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Exhibit 2.4
AGREEMENT AND PLAN OF CORPORATE SEPARATION
AND REORGANIZATION
AGREEMENT AND PLAN OF CORPORATE SEPARATION AND REORGANIZATION dated as
of February 16, 1996 by and among XXXXXX HOLDINGS, INC. ("Holdings"), a Delaware
corporation; THE XXXXXX COMPANY ("TAC"), a South Dakota corporation and wholly
owned subsidiary of Holdings; HANOVER DIRECT, INC. ("Hanover"), a Delaware
corporation and the owner of 67.5% of the outstanding shares of capital stock of
Holdings; XXXXX X. XXXXXX, a resident of the State of South Dakota, individually
("Xxxxx Xxxxxx") and as custodian for certain members of his immediate family
under the South Dakota Uniform Transfer to Minors Act ("SDUTMA"); and XXXXXX
XXXXXX, also a resident of the State of South Dakota (collectively with Xxxxx
Xxxxxx, both individually and as custodian as aforesaid, the "Xxxxx Xxxxxx
Group", the members of such Group being collectively the owners of the remaining
32.5% of the outstanding shares of capital stock of Holdings).
W I T N E S S E T H:
WHEREAS, TAC is, and since 1973 has been, actively engaged in the
business of direct marketing of golf equipment, supplies, apparel and related
goods and services through its Austad's catalog in Sioux Falls, South Dakota;
and
WHEREAS, TAC is also actively engaged, through its Retail Division (the
"Division"), in the business of the retail sale of golf equipment, supplies,
apparel and related goods and services, such business having been commenced by
TAC in a single retail store in Sioux Falls in 1974 and expanded by two stores
in Minnesota and a fourth store in Illinois during the period 1989 through 1991;
and
WHEREAS, Hanover and the Xxxxx Xxxxxx Group acquired their respective
interests in Holdings on May 25, 1995, the former in exchange for a cash capital
contribution and certain other consideration, and the latter in exchange for all
the outstanding capital shares of TAC, in a transaction in which no gain or loss
was recognized in whole or in part under the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, in consequence of the foregoing transactions,
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Holdings is the sole shareholder of TAC; and
WHEREAS, TAC has offered to transfer all assets of the Division,
subject to all liabilities of the Division, such assets and liabilities being
substantially those appearing on the pro forma balance sheet prepared February
13, 1996 and dated February 16, 1996, attached hereto as Exhibit A (the "Balance
Sheet"), as adjusted from such date to the date on which the closing of such
transfer shall take place (the "Closing Date"), to AGS, Inc. ("Newco"), a South
Dakota corporation organized by TAC on January 19, 1996, in exchange for the
original issue of 100,000 shares of common stock, par value $1.00 per share, of
Newco (the "Newco Shares"), which shall constitute all of the outstanding common
stock of Newco, in a transaction qualifying as a tax-free reorganization under
Sections 368(a)(1)(D) and 355 of the Code; and
WHEREAS, TAC has offered to spin off the Newco Shares acquired by it to
Holdings, in a transaction intended to qualify as a tax-free reorganization
under Section 355 of the Code; and
WHEREAS, Holdings has offered to transfer the Newco Shares acquired
from TAC to the members of the Xxxxx Xxxxxx Group, in exchange for (1) the
payment of $1,164,445 by the members of the Xxxxx Xxxxxx Group to First National
Bank of Omaha, a national banking association ("FNBO"), as payment of a
liability of the Division, representing a partial paydown of TAC's existing
indebtedness to FNBO (the "FNBO Payment"), and (2) the surrender by the members
of the Xxxxx Xxxxxx Group of all their respective shares of the Common Stock,
$1.00 par value, of Holdings, representing an aggregate of 32,500 such shares,
in a transaction intended to qualify as a tax-free split-off under Section 355
of the Code, and the members of the Xxxxx Xxxxxx Group desire to accept such
offer subject to the terms and conditions set forth herein.
NOW, THEREFORE, in reliance upon the representations, warranties and
agreements made herein and in consideration of the premises and mutual promises
herein contained, the parties agree as follows:
1. PLAN OF REORGANIZATION.
The parties hereby adopt a Plan of Reorganization intended
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to effect a tax-free reorganization under Section 355 and various other
Sections of the Code. Pursuant to the terms of this Agreement
hereinafter set forth, the reorganization will consist of:
a. SECTION 351 TRANSFER: The transfer by TAC of the part of its
assets constituting the Division, subject to all liabilities of
the Division, to Newco in exchange solely for all of the
outstanding voting stock of Newco;
b. SECTION 355 AND 368(A)(1)(D) TRANSFERS:
(1) The transfer by TAC to Holdings of all the shares of
Newco's voting stock acquired by TAC as aforesaid; and
(2) The distribution by Holdings to the members of the
Xxxxx Xxxxxx Group of an aggregate of 100,000 Newco
Shares, constituting all the stock of Newco acquired
by Holdings, in exchange for the FNBO Payment and
32,500 shares of Holdings' Common Stock, $1.00 par
value, constituting all of the voting stock of
Holdings owned by such members.
2. TRANSFER OF THE DIVISION TO NEWCO.
The parties acknowledge that Newco's articles of incorporation, bylaws,
and organizational minutes are in a form approved by counsel for TAC
and the Xxxxx Xxxxxx Group, its corporate name having been agreed upon
by Xxxxx Xxxxxx and TAC, and that the initial capitalization of Newco
consists solely of 100,000 shares of Common Stock, par value $1.00 per
share. The initial officers and the initial director of Newco shall be
as follows:
Xxxxx Xxxxxx President
Xxxxxx X'Xxxxx Vice President and Treasurer
Xxxxxxx X. Xxxxxxx Vice President, Secretary and Sole
Director
TAC agrees to take, or cause to be taken, the following action at or
prior to the Closing Date:
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a. TAC shall transfer to Newco, in exchange for the Newco Shares,
all of the assets, properties and business of the Division,
subject to all of the liabilities, debts, obligations and
contracts of the Division (including all assets and the
liabilities appearing on the books and records of the Division
and included in Exhibit A hereto, but subject to certain
adjustments as set forth in Section 4 below). The transfer and
assignment of assets shall be by bulk or individual assignments
substantially in the form set forth in Exhibits 2.a.1 through
2.a.__ attached hereto, in each case with such other
appropriate instruments of title as counsel for the Xxxxx
Xxxxxx Group may reasonably request.
b. TAC shall then transfer the Newco Shares to Holdings pursuant
to a unanimous written consent of the Board of Directors and
Sole Shareholder of TAC.
3. PAYMENT ON ACCOUNT OF CERTAIN INDEBTEDNESS; EXCHANGE OF STOCK.
On the Closing Date, the members of the Xxxxx Xxxxxx Group agree:
a. to pay, or cause Newco to pay, to FNBO, as payment of a
liability of the Division, by wire transfer to an account
designated by FNBO, the sum of $1,164,445, representing a
portion of the outstanding obligations of TAC to FNBO under the
Loan Agreement dated as of May 31, 1995 between TAC and FNBO,
such sum being reflected as the "Revolving Credit Facility"
line item in the Retail column of the Liabilities section of
the Balance Sheet (sometimes hereinafter referred to as the
"Balance Due Amount" as described in Section 4 below).
b. to deposit, or cause Newco to deposit, into the Escrow Account
(as defined in Section 4 below), the sum of $200,000 (along
with any interest or earnings thereafter earned thereon, the
"Xxxxx Xxxxxx Escrow Deposit"), to be held as provided in
Section 4; and
c. to transfer, assign, and surrender to Holdings a total of
32,500 shares of the Common Stock, par value $1.00
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per share, of Holdings, which shares shall constitute, in the
aggregate, all of the shares of voting stock of Holdings owned
by any of such members at the Closing Date;
and in exchange solely for such payment and such transfer of shares,
Holdings agrees:
d. to transfer to the respective members of the Xxxxx Xxxxxx
Group, on the Closing Date, the number of Newco Shares set
forth opposite the name of each in Exhibit 3.d attached hereto,
representing a total of 100,000 Newco Shares, which shares
shall constitute all of the outstanding capital stock of Newco
at the Closing Date, and
e. to deposit, or cause TAC to deposit, into the Escrow Account
the sum of $200,000 (along with any interest or earnings
thereafter earned thereon, the "TAC Escrow Deposit"), to be
held as provided in Section 4 below.
4. ESCROW ACCOUNT; POST-CLOSING ADJUSTMENTS.
a. CERTAIN DEFINITIONS. The parties agree that the following
capitalized terms shall have the meanings indicated:
(1) Agreed Company Value--At February 16, 1996, 2,733,992,
representing $2,666,667(1) plus net income of Holdings
and subsidiary for the period May 26, 1995 through the
date of the Balance Sheet, the Balance Sheet having
been prepared in accordance with the methodology set
forth in Exhibit B attached hereto.
(2) Balance Due Amount--The "Revolving Credit Facility"
line item in the Balance Sheet, representing the
amount by which Retail Net Asset
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(1) In accordance with the parties' agreement, this calculation is based on
Hanover's May 1995 purchase price of $1,800,000 for 67.5% of Holdings'
outstanding shares.
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Value (ignoring the Revolving Credit Facility line
item) exceeds 32.5% of the Agreed Company Value at the
date of the Balance Sheet, for a calculation at
February 16, 1996 as follows:
Total Retail Assets: $2,836,072
less Total Retail Liabilities: -1,947,524
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Retail Net Asset Value 888,548
plus Retail Revolving Credit
Facility line item: 1,164,445
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2,052,993
less 32.5% of $2,733,992: 888,548
----------
$1,164,445
(3) Retail Net Asset Value--Total Assets less Total
Liabilities as set forth in the Retail column in the
Balance Sheet.
b. FINAL BALANCE SHEET. As soon as reasonably practicable after
the Closing Date but in no event later than the thirtieth
(30th) day following the Closing Date, Holdings shall prepare,
in consultation with Newco, a pro forma balance sheet of
Holdings and subsidiary on a combined basis as at the Closing
Date (the "Final Balance Sheet"), which shall contain all
categories of assets and liabilities reflected in the Balance
Sheet, and shall separately identify Retail and Catalog line
items in the manner set forth in the Balance Sheet. The Escrow
Agent (as defined below in Section 4.c) shall make a cash
payment (the "Adjustment Payment") in accordance with the
Escrow Agreement referred to in Section 4.c, as follows: if the
Balance Due Amount set forth in the Final Balance Sheet exceeds
that set forth in the Balance Sheet, the Adjustment Payment
shall be made to TAC in an amount equal to such excess; if the
Balance Due Amount set forth in the Final Balance Sheet is less
than that set forth in the Balance Sheet, however, the
Adjustment Payment shall be made to Newco in an amount equal to
such deficit. In the event of a dispute between Xxxxx Xxxxxx
and Holdings as to the Balance Due Amount in the Final Balance
Sheet, the
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parties shall promptly negotiate in good faith to resolve the
issue or issues which form the basis for such dispute. If the
parties are unable to agree on the resolution of the dispute
within ten (10) days after delivery of the Final Balance Sheet
to Xxxxx Xxxxxx and Holdings, the parties will refer such
dispute to Xxxxxx Xxxxxxxx LLP for determination of an
appropriate adjustment to the Final Balance Sheet to resolve
the disputed issues. The parties agree that such determination
shall be binding on all parties. Xxxxx Xxxxxx and Holdings each
shall pay one-half of the fees, expenses and costs of such firm
for the services described herein.
c. ESCROW AGENT; ESCROW AGREEMENT. At the Closing, Xxxxx Xxxxxx
shall deliver the Xxxxx Xxxxxx Escrow Deposit, and TAC shall
deliver the TAC Escrow Deposit, in each case to The First
National Bank in Sioux Falls (the "Escrow Agent"), for deposit
into escrow in accordance with this Section 4 and the escrow
agreement among the Escrow Agent, Xxxxx Xxxxxx, acting for
himself and the other members of the Xxxxx Xxxxxx Group, TAC
and the Escrow Agent, such agreement to be in the form attached
as Exhibit 4.c (the "Escrow Agreement"). The Adjustment Payment
shall be made by the Escrow Agent in accordance with the Escrow
Agreement within ten (10) days following the delivery of the
Final Balance Sheet; provided, that in the event of a dispute
between Xxxxx Xxxxxx and TAC regarding the Adjustment Payment,
the Escrow Agent shall retain an amount equal to the disputed
amount, and shall continue to hold such retained amount
pursuant to the Escrow Agreement pending resolution of such
dispute.
d. SALE OF FACILITY; SALE OF COMPUTER EQUIPMENT.
(1) Sale or other disposition to a third party of TAC's
office and distribution facility commonly known as
0000 Xxxx 00xx Xxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx (the
"Facility"), and of the computer hardware and software
leased by TAC from Lease Finance Group, Inc. or its
assignees (the "Computer Equipment"), shall require
the written
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consent of Newco, which consent shall not be
unreasonably withheld. Should Newco not respond to a
written request for consent within five business days
following delivery thereof, its consent shall be
presumed.
(2) Within twenty (20) days following the sale or other
disposition of the Facility or the Computer Equipment
to a third party, (A) TAC shall pay to Newco a sum in
cash, notes or other consideration (in the same types
and the same proportion as received by TAC from the
third party) equal to 32.5% of any Gain (as defined
below) on such sale, or, as the case may be, (B) Newco
shall pay TAC an amount in cash equal to 32.5% of any
Loss (as defined below) on such sale. The parties
acknowledge that any sale of Computer Equipment to
Newco shall be treated as a sale to a third party for
purposes of this Section 4.d.
(3) For purposes of this Section 4.d, "Gain" shall refer
to the excess of net proceeds of sale or other
disposition over the aggregate indebtedness secured by
the asset in question and remaining unpaid at the date
of sale, and "Loss" shall refer to the excess of such
indebtedness over the net proceeds of sale or
disposition, all determined net of any applicable
income or other taxes. "Net proceeds of sale or other
disposition" shall mean, in the event of a sale, the
selling price less any reasonable brokerage fee, the
South Dakota transfer fee(if any), attorneys fees, and
improvements required by the purchaser (if any), but
not including any reduction for fees or expenses
associated with the shutdown of the Facility or the
Computer Equipment; and to the extent shutdown fees
and expenses have previously been included in the
Balance Sheet, such fees and expenses will not be
deducted in the calculation of Gain or Loss. Federal
and state taxes shall be determined for such purposes
as if Holdings and TAC were filing applicable tax
returns on their own and not with Hanover on a
consolidated basis,
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and payments shall be subject to adjustment following
any tax or other audits. The amount of income taxes
allocable to the computation of Gain or Loss shall be
the incremental income tax computed based on the
inclusion of the tax gain or loss on sale of the asset
in question in all applicable returns. In calculating
the applicable income tax, TAC shall maximize the use
of any available AMT and regulat net operating loss to
reduce the applicable tax, if any. In calculating Gain
or Loss, TAC shall ignore payments on the indebtedness
other than the regularly scheduled installments on the
indebtedness secured by the property in question, and
likewise shall ignore any increase in any such
indebtedness after the date hereof.
(3) Payment in the case of any adjustment under this
Section 4.d will be made by check or wire transfer as
designated by the party to receive such payment.
5. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND TAC.
Holdings and TAC, jointly and severally, represent and warrant to the
members of the Xxxxx Xxxxxx Group as follows:
a. On the Closing Date, Newco will be a corporation duly organized
and existing and in good standing under the laws of the State
of South Dakota, and will have all necessary corporate power
and authority to own and conduct the business now being
conducted by the Division.
b. On the Closing Date, the authorized capital of Newco shall
consist of 500,000 shares of Common Stock, par value $1.00 per
share, of which 100,000 shares shall be issued and outstanding.
All of the issued and outstanding shares shall have been duly
authorized, validly issued, fully paid, and nonassessable and
shall be owned beneficially and of record by Holdings, free and
clear of any liens, claims, charges, options or encumbrances.
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c. On the Closing Date, all of the assets, properties and business
of every kind, character and description, whether tangible or
intangible, whether real, personal or mixed, and wherever
located, of the Division, subject to the debts, liabilities,
contracts and obligations of the Division, shall have been
transferred, assigned, conveyed and delivered to Newco, free
and clear of any liens or encumbrances, including, without
limitation, any liens in favor of FNBO (assuming payment in
full of outstanding obligations due to FNBO from TAC, release
by FNBO of its Form UCC- 3 termination statements and any other
applicable agreements or instruments terminating any security
interests of FNBO ("FNBO Termination Instruments"), and filing
of the FNBO Termination Instruments with governmental
authorities as applicable) or in favor of Congress Financial
Corporation ("Congress"), but subject however to the
adjustments provided for in Section 4 above.
d. At any time and from time to time after the Closing Date, upon
request of Newco or Xxxxx Xxxxxx and without the payment of any
further consideration, Holdings or TAC or both of them shall
duly execute, acknowledge and deliver all such assignments,
conveyances and other instruments of transfer and other
assurances and documents, and will take such other action,
consistent with the terms of this Agreement, as reasonably may
be requested for the purpose of better assigning, transferring
and conveying to Newco or reducing to its possession any and
all of the assets, properties and business of the Division.
e. At the request of Newco or Xxxxx Xxxxxx, and at Newco's
expense, TAC will prosecute or otherwise enforce in its own
name for the benefit of Newco, any and all claims or rights in
the name of TAC which, or the benefits of which, are
transferred to Newco pursuant to this Agreement and which are
required to be prosecuted or otherwise enforced in TAC's name.
f. On the Closing Date, Holdings and TAC will deliver or cause to
be delivered to Xxxxx Xxxxxx the stock record
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book, minute book, financial records and all other corporate
documents of Newco. Holdings and TAC shall thereafter be
entitled to reasonable access to such records and documents as
are applicable to periods prior to the Closing Date.
g. To the best of the knowledge of Xxxxxxx X. Xxxxxx and Xxxxx
Xxxxx, the Chief Financial Officers, respectively, of TAC and
of Brawn of California, Inc., an affiliate of Holdings, there
are no material assets of TAC or Holdings, and no material
agreements, commitments, liens, encumbrances, obligations or
liabilities (absolute, accrued, contingent or otherwise) of or
affecting TAC or Holdings or any of the property of either,
except as shown or reflected in the Balance Sheet or otherwise
disclosed in writing to Xxxxx Xxxxxx. For purposes hereof, an
asset or liability is material if it involves an amount in
excess of $20,000.
h. The shares of Holdings' Common Stock to be acquired by Holdings
hereunder will be acquired for its own account for investment
only and not with a present view to, or for sale in connection
with, any distribution of such shares.
i. To the best of the knowledge of Xxxxx Xxxxx and of Xxxxx
Xxxxxx, Executive Vice President and Chief Financial Officer of
Hanover, in each case without specific inquiry, Xxxxx Xxxxxx
has not breached any representation or warranty made by him and
set forth in the Stock Purchase Agreement referred to in
Section 18 below or in any related agreement of the parties
executed and delivered on or about May 19, 1995 or May 25,
1995; it being understood and agreed by the parties that the
representation and warranty set forth in this Section 5.i is
based in part on, and made in partial reliance on, a
certificate of Xxxxx Xxxxxx dated on or about this date, a copy
of which is attached hereto as Exhibit 5.i.
6. REPRESENTATIONS AND WARRANTIES OF THE XXXXX XXXXXX GROUP MEMBERS.
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The members of the Xxxxx Xxxxxx Group, jointly and severally, represent
and warrant to Holdings and TAC as follows:
a. The respective members of the Xxxxx Xxxxxx Group own
beneficially and of record that number of shares of Holdings
Common Stock set forth opposite the name of each in Exhibit 6.a
attached hereto, and each member has full power and authority
to sell and transfer such shares to Holdings in the manner
provided herein, free and clear of any liens, claims, charges,
options and encumbrances.
b. At any time and from time to time after the Closing Date, upon
request of Holdings or TAC and without the payment of any
further consideration, the members of the Xxxxx Xxxxxx Group or
Newco or any of them shall duly execute, acknowledge and
deliver all such assumption agreements, assignments,
conveyances and other instruments of transfer and other
assurances and documents, and will take such other action,
consistent with the terms of this Agreement, as reasonably may
be requested for the purpose of better assuming the liabilities
of the Division being assumed by Newco, or transferring and
conveying to Newco or reducing to its possession any and all of
the assets, properties and business of the Division.
c. The Newco Shares to be acquired by the members of the Xxxxx
Xxxxxx Group hereunder will be acquired for their own account
for investment only and not with a present view to, or for sale
in connection with, any distribution of such shares.
d. To the best of Xxxxx Xxxxxx'x knowledge, there are no material
assets of TAC or Holdings, and no material agreements,
commitments, liens, encumbrances, obligations or liabilities
(absolute, accrued, contingent or otherwise) of or affecting
TAC or Holdings or any of the property of either, except as
shown or reflected in the Balance Sheet or otherwise disclosed
in writing to Hanover's Chief Financial Officer.
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7. OTHER COVENANTS OF THE PARTIES.
a. Each of Xxxxx Xxxxxx, Newco and Holdings agrees to use his or
its best efforts to obtain, prior to the Closing Date, all
third-party and other consents required by Congress in
connection with its contemplated provision of loans and/or
other financial accommodations to Holdings and TAC, including,
without limitation, the consent of Valley Bank, provider of
mortgage financing respecting the Facility, substantially in
the form set forth in the attached Exhibit 7.a.
b. As promptly as possible and in any event prior to the Closing
Date, TAC and Newco shall arrange for the transfer of
sponsorship of TAC's Go for the Green Plan (the "TAC Plan")
from TAC to Newco. The parties acknowledge that TAC Plan
participants who become eligible and choose to participate in
the Hanover 401(k) Plan following the Closing Date shall
continue to retain all appropriate rights in their
undistributed account balances in accordance with the TAC Plan.
TAC agrees to pay Newco a one-time fee of $2,000 in respect of
administration of the TAC Plan, payable on the Closing Date.
c. On the Closing Date, the appropriate parties shall execute and
deliver:
(1) the Escrow Agreement, executed by the parties and the
Escrow Agent;
(2) an Amended License Agreement among Holdings, TAC,
Hanover (as to Article IX only) and Xxxxx Xxxxxx,
substantially in the form attached as Exhibit 7.c.2,
providing for an exclusive license for retail use in a
37-state territory and Canada of certain Holdings
trademarks and other intellectual property rights of
Holdings and TAC;
(3) a Joint Buying and Mutual Cooperation Agreement among
TAC, Newco and DBA, Inc. ("DBA"), a South Dakota
corporation (DBA being wholly owned by Xxxxx Xxxxxx
and having been formed by him to open
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and operate a fifth Austad's retail store in Omaha,
Nebraska, pursuant to the foregoing Amended License
Agreement), substantially in the form attached as
Exhibit 7.c.3, providing for coordinated purchasing
and other activities; and
(4) a Consulting Agreement between TAC and Xxxxx Xxxxxx,
substantially in the form attached as Exhibit 7.c.4,
respecting consulting services to be provided by Xxxxx
Xxxxxx to TAC and/or Holdings;
(5) bulk or individual assignments substantially in the
form set forth in Exhibits 2.a.1 through 2.a.__
attached hereto, in each case with such other
appropriate instruments of title as counsel for the
Xxxxx Xxxxxx Group may reasonably request.
The foregoing agreements may be referred to collectively hereinafter as
the "Other Agreements."
8. CONDITIONS TO CLOSING--HOLDINGS AND TAC.
The obligation of Holdings to exchange the Holdings shares owned by the
members of the Xxxxx Xxxxxx Group for the Newco Shares, and the
obligations of Holdings and TAC to make the TAC Escrow Deposit and to
execute and deliver the Other Agreements pursuant to this Agreement,
shall be subject to the satisfaction, at or before the Closing Date, of
the following conditions (any of which may be waived, in whole or in
part, by Holdings):
a. The representations and warranties of the members of the Xxxxx
Xxxxxx Group contained in this Agreement, or in any certificate
or document delivered to Holdings in connection herewith, shall
be true in all material respects at the Closing Date as if made
again on and as of the Closing Date, and such members and Newco
shall have duly performed and complied with all agreements and
conditions required by this Agreement to be performed or
complied with by them at or before the Closing Date. Holdings
shall have been furnished with certificates of such members and
of appropriate
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officers of Newco certifying in such detail as Holdings may
reasonably request to the fulfillment of the foregoing
conditions.
b. Xxxxx Xxxxxx or Newco shall have paid to FNBO the FNBO Payment
and shall have deposited the Xxxxx Xxxxxx Escrow Deposit with
the Escrow Agent.
c. Xxxxx Xxxxxx shall have furnished Holdings with the following
documents:
(1) Resignations of the following from all positions with
Holdings and TAC, effective on the Closing Date:
Xxxxx Xxxxxx Director, President and
Chief Executive Officer--
Holdings, TAC
Xxxxxxx Xxxxxxx Director--Holdings
Xxxxxxx Xxxxxx Treasurer--Holdings, TAC
(2) Evidence of the payment by TAC to the respective
Warrant Holders of the sums required by Exhibit 8.c.3,
it being agreed by the parties that 32.5% of each such
sum, or $8,125 in the aggregate, is being paid by TAC
on behalf of the members of the Xxxxx Xxxxxx Group and
shall be reflected in the Final Balance Sheet as an
adjustment thereto.
(3) The executed Warrant Holder Releases, together with
warrants submitted in proper form for cancellation.
d. The members of the Xxxxx Xxxxxx Group and Newco shall have
executed and delivered the Other Agreements to which they are
parties.
e. All necessary authorizations and approvals required for the
execution, delivery and consummation of the transactions
provided for in this Agreement shall have been obtained,
including, without limitation, the consents of Congress and
Valley Bank.
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f. Holdings shall have received either (1) executed agreements
from landlords for TAC's retail stores approving the assignment
to Newco of each of TAC's lease agreements respecting such
stores, as identified in Exhibit 8.e hereto (collectively, the
"Lease Agreements"), and releasing TAC from all obligations
under the Lease Agreements, or, at Holdings' election exercised
in its sole discretion, (2) agreements approving and effecting
the assignment of each of the Lease Agreements to Newco or
subleases executed by Newco in respect of each Lease Agreement,
in each case satisfactory in form and substance to Holdings and
its counsel.
g. Holdings and TAC shall have received a Certificate of the
Secretary of Newco certifying as to the incumbency and
authority of the officers of Newco executing all documents to
be executed and delivered by Newco in connection herewith.
9. CONDITIONS TO CLOSING--XXXXX XXXXXX GROUP AND NEWCO.
The obligation of the members of the Xxxxx Xxxxxx Group to exchange the
Holdings shares owned by them for the Newco Shares, the obligation of
Xxxxx Xxxxxx to deposit funds with the Escrow Agent pursuant to the
Escrow Agreement, and the respective obligations of Xxxxx Xxxxxx and
Newco to enter into the Other Agreements pursuant to this Agreement,
shall be subject to the satisfaction, at or before the Closing Date, of
the following conditions (any of which may be waived, in whole or in
part, by Xxxxx Xxxxxx):
a. The representations and warranties of Holdings and TAC
contained in this Agreement, or in any certificate or document
delivered to the members of the Xxxxx Xxxxxx Group or Newco in
connection herewith, shall be true in all material respects at
the Closing Date as if made again on and as of the Closing
Date.
b. TAC shall have deposited the TAC Escrow Deposit with the Escrow
Agent.
c. Holdings shall have furnished Xxxxx Xxxxxx with the
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following documents:
(1) The Certificate or Articles of Incorporation of Newco
and all amendments thereto, duly certified by the
proper officials of the jurisdiction of Newco's
organization.
(2) A certificate as to the good standing of Newco and
payment of all applicable state taxes thereby,
executed by the appropriate officials of the States of
South Dakota.
(3) The by-laws of Newco, duly certified by the Secretary
of Newco and the Secretary or an Assistant Secretary
of Newco as being in full force and effect.
(4) A certificate of the Secretary or an Assistant
Secretary of Newco, certifying (a) that attached
thereto is a true and complete copy of all instruments
reflecting actions of the incorporator of Newco, and
of all resolutions of the board of directors of Newco
pertaining to the transactions contemplated by this
Agreement, the latter being duly adopted at meetings
of such board at which a quorum of directors was
present and acting throughout, and certifying (b) as
to the incumbency and authority of the incorporator
and officers of Newco.
(5) A favorable opinion of May, Xxxxxxx, Xxxxx and Xxxxxx,
P.C., dated the Closing Date, substantially in the
form of Exhibit 9.c.5, relating to the formation of
Newco, the issuance of its shares of Common Stock and
the transfer of such shares by TAC to Holdings.
(6) Evidence of the payment by TAC to the respective
Warrant Holders of the sums required by Exhibit 8.c.3,
it being agreed by the parties that 67.5% of each such
sum, or $16,875 in the aggregate, is being paid by TAC
for its own account and the balance on behalf of the
members of the Xxxxx
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Xxxxxx Group as provided in Section 8.c(3) above, such
balance to be reflected in the Final Balance Sheet as
an adjustment thereto.
d. TAC and Holdings shall have executed and delivered the Other
Documents to which they are parties.
e. All necessary authorizations and approvals required for the
execution, delivery and consummation of the transactions
provided for in this Agreement shall have been obtained,
including, without limitation, the consents of Valley Bank,
Congress and First National Bank in Sioux Falls.
10. THE CLOSING.
The closing of the transactions contemplated hereby (the "Closing")
shall be held at the offices of Lynn, Jackson, Xxxxxx & Xxxxxx, P.C.,
000 Xxxxx Xxxx Xxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx or at such other place
or places as the parties may agree upon, at 10:00 A.M., local time, on
February 16, 1996, or such other time and date as may be mutually
approved by the parties in writing, but not later than February 28,
1996.
11. CERTAIN EXPENSES.
Except as otherwise set forth below, neither Hanover, Holdings nor TAC
shall pay or be liable for or be required to pay any of the following
liabilities, fees or expenses related to the transactions contemplated
hereby, all of which shall be borne and paid for by Xxxxx Xxxxxx:
a. professional fees of counsel and any accountant or auditor for
any member of the Xxxxx Xxxxxx Group, or for Newco in respect
of activities conducted following the Closing, or for a Warrant
Holder or other former stockholder of TAC; provided, that at
the Closing TAC shall reimburse Xxxxx Xxxxxx for professional
fees of counsel respecting the obtaining of landlord consents
to assignment and releases of TAC's obligations thereunder,
upon receipt of itemized documentation
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thereof;
b. fees and expenses, if any, of Mesirow Financial, Inc. or any
other investment banking company or any person or entity
retained for financial services or services as a finder
rendered to a member of the Xxxxx Xxxxxx Group or a Former
Stockholder or a Warrant Holder in connection with the
transactions contemplated hereby; and
c. any income, capital gains or other taxes incurred by one or
more members of the Xxxxx Xxxxxx Group or Newco in connection
with the transactions contemplated hereby; provided, that in
the event the transactions contemplated in this Agreement fail
to qualify for treatment as a tax-free reorganization under the
Code as aforesaid, TAC shall pay to the members of the Xxxxx
Xxxxxx Group an amount equal to 67.5% of any federal income tax
liability incurred by such members as a result of such failure,
it being understood that such members will be responsible for
the balance of such liability.
12. CERTAIN OPERATIONAL AND TAX MATTERS; MAINTENANCE OF RECORDS
a. The parties acknowledge that they have been advised that the
written consent of United Properties Investment Company
("Landlord") to the assignment to Newco of TAC's interest as
tenant under its undated lease for a 10-year lease term
expiring July 31, 1999 with The Northtown Triangle Limited
Partnership, Landlord's predecessor in interest, respecting
TAC's retail store premises at the Northcourt Commons Shopping
Center, Blaine, Minnesota (the "Northcourt Lease"), such
consent to include a release of TAC (such consent and release,
the "Northcourt Consent"), may not be received prior to the
Closing. In view of this possible delay, and in view of Newco's
expectation that such Consent will be received no more than
twenty (20) days following the Closing Date, Newco has
requested that TAC waive the condition to closing set forth in
Section 8.f above to the extent required to permit
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Newco to operate the retail store business in such premises, as
a Licensee's Store pursuant to the Amended License Agreement,
pending receipt of the expected consent. TAC agrees to permit
such operation, pending receipt of the Northcourt Consent,
under the terms and conditions set forth below:
(1) Newco shall perform all obligations of TAC under the
Northcourt Lease, except that TAC shall continue to
pay rent and other sums due to the landlord from time
to time under the Northcourt Lease, and Newco shall
pay TAC, at the Closing, an amount equal to ten (10)
days' rent to cover the anticipated rent expenses;
(2) Newco and Xxxxx Xxxxxx shall use their best efforts to
obtain the Northcourt Consent as promptly as possible
and in any event not later than the twentieth (20th)
day following the Closing Date;
(3) Should the Northcourt Consent not be received by the
close of business on the tenth (10th) day following
the Closing Date, Newco shall immediately commence to
perform all obligations under the Northcourt Lease,
including, without limitation, the direct payment to
the Landlord of rent and other sums due to the
Landlord from time to time under the Northcourt Lease.
The parties shall then use their best efforts to
obtain the Northcourt Consent, or if the parties are
unsuccessful in obtaining such Consent, some agreement
satisfactory to Landlord whereby Newco is assigned the
Northcourt Lease or Newco shall become a subtenant,
TAC being the Sublandlord, and in any such event Newco
and Xxxxx Xxxxxx, jointly and severally, shall
indemnify and hold harmless TAC, its officers,
directors, shareholders, subsidiaries, affiliates,
agents and representatives as more fully set forth in
the Indemnification Agreement. In the event that no
mutually satisfactory agreement can be negotiated with
Landlord, the parties hereto shall negotiate
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in good faith to arrange for the transfer to TAC of
the Northcourt retail business assets and liabilities
and to agree upon a settlement among the parties
whereby TAC remains as tenant of the Northcourt Lease
and resumes operation of the Xxxxxx'x retail store in
such premises.
b. From and after the Closing Date, Newco shall endorse its
insurance policies to be primary to any other policies in
effect, and shall provide TAC with satisfactory evidence of
such endorsement. Notwithstanding the assumption of the
Division's liabilities by Newco pursuant to this Agreement and
the Assignment and Assumption Agreement between TAC and Newco
being delivered at the Closing (the form of such agreement
being included as Exhibit 2.a.1 hereto), TAC agrees to be
responsible for any claim respecting the Division's assets and
business that arises prior to the Closing Date, provided TAC
receives notice of such claim, and provided such claim is
covered by TAC's liability policies under the applicable terms
and conditions of such policies in effect prior to the Closing
Date; and provided further, that TAC's responsibility hereunder
shall be only to the extent of such coverage.
c. From and after the Closing Date, each of the parties shall
cooperate with the other parties in connection with any audits
or other examinations by federal, state, local or other taxing
authorities, shall make reasonably available to the other
parties their respective books, records and other data relating
to the transactions contemplated by this Agreement and the
business and affairs of Holdings, TAC and Newco (which books,
records and other data such parties shall maintain until the
later of (i) six years after the Closing Date (and permanently
for personnel- related records) or (ii) the completion of any
Internal Revenue Service or state tax audits of Holdings and/or
TAC), and shall provide assistance to the other parties and
their counsel and accountants, all as reasonably requested and
during normal business hours. In addition to the foregoing,
each of Holdings and TAC,
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its counsel and accountants shall have the right to remove and
take possession of any of Holdings' or TAC's books, records and
other data that are transferred to Newco on the Closing Date,
as reasonably may be requested, provided that (i) Newco shall
have the right to make copies thereof at TAC's expense before
such removal and (ii) Holdings or TAC, as the case may be,
promptly will return such books, records and other data upon
the request of Newco. Except as otherwise provided in the
foregoing sentence, each party shall bear its own costs
incurred in connection with the cooperation and maintenance of
records provided for herein.
13. SURVIVAL.
The representations and warranties made in this Agreement and in any
certificate, Schedule, Exhibit, release or other instrument or document
delivered in connection therewith shall survive the Closing Date. The
covenants of the parties hereto shall continue in full force and effect
in accordance with their terms.
14. NO BROKERS.
Each party hereto represents and warrants that there are no claims for
brokerage commissions or finder's fees in connection with the
transactions contemplated hereby resulting from any action taken by any
party, any Warrant Holder, or the officers or directors of any
corporate party.
15. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the
internal, substantive laws of the State of New Jersey, without giving
effect to the conflict of law rules thereof.
16. NOTICES.
All notices, consents, requests, instructions, approvals and other
communications provided for herein shall be deemed validly given, made
or served if in writing and delivered
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personally (as of such delivery) or sent by certified mail, return
receipt requested (as of two days after deposit in a United States post
office), postage prepaid, or by facsimile transmission (as of such
transmission provided it is subsequently confirmed in writing) or by
prepaid overnight courier (as of the time of delivery):
(a) if to Holdings, TAC or Hanover, addressed to:
Hanover Direct, Inc.
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Fax No.: 000-000-0000
(b) if to a member of the Xxxxx Xxxxxx Group, addressed to
such member c/o Xxxxx Xxxxxx as follows:
c/o Xxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxx Xxxxxx 00000
or such other address as shall be furnished in writing by a party to the others.
17. JURISDICTION; AGENT FOR SERVICE.
Legal proceedings commenced by any party hereto arising out of any of
the transactions or obligations contemplated by this Agreement shall be
brought exclusively in the Federal courts or, in the absence of Federal
jurisdiction, state courts, in either case in the State of New Jersey.
The parties hereto irrevocably and unconditionally submit to the
jurisdiction of such courts and agree to take any and all future action
necessary to submit to the jurisdiction of such courts. Each of the
parties hereto irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding
brought in any Federal or state court in the State of New Jersey and
further irrevocably waives any claims that any such suit, action or
proceeding brought in any such court has been brought in an
inconvenient forum. Each of TAC and Newco hereby irrevocably
designates, appoints and empowers Corporation Trust Company, whose
present address is 000 Xxxx Xxxxxx Xxxx, Xxxx Xxxxxxx, Xxx Xxxxxx
00000, as its
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authorized agent to receive, for and on behalf of TAC and Newco,
respectively, service of process in the State of New Jersey as and when
such actions and proceedings may be brought, and such service of
process shall be deemed completed upon the date of delivery thereof to
such agent, whether or not such agent gives notice thereof to TAC or
Newco, as the case may be, or upon the earliest of any other date
permitted by applicable law. Final judgment against TAC or Newco in any
such suit shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of
which shall be conclusive evidence of the fact and the amount of any
indebtedness or liability of TAC or Newco therein described, or by
appropriate proceedings under any applicable treaty or otherwise.
18. ENTIRE AGREEMENT; ETC.
This Agreement represents the entire agreement between the parties and
supersedes and cancels any prior oral or written agreement, letter of
intent or understanding related to the subject matter hereof, including
(a) the Stockholders' Agreement dated as of May 25, 1995 to which the
members of the Xxxxx Xxxxxx Group and Hanover are parties, and the
Reimbursement Agreement dated the same date between TAC and Hanover,
but not including (b) the Stock Purchase Agreement dated as of May 19,
1995 (the "Stock Purchase Agreement") to which TAC, Hanover, the
members of the Xxxxx Xxxxxx Group and Holdings are parties, which
latter agreement shall continue in full force and effect.
Notwithstanding the generality of the foregoing, the parties agree in
respect of the Stock Purchase Agreement that the provisions of Sections
1.04 (relating to an Additional Capital Contribution), 10.02(b)
(relating to the expenditure of minimum amounts on two new Xxxxxx'x
stores by Xxxxx Xxxxxx) and 10.03(a) through (c) (relating to
relocation of certain TAC operations, MIS linkups and proposed new TAC
stores) shall be superseded and of no further force or effect. Also
notwithstanding the generality of the foregoing, the parties
specifically agree that those certain Indemnification Agreements dated
May 25, 1995 between Hanover and each of Xxxxx Xxxxxx and Xxxxxxx
Xxxxxx shall remain in full force and effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and
their respec-
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tive successors and permitted assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. This
Agreement may be executed in one or more
[BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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counterparts, and shall become effective when one or more counterparts
have been signed by each of the parties.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto on the day and year first above written.
XXXXXX HOLDINGS, INC.
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
THE XXXXXX COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
HANOVER DIRECT, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
Title: Executive VP
THE XXXXX XXXXXX GROUP:
/s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx, individually
/s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx, as custodian under
the SDUTMA for each of Xxxx, Xxxx
and Xxxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
-----------------------------------
Xxxxxx Xxxxxx
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