EXHIBIT 04.01
SECURITIES PURCHASE AGREEMENT
Among
▇. ▇▇▇▇▇, INC.
JBI, INC.
JBI APPAREL, INC.
and
The Several Purchasers Named in Schedule I Hereto
Dated as of May 19, 1999
TABLE OF CONTENTS
Page
I. PURCHASE AND SALE OF SECURITIES 2
SECTION 1.01. Issuance and Sale to Purchasers. 2
SECTION 1.02. Asset Purchase by the Company 2
SECTION 1.03. Closing Date 2
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3
SECTION 2.01. Organization, Qualification and Power 3
SECTION 2.02. Subsidiaries 3
SECTION 2.03. Capitalization 4
SECTION 2.04. Authorization of Agreements, Etc. 5
SECTION 2.05. Validity 5
SECTION 2.06. Governmental Approvals 5
SECTION 2.07. Financial Statements, Etc. 6
SECTION 2.08. SEC Filings 7
SECTION 2.09. Absence of Certain Changes or Events 7
SECTION 2.10. Actions Pending 8
SECTION 2.11. Title to Properties 9
SECTION 2.12. Real Property Interests 9
SECTION 2.13. Intellectual Property Rights 10
SECTION 2.14. Labor Matters 10
SECTION 2.15. Severance Arrangements 11
SECTION 2.16. Taxes 11
SECTION 2.17. Compliance with Law; Permits 12
SECTION 2.18. Employee Benefit Plans 13
SECTION 2.19. Environmental Matters 15
SECTION 2.20. Contracts 17
SECTION 2.21. Insurance 17
SECTION 2.22. Offering of the Securities 18
SECTION 2.23. Related Party Transactions 18
SECTION 2.24. Brokers 18
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 19
SECTION 3.01. Authorization 19
SECTION 3.02. Validity 19
SECTION 3.03. Investment Representations 19
SECTION 3.04. Governmental Approvals 20
IV. COVENANTS OF THE COMPANY, THE GUARANTOR AND APPAREL....................20
SECTION 4.01. Conduct of the Company's Business 20
SECTION 4.02. Access to Information 23
SECTION 4.03. Financial Statements 24
SECTION 4.04. Additional Guaranty 24
SECTION 4.05. Further Assurances 25
SECTION 4.06. Notification of Certain Matters 25
SECTION 4.07. Public Announcements 25
SECTION 4.08. Use of Proceeds 25
V. CONDITIONS PRECEDENT 26
SECTION 5.01. Conditions Precedent to the Obligations of the
Purchasers 26
SECTION 5.02. Conditions Precedent to the Obligations of the
Company 28
VI. SURVIVAL OF REPRESENTATIONS; INDEMNITY.................................29
SECTION 6.01. Survival of Representations 29
SECTION 6.02. General Indemnity 29
SECTION 6.03. Conditions of Indemnification 30
SECTION 6.04. Limitation on Certain Indemnities....................30
VII. TERMINATION 31
SECTION 7.01. Termination by the Parties 31
SECTION 7.02. Effect of Termination 31
VIII. MISCELLANEOUS 32
SECTION 8.01. Restrictive Legends 32
SECTION 8.02. Expenses, Etc. 32
SECTION 8.03. Survival of Agreements 32
SECTION 8.04. Parties in Interest 33
SECTION 8.05. Notices 33
SECTION 8.06. Entire Agreement; Assignment 34
SECTION 8.07. Counterparts 34
SECTION 8.08. Governing Law 34
INDEX TO EXHIBITS, SCHEDULES AND ANNEX
Exhibit Description
------- -----------
A Form of 13% Senior Subordinated Note
B Form of Warrant
C Form of Credit Agreement
D Form of Guaranty
E Form of Registration Rights Agreement
Schedule Description
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I Purchasers and Securities
2.02 Subsidiaries
2.03 Capitalization
2.04 Authorization
2.06 Governmental Approvals
2.07 Financial Statements
2.09 Certain Changes or Events
2.10 Actions Pending
2.12 Real Property
2.13 Intellectual Property
2.15 Severance Arrangements
2.16 Taxes
2.17 Compliance with Law; Permits
2.18 Employee Benefit Plans
2.19 Environmental Matters
2.21 Insurance
Annex Description
----- -----------
I Form of Opinion of Counsel
SECURITIES PURCHASE AGREEMENT dated as of May 19, 1999, among
▇. ▇▇▇▇▇, INC., a Massachusetts corporation (the "Company"), JBI, INC., a
Massachusetts corporation and a wholly-owned subsidiary of the Company
("Guarantor"), JBI APPAREL, INC., a Massachusetts corporation and a wholly-owned
subsidiary of the Guarantor ("Apparel"), and the several persons named in
Schedule I hereto (the "Purchasers").
WHEREAS, Apparel desires to sell to the Purchasers, and the
Purchasers desire to purchase from Apparel, on the terms and subject to the
conditions set forth herein, 13% Senior Subordinated Notes of the Company due
December 31, 2001, in the principal amount of $10,000,000 substantially in the
form attached as Exhibit A hereto (the "Notes"); and
WHEREAS, the Company desires to sell to the Purchasers, and
the Purchasers desire to purchase from the Company, on the terms and subject to
the conditions set forth herein, warrants substantially in the form attached as
Exhibit B hereto (the "Warrants" and together with the Notes, the "Securities")
to purchase up to 1,200,000 shares of common stock, par value $.50 per share, of
the Company ("Common Stock"); and
WHEREAS, Guarantor, desires to guaranty the performance of the
obligations of Apparel under the Notes substantially in the form attached as
Exhibit C hereto (the "Guaranty"); and
WHEREAS, the Company has agreed to purchase the assets (the
"Asset Purchase") of the ▇▇▇▇ divisions (collectively, "▇▇▇▇") of Edison
Brothers Stores, Inc., a Delaware corporation ("Edison Brothers"), for an
aggregate purchase price of approximately $33,000,000, on the terms and subject
to the conditions set forth in the Asset Purchase Agreement, by and between the
Company and Edison Brothers (the "Asset Purchase Agreement"); and
WHEREAS, the Company intends to assign its rights under the Asset Purchase
Agreement to Apparel; and
WHEREAS, in connection with the transactions contemplated by
the Asset Purchase Agreement, Apparel wishes to obtain a senior revolving credit
facility in an amount up to $25,000,000 from BankBoston Retail Finance Inc. and
certain other lenders pursuant to a loan and security agreement substantially in
the form of Exhibit D hereto (the "Credit Agreement") and to receive the
proceeds thereof; and
WHEREAS, in order to induce the Purchasers to consummate the
transactions contemplated by this Agreement, the Company has agreed to enter
into a registration rights agreement substantially in the form of Exhibit E
hereto (the "Registration Rights Agreement") with respect to the shares of
Common Stock that will be issuable upon the exercise of the Warrants purchased
hereunder (the "Warrant Shares");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF SECURITIES
SECTION 1.01. Issuance and Sale to Purchasers.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date (as hereinafter defined) Apparel shall issue, sell and deliver
to the Purchasers, and the Purchasers shall purchase from Apparel, Notes in the
principal amount set forth opposite the name of such Purchaser on Schedule I
hereto under the heading "Notes Purchased."
(b) Subject to the terms and conditions set forth herein, on
the Closing Date (as hereinafter defined) the Company shall issue, sell and
deliver to the Purchasers, and the Purchasers shall purchase from the Company,
Warrants to purchase the number of shares of Common Stock set forth opposite the
name of such Purchaser on Schedule I hereto under the heading "Warrants
Purchased."
(c) As payment in full for the Securities being purchased by
it hereunder, and against delivery of the certificate or certificates therefor
as aforesaid, on the Closing Date each Purchaser shall transfer immediately
available funds by wire transfer to the account or accounts designated by the
Company two business days prior to the Closing Date an amount set forth opposite
the name of such Purchaser on Schedule I hereto under the heading "Aggregate
Purchase Price" for an aggregate amount of $10,000,000.
SECTION 1.02. Asset Purchase by Apparel. Subject to the terms
and conditions set forth in the Asset Purchase Agreement, on the Closing Date
immediately prior to the issuance and sale of the Securities to the Purchasers
pursuant to Section 1.01 hereof and the receipt by Apparel of the requisite
proceeds from the Credit Agreement, Apparel shall consummate the Asset Purchase.
SECTION 1.03. Closing Date. The transfer, sale and delivery of
the Securities contemplated by Section 1.01 hereof (the "Closing") shall take
place at the offices of Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol, ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, as soon as practicable after the
satisfaction or waiver of each of the conditions to the obligations of the
parties set forth in Article VI hereof, or at such date and time as may be
mutually agreed upon among the parties hereto (such date and time of the Closing
being herein called the "Closing Date").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For purposes of this Article II, the Company shall refer to the Company as
its exists on the date hereof, in giving pro forma effect to the transactions
contemplated by the Asset Purchase Agreement. The Company represents and
warrants, for itself and for each of Guarantor and Apparel, to the Purchasers as
follows:
SECTION 2.01. Organization, Qualification and Power. Each of
the Company, the Guarantor and Apparel is a corporation validly existing and in
good standing under the laws of the State of Massachusetts and has all requisite
corporate power and authority to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted. Each of the
Company, the Guarantor and Apparel is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where such failure would not
reasonably be expected to, individually or in the aggregate, have a material
adverse effect on the properties, assets, financial condition, prospects,
operating results or business of the Company and its subsidiaries, taken as a
whole, the Guarantor and its subsidiaries taken as a whole, or Apparel and its
subsidiaries, taken as a whole (a "Material Adverse Effect"). Each of the
Company, the Guarantor and Apparel, as applicable, has the corporate power and
authority to (i) execute, deliver and perform this Agreement and the Credit
Agreement, the Guaranty and the Registration Rights Agreement (collectively, the
"Ancillary Agreements"), (ii) issue, sell and deliver the Securities and the
Warrant Shares and (iii) consummate the Asset Purchase.
SECTION 2.02. Subsidiaries. (a) Except as set forth on
Schedule 2.02 hereto or in (i) the Annual Report of the Company on Form 10-K for
the year ended January 30, 1999, and (ii) all other reports, statements and
registration statements (including Current Reports on Form 8-K) filed by the
Company with the Securities and Exchange Commission (the "SEC") since January
30, 1996, in each case including all amendments, supplements and exhibits
thereto (collectively, the "Company SEC Filings"), neither the Company, the
Guarantor, Apparel nor any of their subsidiaries owns of record or beneficially,
directly or indirectly, (i) any shares of outstanding capital stock or
securities convertible into capital stock of any other corporation or (ii) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise. Each subsidiary of the Company, the Guarantor and Apparel
is a corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own or lease and operate its properties and assets and to carry on
its business as it is now being conducted. Each subsidiary of the Company, the
Guarantor and Apparel is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction in which the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except where such failure would not reasonably be
expected to have a Material Adverse Effect. All the outstanding shares of
capital stock of the Company's, the Guarantor's and Apparel's subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and, except as set
forth on Schedule 2.02, are owned by the Company or by a direct or indirect
wholly-owned subsidiary of the Company, in the case of subsidiaries of the
Company, by the Guarantor or a wholly-owned subsidiary of the Guarantor, in the
case of subsidiaries of the Guarantor, or by Apparel or a wholly-owned
subsidiary of Apparel, in the case of subsidiaries of Apparel, free and clear of
any liens, claims, charges, restrictions, rights of others, security interests,
prior assignments or other encumbrances (collectively, "Claims"), and there are
no proxies, voting or transfer agreements or understandings outstanding with
respect to any such shares.
(b) The Company SEC Filings include a complete and accurate
list of each subsidiary of the Company required to be disclosed therein by the
rules and regulations of the SEC.
(c) For purposes of this Agreement, the term "subsidiary",
when used with respect to the Company, the Guarantor or Apparel, shall mean any
corporation or other business entity, a majority of whose outstanding equity
securities is at the time owned, directly or indirectly, by the Company, the
Guarantor and/or Apparel, as the case may be, and/or one or more other
subsidiaries of the Company, the Guarantor and/or Apparel, as the case may be.
SECTION 2.03. Capitalization.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of Common Stock and 2,100,000 shares of preferred stock, $1.00
par value, of the Company ("Preferred Stock"). As of the date hereof, 14,064,526
shares of Common Stock are issued and outstanding, all of which were duly
authorized and validly issued and are fully paid and nonassessable, and 100,000
shares of Preferred Stock are issued and outstanding. The authorized capital
stock of the Guarantor consists of 300,000 shares of common stock, par value
$1.00 per share, of the Guarantor ("Guarantor Common Stock"). As of the date
hereof, 200 shares of Guarantor Common Stock are issued and outstanding, all of
which are owned by the Company and all of which were duly authorized and validly
issued and are fully paid and nonassessable. The authorized capital stock of
Apparel consists of 200,000 shares of common stock, par value $1.00 per share,
of Apparel ("Apparel Common Stock"). As of the date hereof, 1,000 shares of
Apparel Common Stock are issued and outstanding, all of which are owned by the
Guarantor and all of which were duly authorized and validly issued and are fully
paid and nonassessable.
(b) Except as set forth on Schedule 2.03, neither the Company,
the Guarantor, Apparel nor any of their subsidiaries has any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
SECTION 2.04. Authorization of Agreements, Etc. (a) Except as
set forth on Schedule 2.04 hereto, each of (i) the execution and delivery by the
Company of this Agreement, the Warrants, the Asset Purchase Agreement and the
other agreements related thereto, and the Ancillary Agreements, (ii) the
performance by the Company of its respective obligations hereunder and
thereunder, (iii) the execution and delivery by the Guarantor of this Agreement
and the Guaranty, (iv) the performance by the Guarantor of its respective
obligations hereunder and thereunder, (iv) the execution and delivery by Apparel
of this Agreement, the Notes and the Asset Purchase Agreement, (v) the
performance by Apparel of its respective obligations hereunder and thereunder,
and (vi) the issuance, sale and delivery by each of the Company and Apparel, as
the case may be, of the Securities and the Warrant Shares, and will not violate
any provision of law, any order of any court or other agency of government, the
Articles of Organization or By-laws of the Company, the Guarantor or Apparel, or
any provision of any indenture, agreement or other instrument to which the
Company, the Guarantor, Apparel or any of their properties or assets is bound,
or conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any Claim in favor of any
third person upon any of the assets of the Company, the Guarantor, Apparel or
any of their subsidiaries.
(b) The Securities have been duly authorized by the Company
and Apparel, as the case may be, and, when sold and paid for in accordance with
this Agreement, will be validly issued Notes or Warrants, as the case may be.
The Warrant Shares, when issued and delivered upon the exercise of the Warrants,
will be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock. Neither the issuance, sale and delivery of the Warrants, nor the
issuance and delivery of the Warrant Shares upon the exercise of the Warrants,
is subject to any preemptive rights of stockholders of the Company or to any
right of first refusal or other similar right in favor of any person.
SECTION 2.05. Validity. This Agreement has been duly executed
and delivered by each of the Company, the Guarantor and Apparel and constitutes
the legal, valid and binding obligation of each of the Company, the Guarantor
and Apparel, enforceable against each of the Company, the Guarantor and Apparel
in accordance with its terms. The Notes, the Warrants and the Ancillary
Agreements, when executed and delivered by the Company, the Guarantor and/or
Apparel, as the case may be, as provided in this Agreement, will constitute the
legal, valid and binding obligations of each of the Company, the Guarantor and
Apparel, as the case may by, enforceable against each of the Company, the
Guarantor and Apparel in accordance with their respective terms.
SECTION 2.06. Governmental Approvals. Subject to the accuracy
of the representations and warranties of the Purchasers set forth in Article III
hereof, except as set forth on Schedule 2.06 hereto, no registration or filing
with, or consent or approval of, or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance of this Agreement or any of the Ancillary
Agreements, the issuance, sale and delivery of the Securities, the issuance and
delivery of the Warrant Shares upon the exercise of the Warrants, or the
consummation of the Asset Purchase, other than filings required by the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act")
or the Securities Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.07. Financial Statements, Etc. (a) The Company has
furnished to the Purchasers the consolidated balance sheets of the Company and
its consolidated subsidiaries as of January 30, 1999, January 31 1998, and
February 1, 1997 and their related consolidated statements of income,
stockholders' equity and cash flows for the years then ended, audited by KPMG
Peat Marwick LLP, the independent public accountants retained by the Company.
Except as set forth on Schedule 2.07(a) or in the Company SEC Filings, all such
financial statements (including any related schedules and/or notes, if any) have
been prepared in all material respects in accordance with generally accepted
accounting principles consistently applied and consistent with prior periods
("GAAP"), except as reflected in the notes thereto. Except as set forth on
Schedule 2.07(a) hereto, such balance sheets fairly present, in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries as of their respective dates, and such statements of
operations, changes in stockholders' equity and cash flows fairly present, in
all material respects, the consolidated results of operations of the Company and
its consolidated subsidiaries (as the case may be) for the respective periods
then ended. Except (i) as set forth in the consolidated financial statements of
the Company and its consolidated subsidiaries as of January 30, 1999, or (ii) as
incurred in the ordinary course of business and consistent with past practice
since January 30, 1999, or (iii) as set forth on Schedule 2.07(a) hereto or
incurred in connection with the Asset Purchase or transactions related thereto,
neither the Company nor any of its subsidiaries has any material liabilities or
obligations of any kind or nature that would be required to be disclosed on a
consolidated balance sheet of the Company prepared in accordance with GAAP,
whether known or unknown (whether absolute, secured, contingent or otherwise)
and whether due or to become due.
(b) Guarantor has furnished to the Purchasers (i) the
consolidated balance sheets of the Guarantor and its consolidated subsidiaries
as of January 30, 1999 and 1998 and their related consolidated statements of
income, stockholders' equity and cash flows for the years then ended, in the
same form presented to the Guarantor's working capital lenders. Except as set
forth on Schedule 2.07(b), all such financial statements (including any related
schedules and/or notes, if any) have been prepared in all material respects in
accordance with GAAP, except that such statements do not have the footnotes
required under GAAP. Except as set forth on Schedule 2.07(b) hereto, such
balance sheets fairly present, in all material respects, the consolidated
financial position of the Guarantor and its consolidated subsidiaries as of
their respective dates, and such statements of operations, changes in
stockholders' equity and cash flows fairly present, in all material respects,
the consolidated results of operations of the Company and its consolidated
subsidiaries (as the case may be) for the respective periods then ended. Except
(i) as set forth in the consolidated financial statements of the Guarantor and
its consolidated subsidiaries as of January 30, 1999, or (ii) as incurred in the
ordinary course of business and consistent with past practice since January 30,
1999, neither the Guarantor nor any of its subsidiaries has any material
liabilities or obligations of any kind or nature that would be required to be
disclosed on a consolidated balance sheet of Guarantor prepared in accordance
with GAAP, whether known or unknown (whether absolute, secured, contingent or
otherwise) and whether due or to become due.
SECTION 2.08. SEC Filings. The Company has filed all forms,
reports and documents required to be filed with the SEC since January 30, 1996,
and the Company has made available to the Purchasers, as filed with the SEC,
complete and accurate copies of the Company SEC Filings. The Company SEC Filings
(including, without limitation, any financial statements or schedules included
therein) (i) were prepared in compliance with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act, and the
rules and regulations thereunder, as the case may be, and (ii) did not at the
time of filing (or if amended, supplemented or superseded by a filing prior to
the date hereof, on the date of that filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 2.09. Absence of Certain Changes or Events. Except as
set forth on Schedule 2.09 hereto or as otherwise disclosed in (i) the Company
SEC Filings, or (ii) the financial statements referred to in Sections 2.07(a) or
(b), and except as otherwise expressly contemplated by this Agreement the Asset
Purchase Agreement and the transactions contemplated hereby and thereby, since
January 30, 1999, neither the Company, the Guarantor, Apparel nor any of their
subsidiaries has:
(a) incurred any material obligation or liability (fixed or
contingent), except in the ordinary course of business and consistent
with past practice;
(b) discharged or satisfied any lien, security interest,
charge or other encumbrance or paid any obligation or liability (fixed
or contingent), other than in the ordinary course of business and
consistent with past practice;
(c) mortgaged, pledged or subjected to any lien, security
interest, charge or other encumbrance any of its material assets or
properties (other than mechanic's, materialman's and similar statutory
liens arising in the ordinary course of business and purchase money
security interests arising as a matter of law between the date of
delivery and payment);
(d) transferred, leased or otherwise disposed of any of its
material assets or properties, or acquired any material assets or
properties (including without limitation any leases, licenses or
contract rights), in any case except in the ordinary course of business
and consistent with past practice;
(e) authorized, declared or paid any dividend (other than
regular quarterly dividends by the Company) or made any other
distribution on or in respect of any class of its capital stock or
established a record date for any of the foregoing;
(f) canceled or compromised any material debt or claim other
than in the ordinary course of business consistent with past practice;
(g) waived or released any rights of material value other
than in the ordinary course ofbusiness;
(h) transferred or granted any rights under any material
patents, trademarks, trade names, servicemarks or copyrights or with
respect to any know-how;
(i) entered into any transaction, contract or commitment other
than in the ordinary course of business that, individually or in the
aggregate, are material to the Company and its subsidiaries, taken as a
whole, or Apparel and its subsidiaries, taken as a whole, other than
(A) contracts listed, or which pursuant to the terms hereof are not
required to be listed, on Schedule 2.20 hereto and (B) this Agreement,
the Asset Purchase Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby;
(j) suffered any material casualty loss or damage (whether or
not such loss or damage shall have been covered by insurance) which
affects in any material respect its ability to conduct its business;
(k) suffered any material adverse change in the properties,
assets, condition (financial or other), prospects, operating results or
business of the Company and its subsidiaries, taken as a whole, or
Apparel and its subsidiaries, taken as a whole; or
.
(l) except in connection with this Agreement, the Asset
Purchase Agreement or the Ancillary Agreements and the transactions
contemplated hereby and thereby, entered into any agreement, letter of
intent or similar undertaking to take any of the actions listed in
clauses (a) through (l) above.
SECTION 2.10. Actions Pending. Except (i) for any actions,
suits, investigations or proceedings which individually do not involve claims
against the Company, the Guarantor, Apparel or any of their subsidiaries for
more than $250,000, (ii) as set forth on Schedule 2.10 hereto, or (iii) as set
forth in the Company SEC Filings there is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened in writing
against or affecting the Company or Apparel, or any of their properties or
rights, before any court or by or before any governmental body or arbitration
board or tribunal. Except as set forth on Schedule 2.10 hereto, there is no
unsatisfied judgment, decree, injunction or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company, the Guarantor or Apparel.
SECTION 2.11. Title to Properties. The Company, the Guarantor,
Apparel and their subsidiaries have good and marketable title to the properties
and assets reflected on the January 30, 1999 balance sheets (other than
non-material properties and assets and other properties and assets disposed of
in the ordinary course of business consistent with past practice since the date
of such balance sheet), and all such properties and assets are owned free and
clear of any Claims, except (i) as described on or referred to in the Company
SEC Filings and (ii) for the liens described in clauses (i) through (iv) of
Section 2.12 below. Such properties and assets constitute all of the assets
material to the business of the Company and its subsidiaries (the "Company
Business"), all of the assets material to the business of the Guarantor and its
subsidiaries (the "Guarantor Business") or all of the assets material to the
business of Apparel and its subsidiaries (the "Apparel Business" and together
with the Company Business and the Guarantor Business, the "Businesses") as the
same is currently being conducted.
SECTION 2.12. Real Property Interests. The Company SEC Filings
sets forth a complete and accurate list of the real properties (1) owned by the
Company, the Guarantor or Apparel required by the rules and regulations of the
SEC to be disclosed therein (the "Owned Properties") and (ii) leased by the
Company, the Guarantor, Apparel or any of their subsidiaries required by the
rules and regulations of the SEC to be disclosed therein (the "Leased
Properties"). Except as set forth on Schedule 2.12 hereto or in the Company SEC
Filings, the Company, the Guarantor or Apparel, as the case may be, has good and
marketable fee title to each Owned Property, including the buildings,
structures, and other improvements located thereon, free and clear of all
Claims, subject to (i) liens for current taxes not yet due, (ii) landlord's
liens, (iii) purchase money liens and (iv) ▇▇▇▇▇▇▇'▇, materialman's,
warehouseman's and similar liens arising by law or statute, except, in the case
of (i), (ii), (iii) or (iv) above, for those liens which would not reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule 2.12
hereto, there are no condemnations or eminent domain proceedings pending or, to
the knowledge of the Company threatened, against any Owned Property or any
material portion thereof except for those condemnations or proceedings which
would not reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 2.12 hereto, neither the Company, the Guarantor nor
Apparel has received any notice from any city, village or other governmental
authority of any zoning, ordinance, land use, building, fire or health code or
other legal violation in respect of any Owned Property, other than violations
which have been corrected or which could not reasonably be expected to have a
Material Adverse Effect. Each lease or other agreement relating to the Leased
Properties is in full force and effect, without any material default of the
Company, the Guarantor, Apparel or any such subsidiary thereunder and without
any material default thereunder of the other party thereto, except for those
defaults which would not reasonably be expected to have a Material Adverse
Effect, and such leases and agreements together with the Owned Properties give
the Company, the Guarantor, Apparel and their subsidiaries the right to use or
occupy, as the case may be, all real properties as are sufficient and adequate
to operate the Businesses as the same are currently being conducted.
SECTION 2.13. Intellectual Property Rights. The patents,
trademarks and trade names, trademark and trade name registrations, servicemark,
brandmark and brand name registrations and copyrights, the applications therefor
and the licenses with respect thereto (collectively, "Intellectual Property
Rights") listed on Schedule 2.13 hereto constitute all such material proprietary
rights to be acquired by Apparel pursuant to the Asset Purchase Agreement. The
Company, the Guarantor, Apparel and their subsidiaries conduct the Businesses
without any material claim of infringement of any Intellectual Property Right of
others, except for those claims which would not reasonably be expected to have a
Material Adverse Effect; (ii) the consummation of the Asset Purchase and the
transactions contemplated by this Agreement will not violate, terminate, impair
or compromise any Intellectual Property Right; (iii) none of the Intellectual
Property Rights listed on Schedule 2.13 is the subject of any outstanding order,
ruling, decree, judgment or stipulation, except for those orders, rulings,
decrees, judgements or stipulations which would not reasonably be expected to
have a Material Adverse Effect; (iv) none of the authorized activities of any
employee of the Company, the Guarantor, Apparel or any of their subsidiaries on
behalf thereof violates any obligations of such employee to third parties,
including, without limitation, confidentiality or non-competition obligations
under agreements with a former employer, except for those violations which would
not reasonably be expected to have a Material Adverse Effect; and (v) the
Company, the Guarantor, Apparel and their subsidiaries have taken and are taking
reasonable precautions to protect any material trade secrets and other
confidential information included in the Intellectual Property Rights.
SECTION 2.14. Labor Matters. Except as set forth in the
Company SEC Filings, neither the Company, the Guarantor, Apparel nor any of
their subsidiaries is or has been a party to any collective bargaining or union
agreement, and no such agreement is or has been applicable to any employees of
the Company, the Guarantor, Apparel or any of their subsidiaries. Except as set
forth in the Company SEC Filings, there are no pending controversies between the
Company, the Guarantor, Apparel or any of their subsidiaries and any of such
employees that might reasonably be expected to result in a Material Adverse
Effect, or any unresolved labor union grievances or unfair labor practice or
labor arbitration proceedings pending or threatened relating to the Businesses.
Except as set forth in the Company SEC Filings, there are no labor unions or
other organizations representing or purporting to represent any employees of the
Company, the Guarantor, Apparel or any of their subsidiaries and there are not
any organizational efforts currently being made or threatened involving any of
such employees. Except as set forth in the Company SEC Filings, the Company, the
Guarantor, Apparel and their subsidiaries are in compliance in all material
respects with all laws and regulations or other legal or contractual
requirements regarding the terms and conditions of employment of employees,
former employees or prospective employees or other labor related matters,
including without limitation laws, rules, regulations, orders, rulings,
conciliation agreements, decrees, judgments and awards relating to wages, hours,
the payment of social security and similar taxes, equal employment opportunity,
employment discrimination, fair labor standards, occupational health and safety,
wrongful discharge or violation of the personal rights of employees, former
employees or prospective employees. Neither the Company, the Guarantor, Apparel
nor any of their subsidiaries is liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing, except for those
liabilities which would not reasonably be expected to have a Material Adverse
Effect.
SECTION 2.15. Severance Arrangements. Except as set in the
Company SEC Filings, neither the Company, the Guarantor, Apparel nor any of
their subsidiaries is party to any agreement with any executive officer (i) the
benefits of which (including, without limitation, severance benefits) are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company, the Guarantor, Apparel or any of their
subsidiaries of the nature of any of the transactions contemplated by this
Agreement or in connection with the Asset Purchase.
SECTION 2.16. Taxes. (a) Except as set forth on Schedule 2.16
hereto, each of the Company, the Guarantor, Apparel, their subsidiaries and any
affiliated, combined or unitary group of which any such corporation is or was a
member has (A) timely filed (taking into account any extension) all Federal and
all material state, local and foreign returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed by it in
respect of any Taxes (as hereinafter defined), (B) timely paid all material
Taxes that are due and payable with respect to the periods covered by the
Returns referred to in clause (A) without regard to whether such Taxes have been
assessed (except for audit adjustments not material in the aggregate or to the
extent that liability therefor is fully reserved for in the Company's, the
Guarantor's or Apparel's most recent audited financial statements), (C)
established reserves that are adequate for the payment of all Taxes not yet due
and payable with respect to the results of operations of the Company, the
Guarantor, Apparel and their subsidiaries through the date hereof and through
the Closing Date, and (D) complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes,
including without limitation required withholding from employee wages.
(b) Schedule 2.16 sets forth the last taxable period through
which the Federal income Tax Returns of the Company, the Guarantor, Apparel and
any of their subsidiaries (A) have been examined by the Internal Revenue Service
and closed or (B) with respect to which the applicable period for assessment
under applicable law, after giving effect to extensions or waivers, has expired.
All deficiencies asserted as a result of such examinations and any examination
by any applicable state, local or foreign taxing authority which have not been
or will not be appealed or contested in a timely manner have been paid, fully
settled or adequately provided for in the Company's or Apparel's most recent
audited financial statements. Except as set forth on Schedule 2.16, no Federal,
state, local or foreign Tax audits or other administrative proceedings or court
proceedings are currently pending with regard to any Federal or material state,
local or foreign Taxes for which the Company, the Guarantor, Apparel or any of
their subsidiaries would be liable, and no material deficiency for any such
Taxes has been proposed, asserted or assessed or, to the best knowledge of the
Company, threatened pursuant to such examination of the Company, the Guarantor,
Apparel or any of their subsidiaries by such Federal, state, local or foreign
taxing authority with respect to any period.
(c) Except as set forth on Schedule 2.16, neither the Company,
the Guarantor, Apparel nor any of their subsidiaries has executed or entered
into with the Internal Revenue Service or any taxing authority (A) any agreement
or other document extending or having the effect of extending the period for
assessments or collection of any Federal, state, local or foreign Taxes for
which the Company, the Guarantor, Apparel or any of their subsidiaries would be
liable or (B) a closing agreement pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), or any
predecessor provision thereof or any similar provision of state, local or
foreign income Tax law that relates to the assets or operations of the Company,
the Guarantor, Apparel or any of their subsidiaries.
(d) Except as set forth on Schedule 2.16 hereto, neither the
Company, the Guarantor, Apparel nor any of their subsidiaries is a party to any
agreement providing for the allocation or sharing of liability for any Taxes.
(e) The Company has made available to the Purchasers complete
and accurate copies of all income and franchise Tax Returns and all other
material Returns filed by or on behalf of the Company, Apparel or any of their
subsidiaries for the three taxable years ending on or prior to December 31,
1998, as well as for any taxable year which is under or still subject to
examination by any applicable taxing authority.
(f) Each of the Company, the Guarantor and Apparel is not and
has not been at any time over the last five years a "U.S. real property holding
corporation," as defined in section 897 (c)(2) of the Internal Revenue Code.
For purposes of this Agreement, "Taxes" shall mean all
Federal, state, local, foreign or other taxing authority income, franchise,
sales, use, ad valorem, property, payroll, social security, unemployment,
assets, value added, withholding, excise, severance, transfer, employment,
alternative or add-on minimum and other taxes, charges, fees, levies, imposts,
duties, licenses or other assessments, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority.
SECTION 2.17. Compliance with Law; Permits. Neither the
Company, the Guarantor, Apparel nor any of their subsidiaries is in default in
any respect under any order or decree of any court, governmental authority,
arbitrator or arbitration board or tribunal or under any laws, ordinances,
governmental rules or regulations to which the Company, the Guarantor, Apparel
or any of such subsidiaries or any of their respective properties or assets is
subject, except where such default would not have a Material Adverse Effect. The
Company, the Guarantor and/or Apparel possesses all material permits,
authorizations, approvals, registrations, variances and licenses ("Permits")
necessary for the Company, the Guarantor, Apparel or their subsidiaries to own,
use and maintain their properties and assets or required for the conduct of each
of the Businesses in substantially the same manner as it is currently conducted.
Each Permit is in full force and effect and no proceeding is pending or, to the
best knowledge of the Company, the Guarantor or Apparel, threatened in writing
to modify, suspend, revoke or otherwise limit any Permit and no administrative
or governmental actions have been taken or, to the best knowledge of the
Company, the Guarantor or Apparel, threatened in writing in connection with the
expiration or renewal of any Permit. Except as set forth on Schedule 2.17
hereto, neither the Company, the Guarantor, Apparel nor any of their
subsidiaries will be required, as a result of the consummation of the
transactions contemplated hereby or in connection with the Asset Purchase or the
transactions contemplated hereby or thereby, to obtain or renew any Permit,
except for such failure which would not reasonably be expected to have a
Material Adverse Effect.
SECTION 2.18. Employee Benefit Plans. (a) As used herein the
term "Plans" means any plan, program, arrangement, agreement, binding written
commitment or other material binding commitment that is an employment,
consulting or deferred compensation agreement, or an executive compensation,
incentive bonus or other bonus, employee pension, profit-sharing, savings,
retirement, stock option, stock purchase, severance pay, life, health,
disability or accident insurance plan, or vacation or other employee benefit
plan, program, arrangement, agreement, binding written commitment or other
material binding commitment, including, without limitation, each employee
benefit plan (as defined under Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained by the Company, the
Guarantor, Apparel or any of their subsidiaries or any trade or business
(whether or not incorporated) which, together with such persons, would be
treated as a single employer under Title IV of ERISA or Section 414 of the
Internal Revenue Code (collectively, the "ERISA Affiliates") or to which any
ERISA Affiliate contributes or has any obligation to contribute to, or has or
may have any liability (including, without limitation, a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement).
(b) Each of the Company, the Guarantor, Apparel and each of their subsidiaries
have complied, and currently are in compliance, in all material respects with
all laws and regulations applicable to the Plans, including, without limitation,
ERISA and the Internal Revenue Code.
(c) No ERISA Affiliate has, within the last six years,
maintained, adopted or established, contributed to or been required to
contribute to, or otherwise participated in or been required to participate in,
any employee benefit plan or other program or arrangement subject to Title IV of
ERISA (including, without limitation, a "multi-employer plan" (as defined in
Section 3(37) of ERISA), a multiple employer plan (as defined in Section 210 of
ERISA) and a defined benefit plan (as defined in Section 3(35) of ERISA), and no
ERISA Affiliate has incurred or will incur any material liability as a result of
its maintenance, adoption or establishment of, contribution to, other
participation in, or its being required to contribute to or otherwise
participate in, any such plan, program or arrangement at any time prior to the
Closing Date.
(d) Except as set forth on Schedule 2.18, neither the Company,
the Guarantor, Apparel nor any of their subsidiaries provides or may be required
to provide and no Plan, other than a Plan that is an employee pension benefit
plan (within the meaning of Section 3(2)(A) of ERISA), provides or may be
required to provide benefits, including, without limitation, death, health or
medical benefits (whether or not insured), with respect to current or former
employees of the Company, the Guarantor, Apparel or any of their subsidiaries
beyond their retirement or other termination of service with the Company, the
Guarantor, Apparel or their subsidiaries (other than (A) coverage mandated by
applicable law, (B) deferred compensation benefits accrued as liabilities on the
books of the Company, the Guarantor, Apparel or their subsidiaries, or (C)
benefits the full cost of which is borne by the current or former employee (or
his or her beneficiary)). No ERISA Affiliate maintains any Plan under which any
employee or former employee of any of the ERISA Affiliates may receive medical
benefits which cannot be modified or terminated by the ERISA Affiliates at any
time without the consent of any person (except as provided by generally
applicable legislation).
(e) Neither the transactions contemplated hereby nor the Asset
Purchase will result in (i) any portion of any amount paid or payable by the
Company, the Guarantor or Apparel to a "disqualified individual" (within the
meaning of Section 280G(c) of the Internal Revenue Code and the regulations
promulgated thereunder), whether paid or payable in cash, securities of the
Company or Apparel or otherwise and whether considered alone or in conjunction
with any other amount paid or payable to such a "disqualified individual", being
an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Internal Revenue Code and the regulations promulgated thereunder, (ii) any
employee of the Company, the Guarantor, Apparel or any of their subsidiaries
being entitled to severance pay, unemployment compensation, or any other
payment, (iii) an acceleration of the time of payment or vesting, or an increase
in the amount of compensation due to any such employee or former employee or
(iv) any prohibited transaction described in Section 406 of ERISA or Section
4975 of the Internal Revenue Code for which an exemption is not available.
(f) No ERISA Affiliates have incurred any material liability
with respect to any Plan under ERISA (including, without limitation, Title I or
Title IV thereof, other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Internal Revenue Code or other applicable law, which
has not been satisfied in full or been accrued on the consolidated balance sheet
of the Company and its subsidiaries as of January 30, 1999 pending full
satisfaction, and no event has occurred, and there exists no condition or set of
circumstances which could result in the imposition of any material liability
under ERISA, the Internal Revenue Code or other applicable law with respect to
any Plan.
(g) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under such insurance policy have been paid, and, except as set forth on
Schedule 2.18, as of the Closing Date there will be no material liability of any
of the ERISA Affiliates under any such insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Closing Date.
(h) None of the ERISA Affiliates has made any contribution to
any Plan that may be subject to any material excise tax under Section 4972 of
the Internal Revenue Code.
SECTION 2.19. Environmental Matters.
(a) Except as set forth in Schedule 2.19 hereto:
(i) Neither the business or operations of the Company, the
Guarantor, Apparel and their subsidiaries, nor any of the Owned
Properties or Leased Properties (the "Real Property"), violates any
applicable Environmental Law (as defined below) in any material
respect.
(ii) Neither the Company, the Guarantor, Apparel nor any of
their subsidiaries has stored, used, treated, released, discharged,
spilled or disposed of any pollutants, contaminants, hazardous or toxic
wastes, substances or materials, or other wastes or materials, that are
subject to regulation under any applicable Environmental Law
(collectively, "Regulated Materials"), either on or at any Real
Property or at any other location, in violation in any material respect
of any Environmental Law.
(iii) Neither the Company, the Guarantor, Apparel nor any of
their subsidiaries has received any notice from any governmental
authority or any other person alleging that the Company, the Guarantor,
Apparel, their subsidiaries, or their respective business, operations,
or properties are in violation of any Environmental Law or any
applicable Governmental Approval (as defined below), or that any of
them are responsible or potentially responsible for the investigation,
removal, confinement, remediation or cleanup (collectively, "Response
Action") of any Regulated Material at, on or beneath (A) the Real
Property or any land adjacent thereto; (B) any property previously
owned, leased or operated by the Company, the Guarantor, Apparel, their
subsidiaries, or any of their predecessors; or (C) any other site.
(iv) Neither the Company, the Guarantor, Apparel nor any of
their subsidiaries is subject to any actual or threatened government or
private litigation or proceedings involving a claim for damages or
other potential liabilities arising under or pursuant to any
Environmental Law or Common Law Environmental Principles (as defined
below).
(v) There is no condition or circumstance at, on or beneath
(A) any premises owned, leased, or operated by the Company, the
Guarantor, Apparel or any of their subsidiaries, or previously owned,
leased or operated by the Company, the Guarantor, Apparel, their
subsidiaries or any of their predecessors, or (B) any property at which
Regulated Materials generated by the Company, the Guarantor, Apparel,
any of their subsidiaries or any of their respective predecessors have
been treated or disposed of, that could reasonably be expected to give
rise to any liability, loss or expense to the Company, the Guarantor or
Apparel under any Environmental Law or form the basis of any
requirement for a Response Action by the Company, the Guarantor or
Apparel under any Environmental Law or Common Law Environmental
Principles. Neither the Company, the Guarantor, Apparel, nor any of
their subsidiaries have arranged for the treatment or disposal of any
Regulated Material, or arranged for the transport of a Regulated
Material for treatment or disposal, at or to any facility listed or
proposed for listing on the National Priorities List established
pursuant to CERCLA (as defined below) or on any list established by
another governmental authority of sites requiring Response Action, or
to any other location that is the subject of enforcement action or
Response Action, or to the best knowledge of the Company, the Guarantor
or Apparel, an investigation by any Governmental Authority or other
party that could lead to claims against the Company, the Guarantor,
Apparel or their subsidiaries for any Response Action, property or
natural resource damages, or personal injury.
(vi) The Company, the Guarantor, Apparel and their
subsidiaries now hold, and the Company, the Guarantor, Apparel, and
their subsidiaries, and their respective predecessors in the past have
held, all Governmental Approvals required under any applicable
Environmental Laws with respect to their respective businesses,
operations, activities, properties and assets, except where such
failure would not reasonably be expected to have a Material Adverse
Effect. Each of the Company, the Guarantor, Apparel and their
subsidiaries has timely filed all material reports required to be filed
by it under applicable Environmental Laws with respect to the
properties, operations, and businesses of the Company, the Guarantor,
Apparel and their subsidiaries; and each of the Company, the Guarantor,
Apparel and their subsidiaries has generated and maintained, in all
material respects, all data, documentation and records required to be
generated or maintained by the Company, the Guarantor, Apparel and
their subsidiaries under any applicable Environmental Laws with respect
thereto.
(b) For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Common Law Environmental Principles" means any principles
of common law under which a person or entity may be held liable for the
release or discharge into the environment of any pollutants,
contaminants, hazardous or toxic wastes, substances or materials, or
other wastes or materials.
(ii) "Environmental Law" shall mean any federal, state,
provincial, foreign, or local statute, law, rule, regulation,
ordinance, code, order, consent decree, settlement agreement, or policy
having the force of law relating to protection of the environment,
natural resources, or public or employee health and safety, or relating
to the production, generation, use, storage, treatment, processing,
transportation or disposal of Regulated Materials, including, without
limitation: the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601 et seq. ("CERCLA"); the Superfund
Amendments and Reauthorization Act, Public Law 99-499, 100 Stat. 1613;
the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq.;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
ss.136, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
ss.1801; the Federal Water Pollution Control Act, 33 U.S.C. ss.1251 et
seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.2701 et seq.; the
Clean Air Act, 42 U.S.C. ss.7401 et seq.; the Occupational Safety and
Health Act, 29 U.S.C. ss.651 et seq.; and counterpart state and local
laws, and regulations adopted thereunder.
(iii) "Governmental Approval" means any permit, license,
authorization, consent, approval, waiver, exception, variance, order,
or exemption issued by any governmental authority in respect of any
Environmental Law.
SECTION 2.20. Contracts. Except as set forth the Company SEC
Filings or entered into in connection with this Agreement, the Asset Purchase
Agreement or the transactions contemplated hereby or thereby, there are no
contracts or agreements that are material to the conduct of the Businesses or to
the financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. The Company has made available to the Purchasers
complete and accurate copies of said contracts and agreements. Such agreements
are valid and enforceable obligations of the Company, the Guarantor, Apparel or
their subsidiaries, as the case may be, and, to the best knowledge of the
Company, the Guarantor or Apparel, of the other par ties thereto. Neither the
Company, the Guarantor nor Apparel has been notified in writing of any claim
that any agreement referred to on such Schedule is not valid and enforceable in
accordance with its terms for the periods stated therein, or that there is under
any such contract any existing default or event of default or event which with
notice or lapse of time or both would constitute such a default.
SECTION 2.21. Insurance. All policies of fire, liability,
workers' compensation and other forms of insurance providing insurance coverage
to or for the Company, the Guarantor, Apparel or any of their subsidiaries for
events or occurrences arising or taking place in the case of occurrence type
insurance, and for claims made or suits commenced in the case of claims-made
type insurance, between the date of this Agreement and the Closing Date, are
listed on Schedule 2.21 hereto, and, except as set forth on Schedule 2.21, all
premiums with respect thereto covering all periods up to and including the date
hereof have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. All such policies are in full force
and effect, and, except as set forth on Schedule 2.21, provide insurance in such
amounts and against such risks as is customary for companies engaged in similar
businesses to protect the employees, properties, assets, business and operations
of the Company, the Guarantor, Apparel and their subsidiaries. All such policies
will remain in full force and effect and will not in any way be affected by, or
terminate or lapse by reason of, any of the transactions contemplated hereby or
the Asset Purchase.
SECTION 2.22. Offering of the Securities. Neither the Company,
Apparel nor any person authorized or employed by the Company or Apparel as
agent, broker, dealer or otherwise in connection with the offering or sale of
the Securities or any similar securities of the Company or Apparel has offered
any such securities for sale to, or solicited any offers to buy any such
securities from, or otherwise approached or negotiated with respect thereto
with, any person or persons, under circumstances that involved the use of any
form of general advertising or solicitation as such terms are defined in
Regulation D of the Securities Act; and, assuming the accuracy of the
representations and warranties of the Purchasers set forth in Article III
hereof, neither the Company, Apparel nor any person acting on the Company's or
Apparel's behalf has taken or will take any action (including, without
limitation, any offer, issuance or sale of any securities of the Company or
Apparel under circumstances which might require the integration of such
transactions with the sale of the Securities under the Securities Act or the
rules and regulations of the SEC thereunder) which would subject the offering,
issuance or sale of the Securities to the Purchasers to the registration
provisions of the Securities Act.
SECTION 2.23. Related Party Transactions. Except as set forth
in the Company SEC Documents or as contemplated hereby, there are no existing
material arrangements or proposed material transactions between the Company, the
Guarantor or Apparel and (i) any executive officer or director of the Company,
the Guarantor, Apparel or any member of the immediate family of any of the
foregoing persons (such officers, directors and family members being hereinafter
individually referred to as a "Related Party"), (ii) any business (corporate or
otherwise) which a Related Party owns, directly or indirectly, or in which a
Related Party has an ownership interest, or (iii) between any Related Party and
any business (corporate or otherwise) with which the Company, the Guarantor or
Apparel regularly does business.
SECTION 2.24. Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by the
Company, the Guarantor and Apparel directly with the Purchasers without the
intervention of any other person on behalf of the Company, the Guarantor or
Apparel in such manner as to give rise to any valid claim by any other person
against the Purchasers for a finder's fee, brokerage commission or similar
payment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and
warrants to the Company as follows:
SECTION 3.01. Authorization. The execution, delivery and
performance by such Purchaser of this Agreement and the Ancillary Agreements,
and the purchase and receipt by such Purchaser of the Securities being acquired
by it hereunder, have been duly authorized by all requisite action on the part
of such Purchaser, and will not violate any provision of law, any order of any
court or other agency of government, the charter or other governing documents of
such Purchaser, or any provision of any indenture, agreement or other instrument
by which such Purchaser or any of such Purchaser's properties or assets are
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in any Claim upon any of the properties or assets of such
Purchaser.
SECTION 3.02. Validity. This Agreement has been duly executed
and delivered by such Purchaser and constitutes the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms. Each of the Ancillary Agreements, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms.
SECTION 3.03. Investment Representations.
(a) Such Purchaser is acquiring the Securities being purchased
by such Purchaser hereunder for such Purchaser's own account, for investment,
and not with a view toward the resale or distribution thereof.
(b) Such Purchaser understands that he, she or it, as the case
may be, must bear the economic risk of such Purchaser's investment for an
indefinite period of time because the Securities are not registered under the
Securities Act or any applicable state securities laws, and may not be resold
unless subsequently registered under the Securities Act and such other laws or
unless an exemption from such registration is available. Such Purchaser also
understands that, except as provided in the Registration Rights Agreement, it is
not contemplated that any registration will be made under the Securities Act or
that the Company will take steps which will make the provisions of Rule 144
under the Securities Act available to permit resale of the Securities. Such
Purchaser agrees not to pledge, transfer, convey or otherwise dispose of any of
the Securities, except in a transaction that is the subject of either (i) an
effective registration statement under the Securities Act and any applicable
state securities laws, or (ii) an unqualified opinion of counsel to the effect
that such registration is not required (which opinion and counsel shall be
reasonably satisfactory to the Company, it being agreed that Reboul, MacMurray,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol shall be satisfactory, and may be relied on by the
Company in making such determination), it being intended that the agreements
with respect to the Securities contained in this sentence shall be construed
consistently with the provisions relating to the same subject matter contained
in the Registration Rights Agreement.
(c) Such Purchaser is able to fend for itself in the
transactions contemplated by this Agreement and such Purchaser has the ability
to bear the economic risks of the investment in the Securities being purchased
hereunder for an indefinite period of time. Without limiting or compromising the
rights of the Purchasers pursuant to Section 4.02 hereof, such Purchaser further
acknowledges that he, she or it, as the case may be, has received copies of the
documents that it deems relevant to the transactions contemplated hereby and has
had the opportunity to ask questions of, and receive answers from, officers of
the Company and Edison Stores with respect to the business and financial
condition of the Company and ▇▇▇▇ and the terms and conditions of the offering
of the Securities and to obtain additional information necessary to verify such
information or can acquire it without unreasonable effort or expense.
(d) Such Purchaser has such knowledge and experience in
financial and business matters that such Purchaser is capable of evaluating the
merits and risks of its investment in the Securities. Except as set forth on
Schedule 3.03, such Purchaser further represents that he, she or it, as the case
may be, is an "accredited investor" as such term is defined in Rule 501 of
Regulation D of the SEC under the Securities Act with respect to its purchase of
the Securities, and that any such Purchaser that is a limited partnership has
not been formed for the purpose of purchasing the Securities.
(e) If such Purchaser is a limited partnership, such Purchaser
represents that it has been organized and is existing as a limited partnership
under the laws of the State of Delaware.
SECTION 3.04. Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any Federal, state
or other governmental agency or instrumentality is or will be necessary by the
Purchasers for the valid execution, delivery and performance of this Agreement
and the Ancillary Agreements.
ARTICLE IV.
COVENANTS OF THE COMPANY, THE GUARANTOR AND APPAREL
SECTION 4.01. Conduct of the Company's, the Guarantor's and
Apparel's Business. Each of the Company, the Guarantor and Apparel, in the case
of the Guarantor and Apparel solely with respect to it and its subsidiaries,
covenants and agrees that, prior to the Closing Date (and not after the Closing
Date), unless the Purchasers shall otherwise consent in writing or as otherwise
expressly contemplated by this Agreement, the Asset Purchase Agreement or the
transactions contemplated hereby or thereby:
(a) the Businesses shall be conducted only in, and the
Company, the Guarantor, Apparel and its subsidiaries shall not take any action
except in, the ordinary course of business consistent with past practice and
each of the Company, the Guarantor, Apparel and their subsidiaries shall use its
best efforts to preserve intact its present business organization, keep
available the services of its current officers and employees, maintain its
assets (other than those permitted to be disposed of hereunder) in good repair
and condition, maintain its books of account and records in the usual, regular
and ordinary manner and preserve its goodwill and ongoing business;
(b) neither the Company, the Guarantor nor Apparel shall
directly or indirectly do any of the following: (i) issue, sell, pledge, dispose
of or encumber (or permit any of its subsidiaries to issue, sell, pledge,
dispose of or encumber) (A) any capital stock of any of its subsidiaries or (B)
any property or assets (including Intellectual Property Rights) of the Company,
the Guarantor, Apparel or any of their subsidiaries, except inventory and
immaterial assets in the ordinary course of business consistent with past
practice; (ii) amend or propose to amend its Articles of Organization or
By-Laws; (iii) split, combine or reclassify any outstanding shares of its
capital stock, or declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to such shares (except for any dividends paid
in the ordinary course to the Company or to any wholly-owned subsidiary of the
Company); (iv) redeem, purchase, acquire or offer to acquire (or permit any of
its subsidiaries to redeem, purchase, acquire or offer to acquire) any shares of
its capital stock; or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this paragraph (b);
(c) neither the Company, the Guarantor, Apparel nor any of their subsidiaries
shall (i) issue, sell, pledge or dispose of, or agree to issue, sell, pledge or
dispose of, any additional shares of, or securities convertible or exchangeable
for, or any options, warrants or rights of any kind to acquire any shares of,
its capital stock of any class or other property or assets whether pursuant to
the Company's stock option plan or otherwise or modify the terms or any
outstanding options, warrants or rights to acquire the Company's, the
Guarantor's or Apparel's capital stock; provided that the Company, the Guarantor
or Apparel may issue shares of Common Stock upon the exercise of currently
outstanding options, warrants or contractual rights referred to in Section
2.03(c) hereof or Schedule 2.03 hereof; (ii) acquire (by merger, consolidation
or acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof (except an existing wholly-owned
subsidiary) or any material amount of assets, except pursuant to the Asset
Purchase Agreement; (iii) incur or guarantee any indebtedness for borrowed money
or refinance any such indebtedness or issue or sell any debt securities, except
in the ordinary course of business consistent with past practice; (iv) enter
into or modify any material contract, lease, agreement or commitment, or permit
or perform any act that would cause a material breach of any such contract,
lease, agreement or commitment; (v) terminate, modify, assign, waive, release or
relinquish any material contract rights or amend any material rights or claims;
(vi) other than as disclosed on Schedule 2.09 hereof, discharge or satisfy any
material Claim or settle or compromise any material claim, action, suit or
proceeding pending or threatened against the Company, the Guarantor, Apparel or
any of their subsidiaries, or, if the Company, the Guarantor, Apparel or any of
their subsidiaries may be liable or obligated to provide indemnification,
against the Company's, the Guarantor's or Apparel's directors or officers,
before any court, governmental agency or arbitrator; (vii) make any loans,
advances or capital contributions to or investments in, any other person; (viii)
alter through merger, liquidation, reorganization, restructuring or in any other
manner the corporate structure or ownership of any subsidiary of the Company,
the Guarantor or of Apparel; (ix) violate or fail to perform, in any material
respect, any obligation imposed upon the Company, the Guarantor, Apparel or any
of their subsidiaries by any applicable laws, orders or decrees, ordinances,
government rules or regulations or conciliation agreements; or (x) to the extent
not described herein, take any action described in Section 2.09 hereof;
(d) neither the Company, the Guarantor, Apparel nor any of
their subsidiaries shall grant any increase in the salary or other compensation
of its directors, officers or employees, except reasonable salary increases, in
the case of employees who are not directors or executive officers of the
Company, the Guarantor, Apparel or any of their subsidiaries, in the ordinary
course of business consistent with past practice, or grant any bonus to any
employee or enter into any employment agreement or make any loan to or enter
into any material transaction of any other nature with any employee of the
Company, the Guarantor, Apparel or any of their subsidiaries;
(e) neither the Company, the Guarantor, Apparel nor any of
their subsidiaries shall take any action to institute any new severance or
termination pay practices with respect to any directors, officers or employees
of the Company, the Guarantor, Apparel or their subsidiaries or to increase the
benefits payable under its severance or termination pay practices;
(f) neither the Company, the Guarantor, Apparel nor any of
their subsidiaries shall (except for reasonable salary increases for employees
who are not directors or executive officers of the Company, the Guarantor,
Apparel or any of their subsidiaries in the ordinary course of business
consistent with past practice) adopt or amend, in any material respect, any Plan
for the benefit or welfare of any directors, officers or employees, except as
contemplated hereby or as may be required by applicable law or regulation;
(g) each of the Company, the Guarantor, Apparel and their
subsidiaries shall use its best efforts, to the extent not prohibited by the
foregoing provisions of this Section 4.01, to maintain its relationships with
its suppliers and customers, clients and others having business dealings with
it, and if and as requested by the Purchasers, (i) the Company shall use its
best efforts to make reasonable arrangements for representatives of the
Purchasers to meet with customers and suppliers of the Company, the Guarantor,
Apparel or any of their subsidiaries and (ii) the Company shall schedule, and
the management of the Company shall participate in, meetings of representatives
of the Purchasers with employees of the Company, the Guarantor, Apparel or any
of their subsidiaries;
(h) the Company shall provide to the Purchasers or their
representatives a draft of any Federal income Tax return or material state,
local or foreign Tax return (other than state or local sales and use taxes)
required to be filed on behalf of the Company, the Guarantor, Apparel or any of
their subsidiaries between the date of this Agreement and the Closing Date at
least 30 days prior to the date on which such return is due (or, if later, any
extensions of such date) and shall not file any such return without the consent
of the Purchasers or their representatives, unless required by applicable law;
(i) each of the Company, the Guarantor and Apparel shall not,
and shall not permit any subsidiary to, (A) utilize accounting principles
different from those used in the preparation of the financial statements
referred to in Section 2.07, (B) change in any manner its method of maintaining
its books of account and records from such methods as in effect on December 31,
1998, or (C) accelerate booking of revenues or the deferral of expenses, other
than as shall be consistent with past practice and in the ordinary course of
business, except to the extent that any such action is required by GAAP; and
(j) each of the Company, the Guarantor and Apparel shall not,
and shall not permit any subsidiary to, enter into any transaction or make any
agreement or commitment, or permit any event to occur, which would result in any
of the representations or warranties of the Company contained in this Agreement
not being true and correct in all material respects at and as of the time
immediately after the occurrence of such transaction or event.
SECTION 4.02. Access to Information. (a) Each of the Company,
the Guarantor and Apparel shall, and shall cause its subsidiaries, officers,
directors, employees, representatives, advisors and agents to, (1) afford, from
the date hereof through the Closing Date, the representatives, advisors and
agents of the Purchasers complete access at all reasonable times during normal
business hours to its officers, employees, agents, properties, books, records
and workpapers, and shall furnish the Purchasers all financial, operating and
other information and data as the Purchasers, through their representatives,
advisors or agents, may reasonably request and (b) shall promptly furnish to the
Purchasers a copy of (i) each report, schedule and other document filed or
received by it during such period pursuant to the requirements of the federal
securities laws or rules and regulations of any national securities exchange,
and (ii) all material written correspondence, filings, communications (or
memoranda setting forth the substance thereof) between the Company, the
Guarantor or Apparel or any of their officers, employees, representatives,
advisors or agents and any governmental entity with respect to the obtaining of
any waivers, consent or approvals and the making of any registrations or
filings, in each case that is necessary to the transactions contemplated by this
Agreement or the Asset Purchase Agreement.
(b) No investigation pursuant to this Section 4.02 shall
affect, add to or subtract from any representations or warranties of the parties
hereto or the conditions to the obligations of the parties hereto to effect the
transactions contemplated hereby or the Asset Purchase.
SECTION 4.03. Financial Statements. The Company shall
each deliver, or cause to be delivered to Purchaser, so long as such Purchaser
shall be a holder of any Notes:
(i) as soon as available but in any event within 45 days after
the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of income and cash flows of each of
the Company and its subsidiaries, the Guarantor and its subsidiaries
and Apparel and its subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such
quarter, and consolidated balance sheets of each of the Company and its
subsidiaries, the Guarantor and its subsidiaries and Apparel and its
subsidiaries as of the end of such quarterly period, all prepared in
accordance with GAAP, subject to the absence of footnote disclosures
and to normal year-end adjustments;
(ii) within 120 days after the end of the each fiscal year,
consolidated statements of income and cash flows of each of the Company
and its subsidiaries, the Guarantor and its subsidiaries and Apparel
and its subsidiaries for such fiscal year, and consolidated balance
sheets of each of the Company and its subsidiaries, the Guarantor and
its subsidiaries and Apparel and its subsidiaries as of the end of such
fiscal year, setting forth in each case comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance
with GAAP, and accompanied by (a) with respect to the consolidated
portions of such statements (except with respect to budget data), an
opinion containing no exceptions or qualifications (except for
qualifications regarding specified contingent liabilities) of KPMG Peat
Marwick LLP independent public accountants retained by the Company or
another independent accounting firm of recognized national standing
acceptable to DLJ (as defined herein) (b) a copy of such firm's annual
management letter to the Company's board of directors;
(iii) accompanying the financial statements referred to in
paragraphs (i) and (ii), a certificate of the Company's Chief Financial
Officer stating that, as the case may be, neither the Guarantor,
Apparel nor any of their Subsidiaries is in default under any of its
other material agreements or, if any such default exists, specifying
the nature and period of existence thereof and what actions the
Company, the Guarantor, Apparel and their Subsidiaries have taken and
propose to take with respect thereto;
SECTION 4.04. Additional Guaranty. In the event the Company
replaces, renews, restructures or refinances all of the working capital lines of
credit extended to it or its subsidiaries, the Company shall use its reasonable
efforts to obtain from the new working capital lenders the right to have The
Casual Male, Inc., a Massachusetts corporation and a wholly-owned subsidiary of
the Company ("TCM"), to guarantee Apparel's obligations under the Notes by
executing a guaranty substantially similar to the Guaranty. In the event such
right is received, the Company shall promptly cause Casual Male to execute such
guaranty after the effectiveness of any such new or amended working capital
lines of credit; provided, however, that this Section 4.04 shall in no way be
construed as requiring the Company or its subsidiaries to enter into any working
capital arrangements that are in any way less favorable to the Company or its
subsidiaries as could be obtained from one or more lenders who do not permit TCM
to guarantee the Notes.
SECTION 4.05. Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and the Asset Purchase Agreement, including, without limitation, using
all reasonable efforts to obtain all necessary waivers, consents and approvals
and to effect all necessary registrations and filings.
SECTION 4.06. Notification of Certain Matters. The Company
shall give prompt notice to the Purchasers, and the Purchasers shall give prompt
notice to the Company, of (i) the occurrence, or failure to occur, of any event
that such party believes would be likely to cause (x) any of its representations
or warranties contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof through the Closing Date or
(y) any covenant, condition or agreement contained in this Agreement not to be
complied with or satisfied and (ii) any failure of the Company, the Guarantor,
Apparel or the Purchasers, as the case may be, or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that failure to give such notice shall not constitute a waiver of any defense
that may be validly asserted.
SECTION 4.07. Public Announcements. Prior to the Closing Date,
each of the Company, the Guarantor, Apparel and the Purchasers agrees that it
will not issue or release any press release or otherwise make any public
statement with respect to this Agreement (including the Exhibits and Schedules
hereto) or the transactions contemplated hereby without the prior consent of the
other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with any national securities exchange and (ii)
the party making such disclosure has first used its reasonable efforts to
consult with the other party about the form and substance of such disclosure.
SECTION 4.08. Use of Proceeds. The Company shall apply the
proceeds from the sale of the Securities and the Credit Agreement first (i) for
the payment of the purchase price under the Asset Purchase Agreement and (ii)
for working capital and general corporate purposes.
ARTICLE V.
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Obligations of the
Purchasers. The obligations of the Purchasers hereunder are, at their option,
subject to the satisfaction, on or before the Closing Date, of the following
conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Company contained in this Agreement
(without regard to any qualifications as to materiality contained therein) shall
be true and correct in all material respects on the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of such date, and the Company shall have so certified to the Purchasers
in writing.
(b) Performance. Each of the Company, the Guarantor and
Apparel shall have performed and complied in all material respects with all
agreements and conditions contained herein required to be performed or complied
with by it prior to or on the Closing Date, and the Company shall have so
certified to the Purchasers in writing.
(c) All Proceedings to Be Satisfactory. All corporate and
other proceedings to be taken by the Company, the Guarantor and Apparel and all
waivers and consents to be obtained by the Company, the Guarantor and Apparel in
connection with the transactions contemplated hereby shall have been taken or
obtained by the Company, the Guarantor or Apparel, as the case may be, and all
documents incident thereto shall be satisfactory in form and substance to the
Purchasers and their counsel.
(d) Supporting Documents. On or prior to the Closing Date the
Purchasers and their counsel shall have received copies of the following
supporting documents:
(i) copies of (1) the Articles of Organization of the Company,
the Guarantor and Apparel, including all amendments thereto, certified
as of a recent date by the Secretary of State or the appropriate
official of the relevant state of incorporation, and (2) certificates
of said Secretary or official, dated as of a recent date, as to the due
incorporation and good standing of the Company, the Guarantor, Apparel
and each such subsidiary, and listing all documents on file with said
official; and
(ii) a certificate of the Secretary or an Assistant Secretary
of the Company, of the Secretary or Assistant Secretary of the
Guarantor and of the Secretary or an Assistant Secretary of Apparel,
dated the Closing Date and certifying (1) that attached thereto is a
true and complete copy of the By-laws of the Company, the Guarantor or
Apparel, as the case may be, as in effect on the date of such
certification and at all times since the date hereof; (2) that attached
thereto is a true and complete copy of resolutions adopted by the Board
of Directors of the Company, the Guarantor or Apparel, as the case may
be, authorizing the execution, delivery and performance of this
Agreement, the Asset Purchase Agreement and the Ancillary Agreements,
the issuance, sale and delivery of the Securities, the reservation,
issuance and delivery of the Warrant Shares, and the performance of the
Asset Purchase and that all such resolutions are still in full force
and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (3) that the Articles of
Organization of the Company, the Guarantor or Apparel, as the case may
be, has not been amended since the date of the last amendment referred
to in the certificate delivered pursuant to clause (i)(2) above; and
(4) as to the incumbency and specimen signature of each officer of the
Company, the Guarantor or Apparel, as the case may be, executing this
Agreement, the Notes, the Warrants and the Ancillary Agreements and any
certificate or instrument furnished pursuant hereto, and a
certification by another officer of said corporation as to the
incumbency and signature of the officer signing the certificate
referred to in this paragraph (ii).
All such documents shall be satisfactory in form and substance to the
Purchasers and their counsel.
(e) Opinion of Counsel. The Purchasers shall have received
from ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP, counsel for the Company, an opinion dated the
Closing Date, substantially in the form of Annex I attached hereto.
(f) Consents; HSR Act Waiting Period. The Company shall have
obtained all consents required to be obtained pursuant to Section 4.06 hereof.
Without limiting the generality of the foregoing, all applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby or by the
Asset Purchase Agreement shall have expired or been terminated.
(g) Legal Proceedings. No preliminary or permanent injunction
or other order, decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated or enacted by
any governmental, regulatory or administrative agency or authority, or national
securities exchange shall be in effect that would prevent the consummation of
the transactions contemplated this Agreement or the Asset Purchase Agreement.
(h) Ancillary Agreements. Each party hereto shall have
executed and delivered the Ancillary Agreements and the Ancillary Agreements
shall be in full force and effect.
(i) Guaranty. The Guaranty shall be in full force and effect.
(j) Credit Agreement. The Company shall have entered into the
Credit Agreement on terms acceptable to the Purchasers and shall have received
proceeds therefrom sufficient in combination with the proceeds received pursuant
to the consummation of the transactions contemplated hereby to permit the
Company to effect transactions contemplated by the Asset Purchase Agreement.
(k) Asset Purchase. The Asset Purchase shall be consummated
simultaneously with the issuance and sale of the Note and Warrants and none of
the conditions set forth in Section 8.4 of the Asset Purchase Agreement shall
have been waived.
SECTION 5.02. Conditions Precedent to the Obligations of the
Company. The obligations of the Company and Apparel hereunder are, at its
option, subject to the satisfaction, on or before the Closing Date, of the
following conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Purchasers contained in this Agreement
(without regard to any qualifications as to materiality contained therein) shall
be true and correct in all material respects on the Closing Date, with the same
effect as though such representations and warranties had been made on and as of
such date, and the Purchasers shall have so certified to the Company in writing.
(b) Performance. The Purchasers shall have performed and
complied in all material respects with all agreements and conditions contained
herein required to be performed or complied with by them prior to or on the
Closing Date, and the Purchasers shall have so certified to the Company in
writing.
(c) All Proceedings to Be Satisfactory. All proceedings to be
taken by the Purchasers and all waivers and consents to be obtained by the
Purchasers in connection with the transactions contemplated hereby shall have
been taken or obtained by the Purchasers and all documents incident thereto
shall be satisfactory in form and substance to the Company and its counsel.
(d) HSR Act Waiting Period. All applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby or by the
Asset Purchase Agreement shall have expired or been terminated.
(e) Legal Proceedings. No preliminary or permanent injunction
or other order, decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated or enacted by
any governmental, regulatory or administrative agency or authority, or national
securities exchange shall be in effect that would prevent the consummation of
the transactions contemplated by this Agreement or the Asset Purchase Agreement.
(f) Ancillary Agreements. Each party hereto shall have
executed and delivered the Ancillary Agreements and the Ancillary Agreements
shall be in full force and effect.
(g) Credit Agreement. The Company shall have entered into the
Credit Agreement on terms acceptable to the Purchasers and shall have received
proceeds therefrom sufficient in combination with the proceeds received pursuant
to the consummation of the transactions contemplated hereby to permit the
Company to effect transactions contemplated by the Asset Purchase Agreement.
(h) Asset Purchase. The Asset Purchase shall be consummated
simultaneously with the issuance and sale of the Note and Warrants and none of
the conditions set forth in Section 8.4 of the Asset Purchase Agreement shall
have been waived.
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS; INDEMNITY
SECTION 6.01. Survival of Representations. Subject as set
forth below, all representations and warranties (other than representations and
warranties as to Tax matters) made by any party hereto in this Agreement or
pursuant hereto shall survive for the period commencing on the date hereof and
ending on third anniversary of the date hereof, and (ii) the representations and
warranties as to Tax matters made by any party hereto in this Agreement or
pursuant hereto shall survive for the applicable Tax statute of limitation
period, including any extensions thereof. The sole recourse of any party hereto
as a result of any breach of any representations or warranties of any other
party shall be pursuant to, and subject to the limitations of, this Article VI.
SECTION 6.02. General Indemnity.
(a) Subject to the terms and conditions of this Article VI,
the Company hereby agrees to indemnify, defend and hold the Purchasers harmless
from and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses (collectively,
"Damages"), asserted against, resulting to, imposed upon or incurred by the
Purchasers by reason of or resulting from a breach of any representation,
warranty or covenant of the Company, the Guarantor or Apparel contained in or
made pursuant to this Agreement.
(b) Subject to the terms and conditions of this Article VI,
each Purchaser hereby agrees to indemnify, defend and hold the Company, the
Guarantor and Apparel harmless from and against all Damages asserted against,
resulting to, imposed upon or incurred by the Company by reason of or resulting
from a breach of any representation, warranty or covenant of the Purchasers
contained in or made pursuant to this Agreement.
SECTION 6.03. Conditions of Indemnification. The respective
obligations and liabilities of the Purchasers, on the one hand, and the Company,
on the other hand (the "indemnifying party"), to the other (the "party to be
indemnified") under Section 6.02 hereof with respect to claims resulting from
the assertion of liability by third parties shall be subject to the following
terms and conditions:
(a) within 20 days after receipt of notice of commencement of
any action or the assertion in writing of any claim by a third party, the party
to be indemnified shall give the indemnifying party written notice thereof
together with a copy of such claim, process or other legal pleading, and the
indemnifying party shall have the right to undertake the defense thereof by
representatives of its own choosing;
(b) in the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party, subject to the right of the indemnifying
party to assume the defense of such claim at any time prior to settlement,
compromise or final determination thereof, provided that the indemnifying party
shall be given at least 15 days prior written notice of the effectiveness of any
such proposed settlement or compromise and no settlement shall be entered into
without the written consent of the indemnifying party;
(c) anything in this Section 6.03 to the contrary
notwithstanding (i) if there is a reasonable probability that a claim may
materially and adversely affect the indemnifying party other than as a result of
money damages or other money payments, the indemnifying party shall have the
right, at its own cost and expense, to compromise or settle such claim, but (ii)
the indemnifying party shall not, without the prior written consent of the party
to be indemnified, settle or compromise any claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the party to be indemnified a release from all
liability in respect of such claim; and
(d) in connection with any such indemnification, the
indemnified party will cooperate in all reasonable requests of the indemnifying
party.
SECTION 6.04. Limitation on Certain Indemnities.
Notwithstanding anything in this Article VI to the contrary:
(a) the Company shall not be obligated to indemnify, defend
and hold harmless the Purchasers pursuant to Section 6.02 hereof unless the
aggregate amount of such Damages exceeds $200,000; and
(b) the Company's aggregate liability and obligation to
indemnify, defend and hold harmless the Purchasers pursuant to said Section 6.02
shall in no event exceed the aggregate purchase price paid by the Purchasers for
the Securities pursuant to Section 1.01 hereof.
ARTICLE VII.
TERMINATION
SECTION 7.01. Termination by the Parties. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned at any
time prior to the Closing Date:
(a) by mutual consent of the Purchasers and the Company;
(b) by either the Purchasers or the Company, if (i) the
transactions contemplated hereby have not been consummated before June 15, 1999
or (ii) any permanent injunction or action by any governmental entity of
competent jurisdiction preventing the consummation of the transactions
contemplated by this Agreement or the Asset Purchase Agreement shall have become
final and nonappealable; provided, however, that the party seeking to terminate
this Agreement pursuant to this clause (ii) shall have used all reasonable
efforts to remove such injunction or overturn such action;
(c) by the Purchasers, if (i) there has been a breach in any
material respect of any of the representations and warranties of the Company set
forth herein, (ii) there has been a breach in any material respect of any of the
covenants or agreements set forth in this Agreement on the part of the Company,
the Guarantor or Apparel, which breach is not curable or, if curable, is not
cured within 30 days after written notice thereof is given by the Purchasers to
the Company, or (iii) the Board of Directors of the Company, the Guarantor or
Apparel shall have withdrawn or modified in a manner adverse to the Purchasers
its approval or recommendation of this Agreement, the Asset Purchase Agreement
or the transactions contemplated hereby or thereby.
(d) by the Company if (i) there has been a breach in any
material respect of any of the representations and warranties of the Purchasers
set forth herein, or (ii) there has been a breach in any material respect of any
of the covenants or agreements set forth in this Agreement on the part of the
Purchasers which breach is not curable or, if curable, is not cured within 30
days after written notice thereof is given by the Purchasers to the Company.
SECTION 7.02. Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to this Article VII, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to any other party hereto, except as provided in this Section 7.02 and
Sections 4.06 and 8.02 hereof, and except that nothing shall relieve any party
from liability for any breach of this Agreement.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Restrictive Legends. (a) The certificate or
instrument representing the Securities shall bear a legend substantially in the
following form:
THIS [NOTE][WARRANT] HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
(b) Each certificate representing the Warrant Shares, whether
by reason of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, and each certificate for any such securities issued to
subsequent transferees of any such certificate shall be stamped or otherwise
imprinted with the legend required to be borne by such shares by the
Registration Rights Agreement, except as expressly provided in the Registration
Rights Agreement.
SECTION 8.02. Expenses, Etc. Each party hereto shall pay its
own expenses in connection with the transactions contemplated hereby, except
that the Company shall reimburse DLJ or pay on its behalf any reasonable fees
and expenses incurred by DLJ Fund Investment Partners II, L.P. and its
affiliates ("DLJ") in connection with the negotiation and preparation of this
Agreement and the related documents and agreements contemplated hereby;
provided, however, that in the event that the transactions contemplated hereby
are not consummated, the Company shall only be obligated hereunder, if such
failure to consummate the transactions contemplated hereby results from the
termination of this Agreement by the Purchasers in accordance with the terms
hereof due to the breach in any material respect of representations, warranties,
covenants or agreements of the Company set forth herein. For purposes hereof,
the "fees and expenses incurred by DLJ" shall include, without limitation, the
fees, disbursements and expenses of counsel, accountants, financial advisors and
other experts retained by DLJ in connection with this Agreement and the
transactions contemplated hereby. Such Termination Fee and/or such fees and
expenses, as the case may be, shall be payable on the Closing Date or, in the
case of the proviso above, upon the termination of this Agreement.
SECTION 8.03. Survival of Agreements. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the issuance, sale and delivery of
the Securities pursuant hereto, notwithstanding any investigation made at any
time by or on behalf of any party hereto. All statements contained in any
certificate or other instrument delivered by the Company hereunder shall be
deemed to constitute representations and warranties made by the Company.
SECTION 8.04. Parties in Interest. All covenants and
agreements contained in this Agreement by or on behalf of any party hereto shall
bind and inure to the benefit of the respective successors and assigns of such
party hereto whether so expressed or not.
SECTION 8.05. Notices. Any notice or other communications
required or permitted hereunder shall be deemed to be sufficient if contained in
a written instrument delivered in person or duly sent by first class certified
mail, postage prepaid, by nationally recognized overnight courier, or by
telecopy addressed to such party at the address or telecopy number set forth
below or such other address or telecopy number as may hereafter be designated in
writing by the addressee to the addressor listing all parties:
if to the Company, the Guarantor or Apparel, to:
▇. ▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
with a copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
if to any Purchaser at the address of such Purchaser appearing
on Schedule 1 hereto with a copyto:
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or, in any case, at such other address or addresses as shall have been furnished
in writing by such party to the other parties hereto. All such notices,
requests, consents and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of mailing, on the fifth business day following the date of such
mailing, (c) in the case of delivery by overnight courier, on the business day
following the date of delivery to such courier, and (d) in the case of telecopy,
when received.
SECTION 8.06. Entire Agreement; Assignment. This Agreement
(including the Schedules, Exhibits and Annexes thereto) constitutes the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended or modified nor any provisions waived except in a writing signed by
the Company and the Purchasers. This Agreement shall not be assigned by
operation of law of otherwise without the consent of the other parties hereto.
SECTION 8.07. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 8.08. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company and the Purchasers have
executed this Agreement as of the day and year first above written.
▇. ▇▇▇▇▇, INC.
By:/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
JBI, INC.
By:/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
JBI APPAREL, INC.
By:/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO Plans Management Corporation
By:/s/▇▇▇ ▇▇▇▇▇
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO Plans Management Corporation
By:/s/▇▇▇ ▇▇▇▇▇
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
DLJ PRIVATE EQUITY PARTNERS, L.P.
By: WSW Capital, Inc.
By:/s/▇▇▇ ▇▇▇▇▇
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
/s/▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
/s/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
CORNERSTONE CAPITAL, INC.
By:/s/▇▇▇▇▇ ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
GB INVESTMENT, LLC
By:/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Manager and Chief Financial Officer
▇▇ ▇▇▇▇▇▇▇ PILOT FISH OPPORTUNITY
FUND, L.P.
By: ▇▇ ▇▇▇▇▇▇▇ Pilot Fish Opportunity
Fund, Inc., general partner
By:/s/▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary
SCHEDULE I
Purchasers
----------
Name and Address Aggregate
of Purchaser Notes Purchased Warrants Purchased Purchase Price
------------ --------------- ------------------ --------------
DLJ Fund Investment Partners II, L.P.(1) 1,804,985 216,598 $1,804,985
DLJ Private Equity Employees Fund, L.P.(1) 165,201 19,824 $165,201
DLJ Private Equity Partners Fund, L.P.(1) 4,636,814 556,418 $4,636,814
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇(1) 25,000 3,000 $25,000
▇▇▇▇▇▇▇▇▇ ▇▇▇▇(1) 4,000 480 $4,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇(1) 4,000 480 $4,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇(1) 100,000 12,000 $100,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇(1) 50,000 6,000 $50,000
▇▇▇▇▇▇▇ ▇▇▇▇(1) 10,000 1,200 $10,000
Cornerstone Capital, Inc.(2) 200,000 24,000 $200,000
GB Investment, LLC(3) 2,000,000 240,000 $2,000,000
▇▇ ▇▇▇▇▇▇▇ Pilot Fish Opportunity Fund L.P.(4) 1,000,000 120,000 $1,000,000
TOTAL: 10,000,000 1,200,000 $10,000,000
--------
(1) ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
(2) Cornerstone Capital, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
(3) GB Investment, LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
(4) ▇▇ ▇▇▇▇▇▇▇ Pilot Fish Opportunity Fund, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Ian Kirschne