STOCK PURCHASE AGREEMENT dated as of August 25, 2008 by and between CROSSTOWN TRADERS, INC. NORM THOMPSON OUTFITTERS, INC. CHARMING SHOPPES, INC. and THE OTHER PERSONS LISTED ON THE SIGNATURE PAGES HERETO
EXHIBIT
10.1
dated as
of
August
25, 2008
by and
between
CROSSTOWN
TRADERS, INC.
XXXX
XXXXXXXX OUTFITTERS, INC.
CHARMING
SHOPPES, INC.
and
THE OTHER
PERSONS LISTED ON THE SIGNATURE PAGES HERETO
TABLE
OF CONTENTS
Page
|
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DEFINITIONS
|
1
|
|
1.1
|
Definitions
|
1
|
Section
2.
|
PURCHASE
AND SALE OF SHARES
|
10
|
2.1
|
Purchase
and Sale of Shares
|
10
|
2.2
|
Closing
|
10
|
2.3
|
Payment
of Indebtedness
|
11
|
2.4
|
Assignment
and Assumption
|
11
|
Section
3.
|
PURCHASE
PRICE ADJUSTMENT
|
12
|
3.1
|
Estimated
Closing Outstanding Checks and Estimated Closing CTI Borne
Expenses
|
12
|
3.2
|
Closing
Statement
|
12
|
3.3
|
Post-Closing
Adjustment
|
13
|
3.4
|
Assumption
of CTI Borne Expenses
|
14
|
Section
4.
|
REPRESENTATIONS
AND WARRANTIES REGARDING CTI
|
14
|
4.1
|
Organization
and Good Standing
|
14
|
4.2
|
Power
and Authorization
|
15
|
4.3
|
No
Conflicts
|
15
|
4.4
|
Ownership
of the Shares
|
16
|
4.5
|
Brokers
|
16
|
Section
5.
|
REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANY AND
SUBSIDIARIES
|
16
|
5.1
|
Organization
and Good Standing
|
16
|
5.2
|
No
Conflicts
|
16
|
5.3
|
Capitalization
|
17
|
5.4
|
Compliance
with Laws
|
18
|
5.5
|
Litigation
|
18
|
5.6
|
Financial
Statements
|
18
|
5.7
|
Inventory
|
19
|
5.8
|
Absence
of Certain Changes and Events
|
20
|
5.9
|
Real
Property
|
22
|
5.10
|
Personal
Property; Bank Accounts
|
22
|
5.11
|
Material
Contracts
|
22
|
5.12
|
Insurance
|
24
|
5.13
|
Intellectual
Property
|
24
|
5.14
|
Suppliers
|
26
|
5.15
|
Labor
Matters
|
26
|
5.16
|
Employee
Benefits
|
27
|
5.17
|
Officers
and Employees
|
28
|
5.18
|
Environmental
Matters
|
29
|
5.19
|
Sufficiency
of the Assets
|
31
|
5.20
|
Brokers
|
31
|
Section
6.
|
REPRESENTATIONS
AND WARRANTIES OF BUYER
|
31
|
6.1
|
Organization
and Good Standing
|
31
|
6.2
|
Power
and Authorization
|
31
|
6.3
|
No
Conflicts
|
32
|
6.4
|
No
Reliance
|
32
|
6.5
|
Brokers
|
32
|
6.6
|
Financing
|
33
|
6.7
|
Disclaimer
Regarding Projections
|
33
|
6.8
|
No
Additional Representations
|
33
|
Section
7.
|
COVENANTS
OF CTI
|
33
|
7.1
|
Conduct
of Business Pending Closing
|
33
|
7.2
|
Negative
Covenants Pending Closing
|
34
|
7.3
|
Governmental
Authorizations; Consents
|
36
|
7.4
|
Access
to Information
|
37
|
7.5
|
Confidential
Information
|
38
|
7.6
|
Non-Solicitation
|
39
|
7.7
|
Elimination
of Intercompany Accounts
|
39
|
7.8
|
Exclusivity
|
39
|
7.9
|
Financial
Information
|
40
|
7.10
|
Maintenance
of Insurance Policies
|
40
|
Section
8.
|
COVENANTS
OF BUYER
|
40
|
8.1
|
Confidential
Information
|
40
|
8.2
|
Governmental
Authorizations
|
42
|
8.3
|
Notice
of Breach; Failure to Satisfy Closing Condition
|
42
|
8.4
|
Non-Solicitation
|
42
|
Section
9.
|
ADDITIONAL
COVENANTS OF BUYER, THE COMPANY AND CTI
|
42
|
9.1
|
Further
Assurances
|
42
|
9.2
|
Certain
Filings and Consents
|
43
|
9.3
|
Public
Announcements
|
43
|
9.4
|
Excluded
Subsidiaries and Excluded Assets
|
43
|
9.5
|
Transition
Services
|
44
|
9.6
|
Mutual
Release
|
44
|
Section
10.
|
TAX
MATTERS
|
45
|
10.1
|
Tax
Representations of CTI
|
45
|
10.2
|
Tax
Covenants of CTI and the Company
|
46
|
10.3
|
Tax
Indemnification
|
46
|
10.4
|
Tax
Contest
|
47
|
10.5
|
Tax
Sharing Agreements
|
48
|
10.6
|
Transfer
Taxes
|
48
|
10.7
|
Section
338(h)(10) Election
|
48
|
10.8
|
Purchase
Price Allocation
|
48
|
Section
11.
|
EMPLOYEE
BENEFITS
|
49
|
11.1
|
Listed
Employees; Transferred Employees
|
49
|
11.2
|
Comparability
of Benefits
|
49
|
11.3
|
Welfare
Plans
|
50
|
11.4
|
Service
Credit
|
50
|
11.5
|
Rollovers
and Transfers
|
50
|
11.6
|
Continuation
Coverage
|
51
|
11.7
|
Retained
Liabilities
|
51
|
11.8
|
Paid
Time Off
|
52
|
11.9
|
Third
Party Beneficiaries; Other Limitations
|
52
|
Section
12.
|
CLOSING
CONDITIONS
|
52
|
12.1
|
Conditions
to Obligation of Buyer
|
52
|
12.2
|
Conditions
to Obligation of CTI
|
53
|
12.3
|
Frustration
of Closing Conditions
|
54
|
Section
13.
|
TERMINATION
AND ABANDONMENT
|
54
|
13.1
|
Termination
|
54
|
13.2
|
Procedure
for Termination
|
55
|
Section
14.
|
SURVIVAL;
INDEMNIFICATION
|
56
|
14.1
|
Survival
|
56
|
14.2
|
Indemnification
|
56
|
14.3
|
Procedures
|
57
|
14.4
|
Limitation
on Damages
|
59
|
14.5
|
Assignment
of Claims
|
59
|
14.6
|
Exclusivity
|
59
|
14.7
|
Limitation
on Liability
|
60
|
Section
15.
|
MISCELLANEOUS
|
60
|
15.1
|
Costs
and Expenses
|
60
|
15.2
|
Notices
|
60
|
15.3
|
Assignment
|
61
|
15.4
|
Amendment,
Modification and Waiver
|
61
|
15.5
|
Governing
Law
|
61
|
15.6
|
Waiver
of Jury Trial
|
62
|
15.7
|
Consent
to Jurisdiction
|
62
|
15.8
|
Section
Headings and Defined Terms
|
62
|
15.9
|
Severability
|
63
|
15.10
|
Counterparts;
Third-Party Beneficiaries
|
63
|
15.11
|
Entire
Agreement
|
63
|
15.12
|
Waiver
of Conflicts Regarding Representation; Nonassertion of Attorney-Client
Privilege
|
63
|
15.13
|
Orchard
Guaranty
|
64
|
15.14
|
Parent
Guaranty
|
65
|
THIS
STOCK PURCHASE AGREEMENT, dated as of August 25, 2008 (this “Agreement”), is made
by and between CROSSTOWN TRADERS, INC., a Delaware corporation (“CTI”), CHARMING
SHOPPES, INC., a Delaware corporation (“Parent”), XXXX
XXXXXXXX OUTFITTERS, INC., a Delaware corporation (the “Buyer”), and the
other parties listed on the signature pages hereto. Certain terms
used herein are defined in Section 1.1
hereof.
BACKGROUND
CTI is
the record and beneficial owner of all of the outstanding shares of capital
stock of the Company.
The
parties hereto desire to provide for the acquisition by Buyer of the Company
through the sale by CTI to Buyer of all the outstanding shares of capital stock
of the Company and for certain other matters, all on the terms and conditions
set forth in this Agreement.
NOW,
THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION
1. DEFINITIONS
1.1 Definitions.
(a) The
following terms, as used herein, have the following meanings:
“Acquired Assets” means those
assets, agreement, contracts and other items identified or described on Schedule 1.1A
hereto.
“Accrued Vacation Amount” means
the lesser of (a) the product of (i) any liability for accrued vacation,
personal days, sick pay and other paid time off times (ii) 0.80, and
(b) $200,000.
“Affiliate” means, with respect
to any Person, any Person directly or indirectly controlling, controlled by, or
under common control with such other Person. For purposes of this
definition, “control,”
when used with respect to any Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative
meanings.
“Assumed Liabilities” means (i)
any Liabilities resulting from, arising out of, relating to, in the nature of,
or caused by any Acquired Asset, (ii) any Liabilities included in the
calculation of the Final Closing CTI Borne Expenses that are assumed by the
Company and its Subsidiaries pursuant to Section 3.4, and
(iii) any Liabilities for accrued vacation, personal
1
days,
sick pay and other paid time off that are assumed by the Company pursuant to
Section 3.4.
“Business Day” means a day
other than a Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by Law to close.
“Closing CTI Borne Expenses”
means the amount of unpaid CTI Borne Expenses as of the Closing.
“Closing Outstanding Checks”
means the amount of Outstanding Checks as of the Closing.
“Closing Payment” means
$35,000,000.
“Company” means Arizona Mail
Order Company, Inc., a Delaware corporation.
“Consent” means any approval,
consent, license, permit, franchise, grant, waiver or other
authorization.
“CTI Borne Expenses” means,
with respect to the Company and its Subsidiaries, the sum of (i) the amount of
Past Due Payables (less the amount of any vendor credits (not to exceed $100,000
in the aggregate for all vendor credits) which may be used by the Company and
its Subsidiaries to reduce amounts otherwise due and owing under such Past Due
Payables to the applicable vendors) in excess of $250,000 in the aggregate, (ii)
the amount of all unprocessed customer returns/refunds that have not been
promptly processed in the ordinary course of business, (iii) any
change-of-control, retention or similar payment which is triggered in whole or
in part by the transactions contemplated by this Agreement, (iv) (A) any
liability for accrued payroll, (B) any liability for accrued bonus payments, (C)
the Accrued Vacation Amount, and (D) any other liability for accrued employee
compensation, (v) any liability for accrued severance payments, (vi) any
liability for accrued restructuring costs, (vii) any liability for Taxes, and
(viii) the amount of all payables due to Direct Marketing Services,
Inc.
“Encumbrance” means any
mortgage, deed of trust, pledge, lien, security interest, charge, encumbrance,
community property interest or restriction on use, voting, transfer or receipt
of income.
“Environmental Laws” means all
Laws concerning or relating to the protection of the environment and human
health as it relates to the environment.
“Excluded Assets” means those
assets, agreements, contracts and other items identified or described on Schedule 1.1B
hereto.
“Excluded Liabilities” any
Liabilities resulting from, arising out of, relating to, in the nature of, or
caused by any Excluded Asset or the Excluded Subsidiaries (including any
Liabilities relating to the Lane Xxxxxx business).
2
“Excluded Subsidiaries” means
Home Etc., Inc., a Delaware corporation, and Old Pueblo Traders #8257, LLC, an
Arizona limited liability company.
“GAAP” means United States
generally accepted accounting principles applied consistently with those used to
prepare the Financial Statements.
“Governmental Body” means any
foreign or United States federal, state, local, municipal or other government,
agency, instrumentality or authority.
“Governmental Authorization”
means any Consent issued, granted, given, or otherwise made available by or
under the authority of any Governmental Body or pursuant to any
Laws.
“Hazardous Substance” means any
substance governed or regulated under any Environmental Laws, including any
substance which is: (i) petroleum, asbestos or asbestos-containing
material, or polychlorinated biphenyls; (ii) defined, designated or listed
as a “Hazardous Substance” pursuant to Sections 307 or 311 of the Clean Water
Act, 33 U.S.C. §§ 1317, 1321, Section 101(14) of CERCLA, 42 U.S.C.
§ 9601; (iii) listed in the United States Department of Transportation
Hazardous Material Tables, 49 C.F.R. § 172.101; or (iv) defined,
designated or listed as a “Hazardous Waste” under Section 1004(5) of the
Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5).
“Indebtedness” of a Person
means (i) any indebtedness of that Person for borrowed money or issued in
substitution for or exchange of indebtedness for borrowed money, (ii) any
indebtedness of that Person evidenced by any note, bond, debenture or other debt
security, (iii) any indebtedness for the deferred purchase price of property or
services with respect to which that Person is liable, contingently or otherwise,
as obligor or otherwise (other than trade payables or other accruals incurred in
the ordinary course of business), (iv) any commitment by which that Person
assures a creditor against loss (including, without limitation, contingent
reimbursement Liability with respect to letters of credit), (v) any indebtedness
guaranteed in any manner by that Person (including, without limitation,
guarantees in the form of an agreement to repurchase or reimburse), (vi) any
Liabilities under capitalized leases with respect to which that Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, (vii) any
indebtedness secured by an Encumbrance on that Person’s assets, (viii) any
off-balance sheet financing of that Person (other than operating leases), (ix)
any accrued and unpaid interest on, and any prepayment premiums, penalties or
similar contractual charges in respect of, any of the foregoing obligations
computed as though payment is being made in respect thereof on the Closing Date,
and (x) any Liabilities incurred by that Person (including, in the case of the
Company and its Subsidiaries, any fees, costs and expenses incurred on behalf of
CTI and any fees payable to Banc of America Securities LLC and Xxxxxx Brothers,
Inc.) in connection with the negotiation of this Agreement, the other
Transaction Documents, the performance of such Person’s and its pre-Closing
Affiliates’ obligations hereunder and thereunder, and the consummation of the
transactions contemplated hereby and thereby.
3
“Knowledge” means the actual
knowledge of (i) with respect to CTI, any one or more of Xxxx Xxxxxxx and
Xxxxx Xxxxxxx and (ii) with respect to Buyer, any one or more of Xxxxx
Xxxxxxxxxxxx, Xxxx Xxxxx and Xxxxxx Xxxxxxxxx.
“Laws” means any law (including
principles of common law), constitution, statute, regulation, ordinance,
certificate, judgment, order, award or other decision or requirement of any
Governmental Body.
“Liability” means any
liability, debt, obligation, assessment, fine, claim, cause of action or other
loss of any kind or nature whatsoever, whether asserted or unasserted, absolute
or contingent, known or unknown, accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due and regardless of when
asserted.
“Material Adverse Effect” means
any change, effect, event or condition that, individually or in the aggregate,
has had or would be reasonably likely to have a material adverse effect on
(i) the business, operations, results of operations, assets or financial
condition of the Company and the Subsidiaries, taken as a whole, or
(ii) the ability of CTI to consummate the transactions contemplated by this
Agreement or any other Transaction Document; provided, however, that any such
effect to the extent attributable to any change, effect, event or condition
(a) generally applicable to the industries and markets in which the Company
and the Subsidiaries operate and not disproportionately affecting the Company or
its Subsidiaries, (b) generally applicable to financial, banking or securities
markets, (c) relating to any change in applicable Law, in GAAP or in any
interpretation thereof occurring after the date hereof, (d) expressly
contemplated by the terms of this Agreement or any other Transaction Document or
approved by Buyer in writing, (e) resulting from the engagement by the
United States in hostilities, whether or not pursuant to the declaration of a
national emergency or war, or resulting from the occurrence of any military or
terrorist attack upon the United States, (f) resulting from seasonal
fluctuations affecting the Company or the Subsidiaries or the apparel retail
industry, or (g) resulting from the execution of this Agreement or any other
Transaction Document or the public announcement of the transactions contemplated
hereby or thereby, in any such case, shall not, in and of
itself, constitute a “Material Adverse
Effect.” Notwithstanding the foregoing, CTI may include in the
Disclosure Schedule disclosure with respect to items that would not have a
Material Adverse Effect within the meaning of the previous sentence, and this
inclusion shall not be deemed to be an acknowledgement by CTI that these items,
or any of them, would have a Material Adverse Effect or further change, amend or
define the meaning of the term Material Adverse Effect for purposes of this
Agreement.
“Net Tax Benefit” means, with
respect to any indemnification claim, the actual reduction in the aggregate
federal and state income tax liability in the taxable period of the loss or
other adjustment for which the indemnification is payable, calculated on a with
and without basis.
“Orchard” means, collectively,
Xxxxxx’x & Damon’s, Inc., a California corporation, Haband Company LLC, a
Delaware limited liability company, Xxxxxx Xxxxxxxxx’x Inc., a Massachusetts
corporation, and Xxxxx LLC, a Delaware limited liability company, Orchard Brands
Corporation, a Delaware corporation.
4
“Outstanding Checks” the amount
of all checks written by the Company or its Subsidiaries but not cashed prior to
Closing (including, without limitation, in respect of accounts payable and
customer refunds).
“Past Due Payables” means the
amount of all payables of the Company and its Subsidiaries (including any
accounts payable, notes payable and any disputed payables) and accrued expenses,
in each case, that are past due.
“Permitted Encumbrances” means
(i) Encumbrances for Taxes and other governmental charges and assessments
that are not yet due and payable, (ii) Encumbrances of landlords and
Encumbrances of carriers, warehousemen, mechanics and materialmen and other like
Encumbrances arising in the ordinary course of business, (iii) other
non-consensual Encumbrances or imperfections of title to or on property that are
not material in amount and do not materially detract from the value of or impair
in any material respect the existing use of the property affected by such
Encumbrance or imperfection, (iv) all Encumbrances of record or identified in
any title reports obtained by Buyer or delivered to Buyer by CTI prior to the
date of this Agreement, (v) all local and other building and zoning Laws now or
hereafter in effect relating to or affecting any real property, (vi) all
leases, subleases, licenses and occupancy and/or use agreements affecting any
real property (or any portion thereof) which are identified on the Disclosure
Schedule, (vii) all service contracts and agreements affecting any real
property which are identified on the Disclosure Schedule, or
(viii) Encumbrances reflected in the contracts identified in Section 5.11 of the
Disclosure Schedule or which are disclosed in the notes accompanying the
Financial Statements.
“Person” means any individual,
corporation (including any non-profit corporation), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union or other entity or Governmental
Body.
“Personally Identifiable Data”
means the names, addresses, email addresses, telephone numbers and fax numbers
of any individuals, or any other data likely to substantially identify any
individual, together with any other information about an individual which is
combined with or linked to any of the foregoing information, including but not
limited to, customer lists, mailing lists, telemarketing lists, email lists,
customer or prospective customer databases, credit reports, data regarding
purchases of identified customers, and databases or records of website usage by
users who are identified by any of the foregoing information.
“Purchase Price” means the
Closing Payment, as finally adjusted in accordance with Section
3.
“Related Party” means (i) CTI,
(ii) any Affiliate of CTI, (iii) any director or officer of CTI or its
Affiliates and (iv) any member of the immediate family of any individual
included in (iii). For purposes of this definition, the “immediate
family” of an individual includes only the individual’s spouse, parents,
children and siblings.
“Related Party Agreements”
means agreements, contracts, commitments or understandings by and between any
Related Party, on the one hand, and the Company or any
5
Subsidiary,
on the other hand, including, without limitation, any such agreements,
contracts, commitments or understandings pursuant to which a Related Party
provides or receives any information, assets, properties, support or other
services to or from the Company or any Subsidiary (including, but not limited to
accounting, tax, data processing, information technology and legal
services).
“Representative” means with
respect to a particular Person, any director, member, partner, general partner,
limited partner, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
“Response,” “Removal” and “Remedial Action” shall have
the meanings ascribed to them in Sections 101(23)-101(25) of the Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”), as amended
by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
§§ 9601(23)-9601(25).
“Software” means all computer
programs (whether in source code or object code form), databases, compilations
and data, and all documentation related to any of the foregoing that is owned,
leased, used or held by, granted to or licensed by the Company or any
Subsidiary.
“Subsidiaries” means Bedford
Fair Apparel, Inc., a Delaware corporation, LM&B Catalog, Inc., a Delaware
corporation, and Monterey Bay Clothing Company, Inc., a Delaware
corporation.
“Tax” means all federal, state,
local or foreign income, gross receipts, windfall profits, severance, property,
production, sales, use, ad valorem, transfer, franchise, capital, paid-up
capital, license, greenmail, excise, franchise, stamp, occupation, premium,
environmental, employment, withholding or other taxes, escheat, unclaimed or
abandoned property, governmental fees or other like assessments, together with
any interest, additions or penalties with respect thereto.
“Tax Returns” means all
reports, returns, statements and forms with respect to Taxes.
“Trade Secrets” means (i) all
customer and supplier lists, pricing and cost information, business and
marketing plans and proposals, and Personally Identifiable Data, and (ii) all
material proprietary formulas, know-how, trade secrets, business methods,
technical data, and inventions, in each case owned, leased, used or held by,
granted to or licensed by the Company or any Subsidiary.
“Transaction Documents” means
this Agreement and all other agreements required to be delivered by any party
hereto pursuant to the terms of this Agreement.
“Transition Period” shall mean
the period commencing on the date of this Agreement and ending on September 15,
2008, during which (i) Buyer shall develop and execute a plan to integrate the
business operations of the Company and its Subsidiaries into the business
operations of Buyer and its Affiliates, (ii) CTI shall cause the Company and the
Subsidiaries to provide Buyer and its Representatives access to certain
information as contemplated by
6
Section 7.4 and (iii)
CTI shall provide, and shall cause its Affiliates to provide, the cooperation in
connection with facilitating the Closing as contemplated by Section
7.9.
“Wachovia Facility” means that
certain Second Amended and Restated Loan and Security Agreement dated as of
July 28, 2005 by and among CTI and certain of its Affiliates and a
syndicate of banks and other financial institutions identified therein,
including Wachovia Bank, National Association as agent for the lenders, as
amended.
(b) Each of
the following terms is defined in the Section set forth opposite such
term:
Term
|
Section
|
Agreement
|
Preamble
|
Assignment
and Assumption
|
2.4(a)
|
Balance
Sheet
|
5.6(a)
|
Business
|
5.19
|
Buyer
|
Preamble
|
Buyer
Group Health Plan Effective Date
|
11.2
|
Buyer
Material Adverse Effect
|
6.3(c)
|
Buyer
Plan Effective Date
|
11.5
|
Buyer
Transaction Documents
|
6.1
|
Buyer’s
Representatives
|
7.4
|
CERCLA
|
1.1
|
Claim
|
14.3(a)
|
Closing
|
2.2
|
Closing
Date
|
2.2
|
Closing
Statement
|
3.2(a)
|
Code
|
5.16(a)
|
Company
Account
|
5.10(b)
|
Company
Intellectual Property
|
5.13(a)
|
Continuation
Coverage Laws
|
11.6
|
Copyrights
|
5.13(a)
|
Covered
Individual
|
11.3
|
CTI
|
Preamble
|
CTI
Confidential Information
|
8.1(b)
|
Current
Representation
|
15.12(a)
|
Damages
|
14.2(a)
|
Defined
Benefit Plan
|
5.16(d)
|
Designated
Person
|
15.12(a)
|
DOL
|
5.16(a)
|
Domain
Registrations
|
5.13(a)
|
Election
|
10.7
|
Employee
Benefit Plans
|
5.16(a)
|
7
Term
|
Section
|
Employee
Pension Benefit Plan
|
5.16(c)
|
ERISA
|
5.16(a)
|
ERISA
Affiliate
|
5.16(d)
|
Final
Check Excess
|
3.3(d)
|
Final
Closing Outstanding Checks
|
3.3(d)
|
Final
Closing CTI Borne Expenses
|
3.3(d)
|
Financial
Statements
|
5.6(a)
|
Indemnified
Party
|
14.3(a)
|
Indemnifying
Party
|
14.3(a)
|
Independent
Accounting Firm
|
3.2(c)
|
IRS
|
10.1(c)
|
Listed
Employees
|
11.1
|
Marks
|
5.13(a)
|
Multiemployer
Plan
|
5.16(d)
|
Nasdaq
|
7.5(a)
|
Old
Coverage
|
11.2
|
Orchard
Guaranteed Obligations
|
15.13(a)
|
Orchard
Guaranty
|
15.13(a)
|
Orchard
Post-Closing Guaranteed Obligations
|
15.13(b)
|
Orchard
Post-Closing Guaranty
|
15.13(b)
|
Orchard
Pre-Closing Guaranteed Obligations
|
15.13(a)
|
Orchard
Pre-Closing Guaranty
|
15.13(a)
|
Parent
|
Preamble
|
Parent
Guaranteed Obligations
|
15.14(a)
|
Parent
Guaranty
|
15.14(a)
|
Patents
|
5.13(a)
|
Post-Closing
Representation
|
15.12(a)
|
Potential
Contributor
|
14.5
|
Pre-Closing
Tax Period
|
10.3(a)
|
Purchase
Price Allocation
|
10.8
|
Required
Amount
|
11.2
|
Seller
Transaction Documents
|
4.1
|
Shares
|
2.1(a)
|
Straddle
Period
|
10.3(b)
|
Surviving
Representations and Warranties
|
14.1
|
Tax
Contest
|
10.4
|
Terminating
Buyer Breach
|
13.1(d)
|
Terminating
Seller Breach
|
13.1(c)
|
8
Term
|
Section
|
Third
Party Claim
|
14.3(b)
|
Transferred
Employees
|
11.1
|
Transition
Services Agreement
|
9.5
|
WARN
Act
|
5.15(b)
|
Warranty
Breach
|
14.2(a)
|
(c) Except as
otherwise provided or unless the context otherwise requires, whenever used in
this Agreement, (i) any noun or pronoun shall be deemed to include the
plural and the singular, (ii) the use of masculine pronouns shall include
the feminine and neuter, (iii) the terms “include” and “including” shall be
deemed to be followed by the phrase “without limitation,” (iv) the word
“or” shall be inclusive and not exclusive, (v) all references to Sections
refer to the Sections of this Agreement, all references to the Disclosure
Schedule refer to the Disclosure Schedule attached hereto or delivered with this
Agreement, as appropriate, and all references to Exhibits refer to the Exhibits
attached to this Agreement, each of which is made a part of this Agreement for
all purposes, (vi) each reference to “herein” means a reference to “in this
Agreement,” and (vii) accounting terms which are not otherwise defined in
this Agreement shall have the meanings given to them under GAAP; provided,
however, that to the extent that a definition of a term in this Agreement is
inconsistent with the meaning of such term under GAAP, the definition set forth
in this Agreement will control.
(d) Any
matter set forth in any Section of the Disclosure Schedule shall be deemed set
forth in all other Sections to the Disclosure Schedule to the extent the
applicability of such matter to such other Sections is reasonably
apparent. The inclusion of any information (including dollar amounts)
in any Section of the Disclosure Schedule shall not be deemed to be an admission
or acknowledgment by CTI that such information is material to or outside the
ordinary course of the business of CTI, the Company or any
Subsidiary. Matters reflected in the Disclosure Schedule are not
necessarily limited to matters required by this Agreement to be reflected in the
Disclosure Schedule. The information contained in this Agreement, the
Exhibits hereto and the Disclosure Schedule is disclosed solely for purposes of
this Agreement, and no information contained herein or therein shall be deemed
to be an admission by any party hereto to any third party of any matter
whatsoever (including, without limitation, any violation of Law or breach of
contract).
(e) The
provisions of this Agreement shall be construed according to their fair meaning
and neither for nor against any party hereto irrespective of which party caused
such provisions to be drafted. Each of the parties hereto
acknowledges that it has been represented by an attorney in connection with the
preparation and execution of this Agreement and the other Transaction
Documents.
(f) Unless
expressly provided otherwise, the measure of a period of one month or one year
for purposes of this Agreement shall be that date of the following month or year
corresponding to the starting date, provided that if no corresponding date
exists, the measure shall be that date of the following month or year
corresponding to the next day
9
following
the starting date. For example, one month following February 18th is
March 18th, and one month following March 31 is May 1.
SECTION
2. PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale of
Shares.
(a) Upon the
terms and subject to the conditions of this Agreement, at the Closing, CTI shall
sell, transfer and deliver to Buyer, and Buyer shall purchase from CTI, all of
the outstanding shares of Common Stock, par value $0.01 per share, of the
Company (the “Shares”), free and
clear of any Encumbrance (except for restrictions imposed generally by
applicable securities Laws).
(b) Upon the
terms and subject to the conditions of this Agreement, in consideration for
CTI’s delivery of the Shares, Buyer shall pay to CTI the Purchase
Price.
2.2 Closing. The
closing of the purchase and sale of the Shares (the “Closing”) pursuant to
this Agreement shall take place at the offices of Drinker Xxxxxx &
Xxxxx LLP, One Xxxxx Square, 18th and
Xxxxxx Xxxxxxx, Xxxxxxxxxxxx, XX 00000, commencing at 10:00 A.M., Eastern time,
on a date to be mutually agreed by Buyer and CTI (the “Closing Date”), which
shall be no later than the later of (x) three Business Days after satisfaction
or waiver of the conditions set forth in Section 12, and (y)
September 30, 2008. Buyer and CTI will work in good faith to effect
the Closing on or prior to the termination of the Transition Period or as soon
as reasonably practicable thereafter. At the Closing, in addition to
the other actions contemplated elsewhere herein:
(a) CTI shall
deliver to Buyer:
(i) certificates
representing all of the Shares, duly endorsed for transfer or with stock powers
affixed thereto executed in blank in proper form for transfer;
(ii) a
certificate, dated the Closing Date and signed by an authorized person of CTI
(in his or her capacity as such), certifying as to the satisfaction of the
conditions to Closing set forth in Sections 12.1(b) and
(c);
(iii) copies of
the resolutions of the board of directors and sole stockholder of CTI,
authorizing the execution, delivery and performance of this Agreement and the
other Seller Transaction Documents, certified as of the Closing Date by an
authorized person (in his or her capacity as such) of CTI;
(iv) certificates
representing all of the outstanding shares or membership interests of each
Subsidiary (to the extent applicable), registered in the name of the
Company;
(v) the
original corporate seals, minute books and stock transfer and record books of
the Company and each Subsidiary as they exist on the Closing Date;
10
(vi) a
certificate, dated the Closing Date and signed by an authorized person of CTI
(in his or her capacity as such), certifying as to the payment of Indebtedness
and release of Encumbrances pursuant to Section
2.3;
(vii) a copy of
the Assignment and Assumption, duly executed and delivered by each of the
parties thereto; and
(viii) the other
documents and agreements required to be delivered pursuant to Section
12.1.
(b) Buyer
shall deliver to CTI:
(i) an amount
equal to the Closing Payment plus or minus the adjustment provided for in Section 3.1(b) by
wire transfer of immediately available funds to such account or accounts as
shall, at least two Business Days before Closing, be designated by CTI in
writing to Buyer;
(ii) certificates,
dated the Closing Date and signed by an authorized person of Buyer (in their
respective capacities as such), certifying as to the satisfaction of the
conditions to Closing set forth in Sections 12.2(b)
and (c);
(iii) copies of
the resolutions of the board of directors Buyer, authorizing the execution,
delivery and performance by Buyer of this Agreement and the other Buyer
Transaction Documents, certified as of the Closing by an authorized person of
Buyer (in their respective capacities as such); and
(iv) the other
documents and agreements required to be delivered pursuant to Section 12.2.
2.3 Payment of
Indebtedness. At the Closing, immediately upon receipt of the
Closing Payment (plus or minus the adjustment provided for in Section 3.1(b)), CTI
shall repay all Indebtedness of the Company and its Subsidiaries outstanding
immediately prior to the Closing and shall cause all Encumbrances relating to
such Indebtedness to be released. At Closing, CTI shall certify as to
the payment of such Indebtedness and the release of such Encumbrances.
2.4 Assignment and
Assumption.
(a) Prior to
the Closing, the Company, its Subsidiaries, CTI, Parent, and Charming Shoppes of
Delaware, Inc. shall enter into an Assignment and Assumption and Shared Contract
Agreement in the form attached hereto as Exhibit A (the “Assignment and
Assumption”), pursuant to which (i) the Company and its Subsidiaries will
assign the Excluded Assets to CTI or one of its Affiliates (other than the
Company or one of its Subsidiaries); (ii) CTI or one of its Affiliates shall
assume the Excluded Liabilities; (iii) CTI will assign to the Company or its
Subsidiaries the Acquired Assets; (iv) the Company and/or its Subsidiaries shall
assume the Assumed Liabilities described in clause (i) of the definition of
Assumed Liabilities; and (v) the parties thereto will provide one another
certain benefits under their agreements with certain third-party vendors
following the Closing. The transfer of
11
assets
and assumption of liabilities contemplated by the Assignment and Assumption
shall be consummated prior to the Closing.
(b) If Buyer,
the Company or CTI identifies, prior to Closing or within one year after
Closing, any assets which are owned by CTI and its Affiliates and not included
as part of the Acquired Assets that are related primarily to the operation of
the Business or otherwise reasonably necessary to operate the Business in the
same manner in which it was operated prior to the Closing recognizing that the
parties intend for certain assets to be made available to Buyer, the Company or
its Subsidiaries through the Transition Services Agreement and the Assignment
and Assumption, then CTI shall, and shall cause its Affiliates to, promptly
transfer, convey and/or assign such assets to the Company or its Subsidiaries,
at no additional cost to Buyer; provided, that CTI and its Affiliates shall not
be obligated to transfer, convey and/or assign any such assets that are, or that
primarily relate to, the Excluded Assets. As a condition to the
assignment of any asset pursuant to this Section this Section 2.4(b), the
Company or one of its Subsidiaries shall assume all Liabilities resulting from,
arising out of, relating to, in the nature of, or caused by such
assets.
SECTION
3. PURCHASE PRICE ADJUSTMENT
3.1 Estimated Closing
Outstanding Checks and Estimated Closing CTI Borne Expenses.
(a) Not less
than one Business Day prior to the Closing Date and following reasonable advance
consultation with Buyer, CTI shall deliver to Buyer a certificate (the “Estimate
Certificate”) of an executive officer of CTI setting forth CTI’s good
faith estimate of (i) the amount of the Closing Outstanding Checks (the “Estimated Closing
Outstanding Checks”) and (ii) the amount of the Closing CTI Borne
Expenses (the “Estimated Closing CTI Borne
Expenses”). The Estimated Closing CTI Borne Expenses set forth on the
Estimate Certificate shall be calculated in accordance with the provisions of
Section
3.2(a). The amount, if any, by which the Estimated Closing
Outstanding Checks exceeds $2,500,000 is referred to herein as the “Estimated Check
Excess”.
(b) If the
sum of the (i) Estimated Check Excess plus (ii) the Estimated Closing CTI Borne
Expenses exceeds the amount of cash actually in the bank accounts of the Company
and its Subsidiaries at Closing, the amount of such excess shall be subtracted
from the Closing Payment to be made by Buyer pursuant to Section 2.2(b)(i).
3.2 Closing
Statement.
(a) As
promptly as practicable, but no later than 60 days, after the Closing Date, CTI
will cause to be prepared and delivered to Buyer a statement of Closing
Outstanding Checks and Closing CTI Borne Expenses (the “Closing Statement”).
The Closing Statement will be accompanied by a certificate of an executive
officer of CTI specifying that the Closing Statement was prepared in accordance
with the provisions of this Section 3.2(a). The
determination of Closing CTI Borne Expenses shall be made by applying the
principles, policies and practices used in connection with the preparation of
the relevant portions of the Balance Sheet so long as they are in accordance
with GAAP.
12
(b) If Buyer
disagrees with CTI’s calculation of the Closing Outstanding Checks or Closing
CTI Borne Expenses set forth in the Closing Statement, Buyer may, within 45 days
after delivery of the certificate referred to in Section 3.2(a),
deliver a notice to CTI disagreeing with such calculation and setting forth
Buyer’s calculation of such amount. Any such notice of disagreement shall
specify those items or amounts as to which Buyer disagrees, and Buyer shall be
deemed to have agreed with all other items and amounts contained in the Closing
Statement.
(c) If a
notice of disagreement shall be duly delivered pursuant to Section 3.2(b), Buyer
and CTI shall, during the 30 days following such delivery, use their reasonable
best efforts to reach agreement on the disputed items or amounts of Closing
Outstanding Checks and Closing CTI Borne Expenses. If, following such period,
Buyer and CTI are unable to reach such agreement, they shall promptly thereafter
cause an independent accountant of nationally recognized standing reasonably
satisfactory to Buyer and CTI (who shall not have any material relationship with
Buyer or CTI) (the “Independent Accounting
Firm”), promptly to review this Agreement and the disputed items or
amounts for the purpose of calculating the Closing Outstanding Checks and
Closing CTI Borne Expenses. In making such calculation, the
Independent Accounting Firm shall consider only those items or amounts in the
Closing Outstanding Checks and Closing CTI Borne Expenses as to which Buyer has
disagreed. The Independent Accounting Firm shall deliver to Buyer and
CTI, as promptly as practicable, a report setting forth such calculation, it
being understood that neither the Closing Outstanding Checks nor the Closing CTI
Borne Expenses calculated by the Independent Accounting Firm shall be less than
the amount thereof shown in the Closing Statement nor more than the amount
thereof shown in Buyer’s calculation delivered pursuant to Section
3.2(b). Such report shall be final and binding upon the
parties hereto. The cost of such review and report shall be allocated to be paid
by CTI, on the one hand, and/or the Buyer, on the other hand, based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party, as determined by the
Independent Accounting Firm.
(d) Buyer and
CTI agree that they will, and agree to cause their respective independent
accountants and the Company and each Subsidiary to, cooperate and assist in the
preparation of the Closing Statement and the calculation of the Closing
Outstanding Checks and Closing CTI Borne Expenses and in the conduct of the
audits or reviews referred to in Section
3.2(c).
3.3 Post-Closing
Adjustment.
(a) If an
adjustment to the Closing Payment was made pursuant to Section 3.1(b) and
(i) the sum of (A) the Final Check Excess plus (B) the Final Closing CTI Borne
Expenses exceeds (ii) the sum of (A) Estimated Check Excess plus (B) the
Estimated Closing CTI Borne Expenses, then CTI shall pay Buyer, in the manner
provided in Section
3.3(e), the amount of such excess.
(b) If no
adjustment to the Closing Payment was made pursuant to Section 3.1(b) and
the sum of (i) the Final Check Excess plus (ii) the Final Closing CTI Borne
Expenses exceeds the amount of cash actually in the bank accounts of the Company
and its
13
Subsidiaries
at Closing, CTI shall pay Buyer, in the manner provided in Section 3.3(e), the
amount of such excess.
(c) If an
adjustment to the Closing Payment was made pursuant to Section 3.1(b) and
the (i) the sum of (A) Estimated Check Excess plus (B) the Estimated Closing CTI
Borne Expenses, exceeds (i) the sum of (A) the Final Check Excess plus (B) the
Final Closing CTI Borne Expenses, Buyer shall pay to CTI, in the manner provided
in Section
3.3(e), the lesser of (x) the amount of such excess and (y) the amount of
the adjustment to the Closing Payment made pursuant to Section
3.1(b).
(d) “Final Check Excess”
means the amount, if any, by which the Final Closing Outstanding Checks exceeds
$2,500,000. “Final Closing Outstanding
Checks” means Closing Outstanding Checks as shown in CTI’s calculation
delivered pursuant to Section 3.2(a), if no
notice of disagreement with respect thereto is duly delivered pursuant to Section 3.2(b), or if
such a notice of disagreement is delivered, as agreed by Buyer and CTI pursuant
to Section
3.2(c) or in the absence of such agreement, as shown in the Independent
Accounting Firm’s calculation delivered pursuant to Section
3.2(c). “Final Closing CTI Borne
Expenses” means Closing CTI Borne Expenses as shown in CTI’s calculation
delivered pursuant to Section 3.2(a), if no
notice of disagreement with respect thereto is duly delivered pursuant to Section 3.2(b), or if
such a notice of disagreement is delivered, as agreed by Buyer and CTI pursuant
to Section
3.2(c) or in the absence of such agreement, as shown in the Independent
Accounting Firm’s calculation delivered pursuant to Section
3.2(c).
(e) Any
payment made by Buyer or CTI pursuant to Sections 3.3(a),
(b) or (c) shall be made
within five days after such calculation has been determined by delivery by Buyer
or CTI, as the case may be, in immediately available funds by wire transfer to
an account of CTI (in the case of a payment by Buyer) or Buyer (in the case of a
payment by CTI).
3.4 Assumption of CTI Borne
Expenses. Effective as of the Closing, the Company shall
assume any and all Liabilities included in the calculation of the Final Closing
CTI Borne Expenses (to the extent such Liabilities are not already Liabilities
of the Company and its Subsidiaries at Closing) and all Liabilities for accrued
vacation, personal days, sick pay and other paid time off for all the
Transferred Employees (to the extent such Liabilities are not already included
in the calculation of Final Closing CTI Borne Expenses) and shall pay, discharge
and perform all such Liabilities as they become due.
SECTION
4. REPRESENTATIONS AND WARRANTIES REGARDING CTI
CTI
hereby represents and warrants to Buyer that, as of the date of this Agreement
and as of the Closing Date, except as set forth on the Disclosure Schedule
attached hereto:
4.1 Organization and Good
Standing. CTI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary corporate power and authority to perform all of its obligations
under this Agreement and the other Transaction Documents to which it is a party
(collectively, the “Seller Transaction
Documents”).
14
4.2 Power and
Authorization. CTI has all legal right, power and authority to
execute and deliver this Agreement and each other Seller Transaction Document,
to perform its obligations hereunder and thereunder, and to carry out the
transactions contemplated hereby and thereby. All necessary corporate
and stockholder action has been taken by CTI to authorize the execution,
delivery and performance of this Agreement and each other Seller Transaction
Document by CTI, and the consummation by CTI of the transactions contemplated
hereby and thereby. CTI has duly executed and delivered this
Agreement and, at or prior to the Closing, will have duly executed and delivered
each other Seller Transaction Document. This Agreement is, and each
other Seller Transaction Document, when duly executed and delivered at Closing
by CTI, will be, the legal, valid and binding obligation of CTI, enforceable
against CTI in accordance with their respective terms, except as enforceability
of such obligations may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
limiting creditors’ rights generally and general principles of equity relating
to the availability of specific performance and injunctive and other forms of
equitable relief.
4.3 No
Conflicts.
(a) The
execution, delivery and performance by CTI of this Agreement and the other
Seller Transaction Documents do not and will not (with or without the passage of
time or the giving of notice, or both):
(i) contravene,
conflict with or result in a violation of (A) the certificate of
incorporation or bylaws of CTI; (B) any resolution adopted by the board of
directors or stockholders of CTI; or (C) in any material respect any Laws
or Governmental Authorizations binding upon or applicable to CTI;
or
(ii) contravene,
conflict with, result in a violation or breach of or constitute a default or
otherwise cause any loss of benefit under, any material agreement or other
obligation to which CTI is a party or by which it or any of CTI’s assets are
bound, or give to others any rights (including rights of termination,
foreclosure, cancellation, modification or acceleration) in or with respect to
any of the Shares.
(b) Section 4.3(b) of the
Disclosure Schedule contains a complete and accurate list of each other material
Consent of, or material registration, notification, filing or declaration with,
any Governmental Body, creditor, lessor or other Person, in each case required
to be given or made by CTI, its Affiliates, the Company or any Subsidiary in
connection with the execution, delivery and performance of this Agreement and
the other Seller Transaction Documents.
(c) There are
no judicial, administrative or other governmental actions, proceedings or
investigations pending or, to the Knowledge of CTI, threatened, which
individually or in the aggregate, have had or would reasonably be expected to
materially affect the ability of CTI to perform its obligations under this
Agreement or any other Seller Transaction Document.
15
4.4 Ownership of the
Shares. CTI owns the Shares beneficially and of record, free
and clear of any Encumbrance. Other than this Agreement, there are no
options, warrants, purchase rights, or other contracts, commitments or
agreements to which CTI is a party that could require CTI to sell, transfer or
otherwise dispose of any of the Shares or that could affect the right of CTI to
convey the Shares to Buyer at Closing, and CTI has the absolute right,
authority, power and capacity to sell, assign and transfer the Shares to Buyer
free and clear of any Encumbrance (except for restrictions imposed generally by
applicable securities Laws). CTI is not a party to any voting trust,
proxy or other agreement or understanding with respect to the voting of any of
the Shares. Upon delivery at the Closing by CTI to Buyer of the
certificates for the Shares, Buyer will acquire good, valid and marketable title
to such Shares, free and clear of any Encumbrance (except for applicable
securities Laws restrictions).
4.5 Brokers. Other
than Banc of America Securities LLC and Xxxxxx Brothers Inc., there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of CTI or any of its Affiliates that might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement or any other Seller Transaction
Document.
SECTION
5. REPRESENTATIONS AND WARRANTIES REGARDING THE
COMPANY AND SUBSIDIARIES
CTI
hereby represents and warrants to Buyer, as of the date of this Agreement and as
of the Closing Date, that, except as set forth on the Disclosure Schedule
attached hereto:
5.1 Organization and Good
Standing. The Company and each Subsidiary is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, formation or organization, as applicable, and has all necessary
corporate or limited liability company, as applicable, power and authority to
carry on its business as presently conducted, to own and lease the
assets which it owns and leases, and to perform all of its obligations under
each agreement to which it is a party or by which it or its assets are
bound. The Company and each Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
identified in Section
5.1 of the Disclosure Schedule, which includes each jurisdiction in which
its ownership or leasing of assets or properties or the nature of its activities
requires such qualification, except where the failure to be so qualified would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.2 No
Conflicts. The execution, delivery and performance by CTI of
this Agreement and the other Seller Transaction Documents do not and will not
(with or without the passage of time or the giving of notice, or
both):
(a) contravene,
conflict with or result in a violation of (A) the certificate or articles
of incorporation or bylaws (or other organizational documents) of the Company or
any Subsidiary; (B) any resolution adopted by the board of directors, the
board of managers (or similar governing body), or stockholders or members, as
applicable, of the Company or any
16
Subsidiary;
or (C) in any material respect any Laws or Governmental Authorizations binding
upon or applicable to the Company or any Subsidiary;
(b) contravene,
conflict with, result in a violation or breach of or constitute a default or
otherwise cause any loss of benefit under, any material agreement or other
obligation to which the Company or any Subsidiary is a party or by which they or
any of their assets are bound, or give to others any rights (including rights of
termination, foreclosure, cancellation, modification or acceleration) in or with
respect to the Company or any Subsidiary or any of their respective assets;
or
(c) result
in, require or permit the creation or imposition of any Encumbrance (other than
a Permitted Encumbrance) upon or with respect to any assets owned or leased by
the Company or any Subsidiary.
5.3 Capitalization.
(a) The
Company’s authorized, issued and outstanding capital stock and its other equity
securities are fully and accurately described in Section 5.3(a) of the
Disclosure Schedule. The Company has not granted to any Person any
preemptive or other similar rights with respect to any of such equity interests
or other equity securities and there are no offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise) relating to the
issuance, voting, conversion, exchange, registration, sale or transfer of any
equity interests or other equity securities of the Company (including the
Shares) or obligating the Company or any other Person to purchase or redeem any
of such equity interests or other equity securities or to make capital
contributions, advances or loans to or on behalf of the Company. The
Shares (i) constitute all of the issued and outstanding shares of capital
stock of the Company and other equity securities, (ii) have been duly
authorized, (iii) are validly issued and outstanding, fully paid and
nonassessable, and (iv) have been issued in compliance in all material
respects with all applicable securities Laws.
(b) The
authorized, issued and outstanding capital stock and other equity securities of,
or the membership interests in, each Subsidiary, as applicable, are fully and
accurately described in Section 5.3(b) of the
Disclosure Schedule. All the outstanding capital stock and other
equity securities of, or equity interests in, each Subsidiary, as applicable,
are owned of record and beneficially by the Company. No Person has
any preemptive or other similar rights with respect to any such equity interests
or other equity securities and there are no offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise) relating to the
issuance, voting, conversion, exchange, registration, sale or transfer of any
equity interests or other securities of any Subsidiary, or obligating the
Company, any Subsidiary, or any other Person to purchase or redeem any such
equity interests or other equity securities or to make capital contributions,
advances or loans to or on behalf of any Subsidiary. All of the
issued and outstanding shares of capital stock (or equivalent equity interests)
of each Subsidiary have been duly authorized and are validly issued and
outstanding, fully paid and non-assessable and have been issued in compliance in
all material respects with applicable securities Laws. Other than the
Subsidiaries and the Excluded Subsidiaries, the Company does not own or control
or have any right to acquire (directly or
17
indirectly)
any stock, partnership interest, joint venture interest, equity participation or
other security or interest in any other Person.
5.4 Compliance with Laws.
(a) The
Company and each Subsidiary is, and at all times since January 29, 2006 has
been, in compliance in all material respects with all applicable Laws and
Governmental Authorizations. Neither the Company nor any of the
Subsidiaries have, since January 29, 2006, received any written notice,
order or other communication from any Governmental Body of any alleged, actual
or potential violation of, or failure to comply in any material respect with,
any Laws or Governmental Authorizations which has not been resolved in all
material respects.
(b) Section 5.4(b) of the
Disclosure Schedule lists all material Governmental Authorizations required for
the operation of the business of the Company and each Subsidiary as currently
conducted. Each Governmental Authorization listed or required to be
listed in Section
5.4(b) of the Disclosure Schedule is in full force and effect without any
default or violation thereunder in any material respect by the Company, any
Subsidiary or, to the Knowledge of CTI, by any other party
thereto. No proceeding is pending or, to the Knowledge of CTI,
threatened by any Person to revoke or deny the renewal of any material
Governmental Authorization of the Company or any Subsidiary.
5.5 Litigation. Since
January 29, 2006, there have not been, nor are there currently pending, any
material claims, actions, suits or proceedings (arbitration or otherwise) or, to
the Knowledge of CTI, investigations involving or affecting the Company or any
Subsidiary, their businesses or assets (including, as of the Closing, the
Acquired Assets), any Employee Benefit Plan (other than routine claims for
benefits), or, to the Knowledge of CTI, their respective directors or officers
in their capacities as such before or by any Governmental Body, or before any
arbitrator of any kind. To the Knowledge of CTI, no such claim,
action, suit, proceeding or investigation is presently
threatened. There are no unsatisfied material judgments, penalties or
awards against or affecting the Company or any Subsidiary or any of their
businesses, properties or assets (including, as of the Closing, the Acquired
Assets).
5.6 Financial
Statements.
(a) Section 5.6(a) of the
Disclosure Schedule includes the unaudited consolidated balance sheet of the
Company and the Subsidiaries as of February 2, 2008 (the “Balance Sheet”) and
February 3, 2007 and the related unaudited consolidated statements of income and
cash flow for the fiscal years ended February 2, 2008 and February 3, 2007,
respectively (collectively, the “Financial
Statements”). The Financial Statements fairly present in all
material respects the consolidated financial condition, cash flow and results of
operations of the Company and the Subsidiaries as of the respective dates
thereof and for the periods therein referred to, all in accordance with GAAP as
consistently applied, except to the extent that the Financial Statements do not
reflect (i) federal and state income taxes (including provision for income
taxes, income taxes payable and deferred income taxes); (ii) Liabilities
associated with terminated leases and assets related to prepayments of rent;
(iii) Liabilities associated with non-qualified retirement and deferred
compensation plan obligations related
18
to CTI’s
or its Affiliates’ employees; (iv) goodwill and other intangible assets and
related amortization; (v) Liabilities for third-party insurance and
self-insurance for certain risks, including workers’ compensation, medical,
dental, automobile and general liability claims; (vi) the costs related to share
based compensation accounted for under Statement of Financial Accounting
Standard No. 123R; (vii) certain other miscellaneous assets and Liabilities
accounted for on a centralized basis (including miscellaneous real estate and
construction assets and liabilities) that were not material, individually or in
the aggregate, to the Company or the Subsidiaries; and (viii) costs not
allocated to the Company and the Subsidiaries.
(b) CTI
maintains a system of internal accounting controls designed to provide
reasonable assurances that (i) transactions engaged in by the Company or
any of the Subsidiaries are executed in material compliance with the general
policies of the Company and the Subsidiaries and/or the general or specific
authorizations of management of the Company and the Subsidiaries,
(ii) access to material assets of the Company and the Subsidiaries is
permitted only in accordance with the general policies of the Company and the
Subsidiaries and/or the general or specific authorizations of management of the
Company and the Subsidiaries, and (iii) all intercompany transactions,
charges and expenses among or between the Company, any of the Subsidiaries, CTI
and/or their respective Affiliates are accurately reflected at fair arms’ length
value on the books and records of the Company and the Subsidiaries.
(c) Neither
the Company nor any of its Subsidiaries has any material Liability arising out
of transactions entered into at or prior to the Closing, or any action or
inaction at or prior to the Closing, or any state of facts existing at or prior
to the Closing, except (i) Liabilities under agreements described in Section 5.11 of the
Disclosure Schedule or under agreements which are not required to be disclosed
thereon (but not Liabilities for breaches thereof), (ii) Liabilities reflected
on the face of the Balance Sheet, (iii) Liabilities which have arisen in the
ordinary course of business, consistent with past practice and otherwise in
accordance with the terms and conditions of this Agreement (none of which is a
Liability for breach of contract, breach of warranty, tort or infringement or a
claim or lawsuit or an environmental Liability), and (iv) Liabilities disclosed
in Section
5.6(c) of the Disclosure Schedule.
5.7 Inventory. Subject
to any reserve therefor included in the Balance Sheet, at the date of the
Balance Sheet, all inventories of the Company and its Subsidiaries (including
inventory ordered but not yet received) consisted of items of a quality usable
or saleable in the normal course of the business of the Company consistent with
past practices and were to the Knowledge of CTI in quantities sufficient for the
normal operation of the business of the Company in accordance with past
practices. The values at which inventories are reflected on the
Balance Sheet have been determined in accordance with the customary valuation
policy of the Company (which is the lower of cost or fair market value thereof)
and in accordance with GAAP. Since the date of the Balance Sheet, the
Company and its Subsidiaries have continued to replenish its inventory and to
seek to dispose of out-of-season and slow-moving inventory in a normal and
customary manner consistent with past practices prevailing in the business of
the Company.
19
5.8 Absence of Certain Changes
and Events. Since the date of the Balance Sheet, the Company
and the Subsidiaries have in all material respects conducted their businesses
only in the usual and ordinary course consistent with past practice and, except
as expressly contemplated by this Agreement or any other Transaction Document,
there has not, with respect to the Company or a Subsidiary, or in the case of
Sections 5.8(f)
and (q), with
respect to CTI and its Affiliates, been any:
(a) event,
condition, occurrence, contingency or development that has had or would
reasonably be expected to have a Material Adverse Effect;
(b) any
repurchase, redemption or other acquisition by the Company or any Subsidiary of
any of shares of capital stock or other securities of the Company or any
Subsidiary or any dividends or other distributions or payments in respect of any
shares of capital stock of the Company or any Subsidiary other than
distributions payable solely in cash and distributions of the capital stock or
membership interests of the Excluded Subsidiaries;
(c) amendment
of any term of any outstanding security of the Company or any
Subsidiary;
(d) making of
any loan, advance or capital contribution to or investment in any Person by the
Company or any Subsidiary, other than loans, advances or capital contributions
to a Subsidiary, travel and similar advances to employees, and advances and
extended payment terms to suppliers, in each case in the ordinary course of
business consistent with past practice;
(e) material
change in the accounting methods, principles or practices followed by the
Company or any Subsidiary (except for any such change required by reason of a
change in GAAP);
(f) (i)
adoption, amendment or modification in any material respect of an Employee
Benefit Plan, other than an amendment or modification to comply with applicable
Laws and adoptions, amendments and modifications that do not apply to any Listed
Employee or officer, employee or consultant of the Company or any Subsidiary
(ii) grant of severance or termination pay or any other compensation of any kind
or nature payable, in whole or in part, by reason of the transactions
contemplated by this Agreement to any Listed Employee or any officer, employee
or consultant of the Company or any Subsidiary, or (iii) any change in
employment terms (including compensation or benefits) for any Listed Employee or
any officer, employee or consultant of the Company or any Subsidiary or increase
in the contingent and non-contingent compensation of, or payment of any bonus
to, any Listed Employee or any officer, employee or consultant of the Company or
any Subsidiary;
(g) material
damage, destruction or loss to any material asset or property of the Company and
the Subsidiaries, taken as a whole, other than damage that has been repaired,
damaged assets that have been replaced or damage for the repair of which
insurance proceeds have been received and used for the repair
thereof;
(h) sale
(other than sales of inventory and customer list rentals and exchanges in the
ordinary course of business consistent with past practice),
assignment,
20
transfer,
hypothecation, conveyance, lease or other disposition of any material asset or
property of the Company or any Subsidiary other than the Excluded Assets or
mortgage, pledge or imposition of any Encumbrance on any material asset or
property of the Company or any Subsidiary (except for Permitted
Encumbrances);
(i) failure
to pay when due any material indebtedness or other material Liabilities, except
with respect to any such Liabilities being contested in good faith by the
Company or any Subsidiary which are identified in Section 5.8(i) of the
Disclosure Schedule;
(j) cancellation,
discharge or satisfaction of any debts, liabilities, obligations or claims
that are material to the Company and the Subsidiaries, taken as a whole, or any
amendment, termination or waiver of any material rights of value to the Company
and the Subsidiaries, taken as a whole;
(k) write
down or write off of the value of any assets that are material to the Company
and the Subsidiaries, taken as a whole, except for write downs and write offs of
accounts receivable and inventory in the ordinary course of business consistent
with past practice;
(l) failure
to pay accounts payable or collect accounts receivable other than in the
ordinary course consistent with past practice;
(m) entry
into, amendment, termination or receipt of notice of termination of any lease or
sublease of real property that is (or would be) required to be disclosed in
Section 5.9 of
the Disclosure Schedule or of any agreement or other document that is required
to be disclosed in Section 5.11 of
the Disclosure Schedule;
(n) merger or
consolidation with any other Person, acquisition of any equity securities of any
other Person, or acquisition of assets from any other Person, other than (i) the
acquisition of inventory in the ordinary course of business in accordance with
past practice, and (ii) capital expenditures in an amount in the aggregate not
more than those set forth in the capital expenditure budget for the current
fiscal year previously provided to Buyer;
(o) material
change in the business or operations of the Company and the Subsidiaries, taken
as a whole, or in the manner of conducting the same or entry by the Company or
any Subsidiary into any material transaction (other than the transactions
contemplated hereby), other than in the ordinary course of business consistent
with past practice;
(p) any
material capital expenditure or commitments therefor, other
than capital expenditures of not more than those set forth in the
capital expenditure budget for the current fiscal year previously provided to
Buyer; or
(q) agreement,
whether or not in writing, to do any of the foregoing by the Company, any
Subsidiary or, with respect to the Business, CTI.
21
5.9 Real
Property. Section 5.9 of the
Disclosure Schedule describes each interest in real property leased by the
Company or any Subsidiary, including the location thereof and the lessor of any
such leased property. Neither the Company nor any Subsidiary owns any
real property in fee title. Either the Company or one of its
Subsidiaries owns all right, title and interest in all leasehold estates granted
by the leases and other agreements required to be listed in Section 5.9 of
the Disclosure Schedule, in each case free and clear of all Encumbrances except
for Permitted Encumbrances. To the Knowledge of CTI, all of the
buildings and structures to the extent of the premises owned or leased by the
Company or any Subsidiary are structurally sound with no material defects, are
in good operating condition and repair, and each has adequate rights of ingress
and egress for the operation in the ordinary course of business consistent with
past practice. No such building or structure, or any appurtenance
thereto or equipment therein or the operation or maintenance thereof, violates
in any material respect any restrictive covenant. With respect to any
real property leased by the Company or any Subsidiary, no event or condition
exists that, with or without the passage of time or the giving of notice, or
both, would constitute a material default or breach by the Company or any
Subsidiary pursuant to any lease agreement governing such
property. To the Knowledge of CTI, each landlord under each such
lease agreement has complied with its material obligations
thereunder. No condemnation proceeding is pending or, to the
Knowledge of CTI, threatened with respect to any real property identified in
Section 5.9 of
the Disclosure Schedule.
5.10 Personal Property; Bank
Accounts.
(a) The
Company and each Subsidiary have good and valid title to all of their material
properties and assets used in the conduct of their respective businesses free
and clear of all Encumbrances (other than Permitted
Encumbrances). All material properties and assets owned or leased by
the Company or any Subsidiary are in the possession or under the control of the
Company and the Subsidiaries, taken as a whole, and are in good condition and
repair, ordinary wear and tear excepted.
(b) Section 5.10(b) of
the Disclosure Schedule lists each bank, checking, money market, investment or
similar account (each, a “Company Account”)
owned by or used for the business and operations of the Company and the
Subsidiaries and each individual authorized to have access to and make
transactions under each Company Account.
(c) Notwithstanding
the foregoing, this Section 5.10 does not
address any real estate matters, which are addressed in Section 5.9, or any
intellectual property matters, which are addressed in Section
5.13.
5.11 Material Contracts.
(a) Except as
expressly provided by this Agreement or the Transaction Documents and except for
any agreement or contract included in the Excluded Assets, neither the Company
nor any Subsidiary is a party to or is bound by any:
22
(i) agreement,
indenture or other instrument relating to Indebtedness for money borrowed or
capital leases (excluding capital leases providing for annual payments of less
than $25,000) or any guarantee or similar undertaking in respect of any
indebtedness or obligations of any Person (other than in connection with
relocation of employees or the endorsement of negotiable instruments for
collection in the ordinary course of business consistent with past
practice);
(ii) Encumbrance
of any nature (other than Permitted Encumbrances) relating to or affecting any
of the material assets or properties of the Company and the Subsidiaries, taken
as a whole;
(iii) agreement,
contract or commitment relating to a single capital expenditure of greater than
$100,000 or any number of such agreements, contracts or commitments relating to
capital expenditures of greater than $250,000 in the aggregate;
(iv) loan or
advance to, or investment in, any Person (other than a Subsidiary) in any case
in an amount in excess of $25,000, or $100,000 in the aggregate for all such
loans, advances and investments or any agreement, contract or commitment
relating to the making of any such loan, advance or investment, other than
travel and similar advances to employees in the ordinary course of business
consistent with past practice;
(v) management
service, sales agency, sales representative, distributorship or any other
similar contract with any Person (other than a Related Party), in each case
under which the amount of payments required to be made thereunder in any fiscal
year is greater than $100,000;
(vi) contract,
agreement or commitment limiting in any material respect the freedom of the
Company or any Subsidiary to engage in any line of business or to compete with
any Person;
(vii) contract,
agreement, purchase order or other commitment involving the performance of
services or delivery of goods or materials, other than inventory purchased or
sold in the ordinary course of business, by or to the Company or any Subsidiary
(A) outside the continental United States or (B) of an aggregate amount in
excess of $100,000 and which is not terminable by the Company or such Subsidiary
without payment of penalty or premium on not more than sixty days
notice;
(viii) contract,
agreement or commitment providing for payments to or by any Person in excess of
$100,000 in any fiscal year based on sales, purchases or profits, other than
direct payments for goods or services;
(ix) agreement,
contract or commitment related to the license to any Person (other than a
Related Party) of any material item of Company Intellectual
Property;
23
(x) any
material agreement, license, contract or commitment pursuant to which any Trade
Secrets of the Company or any Subsidiary may be transferred, disclosed to or
used by any third party (other than a Related Party);
(xi) any
partnership, joint venture or similar agreement or arrangement; or
(xii) any other
contract, agreement or commitment which is material to the business, operations,
results of operations, assets or financial condition of the Company and the
Subsidiaries, taken as a whole.
(b) The
Company and each Subsidiary have furnished or made available to Buyer true and
complete copies of each agreement, plan and other document required to be
disclosed in Section
5.11 of the Disclosure Schedule.
(c) Each
material contract, agreement or commitment disclosed or required to be disclosed
in Section 5.11
of the Disclosure Schedule (including any such contract, agreement or commitment
included in the Acquired Assets) is in full force and effect and is valid,
binding and enforceable against the Company or the Subsidiary party thereto in
accordance with its terms, except in each case as enforceability of such
agreements may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws now or hereafter in effect relating to or limiting
creditors’ rights generally and general principles of equity relating to the
availability of specific performance and injunctive and other forms of equitable
relief. Neither the Company nor any Subsidiary is in violation in any
material respect of any such contract, agreement or commitment, and, to the
Knowledge of CTI, all of the material covenants to be performed by each other
party thereto have been performed in all material respects.
5.12 Insurance. Section 5.12 of
the Disclosure Schedule lists each policy and binder of insurance (including
property, casualty, liability, life, health, accident, workers’ compensation and
disability insurance and bonding arrangements) owned by, or maintained for the
benefit of, or respecting which, any premiums are paid directly or indirectly by
the Company or any Subsidiary, in each case identifying, with respect to the
Company and the Subsidiaries: (i) the respective issuers and expiration
dates thereof; (ii) all deductible amounts and amounts of coverage
available and outstanding thereunder; (iii) whether such policies and
binders are “claims made” or “occurrences” policies; (iv) all
self-insurance programs or arrangements; and (v) any retrospective premium
adjustments of which CTI has Knowledge. Neither the Company nor any
of the Subsidiaries is in material default under any such insurance
policy. All premiums due have been paid on such insurance
policies.
5.13 Intellectual
Property.
(a) Section 5.13(a)
of the Disclosure Schedule lists each (i) fictitious business name, trade
name, registered and unregistered trademark, service xxxx and related
application (“Marks”), (ii)
patent and patent application (collectively, “Patents”),
(iii) issued and pending copyright registration in published and material
unpublished works of authorship including Software works (“Copyrights”), (iv)
Internet domain name registration and related
24
application
(collectively “Domain
Registrations”), in each case, owned by or licensed to the Company or any
Subsidiary or used in connection with the Businesses, including, in each case,
at the Closing, the Acquired Assets (collectively, the “Company Intellectual
Property”). The Company and the Subsidiaries are the sole
owners of, and have all right, title and interest in and to, or have a valid and
enforceable right to use pursuant to a license agreement described in Section 5.11 of the
Disclosure Schedule, all Company Intellectual Property, free and clear of all
Encumbrances (other than Permitted Encumbrances). Neither the Company
nor any Subsidiary has granted or licensed to any Person any rights with respect
to any Company Intellectual Property and no other Person has any material rights
in or to any of the Company Intellectual Property. The rights of the
Company and the Subsidiaries in and to any of such Company Intellectual Property
will not be limited or otherwise affected in any material respect by reason of
any of the transactions contemplated hereby. The Company Intellectual
Property is sufficient for the conduct of the Business in the same manner as the
Business was conducted before the Closing in all material
respects.
(b) The list
of Marks set forth in Section 5.13(a)
of the Disclosure Schedule sets forth: (i) the name of the owner of such
Xxxx; (ii) the jurisdictions by or in which such Xxxx has been issued or
registered or in which an application for such issuance or registration has been
filed; and (iii) the registration and application numbers of such
Xxxx. The list of Copyrights set forth in Section 5.13(a)
of the Disclosure Schedule sets forth: (i) the name of the author and
copyright claimant of such Copyright; and (ii) the registration numbers of
such Copyright. The list of Patents set forth in Section 5.13(a)
of the Disclosure Schedule sets forth the name of each jurisdiction in which
such Patents have been granted and applied for and all application
numbers. The Company and each Subsidiary have taken all reasonable
precautions to preserve and protect the secrecy, confidentiality and value of
their material Trade Secrets.
(c) To the
Knowledge of CTI, no Company Intellectual Property is the subject of any
outstanding judgment, injunction, order or decree restricting in any material
respect the use thereof by the Company or any Subsidiary or restricting the
licensing thereof by the Company or any Subsidiary to any Person. To
the Knowledge of CTI, no Xxxx, Domain Registration, Copyright, Patent or
Software owned by or licensed to the Company or any Subsidiary has in any
material respect been infringed, challenged or threatened in any material
respect. To the Knowledge of CTI, no Xxxx or Patent owned by or
licensed to the Company or any Subsidiary is currently involved in any material
interference, reissue, re-examination, opposition, invalidation or cancellation
proceeding and, to the Knowledge of CTI, no such proceeding is
threatened.
(d) Neither
the Company nor any of the Subsidiaries has infringed, diluted, misappropriated
or otherwise conflicted with, and the operation of their business as currently
conducted does not infringe, dilute, misappropriate or otherwise conflict with,
any Intellectual Property of any third party in any material
respect.
(e) The
representations and warranties set forth in this Section 5.13, along
with the applicable representations in Section 5.4, Section 5.5 and Section 5.11
constitute CTI’s sole and exclusive representations and warranties related to
intellectual property matters.
25
5.14 Suppliers. Section 5.14 of
the Disclosure Schedule lists the names of the five suppliers and vendors (other
than any Related Party or Affiliate thereof) from whom the Company and the
Subsidiaries made the most purchases (in terms of dollar amounts) during the
fiscal year ended February 2, 2008 and a good faith approximation of the
aggregate expenditures attributable to each in such year. No such
vendor or supplier that accounted for more than of 5% of the consolidated
purchases of the Company and the Subsidiaries during the fiscal year ended
February 2, 2008 has terminated or materially reduced, or has given written
notice to the Company or any Subsidiary that it intends to terminate or
materially reduce, the amount of business done with the Company or any
Subsidiary. CTI does not have any Knowledge of any such intention on
the part of any such supplier or vendor, whether or not in connection with or as
a result of, the transactions contemplated by this Agreement or any other
Transaction Document.
5.15 Labor
Matters.
(a) No
application or petition for certification of a collective bargaining agent is
currently pending, and no union or bargaining representative is currently
certified as a representative of the employees of CTI, its Affiliates, the
Company or any Subsidiary. Since January 29, 2006, neither CTI,
its Affiliates, the Company nor any Subsidiary has been the subject of a
representation campaign to organize any group of CTI’s, its Affiliates’, the
Company’s or such Subsidiary’s employees. Since January 29,
2006, there has not been and there is not currently pending any material labor
arbitration or proceeding relating to the grievance of any employee of CTI, its
Affiliates, the Company or the Subsidiaries, any application, charge or
complaint filed by any such employee or union with the National Labor Relations
Board or any comparable state or local agency, any strike, slowdown, picketing
or work stoppage by any employees at any facility of CTI, the Company or any
Subsidiary, any lockout of any such employees, or any other labor related
controversy materially affecting the operations, assets, results of operations,
financial condition or business of the Company or the Subsidiaries taken as a
whole. Except for the terms of the real property leases to which the
Company or any of the Subsidiaries is currently a party, no agreement to which
the Company or any of the Subsidiaries is a party restricts in any material
respect the Company or any Subsidiary from relocating, closing or terminating
any of their operations or facilities or any portion thereof.
(b) During
the last 90 days prior to the date hereof, neither CTI, the Company nor any
Subsidiary has (i) effectuated a “plant closing” (as defined in the Worker
Adjustment and Retraining Act of 1988, as amended (the “WARN Act”)) affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of CTI, the Company or any Subsidiary; or (ii)
effectuated a “mass layoff” (as defined in the WARN Act) affecting any site of
employment or facility of CTI, the Company or any Subsidiary, or (iii)
terminated or announced the termination of the employment of more than a total
of 20 employees (other than “seasonal workers,” as defined by the WARN Act,
terminated in the ordinary course of business).
(c) The
representations and warranties set forth in this Section 5.15, along
with the applicable representations in Section 5.4 and Section 5.5,
constitute CTI’s sole and exclusive representations and warranties related to
labor matters.
26
5.16 Employee Benefits.
(a) Section 5.16(a) of
the Disclosure Schedule contains a complete and correct list of all benefit
plans and arrangements (whether or not employee benefit plans as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)),
including sick leave, vacation pay, severance pay, salary continuation for
disability, consulting or other compensation arrangements, retirement, deferred
compensation, bonus, incentive compensation, stock purchase, stock option,
health including hospitalization, medical and dental, life insurance and
scholarship programs maintained for the benefit of any present or former
employees of CTI, the Company, any Subsidiary or any ERISA Affiliate to which
CTI, the Company, any Subsidiary or any ERISA Affiliate has since
January 29, 2006 contributed or otherwise has any liability or is or was
since January 29, 2006 obligated to make payments excluding, in the case of
CTI or an ERISA Affiliate, any such plan, arrangement or program that does not
cover or does not apply to a Listed Employee, where neither the Company nor any
Subsidiary has any liability with respect to such plan (collectively, the “Employee Benefit
Plans”). The Company has delivered or made available to Buyer,
with respect to all such Employee Benefit Plans, true, complete and correct
copies of the following: all plan documents and handbooks; the most
recent summary plan descriptions and any subsequent summaries of material
modifications; Forms series 5500 as filed with the United States Department of
Labor (“DOL”)
since January 29, 2006; all trust agreements with respect to Employee
Benefit Plans; plan contracts with service providers or with insurers providing
benefits for participants; the most recent annual audit and accounting of plan
assets for all funded plans; and the most recent IRS determination letter for
all plans qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the “Code”).
(b) Each
Employee Benefit Plan has been administered in compliance in all material
respects with its terms and is in compliance in all material respects with the
applicable provisions of ERISA, the Code and all other applicable
Laws.
(c) Each
Employee Benefit Plan which is an “Employee Pension Benefit
Plan” (as defined in Section 3(2) of ERISA) and which is intended to be
“qualified” within the meaning of Section 401(a) of the Code has been issued a
favorable determination (or opinion) letter from the IRS, and to the Knowledge
of CTI, since January 29, 2006 there has been no act or condition that
would reasonably be expected to result in the loss of tax-qualified status of
such Employee Benefit Plan or the loss of exemption from federal income tax
under Section 501(a) of the Code of any trust created pursuant to any such
Employee Pension Benefit Plan.
(d) Neither
CTI, the Company, any Subsidiary nor any ERISA Affiliate maintains or since
January 29, 2006 has maintained or been obligated to contribute to a “Multiemployer Plan”
(as such term is defined by Section 3(37) of ERISA) or to a “Defined Benefit Plan”
(as such term is defined by Section 3(35) of ERISA). Neither the
Company nor any Subsidiary has any actual or potential Liability, including as a
result of being under common control with an ERISA Affiliate, with respect to a
Multiemployer Plan or a Defined Benefit Plan. As used herein, “ERISA Affiliate”
shall refer to any corporation or trade or
27
business,
whether or not incorporated, under common control with the Company within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
(e) With
respect to each Employee Benefit Plan, no material unsatisfied Liabilities to
participants, the IRS, the DOL, the Pension Benefit Guaranty Corporation or to
any other Person have been incurred as a result of the cessation of
contributions under, the transfer of sponsorship of, or the termination of any
Employee Benefit Plan.
(f) Neither
CTI, the Company, any Subsidiary nor any ERISA Affiliate maintains any retiree
life and/or retiree health insurance plans which provide for continuing benefits
or coverage for any former employee, employee, or any beneficiary of an employee
or former employee of CTI, the Company, any Subsidiary or any ERISA Affiliate
after such employee’s termination of employment, other than (i) benefits that
are required to be provided pursuant to Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, or state continuation coverage
rights or (ii) a plan maintained by CTI or an ERISA Affiliate that does not
cover or does not apply to a Listed Employee, where neither the Company nor any
Subsidiary has any liability with respect to such plan.
(g) Section 5.16(g) of
the Disclosure Schedule lists each employment, retention, severance, change of
control, consulting, commission, agency and representative agreement or
arrangement to which CTI, the Company, any Subsidiary or any ERISA Affiliate is
a party or is otherwise bound with respect to any Listed Employee, including all
agreements and commitments relating to wages, hours or other terms or conditions
of employment (other than unwritten employment arrangements terminable at
will).
(h) Except as
required under any Employee Pension Benefit Plan or the Code with respect to any
Employee Pension Benefit Plan, or as expressly contemplated by this Agreement
and subject to the terms of Section 10.1(g), the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents will not, alone or together with any other event: (i)
entitle any person to severance pay, unemployment compensation or termination
benefits or any other payment; (ii) accelerate the time of payment or vesting
of, or materially increase the amount of compensation due to any person or (iii)
result in forfeiture of compensation or benefits to any employee of the Company
and its Subsidiaries or any Listed Employee.
(i) The
representations and warranties set forth in this Section 5.16 along
with the applicable representations and warranties set forth in Sections 5.4, 5.5, 5.6, 5.8 and 5.17, constitute
CTI’s sole and exclusive representations and warranties related to employee
benefits matters.
5.17 Officers and
Employees. Section 5.17 of
the Disclosure Schedule sets forth the following information for each
consultant, agent and independent contractor regularly retained by the Company
or any Subsidiary, whose aggregate compensation for the last fiscal year ended
exceeded $100,000 or whose current aggregate annual rate of compensation exceeds
such amount (including each such person on leave or layoff status), and each
Listed Employee: (i) employer and location of employment; (ii) name
and job title; (iii) current annual rate of compensation (identifying
bonuses separately) and any change in
28
compensation
since the date of the Balance Sheet; (iv) vacation accrued; and
(v) service credited for purposes of vesting and eligibility to participate
in applicable Employee Benefit Plans.
5.18 Environmental
Matters.
(a) Since
January 29, 2006, and to the Knowledge of CTI, prior to January 29,
2006, the Company, each Subsidiary and their respective predecessors, including
all of their businesses and operations, have been operated in compliance in all
material respects with all Environmental Laws.
(b) Neither
the Company nor any Subsidiary has, since January 29, 2006, caused, and to
the Knowledge of CTI, none of the Company, any Subsidiary or any predecessor
entity thereof did, prior to January 29, 2006, cause, and to the Knowledge
of CTI, none of the Company, any Subsidiary or any predecessor entity thereof
has permitted any other Person to cause, any conditions on, about, beneath or
arising from any real property, which is currently, or since January 29,
2006, was owned, leased or operated, or to the Knowledge of CTI, was at any time
prior to January 29, 2006, owned, leased or operated, by the Company, any
Subsidiary or their respective predecessors, which (i) give rise to
material liability (contingent or otherwise) or the imposition of a statutory
lien under any Environmental Law, or (ii) require any material Response,
Removal or Remedial Action or other action under any Environmental
Law.
(c) Neither
the Company nor any Subsidiary has received since January 29, 2006, or to
the Knowledge of CTI, prior to January 29, 2006, any written or oral
notification of a material release or threat of a material release of a
Hazardous Substance with respect to any real property that is currently, or was
at any time since January 29, 2006, owned, leased or operated, or to the
Knowledge of CTI, was at any time prior to January 29, 2006, owned, leased
or operated, by the Company or any Subsidiary or their respective
predecessors.
(d) No
Hazardous Substances have been used, handled, generated, processed, treated,
stored, transported to or from, released, discharged or disposed of by the
Company or any Subsidiary or, to the Knowledge of CTI, any third party, and no
Person has been exposed to any Hazardous Substances, on, about or beneath any
property that is currently, or that has at any time since January 29, 2006
been, owned, leased or operated, or to the Knowledge of CTI, that was at any
time prior to January 29, 2006, owned, leased or operated, by the Company
or any Subsidiary or their respective predecessors so as to give rise to any
material liabilities (contingent or otherwise) under any Environmental
Laws.
(e) There are
not currently, and since January 29, 2006 there have not been, any above
ground or, to the Knowledge of CTI, underground storage tanks, asbestos
containing materials, or transformers containing or, to the Knowledge of CTI,
contaminated with polychlorinated biphenyls on, about or beneath any real
property that is currently, or since January 29, 2006 has been, owned,
leased or operated, or to the Knowledge of CTI, that was at any time prior to
January 29, 2006, owned, leased or operated, by the Company or any
Subsidiary or their respective predecessors in violation in any material respect
of, or as would give rise to any material liabilities under, any Environmental
Laws.
29
(f) To the
Knowledge of CTI, since January 29, 2006, neither the Company nor any
Subsidiary has received written notice of:
(i) any
material claim, demand, investigation, enforcement action, Response, Removal,
Remedial Action, statutory lien or governmental or regulatory action instituted
or threatened against the Company or any Subsidiary or any real property
formerly or currently owned, leased or operated by the Company or any Subsidiary
pursuant to any of the Environmental Laws; or
(ii) any
material claim, demand notice, suit or action, made or threatened by any Person
against the Company, any Subsidiary, or any real property formerly or currently
owned, leased or operated by the Company or any Subsidiary relating to (A) any
material damage, loss or injury resulting from, or claimed to result from, any
Hazardous Substance on, about, beneath or arising from any real property
formerly or currently owned, leased or operated by the Company or any Subsidiary
or any other real property or (B) any alleged material violation of
Environmental Laws by the Company or any Subsidiary.
(g) CTI has
no Knowledge of any communication to or from any Governmental Body arising out
of or in connection with Hazardous Substances on, about, beneath, arising from
or generated at any real property formerly or currently owned, leased or
operated by the Company or any Subsidiary.
(h) No wastes
generated by the Company or any Subsidiary, have since January 29, 2006, or
to the Knowledge of CTI, prior to January 29, 2006, been sent, transferred,
transported to, treated, stored, or disposed of at any site requiring
investigation or clean-up, including any site listed, or to the Knowledge of
CTI, formerly proposed for listing, on the National Priority List promulgated
pursuant to CERCLA or to any site listed on any state list of sites requiring or
recommended for investigation or clean-up. To the Knowledge of CTI,
none of the real property that is currently, or since January 29, 2006 has
been, owned, leased or operated, or to the Knowledge of CTI, prior to
January 29, 2006, has been owned, leased or operated, by the Company or any
Subsidiary or their respective predecessors, is listed on the National
Priorities List or any state list of sites requiring or recommended for
investigation or clean up.
(i) neither
the Company nor any of its Subsidiaries has assumed, undertaken, provided an
indemnity with respect to, or otherwise become subject to any material
liabilities of any other Person relating to any Environmental Law.
(j) There has
been no written environmental audit, investigation, inspection, report, sampling
report, remediation report or other related report conducted by or on behalf of
the Company, any Subsidiary or, to the Knowledge of CTI, any Governmental Body
or other Person, of or related to the Company or its Subsidiaries or Affiliates,
or the environmental condition of any property that is currently or since
January 29, 2006 has been, owned, leased or operated, or to the Knowledge
of CTI, prior to January 29, 2006, has been, owned, leased or operated, by
the Company or any Subsidiary, which has not been made available to Buyer prior
to the date hereof.
30
(k) Notwithstanding
anything in this Agreement to the contrary, Buyer acknowledges and agrees that
this Section 5.18
contains the sole and exclusive representations and warranties in this Agreement
relating to environmental matters.
5.19 Sufficiency of the
Assets. As of the Closing, the assets of the Company and the
Subsidiaries (excluding the Excluded Assets but including the Acquired Assets)
together with the services and assets provided to the Company and the
Subsidiaries pursuant to the Transition Services Agreement and the sharing of
certain contracts as contemplated by the Assignment and Assumption, will be
sufficient to conduct the business of the Company and the Subsidiaries
substantially as conducted on the date hereof, which business includes the
Crosstown Traders business of the Company and its Subsidiaries, namely, the
direct marketing of women’s apparel, footwear and accessories from the locations
specified on Section
5.9 of the Disclosure Schedule, through the Company’s and its
Subsidiaries’ Old Pueblo Traders, Intimate Appeal, Coward Shoes, Bedford Fair
Lifestyles, Bedford Fair Shoestyles, Willow Ridge, Xxx Xxxxxx, Brownstone
Studios and Monterey Bay Clothing Company catalog titles (collectively, the
“Business”).
5.20 Brokers. Other
than Banc of America Securities LLC and Xxxxxx Brothers Inc., there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of the Company or any Subsidiary that might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement or any other Transaction Document.
SECTION
6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to CTI, as of the date of this Agreement and as
of the Closing Date, that:
6.1 Organization and Good
Standing. Buyer is duly organized, validly existing and in
good standing under the laws of its jurisdiction of formation and has all
necessary power and authority to perform all of its obligations under this
Agreement and the other Transaction Documents to which it is a party
(collectively, the “Buyer Transaction
Documents”).
6.2 Power and
Authorization. Buyer has all legal right, power and authority
to execute and deliver this Agreement and the other Buyer Transaction Documents,
to perform its obligations hereunder and thereunder and to carry out the
transactions contemplated hereby and thereby. All necessary
corporate, shareholder and other legal action has been taken by Buyer to
authorize the execution, delivery and performance by it of this Agreement and
each other Buyer Transaction Document, and the consummation by Buyer of the
transactions contemplated hereby and thereby. Buyer has duly executed and
delivered this Agreement and, at or prior to the Closing, will have duly
executed and delivered each other Buyer Transaction Document. This
Agreement is, and each other Buyer Transaction Document, when duly executed and
delivered at or prior to the Closing by Buyer, will be, the legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with their
respective terms, except as enforceability of such obligations may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws now or
hereafter in
31
effect
relating to or limiting creditors’ rights generally and general principles of
equity relating to the availability of specific performance and injunctive and
other forms of equitable relief.
6.3 No
Conflicts.
(a) The
execution and delivery by Buyer of this Agreement does not, the execution and
delivery by Buyer of each Buyer Transaction Document to which it is, or is
specified to be, a party will not, and the consummation of the transactions
contemplated hereby and thereby and compliance by Buyer with the terms hereof
and thereof will not conflict with, or result in any violation or breach of or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to a loss of a material benefit under, or result in the creation
of any Encumbrance (other than a Permitted Encumbrance) upon any of the material
properties or assets of Buyer under, any provision of (i) the certificate
of incorporation, by-laws or other similar organizational documents Buyer,
(ii) any material agreement or other material obligation to which Buyer is
a party or by which any of their property or assets are bound or (iii) any
material Laws or Governmental Authorizations binding upon or applicable to
Buyer.
(b) No
material Consents or registrations, notifications, filings or declarations with,
any Governmental Body, creditor, lessor or other Person are required to be given
or made by Buyer in connection with the execution, delivery and performance of
this Agreement or any other Buyer Transaction Document.
(c) There are
no judicial, administrative or other governmental actions, proceedings or
investigations pending or, to the Knowledge of Buyer, threatened, which
individually or in the aggregate, have had or would reasonably be expected to
have a material adverse effect on the ability of Buyer to perform its
obligations under this Agreement or any other Buyer Transaction Document or on
the ability of Buyer to consummate the transactions contemplated hereby or
thereby (a “Buyer
Material Adverse Effect”).
6.4 No
Reliance. Buyer (a) is an informed and sophisticated buyer and
has engaged expert advisors, experienced in the evaluation of transactions such
as those contemplated in this Agreement, (b) has made its own inquiry and
investigation into, and, based thereon, has formed an independent judgment
concerning, the Company, the Subsidiaries and their businesses, and (c) has been
furnished with or given adequate access to such information about the Company,
each Subsidiary and their businesses as it has reasonably desired or reasonably
requested. Buyer’s Representatives have had adequate opportunity to
meet with management and employees of the Company to discuss the businesses and
assets of the Company and the Subsidiaries. Buyer acknowledges that
the business of the Company and the Subsidiaries has not been operated on a
stand-alone basis. No provision of this Section 6.4 shall
limit or otherwise impair any representations or warranties made by any party
hereto.
6.5 Brokers. There
is no investment banker, broker, finder or other financial intermediary that has
been retained by or is authorized to act on behalf of Buyer or any of
its
32
Affiliates
that might be entitled to any fee or commission in connection with the
transactions contemplated by this Agreement or any other Transaction
Document.
6.6 Financing. Buyer
has committed financing upon which it intends to draw to pay the Closing Payment
at Closing. Buyer acknowledges that its obligations under the
Transaction Documents are not subject to its obtaining financing in order to pay
the Closing Payment or to satisfy any of its other obligations under the Buyer
Transaction Documents.
6.7 Disclaimer Regarding
Projections. In connection with Buyer’s investigation of the
Company and the Subsidiaries, Buyer has received from CTI and/or its Affiliates
certain projections, estimates and other forecasts and business plan
information. Buyer acknowledges that there are uncertainties inherent
in attempting to make such projections, estimates and other forecasts and plans
and that it is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all projections, estimates and other forecasts and
plans so furnished to it. Accordingly, Buyer acknowledges, agrees and
confirms that CTI, the Company and each of their respective Affiliates,
officers, directors, employees, agents and representatives, do not make, have
not made nor shall be deemed to have made any representation or warranty to
Buyer, express or implied, at law or in equity, with respect to any such
projections, estimates, forecasts or plans.
6.8 No Additional
Representations. Buyer acknowledges that none of CTI, the
Company, the Subsidiaries or any other Person has made any representation or
warranty, expressed or implied, as to the accuracy or completeness of any
written or oral information regarding the Company and the Subsidiaries furnished
or made available to Buyer and its Representatives or otherwise with respect to
the Company, the Subsidiaries or their operations, business, financial
condition, assets, liabilities or prospects, except as set forth in Sections 4,
5 and 10. Buyer
shall acquire the Company and the Subsidiaries without any representation or
warranty as to merchantability or fitness for any particular purpose, in an “as
is” condition and on a “where as” basis, except as otherwise represented or
warranted in Sections 4,
5 and 10.
SECTION
7. COVENANTS OF CTI
7.1 Conduct of Business Pending
Closing. From the date hereof until the Closing, except as
expressly contemplated by any of the Transaction Documents or as set forth in
Section 7.1 of
the Disclosure Schedule, CTI shall cause the Company and each Subsidiary to, and
with respect to Sections 7.1(e),
(f) and (k), CTI also
shall:
(a) maintain
their corporate (or other organizational) existence, pay and discharge all of
their respective material debts, Liabilities and obligations as they become due,
and operate their respective businesses in all material respects in the ordinary
course in a manner consistent with past practice;
(b) maintain
their facilities and assets in all material respects in the same state of
repair, order and condition as they were in on the date hereof, reasonable wear
and tear excepted;
33
(c) maintain
their books and records in accordance with past practice in all material
respects and use reasonable commercial efforts to maintain in full force and
effect all material Governmental Authorizations and all material insurance
policies and binders in an amount and scope consistent with any such insurance
policies in effect as of the date hereof;
(d) use their
commercially reasonable efforts to preserve their present business organization
in all material respects and maintain their relations and goodwill with their
material suppliers, vendors, customers and employees;
(e) promptly
advise Buyer upon obtaining Knowledge of any threat or commencement of any
material dispute, claim, action, suit, proceeding, arbitration or investigation
by or against the Company, any Subsidiary or any of their operations, properties
or assets;
(f) promptly
advise Buyer upon obtaining Knowledge of (i) the existence of any fact or
condition that would constitute a breach in any material respect of any of CTI’s
representations and warranties contained in this Agreement or (ii) the
occurrence of any breach in any material respect of any covenant of CTI in this
Agreement; provided, however, that no such notice shall be deemed to amend or
otherwise modify the Disclosure Schedule delivered on the date hereof or the
representations and warranties of CTI contained herein, have any effect on the
satisfaction of the conditions to Buyer’s obligations to consummate the Closing
hereunder, or limit Buyer’s right to indemnification under any applicable
provision of this Agreement;
(g) conduct
its cash management customs and practices in the ordinary course of business
consistent with past practice (including, without limitation, with respect to
maintenance of normalized working capital balances and normalized inventory
levels taking into account seasonal fluctuations, collection of accounts
receivable, payment of accounts payable, accrued liabilities and other
Liabilities and pricing and credit policies);
(h) continue
planning circulation and investment in any associated prepaid expenses in the
ordinary course in a manner consistent with past practice taking into account
seasonal fluctuations;
(i) continue
placing orders for inventory, receiving inventory, and liquidating inventory in
the ordinary course in a manner consistent with past practice taking into
account seasonal fluctuations;
(j) promptly
process all customer refunds; and
(k) otherwise
report periodically to Buyer concerning the status of the business, operations
and finances of the Company and each Subsidiary.
7.2 Negative Covenants Pending
Closing. From the date hereof until the Closing, except as
expressly contemplated by any of the Transaction Documents or as set forth in
Section 7.2 of
the Disclosure Schedule, without the prior written consent of Buyer, CTI shall
cause the Company and each of the Subsidiaries not to, and with respect to Sections 7.2(j),
(o) and (p), CTI also shall
not and shall cause each of its Affiliates not to:
34
(a) (i) make
any change in the Company’s or any Subsidiary’s authorized or issued capital
stock or other securities; (ii) grant any stock option or other right to
purchase shares of the Company’s or any Subsidiary’s capital stock or other
securities; (iii) issue or make any commitment to issue any equity security of
the Company or any Subsidiary, including any security convertible into the
Company’s or any Subsidiary’s capital stock; (iv) grant any registration rights
with respect to the Company’s or any Subsidiary’s capital stock or other
securities; or (v) purchase, redeem, retire or make any other acquisition of any
shares of the Company’s or any Subsidiary’s capital stock or other
securities;
(b) adopt or
propose any change in the certificate or articles of incorporation or bylaws (or
equivalent governing documents) of the Company or any Subsidiary;
(c) merge or
consolidate with any other Person, acquire any equity securities of any other
Person, or acquire assets from any other Person, other than (i) the acquisition
of inventory in the ordinary course of business in accordance with past
practice, (ii) capital expenditures of not more than those set forth in the
capital expenditure budget for the current fiscal year previously provided to
Buyer;
(d) sell,
lease, license or otherwise dispose of any material assets or property
(including any Intellectual Property but excluding the Excluded Assets) of the
Company and the Subsidiaries, considered as a whole, except the sale of
inventory and customer list rentals and exchanges, in each case in the ordinary
course of business consistent with past practice;
(e) make any
material change in the Company’s or any Subsidiary’s inventory policies or
procedures, operating policies or procedures, or advertising and promotional
policies or procedures;
(f) enter
into or materially modify or amend any financing arrangements, including any
financings with respect to the receivables of the Company and the Subsidiaries,
or create any Encumbrance on any assets or properties (including any
Intellectual Property) of the Company other than Permitted
Encumbrances;
(g) enter
into or materially modify or amend any lease or sublease of real property
(excluding any lease included in the Excluded Assets) or enter into or
materially modify or amend any agreement, plan and other document that is
required to be disclosed in Section 5.11 of the
Disclosure Schedule or terminate or cause or permit the extension of the term of
any such lease, agreement, or plan or other document;
(h) make any
loan, advance or capital contribution to or investment in any Person, other than
(i) loans, advances or capital contributions to a Subsidiary, (ii) travel and
similar advances to employees, and (iii) advances and extended payment terms to
suppliers, in each case in the ordinary course of business consistent with past
practice;
(i) change
the independent accountants of the Company or its Subsidiaries or the accounting
methods, principles or change in any material respect the practices
followed
35
by the
Company or any Subsidiary (except for any such change required by reason of a
change in GAAP or Law);
(j) (i)
adopt, amend or modify an Employee Benefit Plan other than an amendment or
modification to comply with applicable Laws and adoptions, amendments and
modifications that do not apply to any Listed Employee or any officer, employee
or consultant of the Company or any Subsidiary, (ii) grant any severance or
termination pay or any other compensation of any kind or nature payable, in
whole or in part, by reason of the transactions contemplated by this Agreement
to any Listed Employee or any officer, employee or consultant of the Company or
any Subsidiary, (iii) make any change in employment terms, including,
compensation or other benefits for any Listed Employee or any officer, employee
or consultant of the Company or any Subsidiary or increase the contingent or
non-contingent compensation of, or pay any bonus to, any Listed Employee or any
officer, employee or consultant of the Company or any Subsidiary, and (iv) hire,
commit to hire or terminate any Listed Employee or any employee of the Company
or any Subsidiary, except, in the case of clauses (iii) and (iv), in the
ordinary course of business consistent with past practice with respect to any
non-management Listed Employee;
(k) cancel,
discharge, waive, compromise or release any debts, Liabilities or other amounts
owed to the Company and the Subsidiaries that are material to the Company and
the Subsidiaries, taken as a whole, by a Person other than a Related Party, or
amend, terminate, or waive any other material rights of value to the Company or
any Subsidiary;
(l) settle
any claim or lawsuit for an amount involving in excess of $25,000 in the
aggregate or involving equitable or injunctive relief;
(m) write
down or write off the value of any asset material to the Company and the
Subsidiaries, taken as a whole, except as required by GAAP and for write downs
and write offs of accounts receivable and inventory in the ordinary course of
business consistent with past practice;
(n) except as
specifically permitted by this Agreement and the other Transaction Documents,
take any other action or engage in any other practice that would reasonably be
expected to cause the Company and its Subsidiaries to be delivered at the
Closing with more Liabilities or fewer assets than they would have been had the
Company and its Subsidiaries operated their respective businesses in the
ordinary course in a manner consistent with past practice taking into account
seasonal fluctuations;
(o) take, or
omit to take, any action with respect to the Business, that if taken or omitted
on or prior to the date hereof, would have been required to be disclosed on
Schedule 5.8
hereof; or
(p) make any
commitment to do any of the foregoing with respect to the Business.
7.3 Governmental Authorizations;
Consents. Promptly after the date of this Agreement, CTI shall
use its commercially reasonable efforts to (i) obtain (and cooperate with
the other parties hereto in obtaining) all Governmental Authorizations necessary
for or
36
required
in connection with the consummation of the transactions contemplated by the
Transaction Documents, (ii) obtain (and cooperate with the other parties hereto
in obtaining) the Consents set forth in Section 7.3 of the
Disclosure Schedule in connection with the consummation of the transactions
contemplated by the Transaction Documents and (iii) make (and cooperate
with the other parties hereto in making) all filings required to be made by CTI
pursuant to applicable Laws in order to consummate the transactions contemplated
by the Transaction Documents.
7.4 Access to
Information.
(a) From the
date hereof to the Closing, CTI shall cause the Company and the Subsidiaries to,
(i) give Buyer and its Representatives (collectively, “Buyer’s
Representatives”) reasonable access to the books, records, plants,
offices and other facilities and properties and personnel (including independent
accountants and outside counsel) of the Company and the Subsidiaries, and, to
the extent related to the Company and the Subsidiaries, to the books and records
of CTI and its Affiliates, during normal business hours and upon reasonable
prior notice, (ii) permit Buyer and Buyer’s Representatives to make such
inspections thereof as such Persons may reasonably request, (iii) furnish
to Buyer and Buyer’s Representatives such financial, operating data and other
information regarding the respective businesses, agreements, commitments,
liabilities, personnel and properties of the Company and the Subsidiaries as
such Person may reasonably request, and (iv) instruct the Representatives
of CTI, the Company and each Subsidiary to reasonably cooperate with Buyer and
Buyer’s Representatives in their investigation of the Company and the
Subsidiaries. Buyer shall request that its Affiliates and
Representatives agree to comply with Buyer’s undertakings in Section 8.1 with
respect to any confidential information of or relating to CTI, its Affiliates,
the Company and the Subsidiaries obtained pursuant to this Section 7.4; provided
that Buyer shall be responsible for any breach of this Section 7.4 by its
Affiliates and Representatives to whom or to which such confidential or
proprietary information was disclosed by Buyer or any Buyer
Representative. Any inspections pursuant to this Section 7.4 shall be
conducted in such a manner as not to interfere unreasonably with the conduct of
the business of CTI, the Company, the Subsidiaries or any of their
Affiliates. Notwithstanding the foregoing, from the date hereof until
the Closing, Buyer shall not have access to personnel records of any Listed
Employee relating to individual performance or evaluation records, medical
histories, any Personally Identifiable Data or other information the disclosure
of which, in CTI’s good faith judgment, would subject CTI, the Company, the
Subsidiaries or any of their Affiliates to any risk of liability, and Buyer
shall not have access to the personnel records of any employee of CTI or its
Affiliates who is not a Listed Employee.
(b) From and
after the Closing Date, CTI and its Affiliates will afford promptly to Buyer and
its counsel, auditors and other authorized representatives reasonable access to
its books of account, financial and other records, employees and auditors to the
extent they relate to the Company or its Subsidiaries or the Transferred
Employees and to the extent necessary to permit Buyer to determine any matter
relating to its rights and obligations in connection with any audit,
investigation, dispute or litigation involving any Governmental Body or other
third Person or any other reasonable business purpose relating to the Company or
its Subsidiaries or the Transferred Employees; provided that any such access by
Buyer and
37
its
counsel, auditors and other authorized representatives shall not unreasonably
interfere with the conduct of the business of CTI or any of its
Affiliates.
7.5 Confidential
Information.
(a) From and
after the date of this Agreement until the third anniversary of the date of this
Agreement, CTI acknowledges and agrees that neither it nor any of its Affiliates
shall use for any purpose, other than in connection with the transactions
contemplated hereby, or shall disclose, any confidential or proprietary
information of or relating to Buyer to any Person (other than its
Representatives and Affiliates) without the prior written consent of Buyer;
provided, however, that the foregoing restriction shall not apply to
(i) any information which is or becomes publicly known without violation of
this Agreement by CTI or its Representatives, (ii) any information which is
lawfully obtained from a third party that, to CTI’s Knowledge, is not bound by a
contractual, legal or other confidentiality obligation to Buyer or its
Affiliates, (iii) any information that is independently developed by CTI and its
Affiliates without reference to such confidential or proprietary information,
(iv) any disclosure required by applicable Law, any final order or judgment
of a Governmental Body, any rule or regulation of the Nasdaq Stock Market
(“Nasdaq”) or
another securities exchange applicable to CTI or its Affiliates (so long as it
promptly notifies Buyer of such requirement and reasonably cooperates with
Buyer’s efforts to obtain a protective order or other assurance that
confidential treatment will be afforded to such information), or (v) in
connection with the enforcement of CTI’s rights under the Transaction
Documents.
(b) From and
after the Closing Date until the third anniversary of the date of this
Agreement, CTI acknowledges and agrees that neither it nor any of its Affiliates
shall use for any purpose, other than in connection with the transactions
contemplated hereby, or shall disclose, any confidential or proprietary
information of or relating to the Company or any Subsidiary or the Transferred
Employees to any Person (other than its Representatives and Affiliates) without
the prior written consent of Buyer; provided, however, that the foregoing
restriction shall not apply to (i) any information which is or becomes
publicly known without violation of this Agreement by CTI or its
Representatives, (ii) any information which is lawfully obtained from a third
party that, to CTI’s Knowledge, is not bound by a contractual, legal or other
confidentiality obligation to Buyer or its Affiliates, (iii) any information
that is independently developed by CTI and its Affiliates without reference to
such confidential or proprietary information, (iv) any disclosure required
by applicable Law, any final order or judgment of a Governmental Body, any rule
or regulation of Nasdaq or another securities exchange applicable to CTI or its
Affiliates (so long as it promptly notifies Buyer of such requirement and
reasonably cooperates with Buyer’s efforts to obtain a protective order or other
assurance that confidential treatment will be afforded to such information), or
(v) in connection with the enforcement of CTI’s rights under the Transaction
Documents. For the avoidance of doubt, the confidential information
protected by this Section 7.5(b) shall
include the names and addresses and other information relating to the customers
of the Business, and such information shall be the exclusive property of the
Company following the Closing, recognizing that certain of such customers may
also have made purchases from the other businesses of CTI and its Affiliates and
the names and addresses and other information relating to such customers, to the
extent such information
38
relates
to such other businesses, shall be the exclusive property of CTI or its
Affiliates following the Closing. In furtherance of the foregoing,
CTI and its Affiliates shall not solicit any customer of the Business, through
the mailing of catalogs or otherwise, regardless of whether CTI or its
Affiliates have previously solicited such customers or included such customers
on its mailing lists, unless either (x) such customers have also made purchases
from CTI’s and its Affiliates’ businesses other than the Business and are
therefore customers of CTI and its Affiliates, or (y) CTI and its Affiliates
have received the name and address of such customers from a third party that, to
CTI’s and its Affiliates’ knowledge, is not bound by a contractual, legal or
other confidentiality obligation to the Company and its Affiliates with respect
to such customer information.
(c) CTI shall
use commercially reasonable methods to ensure its Representatives comply with
the undertakings in this Section 7.5; provided
that, in any event, CTI shall be responsible for any breach of the terms hereof
by any of its Representatives to whom or to which such confidential or
proprietary information was disclosed by CTI.
7.6 Non-Solicitation.
(a) Commencing
from and after the date of this Agreement until the expiration of 18 months from
the date of this Agreement, CTI shall not, and shall cause its Affiliates not
to, without the prior written approval of Buyer, directly or indirectly,
solicit for employment (as an employee, consultant or otherwise) any employee of
Buyer or any of its Affiliates with whom CTI, its Affiliates or its
Representatives had contact at any time during the process of Buyer considering,
investigating, negotiating and consummating the transactions contemplated by
this Agreement; provided that the foregoing restrictions on solicitation shall
not prohibit solicitation conducted through an independent employment or
recruitment firm (so long as the firm was not directed to solicit such person or
the personnel of Buyer or its Affiliates) or as a result of the use of a general
solicitation (such as an advertisement) not specifically directed to such person
or the personnel of Buyer or its Affiliates.
(b) Commencing
from and after the Closing until the expiration of 18 months from the date of
the Closing, CTI shall not, and shall cause its Affiliates not to, without the
prior written approval of Buyer, directly or indirectly solicit for
employment or hire (as an employee, consultant or otherwise) any
Transferred Employee; provided, however, that the foregoing shall not prevent
CTI from soliciting or hiring any Transferred Employee whose employment with the
Company was terminated by the Company as part of a general reduction in force
during such period.
7.7 Elimination of Intercompany
Accounts. Prior to the Closing, CTI shall cause all
intercompany accounts between CTI and any of its Affiliates, on the one hand,
and the Company and its Subsidiaries on the other, to be collected, paid,
eliminated or otherwise settled without any further liability or obligation of
any kind or natures to the Company and its Subsidiaries.
7.8 Exclusivity. Prior
to the first to occur of the Closing or the termination of this Agreement in
accordance with its terms, CTI shall not, and shall cause each of its
Affiliates
39
and each
of its and its Affiliates’ respective Representatives not to discuss or pursue
or enter into any agreement regarding a possible sale, recapitalization or other
disposition of the Company or its Subsidiaries or a substantial portion of the
assets or securities of the Company or its Subsidiaries or any interest therein
with any Person (other than Buyer and its Affiliates) or provide any information
to any Person (other than Buyer and its Affiliates) in connection
therewith. CTI represents that it has suspended (and has caused each
of its Affiliates and each of its and its Affiliates’ respective Representatives
to suspend), and shall cease until the termination of this Agreement in
accordance with its terms, all contacts, discussions and negotiations with third
parties (other than Buyer and its Affiliates) regarding any proposal to acquire
the Company or its Subsidiaries or a substantial portion of the assets or
securities of the Company or its Subsidiaries.
7.9 Financial
Information. CTI shall provide, and shall cause its Affiliates
to provide, all reasonable cooperation in connection with facilitating the
Closing, including, without limitation, (a) furnishing to Buyer any information
or documents requested by Buyer which is in CTI’s and its Affiliates’ possession
or to which CTI and its Affiliates have reasonable access, (b) providing Buyer
such other assistance as Buyer may reasonably request in connection with Buyer’s
preparation of any audited financial statements of the Company and its
Subsidiaries in a form complying with Regulation S-X with respect to pre-Closing
periods, (c) assisting Buyer in the completion of inventory appraisals and a
physical inventory, and (d) assisting Buyer in obtaining landlord waivers and
other documentation required by Buyer’s financing sources. Buyer
shall reimburse CTI and its Affiliates for all costs incurred in furnishing such
information or documents or providing such assistance pursuant to this
covenant.
7.10 Maintenance of Insurance
Policies. Prior to the Closing, CTI and its Affiliates will
use reasonable efforts to maintain insurance policies for the Company and the
Subsidiaries and their assets, properties and employees in an amount and scope
consistent with any such insurance policies in effect as of the date
hereof.
SECTION
8. COVENANTS OF BUYER
8.1 Confidential
Information.
(a) From and
after the date of this Agreement until the first to occur of the Closing or the
third anniversary of the date of this Agreement, Buyer acknowledges and agrees
that neither it nor its Affiliates shall use for any purpose, other than in
connection with the transactions contemplated hereby, or shall disclose, any
confidential or proprietary information provided to it by CTI, its Affiliates,
the Company or any Subsidiary to any Person (other than its Representatives)
without the prior written consent of CTI; provided, however, that the foregoing
restriction shall not apply to (i) any information which is or becomes publicly
known without violation of this Agreement by Buyer or its Representatives, (ii)
any information which is lawfully obtained from a third party that, to Buyer’s
Knowledge, is not bound by a contractual, legal or other confidentiality
obligation to CTI or its post-Closing Affiliates, (iii) any information that is
independently developed by Buyer or its Affiliates without reference to such
confidential or proprietary information, (iv) any disclosure required by
applicable Law, any final order or judgment of a Governmental Body (so long as
it
40
promptly
notifies CTI of such requirement and reasonably cooperates with CTI’s efforts to
obtain a protective order or other assurance that confidential treatment will be
afforded to such information), or (v) in connection with the enforcement of
Buyer’s rights under the Transaction Documents. For the avoidance of
doubt, the confidential information protected by this Section 8.1(a) shall
include the names and addresses and other information relating to the customers
of the businesses of CTI and its Affiliates other than the Business, and such
information shall be the exclusive property of CTI and its Affiliates following
the Closing, recognizing that certain of such customers may also have made
purchases from the Business and the names and addresses and other information
relating to such customers, to the extent such information relates to the
Business, shall be the exclusive property of the Company and its Subsidiaries
following the Closing. In furtherance of the foregoing, the Buyer and
its Affiliates (including the Company and its Subsidiaries) shall not solicit
any customer of CTI and its post-Closing Affiliates, through the mailing of
catalogs or otherwise, regardless of whether the Company and its Subsidiaries
have previously solicited such customers or included such customers on their
mailing lists, unless either (x) such customers have also made purchases from
the Business and are therefore customers of the Business, (y) the Company and
its Subsidiaries have received the name and address of such customers from a
third party that, to Company’s and its Subsidiaries’ knowledge, is not bound by
a contractual, legal or other confidentiality obligation to CTI or its
post-Closing Affiliates with respect to such customer information or (z) such
customers are customers of the Buyer and its Affiliates or the Buyer and its
Affiliates were otherwise in possession the name and address of such customers
prior to the Closing.
(b) Commencing
from and after the Closing until the third anniversary of the date of this
Agreement, Buyer acknowledges and agrees that neither it nor its Affiliates
shall use for any purpose, other than in connection with the transactions
contemplated hereby, or shall disclose, any confidential or proprietary
information provided to it by CTI, its Affiliates, the Company or any Subsidiary
that relates to CTI and its post-Closing Affiliates and not the Company, the
Subsidiaries or the Transferred Employees (the “CTI Confidential
Information”) to any Person (other than its Representatives) without the
prior written consent of CTI; provided, however, that the foregoing restriction
shall not apply to (i) any information which is or becomes publicly known
without violation of this Agreement by Buyer or its Representatives, (ii) any
information which is lawfully obtained from a third party that, to Buyer’s
Knowledge, is not bound by a contractual, legal or other confidentiality
obligation to CTI or its post-Closing Affiliates, (iii) any information that is
independently developed by Buyer or its Affiliates without reference to the CTI
Confidential Information, (iv) any disclosure required by applicable Law, any
final order or judgment of a Governmental Body (so long as it promptly notifies
CTI of such requirement and reasonably cooperates with CTI’s efforts to obtain a
protective order or other assurance that confidential treatment will be afforded
to such information), or (v) in connection with the enforcement of Buyer’s
rights under the Transaction Documents.
(c) Buyer
shall use commercially reasonable methods to ensure its Representatives comply
with the undertakings in this Section 8.1; provided
that, in any event, Buyer shall be responsible for any breach of the terms of
this Section
8.1 by any of its Representatives.
41
8.2 Governmental
Authorizations. Promptly after the date of this Agreement,
Buyer shall use its commercially reasonable efforts to (i) obtain (and
cooperate with the other parties hereto in obtaining) all Governmental
Authorizations necessary for or required in connection with the consummation of
the transactions contemplated by the Transaction Documents, (ii) make (and
cooperate with the other parties hereto in making) all filings required to be
made by Buyer pursuant to applicable Laws in order to consummate the
transactions contemplated by the Transaction Documents, and (iii) obtain the
release of CTI and/or its Affiliates, as applicable, under the guarantees set
forth in Section
8.2 of the Disclosure Schedule.
8.3 Notice of Breach; Failure to
Satisfy Closing Condition. From the date hereof until the
Closing, Buyer shall promptly advise CTI upon obtaining Knowledge of (a) any
threat or commencement of any material dispute, claim, action, suit, proceeding,
arbitration or investigation by, against or affecting Buyer or any of its
Affiliates or any of their properties, operations or assets that would have a
Buyer Material Adverse Effect, (b) the existence of any fact or condition that
would constitute a breach in any material respect of any of Buyer’s
representations or warranties contained herein, or (c) the occurrence of any
breach in any material respect of any covenant of Buyer in this Agreement that,
in all cases, would be reasonably likely to make the satisfaction of the
conditions in Section
12.2 impossible or unlikely.
8.4 Non-Solicitation. Commencing
from and after the date of this Agreement until the expiration of 18 months from
the date of this Agreement, Buyer shall not, and shall cause its Affiliates not
to, without the prior written approval of CTI, directly or indirectly solicit
for employment (as an employee, consultant or otherwise) any employee of CTI or
its Affiliates (other than the Listed Employees) with whom Buyer had contact at
any time during the process of Buyer considering, investigating, negotiating and
consummating the transactions contemplated by this Agreement; provided that the
foregoing restrictions on solicitation shall not prohibit solicitation conducted
through an independent employment or recruitment firm (so long as the firm was
not directed to solicit such person or the personnel of CTI or its Affiliates)
or as a result of the use of a general solicitation (such as an advertisement)
not specifically directed to such person or the personnel of CTI or its
Affiliates.
SECTION
9. ADDITIONAL COVENANTS OF BUYER, THE COMPANY AND
CTI
9.1 Further
Assurances. Subject to the terms and conditions of this
Agreement and the other Transaction Documents, each party hereto shall use its
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary or desirable under applicable
Laws to consummate the transactions contemplated by the Transaction Documents
(including each party hereto using its commercially reasonable efforts to cause
the Closing to occur on or prior to September 30, 2008) and shall, from
time to time and without further consideration, either before or after the
Closing, execute such further instruments and take such other actions as any
other party hereto shall reasonably request in order to fulfill its obligations
under any of the Transaction
42
Documents,
to effectuate the purposes of the Transaction Documents and to provide for the
orderly and efficient transition of the ownership of the Company and its
Subsidiaries to Buyer.
9.2 Certain Filings and
Consents. Each party to this Agreement shall cooperate with
one another (i) in determining whether any action by or in respect of, or
filing with, any Governmental Body is required, or whether any Consents are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by the Transaction
Documents, and (ii) subject to the terms and conditions of this Agreement
and the other Transaction Documents, in taking such commercially reasonable
actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such Consents; provided
that no party shall be obligated to expend any money or grant any other
consideration or compensation to obtain any such Consent. Buyer and
CTI shall use their respective reasonable best efforts to keep the other party
informed in all material respects with respect to any communication given or
received in connection with any filing, submission, investigation or proceeding
relating to the transactions contemplated by the Transaction
Documents.
9.3 Public
Announcements. Each party hereto agrees that no public release
or announcement concerning the transactions contemplated by this Agreement and
the other Transaction Documents shall be issued by any such party without the
prior written consent of the other parties hereto (which consent shall not be
unreasonably withheld or delayed), except any release that may be required by
applicable Laws or the rules or regulations of Nasdaq (including on Form 8-K of
the Securities and Exchange Commission); provided however, in such case, the
party required to make the release or announcement shall, to the extent
practicable, allow the other parties reasonable time to comment on such release
or announcement in advance of such issuance and shall use commercially
reasonable efforts to incorporate such other party’s comments into such release
or announcement. Notwithstanding the foregoing, no provision of this
Agreement shall relieve Buyer or any of its Representatives or Affiliates from
any of their obligations under Section 8.1 or CTI or
any of its Representatives or Affiliates from any of their obligations under
Section
7.5.
9.4 Excluded Subsidiaries and
Excluded Assets.
(a) Buyer
acknowledges that the outstanding capital stock and other equity securities of,
or equity interests in, the Excluded Subsidiaries owned of record and
beneficially by the Company and all of the Excluded Assets have been or will be
transferred to CTI or an affiliate of CTI on or prior to the Closing Date, and
that CTI is not selling, and Buyer is not acquiring, any interest in the
Excluded Subsidiaries or in any asset thereof or any other Excluded Asset as a
result of the transactions contemplated in this Agreement or
otherwise.
(b) The
representations and warranties of CTI made in Sections 4 and 5 of this Agreement
and the Disclosure Schedules, as of the Closing Date, assume that the transfer
of assets and assumption of liabilities contemplated by the Assignment and
Assumption shall have been consummated prior to the Closing pursuant to the
terms of such Assignment and Assumption, so that, as of the Closing, (i) the
Excluded Assets shall no longer be held by the Company or it Subsidiaries, (ii)
the Company and its Subsidiaries shall no longer have any
43
Liabilities
with respect to any Excluded Liabilities, (iii) the Acquired Assets shall be
held by the Company or one of it Subsidiaries, and (iv) the Company and its
Subsidiaries shall be liable with respect to the Assumed Liabilities; provided,
however, the disclosure of any Excluded Liabilities or Excluded Assets on the
Disclosure Schedules shall not be deemed to limit or impair in any manner
whatsoever the right of Buyer, the Company and their Affiliates to seek
indemnification pursuant to Section
14.2(a)(iii).
9.5 Transition
Services. At the Closing, Charming Shoppes of Delaware, Inc.
and the Company will enter into a Transition Services Agreement (the “Transition Services
Agreement”), the form of which is attached as Exhibit
9.5.
9.6 Mutual
Release.
(a) Effective
immediately prior to the Closing, CTI hereby irrevocably waives, releases and
discharges the Company and its Subsidiaries from any and all Liabilities and
obligations to CTI and its Affiliates of any kind or nature whatsoever
(including, without limitation, in respect of rights of contribution or
indemnification), in each case whether absolute or contingent, liquidated or
unliquidated, known or unknown, and whether arising under any agreement or
understanding, or the limited liability agreement, articles, bylaws or other
constitutive documents of the Company or any of its Subsidiaries or otherwise at
law or equity, and CTI and its Affiliates shall not seek to recover any amounts
in connection therewith or thereunder from Buyer, the Company or its
Subsidiaries. The foregoing waiver, release and discharge shall not
apply in respect of any liability or obligation arising under (i) any of the
Transaction Documents or (ii) any agreement entered into on or after the Closing
Date.
(b) At the
Closing, Buyer shall cause the Company and its Subsidiaries to irrevocably
waive, release and discharge CTI and its Affiliates from any and all liabilities
and obligations to the Company and its Subsidiaries of any kind or nature
whatsoever (including, without limitation, in respect of rights of contribution
or indemnification), in each case whether absolute or contingent, liquidated or
unliquidated, known or unknown, and whether arising under any agreement or
understanding, or the articles, bylaws or other constitutive documents of the
Company or any of its Subsidiaries or otherwise at law or equity, and Buyer, the
Company or its Subsidiaries shall not seek to recover any amounts in connection
therewith or thereunder from CTI and its Affiliates. The foregoing
waiver, release and discharge shall not apply in respect of any liability or
obligation arising under (i) any of the Transaction Documents or (ii) any
agreement entered into on or after the Closing Date.
(c) CTI shall
cause all Related Party Agreements to be cancelled as of the Closing Date, and
neither CTI or its Affiliates nor the Company or its Subsidiaries shall have any
further liability or obligation with respect thereto. From and after
the Closing, all transactions between the Company or any Subsidiary, on the one
hand, and CTI or its Affiliates, on the other hand, shall be governed by the
Transaction Documents.
44
SECTION
10. TAX MATTERS
10.1 Tax Representations of
CTI. CTI hereby represents and warrants to Buyer that, except
as set forth in Section 10.1 of the Disclosure Schedule attached
hereto:
(a) All Tax
Returns, or extensions relating thereto, required to be filed by or with respect
to the Company and its Subsidiaries have been timely and properly filed, and all
such Tax Returns are correct and complete in all respects.
(b) All
liabilities for Taxes of the Company and its Subsidiaries (including any Tax
liabilities relating to other consolidated group members under Treasury
Regulation Section 1.1502-6 and any estimated Taxes) with respect to taxable
periods ending on or before, and the portion of any interim period up to and
including, the Closing Date have been properly and timely paid (to the extent
due and payable) or, in the case of Taxes not yet due, properly provided for on
the Balance Sheet or, in the case of Taxes accruing after the date thereof, on
the books and records of the Company and its Subsidiaries in accordance with
past practice and such amounts accrued for Taxes are sufficient to pay any Taxes
of the Company and its Subsidiaries through the Closing
Date. Notwithstanding anything to the contrary in this Agreement, no
representation or warranty is made with respect to the tax effects of any
transactions entered into after the time of Closing based on instructions of the
Buyer and its agents. There are no Encumbrances relating to Taxes,
other than Permitted Encumbrances, existing or, to the Knowledge of CTI,
threatened or pending with respect to any asset of the Company and its
Subsidiaries.
(c) No issues
have been raised in writing with the Company and its Subsidiaries (or are
currently pending) by the Internal Revenue Service (“IRS”) or any other
taxing authority in connection with any of the Tax Returns (including any
assertion by a taxing authority that a required Tax Return was not filed), and
no waivers of statutes of limitations have been given with respect to any such
Tax Returns or with respect to any Taxes.
(d) Section 10.1(d) of
the Disclosure Schedule identifies all Tax Returns of or with respect to the
Company or any of its Subsidiaries that are currently under examination by the
IRS or by other taxing authorities. There are no unpaid deficiencies
asserted or assessments made by any taxing authority against the Company or any
of its Subsidiaries.
(e) Neither
the Company nor any Subsidiary (i) has made any transfer of any intangible
property with respect to which Code Section 367(d) or 482 will require the
recognition of additional income after the Closing Date or (ii) owns stock in a
“passive foreign investment company” within the meaning of Code Section
1297(a).
(f) Neither
the Company nor any Subsidiary (i) is a party to any agreement, with any Person
other than any Affiliate providing for the allocation or sharing of Taxes, or
(ii) has been included in any “consolidated,” “unitary” or “combined” Tax Return
with any such Person since October 30, 2002.
45
(g) Neither
the Company nor any Subsidiary is a party to any agreement, contract,
arrangement or plan that has resulted or will result, separately or in the
aggregate, in the payment of any “excess parachute payment” within the meaning
of Code Section 280G.
(h) The
Company and each of its Subsidiaries has properly withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any shareholder, employee, creditor, independent contractor, or other third
party.
(i) The
representations made by CTI in this Section 10.1 are the only representations
and warranties made in this Agreement with respect to Taxes and Tax matters and
are made only with respect to taxable periods that end on or prior to the
Closing Date and the pre-Closing Date portion of any taxable period that
includes the Closing Date and ends after such date. CTI makes no
representations or warranties regarding any Tax positions taken on or after the
Closing Date. Neither the Company nor any Subsidiary (A) has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Parent) since October 30,
2002 and (B) has any liability for the Taxes of any Person (other than any of
the Company or its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or non-US law), as a transferee or successor,
by contract, or otherwise.
10.2 Tax Covenants of CTI and the
Company.
(a) Neither
Buyer nor the Company shall amend any Tax Return filed on or before the Closing
Date without the written consent of CTI, except for the purpose of claiming a
refund resulting from a carryback from a period ending after the Closing
Date.
(b) Refunds
of Taxes of the Company (net of any Taxes or costs incurred with respect
thereto) with respect to taxable years ended on or before the Closing Date,
aside from any refunds resulting from carrybacks from periods ending after the
Closing Date, shall be for CTI’s account and, if received by Buyer or the
Company, shall be paid over to CTI within 10 Business Days of receipt
thereof.
(c) CTI shall
provide to Buyer at Closing (i) a certification of non-foreign status, in
accordance with Treas. Reg. Section 1.1445-2(b)(2), that CTI is not a foreign
person for United States federal income tax purposes and (ii) a certification
issued by the Company in accordance with Treas. Reg. Section 1.1445-2(c), that
stock in the Company is not a United States real property interest.
10.3 Tax
Indemnification.
(a) CTI shall
indemnify Buyer, the Company and its Subsidiaries and hold them harmless from
and against (A) all Taxes (or the non-payment thereof) of the Company and its
Subsidiaries for all taxable periods ending on or before the Closing Date and
the portion through the end of the Closing Date for any taxable period that
includes (but does not end on) the Closing Date (each such taxable period, a
“Pre-Closing Tax
Period”), (B) any and all Taxes of any member of an affiliated,
consolidated, combined, or unitary group of which the Company or any
Subsidiaries (or any of their predecessors) is or was a member on or prior to
the Closing Date, including pursuant to Treasury Regulation Section 1.1502-6 or
any
46
analogous
or similar state, local, or foreign law or regulation, and (C) any and all Taxes
of any Person (other than the Company and its Subsidiaries) imposed on the
Company and its Subsidiaries as a transferee or successor, by contract or
pursuant to any law, rule or regulation, which Taxes relate to an event or
transaction occurring before the Closing, except in each case, to the extent
such Taxes were taken into account in the final determination of Final Closing
CTI Borne Expenses. Except as otherwise provided in this Agreement,
CTI shall not indemnify Buyer, the Company or its Subsidiaries for Taxes
resulting from actions taken after the time of Closing based on instructions of
the Buyer and its agents. CTI shall reimburse Buyer for any Taxes of
the Company and its Subsidiaries which are the responsibility of CTI pursuant to
this Section
10.3 no later than five business days prior to payment of such Taxes by
Buyer or the Company.
(b) In the
case of any taxable period that includes (but does not end on) the Closing Date
(a “Straddle
Period”), the amount of any Taxes based on or measured by income or
receipts of the Company and its Subsidiaries for the Pre-Closing Tax Period
shall be determined based on an interim closing of the books as of the close of
business on the Closing Date, and the amount of other Taxes of the Company and
its Subsidiaries for a Straddle Period which relate to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax for the entire Taxable
period multiplied by a fraction the numerator of which is the number of days in
the Taxable period ending on the Closing Date and the denominator of which is
the number of days in the Straddle Period.
10.4 Tax
Contest. Notwithstanding Section 14.3, if
Buyer receives any written claim or notification which involves the assertion of
any claim, or the commencement of any investigation, examination, audit, suit,
action or proceeding relating to a matter that is the subject of the
representations or covenants set forth in this Section 10 (a
“Tax Contest”),
Buyer shall, within ten days of receiving notice of such claim, notify CTI in
writing of such Tax Contest and shall give CTI such information with respect to
the Tax Contest as CTI may reasonably request. Except as otherwise
provided in this Section 10.4, CTI
shall, at its own expense, participate in and control any Tax Contest for which
CTI is providing indemnification pursuant to Section 10.3 or Section 14.2(a), and
may, at its own expense, participate in and, assume control over the defense of
any matter at issue in such Tax Contest. In connection with any Tax
Contest with respect to which CTI elects to assume control, CTI shall, except
with respect to items indirectly affecting Taxes of the Company or any
Subsidiary for which CTI has not agreed to be liable and subject to Buyer’s
right to consent contained in this Section 10.4, have
the exclusive power to contest, settle, prosecute, defend and make decisions and
elections in respect of such Tax Contest, and determine the manner in which the
prosecution or defense is conducted, the contest or settlement occurs, or the
decisions or elections are made. Buyer may, at its own expense,
participate in any such Tax Contest other than a Tax Contest that involves the
consolidated, combined or unitary group that includes CTI. At no time
shall Buyer or the Company settle or otherwise compromise, prosecute or defend
without the prior written consent of CTI, any Tax Contest of which CTI assumes
control in accordance with this Section 10.4 and any
settlement or compromise made by Buyer or the Company with respect to such Tax
Contest shall not be effective and shall be null and void with respect to CTI to
the extent CTI is prejudiced by such action. Each of the parties
hereto and their respective Representatives shall cooperate with each other
party hereto and their respective Representatives, as reasonably requested
thereby, in the prosecution,
47
defense,
settlement or contest of any Tax Contest. Buyer shall promptly
provide CTI with copies of all notices and other correspondence and information
received by Buyer or the Company with respect to any Tax
Contest. Buyer hereby grants any Tax practitioner retained by CTI, in
connection with any Tax Contest of which CTI assumes or continues control in
accordance with this Section 10.4, with
power of attorney to act on behalf of Buyer and the Company in respect of such
Tax Contest; provided, however, that the terms of any settlement or agreement,
to the extent such settlement or agreement (i) provides that Buyer or the
Company take or refrain from taking any actions or make any payments for which
Buyer is not fully indemnified pursuant to Section 14.2 or (ii)
would cause any material detriment to the Buyer or the Company in any period
ending after the Closing Date, shall be on terms and conditions reasonably
acceptable to Buyer and, if applicable, the Company and subject to Buyer’s
consent to such Settlement, not to be unreasonably withheld. Buyer
shall provide, or cause the Company to provide, to CTI a separate power of
attorney granting CTI the power to control a particular Tax Contest in the
manner set forth in this Agreement in form and substance reasonably satisfactory
to Buyer and CTI.
10.5 Tax Sharing
Agreements. All tax sharing agreements or similar agreements
with respect to or involving the Company and its Subsidiaries shall be
terminated as of the Closing Date, and, after the Closing Date, the Company and
its Subsidiaries shall not be bound thereby or have any Liability
thereunder.
10.6 Transfer
Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred in
connection with the consummation of the transactions contemplated by this
Agreement shall be borne 50% by Buyer and 50% by CTI. Each of Buyer
and CTI agree to take any reasonable action to reduce such Taxes incurred in
connection with the consummation of the transactions contemplated by this
Agreement.
10.7 Section 338(h)(10)
Election. At or before the Closing, Buyer and CTI shall cause
to be prepared, executed and exchanged between the parties IRS Form 8023 and any
other forms necessary to make a joint election under Section 338(h)(10) of the
Code with respect to the purchase of the Shares of the Company and under any
similar provisions of state, local or foreign law (the “Election”). CTI
shall timely cause such Election to be filed. Neither Buyer nor CTI
shall take any action or file any document inconsistent with the Election.
10.8 Purchase Price Allocation
. Within 60 days of the Closing Date, Buyer shall provide CTI
with an allocation of the Purchase Price and the liabilities of the Company
(plus other relevant items) to the assets of the Company for all purposes
(including Tax and financial accounting) (the “Purchase Price
Allocation”). Buyer shall permit CTI to review and comment on the
Purchase Price Allocation and shall make such revisions as are reasonably
requested by CTI. Buyer, the Company, and CTI shall file all Tax
Returns (including amended returns and claims for refund) and information
reports in a manner consistent with the Purchase Price Allocation.
48
SECTION
11. EMPLOYEE BENEFITS
11.1 Listed Employees;
Transferred Employees. On the Closing Date, CTI and its
Affiliates shall terminate the employment of, and Buyer shall offer employment
with Buyer or one of Buyer’s Affiliates, to each of the employees listed on
Schedule 11.1
hereto (each, a “Listed Employee” and
collectively, the “Listed Employees”),
at a rate of pay comparable to, and with severance entitlements not less
favorable than, the rate of pay and severance entitlements, respectively,
provided to the Listed Employee immediately prior to the Closing
Date. For this purpose, “pay” shall include base salary or wages, but
exclude any equity-based or incentive compensation. Buyer, at the
time it extends such employment offers, shall provide appropriate information
regarding employment terms and conditions to the Listed Employees, which shall
conform in all respects to the provisions of this Section
11.1. Each Listed Employee who accepts such offer of
employment shall become an employee of the Buyer or its Affiliates on the
Closing Date and is referred to as a “Transferred
Employee,” and all such employees are collectively referred to as the
“Transferred
Employees.” Buyer shall, or shall cause its Affiliates to,
continue to provide each Transferred Employee with the pay (while such
Transferred Employees remain employed by Buyer or its Affiliates) and severance
entitlements described in this Section at least until January 1,
2009. On and after January 2, 2009, the severance program applicable
to such employees shall be comparable to that provided to similarly situated
employees of Buyer.
11.2 Comparability of
Benefits. For the period commencing on the Closing Date and
ending on the first anniversary of the Closing Date, Buyer shall, or shall cause
its Affiliates (including the Company or the Subsidiaries), to provide employee
benefits (other than equity-based compensation arrangements) to each Transferred
Employee as of the Closing Date that are no less favorable in the aggregate than
the employee benefits (other than equity-based compensation arrangements)
provided to similarly situated employees of Buyer; provided, however, that with
respect to the period beginning on the Closing Date and ending immediately prior
to January 1, 2009 or such earlier date that Buyer provides medical coverage,
dental coverage, vision coverage and health-care flexible spending accounts to
Transferred Employees through one or more group health plans maintained by Buyer
or its Affiliates (the “Buyer Group Health Plan
Effective Date”), CTI and its Affiliates shall provide medical, dental,
vision and/or health-care flexible spending accounts (as elected by a
Transferred Employee or the Transferred Employee’s beneficiaries) to Transferred
Employees (and their beneficiaries) provided that Buyer pays the “Required
Amount” to CTI within three Business Days of the date the Transferred Employee
would have been required to pay the COBRA premium for such coverage (without
regard to any grace period) if CTI had required the Transferred Employee (and
not the Buyer) to pay the COBRA premium. With respect to medical,
dental and vision coverage, the Required Amount shall be the applicable COBRA
premium required for terminating employees (and their beneficiaries) to receive
COBRA coverage under the applicable plan maintained by CTI’s
Affiliate. With respect to health-care flexible spending accounts,
the “Required Amount” shall be the amount that the Transferred Employee (or his
or her beneficiary) would have been required to pay for COBRA coverage with
respect to health-care flexible spending accounts if CTI had required the
Transferred Employee (and not the Buyer) to pay the COBRA premium.
49
11.3 Welfare
Plans. With respect to any Transferred Employee who was
covered by a medical, dental or health plan maintained by CTI or any of its
Affiliates on the day before the Closing Date (and beneficiaries thereof) (each,
a “Covered
Individual”), if such coverage (the “Old Coverage”) is
changed on or after the Closing Date and before the first anniversary of the
Closing Date, Buyer shall, or shall cause its Affiliates, to use commercially
reasonable efforts (i) to waive all pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to each Covered Individual under the new group health coverage, other
than conditions, exclusions or waiting periods that are already in effect with
respect to any such Covered Individual under the Old Coverage that have not been
satisfied as of the date such new coverage is put in place, and (ii) if the Old
Coverage is changed prior to January 1, 2009, to provide each such Covered
Individual with credit for any deductibles and co-payments applied or made with
respect to him or her under the Old Coverage (to the same extent that such
credit was given under such Old Coverage prior to the date such new coverage was
put in place) in satisfying any applicable deductible or out-of-pocket
requirements under any such plans in which such individuals may be eligible to
participate after the Closing Date; provided, however, that the foregoing shall
not apply to the extent it would result in duplication of benefits. For the
period commencing on the Closing Date and ending immediately prior to January 1,
2009, Buyer shall, or shall cause its Affiliates (including the Company or the
Subsidiaries), to limit the participant contribution required for Covered
Individuals to obtain such medical, dental and vision coverage to no more than
the participant contribution required of Covered Individuals for similar
coverage under the Employee Benefit Plans immediately prior to the Closing Date.
11.4 Service
Credit. Buyer shall give each Transferred Employee full credit
for purposes of eligibility and vesting under the employee benefit plans and
arrangements (including, but not limited to, employee benefit plans within the
meaning of Section 3(3) of ERISA, vacation and severance plans or arrangements)
maintained or sponsored by Buyer or any of its Affiliates (including the Company
and the Subsidiaries) in which such Transferred Employees participate after the
Closing for services rendered by such Transferred Employees to CTI, the Company
or the Subsidiaries prior to the Closing, except to the extent such credit would
result in an unintended duplication of benefits.
11.5 Rollovers and
Transfers. Effective as of the Closing Date, CTI shall cause
its Affiliates to fully vest all account balances of each Transferred Employee
under the Charming Shoppes, Inc. Employees’ Retirement Savings Plan and the
Charming Shoppes Variable Deferred Compensation Plan for
Executives. As soon as practicable after the “Buyer Plan Effective
Date,” Buyer shall, or shall cause its Affiliates (including the Company and the
Subsidiaries), to take the following actions with respect to each Transferred
Employee who continues to be employed by the Company, a Subsidiary or an
Affiliate of Buyer on the date of the rollover (with respect to rollovers
described in subsection (a)) and the date of the transfer (with respect to
transfers described in subsection (b)): (a) permit each such
Transferred Employee to make rollovers (in the form of cash and notes associated
with plan loans) from the Charming Shoppes, Inc. Employees’ Retirement Savings
Plan to a 401(k) plan sponsored by Buyer or one of its Affiliates (including the
Company and the Subsidiaries) after the Closing Date, provided such
distributions are eligible rollover distributions as defined in Section
402(c)(4) of the Code, and (b) accept transfers from the health-care and
dependent-care flexible spending accounts in which such Transferred Employees
participated
50
immediately
prior to the Buyer Plan Effective Date to comparable flexible spending accounts
maintained by Buyer or one of its Affiliates (including the Company and the
Subsidiaries) of an amount equal to the positive excess of (A) over (B),
determined separately for each such employee and separately for the health-care
flexible spending account and the dependent-care flexible spending account,
where (A) is the total salary reduction contributions made by such employee
before the Buyer Plan Effective Date with respect to such account for 2008, and
(B) is the total expenses paid from such account before the Buyer Plan Effective
Date with respect to expenses incurred in 2008. As soon as
practicable after the Buyer Plan Effective Date, CTI shall pay to Buyer the
aggregate amount of the account transfers credited pursuant to clause (b) of the
preceding sentence. Buyer (or an Affiliate thereof, as applicable)
will make appropriate adjustments to their respective cafeteria plans to reflect
this transfer. Buyer (or an Affiliate thereof, as applicable) shall
upon such transfer be responsible to reimburse for all eligible claims under the
terms of Buyer’s (or the Affiliate’s) plan, including claims incurred during
2008 and before Closing, up to the amount of such employee’s election in the
case of a health-care flexible spending account, and up to the amount of such
employee’s 2008 contributions in the case of a dependent-care flexible spending
account, reduced by amounts previously reimbursed by CTI, if any. For
purposes of this Section 11.5, “Buyer
Plan Effective Date” shall mean (a) with respect to rollovers from the Charming
Shoppes, Inc. Retirement Savings Plan and transfers of dependent-care flexible
spending accounts, the Closing Date, or (b) with respect to health-care flexible
spending accounts, the Buyer Group Health Plan Effective Date. Notwithstanding
the foregoing, in the event the Buyer Group Health Plan Effective Date is
January 1, 2009, there shall be no transfer with respect to health-care flexible
spending accounts under this Section 11.5. CTI and
its Affiliates shall not place any Transferred Employee’s 401(k) plan loan into
default unless the Transferred Employee fails to elect a rollover to Buyer’s (or
an Affiliate’s) 401(k) plan within 55 days of the Closing Date. Buyer
and CTI shall take (or cause to be taken) all actions necessary and desirable to
effect this Section
11.5.
11.6 Continuation
Coverage. Effective as of the Buyer Group Health Plan
Effective Date, Buyer shall, or shall cause its Affiliates (including the
Company and its Subsidiaries), to (a) assume sole responsibility for any
liabilities and obligations arising under Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, and applicable state continuation
coverage rights laws (collectively, “Continuation Coverage
Laws”) on or after the Buyer Group Health Plan Effective Date resulting
from the actions (or inactions) of the Buyer or its Affiliates on or after the
Buyer Group Health Plan Effective Date with respect to Buyer’s group health
plans. CTI and its Affiliates shall continue to provide coverage
under the Continuation Coverage Laws for former employees (and their
beneficiaries) of, and eligible beneficiaries of employees of, CTI, the Company
or any Subsidiary who are receiving such coverage or are eligible to elect to
receive such coverage prior to the Buyer Group Health Plan Effective
Date.
11.7 Retained
Liabilities. Except to the extent taken into account in the
final determination of Final Closing CTI Borne Expenses with respect to accrued
payroll, bonus payments and vacation, personal days, sick pay and other paid
time off or otherwise expressly assumed by the Company pursuant to Section 3.4
hereof, CTI and its post-Closing Affiliates, including Parent, will retain and
be responsible for the satisfaction of, and shall indemnify and hold Buyer, the
Company and its Subsidiaries harmless from, all liabilities and
obligations
51
relating
to the Employee Benefit Plans and all such other employee compensation or
benefit plans, programs, agreements and arrangements that have been sponsored,
maintained or contributed to by Parent, CTI or any other entity that, together
with Parent, CTI, the Company or any Subsidiary, is or was treated as a single
employer under Section 414 of the Code. For the avoidance of doubt,
Buyer, the Company and their Affiliates shall not be required to pay or
otherwise be responsible for (whether as a variable cost under the Transition
Services Agreement or otherwise) the amount of any severance payments or any
change-of-control, retention or similar payments or bonuses payable to any
employee of Parent, CTI or any of their post-Closing Affiliates (other than such
amounts payable to Transferred Employees, if any, to the extent such amounts are
taken into account in the final determination of Final Closing CTI Borne
Expenses).
11.8 Paid Time
Off. From and after the Closing Date, Buyer shall, or shall
cause its Affiliates, to assume, honor and be solely responsible for paying,
providing and satisfying when due all vacation, personal days, sick pay and
other paid time off for Transferred Employees accrued but unused as of the
Closing Date, on terms and conditions not less favorable than the terms and
conditions in effect immediately prior to the Closing Date.
11.9 Third Party Beneficiaries;
Other Limitations. Nothing contained in this Agreement,
express or implied, (a) shall be construed to establish, amend, or modify any
benefit plan, program, agreement or arrangement, (b) shall alter or limit the
ability of Buyer, the Company or its Subsidiaries to amend, modify or terminate
any benefit plan, program, agreement or arrangement at any time established,
sponsored or maintained by any of them, (c) is intended to confer upon any
Person any right to employment or continued employment for any period of time by
reason of this Agreement, or any right to a particular term or condition of
employment, or (d) is intended to confer upon any Person any other rights as a
third-party beneficiary of this Agreement.
SECTION
12. CLOSING CONDITIONS
12.1 Conditions to Obligation of
Buyer. The obligation of Buyer to purchase the Shares and to
take the other actions required to be taken by Buyer at Closing is subject to
the satisfaction or waiver by Buyer at the Closing of each of the following
conditions:
(a) Performance. CTI
shall have (i) executed and delivered to Buyer this Agreement and the other
Seller Transaction Documents and (ii) delivered to Buyer certificates
representing all of the Shares, duly endorsed for transfer or with stock powers
affixed thereto executed in blank in proper form for transfer.
(b) Representations and
Warranties. The representations and warranties of CTI
contained in this Agreement shall have been true and correct as of the date of
this Agreement and shall be true and correct as of the Closing Date, as if made
at and as of the Closing Date (except to the extent such representations and
warranties expressly relate to an earlier date, in which case they shall have
been true and correct as of such earlier date), except in both cases for such
breaches of representations and warranties which, individually or in the
aggregate, would not have or, would not reasonably be expected to have, a
Material Adverse
52
Effect;
provided, however, the representations and warranties of CTI in Section 4.2, Section 4.4 and Section 5.3 shall
each then be true and correct in all respects.
(c) Performance of
Covenants. CTI shall have performed or complied in all
material respects with all of the agreements and covenants required by this
Agreement to be performed or complied with by it before or at the
Closing.
(d) Legal
Matters. No temporary, preliminary, permanent or final order,
injunction or judgment of a court of competent jurisdiction or other
Governmental Body shall have been issued or rendered that would prevent or
render unlawful the consummation of the transactions contemplated by this
Agreement or any other Transaction Document.
(e) Resignation of
Directors. Buyer shall have received resignations from all of
the directors of the Company and each Subsidiary.
(f) Indebtedness,
Liens. The Company and each Subsidiary shall have been fully
and unconditionally released as parties to the Wachovia Facility, and any liens
or Encumbrances (other than Permitted Encumbrances) on the assets or properties
of the Company or the Subsidiaries, whether or not related to the Wachovia
Facility, shall have been released and Buyer shall have received satisfactory
evidence of the foregoing.
(g) Tax
Certifications. Buyer shall have received each certification
described in Section
10.2(c).
(h) CTI’s Delivery of Transition
Services Agreement. Charming Shoppes of Delaware, Inc. shall
have executed and delivered the Transition Services Agreement to
Buyer.
(i) Consents. CTI
and its Affiliates shall have received all Consents listed on Schedule
7.3.
(j) Proprietary Credit Card
Program Agreements. Each of the following agreements shall be
in full force and effect: (i) that certain Private Label Credit Card Plan
Agreement, dated as of the date hereof, between Spirit of America National Bank
and Buyer, the Company and its Subsidiaries; (ii) that certain Private Label
Credit Card Plan Agreement, dated as of the date hereof, between World Financial
Network National Bank and Buyer; and (iii) that certain Purchase Agreement,
dated as of the date hereof, by and between Spirit of America National Bank and
World Financial Network National Bank, provided in the case of clauses (i) and
(ii), this condition shall be deemed satisfied if the failure of such agreements
to be in full force and effect is primarily related to or arises from any breach
or violation of such agreements by Buyer or any of its Affiliates.
(k) Assignment and
Assumption. The transactions contemplated by the Assignment
and Assumption shall have been consummated.
12.2 Conditions to Obligation of
CTI. The obligation of CTI to sell the Shares and to take the
other actions required to be taken by CTI at Closing is subject to the
satisfaction or waiver by CTI at the Closing of each of the following
conditions:
53
(a) Performance. Buyer
shall have executed and delivered to CTI this Agreement and the other Buyer
Transaction Documents and Buyer shall have made the payments required to have
been made by Buyer pursuant to Section
2.2.
(b) Representations and
Warranties. The representations and warranties of Buyer
contained in this Agreement shall have been true and correct as of the date of
this Agreement and shall be true and correct as of the Closing Date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case they shall have been true and correct as of such earlier
date), except in both cases for such breaches of representations and warranties
which, individually or in the aggregate, would not have, or would not reasonably
be expected to have, a Buyer Material Adverse Effect; provided, however, the
representations and warranties of Buyer in Section 6.2, shall
then be true and correct in all respects.
(c) Performance of
Covenants. Buyer shall have performed or complied in all
material respects with all of the agreements and covenants required by this
Agreement and each other Buyer Transaction Document to be performed or complied
with by it before or at the Closing.
(d) Legal
Matters. No temporary, preliminary, permanent or final order,
injunction or judgment of a court of competent jurisdiction or other
Governmental Body shall have been issued or rendered that would prevent or
render unlawful the consummation of the transactions contemplated by this
Agreement or any other Transaction Document.
(e) Buyer’s Delivery of
Transition Services Agreement. The Company shall have executed
and delivered the Transition Services Agreement to Charming Shoppes of Delaware,
Inc.
12.3 Frustration of Closing
Conditions. None of the parties hereto may rely on the failure
of any condition set forth in this Section 12 to be
satisfied if such failure was caused by such party’s failure to act in good
faith or to use its commercially reasonable efforts to cause the Closing to
occur, in each case as required hereunder.
SECTION
13. TERMINATION AND ABANDONMENT
13.1 Termination. This
Agreement may be terminated and the transactions contemplated herein may be
abandoned at any time before the Closing:
(a) by Buyer
or CTI, if the Closing has not occurred by October 1, 2008; provided, however,
that neither Buyer nor CTI may terminate this Agreement pursuant to this clause
if the Closing shall not have been consummated by October 1, 2008 by reason of
the failure of such party to perform in all material respects any of its
covenants or agreements contained in this Agreement;
(b) by the
mutual consent of Buyer and CTI;
54
(c) by Buyer,
upon a material breach of any pre-Closing covenant or agreement on the part of
CTI or the Company set forth in this Agreement, or if any representation or
warranty of CTI herein shall be or become untrue in any case such that the
conditions set forth in Section 12.1 would
not be satisfied (any such breach or occurrence, a “Terminating Seller
Breach”); provided, however, that, if such Terminating Seller Breach is
curable by CTI through the exercise of its commercially reasonable efforts, CTI
shall have been given a period of 10 days to cure such Terminating Seller
Breach;
(d) by CTI,
upon a material breach of any pre-Closing covenant or agreement on the part of
Buyer set forth in this Agreement, or if any representation or warranty of Buyer
herein shall be or become untrue in any case such that the conditions set forth
in Section 12.2
would not be satisfied (any such breach or occurrence, a “Terminating Buyer
Breach”); provided, however, that, if such Terminating Buyer Breach is
curable by Buyer through the exercise of its commercially reasonable efforts,
Buyer shall have been given a period of 10 days to cure such Terminating Buyer
Breach; or
(e) by either
Buyer or CTI, if any court of competent jurisdiction or other Governmental Body
shall issue any final non-appealable judgment, order or decree or take such
other action permanently enjoining, restraining or otherwise prohibiting the
consummation of the transactions contemplated hereby or under any other
Transaction Document.
13.2 Procedure for
Termination. A party terminating this Agreement pursuant to
Section 13.1
shall give written notice thereof to each other party hereto, whereupon this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned without further action by any party. If this Agreement is
terminated as permitted by this Section 13, such
termination shall be without liability of any party (or any of its Affiliates,
Representatives or Representatives of its Affiliates) to any other party to this
Agreement; provided, however, that if such termination is by Buyer pursuant to
Section 13.1(c)
as a result of a material breach by CTI or the Company, as applicable, of any
representation, warranty or covenant contained in this Agreement, or if such
termination is by CTI pursuant to Section 13.1(d) as a
result of a material breach by Buyer of any representation, warranty or covenant
contained in this Agreement, nothing herein shall affect the non-breaching
party’s right to damages on account of such other party’s breach (subject to the
limitations set forth in Section
14.7). Except to the extent required in connection with
enforcing or preserving any rights or obligations it may have arising out of
such termination, in the event that this Agreement and the transactions
contemplated hereby are terminated pursuant to Section 13.1, this
Agreement shall terminate, each party hereto shall return or destroy all
documents and other materials received from the other parties hereto relating to
this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby; provided, however, that the
provisions set forth in Section 7.5, Section 7.6(a), Section 8.1, Section 8.4, Section 9.3, Section 14.7, Section 15 and this
Section 13.2
shall survive any such termination.
55
SECTION
14. SURVIVAL; INDEMNIFICATION
14.1 Survival. None
of the representations and warranties of CTI or Buyer contained in this
Agreement shall survive the Closing Date, except that the representations and
warranties contained in (i) Section 4.1, Section 4.2, Section 4.3, Section 4.4, Section 5.1, Section 5.2, Section 5.3, Section 6.1, Section 6.2, Section 6.3, and
Section 10.1
shall survive until the latest date permitted by Law, and (ii) Section 5.4, Section 5.5, Section 5.6, Section 5.10(a),
Section 5.13,
Section
5.15(b), and Section 5.19 shall
survive until the first anniversary of the Closing Date (the representations and
warranties listed in clauses (i) and (ii), the “Surviving Representations
and Warranties”). Except as specifically set forth in the preceding
sentence, no other representation or warranty of any party set forth in this
Agreement will survive the Closing, and no party will have any rights or
remedies after the Closing with respect to any misrepresentation of or
inaccuracy in any such representation or warranty. The covenants and
agreements of Buyer, CTI and the Company contained in this Agreement shall
survive Closing and shall continue in full force and effect indefinitely or for
the shorter period specified in this Agreement. Any breach of representation,
warranty, covenant or agreement in respect of which indemnity may be sought
under this Agreement shall survive the time at which it would otherwise
terminate pursuant to Section 14.1 if
notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time. Notwithstanding any provision in this
Agreement to the contrary, an Indemnified Party shall be entitled to the
indemnification or other remedies provided in this Agreement by reason of any
breach of any surviving representation, warranty, covenant or agreement by the
Indemnifying Party notwithstanding whether any employee, representative or agent
of the Indemnified Party seeking to enforce a remedy knew or had reason to know
of such breach and regardless of any investigation by such Person.
14.2 Indemnification.
(a) From and
after Closing, CTI shall indemnify Buyer and its Affiliates against and hold
each of them harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys’ fees and expenses in connection with any action, suit or
proceeding) (“Damages”) actually
incurred or suffered by Buyer or any of its Affiliates arising out of or
resulting from (i) any inaccuracy or breach of any Surviving Representation and
Warranty (each such inaccuracy and breach, a “Warranty Breach”) or
breach of a covenant, in each case of CTI or the Company, as applicable,
contained in this Agreement (it being agreed that, in the case of the inaccuracy
or breach of the representation and warranty contained in Section 5.19, in
addition to any other rights that CTI may have under this Agreement or under
applicable Law, CTI shall first have ten Business Days following delivery of
notice by Buyer of an alleged breach thereof to cure such breach to the
reasonable satisfaction of Buyer), (ii) any failure by CTI to pay any investment
banker, broker, finder or other intermediary that might be entitled to any fee
or other compensation in connection with the transactions contemplated hereby as
a result of any actual or alleged agreement by any of CTI, the Company, its
Subsidiaries or their Affiliates; (iii) the assertion against Buyer, the Company
or any of their Affiliates of any Excluded Liability; (iv) any claims, actions,
suits or proceedings alleging the Company or any
56
of the
Subsidiaries has infringed, diluted, misappropriated or otherwise conflicted
with Intellectual Property of Leisure Shoe Co., Inc. prior to the Closing,
including any claims, actions, suits or proceedings by Leisure Shoe Co., Inc.
based upon, arising from or in any way related to or in consequence of the
circumstances cited in the June 6, 2008 complaint of Leisure Shoes Co., Inc., as
plaintiff, v. Arizona Mail Order Co., Inc., Crosstown/Traders, Inc. and Charming
Shoppes, Inc., as defendants, in the United States District Court, Central
District of California, case number CV08-03731SJO; and (v) any claims, actions,
suits or proceedings alleging the Company or any of the Subsidiaries has
infringed, diluted, misappropriated or otherwise conflicted with Intellectual
Property of Grupo Denim CA and its affiliates prior to the Closing, including
any claims, actions, suits or proceedings based upon, arising from or in any way
related to or in consequence of the circumstances cited in the letter from
XxXxxxxxx Will & Xxxxx dated May 21, 2008 regarding claim of patent
infringement with respect to Secret Slimmer pants and jeans.
(b) From and
after Closing, Buyer shall indemnify CTI and its Affiliates against and hold
them harmless from any and all Damages actually incurred or suffered by them
arising out of or related in any way to (i) any Warranty Breach or breach of a
covenant, in each case of Buyer contained in this Agreement, (ii) any failure by
Buyer to pay any investment banker, broker, finder or other intermediary that
might be entitled to any fee or other compensation in connection with the
transaction contemplated hereby as a result of any actual or alleged agreement
by Buyer or its pre-Closing Affiliates, (iii) the assertion against CTI and its
Affiliates of any Assumed Liability or (iv) any amounts required to be paid by
CTI or its Affiliates in its or their capacity as a surety, as applicable, in
connection with any guarantee or other credit support provided for the benefit
of the Company and/or its Subsidiaries.
(c) Notwithstanding
anything to the contrary herein, (i) Buyer and its Affiliates shall not be
indemnified for Damages pursuant to this Section 14.2 (in the
absence of fraud or intentional misrepresentation) with respect to any Warranty
Breach of the representations and warranties contained in Section 5.4, Section 5.5, Section 5.6, Section 5.10(a),
Section 5.13,
Section
5.15(b), and Section 5.19 unless
and until the aggregate amount of all such Damages exceeds $350,000, and then
only to the extent of such excess, and (ii) the total liability of CTI to
indemnify and hold Buyer and its Affiliates harmless in respect of Damages
arising as a result of a Warranty Breach of the representations and warranties
contained in Section
5.4, Section
5.5, Section
5.6, Section
5.10(a), Section 5.13, Section 5.15(b), and
Section 5.19
shall be limited (in the absence of fraud or intentional misrepresentation) to
$3,500,000 in the aggregate.
(d) Notwithstanding
any of the provisions of this Section 14, the
procedures set forth in Section 10.3 shall
govern any claim for indemnification based on any breach by CTI of the
representations set forth in Section
10.1.
14.3 Procedures.
(a) The party
seeking indemnification under Section 14.2 (the
“Indemnified
Party”) shall give prompt notice to the party against whom indemnity is
sought (the “Indemnifying Party”)
of the assertion of any claim, or the commencement of any suit,
57
action or
proceeding (“Claim”) in respect of
which indemnity may be sought under such section and will provide the
Indemnifying Party such information with respect thereto as the Indemnifying
Party may reasonably request. The failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of its obligations hereunder, except to
the extent such failure shall have adversely prejudiced the Indemnifying
Party.
(b) The
Indemnifying Party shall be entitled to participate in the defense of any Claim
asserted by any third party (“Third Party Claim”)
and, subject to the limitations set forth in this Section 14.3(b),
shall be entitled to control the defense of such Third Party Claim and appoint
lead counsel for such defense, in each case at its own expense. Notwithstanding
the foregoing, the Indemnifying Party shall not have the right to assume control
of such defense if the claim of which the Indemnifying Party seeks to assume
control (i) to the extent such claim seeks non-monetary relief,
(ii) involves criminal allegations, or (iii) involves a claim which would
be reasonably like to result in Damages to the Indemnified Party in excess of
the amount of Damages the Indemnified Party is entitled to recover from the
Indemnifying Party hereunder.
(c) If the
Indemnifying Party shall assume the control of the defense of any Third Party
Claim in accordance with the provisions of this Section 14.3, (i) the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld, conditioned or delayed) before
entering into any settlement of such Third Party Claim, if the settlement does
not release the Indemnified Party from all liabilities and obligations with
respect to such Third Party Claim or the settlement imposes injunctive or other
equitable relief against the Indemnified Party, and (ii) the Indemnified Party
shall be entitled to participate in the defense of such Third Party Claim and to
employ separate counsel of its choice for such purpose. The fees and expenses of
such separate counsel shall be paid by the Indemnified Party unless the
Indemnifying Party has been advised by counsel that a reasonable likelihood
exists of a conflict of interest between the Indemnifying Party and the
Indemnified Party.
(d) Each
party shall cooperate, and cause its respective Affiliates to cooperate, in the
defense or prosecution of any Third Party Claim and shall furnish or cause to be
furnished such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials or appeals, as may be reasonably
requested in connection therewith.
(e) Each
Indemnified Party shall use commercially reasonable efforts
to mitigate in accordance with applicable Law any loss for which such
Indemnified Party seeks indemnification under this Agreement. If such
Indemnified Party mitigates its loss after the Indemnifying Party has paid the
Indemnified Party under any indemnification provision of this Agreement in
respect of that loss, the Indemnified Party shall notify the Indemnifying Party
and pay to the Indemnifying Party the extent of the value of the benefit (or, if
less, the amount of any such loss previously paid by the Indemnifying Party) to
the Indemnified Party of that mitigation (less the Indemnified Party’s
reasonable costs of mitigation) within two Business Days after the benefit is
received.
58
(f) Each
Indemnified Party shall use commercially reasonable efforts to collect any
amounts available under insurance coverage, or from any other Person alleged to
be responsible, for any Damages payable under Section
14.2.
14.4 Limitation on
Damages.
(a) The
amount of any Damages payable under Section 14.2 by the
Indemnifying Party shall be net of (i) any amounts actually recovered by the
Indemnified Party under applicable insurance policies (determined after giving
effect to any increase in premiums resulting therefrom and other costs of
collection and enforcement) and (ii) the amount of any Net Tax Benefit, as and
when realized, as a result of such Damages and indemnification with respect
thereto.
(b) The
Indemnifying Party shall not be liable under Section 14.2 for any (i) Damages
relating to any matter to the extent that such Damages are taken into account in
the final determination of Final Closing CTI Borne Expenses or (ii) punitive
(except to the extent paid or payable to an unrelated third party), special,
indirect or consequential Damages (including diminution in the value of the
Shares and Damages for lost profits).
14.5 Assignment of Claims.
If the Indemnified Party receives any payment from an Indemnifying Party in
respect of any Damages pursuant to Section 14.2 and the
Indemnified Party could have recovered all or a part of such Damages from a
third party (other than from the Company, any Subsidiary, any Affiliate of the
Company or any current or former employee or agent of any such Persons (a “Potential
Contributor”) based on the underlying Claim asserted against the
Indemnifying Party, the Indemnified Party shall assign such of its rights to
proceed against the Potential Contributor as are necessary to permit the
Indemnifying Party to recover from the Potential Contributor the amount of such
payment.
14.6 Exclusivity. Except
as specifically set forth in this Agreement, Buyer hereby irrevocably waives any
rights and claims it may have against CTI or any of its Affiliates, whether in
law or in equity, relating to the Company or any of its Subsidiaries or any of
their respective assets, business or operations, the Shares or the transactions
contemplated hereby, and CTI waives any such rights and claims CTI and its
Affiliates may have against Buyer or any of its Affiliates (including the
Company and any of its Subsidiaries), except in either case, any claim for
fraud. The rights and claims waived hereby include, without
limitation, claims for contribution or other rights of recovery arising out of
or relating to any Environmental Law, claims for breach of contract, breach of
representation or warranty, negligent misrepresentation and all other claims for
breach of duty other than fraud or intentional
misrepresentation. After the Closing, Section 10 and Section 14 shall
provide the sole and exclusive remedy for any misrepresentation, breach of
warranty, covenant or other agreement contained in this Agreement (other than
any claim for fraud or intentional
misrepresentation). Notwithstanding the foregoing, it is understood
that, subject to Section 14.7, below,
nothing herein shall prohibit any party hereto from exercising its rights to
seek equitable relief with respect to a breach of covenant or agreement under
any Transaction Document.
59
14.7 Limitation on
Liability. In the event that the Closing does not occur for
any reason, Buyer (and, for the avoidance of doubt, Orchard) shall not be liable
to CTI for any damages in excess of $10,000,000 for any breach by Buyer of any
representation, warranty or covenant contained in this Agreement. Prior to the
Closing, CTI’s right to damages (subject to the limitation set forth in the
preceding sentence) shall be CTI’s sole remedy for any breach by Buyer of any
representation, warranty or covenant contained in this Agreement (other than a
breach of Section
8.1, Section
8.4 or Section
9.3).
SECTION
15. MISCELLANEOUS
15.1 Costs and
Expenses. Except to the extent otherwise expressly provided
herein, all costs and expenses incurred in connection with the Transaction
Documents shall be paid by the party incurring such cost or
expense.
15.2 Notices. All
notices or other communications permitted or required under this Agreement shall
be in writing and shall be sufficiently given if and when hand delivered to the
persons set forth below or if sent by documented overnight delivery service or
registered or certified mail, postage prepaid, return receipt requested, or by
telegram, telex or telecopy, receipt acknowledged, addressed as set forth below
or to such other Person or Persons and/or at such other address or addresses as
shall be furnished in writing by any party hereto to the other parties
hereto. Any such notice or communication shall be deemed to have been
given as of the date received, in the case of personal delivery, or on the date
shown on the receipt or confirmation therefor in all other cases.
To
Buyer:
c/o
Golden Gate Private Equity, Inc.
Xxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx
Xxxxxxx and Xxxxxx Xxxxxxxxx
Facsimile: 000-000-0000
with a
copy to (which shall not constitute notice):
Xxxxxxxx &
Xxxxx LLP
000 Xxxx
Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx,
XX 00000
Attention: Xxxx
X. Xxxxxxx, P.C.
Telecopy: (000)
000-0000
60
To CTI:
c/o
Charming Shoppes, Inc.
0000
Xxxxx Xxxx
Xxxxxxxx,
XX 00000
Attention: General
Counsel
Fax: 000-000-0000
With a
copy to (which shall not constitute notice):
Drinker
Xxxxxx & Xxxxx LLP
One Xxxxx
Square
00xx xxx
Xxxxxx Xxxxxxx
Xxxxxxxxxxxx,
XX 00000-0000
Attention: F.
Xxxxxxx Xxxxxxx, III, Esq.
Fax: (000) 000-0000
15.3 Assignment. Neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned, by operation of Law or otherwise, by any party hereto to any other
Person without the prior written consent of Buyer and CTI, and any such
attempted assignment shall be null and void; provided, however, that (i) Buyer
may, without the prior written consent of CTI, assign its rights and obligations
under this Agreement and the other Transaction Documents (A) in whole or in part
to any Affiliates (provided that Buyer shall remain primarily liable hereunder
following any such assignment), (B) for collateral security purposes to any
lender providing financing to Buyer, the Company or any of the Subsidiaries and
(C) to any subsequent purchaser of Buyer, the Company, the Subsidiaries or any
of their divisions or any material portion of their assets (whether such sale is
structured as a sale of stock, sale of assets, merger, recapitalization or
otherwise) (provided that Buyer shall remain primarily liable hereunder
following any such assignment) and (ii) CTI may assign its rights and
obligations under this Agreement to any of its Affiliates without the prior
written consent of Buyer (provided that CTI shall remain primarily liable
hereunder). Any purported assignment effected without consent shall
be void. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto, and each of their respective successors, heirs, and
assigns.
15.4 Amendment, Modification and
Waiver. Any provision of this Agreement may be amended,
modified, waived or extended if, but only if, such amendment, modification,
waiver or extension is in writing and is signed by Buyer and CTI. The
waiver by a party of any breach of any provision of this Agreement shall not
constitute or operate as a waiver of any other breach of such provision or of
any other provision hereof, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision
hereof.
15.5 Governing
Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of New York
(and the United States federal law, to the extent applicable), irrespective of
the principal place of business,
61
residence
or domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of Law. Nothing contained herein
or in any Transaction Document shall prevent or delay any party hereto from
seeking, in any court of competent jurisdiction, specific performance or other
equitable remedies in the event of any breach or intended breach by another
party of any of its obligations hereunder.
15.6 Waiver of Jury
Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION
HEREWITH OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH PARTY
(A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY
CLAIM, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER AGREEMENTS CONTEMPLATED HEREBY, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION
15.6.
15.7 Consent to
Jurisdiction. Each party hereto irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County and (b) the United States District Court for the Southern District
of New York, for purposes of any claim, action or proceeding arising out of this
Agreement or any transaction contemplated hereby. Each party hereto
agrees to commence any such claim, action or proceeding only in the United
States District Court for the Southern District of New York or, if such claim,
action or proceeding cannot be brought in such court for jurisdictional reasons,
in the Supreme Court of the State of New York, New York County. Each
of the parties hereby waives, and agrees not to assert in any such dispute, to
the fullest extent permitted by applicable Law, any claim that (a) such party is
not personally subject to the jurisdiction of such courts, (b) such party and
such party’s property is immune from any legal process issued by such courts or
(c) any claim, action or proceeding commenced in such courts is brought in an
inconvenient forum. Each party hereto further agrees that service of
any process, summons, notice or document by United States registered mail to
such party’s address set forth in Section 15.2 above
shall be effective service of process for any claim, action or proceeding with
respect to any matters to which it has submitted to jurisdiction in this Section 15.7 or
otherwise.
15.8 Section Headings and Defined
Terms. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement. The terms defined herein and in any other Transaction
Document include the plural as well as the singular and the singular as well as
the plural. Except as otherwise indicated, all agreements defined
herein refer to the same as from time to time amended or supplemented or the
terms thereof waived or modified in accordance herewith and
therewith. All references to “$” or “dollars” shall be to United
States dollars and all references to “days” shall be to calendar days unless
otherwise specified.
62
15.9 Severability. If
any term or other provision of this Agreement (or portion thereof) or the
application of any such term or other provision (or portion thereof) to any
Person or circumstance is determined by a court of competent jurisdiction to be
invalid, illegal or incapable of being enforced pursuant to any applicable Law
or public policy, all other terms and provisions of this Agreement (or remaining
portion of such term or other provision) will nevertheless remain in full force
and effect. Upon such determination by a court of competent jurisdiction that
any term or other provision (or portion thereof) of this Agreement is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent
possible.
15.10 Counterparts; Third-Party
Beneficiaries. This Agreement may be executed in two or more
counterparts, including by facsimile transmission, each of which shall be deemed
an original; and any Person may become a party hereto by executing a counterpart
hereof, but all of such counterparts together shall be deemed to be one and the
same agreement. This Agreement will be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or will confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
15.11 Entire
Agreement. This Agreement, together with the Disclosure
Schedule and the agreements, exhibits, schedules and certificates referred to
herein or delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the purchase and sale of the Shares and supersede
all prior and contemporaneous agreements and understandings, both written and
oral, with respect to the subject matter hereof and thereof.
15.12 Waiver of Conflicts
Regarding Representation; Nonassertion of Attorney-Client
Privilege.
(a) Buyer
waives and will not assert, and, after the Closing, will cause the Company and
the Subsidiaries to waive and not to assert, any conflict of interest arising
out of or relating to the representation, after the Closing (the “Post-Closing
Representation”), of CTI, or any officer or employee of the Company or of
any of the Subsidiaries, or any Affiliate of any of the foregoing (any such
Person, a “Designated
Person”) in any matter involving this Agreement, the Transaction
Documents or any other agreements or transactions contemplated thereby, by any
legal counsel currently representing CTI, the Company or any Subsidiary in
connection with this Agreement, the Transaction Documents or any other
agreements or transactions contemplated thereby (the “Current
Representation”).
(b) Buyer
waives and will not assert, and after the Closing, will cause the Company and
the Subsidiaries to waive and not to assert, any attorney-client privilege with
respect to any communication between any legal counsel and any Designated Person
occurring during the Current Representation in connection with any Post-Closing
Representation, including in connection with a dispute with Buyer, and following
the Closing, with the Company or any of the Subsidiaries, it being the intention
of the parties hereto that
63
all such
rights to such attorney-client privilege and to control such attorney-client
privilege shall be retained by CTI; provided that the foregoing waiver and
acknowledgment of retention shall not extend to any communication not involving
this Agreement, the Transaction Documents or any other agreements or
transactions contemplated thereby, or to communications with any Person other
than the Designated Persons.
15.13 Orchard
Guaranty.
(a) Orchard
hereby, jointly and severally, unconditionally and irrevocably, guarantees (the
“Orchard Pre-Closing
Guaranty”) by way of an independent obligation to CTI, the due and
punctual payment of the obligations of Buyer under this Agreement up to the
amount of the limitation on damages specified in Section 14.7, when
and as the same shall arise and become due and payable in accordance with the
terms of and subject to the conditions contained in this Agreement (the “Orchard Pre-Closing
Guaranteed Obligations”). This Section 15.13(a)
shall automatically terminate without any action on the part of any Person
immediately upon the payment of the Purchase Price to CTI at the
Closing.
(b) Orchard
hereby, jointly and severally, unconditionally and irrevocably, guarantees (the
“Orchard Post-Closing
Guaranty”, and together with the “Orchard Pre-Closing
Guaranty”, the “Orchard Guaranty”) by
way of an independent obligation to CTI and its Affiliates, (i) the due and
punctual payment by the Company of the amounts invoiced by Charming Shoppes of
Delaware, Inc. to the Company for services actually rendered by Charming Shoppes
of Delaware, Inc., its Affiliates and other third-parties to the Company under
and in accordance with the terms of the Transition Services Agreement (and not
of any other Liabilities thereunder) when and as the same shall arise and become
due and payable in accordance with the terms of and subject to the conditions
contained in the Transition Services Agreement, and (ii) the due and punctual
payment of the obligations of the Company and its Subsidiaries as Recipients (as
defined in the Assignment and Assumption) under Section 2 of the Assignment and
Assumption, when and as the same shall arise and become due and payable in
accordance with the terms of and subject to the conditions contained in the
Assignment and Assumption (collectively, the “Orchard Post-Closing
Guaranteed Obligations”, and together with the “Orchard Pre-Closing
Guaranteed Obligations”, the “Orchard Guaranteed
Obligations”).
(c) This is a
guaranty of payment and performance and not of collection only. If
for any reason whatsoever Buyer (in the case of the Orchard Pre-Closing
Guaranteed Obligations) or the Company (in the case of the Orchard Post-Closing
Guaranteed Obligations) shall fail or be unable to perform or comply with its
Orchard Guaranteed Obligation, Orchard will promptly upon receipt of notice
thereof from CTI forthwith pay or cause to be paid in lawful money of the United
States the unpaid Orchard Guaranteed Obligation then due and payable (at the
place specified and in the amounts and to the extent required of the Buyer or
the Company, as applicable).
(d) Orchard
waives any and all notice of the creation, renewal, extension or accrual of the
Orchard Guaranteed Obligation and notice of or proof of reliance by CTI and its
Affiliates upon this Orchard Guaranty or acceptance of this Orchard Guaranty;
the Orchard Guaranteed Obligation shall conclusively be deemed to have been
created, contracted or
64
incurred,
or renewed, extended, amended or waived, in reliance upon this Orchard Guaranty;
and all dealings between Buyer and, after the Closing, the Company and its
Subsidiaries, on the one hand, and CTI and its Affiliates (other than the
Company and its Subsidiaries), on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Orchard
Guaranty. Orchard agrees that (i) any notice provided under this
Agreement (including any demand for payment or notice of default or non payment)
shall be deemed to constitute notice to Orchard for purposes hereof and (ii) any
knowledge of Buyer and, after the Closing, the Company and its Subsidiaries
shall be deemed knowledge of Orchard for purposes hereof. Nothing in
this Section
15.13 shall be deemed to constitute a waiver of, or prevent Orchard from
asserting, any valid defense that may be asserted by Buyer and, after the
Closing, the Company or its Subsidiaries. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against
Orchard, CTI and its Affiliates may, but shall be under no obligation to, make a
similar demand on or otherwise pursue such rights and remedies as it may have
against Orchard or any other person, and any failure by CTI or its Affiliates to
make any such demand, to pursue such other rights or remedies or to collect any
payments from Buyer and, after the Closing, the Company and its Subsidiaries or
any other person shall not relieve Orchard of any obligation or liability
hereunder, and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law, of CTI or its Affiliates
against Orchard. For the purposes hereof “demand” shall include the
commencement and continuance of any legal proceedings
15.14 Parent Guaranty.
(a) Parent
hereby, unconditionally and irrevocably, guarantees (the “Parent Guaranty”) by
way of an independent obligation to Buyer, the due and punctual payment of (i)
the obligations of CTI and its Affiliates under this Agreement, when and as the
same shall arise and become due and payable in accordance with the terms of and
subject to the conditions contained in this Agreement, (ii) the obligations
of Charming Shoppes of Delaware, Inc. and its Affiliates under the Transition
Services Agreement, when and as the same shall arise and become due and payable
in accordance with the terms of and subject to the conditions of such agreement,
and (iii) the obligations of CTI and its Affiliates (other than the Company and
its Subsidiaries) as Recipients (as defined in the Assignment and Assumption)
under Section 2 of the Assignment and Assumption, when and as the same shall
arise and become due and payable in accordance with the terms of and subject to
the conditions contained in this the Assignment and Assumption (the “Parent Guaranteed
Obligation”).
(b) This is a
guaranty of payment and performance and not of collection only. If
for any reason whatsoever CTI or one of its Affiliates shall fail or be unable
to perform or comply with its Parent Guaranteed Obligation, Parent will promptly
upon receipt of notice thereof from the Buyer, the Company or its Subsidiaries
forthwith pay or cause to be paid in lawful money of the United States the
unpaid Parent Guaranteed Obligation then due and payable (at the place specified
and in the amounts and to the extent required of CTI or one of its Affiliates,
as applicable).
(c) Parent
waives any and all notice of the creation, renewal, extension or accrual of the
Parent Guaranteed Obligation and notice of or proof of reliance by the
Buyer,
65
the
Company or its Subsidiaries upon this Parent Guaranty or acceptance of this
Parent Guaranty; the Parent Guaranteed Obligation shall conclusively be deemed
to have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Parent Guaranty; and all dealings between CTI and
its Affiliates (other than the Company and its Subsidiaries), on the one hand,
and Buyer and, after the Closing, the Company and its Subsidiaries, on the other
hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Parent Guaranty. Parent agrees that (i) any notice
provided under this Agreement to CTI or its Affiliates (including any demand for
payment or notice of default or non payment) shall be deemed to constitute
notice to Parent for purposes hereof and (ii) any knowledge of CTI or its
Affiliates shall be deemed knowledge of Parent for purposes
hereof. Nothing in this Section 15.14 shall
be deemed to constitute a waiver of, or prevent Parent from asserting, any valid
defense that may be asserted by CTI or one of its Affiliates. When
making any demand hereunder or otherwise pursuing its rights and remedies
hereunder against Parent, Buyer and, after the Closing, the Company and its
Subsidiaries may, but shall be under no obligation to, make a similar demand on
or otherwise pursue such rights and remedies as it may have against CTI, one of
its Affiliates (other than the Company and its Subsidiaries) or any other
person, and any failure by the Buyer, the Company or its Subsidiaries to make
any such demand, to pursue such other rights or remedies or to collect any
payments from CTI, its Affiliates or any other person shall not relieve Parent
of any obligation or liability hereunder, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of law,
of the Buyer, the Company or its Subsidiaries against Parent. For the
purposes hereof “demand” shall include the commencement and continuance of any
legal proceedings.
[Signature
Page Follows]
66
-
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement, to be signed the
day and year first above written.
CROSSTOWN
TRADERS, INC.
By:
Name:
Title:
|
|
XXXX
XXXXXXXX OUTFITTERS, INC.
By:
Name:
Title:
|
Solely
for the purposes of Section 15.14:
CHARMING
SHOPPES, INC.
By:
Name:
Title:
|
[signatures
continued on next page]
67
Solely
for the purposes of Section 15.13:
XXXXXX’X
& DAMON’S, INC.
By:
Name:
Title:
|
|
HABAND
COMPANY LLC
By:
Name:
Title:
|
|
XXXXXX
XXXXXXXXX’X INC.
By:
Name:
Title:
|
|
XXXXX
LLC
By:
Name:
Title:
|
|
ORCHARD
BRANDS CORPORATION
By:
Name:
Title:
|
68