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STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CYGNE DESIGNS, INC.,
CYGNE GROUP (F.E.) LIMITED,
ANNTAYLOR STORES CORPORATION
AND
ANNTAYLOR, INC.
DATED AS OF JUNE 7, 1996
TABLE OF CONTENTS
PAGE
I. TRANSFER OF ASSETS AND LIABILITIES . . . . . . . 2
1.1 Assets to be Sold . . . . . . . . . . 2
1.2 Consideration . . . . . . . . . . . . 8
1.3 Closing . . . . . . . . . . . . . . . 10
1.4 Deliveries by Seller . . . . . . . . . 10
1.5 Deliveries by Buyer . . . . . . . . . 12
1.6 Post-Closing Adjustments . . . . . . . 14
1.7 Allocation of Purchase Price . . . . . 19
1.8 Assumed Liabilities . . . . . . . . . 20
II. RELATED MATTERS . . . . . . . . . . . . . . . . 20
2.1 Ancillary Agreements . . . . . . . . . 20
2.2 Receivables Settlement . . . . . . . . 22
2.3 Finished Goods . . . . . . . . . . . . 22
2.4 Joint Venture Agreement . . . . . . . 23
2.5 Leases . . . . . . . . . . . . . . . . 23
2.6 Meyer Employment Agreement . . . . . . 23
2.7 Mail Received After Closing . . . . . 24
2.8 Employees, Benefit Plans . . . . . . . 24
III. REPRESENTATIONS AND WARRANTIES OF SELLER . . . 30
3.1 Organization of Seller and CAT;
Authority . . . . . . . . . . . . . . 30
3.2 No Violation; Consents and Approvals . 32
3.3 Seller Financial Statements . . . . . 36
3.4 CAT Financial Statements. . . . . . . 37
3.5 Combined Entity Financial Statements . 39
3.6 Absence of Seller Undisclosed
Liabilities . . . . . . . . . . . . . 42
3.7 Absence of CAT Undisclosed Liabilities 42
3.8 Absence of Division Undisclosed
Liabilities . . . . . . . . . . . . . 42
3.9 Absence of Certain Changes or Events . 43
3.10 Title to CAT Shares . . . . . . . . . 43
3.11 Title to Assets; Leased Property . . 45
3.12 Litigation/Claims . . . . . . . . . . 50
3.13 Employee Benefit Plans . . . . . . . 51
3.14 Certain Contracts and Arrangements . 52
3.15 Compliance with Laws; Licenses . . . 55
3.16 Insurance . . . . . . . . . . . . . . 56
3.17 Labor Matters . . . . . . . . . . . . 57
3.18 Assets of the Division Business . . . 59
3.19 Disclosure . . . . . . . . . . . . . 59
3.20 Environmental Matters . . . . . . . . 60
3.21 Opinion of Financial Advisor . . . . 62
3.22 Brokers . . . . . . . . . . . . . . . 62
3.23 Intellectual Property . . . . . . . . 63
3.24 Absence of Violations of Quotas and
Visas . . . . . . . . . . . . . . . . 63
3.25 No Tariffs or Duties . . . . . . . . 63
3.26 Compliance with U.S. Customs and
Trade Laws . . . . . . . . . . . . . 64
3.27 SEC Documents . . . . . . . . . . . . 64
3.28 Compliance with Laws by CAT; Licenses 65
3.29 CAT Taxes . . . . . . . . . . . . . . 66
3.30 Acquisition of the ATSC Common
Stock for Investment; Securities Act 68
3.31 Suppliers . . . . . . . . . . . . . . 69
3.32 Disclaimer of Other Representations
and Warranties . . . . . . . . . . . 69
IV. REPRESENTATIONS AND WARRANTIES OF ATSC AND BUYER 70
4.1 Organization of ATSC and Buyer;
Authority . . . . . . . . . . . . . . 70
4.2 No Violation; Consents and Approvals . 72
4.3 Litigation/Claims . . . . . . . . . . 75
4.4 SEC Documents and Other Reports . . . 76
4.5 Capital Stock . . . . . . . . . . . . 77
4.6 Absence of Certain Changes or Events . 78
4.7 Information Supplied . . . . . . . . . 78
4.8 Brokers . . . . . . . . . . . . . . . 78
4.9 Disclaimer of Other Representations
and Warranties . . . . . . . . . . . . 79
V. COVENANTS OF THE PARTIES . . . . . . . . . . . . 79
5.1 Conduct of the Division Business . . . 79
5.2 Access to Information; Confidentiality 83
5.3 Financial Statements . . . . . . . . . 84
5.4 Reasonable Best Efforts . . . . . . . 87
5.5 Consents . . . . . . . . . . . . . . . 87
5.6 Antitrust Notification . . . . . . . . 88
5.7 Public Announcements . . . . . . . . . 88
5.8 Access to Books and Records Following
the Closing . . . . . . . . . . . . . 89
5.9 Other Transactions . . . . . . . . . . 89
5.10 Discharge of Liens . . . . . . . . . 90
5.11 Resignations . . . . . . . . . . . . 90
5.12 Insurance . . . . . . . . . . . . . . 90
5.13 Supplementary Disclosure . . . . . . 91
5.14 Brazil Sourcing . . . . . . . . . . . 91
5.15 Letters of Credit . . . . . . . . . . 92
5.16 Amendment . . . . . . . . . . . . . . 92
5.17 Proxy Statement; Stockholder Approval 93
5.18 Occupancy . . . . . . . . . . . . . . 95
5.19 Transfer Taxes . . . . . . . . . . . 96
5.20 Conduct of ATSC Business . . . . . . 96
VI. CONDITIONS TO OBLIGATIONS OF BOTH PARTIES . . . 97
6.1 Conditions . . . . . . . . . . . . . . 97
VII. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . 98
7.1 Conditions . . . . . . . . . . . . . . 98
VIII. CONDITIONS TO OBLIGATIONS OF BUYER . . . . . . 100
8.1 Conditions . . . . . . . . . . . . . . 100
IX. TERMINATION, AMENDMENT AND WAIVER . . . . . . . 102
9.1 Termination . . . . . . . . . . . . . 102
9.2 Procedure and Effect of Termination . 103
9.3 Other Remedies . . . . . . . . . . . . 104
X. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION . . 104
10.1 Survival of Representations . . . . . 104
10.2 Seller's Agreement to Indemnify . . . 104
10.3 Seller's Limitation of Liability . . 106
10.4 Buyer's Agreement to Indemnify . . . 108
10.5 Buyer's Limitation of Liability . . . 109
10.6 Conditions of Indemnification . . . . 110
10.7 Exclusive Remedies . . . . . . . . . 112
10.8 Transfer Pricing . . . . . . . . . . 113
10.9 Claims Against CAT Directors and
Officers . . . . . . . . . . . . . . 113
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . 113
11.1 Fees and Expenses . . . . . . . . . . 113
11.2 Further Assurances . . . . . . . . . 114
11.3 Notices . . . . . . . . . . . . . . . 114
11.4 Entire Agreement . . . . . . . . . . 116
11.5 Severability . . . . . . . . . . . . 116
11.6 Binding Effect; Assignment . . . . . 116
11.7 Amendment, Modification and Waiver . 117
11.8 Third-Party Beneficiaries . . . . . . 117
11.9 Counterparts . . . . . . . . . . . . 118
11.10 Bulk Sales . . . . . . . . . . . . . 118
11.11 Interpretation . . . . . . . . . . . 118
11.12 Governing Law . . . . . . . . . . . 119
Annexes and Exhibits
Annex I . . . . . . . . . . . . . . Division Fabric and Trim
Annex II . . . . . . . . . . . . . . . . Assumed Contracts
Annex III . . . . . . . . . . . . . . . . . Net Fixed Assets
Annex IV . . . . . . . . . . . . . . . . . . Lease Deposits
Exhibit A . . . . . . . . . . . . . . . . . . Bill of Sale
Exhibit B . . . . . . . Assignment and Assumption Agreement
Exhibit C . . . . . . . . . . . . . . . . . . . Undertaking
Exhibit D . . . . . . . . . . . . . . . . Advance Instrument
Exhibit E . . . . . . . . . . . . . . . . . Pledge Agreement
Exhibit F . . . . . . . . . NY Transition Services Agreement
Exhibit G . . . . . . . Miami Transition Services Agreement
Exhibit H . . . . . . . . . . . Manuel Consulting Agreement
Exhibit I . . . . . . . . . . . Benson Consulting Agreement
Exhibit J . . . . . . . . . . . . . . Stockholders Agreement
Exhibit K . . . . . . . . . . . . . . . . . . Florence Lease
Exhibit L . . . . . . . . . Legal Opinion of Buyer's Counsel
Exhibit M . . . . . . . . Legal Opinion of Seller's Counsel
GLOSSARY
PAGE
Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
Seller . . . . . . . . . . . . . . . . . . . . . . . . 1
CGFE . . . . . . . . . . . . . . . . . . . . . . . . . 1
ATSC . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 1
Joint Venture Agreement . . . . . . . . . . . . . . . . 1
CAT-US . . . . . . . . . . . . . . . . . . . . . . . . 1
CAT-Far East . . . . . . . . . . . . . . . . . . . . . 1
CAT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Division . . . . . . . . . . . . . . . . . . . . . . . 1
Division Business . . . . . . . . . . . . . . . . . . . 1
CAT US Shares . . . . . . . . . . . . . . . . . . . . . 2
CAT Far East Shares . . . . . . . . . . . . . . . . . . 2
CAT Shares . . . . . . . . . . . . . . . . . . . . . . 2
Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
Liens . . . . . . . . . . . . . . . . . . . . . . . . . 3
Inventory . . . . . . . . . . . . . . . . . . . . . . . 3
Division Fabric and Trim . . . . . . . . . . . . . . . 3
Capital Leases . . . . . . . . . . . . . . . . . . . . 3
Contracts . . . . . . . . . . . . . . . . . . . . . . . 3
NY Facility . . . . . . . . . . . . . . . . . . . . . . 4
NY Lease . . . . . . . . . . . . . . . . . . . . . . . 4
FWM Lease . . . . . . . . . . . . . . . . . . . . . . . 4
CAT Sublease . . . . . . . . . . . . . . . . . . . . . 4
Net Fixed Assets . . . . . . . . . . . . . . . . . . . 4
Intellectual Property . . . . . . . . . . . . . . . . . 6
Books and Records . . . . . . . . . . . . . . . . . . . 6
Assets . . . . . . . . . . . . . . . . . . . . . . . . 6
Bill of Sale . . . . . . . . . . . . . . . . . . . . . 7
Subleases . . . . . . . . . . . . . . . . . . . . . . . 7
Assignment and Assumption Agreements . . . . . . . . . 7
Other Instruments . . . . . . . . . . . . . . . . . . . 7
ATSC Common Stock . . . . . . . . . . . . . . . . . . . 8
Stock Consideration . . . . . . . . . . . . . . . . . . 9
Average Trading Price . . . . . . . . . . . . . . . . . 9
Inventory Consideration . . . . . . . . . . . . . . . . 9
Fixed Asset Consideration . . . . . . . . . . . . . . . 9
Purchase Price . . . . . . . . . . . . . . . . . . . . 9
Undertaking . . . . . . . . . . . . . . . . . . . . . . 9
Accounts Payable . . . . . . . . . . . . . . . . . . . 10
Advance Instrument . . . . . . . . . . . . . . . . . . 10
Advances . . . . . . . . . . . . . . . . . . . . . . . 10
Liabilities . . . . . . . . . . . . . . . . . . . . . . 10
Closing Date . . . . . . . . . . . . . . . . . . . . . 10
Bank Account . . . . . . . . . . . . . . . . . . . . . 13
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . 14
Estimated Amount . . . . . . . . . . . . . . . . . . . 14
Net Fixed Asset Value . . . . . . . . . . . . . . . . . 14
Initial Payment Amount . . . . . . . . . . . . . . . . 14
Pledged Amount . . . . . . . . . . . . . . . . . . . . 15
Seller Statement . . . . . . . . . . . . . . . . . . . 15
Statement of Objection . . . . . . . . . . . . . . . . 15
Closing Date Statement . . . . . . . . . . . . . . . . 15
Reviewing Accountants . . . . . . . . . . . . . . . . . 16
Accountant Statement . . . . . . . . . . . . . . . . . 16
Adjusted Net Book Value . . . . . . . . . . . . . . . . 17
Pledge Agreement . . . . . . . . . . . . . . . . . . . 18
Code . . . . . . . . . . . . . . . . . . . . . . . . . 19
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Stockholders Agreement . . . . . . . . . . . . . . . . 21
Florence Facility . . . . . . . . . . . . . . . . . . . 21
Florence Lease . . . . . . . . . . . . . . . . . . . . 21
Ancillary Agreements . . . . . . . . . . . . . . . . . 21
Accounts Receivable Estimate . . . . . . . . . . . . . 22
Receivables Payment Amount . . . . . . . . . . . . . . 22
Employment Agreements . . . . . . . . . . . . . . . . . 24
Affected Employees . . . . . . . . . . . . . . . . . . 24
CAT Employees . . . . . . . . . . . . . . . . . . . . . 24
Hired Employees . . . . . . . . . . . . . . . . . . . . 25
Continued Employees . . . . . . . . . . . . . . . . . . 25
Prior Welfare Plans . . . . . . . . . . . . . . . . . . 26
Replacement Welfare Plans . . . . . . . . . . . . . . . 26
COBRA . . . . . . . . . . . . . . . . . . . . . . . . . 26
Material Adverse Effect . . . . . . . . . . . . . . . . 31
Seller Disclosure Schedule . . . . . . . . . . . . . . 31
Seller Related Instruments . . . . . . . . . . . . . . 31
Governmental Entities . . . . . . . . . . . . . . . . . 34
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . 34
Exchange Act . . . . . . . . . . . . . . . . . . . . . 34
1996 Balance Sheet . . . . . . . . . . . . . . . . . . 36
Audited Financial Statements . . . . . . . . . . . . . 36
Financial Statements . . . . . . . . . . . . . . . . . 36
CAT 1996 Balance Sheet . . . . . . . . . . . . . . . . 37
CAT Audited Financial Statements . . . . . . . . . . . 38
CAT Financial Statements . . . . . . . . . . . . . . . 38
Combined Entity . . . . . . . . . . . . . . . . . . . . 39
Combined Entity 1996 Balance Sheet . . . . . . . . . . 39
Combined Entity Audited Financial Statements . . . . . 39
Combined Entity Unaudited Financial Statements . . . . 40
Combined Entity Financial Statements . . . . . . . . . 40
Permitted Liens . . . . . . . . . . . . . . . . . . . . 46
Miami Lease . . . . . . . . . . . . . . . . . . . . . . 47
Leases . . . . . . . . . . . . . . . . . . . . . . . . 47
Miami Facility . . . . . . . . . . . . . . . . . . . . 47
Leased Properties . . . . . . . . . . . . . . . . . . . 47
Plans . . . . . . . . . . . . . . . . . . . . . . . . . 51
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . 51
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 51
Division Contracts . . . . . . . . . . . . . . . . . . 53
Permits . . . . . . . . . . . . . . . . . . . . . . . . 56
Environmental Laws . . . . . . . . . . . . . . . . . . 60
Environmental Claim . . . . . . . . . . . . . . . . . . 60
Hazardous Materials . . . . . . . . . . . . . . . . . . 61
PCBs . . . . . . . . . . . . . . . . . . . . . . . . . 62
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Seller SEC Documents . . . . . . . . . . . . . . . . . 64
Securities Act . . . . . . . . . . . . . . . . . . . . 64
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 67
Tax Return . . . . . . . . . . . . . . . . . . . . . . 68
Buyer Related Instruments . . . . . . . . . . . . . . . 71
Buyer Disclosure Schedule . . . . . . . . . . . . . . . 75
ATSC SEC Documents . . . . . . . . . . . . . . . . . . 76
Confidentiality Agreements . . . . . . . . . . . . . . 84
Combined Entity 1994 Audited Financial Statements . . . 85
Subsequent Monthly Financial Statements . . . . . . . . 85
CAT Subsequent Monthly Financial Statements . . . . . . 85
Combined Entity Subsequent Monthly Financial
Statements . . . . . . . . . . . . . . . . . . . . 85
Subsequent Quarterly Financial Statements . . . . . . . 85
CAT Subsequent Quarterly Financial Statements . . . . . 85
Combined Entity Subsequent Quarterly Financial
Statements . . . . . . . . . . . . . . . . . . . . 85
Subsequent Financial Statements . . . . . . . . . . . . 85
CAT Subsequent Financial Statements . . . . . . . . . . 86
Combined Entity Subsequent Financial Statements . . . . 86
Exclusivity Period . . . . . . . . . . . . . . . . . . 89
Existing Gordon Agreement . . . . . . . . . . . . . . . 92
Commission . . . . . . . . . . . . . . . . . . . . . . 93
Preliminary Proxy Materials . . . . . . . . . . . . . . 93
Annual Meeting . . . . . . . . . . . . . . . . . . . . 93
Proposal . . . . . . . . . . . . . . . . . . . . . . . 93
Proxy Statement . . . . . . . . . . . . . . . . . . . . 94
Transfer Taxes . . . . . . . . . . . . . . . . . . . . 96
Buyer Group . . . . . . . . . . . . . . . . . . . . . . 104
Damages . . . . . . . . . . . . . . . . . . . . . . . . 105
Seller Claims . . . . . . . . . . . . . . . . . . . . . 106
Buyer's Deductible . . . . . . . . . . . . . . . . . . 107
Seller Group . . . . . . . . . . . . . . . . . . . . . 108
Buyer Claims . . . . . . . . . . . . . . . . . . . . . 109
Claims . . . . . . . . . . . . . . . . . . . . . . . . 109
Seller's Deductible . . . . . . . . . . . . . . . . . . 110
Failure of Condition . . . . . . . . . . . . . . . . . 112
Waiving Party . . . . . . . . . . . . . . . . . . . . . 112
person . . . . . . . . . . . . . . . . . . . . . . . . 118
affiliate . . . . . . . . . . . . . . . . . . . . . . . 119
STOCK AND ASSET PURCHASE AGREEMENT
STOCK AND ASSET PURCHASE AGREEMENT, dated as of
June 7, 1996 (the "Agreement"), by and between CYGNE DE-
SIGNS, INC., a Delaware corporation ("Seller"), CYGNE GROUP
(F.E.) LIMITED, a Hong Kong corporation and a wholly owned
subsidiary of Seller ("CGFE"), ANNTAYLOR STORES CORPORATION,
a Delaware corporation ("ATSC"), and ANNTAYLOR, INC., a
Delaware corporation and a wholly owned subsidiary of ATSC
("Buyer").
W I T N E S S E T H
WHEREAS, pursuant to that certain Agreement, dated
July 13, 1993 (the "Joint Venture Agreement"), by and among
Seller, CGFE, CAT US, Inc., a Delaware corporation ("CAT-
US"), C.A.T. (Far East) Limited, a Hong Kong corporation
("CAT-Far East" and, together with CAT-US, "CAT"), and
Buyer, Seller and Buyer own 60% and 40%, respectively, of
the outstanding capital stock of CAT, which serves as a
fully dedicated direct sourcing capability for Buyer;
WHEREAS, Seller, through its AnnTaylor Woven
Division (the "Division"), serves as a private label design-
er, merchandiser and manufacturer of women's apparel for Ann
Taylor (the "Division Business");
WHEREAS, Seller desires to sell to Buyer and Buyer
desires to acquire from Seller (i) all of the shares of
common stock, par value $.01 per share, of CAT-US owned by
Seller (the "CAT US Shares"); and (ii) certain of the assets
of the Division as more fully described herein; and
WHEREAS, CGFE desires to sell to Buyer and Buyer
desires to acquire from CGFE all the shares of common stock,
par value $1 HK per share, of CAT-Far East owned by CGFE
(the "CAT Far East Shares" and, together with the CAT US
Shares, the "CAT Shares").
NOW, THEREFORE, in consideration of the foregoing
and of the representations, warranties, covenants, agree-
ments and conditions contained herein, and intending to be
legally bound hereby, the parties agree as follows:
I. TRANSFER OF ASSETS AND LIABILITIES.
1.1 Assets to be Sold.
(a) Upon the terms and subject to the condi-
tions of this Agreement, at the closing provided for in
Section 1.3 hereof (the "Closing"), Seller shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller, the follow-
ing:
(i) all right, title and interest in
and to the CAT US Shares, free and clear of all liens,
encumbrances, security interests, mortgages, pledges,
claims, options or restrictions of any kind, other than
restrictions on transfer imposed under federal and state
securities laws (collectively, "Liens");
(ii) the following items of inventory
(the "Inventory"): (x) fabric and trim owned by Seller for
use by the Division in the production of merchandise for
Buyer ("Division Fabric and Trim") as of February 3, 1996
and identified on Annex I hereto to the extent not used as
of the Closing Date in the production of merchandise for
Buyer; (y) Division Fabric and Trim purchased since February
3, 1996 pursuant to written commitments or purchase orders
issued by Buyer to the extent not used as of the Closing
Date in the production of merchandise for Buyer and (z)
work-in-progress owned by Seller for use by the Division in
the production of merchandise for Buyer pursuant to purchase
orders issued by Buyer;
(iii) the capital leases and other agree-
ments relating to equipment located on the fifth, sixth and
nineteenth floors of Seller's facility located at 1372
Broadway, New York City, New York (the "NY Facility") and at
the Florence Facility (as hereinafter defined), to the
extent they relate to the Division Business and are listed
on and marked with an asterisk on Annex II hereto (collec-
tively, the "Capital Leases") and other contracts, personal
property leases and other commitments to which Seller is a
party to the extent they relate to the Division Business and
are listed on Annex II hereto (collectively with the Capital
Leases, the "Contracts");
(iv) Seller's or its affiliate's rights
as tenant in accordance with Section 1.1(b) hereof (A) with
respect to the sixth floor of the NY Facility under the
Agreement of Lease, dated August 7, 1991, between Seller, as
tenant, and Nineteen New York Properties Limited Partner-
ship, as landlord, as amended (as it relates to the sixth
floor only, the "NY Lease"), and (B) with respect to the
fifth and nineteenth floors of the NY Facility under the
Agreement of Lease, dated June 24, 1994, between Fenn,
Wright and Manson, Incorporated, as tenant, and Nineteen New
York Properties Limited Partnership, as landlord (as it
relates to the fifth and nineteenth floors only, the "FWM
Lease"), as amended by that certain sublease, dated February
28, 1995, between Fenn, Wright and Manson Incorporated, as
sublessor, and CAT US, Inc., as sublessee (the "CAT Sub-
lease");
(v) all leasehold improvements, furni-
ture, fixtures and equipment that meet all of the following
conditions: (x) are owned by Seller or subject to a Capital
Lease, (y) relate to and are used exclusively or primarily
in the Division Business and (z) are located on the fifth,
sixth or nineteenth floor of the NY Facility or at the
Florence Facility on the Closing Date (the "Net Fixed As-
sets"), including those listed on Annex III hereto;
(vi) all licenses, permits, registra-
tions, renewals thereof and applications therefor, varianc-
es, exemptions, orders, approvals and authorizations issued
by any governmental, regulatory or administrative agency or
authority (domestic or foreign), held by Seller or any
affiliate of Seller of or relating to the Division Business,
including all quota allocations for the export of goods to
the United States and elsewhere, necessary or desirable for
the lawful conduct of the Division Business, to the extent
transferable under applicable law;
(vii) all purchase orders, bills of
lading, trust receipts, warehouse receipts and other docu-
ments of title of whatever kind and description relating to
the Inventory;
(viii) all rights under insurance policies
covering Inventory in transit and all rights and claims
under insurance policies for damage to any Assets to the
extent not repaired or replaced prior to the Closing;
(ix) all goodwill, intellectual property
rights, patents, trademarks, service marks, copyrights
(including all copyrights in computer software and databas-
es), licenses and applications therefor (if any), know-how,
processes, methods, techniques, formulae, designs, drawings,
patterns, trade secrets, proprietary information, sketches,
technical information, computer software, databases and
other proprietary or confidential information of or relating
to the Division Business and all rights in any licenses to
or from any third party of or for the foregoing (collective-
ly, the "Intellectual Property"), it being understood,
however, that the rights to the Intellectual Property shall
be non-exclusive unless such Intellectual Property relates
solely to the Division Business and Seller's rights therein
are exclusive;
(x) all intangible assets of or relat-
ing to the Division Business, including claims against third
parties; and
(xi) all books and records (including
all computerized records and storage media and associated
software) of CAT, and those relating solely to the Division
Business and, to the extent practicable, those portions of
Seller's other books and records that relate to the Division
Business (collectively, "Books and Records"), including,
without limitation, (a) all Books and Records relating to
the employees of, and the purchase of materials, supplies
and services for, the Division Business or CAT, but not
including the tax returns, general ledger or corporate
minute books and capital stock books of Seller, and (b) the
tax returns, general ledger and corporate minute books and
capital stock books of CAT-US and CAT-Far East (together
with the items listed in clauses (ii)-(x) above, the "As-
sets").
(b) Such sale, conveyance, assignment,
transfer and delivery shall be effected by delivery by
Seller to Buyer or its designees of (i) stock certificates
representing the CAT US Shares, duly endorsed or accompanied
by stock powers duly executed in blank with appropriate
transfer stamps, if any, affixed, and any other documents
that are necessary to transfer title to the CAT US Shares to
Buyer, (ii) a duly executed bill of sale in substantially
the form of Exhibit A hereto (the "Bill of Sale"), (iii) a
mutually satisfactory sublease agreement with respect to
each of the NY Lease and the FWM Lease (the "Subleases") or,
alternatively, newly negotiated leases between Buyer and the
landlord of the NY Facility relating to the premises subject
to the NY Lease and the FWM Lease, respectively, (iv) duly
executed assignment and assumption agreements in substan-
tially the form of Exhibit B hereto (the "Assignment and
Assumption Agreements") with respect to each of the Con-
tracts, and (v) such other good and sufficient instruments
of conveyance and transfer (collectively, the "Other Instru-
ments") as shall be reasonably necessary to vest in Buyer
good and valid title to the CAT US Shares and the Assets,
free and clear of all Liens, other than the Permitted Liens
(as hereinafter defined).
(c) Upon the terms and subject to the condi-
tions of this Agreement, at the Closing, CGFE shall sell,
convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase, acquire and accept from CGFE, all right,
title and interest in and to the CAT Far East Shares, free
and clear of all Liens. Such sale, conveyance, assignment,
transfer and delivery shall be effected by delivery by CGFE
to Buyer or its designees of stock certificates representing
the CAT Far East Shares, duly endorsed or accompanied by
stock powers duly executed in blank with appropriate trans-
fer stamps, if any, affixed, and any other documents that
are necessary to transfer title to the CAT Far East Shares
to Buyer.
1.2 Consideration.
(a) Upon the terms and subject to the condi-
tions of this Agreement, in consideration of the aforesaid
sale, conveyance, assignment, transfer and delivery of the
CAT Shares and the Assets, Buyer shall, in accordance with
the terms of this Agreement, deliver or cause to be deliv-
ered to Seller, on its own behalf and on behalf of CGFE, as
their respective interests may appear, in full payment for
the aforesaid sale, conveyance, assignment, transfer and
delivery of the CAT Shares and the Assets:
(i) the number of validly issued, fully
paid and nonassessable shares of common stock, par value
$.0068 per share, of ATSC ("ATSC Common Stock"), rounded to
the nearest whole share, equal to the quotient obtained by
dividing (a) $36.0 million by (b) the Average Trading Price
of the ATSC Common Stock (the "Stock Consideration"); pro-
vided, however, that the number of shares of ATSC Common
Stock to be issued shall in no event exceed 2.5 million
shares. As used in this Agreement, the "Average Trading
Price" shall mean the average of the high and low sale
prices of the ATSC Common Stock on the New York Stock Ex-
change Composite Tape (or as reported on any other exchange
on which the ATSC Common Stock is then listed) on each of
the 10 consecutive trading days ending on the trading day
immediately prior to the Closing Date;
(ii) a dollar amount in cash equal to
the Adjusted Net Book Value (as hereinafter defined) of the
Inventory determined in accordance with Section 1.6 hereof
(the "Inventory Consideration");
(iii) a dollar amount in cash equal to
the lesser of (x) the Net Fixed Asset Value (as hereinafter
defined) and (y) $2,646,000 (the "Fixed Asset Consideration"
and, together with the Inventory Consideration and the Stock
Consideration, the "Purchase Price");
(iv) the Subleases, if applicable;
(v) the Assignment and Assumption
Agreements;
(vi) an undertaking substantially in the
form of Exhibit C hereto (the "Undertaking") evidencing the
assumption by Buyer of accounts payable associated with the
Inventory (the "Accounts Payable"); and
(vii) an instrument, substantially in the
form of Exhibit D hereto (the "Advance Instrument"), evi-
dencing the forgiveness by Buyer of $7,985,000 of outstand-
ing advances (the "Advances" and, collectively with the
Capital Leases and the Accounts Payable, the "Liabilities")
made to Seller by Buyer.
1.3 Closing. The Closing of the transactions
contemplated by this Agreement shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York, at 10:00 a.m., Eastern time, on
the first business day following the Annual Meeting (as
hereinafter defined) or, if the conditions to Closing set
forth in Articles VI, VII and VIII hereof shall not have
been satisfied or waived by such date, as soon as practica-
ble after such conditions shall have been satisfied or
waived, or such other place, date and time as shall be
agreed upon in writing by the parties hereto. The date on
which the Closing actually occurs is referred to herein as
the "Closing Date".
1.4 Deliveries by Seller. At the Closing, Seller
and CGFE, as applicable, shall deliver or cause to be deliv-
ered to Buyer (unless delivered previously) the following:
(a) the stock certificates representing the
CAT Shares, duly endorsed or accompanied by stock powers
duly executed in blank with appropriate transfer stamps, if
any, affixed, and any other documents that are reasonably
necessary to transfer title to the CAT Shares to Buyer;
(b) the Bill of Sale;
(c) the Subleases, if applicable;
(d) the Assignment and Assumption Agreements;
(e) the Pledge Agreement (as hereinafter defined);
(f) the resignations of certain officers and
directors of CAT referred to in Section 5.11 hereof;
(g) the compliance certificate referred to
in Subsection 8.1(c) hereof;
(h) the opinion of counsel to Seller re-
ferred to in Subsection 8.1(d) hereof;
(i) duly executed counterparts of any con-
sent or approval referred to in Subsection 8.1(g) hereof;
(j) the Ancillary Agreements (as hereinafter
defined); and
(k) all other documents, certificates,
instruments or writings required to be delivered by Seller
at or prior to the Closing pursuant to this Agreement or
otherwise reasonably required in connection herewith.
1.5 Deliveries by Buyer. At the Closing, Buyer
shall deliver or cause to be delivered to Seller (unless
delivered previously) the following:
(a) a stock certificate or stock certifi-
cates representing the shares of ATSC Common Stock to be
delivered to Seller in payment of the Stock Consideration,
free and clear of all Liens other than as set forth in, and
bearing the legend set forth in, the Stockholder's Agreement
(as hereinafter defined);
(b) a wire transfer of Federal or other
immediately available funds in an amount equal to the Ini-
tial Payment Amount (as hereinafter defined);
(c) a wire transfer of Federal or other
immediately available funds in amount equal to the Fixed
Asset Consideration;
(d) a wire transfer of Federal or other
immediately available funds in an amount equal to the Re-
ceivables Payment Amount (as hereinafter defined);
(e) a wire transfer of Federal or other
immediately available funds in an amount equal to the depos-
its under the Leases (as hereinafter defined) listed on
Annex IV hereto;
(f) a wire transfer of Federal or other
immediately available funds in an amount equal to the
Pledged Amount (as hereinafter defined) to a bank account in
the name of Buyer (the "Bank Account");
(g) the Pledge Agreement;
(h) the Subleases, if applicable;
(i) the Assignment and Assumption Agreements;
(j) the Undertaking;
(k) the Advance Instrument;
(l) the officer's certificate referred to in
Subsection 7.1(c) hereof;
(m) the opinion of counsel to Buyer referred
to in Subsection 7.1(d) hereof;
(n) the Ancillary Agreements;
(o) evidence that Buyer has substituted
letters of credit or provided an alternative form of finan-
cial support for the letters of credit listed on the sched-
ule delivered pursuant to Section 5.15 hereof; and
(p) all other documents, certificates,
instruments or writings reasonably required to be delivered
by Buyer at or prior to the Closing pursuant to this Agree-
ment or otherwise required in connection herewith.
The wire transfers pursuant to subparagraphs (b)
(c) (d) and (e) above shall be made by a single wire trans-
fer to an account designated in writing at least two (2)
business days prior to the Closing Date by Seller.
1.6 Post-Closing Adjustments.
(a) At least five (5) business days prior to
the Closing Date, Seller shall prepare and deliver to Buyer
(i) a good faith estimate, prepared in accordance with
United States generally accepted accounting principles
("GAAP"), applied in a manner consistent with the prepara-
tion of the financial statements referred to in Section 3.5
hereof, except as otherwise expressly provided below, and
accompanied by a certificate of the chief financial officer
of Seller to that effect, of the aggregate amount of the
Adjusted Net Book Value of the Inventory determined in
accordance with clause (f) below (the "Estimated Amount") as
of the Closing Date, (ii) a statement, prepared in good
faith in a manner consistent with the preparation of the
Company's books and records during the periods reflected in
the financial statements referred to in Section 3.5 hereof
and accompanied by a certificate of the chief financial
officer of Seller to that effect, of the aggregate amount of
the net book value of the Net Fixed Assets as of the Closing
Date (the "Net Fixed Asset Value"), and (iii) a schedule of
all open purchase orders of Seller relating to the Division.
(b) At Closing, Buyer shall (i) deliver to
Seller an amount equal to 80% of the Estimated Amount (the
"Initial Payment Amount") and (ii) cause the Bank Account to
be credited with an amount equal to 20% of the Estimated
Amount (the "Pledged Amount").
(c) Beginning two (2) days prior to the
Closing Date, Seller and Buyer shall jointly conduct, or
shall cause to be jointly conducted by their respective
independent public accountants, a physical count of all
Inventory as of the Closing Date. The physical count of the
Inventory shall be conducted in accordance with procedures
to be mutually agreed upon by the parties' respective inde-
pendent public accountants. As promptly as practicable
thereafter, but in no event more than thirty (30) days
following the Closing Date, Seller shall prepare or cause to
be prepared and shall deliver to Buyer a reasonably detailed
statement setting forth the Adjusted Net Book Value of the
Inventory, determined in accordance with clause (f) below
(the "Seller Statement"). Unless within thirty (30) days
after its receipt of the Seller Statement Buyer shall deliv-
er to Seller a reasonably detailed statement describing its
objections to the Seller Statement (a "Statement of Objec-
tion"), the amount of the Adjusted Net Book Value of the
Inventory determined in accordance with this clause (c)
shall be final and binding on the parties hereto and the
Seller Statement shall be the final statement hereunder (the
"Closing Date Statement"). Buyer may include in its State-
ment of Objection one or more objections to items included
by Seller in the Inventory that, in Buyer's good faith
determination, were not properly included as Inventory
pursuant to Section 1.1(a)(ii) hereof;
(d) If Buyer shall deliver to Seller a
timely Statement of Objection, Buyer and Seller and their
respective independent accountants shall negotiate in good
faith and use reasonable best efforts to resolve any dis-
putes. If a resolution is reached, such resolution shall be
final and binding on the parties and Buyer and Seller shall
set forth the Adjusted Net Book Value of the Inventory on a
mutually acceptable statement and such statement shall be
the Closing Date Statement. If a final resolution is not
reached within fifteen (15) days after Buyer has submitted
its Statement of Objection, any remaining disputes shall be
resolved by a third firm of independent accountants (the
"Reviewing Accountants") selected jointly by the parties'
independent accounting firms. The Reviewing Accountants
shall be instructed to resolve any matters in dispute as
promptly as practicable, but in no event more than thirty
(30) days, and set forth their resolution in a statement
setting forth the Net Book Value of the Inventory (the
"Accountant Statement"). In such event, the determination
of the Reviewing Accountants shall be final and binding on
the parties hereto and the Accountant Statement shall be the
Closing Date Statement.
(e) Seller and Buyer each shall pay one-half
of the fees and expenses of the Reviewing Accountants.
Seller and the Buyer shall cooperate with each other and the
Reviewing Accountants in connection with the matters contem-
plated by this Section 1.6, including Seller's preparation
of and Buyer's review of the Closing Date Statement, includ-
ing by furnishing such information and access to books,
records (including accountants' work papers), personnel and
properties as may be reasonably requested.
(f) The "Adjusted Net Book Value" shall be
equal to the tangible net book value of the Inventory, less
the amount of the Liabilities, as set forth on the Closing
Date Statement. The Closing Date Statement shall be pre-
pared in accordance with GAAP applied in a manner consistent
with the financial statements referred to in Section 3.5
hereof, except as otherwise expressly set forth in this
Section 1.6, and except that Inventory shall be valued at
cost, not the lower of cost or market. For purposes of this
Section 1.6, the Inventory, regardless of condition, shall
be valued as follows: (i) raw materials shall be valued at
cost, including, without limitation, to the extent actually
incurred: FOB or CF purchase price, as the case may be;
inspection costs; re-dyeing and/or refinishing charges;
duty; freight and brokerage charges; fabric commission;
insurance; and storage charges; provided, however, that such
valuation applies only to raw materials available to Buyer
(i.e., excludes shrinkage); and (ii) work-in-progress shall
include (A) raw material costs as determined above; and (B)
making charges to the extent such charges have been paid by
Seller. Notwithstanding the foregoing, finished goods
rejected or canceled by Buyer prior to the Closing Date
shall not be included in the Assets and such finished goods
shall remain in Seller's possession.
(g) At the Closing, Buyer shall pledge the
Bank Account to Seller as security for its interest under
this Section 1.6 pursuant to a Pledge Agreement in substan-
tially the form of Exhibit E hereto (the "Pledge Agree-
ment"). Upon delivery of the Closing Date Statement, Seller
hereby releases its right and security interest in the Bank
Account (but not in the proceeds thereof, to the extent such
proceeds are due to Seller pursuant to this Section 1.6)
automatically and without any further action required on the
part of Seller.
(h) If the Adjusted Net Book Value set forth
in the Closing Date Statement exceeds the Initial Payment
Amount, Buyer shall distribute to Seller in cash out of the
Pledged Amount the amount of such excess. Buyer shall
retain the remainder, if any, of the Pledged Amount. Buyer
shall distribute interest earned on the Pledged Amount in
the Bank Account to Seller, or shall retain such interest,
in proportion to the amount of the Pledged Amount distributed
or retained, as the case may be, by each.
(i) If the Adjusted Net Book Value set forth
in the Closing Date Statement is less than the Initial
Payment Amount, Seller shall pay the difference to Buyer in
immediately available funds, plus interest on such amount
from the Closing Date to the date of payment at the rate of
8% per annum. In such event, Buyer shall retain the Pledged
Amount and all interest earned thereon.
(j) If the Adjusted Net Book Value set forth
in the Closing Date Statement exceeds the Estimated Amount,
then, in addition to distribution of the Pledged Amount
pursuant to clause (h) above, Buyer shall pay the difference
to Seller in immediately available funds, plus interest on
such amount from the Closing Date to the date of payment at
the rate of 8% per annum.
1.7 Allocation of Purchase Price. Prior to the
Closing, the parties shall agree to the appropriate alloca-
tion of the Purchase Price and the Liabilities among the CAT
Shares and Assets, which allocation shall comply with Sec-
tion 1060 of the Internal Revenue Code of 1986, as amended
(the "Code"). The parties hereby agree that such allocation
shall be conclusive and binding on each of them for purposes
of federal and, where applicable, state and local tax re-
turns and that they will not voluntarily take any position
inconsistent therewith. The parties hereby agree to prepare
and timely file all applicable Internal Revenue Service
("IRS") and other governmental authority forms, to cooperate
with each other in the preparation of such forms, and to
furnish each other with a copy of such forms prepared in
draft, within a reasonable period prior to the filing due
date thereof.
1.8 Assumed Liabilities. Except for liabilities
and obligations expressly assumed in this Agreement, Buyer
has not agreed to pay, shall not be required to assume and
shall have no liability or obligation with respect to, and
Seller shall indemnify and hold Buyer harmless from and
against, any liability or obligation, direct or indirect,
absolute or contingent, of Seller, the Division or any of
their affiliates.
II. RELATED MATTERS.
2.1 Ancillary Agreements.
(a) At the Closing, Seller and Buyer shall
enter into (i) a mutually satisfactory transition services
agreement relating to the CAD-CAM work stations located at
the NY Facility with substantially the terms set forth on
Exhibit F hereto and (ii) a mutually acceptable transition
services agreement relating to the Miami Facility (as here-
inafter defined) with substantially the terms set forth on
Exhibit G hereto.
(b) At the Closing, Seller and Buyer shall
enter into a consulting agreement in substantially the form
of Exhibit H hereto, relating to the services of Mr. Bernard
M. Manuel.
(c) At the Closing, Seller and Buyer shall
enter into a consulting agreement in substantially the form
of Exhibit I hereto, relating to the services of Mr. Irving
Benson.
(d) At the Closing, Seller and Buyer shall
enter into a stockholders agreement (the "Stockholders
Agreement") relating to the shares of ATSC Common Stock
issued to Seller pursuant to Subsection 1.2(a)(i) hereof in
substantially the form of Exhibit J hereto.
(e) At the Closing, Seller or an affiliate
of Seller and Buyer shall enter into a mutually satisfactory
lease whereby Buyer shall lease certain real property in
Florence, Italy (the "Florence Facility") from Seller or
such affiliate with substantially the terms set forth on
Exhibit K hereto (the "Florence Lease" and, collectively
with the agreements listed in paragraphs (a)-(d) above, the
"Ancillary Agreements").
2.2 Receivables Settlement. At least five (5)
business days prior to the Closing Date, Seller shall deliv-
er to Buyer a detailed schedule setting forth Seller's good
faith estimate (the "Accounts Receivable Estimate"), accom-
panied by a certificate of the chief financial officer of
Seller to that effect, of the dollar amount of the accounts
receivable of Seller from Buyer and CAT for finished goods
that have been received, quality checked and accepted. At
the Closing, Buyer shall deliver to Seller (a) a detailed
statement describing its disputes, if any, to the Accounts
Receivable Estimate, and (b) a wire transfer of immediately
available funds in an amount equal to the Accounts Receiv-
able Estimate not so disputed (the "Receivables Payment
Amount"). Buyer and Seller agree to negotiate in good faith
to resolve any dispute of the Accounts Receivable Estimate.
If any such dispute is not resolved by the parties and their
respective independent accountants within ten (10) business
days after the Closing, such dispute shall be resolved by
the Reviewing Accountants as promptly as practicable, and
such resolution shall be final and binding on the parties.
The expenses of the Reviewing Accountants shall be paid one
half by each of Seller and Buyer.
2.3 Finished Goods. All finished goods other
than those referred to in Section 2.2 hereof shall be
shipped and paid for in the ordinary course of business in
accordance with the relevant purchase orders; provided,
however, that Seller shall pay all costs incurred or to be
incurred in delivering finished goods to Buyer.
2.4 Joint Venture Agreement. The execution and
delivery of this Agreement by each of Seller, CGFE, ATSC and
Buyer shall not be construed to defeat, impair or limit in
any way the rights, obligations, claims or remedies of
Seller, CGFE or Buyer under the Joint Venture Agreement,
including, without limitation, under Section 5 thereof.
Upon consummation of the Closing, the Joint Venture Agree-
ment shall terminate automatically and be of no further
force or effect.
2.5 Leases. In the event Buyer enters into the
Subleases at the time of Closing, (i) at Seller's election
at any time within two (2) years after the Closing Date,
Buyer shall assume those obligations of Seller under the
NY Lease or the FWM Lease, as the case may be, that relate
to the subleased premises, and (ii) the Subleases shall
contain the consents of the respective landlords to the
assignment described in clause (i) above.
2.6 Meyer Employment Agreement. Buyer shall (i)
pay to Mr. Dwight Meyer any amount payable to him as a
result of the consummation of transactions contemplated by
this Agreement under his existing employment agreement with
CAT-US and (ii) use reasonable best efforts to cause Mr.
Meyer to execute and deliver a full release of all of
Seller's, Buyer's and CAT's obligations to Mr. Meyer in
respect of his employment by CAT prior to the Closing Date.
2.7 Mail Received After Closing. On and after
the Closing, Buyer may receive and open all mail addressed
to former employees of Seller who are Continuing Employees
and deal with the contents thereof in its discretion to the
extent that such mail and the contents thereof relate to the
Division, the Division Business, CAT, the Assets or any of
the Liabilities. Buyer agrees to deliver, or to cause to be
delivered, promptly to Seller all other mail received.
2.8 Employees, Benefit Plans.
(a) Hiring of Employees. Buyer shall not
have any obligation to assume or honor any employment agree-
ment ("Employment Agreements") between Seller and any cur-
rent or former employee of Seller. As of the Closing Date,
Seller shall terminate the employment of, and Buyer shall
offer employment to, employees of Seller or its affiliates
who are actively employed immediately prior to the Closing
Date, whose primary employment is with the Division and who
have been identified to Seller in writing by Buyer as em-
ployees to whom Buyer shall offer employment ("Affected
Employees"). CAT employees who are employed by CAT immedi-
ately prior to the Closing Date shall remain employees of
CAT following the Closing Date ("CAT Employees"). All
Affected Employees who accept employment with Buyer ("Hired
Employees") and CAT Employees who continue employment by CAT
immediately following the Closing Date, shall be referred
to, collectively, as "Continued Employees".
(b) Wages. Buyer shall pay or cause to be
paid when due to the Hired Employees the amount of all
wages, salary, bonuses, commissions, incentive payments and
other compensation (including, without limitation, any
vacation and sick pay) or any other benefit, perquisite,
cost, expense, liability or obligation attributable to
services provided on and after the Closing Date. Seller
shall pay or cause to be paid all amounts due to employees
of Seller engaged in the Division Business, including Hired
Employees, for wages, salary, bonuses, commissions, incen-
tive payments and other compensation (including, without
limitation, any vacation and sick pay) or any other benefit,
perquisite, cost, expense, liability or obligation attribut-
able to services provided prior to the Closing Date. Prior
to the Closing Date, Seller shall allow (and Seller repre-
sents and warrants to Buyer that it has allowed) the Hired
Employees the opportunity to use all accrued or earned
vacation; provided, however, that if any vacation time
remains owed to the Hired Employees as of the Closing Date,
Seller shall pay any and all such amounts to the Hired
Employees.
(c) Welfare Plans. As of the Closing Date,
Continued Employees shall cease to participate in the em-
ployee welfare benefit plans (as such term is defined in
ERISA) maintained or sponsored by Seller or its affiliates
(the "Prior Welfare Plans") and shall commence to partici-
pate in welfare benefit plans of Buyer or its affiliates
(the "Replacement Welfare Plans"), in accordance with the
terms of such plans. Seller shall be responsible for any
claims by Continued Employees for benefits relating to
claims incurred prior to the Closing Date (regardless of
when reported) and Buyer or CAT shall be responsible for any
claims incurred by Continued Employees on or after the
Closing Date.
(d) Workmen's Compensation Liability. Any
payments to be made on or after the Closing Date relating to
workmen's compensation claims of Continued Employees pending
at the time of Closing or arising from services provided
prior to Closing shall be made by Seller or its insurance
carrier.
(e) COBRA Coverage. To the extent required
by law, Seller shall give the Affected Employees and their
spouses notice of their rights to continuation coverage
under Section 4980B of the Code ("COBRA") in accordance with
applicable law. Seller shall continue to be responsible at
all times after the Closing Date for continuation coverage
under COBRA with respect to all Affected Employees, former
CAT Employees and their present or former dependents.
Seller hereby agrees to indemnify and hold harmless Buyer
against any and all losses which the Buyer may incur in
respect of any of the foregoing.
(f) Employment Law Liabilities.
(i) Seller hereby agrees to indemnify
Buyer and its affiliates against, and agrees to hold them
harmless from, any and all claims, losses, damages and
expenses (including, without limitation, reasonable
attorneys' fees) and other liabilities and obligations
incurred or suffered as a result of any claim by any employ-
ee of Seller, including any Hired Employee, that arises
under federal, state or local statute (including, without
limitation, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Age Discrimination in Employ-
ment Act of 1990, the Equal Pay Act, the Americans with
Disabilities Act of 1990, the Employee Retirement Income
Security Act of 1974 and all other statutes regulating the
terms and conditions of employment), regulation or ordi-
nance, under the common law or in equity (including any
claims for wrongful discharge or otherwise), or under any
policy, agreement, understanding or promise, written or
oral, formal or informal, between Seller and the employee,
arising out of actions, events or omissions that occurred
(or, in the case of omissions, failed to occur) on or prior
to the Closing Date; and
(ii) Buyer hereby agrees to indemnify
Seller and its affiliates against, and agrees to hold them
harmless from, any and all claims, losses, damages and
expenses (including, without limitation, reasonable
attorneys' fees) and other liabilities and obligations
incurred or suffered as a result of any claim by any Hired
Employee that arises under federal, state or local statute
(including, without limitation, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1990, the Equal Pay Act,
the Americans with Disabilities Act of 1990, the Employee
Retirement Income Security Act of 1974 and all other stat-
utes regulating the terms and conditions of employment),
regulation or ordinance, under the common law or in equity
(including any claims for wrongful discharge or otherwise),
or under any policy, agreement, understanding or promise,
written or oral, formal or informal, between Buyer and such
Hired Employee, arising out of actions, events or omissions
that occurred (or, in the case of omissions, failed to
occur) subsequent to the Closing Date.
(g) WARN Act Liabilities. Seller shall
bear, and indemnifies and holds harmless Buyer and its
affiliates from and against, all direct and indirect costs,
claims, losses, damages, expenses and other liabilities and
obligations arising from or relating to claims made by or on
behalf of the Affected Employees relating to the termination
of any such person's employment by Seller or its affiliates
prior to or on the Closing Date, including, but not limited
to, claims in respect of the Worker Adjustment and Retrain-
ing Notification Act of 1988, severance pay, salary continu-
ation and similar obligations. Buyer agrees to bear, and
indemnify and hold harmless Seller from and against, all
direct and indirect costs, claims, losses, damages, expenses
and other liabilities and obligations arising from or relat-
ing to claims made by or on behalf of the Continued Employ-
ees relating to the termination of any such person's employ-
ment by Buyer or CAT after the Closing Date, except for
claims in respect of the Worker Adjustment and Retraining
Notification Act of 1988 which would not have arisen but for
aggregation with terminations by Seller prior to the Closing
Date.
(h) No Third-Party Beneficiaries. Nothing
in this Section 2.8 is intended, or shall be construed, to
confer upon any person, other than the parties hereto and
their successors and permitted assigns, any rights or reme-
dies by reason of this Section 2.8.
III. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as fol-
lows:
3.1 Organization of Seller and CAT; Authority.
(a) Each of Seller, CAT-US and CAT-Far East
is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organi-
zation and has all requisite corporate power and authority
to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted, includ-
ing, without limitation, in the case of Seller, the Divi-
sion. Each of Seller, CAT-US and CAT-Far East is duly
qualified or licensed to do business as a foreign corpora-
tion and is in good standing in each jurisdiction in which
the property or assets owned, leased or operated by it or
the nature of the business conducted by it makes such quali-
fication necessary, except in those jurisdictions where the
failure to have such power and authority or to be so duly
qualified or licensed and in good standing would not, indi-
vidually or in the aggregate, reasonably be expected to have
a material adverse effect on the business, properties,
assets, results of operations or financial condition (a
"Material Adverse Effect") of the Division, CAT-US or CAT-
Far East. Except as set forth in Section 3.1 of the Disclo-
sure Schedule being delivered by Seller to Buyer concurrent-
ly herewith (the "Seller Disclosure Schedule"), Seller does
not have any subsidiaries or equity interests in any busi-
ness entity engaged in the Division Business.
(b) Each of Seller and CGFE has all requi-
site corporate power and authority to enter into this Agree-
ment and any instruments and agreements contemplated herein
required to be executed and delivered by it pursuant to this
Agreement (including, without limitation, as applicable, the
Ancillary Agreements, the Bill of Sale, the Assignment and
Assumption Agreements, and any Other Instruments, which are
referred to collectively herein as the "Seller Related
Instruments") and to consummate the transactions contemplat-
ed hereby and thereby. The execution, delivery and perfor-
mance of this Agreement and the Seller Related Instruments
and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary
corporate action on the part of each of Seller and CGFE,
other than approval of Seller's stockholders. This Agree-
ment has been, and each of the Seller Related Instruments
when executed and delivered will be, duly executed and
delivered by Seller and CGFE, as applicable, and this Agree-
ment constitutes, and each of the Seller Related Instruments
to which it is a party will, when executed and delivered,
constitute a valid and binding obligation of Seller or CGFE,
as applicable, enforceable against Seller or CGFE, as appli-
cable, in accordance with its terms, except that (i) such
enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, or other laws, now or hereafter
in effect, relating to or limiting creditors' rights gener-
ally and (ii) the remedy of specific performance and injunc-
tive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. Each of
Seller and CGFE shall deliver to Buyer true, correct and
complete copies of resolutions duly and validly adopted by
its board of directors, evidencing the authorization of the
execution and delivery of this Agreement and the Seller
Related Instruments, as applicable, and the consummation of
the transactions contemplated hereby and thereby.
3.2 No Violation; Consents and Approvals.
(a) Except as set forth in Section 3.2(a) of
the Seller Disclosure Schedule, the execution and delivery
of this Agreement and the Seller Related Instruments do not,
and the consummation of the transactions contemplated hereby
or thereby and compliance with the terms hereof or thereof
will not, (i) conflict with, or result in any violation of
or default under, (A) any provision of the charter or by-
laws of Seller or CGFE, or (B) any judgment, order or de-
cree, or statute, law, ordinance, rule or regulation of any
Governmental Entity (as hereinafter defined) applicable to
Seller, CGFE, CAT, the Division or the Assets; or (ii)
conflict with, or result in any breach or violation of or
constitute a default (or an event or condition which, with
notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of any
maturity of any liability or obligation pursuant to, or
result in the creation or imposition of any Lien under, any
note, bond, mortgage, indenture, license, contract, agree-
ment, lease or other instrument or obligation to which
Seller, CGFE or CAT is a party or by which Seller, CGFE or
CAT may be bound or affected or to which any of the Assets
may be subject, except where the conflict, violation, de-
fault, breach, termination, acceleration, creation or impo-
sition would not reasonably be expected to have a Material
Adverse Effect on the Division or CAT, would not prevent or
delay Seller's ability, or, to the best knowledge of Seller,
Buyer's ability, to consummate the transactions contemplated
hereby, would not impair in any material respect Buyer's
ability to operate CAT or the Division Business as currently
operated or would not result in any liability, cost or
expense of Seller (other than the Liabilities or other
liabilities and obligations not in excess of $50,000 in the
aggregate) being incurred by Buyer.
(b) Except as set forth in Section 3.2(b) of
the Seller Disclosure Schedule, no consent, approval, order
or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or
other governmental entity, authority or instrumentality,
domestic or foreign (collectively, "Governmental Entities"),
is required to be obtained or made by or with respect to
Seller, CGFE or CAT in connection with the execution and
delivery by Seller or CGFE of this Agreement or any Seller
Related Instrument or the consummation by Seller or CGFE of
the transactions contemplated hereby or thereby, or compli-
ance by Seller or CGFE with the terms hereof or thereof,
other than (i) compliance with and filings under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) compliance with and filings under
Sections 13(a) and (d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and (iii) those the
failure of which to obtain would not reasonably be expected
to have a Material Adverse Effect on the Division or CAT,
would not prevent or delay Seller's ability, or, to the best
knowledge of Seller, Buyer's ability, to consummate the
transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate CAT or the
Division Business as currently operated or would not result
in any liability, cost or expense of Seller (other than the
Liabilities or other liabilities and obligations not in
excess of $50,000 in the aggregate) being incurred by Buyer.
(c) Except for the approval of Seller's
stockholders, and as set forth in Section 3.2(c) of the
Seller Disclosure Schedule, no consent, approval, order or
authorization of, notice to, or registration, declaration or
filing with, any third party is required to be obtained or
made by Seller, CGFE or CAT in connection with the execution
and delivery by Seller or CGFE of this Agreement or any
Seller Related Instrument, or the consummation by Seller or
CGFE of the transactions contemplated hereby or thereby or
compliance by Seller or CGFE with the terms hereof or there-
of, except where the failure to obtain any consent, approv-
al, order or authorization, or to give notice, or to make
any registration, declaration or filing would not reasonably
be expected to have a Material Adverse Effect on the Divi-
sion or CAT, would not prevent or delay Seller's ability,
or, to the best knowledge of Seller, Buyer's ability, to
consummate the transactions contemplated hereby, would not
impair in any material respect Buyer's ability to operate
CAT or the Division Business as currently operated or would
not result in any liability, cost or expense of Seller
(other than the Liabilities or other liabilities and obliga-
tions not in excess of $50,000 in the aggregate) being
incurred by Buyer.
3.3 Seller Financial Statements.
(a) Seller has delivered to Buyer true,
correct and complete copies of the audited, consolidated
balance sheets of Seller as of January 29, 1994, January 28,
1995, and February 3, 1996 (the "1996 Balance Sheet") and
the audited, consolidated income statements and statements
of cash flows of Seller for the fiscal years ended Janu-
ary 29, 1994, January 28, 1995 and February 3, 1996, accom-
panied, in each case, by an unqualified report of Seller's
independent public accountants, Ernst & Young, LLP (collec-
tively, the "Audited Financial Statements").
(b) As used in this Agreement, the term
"Financial Statements" means, collectively, the Audited
Financial Statements and the Subsequent Financial Statements
(as hereinafter defined).
(c) The balance sheets included in the
Audited Financial Statements present, and the balance sheets
included in the Subsequent Financial Statements will pres-
ent, fairly the financial position of Seller as of the
respective dates thereof; provided, however, that the Subse-
quent Financial Statements will be subject to normal year-
end adjustments and will lack footnotes. The statements of
income and statements of cash flows included in the Audited
Financial Statements present, and the statements of income
and statements of cash flows included in the Subsequent
Financial Statements will present, fairly the results of
operations and cash flows of Seller for the respective
periods indicated; provided, however, that the Subsequent
Financial Statements will be subject to normal year-end
adjustments and will lack footnotes.
(d) The Audited Financial Statements were
and the Subsequent Financial Statements will have been,
based on the accounting books and records of Seller and have
been prepared or will be prepared in accordance with GAAP
applied on a consistent basis throughout the periods pre-
sented in the Financial Statements; provided, however, that
the Subsequent Financial Statements will be subject to
normal year-end adjustments and will lack footnotes.
3.4 CAT Financial Statements.
(a) Seller has delivered to Buyer true,
correct and complete copies of the audited, combined balance
sheets of CAT as of January 29, 1994, January 28, 1995 and
February 3, 1996 (the "CAT 1996 Balance Sheet") and the
audited, combined income statements and statements of cash
flows of CAT for the fiscal years ended January 29, 1994,
January 28, 1995 and February 3, 1996, accompanied, in each
case, by an unqualified report of CAT's independent public
accountants, Ernst & Young, LLP (collectively, the "CAT
Audited Financial Statements").
(b) As used in this Agreement, the term "CAT
Financial Statements" means, collectively, the CAT Audited
Financial Statements and the CAT Subsequent Financial State-
ments (as hereinafter defined).
(c) The balance sheets included in the CAT
Audited Financial Statements present, and the balance sheets
included in the CAT Subsequent Financial Statements will
present, fairly the financial position of CAT as of the
respective dates thereof; provided, however, that the CAT
Subsequent Financial Statements will be subject to normal
year-end adjustments and will lack footnotes. The state-
ments of income and statements of cash flows included in the
CAT Audited Financial Statements present, and the statements
of income and statements of cash flows included in the CAT
Subsequent Financial Statements will present, fairly the
results of operations and cash flows of CAT for the respec-
tive periods indicated; provided, however, that the CAT
Subsequent Financial Statements will be subject to normal
year-end adjustments and will lack footnotes.
(d) The CAT Audited Financial Statements
were, and the CAT Subsequent Financial Statements will have
been, based on the accounting books and records of CAT and
have been prepared or will have been prepared in accordance
with GAAP applied on a consistent basis throughout the
periods presented in the CAT Financial Statements; provided,
however, that the CAT Subsequent Financial Statements will
be subject to normal year-end adjustments and will lack
footnotes.
3.5 Combined Entity Financial Statements.
(a) Seller has delivered to Buyer true,
correct and complete copies of the following:
(i) the audited combined balance sheets of CAT
and the Division (the "Combined Entity") as
of February 3, 1996 (the "Combined Entity
1996 Balance Sheet") and the audited combined
income statements and statements of cash
flows of the Combined Entity for the fiscal
year ended February 3, 1996, accompanied, in
each case, by an unqualified report of
Seller's independent public accountants,
Ernst & Young, LLP (collectively, the "Com-
bined Entity Audited Financial Statements");
and
(ii) the unaudited combined balance sheets of the
Combined Entity as of January 28, 1995 and
the unaudited combined income statements and
statements of cash flows of the Combined
Entity for the fiscal year ended January 28,
1995 (collectively, the "Combined Entity
Unaudited Financial Statements").
(b) As used in this Agreement, the term
"Combined Entity Financial Statements" means, collectively,
the Combined Entity Audited Financial Statements, the Com-
bined Entity Unaudited Financial Statements and the Combined
Entity Subsequent Financial Statements (as hereinafter
defined).
(c) The balance sheets included in the
Combined Entity Audited Financial Statements and the Com-
bined Entity Unaudited Financial Statements present, and the
balance sheets included in the Combined Entity Subsequent
Financial Statements will present, fairly the pro forma
financial position of the Combined Entity as of the respec-
tive dates thereof, based upon the assumption set forth
therein and the notes thereto; provided, however, that the
Combined Entity Unaudited Financial Statements are, and the
Combined Entity Subsequent Financial Statements (other than
the Combined Entity 1994 Audited Financial Statements) will
be, subject to normal year-end adjustments and will lack
footnotes. The statements of income and statements of cash
flows included in the Combined Entity Audited Financial
Statements and the Combined Entity Unaudited Financial
Statements present, and the statements of income and state-
ments of cash flows included in the Combined Entity Subse-
quent Financial Statements will present, fairly the pro
forma results of operations and cash flows of the Combined
Entity for the respective periods indicated, based on the
assumptions set forth therein and the notes thereto; provid-
ed, however, that the Combined Entity Unaudited Financial
Statements are, and the Combined Entity Subsequent Financial
Statements (other than the Combined Entity 1994 Audited
Financial Statements) will be, subject to normal year-end
adjustments and will lack footnotes.
(d) The Combined Entity Audited Financial
Statements and the Combined Entity Unaudited Financial
Statements were, and the Combined Entity Subsequent Finan-
cial Statements will have been, based on the accounting
books and records of the Combined Entity, subject to the
assumptions set forth in such financial statements and the
notes thereto, and have been prepared or will be prepared in
accordance with GAAP applied on a consistent basis through-
out the periods presented in the Combined Entity Financial
Statements, subject to the assumptions set forth in such
financial statements and the notes thereto; provided, howev-
er, that the Combined Entity Unaudited Financial Statements
are, and the Combined Entity Subsequent Financial Statements
(other than the Combined Entity 1994 Audited Financial
Statements) will be, subject to normal year-end adjustments
and will lack footnotes.
3.6 Absence of Seller Undisclosed Liabilities.
Except for (a) liabilities and obligations set forth in
Section 3.6 of the Seller Disclosure Schedule or reflected
on the 1996 Balance Sheet or (b) liabilities and obligations
incurred in the ordinary course of business consistent with
past practice since the date of the 1996 Balance Sheet,
Seller has incurred no liabilities or obligations relating
to the Division in excess of $50,000 in the aggregate
(whether absolute, accrued, contingent or otherwise, and
whether due or to become due).
3.7 Absence of CAT Undisclosed Liabilities. To
the best knowledge of Seller, except for (a) liabilities and
obligations set forth in Section 3.7 of the Seller Disclo-
sure Schedule or reflected on the CAT 1996 Balance Sheet or
(b) liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the
date of the CAT 1996 Balance Sheet, CAT has incurred no
liabilities or obligations in excess of $50,000 in the
aggregate (whether absolute, accrued, contingent or other-
wise, and whether due or to become due).
3.8 Absence of Division Undisclosed Liabilities.
Except for (a) liabilities and obligations set forth in
Section 3.8 of the Seller Disclosure Schedule or reflected
on the Division 1996 Balance Sheet or (b) liabilities and
obligations incurred in the ordinary course of business
consistent with past practice since the date of the Division
1996 Balance Sheet, the Division has incurred no liabilities
or obligations in excess of $50,000 in the aggregate (wheth-
er absolute, accrued, contingent or otherwise, and whether
due or to become due).
3.9 Absence of Certain Changes or Events. Except
as set forth in Section 3.9 of the Seller Disclosure Sched-
ule, since February 3, 1996, (a) there has not been
any Material Adverse Effect on the Division Business; and
(b) neither Seller nor CAT has taken any action, no event
has occurred and no condition exists that is identified in
Section 5.1 hereof.
3.10 Title to CAT Shares.
(a) Seller has good and valid title to the
CAT US Shares, free and clear of all Liens, other than (i)
Liens arising under the Joint Venture Agreement and (ii)
Liens in favor of The HongKong and Shanghai Banking Corpora-
tion. Upon delivery to Buyer at the Closing of certificates
representing the CAT US Shares, duly endorsed by Seller for
transfer to Buyer or accompanied by stock powers duly exe-
cuted in blank, and upon delivery by Buyer in accordance
with the terms hereof of the consideration provided for in
Section 1.2 hereof, assuming Buyer has purchased the CAT US
Shares in good faith without notice of an adverse claim (as
such term is defined in Section 8-302 of the Uniform Commer-
cial Code as currently in effect in the State of New York)
and has not been a party to any fraud or illegality affect-
ing such shares, good and valid title to the CAT US Shares
will pass to Buyer, free and clear of any Liens. Other than
under this Agreement, the Joint Venture Agreement and
Seller's agreements with The HongKong and Shanghai Banking
Corporation, the CAT US Shares are not subject to any voting
trust agreement or other contract, agreement, arrangement,
commitment or understanding, including any such agreement,
arrangement, commitment or understanding restricting or
otherwise relating to the voting, dividend rights or dispo-
sition of the CAT US Shares.
(b) CGFE has good and valid title to the CAT
Far East Shares, free and clear of all Liens, other than (i)
Liens arising under the Joint Venture Agreement and (ii)
Liens in favor of The HongKong and Shanghai Banking Corpora-
tion. Upon delivery to Buyer at the Closing of certificates
representing the CAT Far East Shares, duly endorsed by CGFE
for transfer to Buyer or accompanied by stock powers duly
executed in blank, and upon delivery by Buyer in accordance
with the terms hereof of the consideration provided for in
Section 1.2 hereof, assuming Buyer has purchased the CAT Far
East Shares in good faith without notice of an adverse claim
(as such term is defined in Section 8-302 of the Uniform
Commercial Code as currently in effect in the state of New
York) and has not been a party to any fraud or illegality
affecting such shares, good and valid title to the CAT Far
East Shares will pass to Buyer, free and clear of any Liens.
Other than under this Agreement, the Joint Venture Agreement
and Seller's agreements with The HongKong and Shanghai
Banking Corporation, the CAT Far East Shares are not subject
to any voting trust agreement or other contract, agreement,
arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding re-
stricting or otherwise relating to the voting, dividend
rights or disposition of the CAT Far East Shares.
3.11 Title to Assets; Leased Property.
(a) Except as set forth in Section 3.11(a)
of the Seller Disclosure Schedule, Seller has (i) good and
valid title to all of the Assets which are owned by Seller
as of the date hereof and valid leasehold interests in, or
other rights to use, all of the Assets which are not owned
by Seller, free and clear of all Liens other than Permitted
Liens and (ii) Seller will have good and valid title to all
of the Assets which will be owned by Seller as of the Clos-
ing Date and will have valid leasehold interests in, or
other rights to use, all of the Assets which will not be
owned by Seller as of the Closing Date, excluding Assets
sold or otherwise disposed of in the ordinary course of
business and including Assets purchased, leased or licensed,
as the case may be, between the date hereof and the Closing
Date. As used in this Agreement, the term "Permitted Liens"
means (i) mechanics', carriers', workmen's, repairmen's or
other like liens arising or incurred in the ordinary course
of business, (ii) liens for taxes, assessments and other
governmental charges which are not due and payable or which
may hereafter be paid without penalty or which are being
contested in good faith by appropriate proceedings (for
which adequate reserves have been made in the Combined
Entity Financial Statements in accordance with GAAP) and
(iii) other imperfections of title or encumbrances, if any,
which imperfections of title or other encumbrances, individ-
ually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on the Division Business,
would not prevent or delay Seller's ability, or, to the best
knowledge of Seller, Buyer's ability, to consummate the
transactions contemplated hereby, would not impair in any
material respect Buyer's ability to operate the Division
Business as currently operated or would not result in any
liability, cost or expense (other than liabilities and
obligations not in excess of $50,000 in the aggregate) to
Buyer or any of its affiliates, CAT or the Division.
(b) Set forth on Annex IV hereto is a true
and correct listing of the portions of the deposits under
the NY Lease and the FWM Lease relating to premises to be
occupied by Buyer after the Closing Date. Seller has deliv-
ered to Buyer true, correct and complete copies of the NY
Lease and all amendments thereto, the FWM Lease and all
amendments thereto, including the CAT Sublease, and the
Business Lease, dated January 21, 1992, among Seller, as
tenant, and David Schaecter and Marvis Schaecter, as land-
lord (the "Miami Lease" and, collectively with the NY Lease
and the FWM Lease, the "Leases"), relating to Seller's
facility located at 4915 NW 159th Street, Miami Lakes,
Florida (the "Miami Facility") and all amendments thereto.
For purposes of this Section 3.11, the term Seller shall
include Seller's wholly owned subsidiary Fenn, Wright and
Manson, Incorporated, as applicable. Seller or CAT, as the
case may be, has a valid and subsisting leasehold estate
with respect to each of the properties subject to a Lease
(the "Leased Properties"). Except as set forth in Section
3.11(b) of the Seller Disclosure Schedule, to the best
knowledge of Seller, (i) each of the Leases is in full force
and effect and (ii) none of the Leases has been modified or
amended. Neither Seller nor CAT, as the case may be, has
given or received a written notice of default under any of
the Leases which remains uncured, and, to the best knowledge
of Seller, there exists no event of default, event, occur-
rence or act which, with the giving of notice, the lapse of
time, or both, or the happening of a further event or condi-
tion, would result in a default under any of the Leases by
Seller or CAT, as the case may be, or, to the best knowledge
of Seller, the applicable landlord under any such Leases.
There are no pending unresolved material disputes with any
landlord under any of the Leases. All security deposits
required under the Leases have been paid to the applicable
landlord under the Leases in compliance with the applicable
Lease. Except as set forth in Section 3.11(b) of the Seller
Disclosure Schedule, there are no subtenants occupying any
portion of the Leased Properties other than CAT and, except
for Seller, to the best knowledge of Seller, no other person
or entity has any right to occupy or possess any portion of
the Leased Properties other than affiliates of Seller claim-
ing by, through or under Seller who shall (except for CAT)
vacate their respective premises on or prior to the Closing
Date. Except as set forth in Section 3.11(b) of the Seller
Disclosure Schedule, as to the Leases, (i) none of Seller's
or CAT's interests in any of the Leases has been assigned,
pledged, hypothecated or otherwise encumbered in any manner;
(ii) no written waiver, indulgence or postponement of the
applicable landlord's obligations under any of the Leases
has been granted by Seller or CAT; (iii) neither Seller nor
CAT has any right or option to purchase or otherwise acquire
any of the Leased Properties or any portion thereof; and
(iv) neither Seller nor CAT has given any notices to any
landlord indicating that Seller or CAT either will or will
not (A) be exercising any extension or renewal options, or
any right or option to purchase any of the Leased Properties
or any portion thereof, (B) abandon any of the Leased Prop-
erties or any portion thereof, or (C) terminate any of the
Leases.
(c) Except as set forth in Section 3.11(c)
of the Seller Disclosure Schedule, (i) to the best knowledge
of Seller, the building and structure at the Florence Facil-
ity are structurally sound and are free from defects (ordi-
nary wear and tear excepted) and are adequate for the uses
to which they are being put, and (ii) all machinery and
equipment owned, leased or used by Seller in the conduct of
the Division Business are free from defects (ordinary wear
and tear excepted) and are in good and normal operating
condition and repair (ordinary wear and tear excepted), and
are adequate for the uses to which they are being put, in
each case, except for defects which, individually or in the
aggregate, would not reasonably be expected to have a Mate-
rial Adverse Effect on the Division Business, would not
impair in any material respect Buyer's ability to operate
the Division Business as currently operated or would not
result in any liability, cost or expense to Buyer or any of
its affiliates (other than the Liabilities or other liabili-
ties and obligations not in excess of $50,000 in the aggre-
gate).
(d) Except as set forth in Section 3.11(d)
of the Seller Disclosure Schedule, upon Closing in accor-
dance with the terms of this Agreement, Buyer shall receive
from Seller good and valid title to all of the Assets, free
and clear of all Liens, other than Permitted Liens.
3.12 Litigation/Claims.
(a) Section 3.12(a) of the Seller Disclosure
Schedule sets forth a true, complete and correct list of any
and all claims, actions, suits and proceedings pending or,
to the best knowledge of Seller, threatened, and, to the
best knowledge of Seller, any investigations or inquiries
pending or threatened, against Seller which relate to the
Division or CAT.
(b) Except as set forth in Section 3.12(b)
of the Seller Disclosure Schedule, there is (i) no claim,
action, suit or proceeding pending or, to the best knowledge
of Seller, threatened, and (ii) to the best knowledge of
Seller, no investigation or inquiry pending or threatened,
by or before any Governmental Entity, or by or on behalf of
any third party, which challenges the validity of this
Agreement or any Seller Related Instrument or which, if
adversely determined, would, individually or in the aggre-
gate, reasonably be expected to have a Material Adverse
Effect on the Division Business, prevent or delay Seller's
ability, or, to the best knowledge of Seller, Buyer's abili-
ty, to consummate the transactions contemplated hereby,
impair in any material respect Buyer's ability to operate
the Division Business as currently operated, or result in
any liability, cost or expense to Buyer or any of its affil-
iates (other than the Liabilities or other liabilities and
obligations not in excess of $50,000 in the aggregate).
3.13 Employee Benefit Plans. (a) With respect
to each employee benefit plan, arrangement or agreement that
is maintained, or was maintained at any time during the five
(5) calendar years preceding the date of this Agreement (the
"Plans"), by either Seller or CAT or by any trade or busi-
ness, whether or not incorporated (an "ERISA Affiliate"),
which together with either Seller or CAT would be deemed a
"single employer" within the meaning of Section 4001 of the
Employment Retirement Income Security Act of 1974, as amend-
ed ("ERISA"):
(i) each of the Plans that is subject
to ERISA has been maintained and administered in all materi-
al respects in compliance with ERISA and each of the Plans
intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified;
(ii) no Plan has an accumulated or
waived funding deficiency within the meaning of Section 412
of the Code;
(iii) no Plan is a multiemployer plan
(within the meaning of Section 4001(a)(3) of ERISA) and no
Plan is a multiple employer plan as defined in Section 413
of the Code; and
(iv) no Plan that is or was maintained
by CAT is subject to Article IV of ERISA.
(b) Neither Seller nor CAT has any obliga-
tions with respect to medical benefits for retired employees
of the Division or CAT.
(c) Neither Seller nor CAT has any obliga-
tions to the Affected Employees with respect to any 401(k)
plan or pension plan.
3.14 Certain Contracts and Arrangements.
(a) Except as set forth in Section 3.14(a) of
the Seller Disclosure Schedule, there are no binding oral
agreements to which Seller is a party relating to the Divi-
sion or the Assets or to which the Division or any of the
Assets is subject. Section 3.14(b) of the Seller Disclosure
Schedule sets forth a true, correct and complete list of all
written agreements, contracts and commitments to which
Seller is a party and to which the Division or any of the
Assets is subject (the "Division Contracts"), including,
without limitation:
(i) employment agreements or severance
agreements;
(ii) covenants not to compete;
(iii) agreements or contracts with any
affiliate of Seller;
(iv) agreements or contracts under which
Seller has borrowed or loaned money, or any note, bond,
indenture or other evidence of indebtedness or any guarantee
of indebtedness, agreements with factors or trade credit
agreements;
(v) "open purchase orders", "take-or-
pay" agreements or any other agreements with suppliers, but
excluding purchase orders which relate to specific goods
made for Buyer in the ordinary course of business;
(vi) agreements or contracts with any
cutting room operator;
(vii) agreements or contracts with con-
tract manufacturers or factory operators;
(viii) all real property leases to which
Seller is a party and which relate to the Division Business;
or
(ix) other agreements, contracts, leas-
es, licenses, commitments or instruments to which the Seller
is a party, which relate, directly or indirectly, to the
Division or any Asset; provided, however, that (x) purchase
orders and written fabric commitments accepted from Buyer
and the fabric commitments related to the fabric listed on
Annex I hereto and (y) such agreements, contracts or commit-
ments as may be terminated by Buyer at any time after the
Closing without liability, penalty or premium upon notice of
three months or less or which will not result in future
annual expenditures or receipts by the Division at any time
of $50,000 or more need not be and are not listed in Section
3.14 of the Seller Disclosure Schedule. Seller and, to the
best knowledge of Seller, no other party to any Division
Contract is in breach thereof or in default thereunder,
which breach or default would, individually or in the aggre-
gate, reasonably be expected to have a Material Adverse
Effect on the Division Business, prevent or delay Seller's
ability, or, to the best knowledge of Seller, Buyer's abili-
ty, to consummate the transactions contemplated hereby,
impair in any material respect Buyer's ability to operate
the Division Business as currently operated or result in any
liability, cost or expense to Buyer or any of its affiliates
(other than the Liabilities or other liabilities and obliga-
tions not in excess of $50,000 in the aggregate). Subject
to obtaining any requisite consents of third parties, the
enforceability of the Division Contracts will not be affect-
ed in any material respect by the execution and delivery of
this Agreement or the consummation of the transactions
contemplated hereby. To the best knowledge of Seller, there
have been no threatened cancellations of, or any dispute
under, any Division Contract.
(b) All amounts due and payable by Seller or
an affiliate of Seller under the Contracts as of the date
hereof have been paid in full by Seller or such affiliate,
and all amounts due and payable by Seller or an affiliate of
Seller under the Contracts as of the Closing Date shall have
been paid in full by Seller or such affiliate.
3.15 Compliance with Laws; Licenses. Except as
set forth in Section 3.15(a) of the Seller Disclosure Sched-
ule, the Division has been, and is being, operated in com-
pliance with all applicable laws, statutes, ordinances,
rules, regulations and orders of all Governmental Entities,
except for laws the violation of which, individually or in
the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Division Business, would not
prevent or delay Seller's ability, or, to the best knowledge
of Seller, Buyer's ability, to consummate the transactions
contemplated hereby, would not impair in any material re-
spect Buyer's ability to operate the Division Business as
currently operated or would not result in any liability,
cost or expense to Buyer or any of its affiliates (other
than the Liabilities or other liabilities and obligations
not in excess of $50,000 in the aggregate). Section 3.15(b)
of the Seller Disclosure Schedule sets forth a true, correct
and complete list of all permits, certificates, licenses,
approvals and other authorizations of Governmental Entities
("Permits") possessed by Seller or any affiliate of Seller
in connection with the operation of the Division as current-
ly operated and ownership of the Assets, which are all the
Permits required in connection with the operation of the
Division as currently operated and ownership of the Assets
under applicable laws, statutes, ordinances, rules, regula-
tions and orders, except where the failure to possess such
Permits, individually or in the aggregate, would not reason-
ably be expected to have a Material Adverse Effect on the
Division Business, would not prevent or delay Seller's
ability, or, to the best knowledge of Seller, Buyer's abili-
ty, to consummate the transactions contemplated hereby,
would not impair in any material respect Buyer's ability to
operate the Division Business as currently operated or would
not result in any liability, cost or expense to Buyer or any
of its affiliates (other than the Liabilities or other
liabilities and obligations not in excess of $50,000 in the
aggregate).
3.16 Insurance. Section 3.16 of the Seller
Disclosure Schedule sets forth a true, correct and complete
list of all policies of fire, medical, life, liability,
product liability, workmen's compensation, libel, health and
other forms of insurance presently in effect with respect to
the Division or CAT. All such policies are in full force
and effect, all premiums due and payable with respect there-
to have been paid, and no notice of cancellation or termina-
tion has been received with respect to any such policy. All
such policies are sufficient for compliance in all material
respects with all requirements of law and the terms of the
Leases and are valid, outstanding and enforceable and will
remain in full force and effect through the Closing Date.
Except as set forth in Section 3.16 of the Seller Disclosure
Schedule, no risks with respect to the Division or CAT have
been designated by Seller as being self-insured. Except as
set forth in Section 3.16 of the Seller Disclosure Schedule,
Seller has not been refused any insurance in connection with
the Division or CAT, nor has any coverage been limited by
any insurance carrier to which Seller has applied for such
insurance or with which Seller has carried such insurance in
the last three years.
3.17 Labor Matters. Except as set forth in
Section 3.17 of the Seller Disclosure Schedule, with respect
to the Division, (a) Seller is in compliance in all material
respects with all applicable laws regarding employment and
employment practices, terms and conditions of employment,
wages, hours of work and occupational safety and health, (b)
Seller is not a party to or bound by any collective bargain-
ing agreement or similar agreement with any labor organiza-
tion, and, to the best knowledge of Seller, no union claims
to represent Division employees, (c) there is no unfair
labor practice charge or complaint against Seller pending
or, to the best knowledge of Seller, threatened before the
National Labor Relations Board or any similar state or
foreign agency, nor is there any grievance or any arbitra-
tion proceeding arising out of or under any collective
bargaining agreement pending or, to the best knowledge of
Seller, threatened against Seller, (d) there is no labor
strike, slowdown, work stoppage or lockout pending or, to
the best knowledge of Seller, threatened against Seller and
(e) there is no charge or complaint pending or, to the best
knowledge of Seller, threatened against Seller before the
Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful
employment practices. Except as set forth in Section 3.17
of the Seller Disclosure Schedule, Seller has not received
written notice of the intent of any federal, state, local or
foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation of or relating
to Seller with respect to the Division, and, to the best
knowledge of Seller, no such investigation is in progress or
threatened.
3.18 Assets of the Division Business. All of the
Assets are used exclusively or primarily in the conduct of
the Division Business other than the CAT Shares and certain
Intellectual Property.
3.19 Disclosure. No representation or warranty
by Seller contained in this Agreement, and no statement
contained in any document (including, without limitation,
the Seller Related Instruments, the Financial Statements,
the CAT Financial Statements, the Division Financial State-
ments and the Seller Disclosure Schedule), list, certificate
or other writing furnished or to be furnished by or on
behalf of Seller to Buyer or any of its representatives
pursuant to this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit
to state any material fact necessary, in the light of the
circumstances under which it was or will be made, in order
to make the statements herein or therein not misleading, or
necessary in order to fully and fairly provide the informa-
tion required to be provided in any such document, list,
certificate or other writing.
3.20 Environmental Matters.
(a) Except as set forth in Section 3.20(a)
of the Seller Disclosure Schedule, Seller is in compliance
in all material respects with all applicable federal, state,
local and foreign laws and regulations relating to pollution
or protection of human health or the environment ("Environ-
mental Laws") with respect to the Division (which compliance
includes, but is not limited to, the possession by Seller of
all permits and other governmental authorizations required
under applicable Environmental Laws with respect to the
Division, and compliance with the terms and conditions
thereof).
(b) Except as set forth in Section 3.20(b)
of the Seller Disclosure Schedule, there is no Environmental
Claim pending or, to the best knowledge of Seller, threat-
ened against Seller relating to the Division or, to the best
knowledge of Seller, against any person or entity whose
liability for any Environmental Claim the Division has or
may have retained or assumed either contractually or by
operation of law which would reasonably be expected to
result in a Material Adverse Effect on the Division Business
or would result in any liability, cost or expense to Buyer
or any of its affiliates (other than the Liabilities or
other liabilities and obligations not in excess of $50,000
in the aggregate). As used herein, "Environmental Claim"
means any claim, action, cause of action, investigation or
notice (written or oral) by any person or entity alleging
potential liability arising out of, based on or resulting
from (i) the presence, or release, spill, discharge, emis-
sion, leaching or migration into the indoor or outdoor
environment, of any Hazardous Materials at any location,
whether or not owned or operated by Seller, or (ii) circum-
stances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(c) Except as set forth in Section 3.20(c)
of the Seller Disclosure Schedule, the Seller has not and,
to the best knowledge of Seller, no other person has placed,
stored, deposited, discharged, buried, dumped or disposed of
substances defined as Hazardous Substances, Oils, Pollutants
or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. SECTION 300.5, or defined as
such by, or regulated as such under, any Environmental Law
("Hazardous Materials") or any other wastes produced by, or
resulting from, any business, commercial or industrial
activities, operations or processes, on, beneath or adjacent
to any property currently or formerly owned, operated or
leased by the Seller for use in the Division, except for
inventories of such substances to be used, and wastes gener-
ated therefrom, in the ordinary course of business of Seller
(which inventories and wastes, if any, were and are stored
or disposed of in accordance in all material respects with
applicable Environmental Laws and in a manner such that
there has been no Release of any such substances into the
indoor or outdoor environment in violation of Environmental
Laws).
(d) Without limiting the generality of the
foregoing, except as set forth in Section 3.20(d) of the
Seller Disclosure Schedule, to the best knowledge of Seller,
none of the properties owned, operated or leased by Seller
and used by the Division contain any: underground storage
tanks; asbestos; polychlorinated biphenyls ("PCBs"); or
septic tanks or waste disposal pits in which process
wastewater or any Hazardous Materials have been discharged
or disposed.
3.21 Opinion of Financial Advisor. Seller has
received an opinion from Ladenburg, Thalmann & Co., Inc. to
the effect that the consideration to be received by Seller
represents reasonable equivalent value and fair consider-
ation for the CAT Shares and the Assets and a copy of such
opinion has been provided to ATSC.
3.22 Brokers. No broker, finder or financial
advisor or other person is entitled to any brokerage fees,
commissions, finders' fees or financial advisory fees in
connection with the transactions contemplated hereby by
reason of any action taken by Seller or any of its affili-
ates, employees, representatives or agents.
3.23 Intellectual Property. Seller has no regis-
tered patents, trademarks, copyrights, service marks, or
applications therefor relating to the Division Business.
Except as set forth in Section 3.23 of the Seller Disclosure
Schedule, Seller (a) owns or licenses the Intellectual
Property related to or used in the conduct of the Division
Business free and clear of all Liens, (b) Seller has the
right to transfer its interest in the Intellectual Property
to Buyer, (c) no claims have been asserted or, to the best
knowledge of Seller, threatened against Seller with respect
to the ownership, use or transfer by Seller of the Intellec-
tual Property, and (d) to the best knowledge of Seller, no
third party is in violation of any of Seller's rights in the
Intellectual Property.
3.24 Absence of Violations of Quotas and Visas.
Except as set forth in Section 3.24 of the Seller Disclosure
Schedule, Seller, with respect to the Division Business, is
not in violation in any material respect of any visa or
quota restrictions under any trade agreements, including,
without limitation, the Multifiber Arrangement or other
arrangements under the General Agreement on Tariffs and
Trade.
3.25 No Tariffs or Duties. With respect to the
Division Business, Seller's payment of all tariffs and
duties are current in all jurisdictions, and Seller does not
owe any tariffs or duties other than those incurred in the
ordinary course of business (a) under any trade agreements,
including, without limitation, The North American Free Trade
Agreement, Caribbean Basin Economic Recovery or the Jackson-
Vanik Amendment to the Trade Act of 1974; and (b) to the
U.S. Customs Service.
3.26 Compliance with U.S. Customs and Trade Laws.
Seller, with respect to the Division Business, is not in
violation in any material respect of any U.S. Customs or
trade laws, including, without limitation, laws pertaining
to country-of-origin, marking or labeling.
3.27 SEC Documents. Seller has filed all docu-
ments required to be filed by it with the Securities a