EXHIBIT 10.15
ASSET PURCHASE AGREEMENT
dated as of April __, 1998
among
Family Bookstores Company, Inc.
Tandycrafts, Inc.
and
The Development Association, Inc.
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it
is attached, but is inserted for convenience only.
PAGE
ARTICLE I - SALE OF ASSETS AND CLOSING . . . . . . . . . . . . . . . . . 1
1.01 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.03 Purchase Price; Allocation; Adjustment. . . . . . . . . . . . 7
1.04 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.05 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.06 Further Assurances; Post-Closing Cooperation. . . . . . . . . 11
1.07 Third-Party Consents. . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF SELLER AND
PARENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.01 Organization of Seller and Parent . . . . . . . . . . . . . . 13
2.02 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.03 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . 14
2.04 Governmental Approvals and Filings. . . . . . . . . . . . . . 15
2.05 Books and Records . . . . . . . . . . . . . . . . . . . . . . 15
2.06 Financial Statements. . . . . . . . . . . . . . . . . . . . . 15
2.07 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . 15
2.08 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . 15
2.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.10 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 16
2.11 Compliance With Laws and Orders . . . . . . . . . . . . . . . 17
2.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 17
2.13 Real Property Leases. . . . . . . . . . . . . . . . . . . . . 18
2.14 Tangible Personal Property. . . . . . . . . . . . . . . . . . 19
2.15 Intellectual Property Rights. . . . . . . . . . . . . . . . . 19
2.16 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.17 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.19 Affiliate Transactions. . . . . . . . . . . . . . . . . . . . 22
2.20 Employees; Labor Relations. . . . . . . . . . . . . . . . . . 23
2.21 Environmental Matters.. . . . . . . . . . . . . . . . . . . . 23
2.22 Substantial Suppliers.. . . . . . . . . . . . . . . . . . . . 25
2.23 Accounts Receivable.. . . . . . . . . . . . . . . . . . . . . 25
2.24 Inventory.. . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.25 Vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.26 No Guarantees . . . . . . . . . . . . . . . . . . . . . . . . 26
2.27 Entire Business . . . . . . . . . . . . . . . . . . . . . . . 26
2.28 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.29 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 26
PAGE
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . 27
3.01 Organization. . . . . . . . . . . . . . . . . . . . . . . . . 27
3.02 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.03 No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . 27
3.04 Governmental Approvals and Filings. . . . . . . . . . . . . . 28
3.05 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 28
3.06 Financial Statements. . . . . . . . . . . . . . . . . . . . . 28
3.07 Absence of Changes. . . . . . . . . . . . . . . . . . . . . . 28
3.08 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . 29
3.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.10 Compliance With Laws and Orders . . . . . . . . . . . . . . . 29
3.11 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV - COVENANTS OF SELLER AND PARENT. . . . . . . . . . . . . . . 29
4.01 Regulatory and Other Approvals. . . . . . . . . . . . . . . . 30
4.02 Investigation by Purchaser. . . . . . . . . . . . . . . . . . 30
4.03 No Solicitations. . . . . . . . . . . . . . . . . . . . . . . 31
4.04 Conduct of Business . . . . . . . . . . . . . . . . . . . . . 31
4.05 Financial Statements and Reports. . . . . . . . . . . . . . . 32
4.06 Certain Restrictions. . . . . . . . . . . . . . . . . . . . . 33
4.07 Security Deposits . . . . . . . . . . . . . . . . . . . . . . 34
4.08 Delivery of Books and Records, etc.; Removal of Property. . . 34
4.09 Noncompetition. . . . . . . . . . . . . . . . . . . . . . . . 35
4.10 Notice and Cure . . . . . . . . . . . . . . . . . . . . . . . 36
4.11 Fulfillment of Conditions . . . . . . . . . . . . . . . . . . 37
4.12 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . 37
4.13 Store Leases. . . . . . . . . . . . . . . . . . . . . . . . . 37
4.14 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.15 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE V - COVENANTS OF PURCHASER . . . . . . . . . . . . . . . . . . . 38
5.01 Regulatory and Other Approvals. . . . . . . . . . . . . . . . 38
5.02 Notice and Cure . . . . . . . . . . . . . . . . . . . . . . . 39
5.03 Fulfillment of Conditions . . . . . . . . . . . . . . . . . . 39
5.04 Store Opening Funds . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VI - CONDITIONS TO OBLIGATIONS OF PURCHASER. . . . . . . . . . . 40
6.01 Representations and Warranties. . . . . . . . . . . . . . . . 40
6.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.03 Officers' Certificates. . . . . . . . . . . . . . . . . . . . 40
6.04 Orders and Laws . . . . . . . . . . . . . . . . . . . . . . . 40
6.05 Regulatory Consents and Approvals.. . . . . . . . . . . . . . 41
PAGE
6.06 Third Party Consents. . . . . . . . . . . . . . . . . . . . . 41
6.07 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . 41
6.08 Real Property Leases. . . . . . . . . . . . . . . . . . . . . 41
6.09 Financing.. . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.10 Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.11 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.12 Computer Services Agreement . . . . . . . . . . . . . . . . . 42
6.13 No Material Adverse Change. . . . . . . . . . . . . . . . . . 42
ARTICLE VII - CONDITIONS TO OBLIGATIONS OF SELLER AND PARENT . . . . . . 43
7.01 Representations and Warranties. . . . . . . . . . . . . . . . 43
7.02 Performance . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.03 Officers' Certificates. . . . . . . . . . . . . . . . . . . . 43
7.04 Orders and Laws . . . . . . . . . . . . . . . . . . . . . . . 43
7.05 Regulatory Consents and Approvals.. . . . . . . . . . . . . . 43
7.06 Third Party Consents. . . . . . . . . . . . . . . . . . . . . 44
7.07 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . 44
7.08 Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.09 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.10 Computer Services Agreement . . . . . . . . . . . . . . . . . 44
7.11 No Material Adverse Change. . . . . . . . . . . . . . . . . . 44
7.12 Additional Indebtedness . . . . . . . . . . . . . . . . . . . 45
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . 45
8.01 Survival of Representations, Warranties, Covenants and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 46
9.01 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 46
9.02 Method of Asserting Claims. . . . . . . . . . . . . . . . . . 48
ARTICLE X - TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . 52
10.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.02 Liabilities in Event of Termination . . . . . . . . . . . . . 53
10.03 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . 53
PAGE
ARTICLE XI - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 54
11.01 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XII - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . 64
12.01 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
12.02 Bulk Sales Act.. . . . . . . . . . . . . . . . . . . . . . . 65
12.03 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 66
12.04 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.05 Public Announcements.. . . . . . . . . . . . . . . . . . . . 66
12.06 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . 66
12.07 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.08 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 67
12.09 No Third Party Beneficiary . . . . . . . . . . . . . . . . . 67
12.10 No Assignment; Binding Effect. . . . . . . . . . . . . . . . 67
12.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.12 Consent to Jurisdiction and Service of Process.. . . . . . . 68
12.13 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . 68
12.14 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 69
12.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 69
EXHIBITS
Exhibit A Assignment and Assumption Agreement
Exhibit B Nonnegotiable Promissory Note
Exhibit C Officer's Certificate of Seller
Exhibit D Secretary's Certificate of Seller
Exhibit E Opinion of Counsel to Seller
Exhibit F Estoppel Certificate and Consent to Assignment
Exhibit G Officer's Certificate of Purchaser
Exhibit H Secretary's Certificate of Purchaser
Exhibit I Opinion of Counsel to Purchaser
This Agreement is an ASSET PURCHASE AGREEMENT dated as of
April __, 1998, among FAMILY BOOKSTORES COMPANY, INC., a Michigan
corporation ("Purchaser"), TANDYCRAFTS, INC., a Delaware corporation
("Parent"), and THE DEVELOPMENT ASSOCIATION, INC., a Texas corporation and
wholly owned subsidiary of Parent ("Seller"). Capitalized terms not
otherwise defined herein have the meanings set forth in Section 11.01(a).
WHEREAS, Seller is engaged in the retail distribution and sale of
Christian Bibles, Christian books (including Christian family and
inspirational books), and related gifts, music and novelty items (the
"Business"); and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from Seller,
certain of the assets of Seller used in the Business and, in connection
therewith, Purchaser has agreed to assume certain of the obligations of
Seller relating to the Business, all on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Purchaser, Parent and Seller agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 ASSETS.
(a) ASSETS TRANSFERRED. On the terms and subject to the
conditions set forth in this Agreement, Seller will sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser
will purchase and pay for, at the Closing, free and clear of all
Liens other than Permitted Liens, all of Seller's right, title
and interest in, to and under the Seller Assets. For purposes of
this Agreement, "Seller Assets" means all the Assets and
Properties of Seller operated, owned or leased by Seller used in
the Business at any of Seller's retail store locations (a
"Store") or otherwise on the Closing Date wherever located,
including, without limitation, the following:
(i) REAL PROPERTY LEASES. (A) The leases and
subleases of real property for any Store or other location
described in SECTION 1.01(a)(i) OF THE DISCLOSURE SCHEDULE
as to which Seller is the lessee or sublessee, together with
any options to purchase the underlying property and
leasehold improvements thereon, and in each case all other
rights, subleases, licenses, permits, deposits, credits,
prepayments and profits appurtenant to or related to such
leases and subleases (the leases and subleases described in
this subclause, collectively, the "Real Property Leases");
(ii) INVENTORY. All goods which are included for sale
to customers, copies of all video cassettes and feature
films held for rental to such customers, copies of all
demonstration audio cassettes or other miscellaneous
recordings intended for use at the Stores, which are held
at, or are in transit from or to, the locations at which the
Business is conducted, or located at customers' premises on
consignment, in each case, which are used or held for use by
Seller in the conduct of the Business, including any of the
foregoing purchased subject to any conditional sales or
title retention agreement in favor of any other Person,
together with all rights of Seller against suppliers of such
inventories, but subject to the limitations on inventory to
be acquired by Purchaser pursuant to Section 1.03(c)(i) of
this Agreement and PROVIDED, HOWEVER, that Purchaser shall
acquire goods in transit to Seller together with the rights
of Seller against the suppliers of the goods in transit only
to the extent that Purchaser has assumed the liability with
respect to the related trade payable pursuant to Section
1.02(a)(v) of this Agreement (the "Inventory");
(iii) ACCOUNTS RECEIVABLE. All trade accounts
receivable and all notes, bonds and other evidences of
rights to receive payments arising out of sales occurring in
the conduct of the Business and the Security Agreements
related thereto, including any rights of Seller with respect
to any third party collection procedures or any other
Actions or Proceedings which have been commenced in
connection therewith (the "Accounts Receivable");
(iv) TANGIBLE PERSONAL PROPERTY. All furniture,
fixtures, equipment, machinery, demonstration equipment,
office and other supplies, parts, packaging materials and
other accessories related thereto and other tangible
personal property (other than the Inventory and the
Vehicles) used or held for use by Seller in the conduct of
the Business at the locations at which the Business is
conducted or at customers' premises on consignment, or
otherwise used or held for use by Seller in the conduct of
the Business (including but not limited to the items listed
in SECTION 1.01(a)(iv) OF THE DISCLOSURE SCHEDULE),
including any of the foregoing purchased subject to any
conditional sales or title retention agreement in favor of
any other Person, but excluding Seller's Computer Equipment
(the "Tangible Personal Property");
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(v) PERSONAL PROPERTY LEASES. (A) The leases or
subleases of tangible personal property described in SECTION
1.01(a)(v)(A) OF THE DISCLOSURE SCHEDULE as to which Seller
is the lessor or sublessor and (B) the leases of tangible
personal property described in SECTION 1.01(a)(v)(B) OF
THE DISCLOSURE SCHEDULE as to which Seller is the lessee or
sublessee, together with any options to purchase the
underlying property, and in each case all other rights,
subleases, credits, prepayments and profits related to such
leases and subleases (the leases and subleases described in
subclauses (A) and (B), collectively, the "Personal Property
Leases");
(vi) BUSINESS CONTRACTS. All Contracts (other than the
Real Property Leases, the Personal Property Leases and the
Accounts Receivable) to which Seller is a party, which are
utilized in the conduct of the Business, including Contracts
relating to suppliers, sales representatives, distributors,
purchase orders, marketing arrangements and manufacturing
arrangements and which are listed in SECTION 1.01(a)(vi) OF
THE DISCLOSURE SCHEDULE (the "Business Contracts");
(vii) PREPAID EXPENSES AND GOODWILL. Except as set
forth in Section 1.05, all prepaid expenses relating to the
Business, including the items listed SECTION 1.01(a)(vii)
OF THE DISCLOSURE SCHEDULE (the "Prepaid Expenses"), and all
goodwill relating to the Business;
(viii) INTANGIBLE PERSONAL PROPERTY. All Intellectual
Property used or held for use by Seller in the conduct of
the Business and all rights, manufacturer's warranties of
any tangible personal properties, privileges, claims, causes
of action and options relating or pertaining to the Business
or the Seller Assets, including the right to redeem and
receive the benefit of any unredeemed coupons issued by
vendors to the Stores (except for credits relating to such
coupons for inventory of the Business retained by Seller
after the Closing) and the items listed in
SECTION 1.01(a)(viii) OF THE DISCLOSURE SCHEDULE (the
"Intangible Personal Property");
(ix) LICENSES. To the extent their transfer is
permitted under the terms thereof or under applicable Laws,
all Licenses (including Environmental Permits) utilized in
the conduct of the Business, including the Licenses listed
in SECTION 1.01(a)(ix) OF THE DISCLOSURE SCHEDULE (the
"Business Licenses");
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(x) VEHICLES. All motor vehicles owned or leased by
Seller and used or held for use in the conduct of the
Business, including the vehicles listed in Section
1.01(a)(x) OF THE DISCLOSURE SCHEDULE (the "Vehicles");
(xi) SECURITY DEPOSITS. All security deposits
deposited by or on behalf of Seller as lessee or sublessee,
or the benefit of any unapplied advance rents, under the
Real Property Leases (the "Tenant Security Deposits");
(xii) BOOKS AND RECORDS. All Books and Records used or
held for use in the conduct of the Business or otherwise
relating to the Seller Assets that are located at any Store,
and copies of any such Books and Records located at Seller's
headquarters office that Purchaser may request reasonably,
other than the minute books, stock certificates and books,
stock transfer ledgers, communications to Seller's directors
or shareholders, and corporate seal of Seller (the "Business
Books and Records"); and
(xiii) STORE OPENING FUNDS. Cash register funds in the
amount of $150 for each cash register at each Store (the
"Store Opening Funds").
(xiv) OTHER ASSETS AND PROPERTIES. All other Assets
and Properties of Seller used or held for use in connection
with the Business, except as otherwise provided in
Section 1.01(b) (the "Other Assets").
Seller agrees to confirm the sale of the Seller Assets on the
Closing Date by the execution and delivery to Purchaser, on the Closing
Date, of the Assignment and Assumption Agreement.
(b) EXCLUDED ASSETS. Notwithstanding anything in this
Agreement to the contrary, the following Assets and Properties of
Seller (the "Excluded Assets") shall be excluded from and shall
not constitute Seller Assets:
(i) CASH AND INVESTMENT ASSETS. Cash, certificates of
deposit and other bank deposits, treasury bills and other
cash equivalents and Investment Assets;
(ii) CORPORATE RECORDS. The minute books, stock
transfer books, communications to Seller's directors and
shareholders and corporate seal of Seller and all other
Books and Records of Seller other than the Business Books
and Records;
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(iii) COMPUTER EQUIPMENT. The data processing
equipment, including point of sale equipment, and related
software of Seller and all computers, phone systems, voice
mail, e-mail and similar and related equipment located at
the home office of Seller or Parent ("Seller's Computer
Equipment");
(iv) EXCLUDED OBLIGATIONS. The rights of Seller in, to
and under all Contracts and Licenses of any nature, the
obligations of Seller under which expressly are not assumed
by Purchaser pursuant to Section 1.02(a);
(v) J MAR DIVISION. The assets and properties of
Seller used solely to conduct business in the J Mar division
of the Seller;
(vi) RESOURCES; REFUNDS; AND CREDITS. The rights of
Seller in any recoveries under insurance or litigation
arising out of or relating to events that occurred prior to
the Closing Date; Seller's credits for any inventory of the
Business that Purchaser shall not acquire pursuant to this
Agreement; Seller's rights to any refunds or adjustments
relating to Taxes; any intercompany receivables and prepaid
expenses between Parent and Seller; and credits against
trade accounts payable retained by Seller; and
(vii) THIS AGREEMENT. The Seller's rights under this
Agreement and any Operative Agreement.
1.02 LIABILITIES.
(a) ASSUMED LIABILITIES. In connection with the sale,
transfer, conveyance, assignment and delivery of the Seller
Assets pursuant to this Agreement, on the terms and subject to
the conditions set forth in this Agreement, at the Closing,
Purchaser will assume and agree to pay, perform and discharge
when due the following obligations of Seller arising in
connection with the operation of the Business, as the same shall
exist on the Closing Date (the "Assumed Liabilities"), and no
others:
(i) REAL PROPERTY LEASE OBLIGATIONS. For all Real
Property Leases transferred to Purchaser at the Closing or
as to which the Purchaser is a subleasee, all obligations of
Seller under the Real Property Leases listed in
Schedule 1.01(a)(i) of the Disclosure Schedule arising and
to be performed on or after the Closing Date, and excluding
all such obligations arising or to be performed prior to the
Closing Date;
-5-
(ii) PERSONAL PROPERTY LEASE OBLIGATIONS. For all
Personal Property Leases transferred to the Purchaser at the
Closing, all obligations of Seller under the Personal
Property Leases listed in Schedule 1.01(a)(v) of the
Disclosure Schedule arising and to be performed on or after
the Closing Date, and excluding all such obligations arising
or to be performed prior to the Closing Date;
(iii) OBLIGATIONS UNDER CONTRACTS AND LICENSES. For
all Business Contracts and Business Licenses assigned to
Purchaser at the Closing, all obligations of Seller under
the Business Contracts and Business Licenses listed in
Schedule 1.01(a)(vi) or (ix) arising and to be performed on
or after the Closing Date, and excluding all such
obligations arising or to be performed prior to the Closing
Date; and
(iv) GIFT CERTIFICATES OUTSTANDING. All obligations of
Seller for any gift certificate issued and outstanding as
set forth in SECTION 1.02(a)(iv) OF THE DISCLOSURE SCHEDULE
(the "Gift Certificates Outstanding").
(v) TRADE PAYABLES. All trade payables for inventory
acquired by Purchaser pursuant to Section 1.03(c)(i)(A), but
only to the extent provided in Section 1.03(c)(i)(B).
Purchaser agrees to confirm such assumption by the execution and
delivery to Seller, on the Closing Date, of the Assignment and Assumption
Agreement. Notwithstanding anything in this Agreement to the contrary,
Purchaser shall not assume any of the obligations for which Seller shall be
liable as provided in Section 1.05, and the same shall be excluded from the
definition of "Assumed Liabilities" for all purposes of this Agreement.
(b) RETAINED LIABILITIES. Except for the Assumed
Liabilities, Purchaser shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall have
no liability for, any Liabilities of Seller or Parent (including,
without limitation, those related to the Business) of any kind,
character or description whatsoever (the "Retained Liabilities").
Parent shall cause Seller to discharge when due or to make
adequate provision for all of the Retained Liabilities, PROVIDED
that each of Seller and Parent shall have the ability to contest,
in good faith, any claim of liability asserted in respect thereof
by any Person. Notwithstanding anything in Section 1.02(a) or in
any other provision of this Agreement to the contrary, the
following shall be Retained Liabilities:
(i) any liability or obligation relating to Excluded
Assets;
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(ii) any liability or obligation to relating to
Indebtedness of Seller or Parent; and
(iii) any claim, liability or obligation relating to
Taxes with respect to Seller or the Business for any period
or portion thereof ending on or before the Closing Date, or
arising out of any tax sharing agreement or the transactions
contemplated by this Agreement.
1.03 PURCHASE PRICE; ALLOCATION; ADJUSTMENT.
(A) PURCHASE PRICE. In addition to the Assumed
Liabilities, the aggregate purchase price for the Seller Assets
and for the covenant of Seller and Parent contained in
Section 4.09 is U.S. $11,500,000, subject to adjustment as
provided in paragraph (c) below (the "Purchase Price"), payable
in the manner provided in paragraph (d) below.
(b) ALLOCATION OF PURCHASE PRICE. Purchaser and Seller
shall negotiate in good faith prior to the Closing Date and
determine the allocation of the consideration paid by Purchaser
for the Seller Assets and the covenant of Seller and Parent
contained in Section 4.09, and each agree that $25,000 will be
allocated to the covenants of Seller and Parent contained in
Section 4.09. Each party hereto agrees (i) that any such
allocation shall be consistent with paragraph (a) above and the
requirements of Section 1060 of the Code and the regulations
thereunder, (ii) to complete jointly and to file separately Form
8594 with its Federal income Tax Return consistent with such
allocation for the tax year in which the Closing Date occurs and
(iii) that no party will take a position on any income, transfer
or gains Tax Return, before any Governmental or Regulatory
Authority charged with the collection of any such Tax or in any
judicial proceeding, that is in any manner inconsistent with the
terms of any such allocation without the consent of the other
parties hereto.
(c) ADJUSTMENT OF PURCHASE PRICE. The Purchase Price shall
be determined by making the following adjustments. The
adjustments shall be made to the principal payment or payments
that first become due under the Promissory Note, except for any
increase in the Purchase Price pursuant to Section 1.03(c)(v),
which shall be added to the cash payment to be made at the
Closing.
(i) RGIS, a national inventory service company, shall
conduct a physical inventory on or near the Closing Date and
the physical inventory shall be valued at Seller's average
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vendor cost determined on a basis consistent with the
Seller's current accounting practices (the "Inventory
Valuation"). The Inventory Valuation shall not be adjusted
for any leftover "seasonal" product, "dated" items (such as
old calendars), or obsolete, defective or unsalable items.
Seller and Purchaser shall share equally the amounts payable
to RGIS to conduct the physical inventory. The Purchase
Price shall be based on the assumption that the Inventory
Valuation shall be equal to at least $7,100,000. The
Purchase Price shall be reduced on a dollar-for-dollar basis
by the amount by which the Inventory Valuation is less than
$7,100,000, but only to the extent that the difference is
greater than $150,000. The Purchase Price shall be
increased on a dollar-for-dollar basis by the amount by
which the Inventory Valuation is greater than $7,100,000,
but only to the extent that the difference is greater than
$150,000, and provided further that any such increase to the
Purchase Price shall not exceed $100,000 and Seller would
have the right to return to vendors any inventory in excess
of $7,350,000. Seller shall use its commercially reasonable
efforts to manage inventory to maintain operations of the
Stores while seeking to avoid any adjustment to the Purchase
Price. Seller shall consult with Purchaser with respect to
inventory purchases between the date of this Agreement and
the Closing. Immediately prior to Closing, Seller shall
cancel all inventory purchase orders that are cancelable.
Purchaser shall (A) acquire the inventory received by
Purchaser after the Closing pursuant to any purchase order
that is not cancelable and (B) assume the trade payable
related to such inventory, but only to the extent that the
aggregate amount of such inventory and related trade
payables shall not exceed $100,000 (the "Inventory Cap").
For any inventory attributable to a purchase order that is
not cancelable and that exceeds the Inventory Cap, Seller
shall have the right to return the excess inventory to the
vendor. Inventory selected for return to vendors under this
paragraph (c)(i), if any, shall be as determined by
Purchaser; provided, however, that any such inventory so
determined by Purchaser shall be returnable without penalty
to Seller. If after the Closing it is determined that the
count and description of the Inventory was incomplete or
inaccurate as of the Closing Date, then the Purchase Price
shall be adjusted by making an adjustment to the principal
payment or payments that first become due under the
Promissory Note.
(ii) The Purchase Price shall be reduced on a dollar-
for-dollar basis by (A) the amount by which the balance of
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the Accounts Receivable as of the Closing Date shall be less
than $80,000 and (B) any amount of an Account Receivable
that the Purchaser shall not collect within 120 days after
the Closing (the Account Receivable to the extent it has not
been so collected shall be referenced as an "Uncollected
Account"); provided, however, that Purchaser shall use its
commercially reasonable efforts consistent with its past
practices to collect Accounts Receivable. Purchaser shall
transfer to Seller the rights to any Uncollected Account.
(iii) The Purchase Price shall be reduced by (A) an
amount equal to 80% of the Gift Certificates Outstanding as
of the Closing Date; (B) the aggregate amount of any Store
Relocation Expenses; and (C) amounts representing any
prepayments by customers of the Business for orders to be
delivered after the Closing.
(iv) The Purchase Price shall be adjusted for the pro
rations set forth in this Agreement.
(v) The Purchase Price shall be increased by an amount
equal to the Store Opening Funds.
(d) The Purchase Price will be paid by Purchaser to Seller
on the Closing Date by wire transfer of immediately available
funds in the amount of $2,900,000, to an account maintained at a
commercial bank located in the United States, which account shall
be designated by Seller by written notice delivered to Purchaser
at least two (2) Business Days before the Closing Date and the
delivery to the Seller of Purchaser's unsecured promissory note,
substantially in the form of Exhibit B (the "Promissory Note"),
in the principal amount equal to $8,600,000 and interest on the
unpaid principal balance at an annual rate equal to 7.25%, due
and payable in three installments of $2,900,000 principal plus
interest on December 31, 1998, $2,900,000 principal plus interest
on December 31, 1999, and $2,800,000 principal plus interest on
December 31, 2000, and with the final installment subject to
prepayment within 30 days after the completion of the closing of
an underwritten public offering of Purchaser's common stock
pursuant to a registration statement effective under the Federal
Securities Act of 1933, as amended, resulting in proceeds to the
Purchaser in excess of $25,000,000.
1.04 CLOSING. The closing of the sale and transfer of the Seller
Assets to Purchaser and the assumption of the Assumed Liabilities by
Purchaser (the "Closing") will take place at the offices of Xxxxxx Xxxxxxxx
& Xxxx LLP, 900 Old Kent Bank Building, 000 Xxxx, X.X., Xxxxx Xxxxxx,
Xxxxxxxx 00000, or at such other place as Purchaser and Seller mutually
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agree, at 10:00 A.M., local time, on the Closing Date. Simultaneously with
the payment of the Purchase Price, (a) Seller will assign and transfer to
Purchaser good and valid title in and to the Seller Assets (free and clear
of all Liens, other than Permitted Liens) by delivery of (i) the Assignment
and Assumption Agreement, duly executed by Seller, and (ii) such other
instruments of conveyance, assignment and transfer, in form and substance
reasonably acceptable to Purchaser's counsel and duly executed by Seller,
as Purchaser shall request to vest in Purchaser good title to the Seller
Assets (the Assignment and Assumption Agreement and the other instruments
referred to in clause (ii) above being collectively referred to herein as
the "Assignment Instruments"), and (b) Purchaser will assume from Seller
the payment and performance when due of the Assumed Liabilities by delivery
of (i) the Assignment and Assumption Agreement duly executed by Purchaser,
and (ii) such other instruments of assumption, in form and substance
acceptable to Seller's counsel and duly executed by Purchaser, as shall be
necessary to cause Purchaser to assume the Assumed Liabilities as and to
the extent provided in Section 1.02(a) (the Assignment and Assumption
Agreement and such other instruments referred to in clause (ii) above being
collectively referred to herein as the "Assumption Instruments"). At the
Closing, there shall also be delivered, to the applicable parties hereto,
the opinions, certificates and other contracts, documents, and instruments
required to be delivered under Articles VI and VII.
1.05 PRORATIONS. Prorations of recurring expenses relating to the
Seller Assets and the ownership and operation of the Business will be made
as of the Closing Date to the extent practicable, with Seller liable to the
extent that such items relate to any time period prior to the Closing Date
and Purchaser liable to the extent such items relate to periods beginning
with and subsequent to the Closing Date, including but not limited to:
accrued or pre-paid amount of rents, real estate taxes and other charges
(except charges for sewer, water, electricity and other utilities) payable
by Seller in respect of the real property subject to the Real Property
Leases and any personal property taxes.
Except as otherwise agreed by the parties hereto, the net amount
of all such prorations will be settled and paid on the Closing Date.
Property taxes shall be treated as if levied in advance for the 12 months
following their due date and prorated accordingly. The name of the Person
responsible for any sewer, water, electricity and other utility charges for
all Real Property Leases transferred to Purchaser or as to which Purchaser
is a subleasee as of the Closing shall be changed from Seller to Purchaser
as of the Closing Date or as soon thereafter as practicable. If not
changed as of the Closing Date, parties will pro rate on a daily, per diem
basis until so changed.
1.06 FURTHER ASSURANCES; POST-CLOSING COOPERATION.
(a) At any time or from time to time after the Closing, at
Purchaser's request and without further consideration, Seller
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shall execute and deliver to Purchaser such other instruments of
sale, transfer, conveyance, assignment, and confirmation, provide
such materials and information and take such other actions as
Purchaser may deem reasonably necessary or desirable in order
more effectively to transfer, convey and assign to Purchaser, and
to confirm Purchaser's title to, all of the Seller Assets, and,
to the full extent permitted by Law, to put Purchaser in actual
possession and operating control of the Business and the Seller
Assets and to assist Purchaser in exercising all rights with
respect thereto, and otherwise to cause Seller and Parent to
fulfill their obligations under this Agreement and the Operative
Agreements. Each party shall pay its own expenses incurred in
connection with the execution and delivery of the instruments
executed and delivered pursuant to this Section 1.06(a).
(b) Effective on the Closing Date, Seller hereby
constitutes and appoints Purchaser the true and lawful attorney
of Seller, with full power of substitution, in the name of
Seller, but on behalf of and for the benefit of Purchaser, to
demand, xxx for, recover and receive any and all rights, demands,
claims and causes of action of every kind and description
whatsoever incident or relating to Seller Assets, for the purpose
of fully vesting in Purchaser, its successors and assigns, all
and singular, all the right, title and interest in and to Seller
Assets. Seller hereby acknowledges that the appointment hereby
made and the powers hereby granted are coupled with an interest
and are not and shall not be revocable by it in any manner or for
any reason. Seller shall deliver to Purchaser at Closing an
acknowledged power of attorney to the foregoing effect executed
by Seller or Parent (as the case may be).
(c) Following the Closing, each party hereto will afford to
the other parties hereto, and their counsel and accountants,
during normal business hours, reasonable access to the Books and
Records and other data relating to the Business in its possession
with respect to periods prior to the Closing and the right to
make copies and extracts therefrom and reasonable access to the
party's employees, to the extent that such access may be
reasonably required by the requesting party in connection with
(i) the preparation of Tax Returns, (ii) compliance with the
requirements of any Governmental or Regulatory Authority, (iii)
any actual or threatened Action or Proceeding in which the
adversarial party is a Person other than the requesting party
under this Agreement. Each party hereto further agrees that, for
a period extending six years after the Closing Date, it shall not
destroy or otherwise dispose of any such Books and Records and
other data unless (x) it shall first offer in writing to
surrender such Books and Records and other data to the other
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parties (other than the party that is its Affiliate), and (y)
such other parties shall not agree in writing to take possession
thereof during the 10-day period after such offer is made.
(d) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or
Regulatory Authorities or its financial statements or to fulfill
its obligations hereunder, it is necessary that a party hereto be
furnished with additional information, documents or records
relating to the Business not referred to in paragraph (c) above,
and such information, documents or records are in the possession
or control of another party or its Representatives, such other
party shall use its commercially reasonable efforts to furnish or
make available such information, documents or records (or copies
thereof) at the recipient's request, cost and expense. Any
information obtained by Purchaser, Seller or Parent in accordance
with this paragraph shall be held confidential by Purchaser,
Seller or Parent, as applicable, in accordance with Section
12.06.
(e) Notwithstanding anything to the contrary contained in
this Section 1.06, if Purchaser, on the one hand, and Parent or
Seller, on the other hand, are in an adversarial relationship in
connection with any Action or Proceeding, the furnishing of
books, records and other documents and information in accordance
with paragraphs (c) and (d) of this Section 1.06 regarding the
subject Action or Proceeding of such matter shall be subject to
applicable rules relating to discovery, PROVIDED that the
foregoing limitations shall not apply to the furnishing of books,
records and other documents and information of the parties hereto
relating to (i) the adjustment to the Purchase Price pursuant to
Section 1.03(c) and (ii) the prorations to be made pursuant to
Section 1.05.
1.07 THIRD-PARTY CONSENTS. To the extent that any Real Property
Lease, Business Contract or Business License is not assignable without the
consent of another party, this Agreement shall not constitute an assignment
or an attempted assignment thereof if such assignment or attempted
assignment would constitute a breach thereof. Seller, Parent and Purchaser
shall use their commercially reasonable efforts as required by Sections
4.01 and 5.01 of the Agreement to obtain the consent of such other party to
the assignment of any such Real Property Lease, Business Contract or
Business License to Purchaser in all cases in which such consent is or may
be required for such assignment. If any such consent shall not be
obtained, Seller and Parent shall cooperate with Purchaser in any
reasonable arrangement designed to provide Purchaser with the benefits
intended to be assigned to Purchaser under the relevant Real Property
Lease, Business Contract or Business License, including, but not limited to
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a Management Agreement for a Store as to which an Estoppel Certificate and
Consent to Assignment Purchaser or sublease (acceptable to Purchaser) has
not been executed and delivered by all parties to the Purchaser. If and to
the extent that such arrangement cannot be made, Purchaser shall have no
obligation pursuant to Section 1.02 or otherwise with respect to any such
Real Property Lease, Business Contract or Business License. The provisions
of this Section 1.07 shall not affect the right of Purchaser to receive any
Store Relocation Expenses or not to consummate the transactions
contemplated by this Agreement if the condition contained in Section 6.08
has not been satisfied.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
Purchaser, Parent and Seller acknowledge that each party's
Disclosure Schedules referenced in this Agreement were not delivered on the
date of this Agreement. Each party shall have ten business days after the
date of this Agreement to deliver to the other party the party's Disclosure
Schedule in final form. The receiving party shall have the right to
terminate in its sole discretion this Agreement by written notice to the
other party within seven business days after the receipt of the other
party's Disclosure Schedule or if (i) the other party fails timely to
deliver the Disclosure Schedule or (ii) if (A) the other party's Disclosure
Schedule is timely delivered, but discloses information, contracts or other
documents not disclosed in writing to the receiving party prior to the
signing of this Agreement ("Undisclosed Information") and (B) the
Undisclosed Information results in a reduction in the value of the Business
or Seller Assets, in the case of Parent and Seller as the disclosing party,
or the business and financial condition of Purchaser, in the case of the
Purchaser as the disclosing party, in an amount in excess of
$_____________. If a receiving party terminates this Agreement pursuant to
the foregoing provision, this Agreement shall be null and void, and have no
effect without any liability on the part of any party hereto or any
Affiliate or Representative of the party. If the party does not terminate
this Agreement pursuant to the foregoing provision, the other party's
Disclosure Schedule shall be deemed to be delivered as of the date of this
Agreement.
Each of Parent and Seller hereby represents and warrants to
Purchaser, on a joint and several basis on the date hereof and on and as of
the Closing Date, as follows:
2.01 ORGANIZATION OF SELLER AND Parent. Each of Seller and Parent is
a corporation duly organized, validly existing and in good standing under
the Laws of the States of Texas and Delaware, respectively, and has full
corporate power and authority to conduct the Business as and to the extent
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now conducted and to own, use and lease the Seller Assets. Each of Seller
and Parent is duly qualified, licensed or admitted to do business and is in
good standing in all jurisdictions in which the ownership, use or leasing
of its Assets and Properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary and in which the
failure to be so qualified, licensed or admitted and in good standing could
reasonably be expected to have an adverse effect on the validity or
enforceability of this Agreement or any of the Operative Agreements to
which it is a party or on the ability of Seller or Parent to perform its
obligations hereunder or thereunder.
2.02 AUTHORITY. Each of Seller and Parent has full corporate power
and authority to execute and deliver this Agreement and the Operative
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby, including without limitation to sell and transfer (pursuant to
this Agreement) the Seller Assets. The execution and delivery by each of
Seller and Parent of this Agreement and the Operative Agreements to which
it is a party, and the performance by each of Seller and Parent of its
obligations hereunder and thereunder, have been duly and validly authorized
by the Board of Directors of Seller and Parent, as the case may be, and no
other corporate action on the part of Seller or Parent shall be necessary
in connection with such execution, delivery and performance. This
Agreement has been duly and validly executed and delivered by each of
Seller and Parent and constitutes, and upon the execution and delivery by
each of Seller and Parent of the Operative Agreements to which it is a
party, such Operative Agreements will constitute, legal, valid and binding
obligations of Seller and Parent enforceable against each of Seller and
Parent in accordance with their terms, except as limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws generally affecting enforcement of creditors' rights
and subject to general principles of equity (regardless of whether
enforceability is considered in a proceeding in law or equity).
2.03 NO CONFLICTS. The execution and delivery by each of Seller and
Parent of this Agreement do not, and the execution and delivery by each of
Seller and Parent of the Operative Agreements to which it is a party, the
performance by each of Seller and Parent of its obligations under this
Agreement and such Operative Agreements and the consummation of the
transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any
of the terms, conditions or provisions of the articles of
incorporation or by-laws of Seller or Parent;
(b) subject to obtaining the consents, approvals and
actions, making the filings and giving the notices disclosed in
SECTION 2.04 OF THE DISCLOSURE SCHEDULE, conflict with or result
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in a violation or breach of any term or provision of any Law or
Order applicable to Seller, Parent or any of their respective
Assets and Properties; or
(c) except as disclosed in SECTION 2.03 OF THE DISCLOSURE
SCHEDULE, (i) conflict with or result in a violation or breach
of, (ii) constitute (with or without notice or lapse of time or
both) a default under or (iii) require Seller or Parent to obtain
any consent, approval or action of, make any filing with or give
any notice to any Person as a result or under the terms of any
Contract or License to which Seller or Parent is a party or by
which any of its Assets and Properties is bound.
2.04 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in
SECTION 2.04 OF THE DISCLOSURE SCHEDULE, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority on the
part of Seller or Parent is required in connection with the execution,
delivery and performance of this Agreement or any of the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
2.05 BOOKS AND RECORDS. EXCEPT AS SET FORTH IN SECTION 2.05 OF THE
DISCLOSURE SCHEDULE, none of the Business Books and Records is recorded,
stored, maintained, operated or otherwise wholly or partly dependent upon
or held by any means (including any electronic, mechanical or photographic
process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership of Seller and
the direct control of one or more Employees.
2.06 FINANCIAL STATEMENTS. Prior to the execution of this Agreement,
Seller has delivered to Purchaser true and complete copies of the following
financial statements:
(a) Seller's balance sheet dated June 30, 1997, and income
statement for the twelve months then ended.
(b) Seller's balance sheet dated December 31, 1997, and
income statement for the six months then ended.
All such financial statements have been prepared from the Books and Records
of Seller on a basis for inclusion in the consolidated financial statements
of Parent, and fairly present, in all material respects, the financial
condition of the Seller as of the dates indicated and the results of
operations of the Seller for the periods then ended, subject to normal
year-end adjustments and the absence of footnotes to such statements.
2.07 ABSENCE OF CHANGES. Except for the execution and delivery of
this Agreement and the transactions to take place pursuant hereto on the
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Closing Date, since December 31, 1997, there has not been any material
adverse change, or any event or development which, individually or together
with other such events, could reasonably be expected to result in a
material adverse change, in the Condition of the Business excluding the
effects of (1) any Employees quitting employment with Seller after the
announcement of the transactions contemplated by this Agreement, (2)
changes in the operations of the Business required by this Agreement or
requested in writing by Purchaser, and (3) changes in the terms or
relationship between Seller and vendors after the announcement of the
transactions contemplated by this Agreement, which changes are attributable
to the announced transaction.
2.08 NO UNDISCLOSED LIABILITIES. Except as reflected or reserved
against in the balance sheet included in the Annual Financial Statements or
in the notes thereto or as disclosed in SECTION 2.08 OF THE DISCLOSURE
SCHEDULE or any other Section of the Disclosure Schedule, neither Parent
nor Seller has any knowledge of any Liabilities against, relating to or
affecting the Business or any of the Seller Assets, other than Liabilities
incurred in the ordinary course of business consistent with past practice
which in the aggregate are not material to the Condition of the Business.
2.09 TAXES. Except as set forth on SCHEDULE 2.09 OF THE DISCLOSURE
SCHEDULE:
(a) All Tax Returns required to have been filed by or with
respect to Seller have been duly filed, and each such Tax Return
correctly and completely reflects Tax liabilities and all other
information required to be reported thereon. All Taxes due and
payable by Seller, whether or not shown on any Tax Return, have
been paid.
(b) There are no Liens for Taxes on the Seller Assets,
other than Liens for Taxes not yet due and payable. There are no
Taxes of Seller, or deficiencies in Taxes or claims for Taxes
against Seller, for any taxable period that could become a
Liability of, or which could be assessed or collected against,
Purchaser or could become a Lien on any of the Seller Assets, as
a result of the transfer of the Seller Assets contemplated by
this Agreement.
(c) Seller has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing
to any Employee, creditor, independent contractor or other third
party.
(d) None of the Seller Assets is property that is required
to be treated as owned by any other person pursuant to the safe
harbor lease provisions of former Section 168(f)(8) of the
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Xxxxxxxx Xxxxxxx Code of 1954, as amended, and in effect
immediately prior to the enactment of the Tax Reform Act of 1986
and none of the Seller Assets is tax exempt use property within
the meaning of Section 168(h) of the Code.
(e) None of the Seller Assets secures any debt the interest
on which is tax exempt under Section 103 of the Code.
2.10 LEGAL PROCEEDINGS. Except as disclosed in SECTION 2.10 OF THE
DISCLOSURE SCHEDULE (with paragraph references corresponding to those set
forth below):
(a) there are no Actions or Proceedings pending or, to the
knowledge of Seller or Parent, threatened against, relating to or
affecting Seller with respect to the Business or any of its
Assets and Properties which (i) could reasonably be expected to
result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the
Operative Agreements or otherwise result in a material diminution
of the benefits contemplated by this Agreement or any of the
Operative Agreements to Purchaser or (ii) if determined adversely
to Seller, could reasonably be expected to result in (x) any
injunction or other equitable relief that would interfere in any
material respect with the Business or (y) Losses by Seller,
individually or in the aggregate with Losses in respect of other
such Actions or Proceedings, exceeding $25,000;
(b) there are no facts or circumstances known to Seller or
Parent that could reasonably be expected to give rise to any
Action or Proceeding that would be required to be disclosed
pursuant to clause (a) above; and
(c) there are no Orders outstanding against Seller or
Parent with respect to the Business.
Prior to the execution of this Agreement, Seller has delivered to Purchaser
all responses of counsel to auditors' requests for information delivered in
connection with the Annual Financial Statements (together with any updates
provided by such counsel) regarding Actions or Proceedings pending or, to
the knowledge of Seller or Parent, threatened against, relating to or
affecting the Business.
2.11 COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in
SECTION 2.11 OF THE DISCLOSURE SCHEDULE, and except with respect to
Environmental Laws, which are covered by Section 2.21, Tax Laws which are
covered by 2.09, and Employment Laws, which are covered by Section 2.20,
neither Seller or Parent is, nor has either of Seller or Parent at any time
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within the last five years been, nor has either of Seller or Parent
received any notice that it is or has at any time within the last five
years been, in violation of or in default under, in any material respect,
any Law or Order applicable to the Business or the Seller Assets.
2.12 EMPLOYEE BENEFIT PLANS. Except as set forth in SECTION 2.12 OF
THE DISCLOSURE SCHEDULE, Seller does not have, and has never had, any
Qualified Plan or other Benefit Plan maintained by Seller, or to which
Seller has made payments or contributions on behalf of Seller's Employees,
whether formal or informal, whether qualified or non-qualified, whether
issued, whether funded or unfunded, and whether legally binding or not.
All of Seller's Plans are, and during all applicable limitation periods
have been, in compliance in all material respects with all applicable laws,
orders or governmental rules or regulations. There has been no transaction
concerning a Plan in connection with either Parent, Seller or Purchaser
could be subject to a civil penalty assessed pursuant to any applicable
law. Any termination, partial termination, curtailment, discontinuance, or
merger involving any of the Plans of Seller has been effected in compliance
in all material respects with all applicable laws, orders or governmental
rules or regulations. Parent or Seller has made full and timely payment of
all required contributions to such Plans and no unfunded liability exists
with respect to any Plan of Seller. No trust created under any such Plan
has incurred an accumulated funding deficiency. Neither Parent, Seller nor
any predecessor or affiliate of Parent or Seller participates in,
contributes to, or is otherwise involved with, or has participated in,
contributed to, or been otherwise involved with at any time in the past,
any "multi-employer plan" as defined in ERISA. Neither Parent nor Seller
is a party to or otherwise subject to any express or implied agreement or
plan to provide health insurance or other benefits to retired employees.
2.13 REAL PROPERTY LEASES.
(a) SECTION 1.01(a)(i) OF THE DISCLOSURE SCHEDULE contains
a true and correct list of each parcel of real property leased by
Seller or Parent (as lessor or lessee) and used or held for use
in connection with the Business.
(b) Seller has a valid and subsisting leasehold estate in
and the right to quiet enjoyment of the real properties subject
to the Real Property Leases described in SECTION 1.01(a)(i) OF
THE DISCLOSURE SCHEDULE for the full term thereof. Each Real
Property Lease is a legal, valid and binding agreement,
enforceable in accordance with its terms, of Seller and, to the
knowledge of Parent and Seller, of each other Person that is a
party thereto, and except as set forth in SECTION 2.13(c) OF THE
DISCLOSURE SCHEDULE, there is no, nor has Seller or Parent
received any notice of any, default (or any condition or event
which, after notice or lapse of time or both, would constitute a
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default) thereunder. Neither Seller nor Parent owes any
brokerage commissions with respect to any such leased space.
None of the real properties, or the use thereof, contravenes or
violates any applicable building or zoning law in any material
respect (whether or not permitted on the basis of prior
nonconforming use, waiver, or variance).
(c) Seller has delivered to Purchaser prior to the
execution of this Agreement true and complete copies of all Real
Property Leases (including any amendments and renewal letters)
and, to the extent reasonably available to Seller, all leases,
mortgages, certificates of occupancy, title insurance policies,
title reports, surveys, and similar documents with respect to the
real property subject to the Real Property Leases described in
SECTION 1.01(a)(i) OF THE DISCLOSURE SCHEDULE.
(d) Except as disclosed in SECTION 2.13(f) OF THE
DISCLOSURE SCHEDULE, the Stores that are the subject of the Real
Property Leases, and the heating, ventilation and air
conditioning equipment and systems located therein and which the
Seller maintains, are in good operating condition and in a state
of good maintenance and repair, ordinary wear and tear excepted,
are adequate and suitable for the purposes for which they are
presently being used and, to the knowledge of Seller, there are
no condemnation or appropriation proceedings pending or
threatened against any of the real property that are the subject
of the Real Property Leases.
2.14 TANGIBLE PERSONAL PROPERTY. Seller is in possession of and has
good title to, or has valid leasehold interests in or valid rights under
Contract to use, all the Tangible Personal Property, which includes all
tangible personal property reflected on the balance sheet included in the
Annual Financial Statements and tangible personal property acquired since
the Annual Financial Statement Date other than tangible personal property
disposed of since such date in the ordinary course of business consistent
with past practice. All the Tangible Personal Property is in good working
order and condition, ordinary wear and tear excepted, and will be conveyed
free and clear of all Liens other than Permitted Liens and Liens disclosed
in SECTION 2.14 OF THE DISCLOSURE SCHEDULE.
2.15 INTELLECTUAL PROPERTY RIGHTS. Seller has interests in or uses
only the items of Intellectual Property disclosed in SECTION 1.01(a)(viii)
OF THE DISCLOSURE Schedule in connection with the conduct of the Business,
each of which items Seller either has all right, title and interest in or a
valid and binding license to use. No other Intellectual Property is used
in the conduct of the Business. Except as disclosed in SECTION 2.15 OF THE
DISCLOSURE SCHEDULE, (i) Seller has the exclusive right to use the
Intellectual Property disclosed in SECTION 1.01(a)(viii) OF THE DISCLOSURE
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SCHEDULE, (ii) all registrations with and applications to Governmental or
Regulatory Authorities in respect of such Intellectual Property are valid
and in full force and effect and are not subject to the payment of any
Taxes or maintenance fees or the taking of any other actions by Seller or
Parent to maintain their validity or effectiveness, (iii) there are no
restrictions on the direct or indirect transfer of any license, or any
interest therein, held by Seller in respect of such Intellectual Property,
(iv) Seller has delivered to Purchaser prior to the execution of this
Agreement documentation with respect to any invention, process, design,
computer program or other know-how or trade secret included in such
Intellectual Property, which documentation is accurate in all material
respects and reasonably sufficient in detail and content to identify and
explain such invention, process, design, computer program, or other know-
how or trade secret and to facilitate its full and proper use without
reliance on the special knowledge or memory of any Person, (v) Seller has
taken security measures to protect the secrecy, confidentiality, and value
of its trade secrets in respect of the Business in accordance with
customary industry practice, (vi) Seller is not, nor has it received any
notice that it is, in default (or with the giving of notice or lapse of
time or both, would be in default) under any license to use such
Intellectual Property and (vii) neither Seller nor Parent has any knowledge
that such Intellectual Property is being infringed by any other Person.
Neither Seller nor Parent has received notice that Seller is infringing any
Intellectual Property of any other Person in connection with the conduct of
the Business, no claim is pending or, to the knowledge of Seller or Parent,
has been made to such effect that has not been resolved and, to the
knowledge of Seller or Parent, neither Seller nor Parent is infringing any
Intellectual Property Rights of any other Person in connection with the
conduct of the Business.
2.16 CONTRACTS.
(a) SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE (with
paragraph references corresponding to those set forth below)
contains a true and complete list of each of the following
Contracts or other arrangements (true and complete copies or, if
none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to
Purchaser prior to the execution of this Agreement) to which
Seller is a party or by which any of the Seller Assets is bound:
(i)(A) all Contracts (excluding Benefit Plans)
providing for a commitment of employment or consultation
services for a specified or unspecified term to any
Employee, the name, position, and rate of compensation of
each Employee party to such a Contract, and the expiration
date of each such Contract; and (B) any written or unwritten
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representations, commitments, promises, communications or
courses of conduct (excluding Benefit Plans and not embodied
in a Contract) involving an obligation of Seller to make
payments in any year, other than with respect to salary or
incentive compensation payments in the ordinary course of
business, to any Employee exceeding $25,000 or any group of
Employees exceeding $50,000 in the aggregate;
(ii) all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of
Seller to engage in any business activity or compete with
any Person in connection with the Business or, except as
provided in Section 4.10, prohibiting or limiting the
ability of any Person to compete with Seller in connection
with the Business;
(iii) all partnership, joint venture, shareholders' or
other similar Contracts with any Person in connection with
the Business;
(iv) all Contracts with distributors, dealers,
manufacturer's representatives, sales agencies or franchises
with whom Seller deals in connection with the Business and
which involve payments or potential payments, pursuant to
the terms of any such Contract, by or to Seller of more than
$20,000;
(v) all Contracts relating to the future disposition
or acquisition of any Seller Assets, other than dispositions
or acquisitions of Inventory in the ordinary course of
business consistent with past practice;
(vi) all Contracts between or among Seller, on the one
hand, and Parent, any officer, director, Affiliate or
Associate of Parent or of Seller or any Associate of any
such officer, director or Affiliate, on the other hand; and
(vii) all other Contracts with respect to the Business
that (A) involve the payment or potential payment, pursuant
to the terms of any such Contract, by or to Seller of more
than $50,000 and (B) cannot be terminated within 30 calendar
days after giving notice of termination without resulting in
any material cost or penalty to Seller.
(b) Each Contract required to be disclosed in
SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE is in full force and
effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of each Seller, and to
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the knowledge of Parent and Seller, of each other party thereto;
and except as disclosed in SECTION 2.16(b) OF THE DISCLOSURE
SCHEDULE neither Seller or Parent nor, to the knowledge of Seller
or Parent, any other party to such Contract is, or has received
notice that it is, in violation or breach of or default under any
such Contract (or with notice or lapse of time or both, would be
in violation or breach of or default under any such Contract).
(c) Except as disclosed in SECTION 2.16(c) OF THE
DISCLOSURE SCHEDULE, (i) the execution, delivery and performance
by Seller and Parent of this Agreement and the Operative
Agreements to which each is a party, and the consummation of the
transactions contemplated hereby and thereby, will not (A) result
in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (B) result in
or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments under
or (C) result in the creation or imposition of any Lien upon
Seller or any of its Assets and Properties under, any Business
Contract, and (ii) neither Seller nor Parent is a party to or
bound by any Business Contract, that, in the case of each of the
foregoing, has been or could reasonably be expected to be,
individually or in the aggregate with any other Business
Contracts, materially adverse to the Condition of the Business.
2.17 LICENSES. Section 1.01(a)(ix) of the Disclosure Schedule
contains a true and complete list of all material Licenses used or held for
use in the Business. Prior to the execution of this Agreement, Seller has
delivered to Purchaser true and complete copies of all such Licenses.
Except as disclosed in SECTION 2.17 OF THE DISCLOSURE SCHEDULE:
(i) Seller owns or validly holds all Licenses that are
material to the Business;
(ii) each Business License is valid, binding and in
full force and effect;
(iii) neither Seller nor Parent is, nor has either
received any notice that it is, in default (or with the
giving of notice or lapse of time or both, would be in
default) under any Business License; and
(iv) the execution, delivery and performance by Seller
of this Agreement and the Operative Agreements to which it
is a party, and the consummation of the transactions
contemplated hereby and thereby, will not (A) result in or
give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to,
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(B) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or
guaranteed payments under or (C) result in the creation or
imposition of any Lien upon Seller or any of its Assets and
Properties under, any Business License.
2.18 INSURANCE. Each liability, property, workers' compensation and
other insurance policies currently in effect that insure the Business, the
Employees or the Seller Assets ("Insurance Policies") is, to the knowledge
of Parent and Seller, a valid and binding obligation of the insurer and is
and will continue to be through at least the Closing Date in full force and
effect, no premiums due thereunder have not been paid and neither Seller
nor Parent has received any notice of cancellation or termination in
respect of any such policy or is in default thereunder. Such Insurance
Policies, in light of the nature of the Business and the Seller Assets, are
in amounts and have coverages that are reasonable and customary for Persons
engaged in such business and having such Assets and Properties. Neither
Seller nor Parent has received notice that any insurer under any policy
referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause.
2.19 AFFILIATE TRANSACTIONS. Except as disclosed in SECTION 2.19(a)
OF THE DISCLOSURE SCHEDULE, as of the date of this Agreement, (i) no
officer, director, Affiliate or Associate of Seller or any Associate of any
such officer, director or Affiliate provides or causes to be provided any
assets, services or facilities used or held for use in connection with the
Business, and (ii) the Business does not provide or cause to be provided
any assets, services or facilities to any such officer, director, Affiliate
or Associate. Except as disclosed in SECTION 2.19(b) OF THE DISCLOSURE
SCHEDULE, each of the transactions listed in SECTION 2.19(a) OF THE
DISCLOSURE SCHEDULE is engaged on terms equivalent to those generally
available on an arm's-length basis.
2.20 EMPLOYEES; LABOR RELATIONS.
(a) SECTION 2.20 OF THE DISCLOSURE SCHEDULE contains a list
of the name of each Employee at the date hereof, together with
such Employee's position or function, annual base salary or wages
and any incentive or bonus arrangement with respect to such
Employee in effect on such date. Seller has no knowledge that a
material number of Employees intend to resign, or will refuse
offers of employment from Purchaser, because of the consummation
of the transactions contemplated by this Agreement.
(b) Except as disclosed in SECTION 2.20 OF THE DISCLOSURE
SCHEDULE, (i) no Employee is presently a member of a collective
bargaining unit and, to the knowledge of each of Seller and
Parent, there are no threatened or contemplated attempts to
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organize for collective bargaining purposes any of the Employees,
and (ii) no unfair labor practice complaint or sex or age
discrimination claim has been brought during the last five years
against Seller with respect to the conduct of the Business before
the National Labor Relations Board or any other Governmental or
Regulatory Authority. Since January 1, 1993 there has been no
work stoppage, strike or other similar concerted action by
employees of Seller engaged in the Business. During that period,
Seller has complied in all material respects with all applicable
Laws relating to the employment of labor, including without
limitation those relating to wages, hours and collective
bargaining.
(c) Parent and Seller represents to Purchaser that the
Worker Adjustment and Retraining Notification Act, 29 U.S.C.
< SECTION >2101 ET SEQ. ("WARN"), or any other similar state, local
or foreign statute or government regulation or ordinance, is
either inapplicable to the transactions contemplated in this
Agreement or Seller has fully complied with all those statutes.
2.21 ENVIRONMENTAL MATTERS. Except as set forth in SECTION 2.21 OF
THE DISCLOSURE SCHEDULE:
(a) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by,
on behalf of, or which are in the possession of Seller or Parent
with respect to any Site which have not been delivered to
Purchaser prior to execution of this Agreement.
(b) With respect to the ownership or operation of any
Store:
(i) Seller has obtained and holds all Environmental
Permits that are required to be held by Seller.
(ii) During Seller's tenancy at each Store, Seller has
not caused a violation of any applicable Environmental Laws.
(iii) There are no pending or, to the knowledge of
Seller, threatened Environmental Claims against Seller in
connection with the Stores, and Seller is not aware of any
facts or circumstances which could reasonably be expected to
form the basis for any Environmental Claim against Seller
with respect to the Stores.
(iv) No Releases of Hazardous Materials in violation of
any applicable Environmental Law have occurred at, from, in,
to, on or under any Site and no Hazardous Materials are
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present in, on, about or migrating to or from any Store that
is to remain operating after Closing that could give rise to
an Environmental Claim against Seller.
(v) Neither Seller, any predecessor of Seller, nor any
entity previously owned by Seller and that operated any
Store, has transported or arranged for the treatment,
storage, handling, disposal or transportation of any
Hazardous Material to any off-Site location which could
result in an Environmental Liability Claim against Seller.
(vi) No Store is a current or, to the knowledge of
Seller, proposed Environmental Clean-up Site.
(vii) To Seller's knowledge, there are no Liens (other
than Permitted Liens) arising under or pursuant to any
Environmental Law with respect to any Store and there are no
facts, circumstances or conditions that could reasonably be
expected to restrict, encumber or result in the imposition
of special conditions under any Environmental Law with
respect to the ownership, occupancy, development, use or
transferability of any Store.
(viii) To Seller's knowledge, there are no:
(i) underground storage tanks, active or abandoned;
(ii) polychlorinated biphenyl containing equipment; or
(iii) asbestos-containing material at any Site.
(c) Neither the Parent nor Seller has any knowledge of any
pending or threatened Environmental Liability relating to or in
connection with any Store or any other Seller Assets.
2.22 SUBSTANTIAL SUPPLIERS. SECTION 2.22(a) OF THE DISCLOSURE
SCHEDULE lists the 10 largest suppliers of the Business, on the basis of
cost of goods or services purchased for the year ending on the Annual
Financial Statement Date. Except as disclosed in SECTION 2.22(b) OF THE
DISCLOSURE SCHEDULE as of the date of this Agreement, no supplier has
ceased or materially reduced its sales or provision of services to the
Business since the Annual Financial Statement Date, or to the knowledge of
Seller, has threatened to cease or materially reduce sales or provision of
services after the date hereof, nor has there been a material change in the
terms or pricing with any supplier. Except as disclosed in SECTION 2.22(c)
OF THE DISCLOSURE SCHEDULE, to the knowledge of Seller and Parent, no
supplier is the subject of any bankruptcy, insolvency or other proceeding
seeking protection from creditors.
2.23 ACCOUNTS RECEIVABLE. Except as set forth in SECTION 2.23 OF THE
DISCLOSURE SCHEDULE, the Accounts Receivable (i) arose from BONA FIDE sales
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transactions in the ordinary course of business and are payable on trade
terms consistent with Seller's past practice, (ii) to the knowledge of
Seller, are legal, valid and binding obligations of the respective debtors
enforceable in accordance with their terms, (iii) are not, to the knowledge
of Seller, subject to any valid set-off or counterclaim, (iv) do not
represent obligations for goods sold on consignment. SECTION 2.23 OF THE
DISCLOSURE SCHEDULE sets forth a description of any security arrangements
and collateral securing the repayment or other satisfaction of the Accounts
Receivable (the "Security Agreements").
2.24 INVENTORY. Except as set forth in SECTION 2.24 OF THE DISCLOSURE
SCHEDULE, all items included in the Inventory are the property of Seller
and are not held by Seller on consignment from others
2.25 VEHICLES. SECTION 1.01(a)(x) OF THE DISCLOSURE SCHEDULE contains
a true and complete list of all motor vehicles owned or leased by Seller
and used or held for use in the conduct of the Business. Except as set
forth in SECTION 2.25 OF THE DISCLOSURE SCHEDULE, Seller has good and valid
title to, or has valid leasehold interests in, or valid rights under
Contract to use, each Vehicle.
2.26 NO GUARANTEES. Except for Parent's guaranty of any Real Property
Lease, none of the Liabilities of the Business or of Seller incurred in
connection with the conduct of the Business is guaranteed by or subject to
a similar contingent obligation of any other Person, nor has Seller
guaranteed or become subject to a similar contingent obligation in respect
of the Liabilities of any customer, supplier or other Person to whom Seller
sells goods or provides services in the conduct of the Business or with
whom Seller otherwise has significant business relationships in the conduct
of the Business.
2.27 ENTIRE BUSINESS. The sale of the Seller Assets by Seller to
Purchaser pursuant to this Agreement will effectively convey to Purchaser
the entire Business and all of the tangible and intangible property used by
Seller (whether owned, leased or held under license by Seller or Parent, by
any of Seller's Affiliates or Associates, or by others) in connection with
the conduct of the Business as heretofore conducted by Seller (except for
the Excluded Assets) including, without limitation, all tangible Assets and
Properties of Seller reflected in the balance sheet included in the Annual
Financial Statements and Assets and Properties acquired since the Annual
Financial Statement Date in the conduct of the Business, other than the
Excluded Assets and Assets and Properties disposed of since such date,
consistent with Section 2.07. Except as disclosed in SECTION 2.27 OF THE
DISCLOSURE SCHEDULE, there are no shared facilities or services which are
used in connection with any business or other operations of Seller or
Parent or any of Seller's Affiliates or Associates other than the Business.
2.28 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Parent and Seller
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directly with Purchaser without the intervention of any Person on behalf of
Parent and Seller in such manner as to give rise to any valid claim by any
Person against Purchaser for a finder's fee, brokerage commission or
similar payment.
2.29 DISCLOSURE. No representation or warranty contained in this
Agreement, and no statement contained in the Disclosure Schedule or in any
certificate, list or other writing furnished to Purchaser pursuant to any
provision of this Agreement (including without limitation the Financial
Statements), contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller on the date
hereof and on and as of the Closing Date as follows:
3.01 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Michigan.
Purchaser has full corporate power and authority to enter into this
Agreement and the Operative Agreements to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Purchaser is duly qualified, licensed or
admitted to do business and is in good standing in all jurisdictions in
which the ownership, use or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary and in which the failure to be so qualified, licensed
or admitted and in good standing could reasonably be expected to have an
adverse effect on the validity or enforceability of this Agreement or any
of the Operative Agreements to which it is a party or on the ability of
Purchaser to perform its obligations hereunder or thereunder.
3.02 AUTHORITY. The execution and delivery by Purchaser of this
Agreement and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and thereunder, have
been duly and validly authorized by the Board of Directors of Purchaser, no
other corporate action on the part of Purchaser or its shareholders being
necessary. This Agreement has been duly and validly executed and delivered
by Purchaser and constitutes, and upon the execution and delivery by
Purchaser of the Operative Agreements to which it is a party, such
Operative Agreements will constitute, legal, valid and binding obligations
of Purchaser enforceable against Purchaser in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws generally affecting
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enforcement of creditors' rights and subject to general principles of
equity (regardless of whether enforceability is considered in a proceeding
in law or equity).
3.03 NO CONFLICTS. The execution and delivery by Purchaser of this
Agreement does not, and the execution and delivery by Purchaser of the
Operative Agreements to which it is a party, the performance by Purchaser
of its obligations under this Agreement and such Operative Agreements and
the consummation of the transactions contemplated hereby and thereby will
not:
(a) conflict with or result in a violation or breach of any
of the terms, conditions or provisions of the articles of
incorporation or by-laws of Purchaser;
(b) subject to obtaining the consents, approvals and
actions, making the filings and giving the notices disclosed in
SECTION 3.04 OF THE DISCLOSURE SCHEDULE hereto, conflict with or
result in a violation or breach of any term or provision of any
Law or Order applicable to Purchaser or any of its Assets and
Properties; or
(c) except as disclosed in SECTION 3.03 OF THE DISCLOSURE
SCHEDULE hereto, (i) conflict with or result in a violation or
breach of, (ii) constitute (with or without notice or lapse of
time or both) a default under, (iii) require Purchaser to obtain
any consent, approval or action of, make any filing with or give
any notice to any Person as a result or under the terms of or
(iv) result in the creation or imposition of any Lien upon
Purchaser or any of its Assets or Properties under any Contract
or License to which Purchaser is a party or by which any of its
Assets and Properties is bound.
3.04 GOVERNMENTAL APPROVALS AND FILINGS. Except as disclosed in
SECTION 3.04 OF THE DISCLOSURE SCHEDULE hereto, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Purchaser is required in connection with the
execution, delivery and performance of this Agreement or the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
3.05 LEGAL PROCEEDINGS. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which could
reasonably be expected to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of
any of the transactions contemplated by this Agreement or any of the
Operative Agreements.
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3.06 FINANCIAL STATEMENTS. Prior the execution of this Agreement,
Purchaser has delivered to Parent true and complete copies of Purchaser's
balance sheet as of January 25, 1998 and related statements of income,
shareholders' equity and cash flows of Purchaser for the fiscal year then
ended, including the notes thereto ("Purchaser's Financial Statements").
The Purchaser's Financial Statements present fairly, in all material
respects, the financial position of Purchaser and its results of operations
and cash flow at and for the fiscal period indicated, in conformity with
GAAP.
3.07 ABSENCE OF CHANGES. Since January 25, 1998, there has not been
any material adverse change, or any event or development which,
individually or together with other such events, could reasonably be
expected to result in a material adverse change, in the business,
conditions (financial or otherwise), results of operations, or Assets and
Properties of Purchaser.
3.08 NO UNDISCLOSED LIABILITIES. Except as reflected or reserved
against in the balance sheet included in the Purchaser's Financial
Statements or in the notes thereto or as disclosed in SECTION 3.08 OF THE
DISCLOSURE SCHEDULE or any other Section of the Disclosure Schedule, there
are no Liabilities against, relating to or affecting the business of
Purchaser or its assets and Properties, other than Liabilities incurred in
the ordinary course of business consistent with practice which in the
aggregate are not material to the business, condition (financial or
otherwise), results of operations, assets and Properties and prospects of
the business of Purchaser.
3.09 TAXES. Except as set forth on SCHEDULE 3.09 OF THE DISCLOSURE
SCHEDULE:
(a) All Tax Returns required to have been filed by or with
respect to Purchaser have been duly filed, and each such Tax
Return correctly and completely reflects Tax liabilities and all
other information required to be reported thereon. All Taxes due
and payable by Purchaser, whether or not shown on any Tax Return,
have been paid.
(b) There are no Liens for Taxes on the Assets and
Properties of Purchaser, other than Liens for Taxes not yet due
and payable.
(c) Purchaser has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor or other
third party.
3.10 COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in SECTION
3.10 OF THE DISCLOSURE SCHEDULE, and except with respect to Tax Laws which
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are covered by 3.09, Purchaser is not and has not at any time within the
last five years been, nor has Purchaser received any notice that it is or
has at any time within the last five years been, in violation of or in
default under, in any material respect, any Law or Order applicable to the
business of Purchaser or its Assets and Properties.
3.11 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser
directly with Parent and Seller without the intervention of any Person on
behalf of Purchaser in such manner as to give rise to any valid claim by
any Person against Parent or Seller for a finder's fee brokerage commission
or similar payment.
ARTICLE IV
COVENANTS OF SELLER AND PARENT
Each of Seller and Parent covenants and agrees with Purchaser
that, at all times from and after the date hereof until the Closing and,
with respect to any covenant or agreement by its terms to be performed in
whole or in part after the Closing, for the period specified herein or, if
no period is specified herein, indefinitely, each of Seller and Parent will
comply with all covenants and provisions of this Article IV, except to the
extent Purchaser may otherwise consent in writing.
4.01 REGULATORY AND OTHER APPROVALS. Each of Seller and Parent will
(a) take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable to obtain all consents, approvals or
actions of, to make all filings with and to give all notices to
Governmental or Regulatory Authorities or any other Person required of
Seller to consummate the transactions contemplated hereby and by the
Operative Agreements, including without limitation those described in
SECTIONS 2.03 AND 2.04 OF THE DISCLOSURE SCHEDULE, (b) provide such other
information and communications to such Governmental or Regulatory
Authorities or other Persons as Purchaser or such Governmental or
Regulatory Authorities or other Persons may reasonably request and
(c) cooperate with Purchaser as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other Persons required
of Purchaser to consummate the transactions contemplated hereby and by the
Operative Agreements. Seller will provide prompt notification to Purchaser
when any such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as applicable, and will
advise Purchaser of any communications (and, unless precluded by Law,
provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the
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transactions contemplated by this Agreement or any of the Operative
Agreements.
4.02 INVESTIGATION BY PURCHASER. Seller and Parent will (a) provide
Purchaser, any Person who is considering providing financing to Purchaser
to finance all or any portion of the Purchase Price and their respective
officers, directors, employees, agents, counsel, accountants, financial
advisors, consultants and other representatives (collectively,
"Representatives") with full access, upon reasonable prior notice and
during normal business hours, to the Employees and such other officers,
employees and agents of Seller or Parent who have any responsibility for
the conduct of the Business, to Seller's and Parent's accountants and to
the Seller Assets; (b) furnish Purchaser and such other Persons with all
such information and data (including without limitation copies of Business
Contracts, Business Licenses, Benefit Plans and other Business Books and
Records) concerning the Business, the Seller Assets and the Assumed
Liabilities as Purchaser or any of such other Persons reasonably may
request in connection with such investigation; and (c) provide access to
any real property that is the subject of any Real Property Lease or the
Business to Purchaser and its Representatives to conduct any environmental
assessment. Purchaser agrees not to contact the Seller's employees,
customers, vendors or other representatives of the other party without the
prior approval of Xxxxx X. Xxxxx, Executive Vice President of Tandycrafts.
4.03 NO SOLICITATIONS. Neither Seller nor Parent will take, nor will
either permit any Affiliate of Seller or Parent, respectively, (or
authorize or permit any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of Seller
or any such Affiliate) to take, directly or indirectly, any action to
initiate, assist, solicit, receive, negotiate, encourage or accept any
offer or inquiry from any Person (a) to explore or reach any agreement or
understanding (whether or not such agreement or understanding is absolute,
revocable, contingent or conditional) for, or otherwise attempt to
consummate, the sale of the Business, or the Assets or Properties of Seller
relating to the Business, in whole or in part, whether directly or
indirectly, through purchase, merger, consolidation or otherwise (other
than the sale of inventory in the ordinary course of business) to any
Person other than Purchaser or its Affiliates or (b) to furnish or cause to
be furnished any information with respect to the Business to any Person
(other than as contemplated by Section 4.02) who Seller, Parent or such
Affiliate (or any such Person acting for or on their behalf) knows or has
reason to believe is in the process of considering any acquisition of the
Business. If Seller, Parent or any such Affiliate (or any such Person
acting for or on their behalf) receives from any Person (other than
Purchaser or any other Person referred to in Section 4.02) any offer,
inquiry or informational request referred to above, Parent and Seller shall
promptly advise such Person, by written notice, of the terms of this
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Section 4.03 and will promptly, orally and in writing, advise Purchaser of
such offer, inquiry or request and deliver a copy of such notice to
Purchaser.
4.04 CONDUCT OF BUSINESS. Seller will operate the Business only in
the ordinary course consistent with past practice, except as is otherwise
contemplated by this Agreement. Without limiting the generality of the
foregoing, Seller will:
(a) use commercially reasonable efforts to (i) preserve
intact the present business organization and reputation of the
Business, (ii) keep available (subject to dismissals and
retirements in the ordinary course of business consistent with
past practice) the services of the Employees, (iii) maintain the
Seller Assets in good working order and condition, ordinary wear
and tear excepted, (iv) maintain the good will of customers,
suppliers, and other Persons to whom Seller sells goods or
provides services or with whom Seller otherwise has significant
business relationships in connection with the Business,
(v) continue in the ordinary course of business and consistent
with Seller's business plan all current sales, marketing,
advertising and promotional activities relating to the Business
and shall refrain from materially deviating from the plans
without Purchaser's prior written consent, which shall not be
unreasonably withheld, and (vi) cause the Seller to refrain from
entering into a new lease for any Store site or extending any
Real Property Lease without Purchaser's prior written consent,
which shall not be unreasonably withheld;
(b) except to the extent otherwise required by applicable
Law, (i) cause the Business Books and Records to be maintained in
the usual, regular and ordinary manner and (ii) not permit any
material change in any pricing, investment, accounting, financial
reporting, inventory, credit, allowance or Tax practice or policy
of Seller that would materially and adversely affect the
Business, the Seller Assets or the Assumed Liabilities;
(c) use commercially reasonable efforts to maintain in full
force and effect until the Closing substantially the same levels
of coverage as the insurance afforded under the Insurance
Policies; and
(d) comply, in all material respects, with all Laws and
Orders applicable to the Business and promptly following receipt
thereof to give Purchaser copies of any notice received from any
Governmental or Regulatory Authority or other Person alleging any
violation of any such Law or Order.
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4.05 FINANCIAL STATEMENTS AND REPORTS.
(a) Seller shall deliver to Purchaser as soon as is
practicable, but in any event in draft form on or before May 25,
1998 and in final form on or before May 29, 1998 the Annual
Financial Statements. The Annual Financial Statements shall be
prepared in accordance with GAAP. The Annual Financial
Statements shall be accompanied by the unqualified opinion of
Price Waterhouse LLP to the effect that they present fairly, in
all material respects, the financial position of Seller and its
results of operations and cash flow at and for the fiscal period
indicated, in conformity with GAAP. The Purchaser and Seller
shall share equally all costs incurred by Seller payable to its
accountants to prepare the Annual Financial Statements, including
any fees associated with the auditor granting its consent for
inclusion of the Annual Financial Statements in any securities
filing by the Purchaser with the Securities and Exchange
Commission, except that Purchaser's cost shall not exceed $75,000
and Purchaser shall not pay any of the auditor's costs in
connection with responses to Purchaser's or its Representative's
due diligence investigations, including the review of the work
papers of the Seller's accountants. Purchaser and its
Representatives shall have access to any of the auditor's
workpapers in preparing the Annual Financial Statements.
(b) As promptly as practicable and in any event no later
than 20 days after the end of each month ending after March 31,
1998 and before the Closing Date, Seller will deliver to
Purchaser true and complete copies of the unaudited balance
sheet, and the related unaudited statement of operations, of the
Business, as of and for the month then ended or as of and for the
portion of the fiscal year then ended, as the case may be,
together with the notes, if any, relating thereto, which
financial statements shall be prepared on a basis consistent with
the Annual Financial Statements. All such financial statements
have been prepared from the Books and Records of Seller on a
basis for inclusion in the consolidated financial statements of
Parent, and fairly present, in all material respects, the
financial condition of the Seller as of the date indicated and
the results of operations of the Seller for the period then
ended, subject to normal year-end adjustments and the absence of
footnotes to such statements.
4.06 CERTAIN RESTRICTIONS. Each of Seller and Parent will refrain
from:
(a) acquiring or disposing of any Assets and Properties
used or held for use in the conduct of the Business, other than
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Inventory in the ordinary course of business consistent with past
practice and other acquisitions or dispositions not exceeding in
either case $50,000 in the aggregate, or creating or incurring
any Lien, other than a Permitted Lien, on any Assets and
Properties used or held for use in the conduct of the Business
and Seller's mix of inventory prior to Closing shall remain
consistent with Seller's historical pattern and practice;
PROVIDED, HOWEVER, that Seller may close the Stores located in
Arlington, Texas (Seller's Store Number 4), Augusta, Georgia
(Seller's Store Number 44), and Riverside, California (Seller's
Store Number 53) (the "Three Closing Stores"), liquidate the
inventory and equipment at the Three Closing Stores, and,
transfer prior to Closing any inventory or equipment of the Three
Closing Stores to Seller's distribution center.
(b) entering into, amending, modifying, terminating
(partially or completely), granting any waiver under or giving
any consent with respect to any material Business Contract or any
material Business License;
(c) violating, breaching or defaulting under in any
material respect, or taking or failing to take any action that
(with or without notice or lapse of time or both) would
constitute a material violation or breach of, or default under,
any term or provision of any Business Contract or any Business
License;
(d) canceling or otherwise providing for a complete or
partial discharge in advance of a scheduled payment date with
respect to, or waiving any right of Seller under, any material
Liability of or owing to Seller in connection with the Business,
other than in the ordinary course of business consistent with
past practice;
(e) engaging with any Person in any Business Combination,
unless such Person agrees, to the extent applicable, in a written
instrument in form and substance reasonably satisfactory to
Purchaser to adopt and comply with the terms and conditions of
this Agreement as though such Person was an original signatory
hereto;
(f) engaging in any transaction with respect to the
Business with any officer, director, Affiliate or Associate of
Seller or any Associate of any such officer, director or
Affiliate, either outside the ordinary course of business
consistent with past practice or other than on an arm's-length
basis;
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(g) making capital expenditures or commitments for
additions to property, plant or equipment constituting capital
assets on behalf of the Business in an aggregate amount exceeding
$25,000; or
(h) entering into any agreement to do or engage in any of
the foregoing.
4.07 SECURITY DEPOSITS. Each of Parent and Seller shall take all
actions necessary to transfer to Purchaser on the Closing Date all of
Seller's and Parent's right, title and interest in and to the Tenant
Security Deposits.
4.08 DELIVERY OF BOOKS AND RECORDS, ETC.; REMOVAL OF PROPERTY.
(a) On the Closing Date, each of Seller and Parent will
deliver or make available to Purchaser at the Stores at which the
Business is conducted (other than the headquarters' office) all
of the Business Books and Records and such other Seller Assets as
are in Seller's or Parent's possession at other locations, and if
at any time after the Closing Seller or Parent discovers in its
possession or under its control any other Business Books and
Records or other Seller Assets, it will forthwith deliver such
Business Books and Records or other Seller Assets to Purchaser.
Parent and Seller shall provide access to Purchaser to review and
copy any Business Books and Records located at Seller's
headquarters' office.
(b) Within thirty (30) days after the Closing Date, Seller
and Parent shall remove all Assets and Properties that are not
being sold to Purchaser hereunder (but are not the subject of the
Computer Services Agreement) from the real property that is the
subject of any Real Property Lease. Such removal shall be at the
sole cost and risk of Seller and Parent, including risk of loss
and damage to such Assets and Properties. Purchaser shall have
no liability to Seller or Parent with respect to such removal and
transportation. Seller and Parent shall be responsible for all
repairs to the Real Property and Improvements due to damage
caused by Seller or Parent and their respective employees and
agents in connection with the removal of Seller's or Parent's
Assets and Properties.
4.09 NONCOMPETITION.
(a) Each of Seller and Parent shall, for a period of five
(5) years from the Closing Date, refrain from, either alone or in
conjunction with any other Person, or directly or indirectly
through its present or future Affiliates:
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(i) employing, engaging or seeking to employ or engage
any Person who had been an employee of Purchaser or any of
its Affiliates engaged in the Business at the time of
Closing, unless such employee (A) resigns voluntarily
(without any solicitation from Seller or any of its
Affiliates) (B) is terminated by Purchaser or any of its
Affiliates after the Closing Date or (C) is not offered
employment by Purchaser at Closing Date;
(ii) causing or attempting to cause (A) any client,
customer or supplier of the Business to terminate or
materially reduce its business with Purchaser or any of its
Affiliates or (B) any officer, employee or consultant of
Purchaser or any of its Affiliates engaged in the Business
to resign or sever a relationship with Purchaser or any of
its Affiliates;
(iii) disclosing (unless compelled by judicial or
administrative process) or using any confidential or secret
information relating to the Business or, to the extent known
by Parent or Seller to be confidential and not generally
available from other sources, relating to any client,
customer or supplier of the Business; or
(iv) except for the sales of goods by Seller's J Mar
division that constitute sales of religious products on a
wholesale basis, participating or engaging in (other than
through the ownership of 5% or less of any class of
securities registered under the Securities Exchange Act of
1934, as amended), or otherwise lending assistance
(financial or otherwise) to any Person participating or
engaged in, any business in the United States to sell
Christian Bibles, Christian books (including Christian
family and inspirational books) and related gifts, music and
novelty items in any retail store or chain whose sales are
primarily religious products.
(b) The parties hereto recognize that the Laws and public
policies of the various states of the United States may differ as
to the validity and enforceability of covenants similar to those
set forth in this Section. It is the intention of the parties
that the provisions of this Section be enforced to the fullest
extent permissible under the Laws and policies of each
jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such Laws or
policies) of any provisions of this Section shall not render
unenforceable, or impair, the remainder of the provisions of this
Section. Accordingly, if any provision of this Section shall be
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determined to be invalid or unenforceable, such invalidity or
unenforceability shall be deemed to apply only with respect to
the operation of such provision in the particular jurisdiction in
which such determination is made and not with respect to any
other provision or jurisdiction.
(c) The parties hereto acknowledge and agree that any
remedy at Law for any breach of the provisions of this Section
would be inadequate, and that Purchaser will be entitled to
injunctive or other equitable relief, without the necessity of
actual monetary loss being proved, in order that the breach of
such provisions may be effectively restrained.
4.10 NOTICE AND CURE. Seller and Parent will notify Purchaser
promptly in writing of, and contemporaneously will provide Purchaser with
access to reasonably detailed information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance occurring after the date of this
Agreement that, prior to the termination of any survival period applicable
to the covenant, agreement, representation, or warranty set forth in this
Agreement, causes or will cause any covenant or agreement of Seller or
Parent under this Agreement to be breached or that renders or will render
untrue any representation or warranty of Seller or Parent contained in this
Agreement as if the same were made on or as of the date of such event,
transaction or circumstance. Seller and Parent also will notify Purchaser
promptly in writing of, and will use all commercially reasonable efforts to
cure, before the Closing, any violation or breach of any representation,
warranty, covenant or agreement made by Seller or Parent in this Agreement,
whether occurring or arising before, on or after the date of this
Agreement. No notice given pursuant to this Section shall have any effect
on the representations, warranties, covenants or agreements contained in
this Agreement for purposes of determining satisfaction of any condition
contained herein or shall in any way limit Purchaser's right to seek
indemnity under Article IX.
4.11 FULFILLMENT OF CONDITIONS. Each of Seller and Parent will
execute and deliver at the Closing each Operative Agreement that Seller or
Parent is required hereby to execute and deliver as a condition to the
Closing, and will otherwise use its commercially reasonable efforts to
achieve satisfaction of the conditions to Closing set forth in this
Agreement and to consummate the Closing on the terms set forth in this
Agreement.
4.12 TRANSFER TAXES. Each of Seller and Parent shall pay, and shall
jointly indemnify Purchaser, the officers, directors, employees and agents
of Purchaser, the direct and indirect Affiliates of Purchaser and the
direct and indirect stockholders, officers, directors, partners, employees
and agents of such Affiliates with respect to any Transfer Taxes which
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become payable in connection with the transactions contemplated by this
Agreement and the Operative Agreements.
4.13 STORE LEASES. For those Real Property Leases for Stores for
which Parent has provided a guaranty to the landlord, Parent agrees to
continue such guaranty in full force and effect if necessary to secure the
assignment of or sublease under the lease to Purchaser; PROVIDED, HOWEVER,
that to the extent permitted under the guaranty, Parent may revoke any
guaranty prior to Purchaser's notification of any renewal of any lease that
the Purchaser has elected to renew as assignee or sublessee. Parent,
Seller and Purchaser each agree to use commercially reasonable efforts
prior to the Closing to remove Parent and Seller from the leases to be
assigned or sublet to Purchaser at the Closing on terms to Purchaser no
less favorable than the terms to Seller, but if Parent and Seller are not
removed at or prior to Closing, Purchaser, Parent and Seller shall each use
best efforts to so remove Parent and Seller on such terms after the Closing
but no later than applicable Real Property Lease expiration date.
Purchaser shall notify Seller if Purchaser intends to renew any applicable
Real Property Lease assigned or sublet to Purchaser and as to which Parent
has guaranteed payment at least 30 days prior to the renewal. Parent and
Seller agree to pay all costs or fees (other than any advance rental
payments) requested by any landlord for Seller to assign or sublease any
Real Property Lease to Purchaser. As of the Closing, Seller assigns to
Purchaser all of Seller's rights and related benefits relating to any
representation or warranty in connection with any Environmental Liability
or Environmental Claim extended to the Seller by the landlord of each Store
that is the subject of a Real Property Lease which is assigned to the
Purchaser or as to which the Purchaser is a subleasee or the Store is
operated for the benefit of the Purchaser under a Management Agreement.
Parent and Seller agree to notify promptly the Purchaser if after the
signing of this Agreement the Seller terminates a manager of a Store or
inventory control manager at a Store or the Store or inventory control
manager shall terminate his or her employment. Upon receipt of the notice,
Purchaser shall have the right to elect in its sole discretion to furnish
for any period of time at its own costs an employee of Purchaser to perform
the duties of the terminated Store or inventory control manager. If
Purchaser so elects to furnish an employee, Seller shall use the services
of Purchaser's employee to operate the Store in the function of a Store or
inventory control manager as the case may be.
4.14 EMPLOYEES. Seller shall pay in full all compensation, benefits
and severance obligations arising from the employment and any termination
of employment of any Employee. Subject to its due diligence investigation
and the Purchaser's sole and absolute discretion not to offer employment to
any of Seller's Employees employed in the Business, Purchaser acknowledges
only as of the execution date of this Agreement that it intends to offer
employment to at least a majority of Seller's Employees employed as of the
Closing at Stores transferred or sublet to or managed by the Purchaser
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("Purchaser's Acknowledgment of Employment Intention"). Purchaser's
Acknowledgment of Employment Intention neither creates nor implies any
commitment or obligation to any Person to interview, offer employment to or
hire any employee of Seller, or to hire such employees on any terms.
Purchaser shall notify Seller at least ten days prior to the Closing of the
names of Seller's employees to whom it plans to offer employment.
Purchaser shall be free to interview and hire any or all of the Seller's
former employees, upon such terms and conditions as Purchaser in its sole
discretion may determine. If Purchaser hires any such employees ("Hired
Employees"), seniority with the Seller shall be used as the basis for
seniority with Purchaser, including, without limitation, service credit
with Seller shall be credited for purposes of eligibility and vesting in
any Plans of Purchaser and, in a manner consistent with Purchaser's
vacation entitlements policy as disclosed to Seller, for purposes of
vacation entitlements of the Hired Employees. Purchaser shall offer all
Hired Employees and their dependents group health coverage to be effective
upon the first date of the month following the date that completes thirty
days of service with either Seller or Purchaser, or both, with no
preexisting condition exclusion or waiting period.
4.15 USE OF NAME. After the Closing Date, neither Parent nor Seller
nor any Affiliate of Parent or Seller, shall use the name "Xxxxxx" or
"Joshua's Christian Stores" or any variation thereof (the "Names"), or any
other trade name, trademark, logo, or service xxxx included in the Seller
Assets. After the Closing Date, neither Parent nor Seller shall, through
any actions or conduct, represent or imply to any person that Parent or
Seller is affiliated with Purchaser. On the Closing Date, or as soon as
practicable after the Closing Date, Parent and Seller shall terminate any
assumed name registration to the use of the Names (or any variation of the
Names) and shall deliver evidence of the termination to Purchaser. In
addition, Parent and Seller shall cooperate with Purchaser to effect a
timely transfer of the Names to Purchaser so that there will be no
recording gap between Purchaser and Parent and Seller with respect to the
Names.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all times
from and after the date hereof until the Closing, and, with respect to any
covenant or agreement by its terms to be performed in whole or in part
after the Closing, for the period specified herein, or if no period is
specified, indefinitely. Purchaser will comply with all covenants and
provisions of this Article V, except to the extent Seller may otherwise
consent in writing.
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5.01 REGULATORY AND OTHER APPROVALS. Purchaser will (a) take all
commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts,
as promptly as practicable to obtain all consents, approvals or actions of,
to make all filings with and to give all notices to Governmental or
Regulatory Authorities or any other Person required of Purchaser to
consummate the transactions contemplated hereby and by the Operative
Agreements, including without limitation those described in Schedules 3.03
and 3.04 hereto, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Seller or
such Governmental or Regulatory Authorities or other Persons may reasonably
request and (c) cooperate with Seller as promptly as practicable in
obtaining all consents, approvals or actions of, making all filings with
and giving all notices to Governmental or Regulatory Authorities or other
Persons required of Seller to consummate the transactions contemplated
hereby and by the Operative Agreements. Purchaser will provide prompt
notification to Seller when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given,
as applicable, and will advise Seller of any communications (and, unless
precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
5.02 NOTICE AND CURE. Purchaser will notify Seller promptly in
writing of, and contemporaneously will provide Seller with true and
complete copies of any and all information or documents relating to, and
will use all commercially reasonable efforts to cure before the Closing,
any event, transaction or circumstance occurring after the date of this
Agreement that causes or will cause any covenant or agreement of Purchaser
under this Agreement to be breached or that renders or will render untrue
any representation or warranty of Purchaser contained in this Agreement as
if the same were made on or as of the date of such event, transaction or
circumstance. Purchaser also will notify Seller promptly in writing of,
and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach of any representation, warranty, covenant
or agreement made by Purchaser in this Agreement, whether occurring or
arising before, on or after the date of this Agreement. No notice given
pursuant to this Section shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for
purposes of determining satisfaction of any condition contained herein or
shall in any way limit Seller's right to seek indemnity under Article IX.
5.03 FULFILLMENT OF CONDITIONS. Purchaser will execute and deliver at
the Closing each Operative Agreement that Purchaser is hereby required to
execute and deliver as a condition to the Closing, and will otherwise use
its commercially reasonable efforts to achieve satisfaction of the
conditions to Closing set forth in this Agreement and to consummate the
Closing on the terms set forth in this Agreement.
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5.04 STORE OPENING FUNDS. Purchaser shall pay to Seller at the
Closing an amount equal to the Store Opening Funds.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the
satisfaction, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Purchaser in its
sole discretion):
6.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Seller or Parent in this Agreement (other than those
made as of a specified date earlier than the Closing Date) shall be true
and correct in all material respects (if not qualified by materiality) or
in all respects (if qualified by materiality) on and as of the Closing Date
as though such representation or warranty were made on and as of the
Closing Date, and any representation or warranty made as of a specified
date earlier than the Closing Date shall also have been true and correct in
all material respects (if not qualified by materiality) or in all respects
(if qualified by materiality) on and as of such earlier date.
6.02 PERFORMANCE. Each of Seller and Parent shall have performed and
complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with
by Seller or Parent at or before the Closing.
6.03 OFFICERS' CERTIFICATES. Each of Seller and Parent shall have
delivered to Purchaser a certificate, dated the Closing Date and executed
by the Chairman of the Board, the President or any Vice President of Seller
or Parent (as the case may be), substantially in the form and to the effect
of EXHIBIT C hereto, and a certificate, dated the Closing Date and executed
by the Secretary or any Assistant Secretary of Seller or Parent (as the
case may be), substantially in the form and to the effect of EXHIBIT D
hereto.
6.04 ORDERS AND LAWS. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by
this Agreement or any of the Operative Agreements or which could reasonably
be expected to otherwise result in a material diminution of the benefits of
the transactions contemplated by this Agreement or any of the Operative
Agreements to Purchaser, and there shall not be pending or threatened on
the Closing Date any Action or Proceeding or any other action in, before or
by any Governmental or Regulatory Authority which could reasonably be
expected to result in the issuance of any such Order or the enactment,
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promulgation or deemed applicability to Purchaser or the transactions
contemplated by this Agreement or any of the Operative Agreements of any
such Law.
6.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Purchaser, Seller and Parent to perform their
obligations under this Agreement and the Operative Agreements and to
consummate the transactions contemplated hereby and thereby (a) shall have
been duly obtained, made or given, (b) shall be in form and substance
reasonably satisfactory to Purchaser, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and
(d) shall be in full force and effect, and all terminations or expirations
of waiting periods imposed by any Governmental or Regulatory Authority
necessary for the consummation of the transactions contemplated by this
Agreement and the Operative Agreements shall have occurred.
6.06 THIRD PARTY CONSENTS. The consents (or in lieu thereof waivers)
listed in SECTION 6.06 OF THE DISCLOSURE SCHEDULE, and all other consents
(or in lieu thereof waivers) to the performance by Purchaser, Seller,
Parent of their obligations under this Agreement and the Operative
Agreements or to the consummation of the transactions contemplated hereby
and thereby as are required under any Contract to which Purchaser, Seller,
or Parent is a party or by which any of their respective Assets and
Properties are bound and where the failure to obtain any such consent (or
in lieu thereof waiver) could reasonably be expected, individually or in
the aggregate with other such failures, to materially adversely affect
Purchaser, the Seller Assets, the Assumed Liabilities or the Business or
otherwise result in a material diminution of the benefits of the
transactions contemplated by this Agreement and the Operative Agreements to
Purchaser, (a) shall have been obtained, (b) shall be in form and substance
reasonably satisfactory to Purchaser, (c) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect.
6.07 OPINION OF COUNSEL. Purchaser shall have received the opinion of
Xxxxxx & Xxxx, L.L.P., counsel to Parent and Seller, dated the Closing
Date, substantially in the form and to the effect of EXHIBIT E hereto.
6.08 REAL PROPERTY LEASES. For at least 48 of the Real Property
Leases described in SECTION 1.01(a)(i) OF THE DISCLOSURE SCHEDULE, Seller
shall have delivered to Purchaser an Estoppel Certificate and Consent to
Assignment from the lessor thereunder or a sublease for the Store site
thereunder in form and substance reasonably satisfactory to Purchaser, each
in full force and effect, that allows Purchaser to operate at least 48 of
the Stores after Closing in compliance with the terms of the Real Property
Leases relating to the Stores. Parent and Seller shall have executed and
delivered to Purchaser a Management Agreement in form and substance
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reasonably satisfactory to Purchaser for Purchaser or Seller to operate for
Purchaser's benefit any Store under the name "Family Christian Stores" for
which such Estoppel Certificate and Consent to Assignment or such sublease
has not been received, which will continue in effect until such Estoppel
Certificate and Consent to Assignment or such sublease shall be given or
until the expiration of the existing term of the Store's Real Property
Lease. For any Store required by a landlord to be open on Sunday,
Purchaser shall have received the landlord's consent in form satisfactory
to Purchaser that the Store may be closed on Sunday. No Site, or portion
of a Site, relating to a Store shall be listed or included within a listing
as an Environmental Clean-Up Site.
6.09 FINANCING. Purchaser shall have obtained financing having terms
satisfactory to Purchaser and (a) the net proceeds of which are in an
amount at least equal to the sum of (i) the Purchase Price plus (ii)
anticipated working capital requirements of Purchaser after the
consummation of the transactions contemplated by this Agreement, plus
(iii) the aggregate amount of expenses of Purchaser incurred in connection
with the negotiation, preparation, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and (b)
pursuant to which Purchaser shall have obtained the consent by its existing
senior and subordinated lenders that the discharge of any Lien granted by
agreement to a landlord pursuant to no more than thirteen Real Property
Leases on any fixture in or leasehold improvement on the Stores that are
the subject of such Real Property Leases or any other Lien on any other
assets in the Business shall not be required for Purchaser to comply with
any provisions of Purchaser's existing lending agreements with the
respective lenders or the financing related to the transactions
contemplated by this Agreement. Purchaser shall have obtained the consents
of any lender permitting Purchaser to issue the Promissory Note in
compliance with any lending agreement.
6.10 DELIVERIES. Seller and Parent shall have delivered to Purchaser
the Assignment and Assumption Agreement and the other Assignment
Instruments.
6.11 PROCEEDINGS. All proceedings to be taken on the part of Seller
or Parent in connection with the transactions contemplated by this
Agreement shall have been consummated. Purchaser shall have received the
consent of all of Purchaser's senior and subordinated lenders that shall be
required to waive any provision in their respective lending agreements that
Purchaser may violate to consummate the transactions contemplated by this
Agreement, or obtain any consent required hereunder.
6.12 COMPUTER SERVICES AGREEMENT. If Purchaser elects to use any of
Seller's Computer Equipment, Purchaser shall have entered into the Computer
Services Agreement with Seller in form reasonably acceptable to Purchaser.
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6.13 NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the Condition of the Business since December 31,
1997, excluding the effects of (1) any Employees quitting employment with
Seller after the announcement of the transactions contemplated by this
Agreement, (2) changes in the operations of the Business required by this
Agreement or requested in writing by Purchaser, and (3) changes in the
terms or relationship between Seller and vendors after the announcement of
the transactions contemplated by this Agreement attributable to the
announced transaction.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER AND PARENT
The obligations of Seller and Parent hereunder are subject to the
satisfaction, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Seller):
7.01 REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by Purchaser in this Agreement (other than those made as of
a specified date earlier than the Closing Date) shall be true and correct
in all material respects (if not qualified by materiality) or in all
respects (if qualified by materiality) on and as of the Closing Date as
though such representation or warranty were made on and as of the Closing
Date, and any representation or warranty made as of a specified date
earlier than the Closing Date shall also have been true and correct in all
material respects (if not qualified by materiality) or in all respects (if
qualified by materiality) on and as of such earlier date.
7.02 PERFORMANCE. Purchaser shall have performed and complied with,
in all material respects, each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Purchaser at or
before the Closing.
7.03 OFFICERS' CERTIFICATES. Purchaser shall have delivered to Seller
a certificate, dated the Closing Date and executed by the Chairman of the
Board, the President or any Vice President of Purchaser (as the case may
be), substantially in the form and to the effect of EXHIBIT G hereto, and
a certificate, dated the Closing Date and executed by the Secretary or
Assistant Secretary of Purchaser (as the case may be), substantially in the
form and to the effect of EXHIBIT H hereto.
7.04 ORDERS AND LAWS. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by
this Agreement or any of the Operative Agreements or which could reasonably
be expected to otherwise result in a material distribution of the benefits
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of the transactions contemplated by this Agreement or any of the Operative
Agreements to Seller, and there shall not be pending or threatened on the
Closing Date any Action or Proceeding or any other action in, before or by
any Governmental or Regulatory Authority which could reasonably be expected
to result in the issuance of any such Order or the enactment, promulgation
or deemed applicability to Seller or the transactions contemplated by this
Agreement or any of the Operative Agreements of any such Law.
7.05 REGULATORY CONSENTS AND APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority necessary to permit Seller, Parent, Purchaser to perform their
obligations under this Agreement and the Operative Agreements and to
consummate the transactions contemplated hereby and thereby (a) shall have
been duly obtained, made or given, (b) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived and (c)
shall be in full force and effect, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority
necessary for the consummation of the transactions contemplated by this
Agreement and the Operative Agreements shall have occurred.
7.06 THIRD PARTY CONSENTS. All consents (or in lieu thereof waivers)
listed in SECTION 7.06 OF THE DISCLOSURE SCHEDULE, and all other consents
(or in lieu thereof waivers) to the performance by Purchaser, Seller,
Parent of their obligations under this Agreement and the Operative
Agreements or to the consummation of the transactions contemplated hereby
and thereby as are required under any Contract to which Purchaser, Seller,
or Parent is a party or by which any of their respective Assets and
Properties are bound and where the failure to obtain any such consent (or
in lieu thereof waiver) could reasonably be expected, individually or in
the aggregate with other such failures, to materially adversely affect
Parent or Seller, or otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement and the
Operative Agreements to Parent or Seller, (a) shall have been obtained, (b)
shall be in form and substance reasonably satisfactory to Seller, (c) shall
not be subject to the satisfaction of any condition that has not been
satisfied or waived and (d) shall be in full force and effect.
7.07 OPINION OF COUNSEL. Each of Parent and Seller shall have
received the opinion of Xxxxxx Xxxxxxxx & Xxxx LLP, counsel to Purchaser,
dated the Closing Date, substantially in the form and to the effect of
EXHIBIT I hereto.
7.08 DELIVERIES. Purchaser shall have delivered to Seller the
Assignment and Assumption Agreement and the other Assumption Instruments.
7.09 PROCEEDINGS. All proceedings to be taken on the part of
Purchaser in connection with the transactions contemplated by this
Agreement shall have been consummated. Parent shall have received the
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consent of Parent's senior lenders that shall be required to waive any
provision under any lending agreement that Parent or Seller may violate to
consummate the transactions contemplated by this Agreement, or obtain any
consent required thereunder.
7.10 COMPUTER SERVICES AGREEMENT. If Purchaser elects to use any of
Seller's Computer Equipment, Seller shall have entered into the Computer
Service Agreement with Purchaser in form reasonably acceptable to Seller.
7.11 NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the business, condition, (financial or
otherwise), results of operations, Assets and Properties and prospects of
the business of Purchaser since December 31, 1997.
7.12 ADDITIONAL INDEBTEDNESS. Purchaser shall not have incurred any
additional material Indebtedness other than (a) in the ordinary course of
business or (b) pursuant to any credit facility arrangement with
Purchaser's lenders in effect as of the date of this Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
8.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Notwithstanding any right of Purchaser (whether or not
exercised) to investigate the Business, the right of Parent and Seller
(whether or not exercised) to investigate Purchaser, or any right of any
party (whether or not exercised) to investigate the accuracy of the
representations and warranties of any other party contained in this
Agreement, a party shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other party
contained in this Agreement. The representations, warranties, covenants
and agreements of Seller, Parent, and Purchaser contained in this Agreement
will survive the Closing (a) indefinitely with respect to the
representations and warranties contained in Sections 2.01, 2.02, 2.28,
3.01, 3.02 and 3.06 and any representation and warranty relating to the
delivery of the Seller Assets free and clear of any Lien other than a
Permitted Lien, (b) until the expiration of all applicable statutes of
limitation (including all periods of extension, whether automatic or
permissive) with respect to the representations contained in Section 2.09,
Section 2.12 (insofar as they relate to ERISA or the Code), Section 2.21(c)
and under Section 9.01(a)(iii) and Section 9.01(b)(iv), until the end of
the existing term of the applicable Real Property Lease (excluding any
extensions or renewals), with respect to the representations and warranties
relating to any Store set forth in Section 2.21(a) and (b); (d) until the
second anniversary of the Closing Date, with respect to all representations
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and warranties other than those specifically identified in clauses (a),
(b), or (c) above, and (e) for a period of two years after any breach with
respect to each covenant or agreement contained in this Agreement or in any
Operative Agreement, except that any representation or warranty that would
otherwise terminate in accordance with clause (a), (b), (c), (d) or (e)
above, and the right of a party to deliver a Claim Notice or Indemnity
Notice with respect thereto, will continue to survive if a Claim Notice or
Indemnity Notice (as applicable) shall have been timely given under
Article IX on or prior to such termination date, until the related claim
for indemnification has been satisfied or otherwise resolved as provided in
Article IX.
ARTICLE IX
INDEMNIFICATION
9.01 INDEMNIFICATION.
(a) Seller and Parent each shall, jointly and severally,
indemnify Purchaser, and their officers, directors, employees,
agents and Affiliates in respect of, and hold each of them
harmless from and against, any and all Losses suffered, incurred
or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to (i) any
breach of any representation, warranty, covenant or agreement on
the part of Seller or Parent contained in this Agreement, (ii) a
Retained Liability, (iii) Seller's failure to comply with the
terms of any applicable bulk sales act of comparable statutory
provisions of each applicable jurisdiction, (iv) the operation of
the Business prior to Closing, including without limitation any
obligation or liability to any employee of Seller in connection
with the employment or any termination of employment of any
employee; any and all claims arising from any failure or alleged
failure to provide notice to Seller's Employees under WARN or any
similar state or local statute or governmental regulations or
ordinance, whether any of the claims are asserted against Parent,
Seller or Purchaser, and all claims asserted by current or former
employees of Seller who are not actually employed by Purchaser
after the Closing Date for benefits pursuant to COBRA, whether
any of those claims are asserted against Purchaser or Seller; or
(v) the enforcement by Purchaser of its indemnification rights
under Article IX.
(b) Purchaser shall indemnify Seller, Parent and their
officers, directors, employees, agents, and Affiliates in respect
of, and hold each of them harmless from and against, any and all
Losses suffered, incurred or sustained by any of them or to which
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any of them becomes subject, resulting from, arising out of or
relating to (i) any breach of any representation, warranty,
covenant or agreement on the part of Purchaser contained in this
Agreement; (ii) an Assumed Liability; (iii) Purchaser's failure
to comply with any federal, state or local laws, including but
not limited to discrimination laws, in connection with
Purchaser's interviewing or hiring of any of Seller's employees;
(iv) any payment made by Parent pursuant to any guaranty of any
Real Property Lease for any obligation that Purchaser assumed
with respect to the Real Property Lease pursuant to
Section 1.02(a)(i) of this Agreement; (v) the operation of the
Business after the Closing; and (vi) the enforcement by Parent or
Seller of their indemnification rights under Article IX.
(c) No amounts of indemnity shall be payable as a result of
claims arising under Section 9.01(a)(i) or Section 9.01(b)(i),
unless and until the Indemnified Parties thereunder have
suffered, incurred, sustained or become subject to Losses
referred to in such Section in excess of $100,000 in the
aggregate under such Section, in which event such Indemnified
Parties shall be entitled to seek indemnity from the applicable
Indemnifying Parties for the amount of such Losses in excess of
$100,000 (the "Basket"): provided, however, that the Basket shall
not apply to breaches of any representation or warranty contained
in Sections 2.01, 2.02, 2.09, 2.12, 2.28, 3.01, 3.02 3.09 and
3.11. The maximum amount of Losses for which indemnification is
payable under Section 9.01(a)(i) (exclusive of any representation
or warranty under Sections 2.01, 2.02, 2.09, and 2.21 and any
representation and warranty relating to the delivery of the
Seller Assets free and clear of any Lien other than a Permitted
Lien) or 9.01(b)(i) (exclusive of Section 3.01, 3.02 and 3.09
shall be $2,000,000. The maximum amount of Losses for which
indemnification is payable under Section 9.01(a)(i) for any
breach of a representation or warranty under Section 2.21(a) or
(b) or any indemnification under Section 9.01(a)(v) shall be
$5,000,000. The maximum amount of Losses for which
indemnification is payable under Section 9.01(a)(i) for any
breach of a representation and warranty under Section 2.21(c)
shall be $11,500,000.
(d) So long as any claims for Losses shall be for an amount
in aggregate less than the unpaid principal balance of the
Promissory Note, Purchaser may, as Purchaser's sole and exclusive
remedy (other than as set forth in Section 9.02(d) of this
Agreement) in the event of any breach of this Agreement by Parent
or Seller or to effect indemnification against Parent or Seller
under this Article, withhold sums payable to Seller or Parent
pursuant to the Promissory Note to the extent of any claim
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asserted by Purchaser, and offset against the amounts due under
the Promissory Note any amounts or reasonably estimated amounts
that Purchaser is entitled pursuant to indemnification or
reimbursement under this Agreement or otherwise. Any sums so
withheld shall operate as a discharge, to the extent of the
amount withheld and offset, of Purchaser's payment obligations to
Seller under the Promissory Note as well as a discharge, to the
extent of the amount withheld and offset, of Parent's and
Seller's indemnification obligations. Notwithstanding the
foregoing, prior to Purchaser withholding sums pursuant to this
Section for indemnification against Parent or Seller, Purchaser
will provide Parent or Seller with 30 days' written notice
describing the indemnification claim, including the amount of
such claim. Parent or Seller shall have 30 days after delivery
of the written notice to notify Purchaser in writing of any
objections to the indemnification claim. If Parent or Seller
objects to the indemnification claim, Purchaser, Parent and
Seller agree to use their reasonable efforts to resolve such
claim. The parties agree and acknowledge that if any claim for
indemnification and offset pursuant to this Section remains
unresolved, including any continuing third party claim pending
against Purchaser, upon maturity of any payment of principal of
and interest on the Promissory Note, the term of the Promissory
Note will be extended for such principal amount equal to the
reasonably estimated total of the unresolved claim (at the same
interest rate and other terms) until such claim is resolved.
Further, the parties agree and acknowledge that the Purchaser
shall pay when due in accordance with the terms of the Promissory
Note all principal amounts of the Promissory Note and interest
thereon that are in excess of an unresolved claim for
indemnification and offset pursuant to this Section. For the
period the Promissory Note is extended for an unresolved claim
(if any) interest will accrue on that portion of principal of the
Promissory Note that becomes payable (if not subject to offset)
upon resolution of any disputed claim. For the period the
Promissory Note is extended (if any) interest will not accrue on
that portion of the principal of the Promissory Note that is
finally determined to be subject to offset under this Section.
9.02 METHOD OF ASSERTING CLAIMS. All claims for indemnification by
any Indemnified Party under Section 9.01 will be asserted and resolved as
follows:
(a) In the event any claim or demand in respect of which an
Indemnifying Party might seek indemnity under Section 9.01 is
asserted against or sought to be collected from such Indemnified
Party by a Person other than Seller, Parent, Purchaser, or any
Affiliate of Seller, Parent, or Purchaser (a "Third Party
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Claim"), the Indemnified Party shall deliver a Claim Notice with
reasonable promptness to the Indemnifying Party; PROVIDED,
HOWEVER, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall limit the Indemnified
Party's rights hereunder unless (and then solely to the extent)
that such delay materially impairs the Indemnifying Party's
ability to respond to the Third Party Claim. The Indemnifying
Party will notify the Indemnified Party as soon as practicable
whether the Indemnifying Party disputes its liability to the
Indemnified Party under Section 9.01 and whether the Indemnifying
Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim
pursuant to this Section 9.02(a), then the Indemnifying
Party will have the right to defend, with counsel reasonably
satisfactory to the Indemnified Party, at the sole cost and
expense of the Indemnifying Party, such Third Party Claim by
all appropriate proceedings, which proceedings will be
prosecuted by the Indemnifying Party in a reasonable manner
and in good faith to a final conclusion. The Indemnifying
Party shall have full authority to settle such Third Party
Claim (but only with the consent of the Indemnified Party,
which consent shall not be unreasonably withheld, in the
case of any settlement that provides for any relief other
than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified
Party will not be indemnified in full pursuant to
Section 9.01). The Indemnifying Party will have full
control of such defense and proceedings, including any
compromise or settlement thereof; PROVIDED, HOWEVER, that
the Indemnified Party may, at the sole cost and expense of
the Indemnified Party, at any time prior to the Indemnifying
Party's delivery of the notice referred to in the first
sentence of this Section 9.02(a)(i), file any motion, answer
or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests if the Indemnified
Party shall have first notified the Indemnifying party of
the Indemnified Party's intentions to file such pleadings or
take such action and the Indemnifying party fails timely to
file the pleading or take the action timely to protect the
Indemnified party's interest; and PROVIDED FURTHER, that if
requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying
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Party in contesting any Third Party Claim that the
Indemnifying Party elects to contest. The Indemnified Party
may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this Section 9.02(a)(i), and
except as provided in the preceding sentence, the
Indemnified Party will bear its own costs and expenses with
respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control
of the defense or settlement of a Third Party Claim at any
time if it irrevocably waives its right to indemnity under
Section 9.01 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within fifteen (15) days after the
Indemnified Party has given notice of the Third Party Claims
that the Indemnifying Party desires to defend the Third
Party Claim pursuant to Section 9.02(a), or if the
Indemnifying Party gives such notice but fails to prosecute
in a reasonable manner and in good faith or settle the Third
Party Claim, or if the Indemnifying Party fails to give any
notice whatsoever within the fifteen-day period, then the
Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party (which costs and
expenses shall be reasonable), the Third Party Claim by all
appropriate proceedings, which proceedings will be
prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of
the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld).
The Indemnified Party will have full control of such defense
and proceedings, including any compromise or settlement
thereof; PROVIDED, HOWEVER, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its
counsel in contesting any Third Party Claim which the
Indemnified Party is contesting and PROVIDED, FURTHER that
the Indemnifying Party may later upon request assume the
full control of the defense and proceedings upon the written
consent of Indemnified Party in Indemnified Party's sole
discretion. Notwithstanding the foregoing provisions of
this Section 9.02(a)(ii), if the Indemnifying Party has
notified the Indemnified Party that the Indemnifying Party
disputes its liability under this Article IX to the
Indemnified Party with respect to such Third Party Claim and
if such dispute is resolved in favor of the Indemnifying
Party in the manner provided in clause (iii) below, the
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Indemnifying Party will not be required to bear the costs
and expenses of the Indemnified Party's defense pursuant to
this Section 9.02(a)(ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request,
and the Indemnified Party will reimburse the Indemnifying
Party in full for all reasonable costs and expenses incurred
by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but
not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 9.02(a)(ii), and
the Indemnifying Party will bear its own costs and expenses
with respect to such participation.
(b) In the event any Indemnified Party should have a claim
under Section 9.01 against any Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver
an Indemnity Notice with reasonable promptness to the
Indemnifying Party; PROVIDED, HOWEVER, that no delay on the part
of the Indemnified Party in notifying the Indemnifying Party
shall limit the Indemnified Party's rights hereunder unless (and
then solely to the extent) that such delay materially impairs the
Indemnifying Party's ability to respond to the claim. If the
Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim described in such Indemnity Notice or fails
to notify the Indemnified Party within sixty (60) days after the
Indemnified Party's request whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss
in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under
Section 9.01 and the Indemnifying Party shall pay the amount of
such Loss to the Indemnified Party. If the Indemnifying Party
has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such
dispute shall be resolved by litigation in a court of competent
jurisdiction.
(c) In the event of any Loss resulting from a
misrepresentation or breach of warranty or nonfulfillment as to
which an Indemnified Party would be entitled to claim indemnity
under Section 9.01 but for the provisions of Section 9.01(c),
such Indemnified Party may nevertheless deliver a written notice
to the Indemnifying Party containing the information that would
be required in a Claim Notice or an Indemnity Notice, as
applicable, with respect to such Loss. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim
described therein or fails to notify the Indemnified Party within
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sixty (60) days after the Indemnified Party's request whether the
Indemnifying Party disputes the claim described in such Claim
Notice or Indemnity Notice, as the case may be, the Loss
specified in the notice will be conclusively deemed to have been
incurred by the Indemnified Party for purposes of making the
determination set forth in Section 9.01(c). If the Indemnifying
Party has timely disputed the claim described in such Claim
Notice or Indemnity Notice, as the case may be, the Indemnifying
Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved
through negotiations within the Resolution Period, such dispute
shall be resolved by litigation in a court of competent
jurisdiction.
(d) Except as set forth in Section 4.09(c) and Article X of
this Agreement, the rights accorded to Indemnified Parties under
this Article IX shall be the sole and exclusive remedy and relief
with respect to the representations, warranties, covenants and
agreements set forth in this Agreement, other than any remedy or
relief from liability for any willful and knowing breach of this
Agreement, knowingly false representations or warranty or fraud.
ARTICLE X
TERMINATION
10.01 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser;
(b) at any time before the Closing, by Parent or Seller, on
the one hand, or Purchaser, on the other hand, in the event (i)
of a material breach hereof by the non-terminating parties if
such non-terminating parties fail to cure such breach within five
(5) Business Days following notification thereof by the
terminating parties or (ii) upon notification of the non-
terminating parties by the terminating party that the
satisfaction of any condition to the terminating parties'
obligations under this Agreement becomes impossible or
impracticable with the use of commercially reasonable efforts if
the failure of such condition to be satisfied is not caused by a
breach hereof by the terminating parties;
(c) at any time after May 15, 1998, upon notice of at least
two Business days by Parent and Seller if Purchaser shall not
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have notified Parent or Seller that the conditions to Purchaser's
obligation under this Agreement that are set forth in Section
6.09 of this Agreement shall have been satisfied or waived and if
Purchaser fails to then furnish notice within the two business
day period that the conditions shall have been satisfied or
waived; or
(d) at any time after June 15, 1998 (or June 30, 1998 if
extended to such date by written notice of Purchaser) by Parent
or Seller, on the one hand, or at any time after June 15, 1998 by
Purchaser, on the other hand, upon notification of the non-
terminating parties by the terminating parties if the Closing
shall not have occurred on or before such date and such failure
to consummate is not caused by a breach of this Agreement by the
terminating party.
10.02 LIABILITIES IN EVENT OF TERMINATION. In the event of the
termination of this Agreement, this Agreement shall be void and have no
effect, and Parent, Seller and Purchaser and their respective directors,
officers and shareholders or other Representatives shall have no obligation
or liability to each other, except that the provisions in Sections 10.03,
12.04 (to the extent applicable) and 12.06 will continue to apply following
any termination of this Agreement.
10.03 TERMINATION FEE. If (a) this Agreement is terminated due to
a material breach of any representation, warranty, covenant or agreement by
Parent or Seller or the failure of Parent or Seller to satisfy any
condition required to be satisfied by it under this Agreement, and (b)
within 365 days after the date on which this Agreement is terminated,
either an Alternate Transaction occurs, or Parent or Seller enters into a
letter of intent or definitive agreement providing for an Alternate
Transaction, then Parent and Seller promptly (and in any event within 10
days after receipt of Purchaser's written demand) shall pay to Purchaser
liquidated damages ("Liquidated Damages") equal to the lesser of (i) the
sum of (w) $500,000 and (x) all of Purchaser's out-of-pocket expenses
incurred in connection with this Agreement, the negotiation of letter of
intent among Parent, Seller and Purchaser dated April 7, 1998, and this
Agreement and the transactions contemplated hereby, including without
limitation, its due diligence expenses and the fees and expenses of its
professional advisors, or (ii) an amount (the "Alternate Transaction
Amount") equal to the difference between the Alternate Transaction Price
(as defined below) and the portion of the Purchase Price that would have
been allocable to the Assets that shall be the subject of the Alternate
Transaction had Parent, Seller and Purchaser consummated the transactions
contemplated by this Agreement. If more than one Alternate Transaction
shall occur, the Alternate Transaction Amount shall be recomputed as a
result of each such Alternate Transaction. The Liquidated Damages shall be
payable immediately upon the occurrence of each Alternate Transaction. The
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"Alternate Transaction Price" means the value attributed to the Seller
based on the maximum price paid for the Seller's assets, equity securities
or business in the Alternate Transaction, which shall include, if
applicable, the value assigned in the Alternate Transaction to securities
or other property exchanged for the Seller's equity securities or received
for the Seller's assets or business or the right to vote the shares. For
purposes of this Agreement, an "Alternate Transaction" means any
transaction, other than sales of inventory in the ordinary course, relating
to the acquisition of a material portion of the Seller, its assets, equity
securities or Business, in whole or in part, whether directly or indirectly
through purchase, merger, consolidation or other business combination.
Notwithstanding this Section 10.03, Liquidated Damages shall not be payable
by Parent or Seller if (y) the Parent or Seller shall have terminated this
Agreement pursuant to Section 10.01(c) and (z) the conditions to
Purchaser's obligations as set forth in Sections 6.01, 6.02, 6.04, 6.05,
6.06, 6.08, and 6.13 shall have been fulfilled or satisfied as of the date
of the termination.
ARTICLE XI
DEFINITIONS
11.01 DEFINITIONS.
(a) As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"ACCOUNTS RECEIVABLE" has the meaning ascribed to it in Section
1.01(a)(iii).
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"AFFILIATE" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause
the direction of the management and policies of such Person whether by
Contract or otherwise and, in any event and without limitation of the
previous sentence, any Person owning ten percent (10%) or more of the
voting securities of a second Person shall be deemed to control that second
Person.
"AGREEMENT" means this Asset Purchase Agreement and the Exhibits,
the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance with Sections 6.03 and 7.03, as the same shall be
amended from time to time in accordance with the terms hereof.
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"ANNUAL FINANCIAL STATEMENT DATE" means March 31, 1998.
"ANNUAL FINANCIAL STATEMENTS" means the audited consolidated
balance sheet of Seller as of March 31, 1998, and the related audited
statements of income, shareholders' equity and cash flows of Seller for the
fiscal year then ended, in each case including the notes thereto.
"ASSETS AND PROPERTIES" of any Person at any time of
determination means, collectively, all assets, properties and rights of
every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the
goodwill related thereto, operated, owned or leased by such Person, at such
time, including without limitation cash, cash equivalents, Investment
Assets, accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, real estate, equipment, inventory, goods
and Intellectual Property.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Xxxx of Sale,
Assignment and Assumption Agreement to be entered into on the Closing Date
by Purchaser and Seller, substantially in the form of Exhibit A, as the
same may be amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof and thereof.
"ASSOCIATE" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner
or is the beneficial owner, directly or indirectly, of ten percent (10%) or
more of any class of equity securities, any trust or estate in which such
Person has a substantial beneficial interest or as to which such Person
serves as a trustee or in a similar capacity and any relative or spouse of
such Person, or any relative of such spouse, who has the same home as such
Person.
"ASSUMED LIABILITIES" has the meaning ascribed to it in
Section 1.02(a).
"ASSUMPTION INSTRUMENTS" has the meaning ascribed to it in
Section 1.04.
"BENEFIT PLAN" means any Plan established by Seller, or any
predecessor or Affiliate of Seller, existing at the Closing Date or prior
thereto, to which Seller contributes or has contributed on behalf of any
Employee, former Employee or director, or under which any Employee, former
Employee or director of Seller or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
"BOOKS AND RECORDS" of any Person means all files, documents,
instruments, papers, books and records relating to the business,
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operations, condition of (financial or other), results of operations and
Assets and Properties of such Person, including financial statements; Tax
Returns and related work papers and letters from accountants; budgets;
pricing guidelines; labels, catalogues, brochures, artwork photographs,
advertising material, marketing and productive literature, files and other
records and documents; ledgers; journals; deeds; title policies; minute
books; stock certificates and books; stock transfer ledgers; Contracts;
Licenses; customer lists, church lists and mailing lists; payroll and
personnel records; computer files and programs; retrieval programs;
operating data and plans; environmental studies and plans; and maintenance
records, brochures, catalogues and other documents relating to any Tangible
Personal Property.
"BUSINESS" has the meaning ascribed to it in the recitals hereto.
"BUSINESS BOOKS AND RECORDS" has the meaning ascribed to it in
Section 1.01(a)(xiii).
"BUSINESS COMBINATION" means with respect to any Person, any
merger, consolidation or combination to which such Person is a party, any
sale, dividend, split or other disposition of capital stock or other equity
interests of such Person or any sale, dividend or other disposition of all
or substantially all of the Assets and Properties of such Person.
"BUSINESS CONTRACTS" has the meaning ascribed to it in
Section 1.01(a)(vi).
"BUSINESS DAY" means a day other than Saturday, Sunday or any day
on which banks located in the State of Michigan or Texas are authorized or
obligated to close.
"BUSINESS LICENSES" has the meaning ascribed to it in
Section 1.01(a)(x).
"CLAIM NOTICE" means written notification pursuant to
Section 9.23(a) of a Third Party Claim as to which indemnity under
Section 9.01 is sought by an Indemnified Party, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such
Third Party Claim and for the Indemnified Party's claim against the
Indemnifying Party under Section 9.01, together with the amount or, if not
then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim.
"CLOSING" has the meaning ascribed to it in Section 1.04.
"CLOSING DATE" means the date on which the Closing actually
occurs, which shall be either (a) the fifth Business Day after the day on
which the last of the consents, approvals, actions, filings, notices or
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waiting periods described in or related to the filings described in
Sections 6.05, 6.06, 7.05 and 7.06 has been obtained, made or given or has
expired, as applicable, but in any event no later than June 15, 1998 (or
June 30, 1998 if extended by Purchaser pursuant to Section 10.01(d)), or
(b) such other date as Purchaser, Parent and Seller may mutually agree in
writing.
"CODE" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"COMPUTER SERVICES AGREEMENT" means the Computer Services
Agreement between Seller and Purchaser for Purchaser to use Seller's
Computer Equipment in form and substance reasonably satisfactory to
Purchaser and Seller.
"CONDITION OF THE BUSINESS" means the business, condition
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Business.
"CONTRACT" means any agreement, lease, debenture, note, other
evidence of Indebtedness, mortgage, deed of trust, indenture, security
agreement or other contract (whether written or oral).
"DISCLOSURE SCHEDULE" means the schedules delivered to Purchaser
by Parent and Seller herewith and dated as of the date hereof, containing
all lists, descriptions, exceptions and other information and materials as
are required to be included therein pursuant to this Agreement.
"EMPLOYEE" means each employee or officer of Seller engaged in
the conduct of the Business.
"ENVIRONMENT" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota
and all other natural resources.
"ENVIRONMENTAL CLAIM" means any and all administrative or
judicial actions, suits, orders, claims, liens, notices, notices of
violations, investigations, complaints, requests for information,
proceedings, or other communication (written or oral), whether criminal or
civil, (collectively, "Claims") pursuant to or relating to any applicable
Environmental Law by any person (including but not limited to any
Governmental or Regulatory Authority, private person and citizens' group)
based upon, alleging, asserting, or claiming any actual or potential (i)
violation of or liability under any Environmental Law, (ii) violation of
any Environmental Permit, or (iii) liability for investigatory costs,
cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or penalties
arising out of, based on, resulting from, or related to the presence,
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Release, or threatened Release into the Environment, of any Hazardous
Materials at any Store, including but not limited to any off-Site location
to which Hazardous Materials or materials containing Hazardous Materials
were sent for handling, storage, treatment, or disposal.
"ENVIRONMENTAL CLEAN-UP SITE" means any location which is listed
or proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System,
Resource Conservation and Recovery Information System or on any similar
state or local list of sites requiring investigation or cleanup, or which
is the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any alleged violation of any
Environmental Law, or at which there has been a Release, threatened or
suspected Release of a Hazardous Material otherwise than in compliance with
Environmental Laws.
"ENVIRONMENTAL LAW" means any and all federal, state, local,
provincial and foreign, civil and criminal laws, statutes, ordinances,
orders, codes, rules, regulations, Environmental Permits, policies,
guidance documents, judgments, decrees, injunctions, or agreements with any
Governmental or Regulatory Authority, relating to the protection of health
and the Environment, worker health and safety, and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Materials, including but not limited to: the Clean Air Act, 42
U.S.C. < SECTION > 7401 ET SEQ.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. < SECTION > 9601 ET SEQ.;
the Federal Water Pollution Control Act, 33 U.S.C. < SECTION > 1251 ET SEQ.;
the Hazardous Material Transportation Act 49 U.S.C. < SECTION > 1801 ET SEQ.;
the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. < SECTION >
136 ET SEQ.; the Resource Conservation and Recovery Act of 1976 ("RCRA"),
42 U.S.C. < SECTION > 6901 ET SEQ.; the Toxic Substances Control Act, 15
U.S.C. < SECTION > 2601 ET SEQ.; the Occupational Safety & Health Act of
1970, 29 U.S.C. < SECTION > 651 ET SEQ.; the Oil Pollution Act of 1990, 33
U.S.C. < SECTION > 2701 ET SEQ.; and the state analogies thereto; and any
common law doctrine, including but not limited to, negligence, nuisance,
trespass, personal injury, or property damage related to or arising out of
the presence, Release, or exposure to a Hazardous Material.
"ENVIRONMENTAL LIABILITY" means (i) the presence, Release or
threatened Release, of any Hazardous Materials existing as of or prior to
the Closing Date at, from, in, to, on or under any Store operated by
Seller, Parent, any predecessor of Seller or Parent or any entity owned by
Seller or Parent other than in compliance with Environmental Laws, (ii) the
transportation, treatment, storage, handling or disposal or arrangement for
transportation, treatment, storage, handling or disposal of any Hazardous
Materials generated by Seller or Parent, any predecessor of Seller or
Parent or any entity owned by Seller or Parent at or to any off-Site
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location prior to the Closing Date in connection with any Store, and
otherwise than in compliance with Environmental Laws or (iii) any violation
of Environmental Law relating to any Store by Seller or Parent prior to the
Closing Date.
"ENVIRONMENTAL PERMIT" means any federal, state, local,
provincial, or foreign permits, licenses, approvals, consents or
authorizations required by any Governmental or Regulatory Authority under
or in connection with any Environmental Law and includes any and all
orders, consent orders or binding agreements issued or entered into by a
Governmental or Regulatory Authority under any applicable Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ESTOPPEL CERTIFICATE AND CONSENT TO ASSIGNMENT" means the
Estoppel Certificate and Consent to Assignment to be entered into at or
prior to the Closing among Seller, Parent, Purchaser and any applicable
landlord or sublandlord substantially in the form of Exhibit F.
"EXCLUDED ASSETS" has the meaning ascribed to it in
Section 1.01(b).
"FINANCIAL STATEMENTS" means the financial statements delivered
to Purchaser pursuant to Section 2.06 or 4.05.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"GENERAL ASSIGNMENT" has the meaning ascribed to it in
Section 1.04.
"GIFT CERTIFICATES OUTSTANDING" has the meaning ascribed to it in
Section 1.02(a)(v).
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic
or foreign state, county, city or other political subdivision, and shall
include, without limitation, any stock exchange, quotation service and the
National Association of Securities Dealers.
"HAZARDOUS MATERIAL" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing levels of
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polychlorinated biphenyls (PCBs); (B) any chemicals, materials, substances
or wastes which are now defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import, under any
Environmental Law; and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated by any
Governmental or Regulatory Authority.
"INDEBTEDNESS" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or
services (other than trade payables or accruals incurred in the ordinary
course of business), (iv) under capital leases, (v) as an account party
under letters of credit and (vi) in the nature of guarantees of the
obligations described in clauses (i) through (v) above of any other Person.
"INDEMNIFIED PARTY" means any Person claiming indemnification
under any provision of Article IX, including without limitation a Person
asserting a claim pursuant to Section 9.02(c).
"INDEMNIFYING PARTY" means any Person against whom a claim for
indemnification are being asserted under any provision of Article IX,
including without limitation a Person against whom a claim is asserted
pursuant to Section 9.02(c).
"INDEMNITY NOTICE" means written notification pursuant to
Section 9.02(b) of a claim for indemnity under ARTICLE IX by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"INTANGIBLE PERSONAL PROPERTY" has the meaning ascribed to it in
Section 1.01(a)(viii).
"INTELLECTUAL PROPERTY" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights
(including, but not limited to "Joshua's" and "Joshua's Christian Store"),
brand names, inventions, processes, formulae, copyrights and copyright
rights, trade dress, business and product names, logos, slogans, trade
secrets, industrial models, designs, methodologies, and related
documentation, technical information, manufacturing, engineering and
technical drawings, know-how and all pending applications for and
registrations of patents, trademarks, service marks and copyrights.
"INVENTORY" has the meaning ascribed to it in
Section 1.01(a)(ii).
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"INVENTORY CAP" has the meaning ascribed to it under Section
1.03(c)(i).
"INVENTORY VALUATIONS" has the meaning ascribed to it in Section
1.03(c)(i).
"INVESTMENT ASSETS" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase
and securities convertible into or exercisable or exchangeable for other
securities), interests in joint ventures and general and limited
partnerships, mortgage loans and other investment or portfolio assets owned
of record or beneficially by Seller.
"KNOWLEDGE," "to the knowledge of" and like terms means the
actual knowledge of any officer of the Person after reasonable inquiry of
subordinate employees.
"LAWS" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, known or
unknown fixed or otherwise, or whether due or to become due).
"LICENSES" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"LIENS" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of
any kind, or any conditional sale Contract, title retention Contract or
other Contract to give any of the foregoing.
"LOSSES" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest,
court costs, fees of attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any claim, default or
assessment).
"MANAGEMENT AGREEMENT" means the Management Agreement to be
entered into at or prior to the Closing among Seller, Parent, Purchaser and
any applicable landlord or sublandlord in form and substance reasonably
satisfactory to Seller, Parent and Purchaser.
"OPERATIVE AGREEMENTS" means, collectively, the Promissory Note,
General Assignment and Assumption Agreement, the other Assignment
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Instruments and Assumption Instruments, Computer Services Agreement and
Management Agreement.
"ORDER" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"OTHER ASSETS" has the meaning ascribed to it in
Section 1.01(a)(xiv).
"PARENT" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"PERMITTED LIEN" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for
which adequate reserves have been established in accordance with GAAP, (ii)
any statutory Lien arising in the ordinary course of business by operation
of Law with respect to a Liability that is not yet due or delinquent, (iii)
any minor imperfection of title or similar Lien which, individually or in
the aggregate with other such Liens, does not materially impair the value
of the property subject to such Lien or interfere with the use of such
property in the conduct of the Business or the business of Purchaser, as
the case may be, and (iv) the landlord's liens set forth in the number of
Real Property Leases described in Section 6.09 of the Agreement.
"PERSON" means any natural person, corporation, general
partnership, limited partnership, limited liability company,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"PERSONAL PROPERTY LEASES" has the meaning ascribed to it in
Section 1.01(a)(v).
"PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services,
cafeteria, life, health, accident, disability, workmen's compensation or
other insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral,
including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"PREPAID EXPENSES" has the meaning ascribed to it in
Section 1.01(a)(vii).
"PROMISSORY NOTE" has the meaning ascribed to it in Section
1.03(d).
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"PURCHASE PRICE" has the meaning ascribed to it in Section
1.03(a).
"PURCHASER" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"PURCHASER'S FINANCIAL STATEMENTS" has the meaning ascribed to it
in Section 3.06.
"QUALIFIED PLAN" means each benefit plan which is intended to
qualify under Section 401 of the Code.
"REAL PROPERTY LEASES" has the meaning ascribed to it in
Section 1.01(a)(i).
"RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Material into the Environment.
"REPRESENTATIVES" has the meaning ascribed to it in Section 4.02.
"RESOLUTION PERIOD" means the period ending thirty (30) calendar
days following receipt by an Indemnified Party of a Dispute Notice.
"RETAINED LIABILITIES" has the meaning ascribed to it in
Section 1.02(b).
"SECURITY AGREEMENTS" has the meaning ascribed to it in Section
2.23.
"SELLER" has the meaning ascribed to it in the introductory
paragraph of this Agreement.
"SELLER ASSETS" has the meaning ascribed to it in Section
1.01(a).
"SELLER'S COMPUTER EQUIPMENT" has the meaning ascribed to it in
Section 1.01(b)(iii).
"SITE" means any of the real properties currently or previously
owned, leased or operated by the Parent or the Seller, any predecessors of
the Parent or the Seller or any entities previously owned by the Parent or
the Seller, in each case in connection with the Assets or the Business,
including all soil, subsoil, surface waters and groundwater thereat.
"STORE" has the meaning ascribed to it in Section 1.01(a).
"STORE OPENING FUNDS" has the meaning ascribed to it in
Sections 1.01(a)(xiii).
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"STORE RELOCATION EXPENSE" means the amount of direct, reasonable
out-of-pocket costs (as described in Schedule 11 to this Agreement) that
Purchaser may incur to relocate a Store (a "Nontransferred Store") as to
which Purchaser is required to relocate because (1) Seller shall not have
delivered to Purchaser an Estoppel Certificate and Consent to Assignment in
form and substance reasonably acceptable to Purchaser to operate the Store
after the Closing for a period until at least the expiration of the
existing term of the Real Property Lease relating to the Store and (2)
prior to the end of the term of any such Real Property Lease, the lessor
for such lease has issued a notice of default with respect to the continued
operation of the Store (which notice has not been withdrawn) by or for the
benefit of Purchaser; provided, however, that the maximum reimbursement for
any Store shall be $100,000.
"TANGIBLE PERSONAL PROPERTY" has the meaning ascribed to it in
Section 1.01(a)(iv).
"TAX" or "TAXES" means all federal, state, local or foreign net
or gross income, gross receipts, net proceeds, sales, use, AD VALOREM,
value added, franchise, bank shares, withholding, payroll, employment,
excise, sales, use, property, alternative or add-on minimum, environmental
or other taxes, assessments, duties, fees, levies or other governmental
charges of any nature whatever, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"TAX RETURNS" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular
Tax.
"TENANT SECURITY DEPOSITS" has the meaning ascribed to it in
Section 1.01(a)(xii).
"THIRD PARTY CLAIM" has the meaning ascribed to it in Section
9.02(a).
"TRANSFER TAXES" means sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar Taxes and
fees.
"UNCOLLECTED ACCOUNT" has the meaning ascribed to it in
Section 1.03(c)(ii).
"VEHICLES" has the meaning ascribed to it in Section 1.01(a)(x).
(b) Unless the context of this Agreement otherwise
requires: (i) words of any gender include each other gender; (ii)
words using the singular or plural number also include the plural
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or singular number, respectively; (iii) the terms "hereof,"
"herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to
the specified Article or Section of this Agreement; (v) the words
"include," "includes" and "including" are deemed to be followed
by the phrase "without limitation"; and (vi) the phrases
"ordinary course of business" and "ordinary course of business
consistent with past practice" refer to the business and practice
of Seller in connection with the Business. All accounting terms
used herein and not expressly defined herein shall have the
meanings given to them under GAAP.
ARTICLE XII
MISCELLANEOUS
12.01 NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given
only if delivered personally or by facsimile transmission or mailed (first
class postage prepaid) to the parties at the following addresses or
facsimile numbers:
If to Purchaser:
Family Bookstores Company, Inc.
0000 Xxxxxxxxx, X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, President and CEO
with a copy to:
Xxxxxx Xxxxxxxx & Xxxx LLP
000 Xxx Xxxx Xxxxxxxx
000 Xxxx, X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. XxXxxxxx
If to Seller or Parent, to:
Tandycrafts, Inc.
The Development Association, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx, President and CEO
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with a copy to:
Tandycrafts, Inc.
Legal Department
0000 Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx
and a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxxx
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section and electronically confirmed as received
and a hard copy promptly sent by First Class Mail, be deemed given upon
receipt and (iii) if delivered by mail in the manner described above to the
address as provided in this Section, be deemed given upon receipt (in each
case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice is to be
delivered pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for the purpose
of notices to that party by giving notice specifying such change to the
other party hereto.
12.02 BULK SALES ACT. The parties hereby waive compliance with
the bulk sales act or comparable statutory provisions of each applicable
jurisdiction.
12.03 ENTIRE AGREEMENT. This Agreement and the Operative
Agreements supersede all prior discussions and agreements between the
parties with respect to the subject matter hereof and thereof, including
without limitation that certain letter of intent between Purchaser, Parent
and Seller dated April 7, 1998, and the certain Confidentiality Agreements
between Purchaser and Parent dated May 13 and July 10, 1997, and contains
the sole and entire agreement between the parties hereto with respect to
the subject matter hereof and thereof.
12.04 EXPENSES. Except as otherwise expressly provided in this
Agreement (including as provided in Sections 1.03(c)(i), 4.05(a), 10.02 and
10.03), whether or not the transactions contemplated hereby are
consummated, each party will pay its own costs and expenses incurred in
connection with the negotiation, execution and closing of this Agreement
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and the Operative Agreements and the transactions contemplated hereby and
thereby.
12.05 PUBLIC ANNOUNCEMENTS. At all times at or before the
Closing, Seller, Parent, and Purchaser shall not issue or make any reports,
statements, covenants or releases to the public or generally to the
employees, customers, suppliers or other Persons to whom Seller or Parent
sells goods or provides services in connection with the Business or with
whom Seller otherwise has significant business relationships in connection
with the Business with respect to this Agreement or the transactions
contemplated hereby without the consent of the other parties, which consent
shall not be unreasonably withheld. If any party is unable to obtain the
approval of its public report, statement document, or release from any
other party and such report, statement or release is, in the written
opinion of legal counsel to such party, required by Law to discharge such
party's disclosure obligations, then such party may make or issue the
legally required report, statement or release and promptly furnish the
other party with a copy thereof. Seller, Parent, and Purchaser will also
obtain each other party's prior approval of any press release to be issued
immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
12.06 CONFIDENTIALITY. For a period of two years from the date of
this Agreement, each party hereto will hold, and will use its commercially
reasonable efforts to cause its Affiliates and their respective
Representatives to hold, in strict confidence from any Person (other than
any such Affiliate or Representative), unless (a) compelled to disclose by
judicial or administrative process (including without limitation in
connection with obtaining the necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental Authorities) or by other
requirements of Law or Governmental Authorities or (b) disclosed in an
Action or Proceeding brought by a party hereto in pursuit of its rights or
in the exercise of its remedies hereunder, all documents and information
concerning any other party or any of its Affiliates furnished to it by such
other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent
that such documents or information can be shown to have been (i) previously
known by the party receiving such documents or information, (ii) in the
public domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (iii)
later acquired by the receiving party from another source if the receiving
party is not aware that such source is under an obligation to another party
hereto to keep such documents and information confidential (the
"Confidential Information"); PROVIDED that following the Closing the
foregoing restrictions will not apply to Purchaser's use of documents and
information concerning Seller, the Business, the Assets or the Assumed
Liabilities furnished by any party hereto. In the event the transactions
contemplated hereby are not consummated, upon the request of any other
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party, each party hereto will, and will cause its Affiliates and their
respective Representatives to, promptly (and in no event later than five
days after such request) redeliver or cause to be redelivered all copies of
documents and information furnished by such other party in connection with
this Agreement or the transactions contemplated hereby and destroy or cause
to be destroyed all notes, memoranda, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by the party
furnished such documents and information or its Representatives and will
not use such information in a manner that would be likely to have a
materially adverse effect upon such other party. Each party shall inform
their respective Affiliates and Representatives of the confidential nature
of the other party's Confidential Information and not to disclose any of
the other party's Confidential Information to any other Person. Each party
shall be responsible for any breach of Section 12.06 by any of its
Representatives.
12.07 WAIVER. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed
as a waiver of the same or any other term or condition of this Agreement on
any future occasion. All remedies, either under this Agreement or by Law
or otherwise afforded, will be cumulative and not alternative.
12.08 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
12.09 NO THIRD PARTY BENEFICIARY. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the
intention of the parties to confer third-party beneficiary rights upon any
other Person other than any Person entitled to indemnification under
Article IX.
12.10 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor
any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and
any attempt to do so will be void, except (a) for assignments and transfers
by operation of Law and (b) that Purchaser may assign any or all of its
rights, interests and obligations hereunder (including without limitation
its rights under Article IX) to (i) a wholly owned subsidiary, provided
that any such subsidiary agrees in writing to be bound by all of the terms,
conditions and provisions contained herein, (ii) any post-Closing purchaser
of the Business or a substantial part of the Assets or (iii) any financial
institution providing purchase money or other financing to Purchaser from
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time to time as collateral security for such financing, but no such
assignment referred to in clause (i) or (ii) shall relieve Purchaser of its
obligations hereunder. Subject to the preceding sentence, this Agreement
is binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
12.11 HEADINGS. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
12.12 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN OR ANY COURT OF
THE STATE OF MICHIGAN LOCATED IN THE CITY OF GRAND RAPIDS IN ANY SUCH
ACTION, SUIT OR PROCEEDING, AND AGREES THAT ANY SUCH ACTION, SUIT OR
PROCEEDING MAY BE BROUGHT IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS OR ANY OTHER OBJECTION TO VENUE THEREIN), PROVIDED,
HOWEVER, THAT SUCH CONSENT TO JURISDICTION IS SOLELY FOR THE PURPOSE
REFERRED TO IN THIS SECTION AND SHALL NOT BE DEEMED TO BE A GENERAL
SUBMISSION TO THE JURISDICTION OF SAID COURTS OR IN THE STATE OF MICHIGAN
OTHER THAN FOR SUCH PURPOSE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY
PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE OTHER IN ANY OTHER
JURISDICTION.
12.13 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future
Law, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (a) such
provision will be fully severable, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance herefrom
and (d) in lieu of such illegal, invalid or unenforceable provision, there
will be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
12.14 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Michigan,
without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Michigan or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of Michigan.
12.15 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party as of the date first
above written.
FAMILY BOOKSTORES COMPANY, INC.
By: ______________________________________
Name:
Title:
TANDYCRAFTS, INC.
By: ______________________________________
Name:
Title:
THE DEVELOPMENT ASSOCIATION, INC.
By: ______________________________________
Name:
Title:
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