenant made herein or pursuant to Section 15.3(v) (i) until the
aggregate amount of all Losses exceeds $250,000 (after which point GFI shall be
obligated only to indemnify Buyer from and against further Losses in excess of
such amount); (ii) or to the extent the aggregate Losses Buyer has suffered by
reason of all such breaches of representation, warranty or covenant of GFI
exceeds $10,000,000; provided, however, that such limitations shall not apply to
product warranty claims, Environmental Losses, or any Loss resulting from a
breach of Section 7.20, or a claim under Section 10.10.
(b) Subject to the provisions of Section 10.9 and notwithstanding
anything else contained herein to the contrary, GFI's indemnification
obligations to Buyer arising out of a breach of Section 7.20 or any
other representation, warranty or covenant to the extent related to
Environmental, Health and Safety Requirements or Hazardous Materials
("Environmental Losses") shall be limited to the extent they
constitute Reasonably Necessary Costs of Remediation and be subject to
the following:
(i) The first $125,000 of Environmental Losses shall be borne
by Buyer.
(ii) The next $1,000,000 of Environmental Losses shall be
borne by GFI.
(iii) The next $2,000,000 of Environmental Losses shall be
borne one-half by GFI and one-half by Buyer.
(iv) All Environmental Losses in excess of $3,125,000 shall
be borne by Buyer.
(v) GFI shall have no obligation to indemnify Buyer for
Environmental Losses relating to remediation not as a result of a
Buyer's Third Party Claim except to the extent of (1) fines and
penalties levied in respect of a release of Hazardous Materials
on the Real Property prior to the Closing Date and (2) the
necessary costs of bringing the Real Property into compliance
with Environmental, Health and Safety Requirements as in effect
on the Closing Date.
(c) Buyer hereby agrees that it will provide GFI, its agents,
consultants and attorneys, with (i) reasonable access to the Real
Property and (ii) all non-privileged documents related to or generated
in connection with any Environmental Losses, for purposes of verifying
that Environmental Losses have been incurred by Buyer. To the maximum
extent feasible, notice shall be given to GFI prior to Buyer's
incurring any Costs of Remediation. For purposes of this Agreement,
"Costs of Remediation" shall mean all out of pocket costs of
investigation, characterization, removal or remediation of Hazardous
Materials, including, without limitation, consultants, contractor and
laboratory fees. For purposes of this Agreement "Reasonably Necessary
Costs of Remediation" means those Costs of Remediation which are (i)
consistent with custom and good business practice and (ii) consistent
with the most cost-effective means allowable by all applicable
governmental agencies.
40
(d) Furthermore, for the purpose of indemnification under this
Article XV including Section 15.6(b) and not with respect to
satisfaction of conditions precedent set forth in Article XII, the
determination as to whether a representation, warranty, or covenant
has been breached will be made without regard to any qualification of
materiality (including Material Adverse Change or Material Adverse
Effect) contained therein.
15.7. Buyer's Third Party Claims; Notice of Claims.
(a) Immediately upon receipt by Buyer of any claim against it
(other than by GFI) for which GFI is obligated to indemnify Buyer
pursuant to this Agreement (the "Buyer's Third Party Claims"), Buyer
shall promptly advise GFI in writing of such claim and provide a copy
of the complaint or other document or documents asserting the claim.
At any time following receipt of such notice, GFI may notify Buyer in
a writing executed by GFI that it is assuming the defense of such
Buyer's Third Party Claim, after which point GFI shall assume and
control the defense of such Buyer's Third Party Claim. In the event
GFI notifies Buyer that it is assuming the defense of such Buyer's
Third Party Claim, GFI shall immediately reimburse Buyer for the
expenses and defense costs it has incurred for defense of such claim
prior to GFI's assumption of the defense of such claim and such
assumption shall not prejudice the right of GFI to claim at a later
date that such Buyer's Third Party Claim is not a proper matter for
indemnification pursuant to this Article XV. If GFI fails to either
pay such claim or notify Buyer that it intends to defend such claim
then Buyer shall, prior to any assumption by GFI of such Buyer's Third
Party Claim, have the right to pay, compromise or defend any such
Buyer's Third Party Claims; provided that Buyer has delivered a notice
to GFI of its intention to take such action at least five (5) days
prior to taking such action, in which event GFI shall promptly pay or
reimburse Buyer in respect of any amount of payment plus costs of
defense incurred by Buyer hereunder. Except as set forth in the
immediately preceding sentence, Buyer shall not consent to the entry
of a judgment or enter into any settlement with respect to any matter
which may give rise to a Buyer's Third Party Claim without the written
consent of GFI (not to be withheld or delayed unreasonably). Buyer and
GFI shall cooperate with each other in the defense of any Buyer's
Third Party Claims brought hereunder.
(b) With respect to any matter for which GFI is obligated to
indemnify Buyer pursuant to this Agreement other than Buyer's Third
Party Claims, Buyer shall give written notice to GFI outlining with
reasonable particularity the nature and amount of such claim. If Buyer
and GFI are unable to resolve such matter within thirty (30) days of
Buyer's notice, then the dispute may be resolved by arbitration in
accordance with Section 17.3 or by agreement between the parties. The
prevailing party to any such arbitration shall be entitled to
indemnification for its reasonable attorneys' fees and filing fees to
the extent awarded by the arbitrator or arbitrators.
15.8. GFI's Third Party Claims; Notice of Claims.
41
(a) Immediately upon receipt by GFI of any claim against it
(other than by Buyer) for which Buyer is obligated to indemnify GFI
pursuant to this Agreement (the "GFI's Third Party Claims"), GFI shall
promptly advise Buyer in writing of such claim, and provide a copy of
the complaint or other document or documents asserting the claim. At
any time following receipt of such notice, Buyer may notify GFI in a
writing executed by Buyer that it is assuming the defense of such
GFI's Third Party Claim, after which point Buyer shall assume and
control the defense of such GFI's Third Party Claim. In the event
Buyer notifies GFI that it is assuming the defense of such GFI's Third
Party Claim, Buyer shall immediately reimburse GFI for the expenses
and defense costs it has incurred for defense of such claim prior to
Buyer's assumption of the defense of such claim; and such assumption
shall not prejudice the right of Buyer to claim at a later date that
such GFI's Third Party Claim is not a proper matter for
indemnification pursuant to this Article XV. If Buyer fails to pay
such claim or notify GFI that it intends to defend such claim, then
GFI shall, prior to any assumption by Buyer of such GFI's Third Party
Claim, have the right to pay, compromise or defend any such GFI's
Third Party Claim; provided that GFI has delivered a notice to Buyer
of its intention to take such action at least five (5) days prior to
taking such action. Buyer shall promptly pay or reimburse GFI in
respect of any amount of payment plus costs of defense incurred by GFI
hereunder. Except as set forth in the immediately preceding sentence,
GFI shall not consent to the entry of a judgment or enter into any
settlement with respect to any matter which may give rise to a GFI's
Third Party Claim without the written consent of Buyer (not to be
withheld or delayed unreasonably). Buyer and GFI shall cooperate with
each other in the defense of any GFI's Third Party Claims brought
hereunder.
(b) With respect to any matter for which Buyer is obligated to
indemnify GFI pursuant to this Agreement other than GFI's Third Party
Claims, GFI shall give written notice to Buyer outlining with
reasonable particularity the nature and amount of such claim. If Buyer
and GFI are unable to resolve such matter within thirty (30) days of
GFI's notice, then the dispute may be resolved by arbitration or by
agreement between the parties. The prevailing party to any such
arbitration shall be entitled to indemnification for its reasonable
attorneys' fees and filing fees to the extent awarded by the
arbitrator or arbitrators.
15.9. Certain Additional Provisions Relating to Indemnification.
(a) Notwithstanding anything to the contrary contained in this
Agreement, after the Closing Date, the indemnification provisions set
forth in this Article XV shall constitute the sole and exclusive
recourse and remedy available to the parties hereto with respect to
the breach of any representation, warranty or covenant (other than
fraud or the failure to deliver the Purchase Price or the Purchased
Assets) contained in this Agreement, the Related Documents or in any
certificate delivered pursuant hereto or thereto.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Buyer shall not be entitled to indemnity pursuant to this
Agreement, for any Losses for a breach
42
of the representation and warranty contained in Section 7.5 to the extent it has
received a purchase price adjustment pursuant to Article III.
(c) Any indemnification payment under this Article XV shall be
treated by the parties as an adjustment to the Purchase Price for all
foreign, federal, state and local income tax purposes.
ARTICLE XVI. OTHER POST-CLOSING COVENANTS
16.1. GFI's Employees.
(a) Buyer shall have the right to employ, on an individual basis,
in its sole discretion on and after the Closing, any employees on
GFI's payroll primarily performing services for GFI in connection with
the operation of the Business (the "Employees").
(b) Subject to the provisions of the following sentence, GFI
shall be responsible for and shall hold Buyer harmless with respect to
all claims (including the costs of defense thereof) asserted against
Buyer pursuant to the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. ▇▇.▇▇. 2101-09 or similar state, local or foreign
country laws or regulations (collectively, "WARN Laws") by Employees
of GFI who Buyer does not hire or to Disqualified Employees who Buyer
terminates within thirty (30) days following Closing. On or before the
Closing Date, Buyer shall offer employment, effective as of the
Closing Date, to all Employees other than a number of Employees not to
exceed twenty five (25). Buyer shall have the option to revoke or
rescind its offer to Employees who either fail or refuse to take the
required drug test administered by or on behalf of Buyer and to
illegal aliens (the "Disqualified Employees").
(c) In addition to any liability which GFI may have under WARN
Laws, GFI shall be responsible for all other obligations and severance
costs, if any, required to be paid to Employees arising out of their
employment by GFI or the termination thereof. Any bonus obligations
owing in respect of periods prior to the Closing Date shall be paid
directly to such Employees by GFI. Sick leave benefits, if any, shall
be paid to the Employee by the party in ownership of the Business at
the time of occurrence.
16.2. Employee Benefit Plans. Any Employee, other than a Disqualified
Employee, who is offered employment by Buyer at Closing, and who accepts such
offer will receive employee welfare and retirement benefits similar to those
currently provided to similarly situated employees of Buyer and will be given
credit for all service with GFI for the purpose of determining eligibility and
vesting with respect to the ▇▇▇▇▇ Yarns, Inc. 401(k) Retirement Savings Plan
(the "▇▇▇▇▇ 401(k) Plan"). Eligibility to participate in any plan will be based
on the rules of Buyer's plan and the parties recognize that in individual cases,
Employees who were eligible to participate in GFI's Benefit Plans will not have
immediate eligibility for Buyer's plans or may be subject to a pre-existing
condition waiting period, notwithstanding the service credit provided in the
preceding sentence. GFI and the Buyer agree that Buyer is not acquiring or
succeeding to any obligations with respect to the Benefit Plans and that the
Buyer is not intended
43
to be a successor employer to GFI for any purposes, including with respect to
COBRA, and that no benefit plan sponsored or maintained by the Buyer is intended
to be a successor plan to any of GFI's Benefit Plans. GFI agrees that it will
comply with COBRA after the Closing with respect to all qualified beneficiaries
who had a qualifying event as of or prior to the Closing. GFI will provide the
certification described in Sections 9801 et seq of the Code to the extent
required by law for all Employees on the Closing Date.
Amendments to Plans. GFI will amend the Foamex/GFI 401(k) Savings Plan
(the "GFI 401(k) Plan") before the Closing Date to provide (i) for distributions
permitted by Section 401(k)(10) of the Code and to provide for such
distributions to Employees who are hired by Buyer at Closing and (ii)
participants in the GFI 401(k) Plan on the Closing Date shall be considered to
be employed on the last day of the plan year for the purposes of eligibility to
receive matching and discretionary contributions and shall receive the same
contributions from GFI based upon their actual contributions to the GFI 401(k)
Plan and their compensation earned while employed by GFI as other participants
of the GFI 401(k) Plan. Buyer will amend the ▇▇▇▇▇ 401(k) Plan before the
Closing Date to provide that, subject to the limitations of section 401(a)(4) of
the Code, credit will be given for service with GFI for the purposes of
eligibility and vesting; those Employees who are offered employment by Buyer at
Closing and who are eligible to participate in the ▇▇▇▇▇ 401(k) Plan shall
receive the same contributions from the Buyer based upon their actual
contributions to the ▇▇▇▇▇ 401(k) Plan and their compensation earned while
employed by Buyer as other participants of the ▇▇▇▇▇ 401(k) Plan.
16.3. Delivery of Mail, Etc. GFI will deliver (or in the case of
telephone calls forward information regarding such call) promptly to Buyer any
telephone calls, mail, documents or instruments received by GFI after the
Closing Date pertaining to the post-Closing Date operations of Buyer and Buyer
will deliver (or in the case of telephone calls forward information regarding
such call) promptly to GFI any telephone calls, mail, documents or instruments
received by it after the Closing Date pertaining to the pre-Closing Date
operations of the Business or any business of GFI other than the Business.
16.4. Access to Records. The parties agree to maintain all records
relating to the Business in accordance with their existing records retention
policies and procedures and to make such records available for inspection or
copying by the other parties hereto (or their attorneys, accountants,
consultants or agents) on reasonable notice and during normal business hours. In
any event, Buyer shall maintain personnel records for at least three (3) years
following the Closing Date.
16.5. Motor Vehicles. GFI agrees to cause the Motor Vehicles included
in the Purchased Assets and all necessary documents for transfer thereof to be
delivered to Buyer immediately following the Closing.
16.6. Confidentiality.
(a) GFI agrees that all nonpublic or proprietary information, and
all information that constitutes trade secrets pertaining to the
Business and the Purchased Assets unless the information sought to be
disclosed or used (i) is publicly known as of
44
the date hereof or becomes publicly known through no fault of GFI or
its Affiliates or (ii) is lawfully received by any party from a third
party which to its Knowledge is not bound in a confidential
relationship to any party whose confidential information is to be
protected hereunder (the "Buyer Confidential Information") shall be
deemed confidential. After the Closing Date, GFI and its Affiliates
will not, without the prior written consent of Buyer, release or
disclose any Buyer Confidential Information unless (a) the use of such
information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated by this Agreement, or (b) the furnishing or
use of such information is required by or is necessary or appropriate
in connection with legal proceedings. In the event that GFI or an
Affiliate thereof receives a request to disclose all or part of the
Buyer Confidential Information (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative
demand, any information or formal investigation by any government or
governmental agency or authority or otherwise) GFI will (a) promptly
notify Buyer of the existence, terms and circumstances surrounding
such request, (b) consult with Buyer on the advisability of taking
legally available steps to resist or narrow such request at the
expense of Buyer and (c) if disclosure of such information is in GFI's
opinion required by or necessary or appropriate in connection with
such request, furnish only that portion of the Buyer Confidential
Information which, in GFI's opinion, is required by or necessary or
appropriate in connection with such request and to cooperate with any
reasonable action by Buyer at the expense of Buyer to obtain an
appropriate protective order or other reliable assurance that
confidential treatment will be accorded to such portion of the
disclosed Confidential Information which Buyer so designates.
(b) Buyer agrees that all nonpublic or proprietary information,
and all information that constitutes trade secrets pertaining to GFI's
business (other than the Business) unless the information sought to be
disclosed or used (i) is publicly known as of the date hereof or
becomes publicly known through no fault of Buyer or its Affiliates or
(ii) is lawfully received by any party from a third party which to its
knowledge is not bound in a confidential relationship to any party
whose confidential information is to be protected hereunder (the "GFI
Confidential Information") shall be deemed confidential. After the
Closing Date, Buyer and its Affiliates will not, without the prior
written consent of GFI, release or disclose any GFI Confidential
Information unless (a) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval
required for the consummation of the transactions contemplated by this
Agreement, or (b) the furnishing or use of such information is
required by or is necessary or appropriate in connection with legal
proceedings. In the event that Buyer or an Affiliate thereof receives
a request to disclose all or part of the GFI Confidential Information
(by oral questions, interrogatories, requests for information or
documents, subpoena, civil investigative demand, any information or
formal investigation by any government or governmental agency or
authority or otherwise) Buyer will (a) promptly notify GFI of the
existence, terms and circumstances surrounding such request, (b)
consult with GFI on the advisability of taking legally available steps
to resist or narrow such request at the expense of GFI and (c) if
disclosure of such information is in Buyer's
45
opinion required by or necessary or appropriate in connection with
such request, furnish only that portion of the GFI Confidential
Information which, in Buyer's opinion, is required by or necessary or
appropriate in connection with such request and to cooperate with any
reasonable action by GFI at the expense of GFI to obtain an
appropriate protective order or other reliable assurance that
confidential treatment will be accorded to such portion of the
disclosed GFI Confidential Information which GFI so designates.
16.7. Litigation Support. In the event and for so long as any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Business, the other parties will cooperate
with the contesting or defending party and its counsel in the contest or
defense, make available its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
(unless the contesting or defending party is entitled to indemnification
therefor under Article XV hereof).
16.8. Accounts Receivable Application. Any payment received by either
GFI or Buyer from any Customer shall be applied to the invoice specified by the
Customer. If the Customer shall fail to specify or shall improperly specify the
invoice to which such payment shall be applied, the party receiving the payment
shall contact the Customer to determine how such payment is to be applied and
such payment shall be applied in accordance with such direction. GFI and Buyer
shall settle all mispayments of accounts receivable by Customers on a weekly
basis.
16.9. Removal of Purchased Assets. Prior to November 30, 1997, Buyer
shall remove all Purchased Assets from FLP's facility in La Mirada, California
provided, however, that Buyer shall be entitled to occupy at Buyer's expense,
necessary space at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ on a month to
month basis at a rate equal to GFI's cost not to extend beyond February 28,
1998.
16.10. Customer Claims; Rebates.
(a) GFI shall be responsible for all claims of any nature by
Customers ("Customer Claims") relating to sales made by GFI prior to
the Closing Date and Buyer shall be responsible for Customer Claims
relating to sales made by Buyer on and after the Closing Date. If
Buyer receives notice of a Customer Claim against GFI, Buyer shall
promptly notify GFI of such Customer Claim, whereupon GFI shall
diligently negotiate a settlement of the Customer Claim and if no
settlement has been made within forty-five (45) days following receipt
of notice of such Customer Claim then Buyer shall have the right to
settle such Customer Claim, and be assigned the rights to such claim
by the affected Customer and to pursue such claim against GFI,
provided that with respect to any such Customer Claim Buyer shall have
no greater rights against GFI than the rights of affected Customer.
46
(b) The parties shall make a cash settlement on a weekly basis on
all deductions taken by Customers from amounts owed to either Buyer or
GFI which relate to a claim against the other party to this Agreement.
(c) GFI shall be responsible for the payment of all rebates,
markdown monies, advertising, discounts and other price adjustments
("Price Adjustments") to Customers in respect of sales made prior to
the Closing Date and Buyer shall be responsible for the payment of all
Price Adjustments to Customers in respect of sales made on and after
the Closing Date, provided, however, that with respect to rebates
payable pursuant to programs listed in Schedule 16.10, GFI shall be
responsible for any increase in rebates payable in respect of sales
prior to the Closing Date in accordance with programs listed in
Schedule 16.10 as in effect on the date of this Agreement as a result
of sales made on and after the Closing Date through December 31, 1997
("Price Adjustment Increases"). GFI shall reimburse Buyer for the
Price Adjustment Increases within five (5) Business Days following
receipt of proof of payment thereof by Buyer to such program
Customers.
(d) GFI and Buyer shall cooperate in a commercially reasonable
manner in connection with the resolution of Customer Claims.
16.11. AT&T Agreements. On the Closing Date, Buyer shall reimburse GFI
on the obligations under the Agreement listed on Schedule 16.11 through December
31, 1997. Bretlin will be responsible to remove and return all equipment covered
by the lease to meet the December 31, 1997 return date. All removal costs are
the responsibility of Bretlin.
16.12. Customer Letter. On or before the Closing, GFI and Buyer shall
jointly send to Customers a mutually satisfactory letter.
ARTICLE XVII.
MISCELLANEOUS
17.1. Simultaneous Closing. All transactions at Closing including
execution of Related Documents shall be deemed to take place simultaneously and
none shall be deemed to take place until all shall have taken place.
17.2. Survival of Representations and Warranties. The representations,
warranties and covenants in this Agreement, or in any certificate delivered in
connection herewith or therewith shall survive the Closing for a period of
eighteen (18) months thereafter; provided, however, that (a) any claim under the
covenant set forth in Section 15.3(i) shall survive the Closing until thirty
(30) days after the expiration of the applicable statutory period of limitations
to which the claim relates, as such period may be extended from time to time,
(b) representations and warranties set forth in Sections 7.1, 7.3, 7.4, 8.1, 8.2
and 8.3 shall survive the Closing without any limitation as to time, (c) claims
for damage to real or personal property as of Closing arising out of a breach of
a representation, warranty or covenant shall survive for six (6) months
following the Closing and (d) representations and warranties set forth in
Section 7.20 shall survive the Closing until the fifth anniversary of the
Closing Date. Notwithstanding anything contained herein to the
47
contrary, any covenant, agreement, representation or warranty in respect of
which indemnity may be sought pursuant to this Agreement, shall survive the time
at which it would otherwise terminate pursuant to the preceding sentence, if,
prior to such time, written notice of a good faith claim, breach or inaccuracy
thereof giving rise to such indemnity shall have been given to the other party
specifying in reasonable detail the basis thereof and referencing the provision
of this Agreement pursuant to which the claim is being asserted and shall be
extended for the representation, covenant, agreement or warranty alleged to have
been breached as applied to the circumstances set forth in such notice until
after the final resolution of the matter.
17.3. Arbitration. Except as otherwise provided herein, any
controversy, dispute or question arising out of, or in connection with, or in
relation to this Agreement or its interpretation, performance or non-performance
or any breach thereof shall be determined by arbitration conducted in Atlanta,
Georgia in accordance with the then existing rules of The American Arbitration
Association and any decision rendered by The American Arbitration Association
shall be binding upon the parties hereto provided that no award of punitive
damages shall be awarded in connection therewith. Any judgment upon any award,
which may include an award of damages (other than punitive damages), may be
entered in the highest State or Federal court having jurisdiction thereof.
17.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
17.5. Notices. Any and all notices, certificates, demands or other
communications permitted or required to be made under this Agreement shall be in
writing signed by the party giving such notice or demand, and delivered
personally, or sent by (i) facsimile transmission, (ii) recognized overnight
delivery service or (iii) registered or certified mail to the other party at the
address set forth below, or at such other address as may be supplied in writing
pursuant to the terms of this section. The recipient of such notice shall be
deemed to have received the notice (i) on the date of delivery or the date of
transmission if the notice was personally delivered or sent by facsimile
transmission on a Business Day (or if not a Business Day then the next Business
Day), (ii) on the Business Day after dispatch if the notice was sent by
recognized overnight delivery service with charges prepaid or (iii) five (5)
days after dispatch if sent by registered or certified mail. The rejection or
inability to deliver because of a change of address of which no notice has been
given shall not effect the validity of any notice or demand sent in accordance
with the provisions hereof. For purposes of this Agreement, notices shall be
addressed as follows:
If to Buyer at: If overnight to Buyer:
Bretlin, Inc. Bretlin, Inc.
P. O. Box 12542 ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
48
with a required copy to:
The ▇▇▇▇▇ Group, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy (which shall not constitute notice) to:
▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
If to GFI at:
General Felt Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
17.6. Press Releases and Public Announcements. No party to this
Agreement shall issue any press release or make any public announcement relating
to the subject matter of this Agreement or otherwise disclose any of the terms
of this Agreement without the prior approval of the other party; provided,
however, that any party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing party will use its
reasonable efforts to advise the other party prior to making the disclosure).
The parties acknowledge that GFI and/or its Affiliates and Buyer and/or its
Affiliates may file a Form 8-K, which may include a copy of this Agreement as an
exhibit, promptly following the execution of this Agreement and the Closing of
the transactions contemplated hereby. The parties agree not to file any Exhibits
or Schedules to such Forms 8-K unless such party determines such filing is
required by law and such party has used its best efforts to notify the other
party at least five (5) Business Days prior to such filing or, if not possible,
as soon as practicable.
49
17.7. Entire Agreement, Modification. This instrument contains the
entire agreement of the parties with respect to the subject matter hereof; all
previous agreements and discussions relating to the same or similar subject
matter being merged herein. The parties acknowledge and agree that none of them
has made any representation with respect to the subject matter of this Agreement
or any representations inducing the execution and delivery hereof except as
specifically set forth herein. Each of the parties hereto acknowledges that it
has relied on its own judgment in entering into this Agreement. This Agreement
may not be changed, amended, or modified including specifically the provisions
of this paragraph, except by a writing signed by all of the parties hereto. The
provisions of this paragraph may not be changed, amended, modified, terminated,
or waived as a result of any failure to enforce any provision or the waiver of
any specific breach or breaches thereof or any course of conduct of the parties.
17.8. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
parties intend that each representation, warranty, and covenant contained herein
shall have independent significance. If any party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
17.9. Specific Performance. Each of the parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that on
or prior to the Closing Date the other party shall be entitled to have awarded
by the arbitrators pursuant to Section 17.3 an injunction or injunctions to
prevent imminent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof and to have such
award enforced in any court of the United States or any state thereof having
jurisdiction over the parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
17.10. Assignment. This Agreement and the rights, obligations and
duties of the parties hereto shall not be assignable or otherwise transferable
to any party except that the right to acquire the Purchased Assets may be
assigned by Buyer to a related party of Buyer prior to the Closing; provided,
however, that (a) such assignment shall not relieve the Buyer of its obligations
hereunder, (b) such assignment shall not hinder or delay the Closing, and (c)
such assignee assumes the obligations of Buyer hereunder.
17.11. Binding Effect and Benefit. This Agreement shall inure to the
benefit of, and shall be binding upon, the parties, their heirs, executors and
administrators, successors and permitted assigns.
50
17.12. Further Assurances. GFI shall on the Closing Date, and from
time to time thereafter promptly at Buyer's request and without further
consideration, execute and deliver to Buyer such instruments of transfer,
conveyance and assignment as Buyer shall reasonably request to transfer, convey
and assign more effectively the Purchased Assets to Buyer.
17.13. Partial Invalidation. If any portion of this Agreement is held
invalid, illegal or unenforceable, such determination shall not impair the
enforceability of the remaining terms and provisions contained herein. In such
event, this Agreement shall be construed and interpreted as if such invalid,
illegal or unenforceable terms were limited to the minimum extent whereby such
terms would be valid, legal and enforceable. If such limitation is not possible,
this Agreement shall be construed and interpreted as if such invalid, illegal or
unenforceable terms were severed and not included herein.
17.14. Waiver. No waiver of a breach or violation of any provision of
this Agreement shall operate or be construed as a waiver of any subsequent
breach.
17.15. Exhibits and Schedules. All Exhibits, Schedules and documents
referred to in this Agreement shall be deemed to be incorporated herein by any
reference thereto as if fully set out, yet no matter disclosed in one Schedule
or Exhibit shall be deemed disclosed in another Schedule or Exhibit in the
absence of an express cross-reference.
17.16. No Third Party Beneficiaries. This Agreement shall not create
any rights for the benefit of any third party.
17.17. Governing Law. This Agreement shall be interpreted and
construed in accordance with the laws of the State of Georgia.
ARTICLE XVIII.
FLP GUARANTY
18.1. Guaranty. FLP hereby irrevocably and unconditionally guarantees
to Buyer the agreements to be performed by GFI hereunder (the "GFI
Obligations").
18.2. Nature of Guaranty. The guaranty to be provided by FLP pursuant
to Section 18.1 hereof is a guaranty of payment and performance, not merely of
collection. If GFI shall fail timely to perform or pay any GFI Obligation
hereunder, FLP shall pay or perform such GFI Obligation as and when due. FLP
hereby waives (i) promptness, diligence, notice, disclosure, demand for,
presentment, protest and dishonor, and (ii) except as set forth below, any right
to force Buyer to proceed first, concurrently or jointly against GFI, any other
guarantor, surety or other co-obligor. Buyer hereby agrees that prior to
enforcing its rights of payment and performance against FLP pursuant to Section
18.1 hereof with respect to any GFI Obligation, Buyer shall have (x) made demand
on GFI to perform such GFI Obligation, (y) given GFI a reasonable opportunity to
comply with such GFI Obligation, and (z) determined in its reasonable discretion
that GFI has not or will not comply with such GFI Obligation.
51
18.3. Limitation on Guaranty. Notwithstanding anything to the contrary
contained in this Agreement, the scope of FLP's liability hereunder (as
guarantor) shall in no event be greater than the scope of the liability of GFI
under this Agreement. Buyer expressly agrees that the defenses available to FLP
shall be no less than the defenses which are, or would have been, available to
GFI.
ARTICLE XIX.
▇▇▇▇▇ GUARANTY
19.1. Guaranty. ▇▇▇▇▇ hereby irrevocably and unconditionally
guarantees to GFI the agreements to be performed by Buyer hereunder (the "Buyer
Obligations").
19.2. Nature of Guaranty. The guaranty to be provided by ▇▇▇▇▇
pursuant to Section 19.1 hereof is a guaranty of payment and performance, not
merely of collection. If Buyer shall fail timely to perform or pay any Buyer
Obligation hereunder, ▇▇▇▇▇ shall pay or perform such Buyer Obligation as and
when due. ▇▇▇▇▇ hereby waives (i) promptness, diligence, notice, disclosure,
demand for, presentment, protest and dishonor, and (ii) except as set forth
below, any right to force GFI to proceed first, concurrently or jointly against
Buyer, any other guarantor, surety or other co-obligor. GFI hereby agrees that
prior to enforcing its rights of payment and performance against ▇▇▇▇▇ pursuant
to Section 19.1 hereof with respect to any Buyer Obligation, GFI shall have (x)
made demand on Buyer to perform such Buyer Obligation, , (y) given Buyer a
reasonable opportunity to comply with such Buyer Obligation, and (z) determined
in its reasonable discretion that Buyer has not or will not comply with such
Buyer Obligation.
19.3. Limitation on Guaranty. Notwithstanding anything to the contrary
contained in this Agreement, the scope of Dixie's liability hereunder (as
guarantor) shall in no event be greater than the scope of the liability of Buyer
under this Agreement. GFI expressly agrees that the defenses available to ▇▇▇▇▇
shall be no less than the defenses which are, or would have been, available to
Buyer.
this space intentionally left blank
52
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year aforesaid.
GFI:
GENERAL FELT INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
FLP:
FOAMEX L.P. By FMXI, Inc., its Managing
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
BUYER:
BRETLIN, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇
▇▇▇▇▇:
THE ▇▇▇▇▇ GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
53
LIST OF OMITTED EXHIBITS AND SCHEDULES
In accordance with Item 601 of Regulation S-K, the Registrant hereby
undertakes to furnish supplementally, upon request of the Commission's
Staff, a copy of any of the Exhibits and Schedules listed below, which
have been omitted from this filing.
Exhibit A - Assignment and Assumption Agreement
Exhibit B - Financial Statement
Exhibit C - Phase I Environmental Audit
Exhibit D - 1997 Monthly Projections
Exhibit H - Affidavit of Transferor
Exhibit J - Certificate of General Felt Industries, Inc.
(Bring down)
Exhibit K - Certificate of General Felt Industries, Inc.
(Compliance with covenants)
Exhibit L - Non-Competition Agreement
Exhibit M - Assignment and ▇▇▇▇ of Sale
Exhibit N - ▇▇▇▇▇▇▇ ▇▇▇▇, Opinion Letter
Exhibit O - ▇▇▇▇ ▇▇▇▇▇▇▇ Opinion Letter
Exhibit P - Certificate of Bretlin, Inc.
(Bring down)
Exhibit Q - Certificate of Bretlin, Inc.
(Compliance with covenants)
Exhibit S - Supply Agreement
Schedule 1.1(a) - Inventory Valuation and Review Procedure
Schedule 1.1(b) - Knowledge Parties
Schedule 2.1(a) - Real Property
Schedule 2.1(b) - Real Property Leases
Schedule 2.1(f) - Motor Vehicles
Schedule 2.1(g) - Fixed Assets
Schedule 2.1(j) - Trademarks, Copyrights, etc. relating to the Business
Schedule 2.1(l) - Assumed Contracts
Schedule 2.1(p) - Excluded Telephone Numbers, Facsimile Numbers
and Post Office Box Numbers
Schedule 2.2 - Excluded Assets
Schedule 5.1 - Assumed Liabilities
Schedule 7.3 - Execution Date Liens
Schedule 7.4 - Conflicts
Schedule 7.5 - Inventory Locations
Schedule 7.6 - Noncompliance
Schedule 7.7 - Equipment not in Working Order
Schedule 7.8 - Material Changes in the Business
Schedule 7.10 - Major Customers and Suppliers
Schedule 7.11 - Material Contracts
Schedule 7.14(a) - Other Real Property
Schedule 7.14(c) - Real Property Notices of Violations
Schedule 7.15 - Litigation
Schedule 7.17 - Benefit Plans
Schedule 7.19 - Insurance Policies
Schedule 7.20 - Environmental and Health Matters
Schedule 7.21 - Protection of Intellectual Property
Schedule 7.21(c) - Intellectual Property (GFI)
Schedule 7.21(d) - Third Party Intellectual Property
Schedule 7.22 - Product Warranty Claims
Schedule 12.4 - Licenses and Permits
Schedule 12.5 - Consents and Approvals
Schedule 12.10 - Certain Events
Schedule 16.10 - Rebate Customers
Schedule 16.11 - AT&T Agreements