Asset Purchase Agreement

Asset Purchase Agreement
among
McGregor Corporation, Winston Mills, Inc.
Anvil Knitwear (Del.), Inc., Anvil
Knitwear, Inc. and Anvil Holdings, Inc.


TABLE OF CONTENTS


PAGE ARTICLE 1 DEFINITIONS........................................................1 ARTICLE 2 PURCHASE AND SALE OF ASSETS.......................................32
2.1 Purchase and Sale.................................................32
2.2 Assumption of Liabilities and Obligations.........................36
2.3 Assignment of Contracts...........................................38
2.4 Purchase Price....................................................39
2.5 Adjustment of Cash Purchase Price; Estimate.......................39
2.6 Closing...........................................................45
2.7 Deliveries at the Closing.........................................45


ARTICLE 3 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES............47
3.1 Organization and Good Standing of the Companies...................47
3.2 Interests in the Assets...........................................48
3.3 Capital Stock of Anvil Knitwear (Del.), Inc.......................48
3.4 Authority, Approvals and Consents.................................49
3.5 Financial Statements..............................................51
3.6 Absence of Material Adverse Change: Conduct of Business...........52
3.7 Legal Matters.....................................................53
3.8 Contracts.........................................................55
3.9 Employees.........................................................57
3.10 Employee Benefit Plans............................................58
3.11 Intellectual Property.............................................60
3.12 Brokers...........................................................61
3.13 Permits...........................................................62
3.14 Environmental Representation......................................62
3.15 Undisclosed Liabilities...........................................64
3.16 Business of Anvil Knitwear (Del.), Inc............................65
3.17 Taxes.............................................................66
3.18 No Other Representations or Warranties............................66
3.19 Affiliate Transactions............................................66
3.20 Payments from Anvil s.r.o.........................................67


ARTICLE 4 REPRESENTATIONS AND WARRANTIES REGARDING BUYER....................67
4.1 Organization and Good Standing of Buyer...........................68
4.2 Authority, Approvals and Consents.................................68
4.3 Brokers...........................................................70
4.4 Litigation........................................................70
4.5 Business of Holdings..............................................70
4.6 Holdings Stock....................................................70
4.7 Organization and Good Standing of Holdings........................70


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4.8 Holdings Authority to Execute and Perform Stockholders'
Agreement, Seller Note, etc.......................................71
4.9 Capitalization, Ownership of Holdings.............................73
4.10 Commitment Letter.................................................73
4.11 Title Insurance...................................................73


ARTICLE 5 COVENANTS.........................................................74
5.1 Access; Confidentiality...........................................74
5.2 Announcements.....................................................75
5.3 Conduct of Business Prior to the Closing..........................75
5.4 Consent; Cooperation..............................................77
5.5 [Intentionally Left Blank]........................................79
5.6 Hart-Scott-Rodino.................................................79
5.7 Further Assurances................................................79
5.8 Allocation of Purchase Price......................................79
5.9 Retention of Books and Records....................................79
5.10 Tax Matters.......................................................81
5.11 Employees.........................................................83
5.12 Notice of Developments............................................87
5.13 Exclusivity.......................................................88
5.14 Confidentiality Non-Solicitation..................................89
5.15 BNY Factoring Agreement...........................................90
5.16 Buyer's Financing and Title Insurance.............................90
5.17 [Intentionally Left Blank]........................................91
5.18 Stockholder's Agreement...........................................91
5.19 Guaranty Agreement................................................91
5.20 Business Interruption Insurance...................................91
5.21 SEC...............................................................92
5.22 Taxes.............................................................93
5.23 Computation of Workers' Compensation Reserve......................93
5.24 Special Procedures in Respect of Certain Environmental
Liabilities.......................................................94
5.25 Revision to Schedule..............................................95
5.26 Workers' Compensation.............................................97


ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF BUYER............................97
6.1 Representations and Warranties; Covenants.........................97
6.2 Authorization; Consents; Other Matters............................98
6.3 Instruments of Transfer...........................................98
6.4 Certificates......................................................99
6.5 Opinion of Counsel................................................99
6.6 Financing.........................................................99
6.7 Title Insurance and Surveys.......................................99
6.8 Employment Matters...............................................100


ARTICLE 7 CONDITIONS TO THE OBLIGATION OF THE SELLERS......................101
7.1 Representations and Warranties; Covenants........................101
7.2 Authorization; Consents..........................................102


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7.3 Certificates.....................................................102
7.4 Instruments of Assumption........................................102
7.5 Opinion of Counsel...............................................103


ARTICLE 8 TERMINATION......................................................103
8.1 Termination......................................................103
8.2 Effect of Termination............................................105
8.3 Buyer's Knowledge of Sellers' Breach.............................109
8.4 Sellers' Right to Cure...........................................110


ARTICLE 9 SURVIVAL AND INDEMNIFICATION.....................................111
9.1 Survival of Representations, Warranties and Covenants............111
9.2 The Sellers' Indemnification.....................................112
9.3 Buyer's Indemnification..........................................119
9.4 Claims by Third Parties..........................................122
9.5 Environmental Identification Procedures..........................129


ARTICLE 10 MISCELLANEOUS....................................................140
10.1 Expenses.........................................................140
10.2 Headings.........................................................141
10.3 Notices..........................................................141
10.4 Assignment.......................................................142
10.5 Entire Agreement.................................................143
10.6 Amendment; Waiver................................................143
10.7 Counterparts.....................................................144
10.8 Governing Law....................................................144
10.9 Severability.....................................................144
10.10 Consent to Jurisdiction..........................................144
10.11 Third Person Beneficiaries.......................................145
10.12 Representations and Warranties; Schedules........................145
10.13 Arbitration......................................................146


SCHEDULES


Schedule 1.1(i) - Assumed Contracts Schedule 1.1(ii) - Balance Sheet Schedule 1.1(iii) - Employee Benefit Plans Schedule 1.1(iv) - Environmental Schedule 1.1(vi) - Licensed Intellectual Property Schedule 1.1(vii) - Licenses and Permits Schedule 1.1(ix) - Permitted Liens Schedule 1.1(xi) - Owned Facilities Schedule 2.1(viii) - Vehicles Schedule 2.4 - Holdings Assets Schedule 2.5(a)(i) - Adjustment Statement Schedule 2.7(b)(iii)- Holdings Stock Schedule 3.2(a) - Fixed Assets Schedule 3.4 - Authority, Approvals and Consents


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Schedule 3.5 - Financial Statements Schedule 3.6 - Material Changes Schedule 3.7(a) - Litigation Schedule 3.7(b) - Non-Compliance Schedule 3.8 - Material Agreements Schedule 3.9 - Employee Compensation Schedule 3.11 - Infringement Schedule 3.19 - Affiliate Transactions Schedule 4.2 - Contraventions Schedule 4.3 - Buyer Commissions Schedule 4.8 - Holdings Contraventions Schedule 4.9 - Pro Forma Capitalization of Holdings Schedule 5.23 - Workers' Compensation Methodology Schedule 6.2 - Authorization; Consents of Seller Schedule 6.7 - Title Insurance Requirements Schedule 7.2 - Authorization; Consents of Buyer


EXHIBITS


EXHIBIT A Form of General Conveyance, Bill of Sale and Assignment EXHIBIT B Form of Assignment and Assumption Instruments EXHIBIT C [Intentionally Omitted] EXHIBIT D Form of Deed EXHIBIT E Form of Trademark Assignment EXHIBIT F Stockholders, Agreement Term Sheet EXHIBIT G-1 Culligan Guaranty EXHIBIT G-2 Vestar Guaranty EXHIBIT H Form of Seller Note EXHIBIT I Commitment Letter EXHIBIT J-1 Willkie Farr & Gallagher Opinion EXHIBIT J-2 Kirkland & Ellis Opinion


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ASSET PURCHASE AGREEMENT


THIS AGREEMENT dated this 29th day of December, 1994, among McGregor Corporation, a corporation formed under the laws of the State of New York ("McGregor"), Winston Mills, Inc., a corporation formed under the laws of the State of Delaware ("Winston Mills", and together with McGregor, each a "Seller" and collectively the "Sellers"), Anvil Knitwear (Del.), Inc., a corporation organized under the laws of Delaware, Anvil Knitwear, Inc., a corporation formed under the laws of the State of Delaware ("Buyer"), and Anvil Holdings, Inc. a corporation organized under the laws of the State of Delaware ("Holdings").


WHEREAS, the Sellers desire to sell, and the Buyer and Holdings, together, desire to purchase, all of the Sellers, assets comprising their Anvil Knitwear division, which designs, manufactures and markets casual knitwear and athletic wear, on the terms and subject to the conditions hereinafter set forth;


NOW, THEREFORE, in consideration of the premises and of the respective covenants and agreements contained herein, the parties hereto hereby agree as follows:


ARTICLE 1
DEFINITIONS


1.1 In this Agreement (including the recitals hereto) and in the Schedules and Exhibits hereto, except as expressly provided or as the context otherwise requires:


"Accountant" shall mean one of the six major independent certified public accounting firms in the United States.


"Accounts Receivable" means the accounts receivable of the Sellers occurring in the conduct of the Business including subject to Section 5.15 hereof amounts due from BNY Financial Corporation in respect of such accounts receivable.


"Adjustment Statement" shall have the meaning assigned such term in Section 2.5(a)(i) hereof.


"Affiliate" means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person will be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, partnership interests or other equity interests, by contract or otherwise.


"Affiliated Group" means an affiliated group as defined in Section 15O4 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law, including Section 1563 of the Code solely for the purpose of determining employee benefit Liabilities).


"Agreement" means this agreement, including all recitals, Schedules and Exhibits hereto.


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"Another Transaction" shall have the meaning assigned to such term in Section 5.13 hereof.


"Anvil Knitwear (Del.), Inc." means Anvil Knitwear (Del.), Inc., a Delaware corporation.


"Anvil s.r.o." means Anvil s.r.o., a corporation organized under the laws of the Czech Republic.


"Apollo" means Apollo E Partners, L.P., a limited partnership.


"Appraisal" shall have the meaning assigned such term in Section 5.8 hereof.


"Arbitrator" shall have the meaning assigned to such term in Section 9.2(a) hereof.


"Asheville Property" means all real property owned by Winston Mills located in Swannanoa, North Carolina.


"Assets" shall have the meaning assigned to such term in Section 2.1 hereof.


"Associate" used to indicate a relationship with any Person means (A) any corporation, partnership, joint venture or other entity of which such Person is an officer or general partner or is, directly or indirectly, through one or more intermediaries, the owner of 10% or more of (1) any class or type of equity securities or other profits interest or (2) the combined voting power of interests ordinarily entitled to vote for management or otherwise, and (B) any trust or other estate in which such Person has a substantial beneficial interest or as to


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which such Person serves as trustee or in a similar fiduciary capacity.


"Assumed Contracts" means all contracts, agreements, leases, licenses, instruments and legal commitments of the Sellers relating primarily to the Business or otherwise used in the conduct of the Business as it is presently conducted, except those relating solely to Excluded Liabilities, which Assumed Contracts shall specifically include, without limitation, all the Material Agreements, Leases, Purchase Orders and Sales Orders, contracts related to the Employee Benefit Plans which are welfare plans, service contracts, distribution agreements and all contracts, agreements, leases, licenses, instruments and legal commitments of the Sellers listed in Schedule 1.1(i).


"Assumed Liabilities" shall have the meaning assigned to such term in Section 2.2 hereof.


"Astrum" means Astrum International Corporation, a Delaware corporation.


"Aynor Property" means all real property owned by McGregor Corporation located in Aynor, South Carolina.


"ENY" means BNY Financial Corporation.


"BNY Factoring Agreement" shall mean the Factoring Agreement dated January 21, 1986, as amended, between McGregor and Irving Commercial Corporation (now known as BNY).


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"Balance Sheet" means the combined balance sheet of the Business as of October 1, 1994, which is set forth in column I of Schedule 1.1(ii) hereto.


"Balance Sheet Net Assets" means $63,000,000.


"Balance Sheet Net Asset Statement" means the statement of net assets of the Business as of October 1, 1994, set forth in column IV of Schedule 1.1(ii) hereto giving effect to the adjustments to the Balance Sheet set forth in columns II and III of Schedule 1.1(ii) hereto.


"Basis" means any past or present fact, situation, circumstance, status, condition activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that is, as of the date of determination, the primary cause of any specified consequence.


"Basket" shall have the meaning assigned to such term in Section 9.2(c)(iii) hereof.


"Breach Notice" shall have the meaning assigned to such term in Section 8.3 hereof.


"Burr Ridge" shall have the meaning assigned to such term in Section 5.26 hereof.


"Business" means the business of the Sellers, Anvil Knitwear division which designs, manufactures and markets casual knitwear and athletic wear excluding any operation, division or other aspect of the Business that was sold, transferred,


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terminated, discontinued or otherwise ceased to be operated by the Sellers prior to the date hereof.


"Business Day" means any day that is not a Saturday, Sunday, or any other day on which banks in the State of New York are authorized or required by law to close.


"Business Employees" shall have the meaning assigned to such term in Section 5.11(a) hereof.


"Buyer" shall have the meaning assigned to such term in the first paragraph of the Agreement.


"Buyer Material Adverse Effect" means a material adverse effect on (a) the business, operations, assets, liabilities, operating results or financial condition of Buyer or Holdings or (b) Buyer's ability to execute and deliver this Agreement, the ability of Holdings to execute and deliver the Seller Note or Stockholders' Agreement or the ability of either of Buyer or Holdings to perform its obligations hereunder or thereunder.


"Buyer's Retirement Plans" shall have the meaning assigned to such term in Section 5.11(b) hereof.


"Buyer's Welfare Plans" shall have the meaning assigned to such term in Section 5.11(b) hereof.


"Cash Purchase Price" shall have the meaning assigned to such term in Section 2.4 hereof.


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"CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act of 1980, as same may be amended, 42 U.S.C. Section 9601 ET SEQ.


"Closing" means the closing of the purchase and sale of the Assets pursuant to this Agreement.


"Closing Date" means the date on which the Closing occurs, as determined by Section 2.6 of this Agreement.


"Closing Date Balance Sheet" means an audited combined balance sheet of the Business as of the Closing Date, prepared by McGregor in accordance with GAAP consistently applied with the Balance Sheet.


"Closing Date Combined Net Assets" means (i) combined total assets of the Business minus (ii) combined total liabilities of the Business, computed by making adjustments to the Closing Date Balance Sheet consistent with the adjustments made to the Balance Sheet to give rise to the Balance Sheet Net Asset Statement; PROVIDED, that Closing Date Combined Net Assets shall not include the amount recorded as an investment in Anvil Knitwear (Del.), Inc., and Closing Date Combined Net Assets shall not include Excluded Assets or Excluded Liabilities but shall include all Taxes (except for income Taxes) accrued in accordance with GAAP.


"Closing Date Combined Net Asset Statement" means a statement showing the computation of Closing Date Combined Net Assets by making adjustments to the Closing Date Balance Sheet


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consistent with the adjustments made to the Balance Sheet to give rise to the Balance Sheet Net Asset Statement (except as otherwise provided in the definition of Closing Date Combined Net Assets); PROVIDED, that, notwithstanding GAAP, the reserve in respect of workers' compensation shall be calculated in accordance with Section 5.23 hereof.


"Closing Deliveries" means the deliveries specified by paragraph 2.7 of this Agreement.


"Code" means the Internal Revenue Code of 1986, as amended.


"Commitment Letter" means the commitment letter executed by NationsBank on November 29, 1994 with respect to financing the purchase by Buyer and Holdings of the Assets and the Special Assets.


"Companies" means, collectively, McGregor, Winston Mills and Anvil Knitwear (Del.), Inc.


"Confidentiality Agreement" means the Confidentiality Agreement among Vestar Equity Partners, L.P. and Sellers dated June 29, 1994.


"Confidential Information" shall have the meaning ascribed to such term in the Confidentiality Agreement.


"Consent" means any consent, approval, authorization, waiver, permit, grant, franchise, concession, agreement, license, certificate, exemption, order, registration, declaration, filing, report or notice of, with or to any Person.


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"Consultation Period" shall have the meaning assigned to such term in Section 9.2(a) hereof.


"Culligan" means Culligan International Company, a Delaware corporation.


"Culligan Guaranty" means the Guaranty Agreement executed by Astrum and Culligan International Company on the date hereof, a copy of which is attached hereto as Exhibit G-1.


"CVC" means Citicorp Venture Capital, Ltd.


"Czech Consents" shall have the meaning assigned to such term in Section 2.1(c)(A) hereof.


"Denial Notice" shall have the meaning assigned to such term in Section 9.5(b) hereof.


"Determination Notice" shall have the meaning assigned to such term in Section 9.2(a) hereof.


"Determination Period" shall have the meaning assigned to such term in Section 9.2(a) hereof.


"Direct Claim" shall have the meaning assigned to such term in Section 9.5(b) hereof.


"Disclosure Schedule" shall have the meaning assigned to such term in the preamble to Article 3 hereof.


"Election" shall have the meaning assigned to such term in Section 5.10(c) hereof.


"Employee Benefit Plans" means pension, profit sharing, incentive, savings, bonus, deferred compensation, health and insurance plans, programs or policies, including, but not


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limited to, all employee benefit plans, as such term is defined in Section 3(3) of ERISA, that are currently maintained by McGregor or Winston Mills for the benefit of McGregor's or Winston Mills's employees, respectively, whose employment relates primarily to the Business, or their dependents, or under which any past or present employee of McGregor or Winston Mills whose employment relates or related primarily to the Business has any present or future rights to benefits, as set forth in Schedule 1.1(iii) of the Disclosure Schedule.


"Environmental Arbitrator" shall have the meaning assigned to such term in Section 9.5(b) hereof.


"Environmental Lien" means a Lien, either recorded or unrecorded, in favor of any Governmental Authority relating to any Liability arising under Environmental Requirements.


"Environmental Requirements" means all federal, state, local and foreign statutes, regulations, ordinances and other provisions having the force or effect of law, all judicial and administrative orders and determinations, and all common law, in each case concerning pollution or protection of the environment (including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any hazardous materials, substances or wastes).


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"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


"Estimate" shall have the meaning assigned to such term in Section 2.5(b) hereof.


"Excluded Assets" shall mean only (i) all of the Sellers, right, title
and interest in and to all agreements, arrangements or understandings that
do not constitute Assumed Contracts;


(ii) corporate seal, minute books, charter documents, corporate stock
record books, original tax and financial records and such other books and
records as pertain to the organization, existence or share capitalization
of each Seller;


(iii) prepaid expenses to the extent such expenses relate
exclusively to Excluded As sets or that are not transferable to Buyer for
future periods;


(iv) tax accounts reflected as assets on the books of the Sellers and
all rights in and to any and all tax refunds and credits other than tax
accounts for which Buyer is assuming the corresponding liability;


(v) all rights of set-off, counterclaim and defenses to the extent
such rights of set-off, counterclaim and defenses relate exclusively to
Excluded Liabilities;


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(vi) all sums due to either Seller from the other Seller or from any
Affiliate of the Sellers (other than Anvil s.r.o.);


(vii) all cash of Sellers not expressly transferred to Buyer
hereunder; and


(viii) subject to Section 2.1(c) hereof, the Subsidiary Stock.


"Excluded Liabilities" shall mean all Liabilities of the Sellers (except as otherwise provided in clause (xi) and clause (xiv) (which clause (xiv) shall treat Anvil Knitwear (Del.), Inc. as if it were a Seller) of this definition) (i) pursuant to this Agreement, (ii) relating to all income Taxes of the Sellers and all other Taxes except, with respect to such other Taxes, to the extent reflected in the Final Adjustment Amount, (iii) relating exclusively to Excluded Assets, (iv) resulting from claims of the Pension Benefit Guaranty Corporation, to indemnify any Person by reason of the fact that such Person was a director or officer ...