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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): OCTOBER 25, 2006
UNIFI, INC.
(Exact name of registrant as specified in its charter)
NEW YORK
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(State or other jurisdiction of incorporation)
1-10542 11-2165495
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(Commission File No.) (IRS Employer Identification No.)
7201 WEST FRIENDLY AVENUE
GREENSBORO, NORTH CAROLINA 27410
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(Address of principal executive offices)
(336) 294-4410
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
PURCHASE AGREEMENT
On October 25, 2006, Unifi Manufacturing, Inc. ("UMI"), a North
Carolina corporation and wholly owned subsidiary of Unifi, Inc. (the "Company")
entered into an Asset Purchase Agreement (the "Purchase Agreement") with Dillon
Yarn Corporation, a South Carolina corporation ("Dillon"), pursuant to which
UMI will purchase certain assets, and assume certain liabilities, of Dillon
related to or used in the textured nylon and polyester yarn businesses of
Dillon (the "Acquisition"), for an aggregate purchase price of $65 million,
payable in a combination of approximately $44.5 million in cash and
approximately 8.3 million shares of common stock of the Company valued at
approximately $20.5 million (the "Unifi Stock Consideration"), subject to
adjustment. The Acquisition is expected to close in January 2007 (the
"Closing").
In connection with the Acquisition, as of the Closing, the
Company and Dillon will enter into a Registration Rights Agreement, a form of
which is attached as an exhibit to the Purchase Agreement (the "Registration
Rights Agreement"), which provides, among other things, that the Company will
grant Dillon certain rights relating to the registration of the Unifi Stock
Consideration.
Copies of the Purchase Agreement and the form of Registration
Rights Agreement are attached hereto as Exhibit 10.1 and Exhibit 10.2,
respectively, each of which is incorporated herein by reference.
ITEM 8.01 OTHER EVENTS
On October 25, 2006, the Company issued a press release
announcing the Acquisition, which press release is attached hereto as Exhibit
99.1 and incorporated herein by reference.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
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10.1 Asset Purchase Agreement, dated October 25, 2006.
10.2 Form of Registration Rights Agreement.
99.1 Press Release, dated October 25, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report on Form 8-K to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNIFI, INC.
By: /s/ Charles F. Mccoy
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Name: Charles F. McCoy
Vice President, Secretary
and General Counsel
Dated: October 26, 2006
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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10.1 Asset Purchase Agreement, dated October 25, 2006.
10.2 Form of Registration Rights Agreement.
99.1 Press Release, dated October 25, 2006.
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ASSET PURCHASE AGREEMENT
BETWEEN
UNIFI MANUFACTURING, INC.
AND
DILLON YARN CORPORATION
__________________________________
October 25, 2006
__________________________________
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TABLE OF CONTENTS
PAGE #
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ARTICLE 1 DEFINITIONS................................................1
ARTICLE 2 PURCHASE AND SALE OF ASSETS................................1
2.1 Purchased Assets...........................................1
ARTICLE 3 EXCLUDED ASSETS............................................2
3.1 Excluded Assets............................................2
ARTICLE 4 ASSUMED LIABILITIES AND EXCLUDED LIABILITIES...............3
4.1 The Buyer's Assumption of Liabilities......................3
4.2 Excluded Liabilities.......................................4
4.3 Straddle Liabilities.......................................6
ARTICLE 5 PURCHASE PRICE AND PURCHASE PRICE ALLOCATION...............6
5.1 Purchase Price.............................................6
5.2 Adjustments to Form of Purchase Price......................6
5.3 Closing Inventory..........................................6
5.4 Allocation.................................................7
5.5 Sales, Use, Transfer and Similar Taxes and Charges.........7
ARTICLE 6 THE SELLER'S REPRESENTATIONS AND WARRANTIES................8
6.1 Organization...............................................8
6.2 No Conflict................................................8
6.3 Authority..................................................8
6.4 Filing Requirements........................................8
6.5 Real Property..............................................9
6.6 Tangible Personal Property.................................9
6.7 Litigation................................................10
6.8 Contracts and Other Agreements............................10
6.9 Intellectual Property.....................................10
6.10 Taxes.....................................................11
6.11 Product Liability.........................................12
6.12 Employee Benefit Plans....................................12
6.13 Broker's Fee..............................................15
6.14 Compliance with Laws; Permits.............................15
6.15 Environmental Compliance..................................15
6.16 No Material Adverse Change................................16
6.17 Prepaid Expenses..........................................16
6.18 Investment Representation.................................16
ARTICLE 7 THE BUYER'S REPRESENTATIONS AND WARRANTIES................16
7.1 Organization..............................................16
7.2 No Conflict...............................................16
7.3 Authority.................................................17
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7.4 Broker's Fee..............................................17
7.5 Filing Requirements.......................................17
7.6 Unifi Stock Consideration.................................17
7.7 Capitalization............................................17
7.8 Delivery of SEC Filings...................................18
7.9 No Material Adverse Change................................18
7.10 SEC Filings; Material Contracts...........................18
7.11 Form S-3 Eligibility......................................18
ARTICLE 8 PRE-CLOSING PERIOD........................................19
8.1 Due Diligence; Confidentiality............................19
8.2 Operate Purchased Assets in the Ordinary Course;
No Material Change or Material Commitments................19
8.3 Efforts to Preserve Relationships and Organization........20
8.4 Work Diligently Towards Closing...........................20
8.5 Prompt Notification of Breach.............................21
8.6 Shareholder Vote..........................................21
8.7 Update of Prepaid Expenses Schedule.......................21
ARTICLE 9 GOVERNMENTAL CONSENTS.....................................21
9.1 Cooperation...............................................21
ARTICLE 10 NON-COMPETITION; NON-SOLICITATION.........................22
10.1 Non-Competition...........................................22
10.2 Exceptions................................................22
10.3 Non-Solicitation..........................................22
10.4 Remedies for Breach; Severability.........................23
ARTICLE 11 CLOSING; DELIVERIES BY THE PARTIES; CONDITIONS PRECEDENT..23
11.1 The Closing; Further Assurances...........................23
11.2 Buyers' Deliveries........................................24
11.3 The Seller's Deliveries...................................24
11.4 Release of Transferred Employees from
Confidentiality Undertaking...............................25
11.5 Conditions to Each Party's Obligations....................25
11.6 Conditions to Obligations of the Buyer....................26
11.7 Conditions to Obligations of the Seller...................27
ARTICLE 12 TAXES AND PRORATIONS......................................27
12.1 Utility Accounts..........................................27
12.2 Prepaid Items.............................................27
ARTICLE 13 COVENANTS.................................................28
13.1 Accounts Receivable; Claims...............................28
13.2 Business Records..........................................28
13.3 Access to Business Records................................28
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13.4 Tax Matters...............................................28
13.5 Litigation Assistance.....................................29
13.6 Post-Closing Administration of Certain Contracts..........29
13.7 Transferred Employees.....................................30
13.8 Correspondence............................................32
13.9 Pro Forma Financials......................................33
ARTICLE 14 BULK SALES ACT............................................33
ARTICLE 15 RIGHT OF TERMINATION......................................33
15.1 Termination...............................................33
15.2 Effect of Termination.....................................34
ARTICLE 16 BUYER'S INDEMNITY.........................................34
ARTICLE 17 SELLER'S INDEMNITY........................................34
ARTICLE 18 INDEMNIFICATION PROCEDURES AND LIMITATIONS................35
18.1 Period for Taking Action..................................35
18.2 Notice....................................................35
18.3 Limitations on Indemnification............................35
18.4 Procedure.................................................36
18.5 Applicability to Claims; Exclusive Remedy.................36
18.6 Limitation of Liability...................................36
ARTICLE 19 CONFIDENTIALITY...........................................36
19.1 Pre-Closing Confidentiality Obligations...................36
19.2 Post-Closing Confidentiality Obligations..................37
ARTICLE 20 DISPUTE RESOLUTION........................................37
20.1 Forum.....................................................37
20.2 Waivers...................................................37
20.3 Waiver of Jury Trial......................................38
ARTICLE 21 MISCELLANEOUS.............................................38
21.1 Press Release.............................................38
21.2 Expenses and Fees.........................................38
21.3 Amendments; Waiver........................................38
21.4 Parties in Interest.......................................38
21.5 Assignment................................................38
21.6 Merger....................................................39
21.7 Notices...................................................39
21.8 Governing Law.............................................39
21.9 Specific Performance......................................39
21.10 Schedules and Exhibits....................................40
21.11 Usage.....................................................40
21.12 Headings..................................................40
21.13 References................................................40
21.14 Counterparts..............................................40
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SCHEDULES
Schedule 1.06 Assigned IP Licenses
Schedule 1.07 Assigned Software
Schedule 1.09 Assumed Contracts
Schedule 1.10 Assumed Leases
Schedule 1.20 Covered Employees
Schedule 1.46 Leased Assets
Schedule 1.49 Liens
Schedule 1.57 Owned Real Property
Schedule 1.59 Permits
Schedule 1.60 Permitted Liens
Schedule 1.63 Real Property Leases
Schedule 3.1 Excluded Equipment
Schedule 6.2 Seller's Consents
Schedule 6.4 Seller's Filing Requirements
Schedule 6.6 Exceptions to Tangible Personal Property
Schedule 6.7 Litigation
Schedule 6.8 Material Contracts
Schedule 6.9(e) Intellectual Property Rights Actions
Schedule 6.11 Product Liability Claims
Schedule 6.12(a) Employee Benefit Plans
Schedule 6.12(b) Compliance
Schedule 6.12(i) WARN
Schedule 6.14(b) Permits
Schedule 6.15 Environmental Compliance
Schedule 6.16 No Material Adverse Change
Schedule 6.17 Prepaid Items
Schedule 7.2 Buyer's Conflicts
Schedule 7.5 Buyer's Filing Requirements
Schedule 7.7 Unifi Parent Capitalization
Schedule 8.2 Material Change or Commitments
Schedule 8.2(b) New Capital Expenditures or Commitments
EXHIBITS
Exhibit A Definitions
Exhibit B Form of American Drawtech Manufacturing Agreement
Exhibit C Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit D Form of Dillon Manufacturing Agreement
Exhibit E Form of Guaranty
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Sales and Services Agreement
Exhibit H Form of Affidavit (Real Property Lease)
Exhibit I Form of Limited Warranty Deed
ANNEXES
Annex A Methodology of Valuation of Inventory
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THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is entered into on
October 25, 2006, by and among Unifi Manufacturing, Inc., a North Carolina
corporation (the "BUYER"), and Dillon Yarn Corporation, a South Carolina
corporation (the "SELLER"), and solely for the purposes of ARTICLES 10, 20 and
21, the individuals who are signatories hereto (the "PRINCIPALS"). The Buyer
and the Seller are collectively the "PARTIES" and individually each is a
"PARTY" to this Agreement.
R E C I T A L S :
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A. Upon the terms and subject to the conditions contained herein,
the Buyer wishes to acquire, and the Seller wishes to sell, the Purchased
Assets (as defined below) located at the Dillon Facilities (as defined below),
where the Seller is engaged in, among other things, the Business (as defined
below).
B. Concurrently with the execution and delivery of this Agreement,
certain shareholders of the Seller have executed and delivered to the Buyer a
Voting Agreement.
NOW, THEREFORE, in consideration of the premises, covenants,
representations and warranties contained herein, and other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
Parties, intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the terms capitalized in this Agreement
shall have the meanings set forth in EXHIBIT A hereto.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
2.1 PURCHASED ASSETS. Upon the terms and subject to the conditions
set forth in this Agreement, on the Closing Date, the Seller shall transfer,
sell, assign, convey and deliver to the Buyer, and the Buyer shall purchase and
accept from the Seller, free and clear of all Liens (other than Permitted
Liens), all of the Seller's right, title and interest in and to the following
property and assets, real, personal or mixed, tangible and intangible, of every
kind and description, located at the Dillon Facilities, or otherwise used or
held for use in connection with operation of the Business, other than the
Excluded Assets (collectively, the "PURCHASED ASSETS"):
(a) All Owned Real Property;
(b) All Leased Real Property;
(c) All Miscellaneous Tangibles;
(d) All Business Records;
(e) Subject to SECTION 13.6, all Assumed Contracts;
(f) All Improvements;
(g) All Equipment;
(h) All Inventory;
(i) All Assigned Intellectual Property;
(j) All goodwill arising in connection with the ownership,
operation or conduct of (i) the Purchased Assets and (ii) the Business as
conducted by the Seller; and
(k) All Permits to the extent transferable or assignable to
the Buyer by the Seller without breaching any applicable Law or any other
enforceable obligation of the Seller.
ARTICLE 3
EXCLUDED ASSETS
3.1 EXCLUDED ASSETS. Notwithstanding ARTICLE 2, the following
assets are expressly excluded from the purchase and sale contemplated hereby
and, as such, are not Purchased Assets (collectively, the "EXCLUDED ASSETS"):
(a) All real property, whether owned or leased by the
Seller, together with all improvements, fixtures and equipment located on or
attached or appurtenant thereto, other than the Owned Real Property and the
Leased Real Property;
(b) All accounts and notes receivable of the Seller arising
in connection with the operation or conduct of the Purchased Assets or the
Business that correspond to a period prior to the Closing Date;
(c) All cash or cash equivalents on hand or in banks,
including investments, of the Seller;
(d) All prepaid Taxes, expenses and advances of the Seller
arising in connection with the operation or conduct of the Purchased Assets or
the Business that correspond to a period prior to the Closing Date, except
those which shall be prorated and allocated to the Buyer in accordance with
ARTICLE 12;
(e) All Taxes withheld by the Seller from its employees'
salaries and wages, and other Taxes of the Seller incurred by it as an employer
or as a vendor, and rights to claims for refunds of Taxes arising in connection
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with the operation or conduct of the Purchased Assets or the Business that
correspond to a period prior to the Closing Date;
(f) All insurance policies of the Seller or its Affiliates;
(g) All Claims of the Seller against third parties (whether
known or unknown on the Closing Date) with respect to the Purchased Assets or
the Business;
(h) All assets in respect of the Benefit Plans;
(i) The industrial business equipment located at the Dillon
Facility and described on SCHEDULE 3.1;
(j) The equipment owned by American Drawtech Corporation
located at the Dillon Facility and described on SCHEDULE 3.1; and
(k) All Software other than the Assigned Software.
ARTICLE 4
ASSUMED LIABILITIES AND EXCLUDED LIABILITIES
4.1 THE BUYER'S ASSUMPTION OF LIABILITIES. Subject to the
provisions of SECTIONS 4.2, 4.3 and 13.7 and ARTICLES 17 and 18, and in partial
consideration of the sale of the Purchased Assets to the Buyer, at the Closing,
the Buyer shall assume from the Seller only the following Liabilities, but
excluding the Excluded Liabilities (collectively, the "ASSUMED LIABILITIES"):
(a) All Liabilities arising from or attributable to the
ownership or use of the Purchased Assets or operation or conduct of the
Business attributable to any date that occurs on or after the Closing Date,
including all Claims, Actions, contracts, licenses, sublicenses, agreements,
leases, commitments sales and purchase orders attributable to any date that
occurs on or after the Closing Date;
(b) All Liabilities assumed by, retained by or agreed to be
performed by the Buyer or any of their Affiliates pursuant to any of the
Ancillary Agreements;
(c) Accounts payable that arise from or in connection with
the ownership or use of the Purchased Assets or operation or conduct of the
Business attributable to any date that occurs on or after the Closing Date;
(d) All Liabilities attributable to Products manufactured,
shipped or sold at or from the Dillon Facilities on or after the Closing Date,
except as to any such Products that were manufactured at the Dillon Facilities
prior to the Closing Date;
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(e) With respect to all Transferred Employees: (i) all
wages and salaries earned (or otherwise attributable to any date that occurs)
after the Closing Date, and (ii) all Liabilities with respect to benefits and
Claims incurred, accrued or earned under any benefits plan or other
compensation, retirement or other benefit arrangement of the Buyer or their
Affiliates, which arise or are incurred after the Closing Date;
(f) All Liabilities related to and obligations under the
Assumed Contracts and the Assumed Leases that arise from or in connection with
the ownership or use of the Purchased Assets or the operation or conduct of the
Business on or after the Closing Date;
(g) All Liabilities related to and obligations under the
Permits assigned by the Seller to the Buyer in accordance with this Agreement
that arise from or in connection with the ownership or use of the Purchased
Assets or the operation or conduct of the Business on or after the Closing
Date;
(h) All customer rebates in respect of all sales of
Products made after the Closing Date; PROVIDED that the Seller shall promptly
reimburse the Buyer for rebates paid to customers which accrue in respect of
all sales of Product made on or prior to the Closing Date;
(i) All Liabilities under any collective bargaining
agreement or labor agreement; and
(j) Notwithstanding anything contained herein or in the
Ancillary Agreements, Liabilities arising from, in connection with or otherwise
with respect to any Environmental Conditions at or from the Leased Real
Property or the Owned Real Property existing as of the date of this Agreement
of which the Seller has no Knowledge as of the date of this Agreement.
4.2 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary,
express or implied, contained in this Agreement (other than as provided in
SECTIONS 4.1, 4.3 and 13.7 and ARTICLES 16 and 18), any and all Liabilities of
the Seller which are not expressly assumed pursuant to SECTION 4.1, shall be
and remain the obligation and Liability of the Seller to pay and/or discharge,
and the Buyers shall not assume, or in any way have any obligation to the
Seller with respect to, any such Liabilities, including the following
Liabilities (collectively, the "EXCLUDED LIABILITIES"):
(a) Accounts payable of the Seller or its Affiliates
arising in connection with the operation or conduct of the Purchased Assets or
the Business, if incurred (or otherwise attributable to any date that occurs)
prior to the Closing Date;
(b) With respect to all Covered Employees: (i) all wages
and salaries earned (or otherwise attributable to any date that occurs) on or
prior to the Closing Date, (ii) all Liabilities with respect to benefits and
Claims incurred, accrued or earned under any benefits plan or other
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compensation, retirement, post-retirement, or other benefit arrangement of the
Seller or its Affiliates, which relate to or arise from events occurring on or
prior to the Closing Date, and (iii) any liability or obligation with respect
to any Benefit Plan except as expressly assumed by the Buyer under SECTION
13.7;
(c) Liabilities of the Seller or its Affiliates related to
all unused vacation benefits of Covered Employees accrued through the Closing
Date;
(d) All Liabilities of the Seller or its Affiliates related
to workers' compensation assessments and Claims (whether or not reported)
attributable to any date that occurs on or prior to the Closing Date;
(e) All Liabilities of the Seller or its Affiliates with
respect to retirement benefits and post-retirement health care for employees of
the Business on or prior to the Closing Date;
(f) All Liabilities of the Seller or its Affiliates (i) for
compensation, benefits or any other obligation arising in connection with the
Business as a result of the employment of, or provision of services by, any
Person who is not a Transferred Employee, or the termination of any such
employment or provision of services, on or prior to the Closing Date or (ii)
arising in connection with the employment of any Transferred Employee on or
prior to the Closing Date;
(g) All Liabilities of the Seller or its Affiliates,
whether presently existing or arising hereafter, attributable to any Excluded
Asset;
(h) All Liabilities of the Seller or its Affiliates arising
from or attributable to the ownership or use of the Purchased Assets or
operation or conduct of the Business (or any other activity conducted at the
Dillon Facilities) by the Seller or any of its Affiliates and attributable to
any date that occurs prior to the Closing Date;
(i) Payment for goods or services refused by the Seller or
its Affiliates prior to the Closing Date;
(j) All Liabilities resulting from or relating to any
Claims by third parties for damage to Persons or property arising out of
Defects or alleged Defects in the Products, or arising under warranties issued
by the Seller or its Affiliates, with respect to Products manufactured, shipped
and/or sold in connection with the Business prior to the Closing Date;
(k) All Liabilities resulting from any violation by the
Seller or its Affiliates of any federal, state or local Law (including ERISA,
the Code and the Fair Labor Standards Act, as amended) arising in connection
with the ownership or use of the Purchased Assets or operation or conduct of
the Business on or prior to the Closing Date;
(l) All Liabilities and expenses of the Seller or its
Affiliates for federal, state, local or foreign income Taxes and any other
Taxes of any kind whatsoever, or which may be or become owed by the Buyer
arising from or concerning the operation of the Business by the Seller or its
Affiliates, in each case, for any period (or portion thereof) ending prior to
5
the Closing Date, including interest or penalties with respect thereto (and
including any Liabilities and expenses pursuant to any tax sharing agreement,
tax indemnification or similar arrangement), other than as described in SECTION
5.5 or Taxes which are to be pro-rated at the Closing Date pursuant to ARTICLE
12; and
(m) All Liabilities related to any Indebtedness of the
Seller or its Affiliates.
4.3 STRADDLE LIABILITIES. The Parties agree that for purposes of
SECTIONS 4.2(B)(III), 4.2(D) and 4.2(K), any Liability arising out of or
relating to a continuing course of conduct or a series of separate acts that
together constitute one act which began prior to the Closing Date and continues
after the Closing Date, shall be treated in part as an Assumed Liability and in
part as an Excluded Liability, allocated pro rata based on the relative
duration of or relative harm caused by the conduct or series of acts prior to
and after Closing.
ARTICLE 5
PURCHASE PRICE AND PURCHASE PRICE ALLOCATION
5.1 PURCHASE PRICE. Subject to SECTION 5.2, the consideration for
the Purchased Assets shall consist of:
(a) An amount equal to $40,000,000 (the "CASH PAYMENT"),
which amount shall be payable by the Buyer in cash;
(b) The assumption by the Buyer of the Assumed Liabilities;
and
(c) $25,000,000, payable in kind in the form of shares of
the Common Stock, par value $0.10 per share (the "UNIFI COMMON STOCK"), of
Unifi Parent (the "UNIFI STOCK CONSIDERATION"). For the purposes of this
SECTION 5.1(C), each share of Unifi Common Stock shall be valued on the basis
of the average closing sale price on The New York Stock Exchange during the
five trading days ending two days prior to the date of this Agreement. The
parties have agreed that such average closing sale price is $2.46.
5.2 ADJUSTMENTS TO FORM OF PURCHASE PRICE. The total number of
shares of Unifi Common Stock that may be issued as the Unifi Stock
Consideration may not exceed 8,333,333. If, as a result of the foregoing
limitation, less than $25,000,000 in value (as determined pursuant to SECTION
5.1(C)) of shares of Unifi Common Stock are issued to the Seller, the Buyer
shall increase the Cash Payment by the shortfall.
5.3 CLOSING INVENTORY(a) . At least three Business Days prior to
the Closing Date, the Seller shall prepare and deliver to the Buyer a statement
(the "INVENTORY STATEMENT"), setting forth a good faith estimate of the value
of the Inventory as of the Closing Date determined in accordance with the
6
methods, assumptions, standards of measurement and procedures set forth in
ANNEX A (with POY costing based on November 2006 purchases and variable, fixed
and overhead costs based on the Seller's 2006 annual operating budget) and
based on a physical inventory count conducted by the Seller or its agents (the
"CLOSING INVENTORY"). The Buyer shall be permitted to review the working
papers, trial balances and similar materials of the Seller and of its advisors
used in connection with the preparation of the Inventory Statement. The Buyer
and the Seller shall seek in good faith to resolve any differences which they
may have with respect to the Inventory Statement and the Closing Inventory. If
the Closing Inventory is less than Fourteen Million Dollars ($14,000,000), the
Buyer may terminate this Agreement by giving written notice to the Seller;
PROVIDED, HOWEVER, this sentence shall not apply if the Seller agrees to reduce
the Cash Payment at Closing by an amount equal to the excess of Fourteen
Million Dollars ($14,000,000), OVER the amount of the Closing Inventory.
5.4 ALLOCATION. The consideration paid or delivered by the Buyer to
the Seller (and the Assumed Liabilities) shall be allocated among the Purchased
Assets as reasonably determined by the Buyer in a manner consistent with
Section 1060 of the Code and the regulations thereunder. The Seller and the
Buyer agree to use the allocations determined pursuant to this SECTION 5.4 (the
"ALLOCATIONS") for all Tax purposes, including those matters subject to Section
1060 of the Code and the regulations thereunder. The Parties further agree that
they shall not take any position inconsistent with the Allocations upon any
examination of any such Tax Return, in any refund claim or in any Tax
litigation. The Buyer and the Seller shall notify the other Party within ten
(10) Business Days if it receives written notice that any Tax Authority
proposes any allocation different from the Allocations.
5.5 SALES, USE, TRANSFER AND SIMILAR TAXES AND CHARGES. The Buyer
and the Seller shall on an equal basis bear all sales or use Taxes and any
transfer, transfer gain, documentation, gross receipts, customer duties, value
added and other Taxes and charges (including deed stamps), upon or with respect
to the sale or transfer of the Purchased Assets by the Seller to the Buyer
pursuant to this Agreement. To the extent that any applicable Law imposes upon
the Seller the obligation to report or to pay such Taxes, charges, interest or
penalties, the Buyer shall promptly, but in no event later than ten (10)
Business Days after receipt of the Seller's invoice for the amount of such
payments, reimburse the Seller for half of such amount. If the sale or transfer
of any or all of the Purchased Assets is exempt from such Taxes or charges, the
Buyer shall provide the Seller with appropriate exemption documents prior to
the Closing Date. The Seller and the Buyer shall jointly file all required
change of ownership and similar statements.
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ARTICLE 6
THE SELLER'S REPRESENTATIONS AND WARRANTIES
The Seller represents and warrants to the Buyer as follows:
6.1 ORGANIZATION. The Seller is duly organized, validly existing
and in good standing in the State of South Carolina. The Seller has full
corporate power to carry on the Business as now being conducted at or from the
Dillon Facilities and to execute, deliver and perform its obligations under
this Agreement and the Ancillary Agreements to which it is a party.
6.2 NO CONFLICT. Except as set forth on SCHEDULE 6.2, neither the
execution, delivery or performance of this Agreement or the Ancillary
Agreements to which it is a party, nor the consummation of the transactions
contemplated by this Agreement or by the Ancillary Agreements to which it is a
party will (i) violate any provision of the Seller's certificate of
incorporation or by-laws, or any Law by which the Seller or any of its
properties may be bound; or (ii) conflict with, result in a breach of the terms
and conditions of, result in the imposition of any Lien (other than Permitted
Liens) on or with respect to any of the Purchased Assets as a result of the
provision of, or constitute a default under, any agreement to which the Seller
is a party or by which the Seller or any of its properties may be bound.
6.3 AUTHORITY. Other than the shareholder approval described in
SECTION 8.6, the Seller has taken all necessary corporate action to authorize
the transactions contemplated by this Agreement and the Ancillary Agreements to
which it is a party, the performance by the Seller of its obligations hereunder
and thereunder, and the execution and delivery by the Seller of all instruments
and other documents contemplated hereby and thereby. This Agreement
constitutes, and each Ancillary Agreement to which it is a party, when
executed, will constitute, legal, valid and binding obligations of the Seller,
enforceable against it in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, or similar Laws affecting
the enforcement of creditors' rights generally and rules and Laws concerning
equitable remedies.
6.4 FILING REQUIREMENTS. Except for filing and approval
requirements under the HSR Act or any other antitrust pre-merger or
pre-acquisition requirements and as set forth on SCHEDULE 6.4, no consent,
authorization, or approval of, or exemption by, or filing with, any
Governmental Authority, is required in connection with the execution, delivery
and performance by the Seller of this Agreement or the other Ancillary
Agreements to which it is a party or of any of the instruments or agreements
herein referred to, or the taking of any action herein or therein contemplated
to be taken by the Seller.
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6.5 REAL PROPERTY.
(a) OWNED REAL PROPERTY. The Seller is the owner of good,
valid and marketable fee title to the Owned Real Property, free and clear of
all Liens, other than Permitted Liens. The Seller has not granted, made or
entered into any option, commitment or agreement to or with any Person for the
purchase of the Owned Real Property or for the possession or occupancy by any
Person of any part of the Owned Real Property or the facilities located
thereon.
(b) LEASED PROPERTY. Set forth on SCHEDULE 1.63 is a true,
accurate and complete list of the only leases, subleases, licenses and other
agreements under which the Seller uses or occupies the Leased Real Property in
connection with the Business. The Seller has delivered or caused to be
delivered to the Buyers true and complete copies of the Real Property Leases,
including all modifications, amendments and supplements thereto. The Real
Property Leases are in full force and effect, unimpaired by any acts or
omissions of the Seller, and constitute the legal, valid and binding obligation
of the Seller, enforceable against the Seller in accordance with their
respective terms and, to the Seller's Knowledge, against any other party
thereto. All rent and other sums and charges payable by the Seller as tenant
thereunder are current, no notice of default or termination thereunder is
outstanding, no termination event or condition or uncured default on the part
of the Seller or, to the Seller's Knowledge, the landlord, exists thereunder,
and no event has occurred and no condition exists which, with the giving of
notice, the lapse of time, or both, would constitute such a default or
termination event or condition.
(c) ENTIRE PREMISES. The Owned Real Property and the Leased
Real Property comprise all of the real property presently used by the Seller or
its Affiliates in the conduct and operation of the Purchased Assets and the
Business.
(d) USE OF LEASED REAL PROPERTY. The Seller has not
subleased, sublicensed or given any other Person the right to use or occupy any
of the Leased Real Property.
(e) CONDEMNATION. There are no pending, and the Seller has
not received written notice and has no Knowledge of any threatened or
contemplated, condemnation proceeding affecting any part of the Owned Real
Property or the Leased Real Property or of any sale or other disposition of any
part of the Owned Real Property or the Leased Real Property in lieu of
condemnation.
(f) CASUALTY. No portion of the Owned Real Property or the
Leased Real Property has suffered any material damage by fire or other casualty
which has not been repaired and substantially restored to its original
condition.
6.6 TANGIBLE PERSONAL PROPERTY. Except as disclosed on SCHEDULE 6.6.
(a) The Seller has good and marketable title to the
Equipment, the Miscellaneous Tangibles and the Inventory and other tangible
9
personal property (excluding the Leased Assets) (collectively, the "TANGIBLE
PROPERTY"), free and clear of all Liens other than Permitted Liens.
(b) No third party has any option or right of first refusal
to purchase all or any part of the Tangible Property except for Inventory to be
sold in the Ordinary Course of Business.
(c) There are no Liens, other than Permitted Liens, or
rights, uses, or privileges of others with respect to the Tangible Property
except as may be imposed by bulk sales and transfer Laws.
(d) All property and assets comprising any part of the
Purchased Assets are sold "as is" with no warranty of any kind, express or
implied, and specifically no express warranties, or warranty of merchantability
or fitness for any particular purpose is given by the Seller hereunder. The
Purchased Assets constitute all of the assets (real or personal), Permits,
contracts, properties and rights (other than the Excluded Assets) which are
necessary for the continued conduct of the Business after the Closing in
substantially the same manner as conducted by the Seller prior to the Closing.
6.7 LITIGATION. Except as disclosed on SCHEDULE 6.7:
(a) There is no Action pending or, to the Seller's
Knowledge, threatened against the Seller or any of its Affiliates as a result
of the Seller's ownership or operation of the Purchased Assets or against the
Purchased Assets or Business; and
(b) The use or operation of the Purchased Assets is not
subject to any injunction, order, judgment, writ or decree.
6.8 CONTRACTS AND OTHER AGREEMENTS. The Material Contracts listed
on SCHEDULE 6.8 constitute all of the Material Contracts related to the
Purchased Assets and the Business. The Seller has delivered or caused to be
delivered to the Buyers true and complete copies of all the Material Contracts,
including all modifications, amendments and supplements thereto. The Material
Contracts are in full force and effect, unimpaired by any acts or omissions of
the Seller, and constitute the legal, valid and binding obligation of the
Seller, enforceable against the Seller in accordance with their terms and, to
the Sellers' Knowledge, against any other party thereto. To the Seller's
Knowledge, each other party to the Material Contracts is in compliance in all
material respects with all the provisions thereof, and no other party to any
Material Contract has notified the Seller that it considers the Seller or its
Affiliates to be in breach in any material respect thereof. The Seller has not
received written notice that any Person intends to terminate or default under
any Material Contract before its stated term, if any.
6.9 INTELLECTUAL PROPERTY. With respect to the Business:
(a) To the Seller's Knowledge, the Assigned Intellectual
Property constitutes all of the Intellectual Property Used in or necessary for
the conduct and operation of the Business as currently conducted by the Seller;
10
(b) There are no Patents, Copyrights or Trademarks Used in
or necessary for the conduct or operation of the Business as currently
conducted by the Seller;
(c) The Seller owns or possesses or has the right to use,
sell, license, sublicense, distribute, reproduce display or perform, pursuant
to valid and enforceable, written licenses, sublicenses, agreements, or
permissions all Assigned Intellectual Property. Each item of Assigned
Intellectual Property owned or used by the Seller immediately prior to the
Closing Date hereunder will be owned or available for use by the Buyer on
identical terms and conditions immediately subsequent to the Closing Date;
(d) There are no Liens other than Permitted Liens on any of
the Assigned Intellectual Property;
(e) Except as set forth on SCHEDULE 6.9(E):
(i) there is no Action pending or, to the Seller's
Knowledge, threatened, against the Seller or any of its Affiliates relating to
the operation of the Business alleging the infringement or misappropriation of
the Intellectual Property rights of any other Person; and
(ii) to the Seller's Knowledge, the operation of the
Business does not infringe upon or constitute a misappropriation of the
Intellectual Property rights of any other Person;
(f) All Assigned IP Licenses within the Assigned
Intellectual Property are subsisting, valid and are in full force and effect;
and
(g) To the Seller's Knowledge, no Person is infringing upon
or misappropriating the Assigned Intellectual Property.
6.10 TAXES. The Seller and its Affiliates have properly prepared
and duly and timely filed all Tax Returns required to be filed by the Seller or
its Affiliates in connection with the Purchased Assets or the Business and all
such Tax Returns (including information provided therewith or with respect to
thereto) are true, complete and correct in all respects. The Seller and its
Affiliates have duly and timely paid all Taxes properly payable and due by the
Seller or its Affiliates in respect of the Business or the Purchased Assets
(whether or not shown as due on such Tax Returns), and have made adequate
provisions for any Taxes that are not yet due and payable in respect of the
Purchased Assets or the Business, for all taxable periods, or portions thereof,
ending on or before the date hereof. No audit or other proceeding by any Tax
Authority is pending or threatened with respect to any Taxes due from or with
respect to the Seller and its Affiliates in connection with the Purchased
Assets or the Business, nor has any audit of any such Tax Return been conducted
within the previous five taxable years of the Seller or its Affiliates. There
are no Tax deficiencies of any kind assessed against or relating to the Seller
and its Affiliates with respect to any taxable periods prior to the Closing
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Date of a character or nature that would result in a Claim against the Buyer,
or a Lien upon the Purchased Assets. No claim in writing has been made by any
Tax Authority in a jurisdiction where the Seller and its Affiliates do not file
Tax Returns with respect to the Purchased Assets or the Business that they are
or may be subject to taxation by that jurisdiction with respect to the
Business. There are no outstanding agreements extending or waiving the
statutory period of limitations applicable to any claim for, or the period for
the collection or assessment or reassessment of, Taxes due from the Seller or
its Affiliates with respect to the Purchased Assets or the Business for any
taxable period and no request for any such waiver or extension is currently
pending. There are no Liens for Taxes upon the Purchased Assets, except for
Permitted Liens.
6.11 PRODUCT LIABILITY. To the Seller's Knowledge, except as
disclosed on SCHEDULE 6.11, during the one year period prior to the date of
this Agreement, there have been no Claims in excess of $50,000 asserted or
threatened in writing against the Seller or its Affiliates for product
liability in respect of any Product manufactured, sold or distributed at any
time by the Seller or its Affiliates in connection with the Business, including
any Claim on account of any express or implied warranty, except for normal
returns and allowances.
6.12 EMPLOYEE BENEFIT PLANS.
(a) Except as disclosed in SCHEDULE 6.12(A), with respect
to the employees, consultants, officers or directors of the Business or any
former employee, consultant, officer or director of the Business, the Seller
does not maintain or contribute to or have any obligation to maintain or
contribute to, or have any direct or indirect liability, whether contingent or
otherwise, with respect to any plan, program, arrangement or agreement that is
a pension, profit-sharing, savings, retirement, employment, consulting,
severance pay, termination, executive compensation, incentive compensation,
deferred compensation, bonus, stock purchase, stock option, phantom stock or
other equity-based compensation, change-in-control, retention, salary
continuation, vacation, sick leave, disability, death benefit, group insurance,
hospitalization, medical, dental, life (including all individual life insurance
policies as to which the Seller is the owner, the beneficiary, or both), Code
Section 125 "cafeteria" or "flexible" benefit, employee loan, educational
assistance or fringe benefit plan, whether written or oral, including, any (i)
"employee benefit plan" within the meaning of Section 3(3) of ERISA, or (ii)
other employee benefit plan, agreement, program, policy, arrangement or payroll
practice, whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as a result of the transaction
contemplated by this Agreement or otherwise) under which any employees,
consultants, officers or directors of the Business or any former employee,
consultant, officer or director of the Business has any present or future right
to benefits (collectively, the "BENEFIT Plans"). If any Benefit Plan is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA
("MULTIEMPLOYER PLAN"), then, other than as specifically stated below, any
representation contained in this SECTION 6.12 with respect to such Benefit Plan
is made to the best of the Seller's Knowledge.
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(b) Except as disclosed in SCHEDULE 6.12(B), to the
Seller's Knowledge (i) each Benefit Plan has been established and administered
in all material respects in accordance with its terms and in compliance with
the applicable provisions of ERISA, the Code and all other applicable laws,
rules and regulations; (ii) with respect to any Benefit Plan, other than
routine claims for benefits, no Liens, Actions or complaints to or by any
Person or Governmental Authority have been filed or made against such Benefit
Plan or the Seller or, to the Knowledge of the Seller, against any other
Person; (iii) no individual who has performed services for the Seller has been
improperly excluded from participation in any Benefit Plan; and (iv) there are
no audits or proceedings initiated pursuant to the Employee Plans Compliance
Resolution System or similar proceedings pending with the Internal Revenue
Service or Department of Labor with respect to any Benefit Plan.
(c) The Seller has not received any notification that any
Multiemployer Plan disclosed in SCHEDULE 6.12(A) is in reorganization (within
the meaning of Section 4121 of ERISA), is insolvent (within the meaning of
Section 4245 of ERISA) or has been terminated (within the meaning of Title IV
of ERISA) and, to the Knowledge of the Seller, no Multiemployer Plan disclosed
in SCHEDULE 6.12(A) is expected to be in reorganization, insolvent or
terminated. The Buyers will not have (i) any obligation to make any
contribution to any Multiemployer Plan disclosed in SCHEDULE 6.12(A) or (ii)
any withdrawal liability from any such Multiemployer Plan under Section 4201 of
ERISA which they would not have had but for the transactions contemplated by
this Agreement, including any withdrawal liability were the Buyers to withdraw
partially or completely from such Multiemployer Plan. Other than as
specifically stated in the first sentence of this SECTION 6.12(C), this SECTION
6.12(C) is not limited to the Knowledge of the Seller.
(d) All contributions (including all employer contributions
and employee salary reduction contributions) or premium payments required to
have been made under the terms of any Benefit Plan, or in accordance with
applicable Law, as of the date hereof, have not been timely made. The Seller is
not, and does not expect to be, in respect of any of the Purchased Assets,
subject to any Lien pursuant to Section 412(n) of the Code or Title IV of
ERISA.
(e) The Seller and any of its ERISA Affiliates does not now
and in the past six years has not established, maintained or contributed to any
employee benefit plan subject to Title IV of ERISA.
(f) The Seller has no obligation to provide or make
available post-employment welfare benefits or welfare benefit coverage for any
employee or former employee, except as may be required under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and at the
expense of the employee or former employee. Each Benefit Plan which is a "group
health plan" within the meaning of Section 5000(b)(1) of the Code and Section
607(l) of ERISA has been administered in material compliance with, and the
Seller has otherwise complied with COBRA and the regulations promulgated
thereunder.
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(g) Neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby will (either alone
or in combination with another event) with respect to any shareholders or
former shareholders of the Seller or any employees, consultants, officers or
directors of the Business, or any former employees, consultants, officers or
directors of the Business, including the Transferred Employees in the case of
CLAUSES (i) to (iv), (i) result in any payment becoming due, or increase the
amount of any compensation due, to any employee of the Seller; (ii) increase
any benefits otherwise payable under any Benefit Plan; (iii) result in the
acceleration of the time of payment or vesting of any such compensation or
benefits; (iv) result in the payment of any amount that could, individually or
in combination with any other such payment, constitute an "excess parachute
payment," as defined in Section 280G(b)(1) of the Code; (v) result in the
triggering or imposition of any restrictions or limitations on the rights of
the sponsor of any Benefit Plan to amend or terminate such Benefit Plan; (vi)
result in a complete or partial withdrawal from any Multiemployer Plan; (vii)
constitute a transaction described in Section 4069 or 4212(c) of ERISA; or
(viii) result in a violation of the privacy requirements of the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA") and the
regulations promulgated thereunder.
(h) The Seller has no plan, contract or commitment, whether
legally binding or not, to create any additional employee benefit or
compensation plans, policies or arrangements or, except as may be required by
applicable law, to modify any Benefit Plan with respect to the Business or the
Transferred Employees.
(i) The Buyer will not incur any liability or obligation
under the Worker Adjustment and Retraining Notification Act ("WARN") if, during
the 90-day period following the Closing Date, only terminations of employment
in the normal course of operations occur. SCHEDULE 6.12(I) contains a list of
all employees or former employees of the Seller who have suffered an
"employment loss" (as defined in the regulations under WARN) during the 90-day
period preceding the Closing Date at each "single site of employment" (as
defined in the regulations under WARN) included in the Business, and the date
of such employment loss and applicable site of employment for each such person.
(j) The Seller has made available to the Buyer with respect
to each Benefit Plan, a true, correct and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the extent
applicable: (i) the most recent documents constituting the Benefit Plan and all
amendments thereto, (ii) any related trust agreement or other funding
instrument; (iii) the most recent IRS determination letter; (iv) the most
recent summary plan description, summary of material modifications and any
other written communication (or a description of any oral communications) by
the Seller to its employees concerning the extent of the benefits provided
under a Benefit Plan; (v) audited financial statements and actuarial valuation
reports; and (vi) any other documents in respect of a Benefit Plan reasonably
requested by the Buyer.
14
6.13 BROKER'S FEE. The Seller has not incurred any obligation or
liability, contingent or otherwise, for broker's or finder's fees with respect
to the matters provided for in this Agreement.
6.14 COMPLIANCE WITH LAWS; PERMITS.
(a) The Seller is in material compliance with all Laws
applicable to the Business or the Purchased Assets.
(b) Except as disclosed in SCHEDULE 6.14(B), the Seller has
all Permits required for the conduct of Business as now being conducted, all of
which are in full force and effect. All such Permits are listed on SCHEDULE
6.14(B) other than routine permits for the use and occupancy of the Leased Real
Property. There are no Actions pending or, to the Knowledge of the Seller,
threatened to terminate or otherwise limit rights under any such Permits,
except as disclosed on SCHEDULE 6.14(B).
The representations and warranties set forth in this Section 6.14 do not apply
to compliance with Environmental Laws or Permits required under Environmental
Laws, which are addressed in Section 6.15.
6.15 ENVIRONMENTAL COMPLIANCE.
(a) To the Seller's Knowledge, the operations and
properties of the Business are and have been in the preceding five years in
compliance in all material respects with Environmental Laws.
(b) To the Seller's Knowledge, the Seller possesses and is
and has been for the preceding five years in compliance in all material
respects with all Permits required under Environmental Laws for the operation
of the Business.
(c) Except as disclosed in SCHEDULE 6.15, to the Seller's
Knowledge, the Seller has not caused, nor is it responsible for, any release or
disposal of any Hazardous Materials, except in compliance with Environmental
Laws, and to Seller's Knowledge there are no events, conditions, including any
condition on, in or under the Leased Real Property arising out of any release
or disposal of Hazardous Materials, or circumstances reasonably likely to
result in liability of the Seller pursuant to Environmental Laws.
(d) No Environmental Claims that remain unresolved have
been asserted in writing or to the Seller's Knowledge, threatened against the
Seller or any of its Affiliates with respect to the Purchased Assets or the
Business.
(e) The Seller has delivered to the Buyer true and complete
copies of all environmental assessment reports or other documentation related
to the condition of the environment or the requirements of Environmental Laws
in the possession or control of the Seller or its Affiliates, regarding
environmental conditions or compliance with Environmental Laws at any of the
15
properties currently or formerly owned or operated by the Seller or any of its
Affiliates or at any other location for which the Seller or any of its
Affiliates may be liable with respect to the Business.
6.16 NO MATERIAL ADVERSE CHANGE. Except as set forth in SCHEDULE
6.16, since September 30, 2006, there has not been any event, change or effect
that is or would reasonably be expected to be materially adverse to the
condition (financial or otherwise), properties, liabilities or results of
operations of the Business and the Purchased Assets, taken as a whole. Except
as set forth in SCHEDULE 6.16, since September 30, 2006, the Seller has not:
(a) sold, leased, abandoned or otherwise transferred (or
contracted to sell, lease or otherwise transfer) any of the assets or
properties of the Business, except in the Ordinary Course of Business
consistent with the Seller's past practice in the previous 12 months;
(b) suffered or incurred any damage, destruction or other
casualty loss, individually or in the aggregate in excess of $100,000 to any of
the Purchased Assets (other than the Leased Real Property), normal wear and
tear excepted; or
(c) agreed, whether in writing or otherwise, to take an
action described in the foregoing clauses (a) and (b).
6.17 PREPAID EXPENSES. SCHEDULE 6.17 is a true, complete and
accurate list of prepaid rent, other prepaid charges due under any Assumed
Contracts and all real and personal property Taxes levied on the Purchased
Assets as of the date hereof.
6.18 INVESTMENT REPRESENTATION. The Seller is acquiring the Unifi
Stock Consideration for its own account for investment, and not with a view to,
or for sale in connection with, any distribution thereof, and does not have any
present intention of distributing or selling the same.
ARTICLE 7
THE BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer represents and warrants to the Seller as follows.
7.1 ORGANIZATION. The Buyer is duly organized, validly existing and
in good standing under the Laws of the State of North Carolina and has full
corporate power to execute, deliver and perform its obligations under this
Agreement and the Ancillary Agreements to which it is a party.
7.2 NO CONFLICT. Except as set forth in SCHEDULE 7.2, neither the
execution, delivery or performance of this Agreement or the Ancillary
Agreements to which it is a party, nor the consummation of transactions
contemplated by this Agreement or by the Ancillary Agreements to which it is a
16
party, will (i) violate any provision of the Buyer's articles of incorporation
or bylaws, or any Law by which the Buyer or any of its properties may be bound;
or (ii) conflict with, result in a breach of the terms and conditions of, or
constitute a default under, any agreement to which the Buyer is a party or by
which it or any of its properties may be bound.
7.3 AUTHORITY. The Buyer has taken all necessary corporate action
to authorize the transactions contemplated by this Agreement and the Ancillary
Agreements to which it is a party, the performance by the Buyer of its
obligations hereunder and thereunder, and the execution and delivery by the
Buyer of all instruments and other documents contemplated hereby and thereby.
This Agreement constitutes, and each Ancillary Agreement to which it is a
party, when executed, will constitute, legal, valid and binding obligations of
the Buyer enforceable against the Buyer in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, or similar Laws affecting the enforcement of creditors' rights
generally and rules and Laws concerning equitable remedies.
7.4 BROKER'S FEE. The Buyer has not incurred any obligation or
liability, contingent or otherwise, for broker's or finder's fees with respect
to the matters provided for in this Agreement.
7.5 FILING REQUIREMENTS. Except for filing and approval
requirements under the HSR Act or any other antitrust pre-merger or
pre-acquisition requirements and as set forth on SCHEDULE 7.5, no consent,
authorization, or approval of, or exemption by, or filing with, any
Governmental Authority, is required in connection with the execution, delivery
and performance by the Buyer of this Agreement or the other Ancillary
Agreements or of any of the instruments or agreements herein referred to, or
the taking of any action herein or therein contemplated to be taken by the
Buyer.
7.6 UNIFI STOCK CONSIDERATION. The Unifi Stock Consideration, when
issued, sold and delivered in accordance with this Agreement, will be duly and
validly issued, fully paid and non-assessable, and will be free of any Liens,
other than restrictions on transfer under applicable state and federal
securities laws.
7.7 CAPITALIZATION.
(a) Set forth on SCHEDULE 7.7 is (i) the authorized capital
stock of Unifi Parent on the date hereof; (ii) the number of shares of capital
stock issued and outstanding; (iii) the number of shares of capital stock
issuable pursuant to the Unifi Parent stock plans; and (iv) the number of
shares of capital stock issuable and reserved for issuance pursuant to
securities exercisable for, or convertible into or exchangeable for any shares
of capital stock of Unifi Parent. All of the issued and outstanding shares of
Unifi Parent capital stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of pre-emptive rights. Except as described
in the SEC Filings, no Person is entitled to pre-emptive or similar statutory
or contractual rights with respect to any securities of Unifi Parent. Except as
set forth on SCHEDULE 7.7, there are no outstanding warrants, options,
convertible securities or other rights, agreements or arrangements of any
character under which Unifi Parent is or may be obligated to issue any equity
17
securities of any kind, or to transfer any equity securities of any kind.
Except as described in the SEC Filings, Unifi Parent does not know of any
voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among any of the security holders of
Unifi Parent relating to the securities held by them. Except as set forth on
SCHEDULE 7.7, Unifi Parent has not granted any Person the right to require
Unifi Parent to register any securities of Unifi Parent under the Securities
Act, whether on a demand basis or in connection with the registration of
securities of Unifi Parent for its own account or for the account of any other
Person.
(b) All of the outstanding shares of capital stock of Unifi
Parent are, and as of the Closing, will be, duly authorized, validly issued,
fully paid and nonassessable and none of such securities are or were at the
time of issuance subject to any preemptive rights (statutory or otherwise),
except such rights as have lapsed or been validly waived.
7.8 DELIVERY OF SEC FILINGS. The Buyer has provided the Seller with
copies of Unifi Parent's most recent Annual Report on Form 10-K for the fiscal
year ended June 25, 2006 (the "UNIFI ANNUAL REPORT"), and all other reports
filed by Unifi Parent pursuant to the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") since the filing of the Unifi Annual Report
(collectively, the "SEC FILINGS")
7.9 NO MATERIAL ADVERSE CHANGE. Since the filing of the Unifi
Annual Report or as otherwise identified and described in the SEC Filings,
there has not been:
(i) any declaration or payment of any dividend, or
any authorization or payment of any distribution, on any of the capital stock
of Unifi Parent, or any redemption or repurchase of any securities of Unifi
Parent;
(ii) any material damage, destruction or loss,
whether or not covered by insurance to any assets or properties of or any of
its subsidiaries; or
(iii) any event, change or effect that is or would
reasonably be expected to be materially adverse to the condition (financial or
otherwise), properties, liabilities, or results of operation or the business of
Unifi Parent and its subsidiaries, taken as a whole.
7.10 SEC FILINGS; MATERIAL CONTRACTS. As of its filing date, each
SEC Filings, was, on its face, appropriately responsive, in all material
respects to the requirements of the Exchange Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
7.11 FORM S-3 ELIGIBILITY. Unifi Parent is currently eligible to
register the resale of the Unifi Stock Consideration by the Seller on a
registration statement on Form S-3 under the Securities Act.
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ARTICLE 8
PRE-CLOSING PERIOD
The Seller and the Buyer covenant and agree that between the date of
this Agreement and the Closing Date:
8.1 DUE DILIGENCE; CONFIDENTIALITY. The Buyer and its
Representatives shall be entitled to conduct a review of the Dillon Facilities,
the Purchased Assets and the Business (the "DUE DILIGENCE") in a manner which
does not unreasonably interfere with the operations of the Business. In
furtherance thereof, the Seller and its Affiliates shall, to the extent
reasonably required for the performance by the Buyer of its Due Diligence:
(a) make available the information in the Seller's or its
Affiliates' possession with respect to the assets (including the Purchased
Assets), Liabilities, business, condition (financial and otherwise) and
operations of the Business;
(b) upon reasonable prior notice, give the Buyer and its
Representatives full access during normal business hours to the Purchased
Assets and the Dillon Facilities;
(c) otherwise instruct the counsel, auditors and other
authorized Representatives of the Seller and its Affiliates to cooperate with
the Buyer and its Representatives in their Due Diligence; and
(d) provide the Buyer with the right to perform a Phase I
Environmental Assessment. The Buyer shall not perform any sampling of soil,
groundwater or surface water.
8.2 OPERATE PURCHASED ASSETS IN THE ORDINARY COURSE; NO MATERIAL
CHANGE OR MATERIAL COMMITMENTS. Except as contemplated by this Agreement or the
Ancillary Agreements or set forth on SCHEDULE 8.2, or otherwise consented to or
requested by the Buyer in writing, the Seller shall operate and maintain the
Business and the Purchased Assets solely in the Ordinary Course of Business.
Without prejudice to the other provisions of this SECTION 8.2, the Seller shall
not, without the prior written consent of the Buyer (which shall not be
unreasonably withheld or delayed):
(a) demolish, remove, alter, enlarge or dispose of any of
the Purchased Assets other than in the Ordinary Course of Business, other than
removal of any Excluded Assets;
(b) except as set forth on SCHEDULE 8.2(B), make any new
commitments for capital expenditures in excess of $100,000, in the aggregate,
with respect to the Purchased Assets or Products made therewith;
(c) make any non-capital commitments, outside of the
Ordinary Course of Business, with respect to the Purchased Assets or Products
made therewith;
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(d) make any material change to the Dillon Facilities or to
the Seller's operation of the Business or the Purchased Assets;
(e) cancel, terminate, amend, modify or fail to perform the
Seller's obligations under any Assumed Lease or any Material Contract;
(f) (i) adopt, terminate or amend, except as may be
required by this Agreement or applicable Law, fund or secure any benefit plan
or bonus, profit sharing, deferred compensation, incentive, stock option or
stock purchase plan, program or commitment, paid time off for sickness or other
plan, program or arrangement for the benefit of any of the employees of the
Business or (ii) grant any increase in the compensation of any of the employees
of the Business (including any such increase pursuant to any bonus, profit
sharing or other compensation or incentive plan, program or commitment);
(g) amend or modify any existing employment agreement or
any consulting agreement with respect to any of the employees of the Business;
(h) enter into, amend or modify any collective bargaining
agreements covering any employees of the Business;
(i) issue any communication to employees of the Seller or
its Affiliates involved in the Business with respect to compensation, benefits
or employment continuation or opportunity following the Closing Date, except as
required by Law;
(j) increase the base wages or salary payable to any of the
employees of the Business; or
(k) renew, amend or modify any material contract or
agreement with respect to any contract employee employed at the Dillon
Facilities.
8.3 EFFORTS TO PRESERVE RELATIONSHIPS AND ORGANIZATION. Except as
otherwise provided herein, or consented to by the Buyer in writing, the Seller
shall use its best efforts on a commercially reasonable basis to preserve
intact its business organization relating to the Business and the Purchased
Assets, and to preserve the Seller's relationship with material suppliers to
the Dillon Facilities and customers of the Business. With the express written
consent of the Seller, the Buyer shall be entitled to communicate directly with
(i) customers of the Business, (ii) third parties to the Material Contracts
with a view to amending or modifying the terms of such Material Contracts as of
the Closing, and (iii) suppliers of the Business with a view to informing them
of the Buyer's intentions for the Business after the Closing.
8.4 WORK DILIGENTLY TOWARDS CLOSING. Each of the Buyer and the
Seller shall use its reasonable best efforts to work diligently, including
obtaining all necessary governmental approvals and filings, obtaining all
required assignments of Material Contracts and working in good faith to
negotiate the terms of the Ancillary Agreements (other than the Ancillary
20
Agreements attached hereto as Exhibits) consistent with the material terms set
forth on the Schedules attached hereto with a view that all conditions to the
Closing of this Agreement are satisfied and such Closing can occur on or before
January 15, 2007.
8.5 PROMPT NOTIFICATION OF BREACH. Each Party shall use its
reasonable best efforts to promptly notify the other Party of any breach of any
of the notifying Party's representations, warranties, covenants or agreements
or of any circumstance or event which it believes in good faith is reasonably
likely to cause any of such representations, warranties, covenants or
agreements to be breached.
8.6 SHAREHOLDER VOTE. The Seller shall cause a meeting of its
shareholders to be duly called and held as soon as practicable after the date
hereof, but in any event no later than 45 days after the date hereof, for the
purpose of voting on the approval and adoption of this Agreement and the
transactions contemplated hereby. The Seller shall take all action necessary in
accordance with applicable Law and its constitutive documents to duly call,
give notice of, and convene such shareholders meeting and to prepare all such
informational statements as may be required to adequately describe to its
shareholders the matters requiring their approval and to so solicit their
approval.
8.7 UPDATE OF PREPAID EXPENSES SCHEDULE. No later than two days
before the Closing Date, the Seller shall deliver to the Buyer an updated
SCHEDULE 6.17, setting forth an update of the items set forth therein, setting
forth actual numbers, or good faith estimates if actual numbers are not known,
of each such item through to the Closing Date.
ARTICLE 9
GOVERNMENTAL CONSENTS
9.1 COOPERATION. Each Party shall use its reasonable best efforts
to obtain all authorizations, consents, orders and approvals of, and to give
all notices to and make all filings with, all Governmental Authorities and
other third parties that may be or become necessary for its execution and
delivery of, and the performance of its obligations pursuant to this Agreement,
and also to enable the Buyer to own, use and operate the Purchased Assets and
the Business, and each Party shall cooperate fully with the other Party in
promptly seeking to obtain all such authorizations, consents, orders and
approvals, giving such notices, and making such filings. Each Party agrees to
make an appropriate filing of a notification and report form pursuant to the
HSR Act with respect to the transactions contemplated hereby within five
Business Days following the date of this Agreement and to supply promptly any
additional information and documentary material that may be requested pursuant
to the HSR Act. The Parties agree not to take any action that will have the
effect of unreasonably delaying, impairing or impeding the receipt of any
required authorizations, consents, orders or approvals.
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ARTICLE 10
NON-COMPETITION; NON-SOLICITATION
10.1 NON-COMPETITION. For a period from the Closing through to the
fifth anniversary of the expiration of the term of the Sales and Services
Contract, none of the Seller, any of its Affiliates or Stephen Wener, Lee
Johnson or William Cohen shall, directly or indirectly, engage in the
manufacture, production, marketing, distribution or sale of the Product in the
Territory, or acquire any interest in, any Person that is engaged in the
manufacture, production, marketing, distribution or sale of Product in the
Territory.
10.2 EXCEPTIONS. Notwithstanding the foregoing, the Parties hereby
acknowledge and agree that nothing set forth in Section 10.1 shall:
(a) prevent the Seller, its Affiliates or any of the
Principals from acquiring any Person, or the assets thereof, if less than 5% of
the gross revenues of such Person (based on such Person's latest annual audited
consolidated financial statements) were derived from the manufacture,
production, marketing, distribution or sale of Product in the Territory;
PROVIDED, that, unless within 90 days of such acquisition, such Person ceases
to be engaged in the manufacture, production, marketing, distribution or sale
of Product in the Territory, the Seller, its Affiliates or the affected
Principal shall divest themselves (by way of "auction" or other competitive
bidding process, negotiated sale, or other manner of divestiture as the Seller
or such Affiliates shall deem appropriate) within one year of such acquisition,
of the assets or operations so acquired that are engaged in the actions
prohibited in SECTION 10.1 (the "COMPETING BUSINESS"). As soon as practical
after the purchase by the Seller, its Affiliates or a Principal of a Competing
Business, the Seller or the affected Principal shall offer, or cause its
Affiliates to offer, the Competing Business to the Buyer to purchase. If the
Buyer declines to purchase such assets at a price acceptable to the Seller, the
Seller or the affected Principal shall expeditiously proceed to sell, or cause
its Affiliates to sell, the Competing Business to an independent third party at
a price and on terms that, in the reasonable business judgment of the Seller or
the affected Principal or its Affiliates, are not inferior to those offered by
the Buyer, PROVIDED, that if the Competing Business is divested by way of a
bidding process, the Buyer shall have an opportunity to participate in such
bidding process;
(b) prevent the Seller, its Affiliates or any of the
Principals from acquiring securities representing not more than 2% of the
outstanding voting power of any publicly held corporation that has voting
securities traded on a national securities exchange, the Nasdaq Stock Market or
on any over-the-counter market; or
(c) apply to the resale of Product purchased before the
Closing and returned by a customer for any reason or no reason after the
Closing (PROVIDED that the Seller shall first offer such Product to the Buyer).
10.3 NON-SOLICITATION. For a period from the Closing through to the
second anniversary of the expiration of the term of the Sales and Services
22
Contract, each of the Seller and the Principals shall not, directly or
indirectly, solicit, induce, or in any manner attempt to solicit or induce, any
employees of the Business or the Buyer to terminate his or her employment or to
become their employees; PROVIDED that an employee shall be deemed not to have
been solicited for employment if such employee responded to a BONA FIDE general
solicitation for employment and PROVIDED, FURTHER, HOWEVER, that this SECTION
10.3 shall not apply to any such employee who is terminated by the Business or
the Buyer after the Closing Date or who voluntarily resigns after the Closing
Date other than because of any inducement to resign or leave their employment
by any of the Seller, the Principals or any of their Affiliates.
10.4 REMEDIES FOR BREACH; SEVERABILITY.
(a) In the event of a breach, or threatened breach of the
provisions of this ARTICLE 10, in addition to any other remedies the Buyer may
have at law or in equity, the Buyer shall be entitled to seek an injunction or
similar remedy so as to enable it specifically to enforce such provisions,
without the necessity of proving irreparable harm or satisfying any requirement
to post any bond or other security.
(b) It is the desire and intent of the Parties and the
Principals that the provisions of this ARTICLE 10 be enforced to the fullest
extent permissible under the Laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
portion of this ARTICLE 10 should be adjudicated to be invalid or
unenforceable, such portion shall be deleted and such deletion shall apply only
with respect to the operation of this ARTICLE 10 in the particular jurisdiction
in which such adjudication is made. To the extent any provision hereof is
deemed unenforceable by virtue of its scope in terms of area or length of time,
but may be enforceable with limitations thereon, the Parties and the Principals
agree that the same shall, nevertheless, be enforceable to the fullest extent
permissible under the Laws and public policies applied in such jurisdiction in
which enforcement is sought.
ARTICLE 11
CLOSING; DELIVERIES BY THE PARTIES; CONDITIONS PRECEDENT
11.1 THE CLOSING; FURTHER ASSURANCES.
(a) The consummation of the transactions which are
contemplated by this Agreement to be consummated on the Closing Date (the
"CLOSING") shall take place five Business Days following the satisfaction or
waiver of the conditions set forth in SECTIONS 11.5, 11.6 AND 11.7 (other than
those conditions which, by their nature, can only be satisfied at the Closing),
at 10:00 a.m. (New York City time), at the offices of Paul, Weiss, Rifkind,
Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019
6064, or at such other time and place as shall be mutually agreed upon by the
Parties. The date on which the Closing occurs is referred to herein as the
"CLOSING DATE" and the Closing shall be deemed to have occurred on 12:01 a.m.
on the Closing Date.
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(b) Subject to the other provisions of this Agreement, each
of the Parties agrees to execute, acknowledge, deliver, file and record such
further certificates, amendments, instruments and documents, and to do all such
other acts and things, as may be required by any applicable Law or as may be
necessary or desirable to carry out the transactions contemplated by this
Agreement.
11.2 BUYERS' DELIVERIES. At the Closing, the Buyer shall deliver, or
cause to be delivered, to the Seller the following.
(a) An amount equal to the Cash Payment (as adjusted
pursuant to SECTION 5.2, if applicable) by wire transfer in immediately
available funds pursuant to wire instructions which shall be delivered by the
Seller to the Buyer no later than three Business Days prior to the Closing
Date;
(b) Evidence of the issuance of the Unifi Stock
Consideration to the Seller;
(c) A duly executed Bill of Sale, Assignment and Assumption
Agreement;
(d) A duly executed Buyer's Certificate;
(e) A duly executed Dillon Manufacturing Agreement;
(f) A duly executed American Drawtech Manufacturing
Agreement;
(g) A duly executed Sales and Services Agreement;
(h) A duly executed Registration Rights Agreement; and
(i) Such other instruments and documents deemed necessary
or appropriate by the Seller, and agreed to by the Buyer, to effectuate the
transactions contemplated by this Agreement.
11.3 THE SELLER'S DELIVERIES. At the Closing, the Seller shall
deliver, or cause to be delivered, to the Buyer the following:
(a) A duly executed Bill of Sale, Assignment and Assumption
Agreement;
(b) A duly executed Limited Warranty Deed;
(c) A duly executed Seller's Certificate;
(d) A duly executed Guaranty;
(e) A duly executed Dillon Manufacturing Agreement;
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(f) A duly executed American Drawtech Manufacturing
Agreement;
(g) A duly executed Sales and Services Agreement;
(h) A duly executed Registration Rights Agreement;
(i) A duly executed certificate stating that the Seller is
not a "foreign" person within the meaning of Section 1445 of the Code, which
certificate shall set forth all information required by, and otherwise be
executed in accordance with, Treasury Regulation ss. 1.1445-2(b)(2);
(j) A duly executed affidavit necessary for the Buyer to
obtain title insurance for the Leased Real Property and substantially in the
form attached hereto as EXHIBIT H;
(k) An affidavit of title, the form and substance of which
shall be subject to the reasonable approval of the Buyer's title insurance
company and such other affidavits as are customarily delivered by a seller of
real property in the jurisdiction where the Owned Real Property is located; and
(l) Such other instruments and documents deemed necessary
or appropriate by the Buyer, and agreed to by the Seller, to effectuate the
transactions contemplated by this Agreement.
11.4 RELEASE OF TRANSFERRED EMPLOYEES FROM CONFIDENTIALITY
UNDERTAKING. Effective as of the Closing Date, the Seller shall release any
Transferred Employee who shall be employed by the Buyer from any secrecy,
confidentiality, non-competition or similar agreement theretofore entered into
between such Transferred Employee and the Seller; PROVIDED, that nothing in
this SECTION 11.4 shall release a Transferred Employee from any secrecy or
confidentiality agreement with or obligation to the Seller or any Person in
respect of any business other than the Business or any assets other than the
Purchased Assets.
11.5 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each Party to complete the Closing and otherwise to effect the
transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any or all
of which may be waived by agreement of the Seller and the Buyer in writing, in
whole or in part, to the extent permitted by applicable Law:
(a) All waiting periods and any extensions thereof under
the HSR Act applicable to the consummation of the transactions contemplated by
this Agreement shall have been satisfied, expired or been terminated (the "HSR
CONDITION"), without imposing any conditions on either of the Parties which are
deemed by the Seller or the Buyer, as the case may be, in its reasonable
opinion to be unacceptable;
25
(b) All other governmental consents and approvals, as are
required by Law, shall have been obtained for the purposes of implementing the
transactions contemplated by this Agreement; and
(c) No order, writ, injunction, or decree shall have been
issued which restrains, enjoins, or invalidates, or otherwise has a Material
Adverse Effect on the transaction and no Action shall be pending or threatened
that has a reasonable likelihood of resulting in any such order, writ,
injunction, or decree being issued.
11.6 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the
Buyer to complete the Closing and otherwise to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of the following additional conditions, compliance with which or
the occurrence of which may be waived, in whole or in part, by the Buyer:
(a) The representations and warranties of the Seller
contained in this Agreement that are qualified as to materiality shall be true
and correct, and representations and warranties of the Seller contained in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case, at the time made and as of the Closing Date as if made
at and as of such time;
(b) The Seller shall have performed and complied in all
material respects with all agreements and covenants required to be performed or
complied with by the Seller under this Agreement at or prior to the Closing;
(c) The Seller shall have delivered or caused to be
delivered to the Buyer each of the documents specified in SECTION 11.3;
(d) The Buyer shall have received or otherwise hold all
third-party approvals (including those required under any Material Contract),
clearances, consents, and authorizations necessary to permit the Buyer (or, if
applicable, the Buyer shall have received adequate assurances reasonably
satisfactory to them that all such material approvals, clearances, consents,
and authorizations will be given) to operate the Business as it is currently
conducted, including the consent described in SCHEDULE 6.2, and no such
authorizations shall be revoked, or, to the extent applicable, shall fail to be
provided to the Buyer without additional expense and subject to no additional
restrictions or burdens on the Buyer; PROVIDED, HOWEVER, that the condition set
forth in this SECTION 11.6(D) shall be deemed satisfied (but not in respect of
the consent described in SCHEDULE 6.2) unless the failure to obtain any such
approvals, clearances, consents or authorizations, in the aggregate, would
reasonably be expected to materially and adversely impair the Buyer's ability
to conduct the Business as presently conducted consistent with past practice;
(e) The Buyer shall not have determined, in its reasonable
judgment, that any supplements to the Schedules made after the date hereof by
the Seller or the matters described therein, individually or in the aggregate,
would have a Material Adverse Effect on the assets, properties or business of
the Buyer;
26
(f) The Buyer shall have received evidence satisfactory to
it of the release of all Liens on any of the Purchased Assets, other than
Permitted Liens; and
(g) This Agreement and the transactions contemplated hereby
shall have been approved by the requisite vote of the shareholders of the
Seller as required by the South Carolina Business Corporation Act of 1988 and
the Seller's constitutive documents, and such approval is in full force and
effect and shall not have been revoked.
11.7 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the
Seller to complete the Closing and otherwise to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of the following additional conditions, compliance with which or
the occurrence of which may be waived, in whole or in part, by the Seller:
(a) The representations and warranties of the Buyer
contained in this Agreement that are qualified as to materiality shall be true
and correct, and representations and warranties of the Buyer contained in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case, at the time made and as of the Closing Date as if made
at and as of such time;
(b) The Buyer shall have performed and complied in all
material respects with all agreements and covenants required to be performed or
complied with by the Buyer under this Agreement at or prior to the Closing; and
(c) The Buyer shall have delivered or caused to be
delivered to the Seller each of the documents specified in SECTION 11.2.
ARTICLE 12
TAXES AND PRORATIONS
12.1 UTILITY ACCOUNTS. The Parties shall arrange for all utility
accounts to be read as of the commencement of business on the Closing Date. The
Seller shall be responsible for all utility charges accruing up to the Closing
Date and the Buyer shall be responsible for all utility charges accruing
thereafter. The Parties agree to prorate on the basis of the number of days in
the event no metering system for the prorating of utilities exists.
12.2 PREPAID ITEMS. All prepaid rent, other prepaid charges due
under any Assumed Contracts and all real and personal property Taxes (including
fee-in-lieu-of-tax payments) levied on the Purchased Assets as set forth on
SCHEDULE 6.17 and as updated pursuant to SECTION 8.7 shall be prorated to the
Closing Date based on the number of days. The prorations shall be based on the
most recent available tax statements, latest tax valuations and latest bills.
If the Closing occurs before the tax rate is fixed for the then current fiscal
or calendar year, whichever is applicable, the proration of the corresponding
Taxes shall be on the basis of the tax rate for the last preceding year applied
27
to the latest assessed valuation. The Seller's estimated accrued liability (to
the Closing) for any of the above-described Taxes and charges that are due and
payable after the Closing, to the extent practicable, shall be made as a credit
against the amount payable at the Closing by the Buyer. As to those prorations
of Taxes and other charges which are not capable of being ascertained on or
prior to the Closing Date, such prorations shall be payable by the Seller to
the Buyer as an adjustment to the consideration for the Purchased Assets, and
paid by the Buyer to the Seller within 90 days of the Closing Date.
ARTICLE 13
COVENANTS
13.1 ACCOUNTS RECEIVABLE; CLAIMS. Any payment made to the Buyer
after the Closing of accounts receivable of the Seller arising out of any
transaction occurring before the Closing Date shall be held in trust for the
benefit of the Seller and promptly forwarded by the Buyer to the Seller.
Conversely, any payment made to the Seller of accounts receivable of the Buyer
arising out of any transaction occurring on or after the Closing Date shall be
held in trust for the benefit of the Buyer and promptly forwarded by the Seller
to the Buyer. To the extent that, after the Closing Date, the Seller prosecutes
against third parties any Claims that are Excluded Assets or Excluded
Liabilities, it shall do so in a manner consistent with the past practice of
the Business.
13.2 BUSINESS RECORDS. Subject to SECTION 13.3, as soon after the
Closing as is reasonably practicable but in no event later than three Business
Days after the Closing, the Seller shall cause to be delivered to the Buyer the
Business Records, it being understood that (i) Seller shall have the right to
retain copies of the Business Records for the purposes of Tax and legal
compliance and (ii) the Buyer shall cooperate with the Seller in identifying,
and deliver to the Seller promptly upon request, any records or information
contained in the Business Records that are not related to the Business.
13.3 ACCESS TO BUSINESS RECORDS. From time to time after the
Closing, upon request by the Seller, the Buyer shall permit the Seller
reasonable access to the Business Records delivered to Buyer in accordance with
SECTION 13.2 for the purposes of Tax and legal compliance; provided that,
except with respect to Taxes and when a longer retention period is required by
Law, for indemnification claims or otherwise agreed to in writing, the Buyer
shall not be required to retain such books and records for a period of more
than seven years from the Closing Date; PROVIDED, HOWEVER, that prior to
destroying or discarding such books and records, the Buyer shall first provide
the Seller with written notice of its intention to destroy or discard such
books and records and the opportunity to retain or copy same.
13.4 TAX MATTERS. After the Closing, the Buyer and the Seller agree
to reasonably cooperate and assist one another regarding all Tax matters
related to the Purchased Assets sold pursuant to this Agreement. The Buyer
agrees to cooperate and assist the Seller in connection with any Tax audits of
the Seller for any periods through the Closing Date. For a period of seven
28
years after the Closing Date or, if longer, 90 days after the expiration of the
applicable statute of limitations, taking into account any extensions actually
obtained, with respect to any Tax matter or Tax Return, the Buyer shall provide
the Seller with such information related to the Business as may reasonably be
requested by the Seller in connection with preparation of any Tax Return and
the conduct of any audit or other examination by any Tax Authority or in
connection with judicial or administrative proceedings relating to any
liability of the Seller for Taxes.
13.5 LITIGATION ASSISTANCE. After the Closing, each Party shall
reasonably cooperate with the other Party and the other Party's attorneys in
the defense or prosecution of any Action instituted against or by the other
Party pertaining to the Purchased Assets or the Business, excluding, however,
any Action between the Parties. Such cooperation shall include conferring with
the other Party's attorneys or experts at their offices during normal business
hours at mutually convenient times and making available to the other Party's
attorneys documents or copies of documents specific to the Purchased Assets or
the Business, and such cooperation shall include giving testimony voluntarily.
Such cooperation shall not require the cooperating Party to be joined as a
party in any such Action or to furnish any information it reasonably believes
would undermine an applicable legal privilege. Each Party further agrees that
it shall not voluntarily disclose to any third party without the other Party's
consent any information or documents received by it heretofore or hereafter
from the other Party's attorneys in connection with the defense or prosecution
of any Action. The other Party shall pay the out-of-pocket expenses of the
cooperating Party and those expenses of the cooperating Party's employees and
agents reasonably incurred in connection with providing such cooperation but
shall not be responsible for paying fees or for reimbursing the cooperating
Party for the salaries or costs of fringe benefits or other similar expenses of
the cooperating Party's employees and agents in connection with time spent
providing such cooperation to the other Party.
13.6 POST-CLOSING ADMINISTRATION OF CERTAIN CONTRACTS. For any
Assumed Contract for which the intended assignment by the Seller and assumption
by the Buyer pursuant to the terms of the Assignment and Assumption Agreement
will require the consent of a third party in, the Parties shall cooperate to
procure such consent as promptly as commercially reasonable after the Closing
Date, provided that (i) the Buyer and the Seller shall use reasonable
commercial efforts to satisfy any and all conditions to obtaining the consent
of any counterparty to such contract (which shall include an agreement by the
Buyer to indemnify and hold the Seller harmless for any loss that the Seller
may incur under any such contract by reason of any failure by the Buyer to
perform all the obligations of the Seller under such contract after the
Closing); (ii) the Parties shall undertake diligent efforts to avoid any cost
or expenses associated with obtaining the consent of any third party required
for the assignment of a contract; (iii) the scope and the terms and conditions
of each such contract to be assigned under this Agreement shall remain
materially unaltered by the assignment (except for the parties to that
contract); and (iv) each Party shall bear its own internal costs and expenses
associated with such efforts. If, notwithstanding the efforts of the Parties as
29
set forth above, such a consent cannot be obtained for such an Assumed
Contract, but for which the Assumed Contract would have been transferred
hereunder to the Buyer, the Parties shall proceed as follows:
(a) Until such Assumed Contract is novated or assigned (in
no event longer than six months from the Closing Date), the Seller shall hold
it in trust for the Buyer absolutely and the Buyer shall (if such
sub-contracting is permissible and lawful under the contract), as the Seller's
sub-contractor, perform all the obligations of the Seller under the contract to
be discharged after the Closing Date and shall indemnify the Seller against all
Actions in respect of any failure on the part of the Buyer to perform those
obligations; PROVIDED that such trust arrangement may be irrevocably terminated
by the Seller, without liability to the Seller, by written notice to the Buyer
upon any failure by the Buyer to promptly and fully indemnify the Seller
pursuant to this SECTION 13.6(A).
(b) Until such Assumed Contract is novated or assigned to
the Buyer (in no event longer than six months from the Closing Date), the
Seller shall (so far as it lawfully may) use reasonable efforts to assist the
Buyer (at the Buyer's request and expense) to enable the Buyer to enforce its
rights under the contract. If the contract prohibits the Buyer from acting as
the Seller's sub-contractor (as referred to in SECTION 13.6(A)) or the Buyer is
not permitted to act as sub-contractor due to confidentiality obligations, the
Seller shall, at the cost of the Buyer and to the extent that the Seller is
reasonably able, do all such acts and things as the Buyer may reasonably
require to enable due performance of the contract and to provide for the Buyer
the benefits, subject to the burdens, of the contract, and the Buyer shall
indemnify the Seller in respect of all such acts and things. The Buyer agrees
to cooperate with such efforts by the Seller to the fullest extent practicable,
including supplying the Seller with Product at no cost to the Seller, PROVIDED
that the Seller assigns to the Buyer all consideration received therefor from a
purchaser thereof. If the Buyer fails to perform the obligations of the Seller
under such Assumed Contracts in accordance with their terms, the Seller may
terminate such Assumed Contracts.
(c) Notwithstanding the provisions set forth in this
SECTION 13.6, the Seller may terminate in accordance with its terms any Assumed
Contract that is not novated or assigned to the Buyer in accordance with the
terms of the Assignment and Assumption Agreement, at any time from and after
the date that is six months after the Closing Date.
13.7 TRANSFERRED EMPLOYEES. The Seller shall cooperate with the
Buyer to make available for interviews the Covered Employees previously
identified by the Buyer. The Buyer shall, at least 15 days prior to the
Closing, make offers of employment to all Covered Employees (other than as
previously designated by the Buyer) on a basis consistent with this SECTION
13.7. The Buyer shall provide the Seller a list of those Covered Employees to
whom offers of employment have been made, which list shall include the nature
and title of the position, salary, and location of employment, and shall update
such list within two Business Days after the Closing to identify those Covered
Employees accepting such employment offer and meeting the requirements of such
offer (the "TRANSFERRED EMPLOYEES"). Notwithstanding the foregoing, the Buyer
covenants and agrees to hire a sufficient number of Covered Employees so that
30
the Seller will not incur any liability or obligation under WARN. The
Transferred Employees shall become the Buyer's employees immediately following
the Closing. All offers of employment shall be subject to the following:
(a) Each Covered Employee to whom an offer of employment is
made shall be offered compensation equal to or greater than 100% of such
Covered Employee's current base wage or salary computed on a monthly basis,
excluding any shift differential and any overtime pay that is not regularly
scheduled as part of the Covered Employee's normal shift ("CURRENT BASE WAGE");
(b) The Buyer shall permit each Transferred Employee to
participate in all of its or its Affiliates' employee benefits plans (such as
defined contribution plans, and welfare benefit plans, but excluding defined
benefit plans and equity plans), policies, and, other than compensation amounts
and wage escalation policies, pay practices (such as vacation, bonuses, and
sickness and disability leave) on a basis substantially similar to that of
similarly situated employees of the Buyer, in accordance with the terms and
conditions of such plans in effect from time to time. In respect of welfare
benefits and other than with respect to the Buyer's drug screening policies,
the Buyer shall not require a physical examination or other proof of
insurability, and shall use its commercially reasonable efforts to cause any
third party insurer to waive all coverage exclusions and limitations relating
to waiting periods or pre-existing conditions, with respect to any Transferred
Employee or any dependent covered by the Seller's comparable welfare benefit
plan, policy or pay practice in effect as of Closing solely to the extent such
exclusion or limitation would not have been applicable in the Benefit Plans
immediately prior to the Closing. Transferred Employees shall receive service
credit equivalent to the service credit held with the Seller as of the Closing
for purposes of eligibility and vesting in the Buyer's plans (but not for
purposes of benefit accruals);
(c) Transferred Employees shall be given credit for any
deductible or co-insurance amounts paid with respect to the plan year in which
the Closing occurs, to the extent, following the Closing Date, that they
participate in any plan of the Buyer for which deductibles or co-insurance are
required. Promptly after receiving the list referenced in the next sentence,
the Seller shall provide the Buyer with a list of deductibles and co-insurance
that have been paid by the Transferred Employees with respect to the plan year
in which the Closing occurs. The Buyer shall provide to the Seller written
notice of all Transferred Employees who have elected coverage under the medical
plans of the Buyer or its Affiliates within 45 days following the Closing Date;
(d) All Transferred Employees shall be subject to the
Buyer's vacation policies, PROVIDED that all such Transferred Employees shall
be given full credit by the Buyer for years of service prior to the Closing
Date recognized by the Seller for vacation purposes. For the year in which the
Closing Date occurs, the Buyer may pro rate the amount of vacation to which any
Transferred Employee will become entitled in respect of such year to reflect
the portion of such year occurring after the Closing Date. The Seller shall be
31
responsible for payments to Covered Employees for any earned but unused
vacation as of the Closing Date, and shall pay such vacation pay benefits to
the Covered Employees as required by applicable Law and its policies and
Benefit Plans;
(e) With respect to Transferred Employees, the Buyer shall
provide and be solely responsible for any continuation coverage required under
COBRA to each "qualified beneficiary" as that term is defined in COBRA whose
first "qualifying event" (as defined in COBRA) occurs after the Closing Date.
The Seller shall provide and be solely responsible for any continuation
coverage required under COBRA to each "qualified beneficiary" whose first
"qualifying event" occurs on or prior to the Closing Date. The Seller shall
provide any required certificates of creditable coverage under HIPAA;
(f) The Buyer shall accept a contribution, in cash or, to
the extent of any notes associated with the outstanding balance of any loans to
Transferred Employees, in kind, attributable to any eligible rollover
distribution (within the meaning of Section 401(a)(31) of the Code) of the
benefit of a Transferred Employee under the Seller's 401(k) Plan to the Buyer's
401(k) plan; PROVIDED that the obligation to accept such a rollover in kind
shall expire 45 days after the Closing Date (or at such other time as the Buyer
and the Seller may mutually agree);
(g) The Buyer shall not, with respect to any of the
Transferred Employees, at any time during the 90 day period following the
Closing Date, without complying fully, as to the Transferred Employees, with
the notice and other requirements of WARN or any similar state or local Law
requiring notice to employees, effectuate (i) a "plant closing" (as defined in
WARN), (ii) a "mass layoff" (as defined in WARN) or (iii) any similar action
under applicable state or local Law requiring notice to employees in the event
of a plant closing or layoff; and
(h) Nothing in this Agreement, express or implied, is
intended to create a contract between the Buyer or the Seller and any Covered
Employee or Transferred Employee, and no Covered Employee or Transferred
Employee may rely on this Agreement as the basis for any Claim against the
Buyer or the Seller. Nothing in this Agreement shall be deemed or construed to
require the Buyer to continue to employ the Transferred Employees for any
period after Closing.
13.8 CORRESPONDENCE. After the Closing Date, each of the Seller and
the Buyer may receive mail, packages and other communications properly
belonging to the other (or the other's Affiliates). Accordingly, at all times
after the Closing Date, each of the Seller and the Buyer authorizes the Seller,
on the one hand, or the Buyer, on the other hand, as the case may be, to
receive and open all mail, packages and other communications received by it and
not unambiguously intended for such other Party or any of such other Party's
officers or directors, and to retain the same to the extent that they relate to
the business of the receiving Party. To the extent that any such communications
relate to the business of the non-receiving Party, the receiving Party shall
promptly deliver such mail, packages or other communications (or, in case the
same relate to both businesses, copies thereof) to the other party. The
provisions of this SECTION 13.8 are not intended to, and shall not be deemed
32
to, constitute an authorization by any of the Seller or the Buyer to permit the
other to accept service of process on its behalf and neither Party is or shall
be deemed to be the agent of the other for service of process purposes.
13.9 PRO FORMA FINANCIALS. At the request of the Buyer, the Seller
shall provide all reasonable cooperation as is necessary to assist the Buyer in
the preparation of the pro forma and historical financials that are required to
be filed with the Securities and Exchange Commission by the Buyer on a current
report, Form 8-K, in connection with the transactions contemplated by this
Agreement. Such cooperation shall include giving the Buyer and its
representatives access to, and making available to them, the Seller's officers,
directors, employees, accountants and agents. The Buyer shall reimburse the
Seller for any out-of-pocket costs reasonably incurred by the Seller in
providing such cooperation.
ARTICLE 14
BULK SALES ACT
The Buyer hereby waives compliance by the Seller with the requirements
of any and all Laws relating to bulk sales and transfers, and as consideration
for such waiver by the Buyer, the Seller agrees to indemnify the Buyer for any
loss to the Buyer resulting from any Claim by any creditors of the Seller under
any such Law.
ARTICLE 15
RIGHT OF TERMINATION
15.1 TERMINATION. This Agreement may, by notice given prior to or at
the Closing, be terminated.
(a) by mutual agreement of the Parties;
(b) by either Party:
(i) if Closing has not occurred on or before
January 15, 2007; PROVIDED, HOWEVER, that the right to terminate this Agreement
pursuant to this SECTION 15.1(B)(I) shall not be available to a Party if such
Party has failed to perform in any material respect its obligations under this
Agreement and such failure has been the cause of, or otherwise results in, the
failure of the Closing to occur on or before such date;
(ii) in the event of a material breach (other than a
breach of the confidentiality provisions of ARTICLE 19) by the other Party of
any of its representations, warranties, covenants or agreements hereunder where
such breach has not been cured within 30 days following receipt of notice of
breach from the non-breaching Party that has or could reasonably be expected to
33
have a material and adverse effect on the Buyer, the Business, the Purchased
Assets or the rights and benefits of the non-breaching Party contained herein
or in the Ancillary Agreements; or
(iii) if a change in Law makes the transaction
contemplated hereby illegal or otherwise prohibited, or if any final and
nonappealable judgment, injunction, order or decree enjoining either Party
hereto from consummating the transaction is entered; or
(c) by the Buyer pursuant to, but subject to, SECTION 5.3.
15.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to this Article 15, all further obligations of the Parties with respect to this
Agreement shall terminate, except that:
(a) the obligations in ARTICLE 19 will survive in all cases;
(b) in the case of a termination pursuant to SECTION
15.1(A) OR 15.1(B)(I) OR 15.1(B)(III) OR 15.1(C), neither Party shall have any
liability hereunder, of any nature whatsoever, to the other, including any
liability for damages with respect to such termination; and
(c) in the case of a termination pursuant to SECTION
15.1(B)(II), the terminating Party's right to damages suffered as a result of
the non-terminating Party's material breach shall survive such termination
unimpaired.
ARTICLE 16
BUYER'S INDEMNITY
Subject to the limitations and procedures set forth in ARTICLE 18, the
Buyer shall indemnify and hold the Seller Indemnified Parties harmless from and
against any and all Losses arising from, in connection with or otherwise with
respect to:
(a) The Assumed Liabilities;
(b) A breach of any of the representations and warranties
of the Buyer contained in this Agreement; and
(c) Any failure to perform or comply with the terms of any
covenant or other agreement of the Buyer in this Agreement.
ARTICLE 17
SELLER'S INDEMNITY
Subject to the limitations and procedures set forth in Article 18, the
Seller shall indemnify and hold the Buyer Indemnified Parties harmless from and
against any and all Losses arising from, in connection with or otherwise with
respect to:
34
(a) The Excluded Assets;
(b) The Excluded Liabilities;
(c) Any breach of any of the representations and warranties
of the Seller contained in this Agreement; and
(d) Any failure to perform or comply with the terms of any
covenant or other agreement of the Seller in this Agreement (other than ARTICLE
10).
ARTICLE 18
INDEMNIFICATION PROCEDURES AND LIMITATIONS
18.1 PERIOD FOR TAKING ACTION.
(a) No Claim shall be brought nor Action instituted against
the other Party, nor shall any Liability be incurred by any Party, with respect
to the representations and warranties contained in this Agreement at any time
after the date that is 18 months after the Closing Date, other than for the
warranties specified in SECTION 18.1(B). The covenants and agreements contained
in this Agreement shall survive the Closing Date indefinitely, except for those
covenants and agreements that are expressly limited by their terms to other
dates or times, which shall survive only to such dates or times.
(b) All obligations of the Seller for breach of the
representations and warranties set forth in SECTION 6.10 and SECTION 6.12 and
the indemnification under SECTION 6.12(E) shall survive the Closing Date and
continue for a period lasting 90 days after the expiration of the applicable
statute of limitations with respect to the matter at issue.
(c) Any on-going claims, actions or demands commenced prior
to expiration of the claim period set forth in SECTION 18.1(A) OR (B) or
specifically stipulated elsewhere in this Agreement shall be pursued to
conclusion even if final disposition of such matter occurs after the claim
period has elapsed.
18.2 NOTICE. No claim for indemnification may be made with respect
to any of the indemnification provisions hereunder unless notice of such claim
for indemnification which satisfies the provisions of SECTION 18.4 is given to
the Party from whom indemnification is claimed (the "INDEMNIFYING PARTY") on or
before the expiration date for such indemnification provision as set forth in
SECTION 18.1, but the actual costs or expenses related thereto may be incurred
or assessed after such expiration date.
18.3 LIMITATIONS ON INDEMNIFICATION. In no event shall the Buyer or
the Seller be liable under this Agreement for indemnification for breach of
their respective representations or warranties, unless and until the aggregate
of all Losses which are incurred or suffered by the Party seeking
indemnification hereunder exceeds $250,000, in which case such Party shall be
35
entitled to seek indemnification for all such Losses, and the aggregate
liability of each of the Parties for indemnification under this Agreement for
breaches of representations and warranties shall not exceed $35,000,000 (the
"CAP").
18.4 PROCEDURE. Each Party shall give prompt written notice to the
other Party under each claim for indemnification hereunder specifying that
indemnification is sought pursuant to this Agreement, the amount (to the extent
known), nature of and event giving rise to the Claim, and of any matter which
is likely to give rise to an indemnification claim. The Indemnifying Party
shall have the right to control at its expense the defense of any such matter
or its settlement. Failure to give timely notice of a matter which may give
rise to an indemnification claim shall not affect the rights of the Indemnified
Party to collect such claims from the Indemnifying Party so long as such
failure to so notify does not materially adversely prejudice the Indemnifying
Party's ability to defend such claim against a third party or mitigate the Loss
arising out of the matter. No Indemnifying Party, in the defense of any Claim,
shall, except with the prior written consent of an Indemnified Party, which
consent shall not be unreasonably withheld or delayed, consent to entry of any
judgment or enter into any settlement by which such Indemnified Party is to be
bound and which judgment or settlement does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such Claim.
18.5 APPLICABILITY TO CLAIMS; EXCLUSIVE REMEDY. It is intended that
the provisions of this Agreement with respect to claims by one Party against
the other shall apply to all claims relating to the transactions contemplated
hereby, regardless of whether such claim is based in tort (including
negligence) contract, or otherwise. Other than claims based upon fraud or
seeking specific performance, notwithstanding anything to the contrary in this
Agreement, this SECTION 18 shall provide the exclusive remedy for any claim or
dispute arising from this Agreement (other than Article 10), including breaches
of representations, covenants and agreements hereunder (other than Article 10).
18.6 LIMITATION OF LIABILITY. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, IN NO EVENT SHALL A PARTY BE LIABLE FOR PUNITIVE, SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION OR ANY OTHER LOSS) ARISING FROM OR RELATING TO
ANY CLAIM MADE UNDER THIS AGREEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
ARTICLE 19
CONFIDENTIALITY
19.1 PRE-CLOSING CONFIDENTIALITY OBLIGATIONS. In connection with the
transactions contemplated hereby, the Seller has communicated and furnished
(and will communicate and furnish) certain non-public information relating to
the Business, both written and oral, whether or not designated confidential, to
the Buyer, all of which the Buyer agrees it will not use or disclose to any
other Person before the Closing for any purpose, without the prior written
36
consent of the Seller, except to its Representatives for whom such non-public
information is necessary to evaluate the transactions contemplated hereby on
behalf of the Buyer. If disclosure is required by Law, the Buyer shall promptly
notify the Seller of any such requirement and the Seller shall be permitted to
seek confidential treatment for such information.
19.2 POST-CLOSING CONFIDENTIALITY OBLIGATIONS. Upon the consummation
of the Closing, the Buyer's obligations under SECTION 19.1 shall terminate
immediately. Conversely, all information known to, possessed by, subsequently
discovered by or disclosed to (i) the Seller, its Affiliates or their
respective Representatives that is in any way related to the Business or the
Purchased Assets, whether or not designated confidential, or (ii) the Buyer or
its respective Representatives that is in any way related to the Seller (other
than to the Business or the Purchased Assets), whether or not designated
confidential (the information referred in clauses (i) and (ii) shall be
collectively referred to hereinafter as the "CONFIDENTIAL INFORMATION") shall
be kept confidential by the Seller, its Affiliates, the Buyer and their
respective Representatives, as applicable. Further, neither the Seller, its
Affiliates, the Buyer nor their respective Representatives shall use the
Confidential Information or disclose the Confidential Information to any Person
except as required by Law. If disclosure is required by Law, either the Seller
or the Buyer, as the case may be, shall promptly notify the other of any such
requirement and the Seller or the Buyer, as the case may be, shall be permitted
to seek an appropriate protective order or confidential treatment for such
Confidential Information.
ARTICLE 20
DISPUTE RESOLUTION
20.1 FORUM. The Parties agree that the appropriate, exclusive and
convenient forum for any disputes between any of the Parties arising out of
this Agreement or the transactions contemplated hereby shall be in any state or
federal court in the State, City and County of New York, and each of the
Parties irrevocably submits to the exclusive jurisdiction of such courts solely
in respect of any Action arising out of or related to this Agreement; PROVIDED,
HOWEVER, that the foregoing shall not limit the rights of the Parties to obtain
execution of judgment in any other jurisdiction. The Parties further agree, to
the extent permitted by Law, that a final and unappealable judgment against a
Party in any Action contemplated above shall be conclusive and may be enforced
in any other jurisdiction within or outside the United States by suit on the
judgment, a certified copy of which shall be conclusive evidence of the fact
and amount of such judgment. Any and all service of process and any other
notice in any such Action shall be effective against any Party if given by
registered or certified mail, return receipt requested, or by any other means
of mail that requires a signed receipt, postage prepaid, mailed to such party
as herein provided.
20.2 WAIVERS. Each Party agrees not to assert, by way of motion, as
a defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of such courts, that its property is exempt or
37
immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is
improper or that this Agreement, or the agreements contemplated hereby or the
subject matter hereof or thereof may not be enforced in or by such court.
20.3 WAIVER OF JURY TRIAL. THE PARTIES HEREBY IRREVOCABLY WAIVE AND
AGREE TO CAUSE THEIR RESPECTIVE AFFILIATES TO WAIVE THE RIGHT TO TRIAL BY JURY
IN ANY ACTION TO ENFORCE OR INTERPRET THE PROVISIONS OF THIS AGREEMENT.
ARTICLE 21
MISCELLANEOUS
21.1 PRESS RELEASE. Except as may be required by applicable Law or
the rules of the securities exchanges on which Unifi Parent's securities are
listed, no Party shall issue a press release or public announcement following
execution of this Agreement with respect to the transactions contemplated by
this Agreement without the prior consent of the other Party. With respect to
any such disclosures required by Law or the rules of such securities exchange,
each Party shall use its reasonable efforts to consult with the other Party on
any such required disclosures.
21.2 EXPENSES AND FEES. Except as otherwise specifically provided
herein, the Parties shall pay their own expenses, including attorneys' fees,
incident to the preparation and performance of this Agreement, whether or not
the transactions contemplated herein are consummated.
21.3 AMENDMENTS; WAIVER. This Agreement shall not be amended or
modified except in a writing signed by the Parties. The failure of the Seller
or the Buyer to insist, in any one or more instances, upon the strict
performance of any of the terms, conditions or covenants of this Agreement
shall not be construed as a waiver or relinquishment for the future of such
term, condition or covenant. No waiver, change, modification or discharge by
either Party of any provision in this Agreement shall be deemed to have been
made or shall be effective unless expressed in writing and signed by each
Party.
21.4 PARTIES IN INTEREST. This Agreement shall inure to the benefit
of and be binding upon the Parties and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended
to confer upon any Person other than the Seller, the Buyer (and their
respective Affiliates) or their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement; it being understood that the
foregoing shall not limit the right of any Person to indemnification as
provided under ARTICLE 16, 17 OR 18.
21.5 ASSIGNMENT. This Agreement may not be transferred or assigned
to a third party without the prior written consent of the other Party;
provided, however, that this Agreement may be freely assigned by either Party
38
to an Affiliate in which case the Affiliate shall assume the transferring
Party's rights and obligations under this Agreement and the transferring Party
shall guarantee its Affiliate's performance hereunder.
21.6 MERGER. All understandings and agreements heretofore existing
between the Parties regarding the purchase and sale of the Purchased Assets and
the Business are merged into this Agreement, the Schedules and the Exhibits
hereto, which fully and completely express the agreement of the Parties and was
entered into after adequate investigation, neither Party relying upon any
statement or representation made by the other which is not embodied in this
Agreement, the Schedules and the Exhibits hereto.
21.7 NOTICES.
(a) All notices, consents, requests and approvals, any
notice of change in address for the purpose of this Article, and other
communications provided for or required herein, shall be deemed validly given,
made or served, if in writing, and delivered personally, sent by U.S.
nationally recognized overnight delivery service, postage prepaid or sent by
facsimile or other electronic transmission:
(i) If to the Seller, addressed to:
Dillon Yarn Corporation
53 East 34th Street
Paterson, NJ 07514
Attention: President
Facsimile: (973) 684-0487
Email: swener@dillonyarn.com
(ii) If to the Buyer, addressed to:
Unifi Manufacturing, Inc.
7201 W. Friendly Avenue
Greensboro, NC 27410
Attention: General Counsel
Facsimile: (336) 856- 4364
Email: cmccoy@unifi-inc.com
(b) All notices hereunder shall be effective on the date of
receipt.
21.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of law provisions thereof that would apply the laws of another
jurisdiction.
21.9 SPECIFIC PERFORMANCE. The Parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
39
adequate remedy at law would exist and damages would be difficult to determine,
and that the Parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
21.10 SCHEDULES AND EXHIBITS. All Schedules referred to herein are
hereby incorporated in this Agreement by reference.
21.11 USAGE. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their plural or singular forms,
respectively. Unless otherwise expressly provided, the words "include,"
"includes" and "including" do not limit the preceding words or terms and shall
be deemed to be followed by the words "without limitation."
21.12 HEADINGS. The various headings used in this Agreement are for
convenience only and are not to be used in interpreting the text of the Article
or Section in which they appear or to which they relate.
21.13 REFERENCES. When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference shall be to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
21.14 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
[remainder of page left intentionally blank]
40
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be executed the date first above written.
UNIFI MANUFACTURING, INC.
By:
------------------------
Name:
Title:
DILLON YARN CORPORATION
By:
------------------------
Name:
Title:
Agreed and accepted solely with respect to Articles 10, 20 and 21:
----------------------------
Name: Stephen Wener
----------------------------
Name: Lee Johnson
----------------------------
Name: William Cohen
41
EXHIBIT A
DEFINITIONS
-----------
The following terms shall have the following meanings in this
Agreement:
1. "ACTION" shall mean any demand, action, Claim, suit,
countersuit, arbitration, inquiry, subpoena, discovery request, proceeding or
investigation by or before any Governmental Authority or any arbitration or
mediation tribunal.
2. "AFFILIATE" means, with respect to any specified Person, a
Person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person. For purposes of this definition, "control," when used with respect to
any specified Person, means (i) the direct or indirect ownership of 50% or more
of the total voting power of securities or other evidences of ownership
interest in such Person or (ii) the power to direct or cause the direction of
the management and policies of such Person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
3. "AMERICAN DRAWTECH MANUFACTURING AGREEMENT" means the Drawtech
Manufacturing Agreement, substantially in the form attached as EXHIBIT B.
4. "ANCILLARY AGREEMENT" means each of the following:
(a) the Bill of Sale, Assignment and Assumption Agreement;
(b) the Limited Warranty Deed;
(c) the Manufacturing Agreements;
(d) the Sales and Services Agreement;
(e) the Registration Rights Agreement; and
(f) the Guaranty.
5. "ASSIGNED INTELLECTUAL PROPERTY" means the Assigned Software,
Assigned Trade Secrets and Assigned IP Licenses.
6. "ASSIGNED IP LICENSES" means all IP Licenses owned or Used by
the Business as currently conducted, each as set forth on SCHEDULE 1.06.
7. "ASSIGNED SOFTWARE" means all Software owned or Used in the
Business as currently conducted as set forth on SCHEDULE 1.07.
8. "ASSIGNED TRADE SECRETS" means all Trade Secrets owned or Used
in the Business as currently conducted.
1
9. "ASSUMED CONTRACTS" means all contracts listed on SCHEDULE
1.09.
10. "ASSUMED LEASES" means all leases for the Leased Real Property
listed on SCHEDULE 1.10.
11. "BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT" means the
Bill of Sale, Assignment and Assumption Agreement, substantially in the form
attached as EXHIBIT C.
12. "BUSINESS" means the research, development, manufacture,
production, marketing, distribution and sale of the Product as conducted at or
from the Dillon Facilities.
13. "BUSINESS DAY" means a day other than Saturday, Sunday or any
day on which banks in North Carolina or South Carolina are closed.
14. "BUSINESS RECORDS" means all existing business records relating
to the Business that were prepared in the Ordinary Course of Business (other
than those related to the Seller's divestiture of the Purchased Assets),
whether or not confidential (subject to third party confidentiality
restrictions or legally required consents) and otherwise, whether or not
located, as of the Closing Date, at the Dillon Facilities, which relate to the
Business as it is conducted by the Seller or to Transferred Employees,
including existing market information; sales aids; customer and supplier lists
(including a list of all customers of the Business); sales history and
historical plant accounting information; product, process and equipment
information, including information and documents pertaining to the design and
operation of all Equipment (including design codes and standards employed,
process and instrument diagrams, and material and energy balances) and other
process safety information (including information pertaining to process
chemistry, management of change, and operating procedures); Equipment
maintenance records and testing/inspection records; process hazard analysis,
incident investigation reports; health, environmental and safety documentation,
reports and records; operational know-how; design drawings and schematics, all
technical manuals, literature, formulations, and medical surveillance samples;
provided that all personnel records (other than personnel records created by
the Seller) and medical records of Covered Employees shall not be included in
the definition of "Business Records."
15. "BUYER INDEMNIFIED PARTIES" means the Buyer, its Affiliates and
each of their respective officers, directors, employees and agents.
16. "BUYER'S CERTIFICATE" means a certificate of a duly authorized
officer of the Buyer confirming that, as of the Closing Date, (i) the
representations and warranties of the Buyer contained in this Agreement that
are qualified as to materiality shall be true and correct, and the
representations and warranties of the Buyer contained in this Agreement that
are not so qualified shall be true and correct in all material respects, in
each case, at the time made and as of the Closing Date as if made at and as of
such time and (ii) the Buyer has performed and complied in all material
2
respects with all agreements and covenants required to be performed or complied
with by the Buyer under this Agreement at or prior to the Closing.
17. "CLAIMS" means any and all past, present and future claims,
demands, debts, losses, obligations, liabilities, expenses, damages, liens,
rights of action, causes of action of any kind or character whatsoever, whether
sounding in contract or tort, whether arising in law or in equity, choate or
inchoate, mature or immature, contingent or fixed, liquidated or unliquidated,
known or unknown, accrued or unaccrued, asserted or unasserted in any
litigation, or otherwise.
18. "CODE" means the Internal Revenue Code of 1986, as amended.
19. "COPYRIGHTS" means, as they exist anywhere in the world, all
copyrightable works and all copyrights and mask works, including all renewals,
extensions, registrations and applications in connection therewith (excluding
Software).
20. "COVERED EMPLOYEE" means any individual who is an employee of
the Business as of the Closing Date. Each Covered Employee shall be listed on
SCHEDULE 1.20, which schedule sets forth the name, location, base salary, hire
date and job description of each such employee, and such SCHEDULE 1.20 shall be
updated by the Seller one Business Day prior to the Closing Date.
21. "DEFECT" means a defect, fault, imperfection, impurity or
dangerous propensity of any kind, whether in design, manufacture, production,
materials, workmanship, processing or otherwise, including any failure to warn
or breach of express or implied warranties or representations, or the failure
to warn of the existence of any defect, fault, imperfection, impurity or
dangerous propensity with respect to the Products.
22. "DILLON FACILITY" means the manufacturing facility of the
Business located in Dillon, South Carolina.
23. "DILLON MANUFACTURING AGREEMENT" means the Dillon Manufacturing
Agreement, substantially in the form attached as EXHIBIT D.
24. "ENVIRONMENT" means the indoor and outdoor environment,
including any surface water, groundwater, drinking water supply, soil, natural
resources, wetlands, land surface, subsurface strata or ambient air.
25. "ENVIRONMENTAL CLAIM" means any claim, complaint, notice,
information request, order or decree in each case received or issued in writing
alleging any liability under or violation of Environmental Law.
26. "ENVIRONMENTAL CONDITION" means the presence of Hazardous
Materials in the Environment or building materials, or the Release from
building materials, including the migration or movement of Hazardous Materials
in or through the Environment.
3
27. "ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended;
the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., as amended;
the Clean Air Act, 42 U.S.C., 7401 et seq., as amended; the Clean Water Act, 33
U.S.C. 1251 et seq., as amended; the Occupational Safety and Health Act, 29
U.S.C. 655 et seq. to the extent such relates to the exposure of employees to
Hazardous Materials, and any other Law imposing liability or establishing
standards of conduct with respect to pollution, protection of the environment,
the release of Hazardous Materials into the environment, or public health and
safety insofar as they may be affected by the Release of, or exposure to,
Hazardous Materials.
28. "EQUIPMENT" means all of the manufacturing, storage,
distribution and physical testing laboratory machinery and equipment located at
the Dillon Facilities (other than any Excluded Asset).
29. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder, as in effect from
time to time.
30. "ERISA AFFILIATE" means any entity which is, or at any
applicable time was, a member of (A) a controlled group of corporations (as
defined in Section 414(b) of the Code), (B) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code) or (C) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or
included the Seller.
31. "FIXTURES" mean all permanently affixed equipment, machinery,
and other fixtures, and other items of real and/or permanently affixed personal
property, including all components thereof, on the Closing Date hereof located
in, on or used in connection with, and permanently affixed to or incorporated
into the Improvements, including all furnaces, boilers, heaters, electrical
equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal pipes,
air-cooling and air conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, cable transmission, oxygen and similar
system, all of which, to the greatest extent permitted by Law, are hereby
deemed by the Parties to constitute real estate, together with all
replacements, modifications, alterations and additions thereto.
32. "GAAP" means U.S. generally accepted accounting principles
applied on a consistent basis during the relevant periods.
33. "GOVERNMENTAL AUTHORITY" means any nation or government, any
state, municipality or other political subdivision thereof and any entity,
body, agency, commission, department, board, bureau or court, whether domestic,
foreign or multinational, exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
executive official thereof.
4
34. "GUARANTY" means the Guaranty, substantially in the form
attached in EXHIBIT E.
35. "HAZARDOUS MATERIALS" means any toxic substances, hazardous
substance, pollutant, contaminant, dangerous substance or substance capable of
causing adverse effects on the Environment or human health and safety,
including (a) any compound or chemical that is defined, listed, classified or
regulated as a contaminant, pollutant, toxic or hazardous substance, or
hazardous waste under Environmental Laws; (b) petroleum, petroleum based or
petroleum derived products; (c) polychlorinated biphenyls; and (d) asbestos.
36. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
37. "IMPROVEMENTS" shall mean all buildings, improvements, Fixtures
and facilities demised under the Real Property Leases, as presently used in, on
or at such Leased Real Property, together with (i) any and all loading docks,
parking lots, garages and other facilities serving any such buildings and (ii)
landscaping and site improvements (but in any event excluding any personal
property).
38. "INDEBTEDNESS" means, as to any Person, (i) all obligations of
such Person for borrowed money (including reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (ii) all obligations of such Person to
pay the deferred purchase price of property or services, (iii) all interest
rate and currency swaps, caps, collars and similar agreements or hedging
devices under which payments are obligated to be made by such Person, whether
periodically or upon the happening of a contingency, (iv) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though the
rights and remedies of the Seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (v) all
liabilities that would be classified as capital leases on a balance sheet in
accordance with GAAP, (vi) any indebtedness of another Person secured by a Lien
on any asset of such first Person, whether or not such Indebtedness is assumed
by such first Person and (vii) any guaranty of, or any contingent obligation in
respect of, any Indebtedness or other obligation of any other Person (other
than an obligation of the Business).
39. "INDEMNIFIABLE ACT" shall mean any act, failure to act, event,
circumstance or condition that is provided for in, and specifically made the
basis for indemnification under, this Agreement.
40. "INDEMNIFIED PARTY" means a Party entitled to indemnification
under this Agreement, each of their Affiliates and each of their respective
officers, directors, employees and agents.
5
41. "INTELLECTUAL PROPERTY" means all (i) Copyrights, (ii) Patents,
(iii) Software, (iv) Trade Secrets, (v) Trademarks and (vi) IP Licenses.
42. "IP LICENSES" means Copyright, Patent, Software, Trade Secret
and Trademark licenses.
43. "INVENTORY" means all inventories of Product, raw materials,
work in process, finished goods, stores, spare parts, supplies and packaging
materials related to the Business and the Purchased Assets, which are located
at the Dillon Facilities, in transit, on consignment, or with outside
warehouses or processors.
44. "KNOWLEDGE" means, with respect to the Seller, the actual
knowledge of Stephen Wener, Lee Johnson, Mitchel Weinberger, William Cohen, Don
Stout and Robert Howell.
45. "LAW" means any law (including common law), treaty, statute,
ordinance, rule, regulation, order, writ, judgment, injunction or decree of any
Governmental Authority, including the Code.
46. "LEASED ASSETS" means all items of personal property, including
equipment, located at the Dillon Facilities which are leased by the Seller and
utilized in the Business, including those assets set forth on SCHEDULE 1.46.
47. "LEASED REAL PROPERTY" means all leasehold or subleasehold
estates and other rights to use or occupy any real property used by the Seller
in the Business pursuant to the Real Property Leases, together with, to the
extent leased by the Seller, all Improvements located thereon, and all
easements, licenses, rights and appurtenances relating to the foregoing.
48. "LIABILITIES" means any and all Indebtedness, liabilities and
obligations, whether accrued, fixed or contingent, mature or inchoate, known or
unknown, reflected on a balance sheet or otherwise, including those arising
under any Action, Law or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
49. "LIEN" means any lien, encumbrance, security interest, charge,
mortgage, deed of trust, deed to secure debt, option, pledge, restriction on
transfer of title or voting, right-of-way, easement, right to occupy of any
kind, right of first refusal, encroachment, building or use restriction,
conditional sales agreement, license or any adverse claim of any nature
whatsoever, other than (i) in the case of securities and any other equity
ownership interests, any restrictions imposed by federal, state and foreign
securities Laws and (ii) in the case of securities and any other equity
ownership interests and other assets, any security interest incurred pursuant
to financings by the Seller or any Affiliate thereof, which are set forth on
SCHEDULE 1.49 and which shall be released prior to the Closing at no cost to
the Buyer.
6
50. "LIMITED WARRANTY DEED" means the limited warranty deed,
substantially in the form attached as EXHIBIT I.
51. "LOSSES" means any and all damages, losses, deficiencies,
Liabilities, Taxes, obligations, penalties, judgments, settlements, claims,
payments, fines, interest, costs and expenses, whether or not resulting from
third party claims, including the costs and expenses of any and all Actions and
demands, assessments, judgments, settlements and compromises relating thereto
and the costs and expenses of attorneys', accountants', consultants' and other
professionals' fees and expenses incurred in the investigation or defense
thereof or the enforcement of rights hereunder; PROVIDED, HOWEVER, that except
as set forth in the proviso below, in no event shall Losses include diminution
in value and punitive damages; PROVIDED, FURTHER, that Losses shall include
consequential damages, diminution in value and punitive damages, in each case,
awarded in an Action (or settlement thereof) to any third party against an
Indemnified Party, without regard to any of the foregoing limitations.
52. "MANUFACTURING AGREEMENTS" means the Dillon Manufacturing
Agreement and the American Drawtech Manufacturing Agreement.
53. "MATERIAL ADVERSE EFFECT" means having a potential economic
impact on the pre-Tax earnings of the Business as conducted at or from the
Dillon Facilities of more than $500,000 per annum.
54. "MATERIAL CONTRACT" means each contract or agreement to which
the Seller is a party for the purchase of supplies, raw materials, energy or
services relating to the Business or for the sale of Product involving
aggregate annual consideration payable to or by the Seller of $1,000,000 or
more in the most recent calendar year.
55. "MISCELLANEOUS TANGIBLES" means all of the office equipment,
furniture and fixtures, files, cabinets and related equipment located at the
administrative office locations of the Dillon Facilities, including the Leased
Assets.
56. "ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" means the
ordinary course of the Business consistent with the Seller's past practice.
57. "OWNED REAL PROPERTY" means the real property listed on
SCHEDULE 1.57, together with all easements and privileges appertaining or
relating to such real property.
58. "PATENTS" means, as they exist anywhere in the world, all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), patents, patent applications, designs, disclosures and improvements
described and claimed therein and other patent rights (including any divisions,
continuations, continuations-in-part, reissues, reexaminations or interferences
thereof, whether or not patents are issued on any such applications and whether
or not any such applications are modified, withdrawn or resubmitted).
7
59. "PERMITS" means all permits, registrations, licenses,
approvals, consents and authorizations of any Governmental Authority, which are
used or held for use in connection with the ownership, conduct or operation of
the Business or the Purchased Assets, including, those listed on SCHEDULE 1.59.
60. "PERMITTED LIENS" means:
(a) Liens set forth on SCHEDULE 1.60 and all matters set
forth in any title insurance policy or commitment issued to the Buyers, the
Seller or to either;
(b) all Liens (i) expressly established in any Real
Property Leases, (ii) expressly established in this Agreement, or (iii)
approved in writing by the Buyers after the date of this Agreement;
(c) easements, rights-of-way, servitudes, permits, licenses
and surface leases; conditions, covenants or other restrictions; and easements
for streets, alleys, highways, telephone lines, power lines, railways and other
easements and rights-of-way on, over or in respect of any Leased Real Property
which would not have a material adverse effect on the ownership, use or
operation of any Leased Real Property;
(d) Liens for Taxes, assessments or other governmental
charges not yet delinquent that are being contested in good faith in (if then
appropriate) appropriate proceedings and for which adequate reserves have been
set aside in accordance with GAAP;
(e) Liens arising out of any failure to comply with the
provisions of any bulk transfer Law which may be applicable to the purchase and
sale of the Purchased Assets pursuant to this Agreement; and
(f) any materialman's, mechanic's, repairman's, employee's,
contractor's, operator's or other similar liens for liquidated amounts arising
in the ordinary course of business and securing payments or obligations, as the
case may be, that are not delinquent or are being contested in good faith in
(if then appropriate) appropriate proceedings and for which adequate reserves
have been set aside in accordance with GAAP.
61. "PERSON" means any natural person, firm, individual,
corporation, partnership, joint venture, business trust, association, trust,
company or other organization or entity, whether incorporated or
unincorporated, or any Governmental Authority.
62. "PRODUCT" means textured polyester and nylon yarn. For the
avoidance of doubt, "Product" (i) does not include industrial and spun yarn,
flat polyester and nylon yarn, and (ii) includes solution and package dyed;
covered; twisted; false twist and air jet textured polyester and/or nylon and
partially orientated yarn ("POY").
8
63. "REAL PROPERTY LEASES" means the leases, subleases, licenses,
concessions and other agreements listed on SCHEDULE 1.63 pursuant to which the
Seller has a leasehold or subleasehold interest or is otherwise granted the
right to use or occupy the Leased Real Property.
64. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, substantially in the form attached as EXHIBIT F.
65. "RELEASE" means any release, spill, emission, discharge,
leaking, pumping, pouring, injection, deposit, disposal, dispersal, dumping,
escaping, leaching or migration of Hazardous Materials into the Environment or
into or out of any property, including the movement of Hazardous Materials
through or in the air, soil, surface water, groundwater or property and
abandoned or discarded barrels, containers or other closed receptacles
containing Hazardous Materials.
66. "REPRESENTATIVES" means, with respect to a Party, its counsel,
accountants, directors, officers, employees, agents and other representatives.
67. "SECURITIES ACT" means the Securities Act of 1933, as amended.
68. "SALES AND SERVICES AGREEMENT" means the Sales and Services
Agreement, substantially in the form attached hereto as EXHIBIT G.
69. "SELLER INDEMNIFIED PARTY" means the Seller, each of its
Affiliates and each of their respective officers, directors, employees and
agents.
70. "SELLER'S CERTIFICATE" means a certificate of a duly authorized
officer of the Seller confirming that, as at the Closing Date, (i) the
representations and warranties of the Seller contained in this Agreement that
are qualified as to materiality shall be true and correct, and representations
and warranties of the Seller contained in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case, at
the time made and as of the Closing Date as if made at and as of such time and
(ii) the Seller has performed and complied in all material respects with all
agreements and covenants required to be performed or complied with by the
Seller under this Agreement at or prior to the Closing.
71. "SOFTWARE" means, as they exist anywhere in the world, computer
software programs, including all source code, object code, specifications,
designs and documentation related to such programs; PROVIDED, HOWEVER, that
Software shall not include packaged, commercially available "off-the-shelf"
licensed software programs, sold to the public and used in the Business.
72. "TAX" or "TAXES" mean, with respect to any Person, any tax,
charge, fee, levy, impost, duty or other assessment of a similar nature,
including income, alternative or add-on minimum, gross receipts, profits,
lease, service, service use, wage, wage withholding, employment, workers
compensation, business occupation, occupation, premiums, environmental,
estimated, excise, employment, sales, use, transfer, license, payroll,
9
franchise, severance, stamp, occupation, windfall profits, withholding, social
security, unemployment, disability, ad valorem, estimated, highway use,
commercial rent, capital stock, paid up capital, recording, registration,
property, real property gains, real estate, value added, business license,
custom duties, bank transaction taxes or other tax or governmental fee of any
kind whatsoever, imposed or required to be withheld by any Tax Authority,
including any interest, additions to tax or penalties applicable or related
thereto, whether disputed or not, for which such Person may be liable
(including by contract, as a transferee or successor, by Law (including by
application of Treasury Regulation ss. 1.1502-6 or similar provisions of state,
local or foreign Laws) or otherwise).
73. "TAX AUTHORITY" means a Governmental Authority or any
subdivision, agency, commission or authority, or any quasi-governmental or
private body, including the Internal Revenue Service, having jurisdiction over
the assessment, determination, collection or imposition of any Tax.
74. "TAX RETURN" means any report, declaration, election,
disclosure, estimate statement, return or other information filed in respect of
Taxes, and any claims for refund of Taxes, including any amendments, schedules,
attachments or supplements to any of the foregoing, with any Tax Authority with
respect to Taxes.
75. "TERRITORY" means the United States, Canada, Mexico, Central
America, South America, Bermuda and the Caribbean Islands.
76. "TRADE SECRETS" means, as they exist anywhere in the world,
trade secrets, know-how, inventions, processes, procedures, databases,
confidential business information , concepts, ideas, designs, research or
development information, techniques, technical information, specifications,
operating and maintenance manuals, engineering drawings, methods, technical
data, discoveries, modifications and other proprietary information and rights
(whether or not patentable or subject to copyright, mask work, or trade secret
protection).
77. "TRADEMARKS" means, as they exist anywhere in the world,
trademarks, service marks, trade dress, trade names, brand names, designs,
logos, or corporate names, whether registered or unregistered, and all
registrations and applications for registration thereof, and all goodwill
related thereto.
78. "TRANSFERRED EMPLOYEE" means each Covered Employee who accepts
the offer of employment made by the Buyer pursuant to SECTION 13.7.
79. "UNIFI PARENT" means Unifi, Inc., a New York corporation.
80. "USE" means, as applicable to the Business as conducted by the
Seller at the Dillon Facilities as of the date hereof, to use, reproduce,
prepare derivative works based upon, distribute, perform, display, make, have
made, sell, offer to sell, import, license, sublicense and otherwise exploit.
10
The following is a list of additional terms used in this Agreement and
the reference to the Section hereof in which such term is defined:
TERM SECTION
- ---- -------
Agreement....................................................... Preamble
Allocations..................................................... 5.4
Assumed Liabilities............................................. 4.1
Benefit Plans................................................... 6.12(a)
Buyer........................................................... Preamble
Cap............................................................. 18.3
Cash Payment.................................................... 5.1(a)
Closing......................................................... 11.1(a)
Closing Date.................................................... 11.1(a)
Closing Inventory............................................... 5.3
COBRA........................................................... 6.12(f)
Competing Business.............................................. 10.2(a)
Confidential Information........................................ 19.2
Current Base Wage............................................... 13.7(a)
Due Diligence................................................... 8.1
Exchange Act.................................................... 7.8
Excluded Assets................................................. 3.1
Excluded Liabilities............................................ 4.2
HIPAA........................................................... 6.12(g)
HSR Condition................................................... 11.5(a)
Indemnifying Party.............................................. 18.2
Inventory Statement............................................. 5.3
Multiemployer Plan.............................................. 6.12(a)
Parties......................................................... Preamble
Party........................................................... Preamble
Principals...................................................... Preamble
Purchased Assets................................................ 2.1
SEC Filings..................................................... 7.8
Seller.......................................................... Preamble
Tangible Property............................................... 6.6(a)
Transferred Employees........................................... 13.7
Unifi Annual Report............................................. 7.8
Unifi Common Stock.............................................. 5.1(c)
Unifi Stock Consideration....................................... 5.1(c)
WARN............................................................ 6.12(i)
11
EXHIBIT 10.2
------------
EXHIBIT F
FORM OF REGISTRATION RIGHTS AGREEMENT
===============================================================================
REGISTRATION RIGHTS AGREEMENT
between
UNIFI, INC.
and
DILLON YARN CORPORATION
___________________________________________
_________________, 200_
___________________________________________
===============================================================================
TABLE OF CONTENTS
Page
----
1. Definitions and Interpretation.........................................1
(a) Certain Definitions...........................................1
(b) Interpretation................................................5
2. Restrictive Legend.....................................................5
(a) Legend........................................................5
(b) Stop Transfer Instructions....................................6
(c) Legending.....................................................6
(d) Restrictions on Transfer......................................6
3. General; Securities Subject to this Agreement..........................6
(a) Grant of Rights...............................................6
(b) Registrable Securities........................................6
(c) Holders of Registrable Securities.............................7
4. Shelf Registration.....................................................7
(a) Filing of Shelf Registration..................................7
(b) Underwriting Procedures.......................................7
(c) Expenses......................................................7
(d) Form S-3......................................................7
5. Incidental or "Piggy-Back" Registration................................8
(a) Request for Incidental or "Piggy-Back" Registration...........8
(b) Expenses......................................................8
(c) Confidentiality...............................................9
6. Restrictions on Transfer...............................................9
(a) Lock-Up.......................................................9
(b) Holder Lock-Up Agreements....................................10
(c) Company Lock-Up Agreements...................................10
(d) Third Party Beneficiaries of Lock-Up Agreements..............10
(e) Further Actions..............................................11
7. Registration Procedures...............................................11
(a) Obligations of the Company...................................11
(b) Seller Obligations...........................................15
(c) Notice to Discontinue........................................16
(d) Valid Business Reason........................................16
(e) Registration Expenses........................................16
8. Indemnification; Contribution.........................................17
(a) Indemnification by the Company...............................17
(b) Indemnification by the Holders...............................17
-i-
Page
----
(c) Conduct of Indemnification Proceedings.......................18
(d) Contribution.................................................19
9. Exchange Act Reporting and Rule 144...................................19
10. Miscellaneous.........................................................19
(a) Assumption of Agreement......................................19
(b) Amendments and Waivers.......................................20
(c) Notices......................................................20
(d) Successors and Assigns.......................................21
(e) Headings.....................................................21
(f) Governing Law................................................21
(g) Dispute Resolution...........................................21
(h) Severability.................................................22
(i) Rules of Construction........................................22
(j) Entire Agreement.............................................22
(k) Counterparts.................................................22
-ii-
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated ______________, 200_, by and
between Unifi, Inc., a New York corporation (the "COMPANY") and Dillon Yarn
Corporation, a South Carolina corporation ("Dillon"). Capitalized terms used
but not otherwise defined herein shall have the respective meanings ascribed to
such terms in Section 1.
R E C I T A L S:
A. Pursuant to the Asset Purchase Agreement, dated October 25,
2006 (the "PURCHASE AGREEMENT"), by and between Unifi Manufacturing, Inc., a
North Carolina corporation ("UNIFI") and a wholly owned subsidiary of the
Company, and Dillon, as partial consideration for the purchase by Unifi of
certain assets of Dillon, Dillon has received 8,333,333 shares of Common Stock,
par value $0.10 per share, of the Company.
B. The Company has agreed to grant registration rights with
respect to the Registrable Securities as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS AND INTERPRETATION.
(a) CERTAIN DEFINITIONS. As used in this Agreement, and
unless the context requires a different meaning, the following terms have the
meanings indicated:
"AFFILIATE" means any Person who is an "affiliate" as defined in Rule
12b-2 of the General Rules and Regulations promulgated under the Exchange Act.
"AGREEMENT" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"APPROVED UNDERWRITER" has the meaning set forth in Section 4(b).
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks in the States of North Carolina and New York are
authorized or required by law or executive order to close.
"CLOSING PRICE" means, with respect to the Registrable Securities, as
of the date of determination, (i) if the Registrable Securities are listed on a
national securities exchange, the closing price per share of a Registrable
Security on such date published in THE WALL STREET JOURNAL (NATIONAL EDITION)
or, if no such closing price on such date is published in THE WALL STREET
JOURNAL (NATIONAL EDITION), the average of the closing bid and asked prices on
2
such date, as officially reported on the principal national securities exchange
on which the Registrable Securities are then listed or admitted to trading; or
(ii) if the Registrable Securities are not then listed or admitted to trading
on any national securities exchange but are designated as national market
system securities by the NASD, the last trading price per share of a
Registrable Security on such date; or (iii) if there shall have been no trading
on such date or if the Registrable Securities are not designated as national
market system securities by the NASD, the average of the reported closing bid
and asked prices of the Registrable Securities on such date as shown by The
Nasdaq Stock Market, Inc. and reported by any member firm of The New York Stock
Exchange, Inc. selected by the Company; or (iv) if none of clause (i), (ii) or
(iii) is applicable, a market price per share determined in good faith by the
Board of Directors or, if such determination is not satisfactory to the
Majority Holders, by a nationally recognized investment banking firm mutually
selected by the Company and the Majority Holders, the expenses for which shall
be borne equally by the Company and the Majority Holders. If trading is
conducted on a continuous basis on any exchange, then the closing price shall
be at 4:00 P.M. New York City time.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Common Stock, par value $0.10 per share, of
the Company or any other capital stock of the Company into which such stock is
reclassified or reconstituted and any other common stock of the Company.
"COMMON STOCK EQUIVALENTS" means any security or obligation which is by
its terms, directly or indirectly, convertible into or exchangeable or
exercisable for shares of Common Stock, including any option, warrant or other
subscription or purchase right with respect to shares of Common Stock or any
Common Stock Equivalent.
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"COMPANY UNDERWRITER" has the meaning set forth in Section 5(a).
"DILLON" has the meaning set forth in the preamble to this Agreement.
"DISCLOSURE PACKAGE" means, with respect to any offering of securities,
(i) the preliminary Prospectus, and (ii) all other information, in each case,
that is deemed, under Rule 159 under the Securities Act, to have been conveyed
to purchasers of securities at the time of sale of such securities (including a
contract of sale).
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules
and regulations of the Commission promulgated thereunder.
"FREE WRITING PROSPECTUS" means any "free writing prospectus" as
defined in Rule 405 of the General Rules and Regulations promulgated under the
Securities Act.
"HEDGING COUNTERPARTY" means a broker-dealer registered under Section
15(b) of the Exchange Act or an Affiliate thereof.
3
"HEDGING TRANSACTION" means any transaction involving a security linked
to the Registrable Class Securities or any security that would be deemed to be
a "derivative security" (as defined in Rule 16a-1(c) under the Exchange Act)
with respect to the Registrable Class Securities or transaction (even if not a
security) which would (were it a security) be considered such a derivative
security, or which transfers some or all of the economic risk of ownership of
the Registrable Class Securities, including any forward contract, equity swap,
put or call, put or call equivalent position, collar, non-recourse loan, sale
of exchangeable security or similar transaction. For the avoidance of doubt,
the following transactions shall be deemed to be Hedging Transactions:
(a) transactions by a Holder in which a Hedging
Counterparty engages in short sales of the Registrable Securities pursuant to a
Prospectus and may use Registrable Securities to close out its short position;
(b) transactions pursuant to which a Holder sells short
Registrable Securities pursuant to a Prospectus and delivers Registrable
Securities to close out its short position;
(c) transactions by a Holder in which such Holder delivers,
in a transaction exempt from registration under the Securities Act, Registrable
Securities to the Hedging Counterparty who will then publicly resell or
otherwise transfer such Registrable Securities pursuant to a Prospectus or an
exemption from registration under the Securities Act; and
(d) a loan or pledge of Registrable Securities to a Hedging
Counterparty who may then become a selling stockholder and sell the loaned
shares or, in an event of default in the case of a pledge, then sell the
pledged shares, in each case, in a public transaction pursuant to a Prospectus.
"HOLDER" means Dillon and any Permitted Transferee.
"HOLDERS' COUNSEL" has the meaning set forth in Section 7(a)(i).
"INCIDENTAL REGISTRATION" has the meaning set forth in Section 5(a).
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(c).
"INSPECTORS" has the meaning set forth in Section 7(a)(viii).
"LIABILITY" has the meaning set forth in Section 8(a).
"LOCK-UP AGREEMENTS" has the meaning set forth in Section 6(b).
"LOCK-UP PERIOD" has the meaning set forth in Section 6(a).
4
"MAJORITY HOLDERS" means Holders of a majority of the outstanding
Registrable Securities.
"MARKET PRICE" means, on any date of determination, the average of the
daily Closing Price of the Registrable Securities for the immediately preceding
30 days on which the national securities exchanges are open for trading.
"NASD" means the National Association of Securities Dealers, Inc.
"OFFERING CONFIDENTIAL INFORMATION" has the meaning set forth in
Section 5(c).
"PERMITTED TRANSFEREE" has the meaning set forth in Section 6(a).
"PERSON" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"PROSPECTUS" means any "prospectus" as defined in Rule 405 of the
Securities Act.
"PURCHASE AGREEMENT" has the meaning set forth in Recital A.
"RECORDS" has the meaning set forth in Section 7(a)(viii).
"REGISTRABLE CLASS SECURITIES" means securities of the Company that are
of the same class as the Registrable Securities.
"REGISTRABLE SECURITIES" means each of the following: (i) any and all
shares of Common Stock issued to Dillon at the closing of the transaction
contemplated by the Purchase Agreement; and (ii) any shares of Common Stock
issued or issuable to a Holder with respect to the Registrable Securities by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise and any shares of Common Stock or voting common stock issuable upon
conversion, exercise or exchange thereof.
"REGISTRATION EXPENSES" has the meaning set forth in Section 7(e).
"REGISTRATION STATEMENT" means a registration statement filed pursuant
to the Securities Act.
"SECTION 5(A) NOTICE" has the meaning set forth in Section 5(a).
"SECURITIES ACT" means the Securities Act of 1933 and the rules and
regulations of the Commission promulgated thereunder.
5
"SHELF REGISTRATION" has the meaning set forth in Section 4(a).
"TRANSFER" means, with respect to any security, the offer for sale,
sale, pledge, transfer or other disposition or encumbrance (or any transaction
or device that is designed to or could be expected to result in the transfer or
the disposition by any Person at any time in the future) of such security, and
includes any Hedging Transaction.
"UNDERWRITTEN PUBLIC OFFERING" of securities means a public offering of
such securities registered under the Securities Act in which an underwriter,
placement agent or other intermediary participates in the distribution of such
securities.
"UNIFI" has the meaning set forth in Recital A.
(b) INTERPRETATION. Unless otherwise expressly provided:
(i) All references to laws, rules, regulations and
forms in this Agreement shall be deemed to be references to such laws, rules,
regulations and forms, as amended from time to time or, to the extent replaced,
the comparable successor thereto in effect at the time.
(ii) All references to agencies, self-regulatory
organizations or governmental entities in this Agreement shall be deemed to be
references to the comparable successor thereto.
(iii) All references to agreements and other
contractual instruments shall be deemed to be references to such agreements or
other instruments as they may be amended from time to time.
(iv) The words "include," "includes" and "including"
do not limit the preceding words or terms and shall be deemed to be followed by
the words "without limitation".
"VALID BUSINESS REASON" has the meaning set forth in Section 7(d).
2. RESTRICTIVE LEGEND.
(a) LEGEND. Each certificate representing shares of
Registrable Securities issued pursuant to the Purchase Agreement shall, unless
otherwise permitted by the provisions of Section 2(c), be marked by the Company
with legends (together with any other legend with which such certificate is
required to be marked) in substantially the following form:
THE SHARES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SHARES
MAY NOT BE TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER
THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR, IN THE OPINION OF
6
COUNSEL FOR THE COMPANY, SUCH TRANSFER MAY BE MADE PURSUANT TO
RULE 144 OR REGISTRATION UNDER THE ACT IS OTHERWISE
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT.
THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A LOCK-UP PERIOD AS
DESCRIBED IN THAT CERTAIN REGISTRATION RIGHTS AGREEMENT
ENTERED INTO BY THE ISSUER AND THE HOLDER (A COPY OF WHICH MAY
BE OBTAINED FROM THE ISSUER).
(b) STOP TRANSFER INSTRUCTIONS. In order to ensure
compliance with the restrictions referred to herein, each Holder agrees that
the Company may issue appropriate "stop transfer" certificates or instructions
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its records.
(c) LEGENDING. Each certificate evidencing Registrable
Securities shall not bear the legend set forth in Section 2(a) if in the
opinion of counsel for a Holder and counsel for the Company such legend is not
required in order to establish compliance with any provision of the Securities
Act.
(d) RESTRICTIONS ON TRANSFER. Notwithstanding any other
provision of this Agreement, no Transfer may be made of any Registrable
Securities to a shareholder of Dillon as described in Section 6(a) unless the
Transfer complies in all respects with applicable federal and state securities
laws, including the Securities Act and any "blue sky" laws. If reasonably
requested by the Company, in its sole discretion, Dillon shall also provide, at
Dillon's expense, a written opinion of legal counsel who shall be, and whose
legal opinion shall be, reasonably satisfactory to the Company, addressed to
the Company, to the effect that the proposed transfer of the Registrable
Securities may be effected without registration under the Securities Act,
whereupon Dillon shall be entitled to Transfer all or a portion of its
Registrable Securities to such shareholder, subject to and in compliance with
the other provisions of this Agreement.
3. GENERAL; SECURITIES SUBJECT TO THIS AGREEMENT.
(a) GRANT OF RIGHTS. The Company hereby grants registration
rights to the Holders upon the terms and conditions set forth in this
Agreement.
(b) REGISTRABLE SECURITIES. For the purposes of this
Agreement, Registrable Securities will cease to be Registrable Securities when
(i) a Registration Statement covering such Registrable Securities has been
declared effective under the Securities Act by the Commission and such
Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) (x) the entire amount of the Registrable
Securities owned by the Holder thereof may be sold in a single sale, in the
opinion of counsel satisfactory to the Company and such Holder, each in their
7
reasonable judgment, without any limitation as to volume pursuant to Rule 144
under the Securities Act and (y) such Holder owns less than 1.0% of the
outstanding shares of Common Stock on a fully diluted basis, or (iii) the
Registrable Securities are proposed to be sold or distributed by a Person not
entitled to the registration rights granted by this Agreement.
(c) HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed
to be a holder of Registrable Securities whenever such Person owns of record
Registrable Securities, or holds an option to purchase, or a security
convertible into, or exercisable or exchangeable for, Registrable Securities
whether or not such purchase, conversion, exercise or exchange has actually
been effected. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company may act upon the basis of the instructions, notice or
election received from the registered owner of such Registrable Securities.
Registrable Securities issuable upon exercise of an option or upon conversion,
exercise or exchange of another security shall be deemed outstanding for the
purposes of this Agreement.
4. SHELF REGISTRATION.
(a) FILING OF SHELF REGISTRATION. Within 45 days following
the date hereof, the Company shall file a Registration Statement on an
appropriate form (the "SHELF REGISTRATION") registering the sale of all of the
Registrable Securities offering on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act. The Company shall use its reasonable efforts
to cause such Registration Statement filed pursuant to this Section 4(a) to be
declared effective as soon as practicable, and remain effective until there are
no longer any Registrable Securities.
(b) UNDERWRITING PROCEDURES. Upon the written request of
the Majority Holders, the Company shall use its reasonable efforts to cause the
sale of Registrable Securities that such Majority Holders wish to be sold to be
in the form of a firm commitment underwritten offering (unless otherwise
consented to by such Majority Holders) if the anticipated aggregate offering
price (calculated based upon the Market Price of the Registrable Securities on
the date of such written request and including any Registrable Securities
subject to any applicable over-allotment option) to the public equals or
exceeds $7,500,000 (including causing to be produced and filed any necessary
Prospectuses or Prospectus supplements with respect to such offering). The
managing underwriter or underwriters selected for such offering shall be
selected by the Company and shall be reasonably acceptable to such Majority
Holders (an "APPROVED UNDERWRITER"). In no event shall the Holders be entitled
to request more than one underwritten public offering.
(c) EXPENSES. The Company shall bear all Registration
Expenses in connection with the Shelf Registration pursuant to this Section 4.
(d) FORM S-3. If the Company is eligible to use Form S-3
for secondary offerings of Registrable Class Securities, the Shelf Registration
shall be on Form S-3.
8
5. INCIDENTAL OR "PIGGY-BACK" REGISTRATION.
(a) REQUEST FOR INCIDENTAL OR "PIGGY-BACK" REGISTRATION. If
the Company proposes to file a Registration Statement with respect to an
offering by the Company of equity securities for its own account (other than a
Registration Statement on Form S-4 or S-8 or a Registration Statement
registering the issuance of equity securities as consideration in an
acquisition transaction) or for the account of any stockholder of the Company
other than the Holders, then the Company shall give written notice (the
"SECTION 5(A) NOTICE") of such proposed filing to the Holders at least 10 days
before the anticipated filing date, and such notice shall describe the proposed
registration, offering price (or reasonable range thereof) and distribution
arrangements, and offer the Holders the opportunity to register the number of
Registrable Securities as the Holders may request (an "INCIDENTAL
REGISTRATION"). The Company shall use commercially reasonable efforts to cause
the managing underwriter or underwriters in the case of a proposed underwritten
offering (the "COMPANY UNDERWRITER") to permit the Holders to include the
number of the Holders' Registrable Securities specified by the Holders in such
offering on the same terms and conditions as the securities of the Company or
for the account of such other stockholder, as the case may be, included
therein. In connection with any Incidental Registration under this Section 5(a)
involving an underwritten offering, the Company shall not be required to
include any Registrable Securities in such underwritten offering unless the
Holder thereof accepts the terms of the underwritten offering as agreed upon
between the Company, such other stockholders, if any, and the Company
Underwriter, and then only in such quantity as the Company Underwriter believes
will not jeopardize the success of the offering by the Company. If the Company
Underwriter determines that the registration of all or part of the Registrable
Securities which the Holders have requested to be included would materially
adversely affect the success of such offering, then the Company shall include
in such Incidental Registration only the aggregate amount of Registrable
Securities that the Company Underwriter believes may be sold without any such
material adverse effect and shall reduce the amount of Registrable Securities
to be included in such registration, (i) in the case of an offering by the
Company for its own account, FIRST, as to the Registrable Securities to be
offered for the account of the Holders pursuant to this Section 5(a); SECOND,
as to the securities requested to be included in such offering by stockholders
other than the Holders; and THIRD, as to all of the securities to be offered
for the account of the Company, and (ii) in the case of an offering by the
Company for the account of any stockholder of the Company other than the
Holders, FIRST, as to the Registrable Securities to be offered for the account
of the Holders pursuant to this Section 5(a); SECOND, as to the securities to
be offered for the account of the Company; THIRD, as to the securities
requested to be included in such offering by stockholders other than the
Holders who have incidental or "piggy-back" registration rights with respect
thereto; and FOURTH, as to the securities to be offered for the account of
stockholders who made the initial request for registration.
(b) EXPENSES. The Company shall bear all Registration
Expenses in connection with any Incidental Registration pursuant to this
Section 5, whether or not such Incidental Registration becomes effective.
9
(c) CONFIDENTIALITY.
(i) The following shall be deemed to be "OFFERING
CONFIDENTIAL INFORMATION": (1) the Company's plan to file the relevant
Registration Statement and engage in the offering so registered, (2) any
information regarding the offering being registered (including, without
limitation, the potential timing, price, number of shares, underwriters or
other counterparties, selling stockholders or plan of distribution) and (3) any
other information (including information contained in draft supplements or
amendments to offering materials) provided to the Holders by the Company (or by
third parties) in connection with the Incidental Registration. Offering
Confidential Information shall not include information that (x) was or becomes
generally available to the public (including as a result of the filing of the
relevant Registration Statement) other than as a result of a disclosure by any
Holder, (y) was or becomes available to any Holder from a source not known to
such Holder to be bound by any confidentiality agreement or (z) was otherwise
in any Holder's possession prior to it being furnished to such Holder by the
Company or on the Company's behalf. Information shall cease to be Offering
Confidential Information upon the earliest to occur of (X) the completion of
the relevant offering and (Y) if the relevant Registration Statement has not
been filed, 30 days after the intended filing date set forth in the Section
5(a) Notice.
(ii) After a Holder has been notified of its
opportunity to include securities in an Incidental Registration, such Holder
shall treat the Offering Confidential Information as confidential information
and shall not use the Offering Confidential Information for any purpose other
than to evaluate whether to include its Registrable Securities in such
Incidental Registration and agrees to disclose the Offering Confidential
Information only to such of its agents, employees, advisors and counsel as have
a need to know such Offering Confidential Information and to cause such agents,
employees, advisors and counsel to comply with the requirements of this Section
5(c); PROVIDED that such Holder may disclose Offering Confidential Information
if it determines, in good faith and upon the advice of counsel, that such
disclosure is required under applicable law or legal process, BUT such Holder
shall cooperate with the Company to limit the extent of such disclosure through
protective order or otherwise, and to seek confidential treatment of the
Offering Confidential Information.
6. RESTRICTIONS ON TRANSFER.
(a) LOCK-UP. Without the prior written consent of the
Company, Dillon shall not, directly or indirectly, (i) Transfer, contract to
Transfer or otherwise dispose of (or enter into any transaction or device that
is designed to, or could be expected to, result in the disposition by any
Person at any time in the future of) any Registrable Securities, (ii) enter
into any Hedging Transaction with respect to the Registrable Securities or
(iii) publicly announce its intention to consummate a transaction described in
clause (i) or (ii) above, in the case of each of clauses (i), (ii) and (iii),
whether any such transaction is to be settled by delivery of Registrable
Securities or other securities, in cash or otherwise, for a period of 30 months
after the date hereof (the "LOCK-UP PERIOD"); except that, notwithstanding the
10
foregoing, (1) each Holder may sell (x) in the aggregate, up to 33% of the
Registrable Securities held by such Holder as of the date hereof (or, if later,
the date such Holder acquired its Registrable Securities) during the period
beginning on the first day of the seventh month and ending on the final day of
the 18th month of the Lock-Up Period and (y) in the aggregate, up to 66% of the
Registrable Securities held by such Holder as of the date hereof (or if later,
the date such Holder acquired its Registrable Securities) beginning on the
first day of the 19th month and ending on the final day of the 30th month of
the Lock-Up Period and (2) at any time and from time to time after the date
hereof, Dillon may transfer any portion of the Registrable Securities it holds
as of the date hereof to (A) any of its employees as stock bonus compensation
for services rendered by such employees or (B) a shareholder of Dillon in
satisfaction of any liabilities owed by Dillon to such shareholder (but in any
event subject to Section 2(d)) (each, a "PERMITTED TRANSFEREE").
(b) HOLDER LOCK-UP AGREEMENTS. In connection with an
underwritten public offering of Registrable Securities, Registrable Class
Securities or other securities convertible into, exercisable for or
exchangeable for Registrable Class Securities, to the extent requested (i) by
the Company (so long as all of the Company's officers and directors execute
agreements identical to or more restrictive than those referred to in this
Section 6(b) and the Company has used all reasonable efforts to cause all
holders of more than 5% of its outstanding capital stock, other than the
Holders, to execute such agreements) or (ii) by the Approved Underwriters or
the Company Underwriter, as applicable, each Holder shall (x) not effect any
Transfer of any Registrable Class Securities or any securities convertible into
or exchangeable or exercisable for such Registrable Class Securities and (y)
not make any request for the registration of the Transfer of any Registrable
Class Securities or any securities convertible into or exchangeable or
exercisable for such Registrable Class Securities, in each case, during the
period beginning on the date of the underwriting agreement relating to such
public offering and ending on the date that is 90 days after such date (or such
shorter period, if any, mutually agreed upon by such Holder and the requesting
party), except as part of such public offering. Upon request by the Company,
each Holder shall enter into customary lock-up agreements (the "LOCK-UP
AGREEMENTS") on terms consistent with the preceding sentence.
(c) COMPANY LOCK-UP AGREEMENTS. With respect to any
offering of Registrable Securities that takes the form of an underwritten
public offering registered on the Shelf Registration, the Company shall not
(except as part of such offering) effect any Transfer of Registrable Class
Securities, or any securities convertible into or exchangeable or exercisable
for such Registrable Class Securities (except pursuant to a Registration
Statement on Form S-8), during the period beginning on the date of the
underwriting agreement relating to such public offering and ending on the date
that is 90 days after such date, except as part of such offering. Upon request
by the Approved Underwriters, the Company shall, from time to time, enter into
Lock-Up Agreements on terms consistent with the preceding sentence.
(d) THIRD PARTY BENEFICIARIES OF LOCK-UP AGREEMENTS. Any
Lock-Up Agreements executed by the Holders pursuant to this Section 6 shall
contain provisions naming the Company as an intended third-party beneficiary
11
thereof and requiring the prior written consent of the Company for any
amendments thereto or waivers thereof. Any Lock-Up Agreements executed by the
Company, or its officers, directors or other stockholders pursuant to this
Section 6 shall contain provisions naming each Holder, if it is a selling
stockholder in the relevant offering, as intended third party beneficiaries
thereof and requiring the prior written consent of such Holder for any
amendments thereto or waivers thereof.
(e) FURTHER ACTIONS. In furtherance of the foregoing, the
Company and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Section 6.
7. REGISTRATION PROCEDURES.
(a) OBLIGATIONS OF THE COMPANY. In connection with the
filing of the Shelf Registration pursuant to Section 4 or the Incidental
Registration pursuant to Section 5, the Company shall use its reasonable
efforts to effect the registration and sale of the Registrable Securities in
accordance with the intended method of distribution thereof as quickly as
practicable, and in connection with any such request or requirement, the
Company shall:
(i) as expeditiously as possible, prepare and file
with the Commission a Registration Statement on any form (subject to Section
4(d)) for which the Company then qualifies or which counsel for the Company
shall deem appropriate and which form shall be available for the sale of such
Registrable Securities in accordance with the intended method of distribution
thereof, and cause such Registration Statement to become effective; PROVIDED,
HOWEVER, that (x) before filing a Registration Statement or Prospectus or any
amendments or supplements thereto (including any documents incorporated by
reference therein), the Company shall provide counsel selected by the Majority
Holders ("HOLDERS' COUNSEL") and any other Inspector with an adequate and
appropriate opportunity to review and comment on such Registration Statement,
each Prospectus included therein (and each amendment or supplement thereto),
subject to such documents being under the Company's control, and (y) the
Company shall notify the Holders' Counsel and each seller of Registrable
Securities pursuant to such Registration Statement of any stop order issued or
threatened by the Commission and take all actions required to prevent the entry
of such stop order or to remove it if entered;
(ii) as expeditiously as possible, prepare and file
with the Commission such amendments and supplements to such Registration
Statement and the Prospectus used in connection therewith as may be necessary
to keep such Registration Statement effective (1) in the case of a Shelf
Registration, for the period required under Section 4(a), and (2) in the case
of an Incidental Registration, for the lesser of (x) 90 days and (y) such
shorter period which will terminate when all Registrable Securities covered by
such Registration Statement have been sold, and shall comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
12
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement;
(iii) as expeditiously as possible, furnish to each
seller of Registrable Securities, prior to filing a Registration Statement, at
least one copy of such Registration Statement as it is proposed to be filed,
and thereafter such number of copies of such Registration Statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the Prospectus included in such Registration Statement (including each
preliminary Prospectus), any Prospectus filed pursuant to Rule 424 under the
Securities Act and any Free Writing Prospectus as each such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(iv) as expeditiously as possible, register or
qualify such Registrable Securities under such other securities or "blue sky"
laws of such jurisdictions as any seller of Registrable Securities may request,
and to continue such registration or qualification in effect in such
jurisdiction for as long as permissible pursuant to the laws of such
jurisdiction, or for as long as any such seller requests or until all of such
Registrable Securities are sold, whichever is shortest, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
any such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; PROVIDED, HOWEVER, that the
Company shall not be required to (x) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 7(a)(iv), (y) subject itself to taxation in any such jurisdiction or
(z) consent to general service of process in any such jurisdiction;
(v) as expeditiously as possible, notify each
seller of Registrable Securities: (A) when a Prospectus, any Prospectus
supplement, any Free Writing Prospectus, a Registration Statement or a
post-effective amendment to a Registration Statement has been filed with the
Commission, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective; (B) of any request by the
Commission or any other federal or state governmental authority for amendments
or supplements to a Registration Statement or related Prospectus or Free
Writing Prospectus or for additional information; (C) of the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that purpose; (D) of the
receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceedings for such purpose; (E) of the existence of any fact or happening of
any event of which the Company has knowledge which makes any statement of a
material fact in such Registration Statement, related Prospectus or Free
Writing Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue or which would require the making of any changes in
the Registration Statement, related Prospectus or Free Writing Prospectus in
order that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
13
misleading, and that in the case of such Prospectus or Free Writing Prospectus,
it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (F) of the determination by counsel of the Company that a
post-effective amendment to a Registration Statement is advisable;
(vi) as expeditiously as possible, upon the
occurrence of any event contemplated by Section 7(a)(v)(E), as promptly as
practicable, prepare a supplement or amendment to such Registration Statement,
related Prospectus or Free Writing Prospectus (or file a new Registration
Statement, in the case of a Registration Statement that has been withdrawn) and
furnish to each seller of Registrable Securities a reasonable number of copies
of such supplement to or an amendment of such Registration Statement or new
Registration Statement, Prospectus or Free Writing Prospectus as may be
necessary so that, after delivery to the purchasers of such Registrable
Securities, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and that in the case of such Prospectus or Free Writing Prospectus,
it will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(vii) with respect to any underwritten public
offering registered under the Shelf Registration or the Incidental Registration
(in the case of an Incidental Registration, only to the extent requested by the
Company Underwriter), enter into and perform customary agreements (including
underwriting and indemnification and contribution agreements in customary form
with the Approved Underwriters or the Company Underwriter, as applicable) and
take such other commercially reasonable actions as are required in order to
expedite or facilitate each disposition of Registrable Securities and shall
provide all reasonable cooperation, including causing appropriate officers to
attend and participate in "road shows" and other information meetings organized
by the Approved Underwriters or the Company Underwriter, if applicable, and
causing counsel to the Company to deliver customary legal opinions in
connection with any such underwriting agreements;
(viii) with respect to any underwritten public
offering registered under the Shelf Registration or the Incidental
Registration, make available at reasonable times for inspection by any seller
of Registrable Securities, any managing underwriter participating in any
disposition of such Registrable Securities pursuant to a Registration
Statement, Holders' Counsel and any attorney, accountant or other agent
retained by any such seller (collectively, the "INSPECTORS"), all financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause the
Company's and its subsidiaries' officers, directors and employees, and the
independent public accountants of the Company, to supply all information
reasonably requested by any such Inspector in connection with such Registration
14
Statement. Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors (and the Inspectors shall confirm their agreement
in writing in advance to the Company if the Company shall so request) unless
(x) the disclosure of such Records is necessary, in the Company's judgment, to
avoid or correct a misstatement or omission in the Registration Statement, (y)
the release of such Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction after exhaustion of all appeals
therefrom or (z) the information in such Records was known to the Inspectors on
a non-confidential basis prior to its disclosure by the Company or has been
made generally available to the public. Each seller of Registrable Securities
agrees that it shall, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(ix) with respect to any underwritten public
offering registered under the Shelf Registration or the Incidental
Registration, obtain a "cold comfort" letter dated the effective date of the
Registration Statement and the date of the closing under the underwriting
agreement from the Company's independent public accountants in customary form
and covering such matters of the type customarily covered by "cold comfort"
letters as Holders' Counsel or the managing underwriter reasonably requests;
(x) with respect to any underwritten public
offering registered under the Shelf Registration or the Incidental
Registration, furnish, at the request of any seller of Registrable Securities
on the date such securities are delivered to the underwriters for sale pursuant
to such registration, an opinion, dated such date, of counsel representing the
Company for the purposes of such registration, addressed to the underwriters,
covering such legal matters with respect to the registration in respect of
which such opinion is being given as the underwriters, may reasonably request
and are customarily included in such opinions;
(xi) with respect to each Free Writing Prospectus or
other materials to be included in the Disclosure Package, ensure that no
Registrable Securities be sold "by means of" (as defined in Rule 159A(b) under
the Securities Act) such Free Writing Prospectus or other materials without the
prior written consent of the Holders holding a majority of the Registrable
Securities proposed to be sold in the relevant offering, which Free Writing
Prospectuses or other materials shall be subject to the review of the Holders'
Counsel;
(xii) as expeditiously as possible and within the
deadlines specified by the Securities Act, make all required filings of all
Prospectuses and Free Writing Prospectuses with the Commission;
(xiii) as expeditiously as possible and within the
deadlines specified by the Securities Act, make all required filing fee
15
payments in respect of any Registration Statement or Prospectus used under this
Agreement (and any offering covered thereby);
(xiv) comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable but no later than 15 months after the effective
date of the Registration Statement, an earnings statement covering a period of
12 months beginning after the effective date of the Registration Statement, in
a manner which satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(xv) cause all Registrable Securities to be listed
on each securities exchange on which Registrable Class Securities issued by the
Company are then listed, PROVIDED that the applicable listing requirements are
satisfied;
(xvi) as expeditiously as practicable, keep the
Holders' Counsel advised in writing as to the initiation and progress of any
Shelf Registration or Incidental Registration, and provide the Holders' Counsel
with all correspondence with the Commission in connection with any such
Registration Statement; (xvii) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD; and
(xviii) take all other steps reasonably necessary to
effect the registration and disposition of the Registrable Securities
contemplated hereby.
(b) SELLER OBLIGATIONS. In connection with any offering
under any Registration Statement under this Agreement, each Holder:
(i) shall promptly furnish to the Company in
writing such information with respect to such Holder and the intended method of
disposition of its Registrable Securities as the Company may reasonably request
or as may be required by law for use in connection with any related
Registration Statement or Prospectus (or amendment or supplement thereto) and
all information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not contain a material
misstatement of fact or necessary to cause such Registration Statement or
Prospectus (or amendment or supplement thereto) not to omit a material fact
with respect to such Holder necessary in order to make the statements therein
not misleading;
(ii) shall comply with the Securities Act and the
Exchange Act and all applicable state securities laws and comply with all
applicable regulations in connection with the registration and the disposition
of the Registrable Securities; and
(iii) shall not use any Free Writing Prospectus
without the prior written consent of the Company.
16
(c) NOTICE TO DISCONTINUE. Each Holder agrees that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 7(a)(v)(E), such Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended Prospectus or Free Writing Prospectus
contemplated by Section 7(a)(vi) and, if so directed by the Company, such
Holder shall deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus or Free Writing Prospectus covering such Registrable Securities
which is current at the time of receipt of such notice. If the Company shall
give any such notice, the Company shall extend the period during which such
Registration Statement shall be maintained effective pursuant to this Agreement
(including the period referred to in Section 7(a)(ii)) by the number of days
during the period from and including the date of the giving of such notice
pursuant to Section 7(a)(v)(E) to and including the date when sellers of such
Registrable Securities under such Registration Statement shall have received
the copies of the supplemented or amended Prospectus or Free Writing Prospectus
contemplated by and meeting the requirements of Section 7(a)(v).
(d) VALID BUSINESS REASON. If the Board of Directors, in
its good faith judgment, determines that any registration of Registrable
Securities should not be made or continued because it would materially
interfere with any material financing, acquisition, corporate reorganization or
merger or other material transaction involving the Company (a "VALID BUSINESS
REASON"), (i) the Company may postpone filing a Registration Statement relating
to a Shelf Registration until such Valid Business Reason no longer exists and
(ii) in case a Registration Statement has been filed relating to an Shelf
Registration, if the Valid Business Reason has not resulted from actions taken
by the Company, the Company, upon the approval of a majority of the Board of
Directors, may cause such Registration Statement to be withdrawn and its
effectiveness terminated or may postpone amending or supplementing such
Registration Statement or may suspend other required registration actions under
this Agreement. The Company shall give written notice to each Holder of its
determination to postpone or withdraw a Registration Statement and of the fact
that the Valid Business Reason for such postponement or withdrawal no longer
exists, in each case, promptly after the occurrence thereof. Notwithstanding
anything to the contrary contained herein, the Company may not postpone or
withdraw a filing due to a Valid Business Reason under this Section 7(d) for
more than a period of up to 30 days in any individual instance or 90 days, in
the aggregate, in any 12-month period.
(e) REGISTRATION EXPENSES. The Company shall pay all
expenses arising from or incident to its performance of, or compliance with,
this Agreement, including (i) Commission, stock exchange and NASD registration
and filing fees, (ii) all fees and expenses incurred in complying with
securities or "blue sky" laws (including reasonable fees, charges and
disbursements of counsel to any underwriter incurred in connection with "blue
sky" qualifications of the Registrable Securities as may be set forth in any
underwriting agreement), (iii) all printing, messenger and delivery expenses,
(iv) the fees, charges and expenses of the Holders' Counsel, any necessary
17
counsel with respect to state securities law matters, counsel to the Company
and of its independent public accountants, and any other accounting fees,
charges and expenses incurred by the Company (including any expenses arising
from any "cold comfort" letters or any special audits incident to or required
by any registration or qualification), and (v) any liability insurance or other
premiums for insurance obtained in connection with the Shelf Registration or
the Incidental Registration pursuant to the terms of this Agreement, regardless
of whether such Registration Statement is declared effective. All of the
expenses described in the preceding sentence of this Section 7(e) are referred
to herein as "REGISTRATION EXPENSES." Each Holder shall bear the expense of any
broker's commission or underwriter's discount or commission relating to the
registration and sale of such Holder's Registrable Securities and, subject to
clause (iv) above, shall bear the fees and expenses of its own counsel.
8. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall
indemnify and hold harmless each Holder, its directors, officers, Affiliates
and each Person who controls (within the meaning of Section 15 of the
Securities Act) such Holder from and against any and all losses, claims,
damages, liabilities and expenses, or any action or proceeding in respect
thereof (including reasonable costs of investigation and reasonable attorneys'
fees and expenses) (each, a "LIABILITY" and collectively, "LIABILITIES")
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Disclosure Package, the
Registration Statement, the Prospectus, any Free Writing Prospectus or in any
amendment or supplement thereto; and (ii) the omission or alleged omission to
state in the Disclosure Package, Registration Statement, the Prospectus, any
Free Writing Prospectus or in any amendment or supplement thereto any material
fact required to be stated therein or necessary to make the statements therein
not misleading; PROVIDED, HOWEVER, that the Company shall not be liable in any
such case to the extent, but only to the extent, that any such Liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Disclosure Package, Registration
Statement, Prospectus or Free Writing Prospectus or preliminary prospectus or
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder (including
the information provided pursuant to Section 8(b)).
(b) INDEMNIFICATION BY THE HOLDERS. Each Holder shall,
severally, but not jointly, indemnify and hold harmless the Company, any
underwriter retained by the Company, their respective directors, officers,
other Affiliates and each Person who controls the Company or such underwriter
(within the meaning of Section 15 of the Securities Act) from and against any
and all Liabilities arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Disclosure
Package, the Registration Statement, the Prospectus, any Free Writing
Prospectus or in any amendment or supplement thereto; and (ii) the omission or
alleged omission to state in the Disclosure Package, the Registration
Statement, the Prospectus, any Free Writing Prospectus or in any amendment or
18
supplement thereto any material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case, to the extent such
Liabilities arise out of or are based upon written information furnished by
such Holder or on such Holder's behalf specifically for inclusion in the
Disclosure Package, the Registration Statement, the Prospectus, any Free
Writing Prospectus or any amendment or supplement thereto relating to the
Registrable Securities as provided in, including the information furnished to
the Company pursuant to this Section 8(b); PROVIDED, HOWEVER, that the total
amount to be indemnified by any Holder pursuant to this Section 8(b) shall be
limited to the net proceeds (after deducting the underwriters' discounts and
commissions) received by such Holder in the offering to which the Disclosure
Package, Registration Statement, Prospectus or Free Writing Prospectus relates.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification hereunder (the "INDEMNIFIED PARTY") shall give
prompt written notice to the indemnifying party (the "INDEMNIFYING Party")
after the receipt by the Indemnified Party of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which the Indemnified Party intends to claim
indemnification or contribution pursuant to this Agreement; PROVIDED, HOWEVER,
that the failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any Liability that it may have to the Indemnified Party
hereunder (except to the extent that the Indemnifying Party forfeits
substantive rights or defenses by reason of such failure). If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to
the extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying
Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the
defense of such action with counsel reasonably satisfactory to the Indemnified
Party or (iii) the named parties to any such action (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party and such
parties have been advised by such counsel that either (x) representation of
such Indemnified Party and the Indemnifying Party by the same counsel would be
inappropriate under applicable standards of professional conduct or (y) there
may be one or more legal defenses available to the Indemnified Party which are
different from or additional to those available to the Indemnifying Party. In
any of such cases, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of such Indemnified Party; it being
understood, however, that the Indemnifying Party shall not be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all Indemnified Parties. No Indemnifying Party shall be
liable for any settlement entered into without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the written consent of such Indemnified Party, effect any settlement of
any pending or threatened proceeding in respect of which such Indemnified Party
is a party and indemnity has been sought hereunder by such Indemnified Party,
19
unless such settlement includes an unconditional release of such Indemnified
Party from all liability for claims that are the subject matter of such
proceeding.
(d) CONTRIBUTION. If the indemnification provided for in
this Section 8 from the Indemnifying Party is unavailable to an Indemnified
Party hereunder in respect of any Liabilities referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Liabilities in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions which resulted in such Liabilities, as well as any other
relevant equitable considerations. The relative faults of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the Liabilities
referred to above shall be deemed to include, subject to the limitations set
forth in Sections 8(a) and 8(b), any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding; PROVIDED, that the total amount to be contributed by any Holder
shall be limited to the net proceeds (after deducting the underwriters'
discounts and commissions) received by such Holder in the relevant offering.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding sentences
of this Section 8(d). No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
9. EXCHANGE ACT REPORTING AND RULE 144. The Company covenants that
it shall (a) file any reports required to be filed by it under the Exchange Act
and (b) take such further action as the Majority Holders may reasonably request
(including providing any information necessary to comply with Rule 144 under
the Securities Act), all to the extent required from time to time to enable the
Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act or Regulation S under the Securities Act or (ii) any
similar rules or regulations hereafter adopted by the Commission. The Company
shall, upon the request of the Majority Holders, deliver to the Holders a
written statement as to whether it has complied with such requirements.
10. MISCELLANEOUS.
(a) ASSUMPTION OF AGREEMENT. The Company shall cause any
successor or assign (whether by merger, consolidation, sale of assets or
otherwise) to assume this Agreement or enter into a new registration rights
agreement with the Holders on terms substantially the same as this Agreement as
a condition of any such transaction.
20
(b) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by the Company and the Majority
Holders.
(c) NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested,
telecopy, electronic transmission, courier service or personal delivery:
(i) if to Dillon:
Dillon Yarn Corporation
53 East 34th Street
Paterson, NJ 07514
Attention: President
Facsimile: (973) 684-0487
Email: swener@dillonyarn.com
with a copy to:
Cole, Schotz, Meisel, Forman & Leonard P.A.
25 Main Street
Hackensack, NJ 07601
Attention: Alan Rubin
Facsimile: 201-489-1536
Email: arubin@coleschotz.com
(ii) if to the Company:
Unifi, Inc.
7201 W. Friendly Avenue
Greensboro, NC 27410
Attention: Charles F. McCoy
Facsimile: (336) 856-4364
Email: cmccoy@unifi-inc.com
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Yvonne Y. F. Chan
Facsimile: (212) 492-0255
Email: ychan@paulweiss.com
21
All such notices, demands and other communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five Business Days after
being deposited in the mail, postage prepaid, if mailed; and when receipt is
acknowledged, if telecopied or electronically transmitted. Any party may by
notice given in accordance with this Section 10(c) designate another address or
Person for receipt of notices hereunder.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and permitted assigns of the
parties hereto as hereinafter provided. The rights and obligations of Dillon
hereunder may not be assigned, except in writing to Permitted Transferees. At
the time of the transfer of Registrable Securities to a Permitted Transferee,
such Permitted Transferee shall execute and deliver to the Company an
instrument, in form and substance satisfactory to the Company, to evidence its
agreement to be bound by, and to comply with, this Agreement as a Holder.
(e) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof that would apply the laws of
another jurisdiction.
(g) DISPUTE RESOLUTION.
(i) The parties agree that the appropriate,
exclusive and convenient forum for any disputes between the parties arising out
of this Agreement or the transactions contemplated hereby shall be in any state
or federal court in the State, City and County of New York, and each of the
parties irrevocably submits to the exclusive jurisdiction of such courts solely
in respect of any action, suit or proceeding arising out of or related to this
Agreement; PROVIDED, HOWEVER, that the foregoing shall not limit the rights of
the parties to obtain execution of judgment in any other jurisdiction. The
parties further agree, to the extent permitted by law, that a final and
unappealable judgment against a party in any action, suit or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which shall be conclusive evidence of the fact and amount of
such judgment. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against any party if given by
registered or certified mail, return receipt requested, or by any other means
of mail that requires a signed receipt, postage prepaid, mailed to such party
as herein provided.
(ii) Each party agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of such courts,
that its property is exempt or immune from attachment or execution, that the
22
action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement or the
subject matter hereof may not be enforced in or by such court.
(iii) THE PARTIES HEREBY IRREVOCABLY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING TO ENFORCE OR INTERPRET THE
PROVISIONS OF THIS AGREEMENT.
(h) SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
(i) RULES OF CONSTRUCTION. Unless the context otherwise
requires, references to sections or subsections refer to sections or
subsections of this Agreement. Terms defined in the singular have a comparable
meaning when used in the plural, and vice versa.
(j) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto with respect to the subject matter contained herein. There are no
restrictions, promises, representations, warranties or undertakings with
respect to the subject matter contained herein, other than those set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such subject matter.
(k) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same instrument.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written.
UNIFI, INC.
By: /s/
------------------------------
Name:
Title:
DILLON YARN CORPORATION
By: /s/
------------------------------
Name:
Title:
[signature page of Registration Rights Agreement]
P R E S S R E L E A S E
- -------------------------------------------------------------------------------
For more information, contact:
William M. Lowe, Jr.
Vice President
Chief Operating Officer
Chief Financial Officer
(336) 316-5664
UNIFI ANNOUNCES ACQUISITION
- -------------------------------------------------------------------------------
GREENSBORO, N.C. - OCTOBER 25, 2006 - Unifi, Inc. (NYSE:UFI) today announced
that it has signed a definitive agreement to acquire the assets, including
inventory, of the textured yarn business operating as the Dillon Yarn Division
of Dillon Yarn Corporation. The purchase price will be approximately $65
million.
The purchase price will be comprised of approximately $44.5 million in
cash and the issuance of approximately 8.3 million shares of Unifi common
stock. All of the shares issued as consideration in the acquisition will be
subject to a lock-up agreement, which will prohibit any transfers of shares for
an initial six-month period following closing. Thereafter, two thirds of the
shares may not be transferred for 18 months following closing, and the
remaining one-third of the shares may not be transferred until 30 months
following closing. The Company expects to use cash-on-hand and its bank
revolver to fund the cash portion of the purchase price. Lehman Brothers
rendered a fairness opinion to Unifi's Board of Directors in regards to the
transaction.
Dillon Yarn Corporation is a privately held company and operates a
facility in Dillon, South Carolina and textures approximately 90 million pounds
of polyester and nylon combined for the twelve months ended December 2005.
Annual sales of the assets being acquired were approximately $130 million.
Unifi currently supplies approximately $40 million of raw material to Dillon
that will be treated as inter-company sales after closing. Synergies generated
from the transaction in fiscal year 2008 are expected to be in the range of
approximately $6-8 million. The Company expects this transaction to be
accretive to earnings approximately $.09 cents per share in its fiscal year
ended June 2008 based upon current volume assumptions and will be cash flow
positive. At the appropriate time, after closing the transaction, the Company
will provide proforma information reflecting the combination with Unifi.
-continued-
UNIFI ANNOUNCES ACQUISITION - PAGE 2
As a result of this transaction, the Company expects to be able to
lower the overall cost of production through operational synergies, which will
enable it to better compete both with regional and global competition that has
made significant inroads into the U.S. market over the past several years. The
Company expects to continue to operate the facility in South Carolina and
streamline the product mix with its existing production facilities. Customer
service and quality will remain a focal point during the transition, as well as
efforts to bring innovation to the market providing the Company's customers
with advantages to remain both regionally and globally competitive.
Subject to governmental approval and other customary conditions, the
purchase is expected to be completed in early January 2007.
Additional information will be provided during the Company's quarterly
earnings call tomorrow, October 26, 2006, scheduled at 10:00 a.m. EST. For
those interested but unable to participate, a replay of the conference call in
its entirety will be available at (973) 341-3080 pin #7953172 approximately one
hour after its conclusion. This replay line will be kept open for two weeks.
Unifi, Inc. (NYSE: UFI) is a diversified producer and processor of
multi-filament polyester and nylon textured yarns and related raw materials.
The Company adds value to the supply chain and enhances consumer demand for its
products through the development and introduction of branded yarns that provide
unique performance, comfort and aesthetic advantages. Key Unifi brands include,
but are not limited to: aio(R) - all-in-one performance yarns, Sorbtek(R),
A.M.Y.(R), Mynx(R) UV, Repreve(R), Reflexx(R), MicroVista(R) and Satura(R).
Unifi's yarns and brands are readily found in home furnishings, apparel,
legwear, and sewing thread, as well as industrial, automotive, military, and
medical applications. For more information about Unifi, visit
http://www.unifi.com.
-continued-
UNIFI ANNOUNCES ACQUISITION - PAGE 3
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements included herein contain forward-looking statements within
the meaning of federal security laws about Unifi, Inc.'s (the "Company")
financial condition and results of operations that are based on management's
current expectations, estimates and projections about the markets in which the
Company operates, as well as management's beliefs and assumptions. Words such
as "expects," "anticipates," "believes," "estimates," variations of such words
and other similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions, which are difficult to
predict. Therefore, actual outcomes and results may differ materially from what
is expressed or forecasted in, or implied by, such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's judgment only as of the date hereof. The
Company undertakes no obligation to update publicly any of these
forward-looking statements to reflect new information, future events or
otherwise.
Factors that may cause actual outcome and results to differ materially from
those expressed in, or implied by, these forward-looking statements include,
but are not necessarily limited to, availability, sourcing and pricing of raw
materials, pressures on sales prices and volumes due to competition and
economic conditions, reliance on and financial viability of significant
customers, operating performance of joint ventures, alliances and other equity
investments, technological advancements, employee relations, changes in
construction spending, capital expenditures and long-term investments
(including those related to unforeseen acquisition opportunities), continued
availability of financial resources through financing arrangements and
operations, outcomes of pending or threatened legal proceedings, negotiation of
new or modifications of existing contracts for asset management and for
property and equipment construction and acquisition, regulations governing tax
laws, other governmental and authoritative bodies' policies and legislation,
the continuation and magnitude of the Company's common stock repurchase program
and proceeds received from the sale of assets held for disposal. In addition to
these representative factors, forward-looking statements could be impacted by
general domestic and international economic and industry conditions in the
markets where the Company competes, such as changes in currency exchange rates,
interest and inflation rates, recession and other economic and political
factors over which the Company has no control. Other risks and uncertainties
may be described from time to time in the Company's other reports and filings
with the Securities and Exchange Commission.
-end-