PURCHASE AGREEMENT
Exhibit 2.1
PURCHASE AGREEMENT, dated as of October 29, 2005 (this “Agreement”), by and between
Saks Incorporated, a Tennessee corporation (“Seller”), and The Bon-Ton Stores, Inc., a
Pennsylvania corporation (“Buyer”).
PRELIMINARY STATEMENT:
WHEREAS, Seller is the owner of all of the outstanding equity interests of Herberger’s
Department Stores, LLC, a Minnesota limited liability company, and Parisian, Inc., an Alabama
corporation (each, a “Company” and, collectively, the “Companies”); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, all of
the equity interests of the Companies, all on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth,
it is hereby agreed between Seller and Buyer as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
Section 1.1 Definitions. In this Agreement, the following terms have the meanings
specified or referred to in this Section 1.1.
“Adjustment Amount” has the meaning specified in Section 2.4(a)(v).
“Affiliate” means, with respect to any Person, any other Person who directly or
indirectly, through one or more intermediaries, controls, is controlled by or is under common
control with, such Person. As used herein, “control” means the power to direct the management or
affairs of a Person and “ownership” means the beneficial ownership of more than 50% of the equity
securities of the Person.
“Aggregate Flex Plan Balances” has the meaning specified in Section 7.3(i).
“Agreed NUBL Principles” means the principles applied in connection with the
calculation of the Reference Net Unfunded Benefit Liabilities, as set forth on Schedule
1.1(a).
“Agreed Rate” means an annual rate equal to the three-month LIBOR rate in effect as of
the third business day prior to the date such payment is made.
“Allocation Schedule” has the meaning specified in Section 7.2(e)(ii).
“Alternative Proposal” has the meaning specified in Section 6.14(b).
“Approved Capital Expenditures” means all Capital Expenditures (other than
Pre-Approved Capital Expenditures) approved in writing after the date of this Agreement by Buyer
for the Business.
“Assigned Contracts” has the meaning specified in Section 2.6(a).
“Assumed Contract Liabilities” has the meaning specified in Section 2.6(a).
“Bridge Facility” means the senior unsecured bridge facility contemplated by the
Commitment Letters.
“Business” means the retail store business conducted under the trade names of Xxxxxx
Xxxxx Xxxxx, Younkers, Herberger’s, Boston Store and Xxxxxxx’x, together with all administrative
and distribution activities associated therewith.
“Business Agreements” has the meaning specified in Section 4.15.
“Business Employees” means all employees of the Business located at the stores of the
Business (whether full- time, part- time or otherwise) and all employees engaged in the Business
listed on Exhibit K (which exhibit excludes the names and any other personally identifying
information), excluding (a) any employees identified on Exhibit L and (b) all employees of
the Club Xxxxx Xx business.
“Buyer” has the meaning specified in the first paragraph of this Agreement.
“Buyer Ancillary Agreements” means all agreements, instruments and documents being or
to be executed and delivered by Buyer under this Agreement or in connection herewith.
“Buyer Appraiser” has the meaning specified in Section 7.2(e)(iii).
“Buyer Disclosure Schedule” has the meaning specified in Section 5.2(b).
“Buyer Group Member” means (a) Buyer and its Affiliates, (b) directors, officers and
employees of Buyer and its Affiliates and (c) the successors and assigns of the foregoing.
“Buyer’s DC Plan” has the meaning specified in Section 7.3(j)(ii).
“Buyer’s Flex Plans” has the meaning specified in Section 7.3(i).
“Buyer’s Plans” has the meaning specified in Section 7.3(c)(ii).
“Buyer Transition Services Agreement” has the meaning specified in Section
6.8(a).
“Capital Expenditures” means (i) any additions to or replacements of property, plant
and/or equipment and (ii) any other expenditures, in each case, other than routine repair and
maintenance in the ordinary course of business consistent with past practice, that would be
capitalized on Seller’s balance sheet in accordance with Seller’s capitalization policy.
“Change In Law” means the adoption, promulgation, modification or reinterpretation of
any law, rule, regulation, ordinance or order or any other Requirements of Law of any Governmental
Body which occurs subsequent to the date of this Agreement.
“CIM” has the meaning specified in Section 4.5.
“Claim Notice” has the meaning specified in Section 10.3.
“CLL Licensed Department Agreements” has the meaning specified in Section
6.8(f).
“Closing” means the closing of the transfer of the Securities from Seller to Buyer.
“Closing Date” has the meaning specified in Section 3.1.
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“COBRA” has the meaning specified in Section 7.3(h).
“Code” means the Internal Revenue Code of 1986, as amended.
“Commitment Letters” has the meaning specified in Section 5.4.
“Companies” has the meaning specified in the Preliminary Statement to this Agreement.
“Company Plan” means any Pension Plan or Welfare Plan that is sponsored by any Company
or any Transferring Subsidiary in which (i) any Business Employees are participating or under which
any current or former employees of the Business have accrued any benefits while employed by the
Companies and the Transferring Subsidiaries to which they remain entitled or (ii) with respect to
which any Company or any Transferring Subsidiary has any liability in connection with the Business.
“Confidential Information” has the meaning specified in Section 7.13.
“Confidentiality Agreement” means that certain letter agreement dated June 3, 2005,
between Seller and Buyer.
“Contracts” means all contracts, guarantees, leases, licenses (including those
relating to concessions or licensed departments), Software licenses, commitments (including
purchase orders) and other agreements (exclusive of Lease Agreements and Real Estate Agreements).
“Copyrights” means all subject matter falling within the scope of the U.S. Copyright
Act (17 U.S.C. §101 et seq.), including copyrights, copyright registrations and applications
therefor, and all other rights corresponding thereto in the United States.
“Court Order” means any judgment, order, award or decree of any foreign, federal,
state, local or other court, agency or tribunal or other Governmental Body, and any award in any
arbitration proceeding.
“Covered Persons” has the meaning specified in Section 7.3(c)(ii).
“Credit Agreement” means the Amended and Restated Credit Agreement dated as of
November 26, 2003, as amended, among Seller, as borrower, Fleet Retail Group, Inc., as Agent, and
the other financial institutions party thereto, as lenders.
“Cut-Off Date” has the meaning specified in Section 3.1.
“Cut-Off Date NUBL Statement” has the meaning specified in Section 2.4(b)(i).
“Cut-Off Date Working Capital Statement” has the meaning specified in Section
2.4(a)(i).
“DOJ” has the meaning specified in Section 6.5.
“Effective Time” has the meaning specified in Section 3.1.
“Employment Agreement” means any employment contract, termination or severance
agreement, change of control agreement or any other agreement respecting the terms and conditions
of employment or payment of compensation in respect to any current or former officer or employee of
the Business.
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“Encumbrance” means any lien, charge, security interest, encumbrance, mortgage,
pledge, easement, conditional sale or other title retention agreement, title exception, defect in
title or other restriction of a similar kind.
“Environmental Law” means all Requirements of Law relating to or addressing protection
of the environment, including protection of surface or ground water, drinking water supply, soil,
surface or subsurface strata or medium, ambient air, pollution control, Hazardous Materials or
chemical use.
“Environmental Permits” means all permits, licenses or authorizations required
pursuant to any Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Taxes” has the meaning specified in Section 7.2(a)(i).
“Expenses” means any and all reasonable out-of-pocket expenses incurred in connection
with defending or asserting any claim, action, suit or proceeding hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees and reasonable fees and disbursements of
legal counsel, expert witnesses, accountants and other professionals).
“Final Net Unfunded Benefit Liabilities” has the meaning specific in Section
2.4(b)(i).
“Final Purchase Price” has the meaning specified in Section 2.4(c)(iii).
“Final Working Capital” has the meaning specified in Section 2.4(a).
“Financial Statements” has the meaning specified in Section 4.5.
“Financial Statements Date” means January 29, 2005.
“Financing” has the meaning specified in Section 5.4.
“Fixed Amount” has the meaning specified in Exhibit 2.6(b)(i).
“FTC” has the meaning specified in Section 6.5.
“GAAP” means United States generally accepted accounting principles, consistently
applied by Seller, in effect at the date of the financial statement to which it refers.
“Governmental Body” means any foreign, federal, state, local or other governmental
authority or regulatory body.
“Governmental Permits” has the meaning specified in Section 4.8.
“Hazardous Materials” means any waste, pollutant, contaminant, hazardous substance,
toxic, ignitable, reactive or corrosive substance, hazardous waste, hazardous chemical, petroleum
or petroleum derived-substance or waste or any constituent of any such substance or waste, the use,
handling or disposal of which is in any way governed by or subject to any applicable Environmental
Law.
“HIPAA” has the meaning specified in Section 7.9.
“Household Bank” has the meaning specified in Section 6.9.
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“HSR Act” means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
“Income Taxes” means Taxes imposed upon or based upon net income.
“Indemnified Party” has the meaning specified in Section 10.3.
“Indemnitor” has the meaning specified in Section 10.3.
“Identified Guaranties” has the meaning specified in Section 6.7.
“Indentures” means the (a) Indenture, dated as of November 9, 1998, among Seller, the
Subsidiary Guarantors and JPMorgan Chase Bank, N.A. (successor to The First National Bank of
Chicago), (b) Indenture, dated as of December 2, 1998, among Seller, the Subsidiary Guarantors and
JPMorgan Chase Bank, N.A. (successor to The First National Bank of Chicago), (c) Indenture, dated
as of February 17, 1999, among Seller, the Subsidiary Guarantors and JPMorgan Chase Bank, N.A. (as
successor to The First National Bank of Chicago), (d) Indenture, dated as of October 4, 2001, among
Seller, the Subsidiary Guarantors and XX Xxxxxx Xxxxx Bank, N.A. (successor to Bank One Trust
Company, National Association), (e) Indenture, dated as of December 8, 2003, among Seller, the
Subsidiary Guarantors and the Bank of New York, and (f) Indenture, dated as of March 23, 2004,
among Seller, the Subsidiary Guarantors and The Bank of New York Trust Company, N.A.
“Independent Appraiser” has the meaning specified in Section 7.2(e)(iii).
“Initiation Date” has the meaning specified in Section 6.15(a).
“Intellectual Property” means (i) Copyrights, (ii) Patent Rights, (iii) Trademarks,
(iv) Trade Secrets, (v) databases and data collections and all rights therein in the United States,
(vi) rights of publicity and privacy in the United States and (vii) any similar or equivalent
rights to any of the foregoing in the United States.
“Intercompany Agreements” has the meaning specified in Section 6.6(b).
“Inventory Schedule” has the meaning specified in Section 2.4(a)(vii).
“January Inventory” has the meaning specified in Section 2.4(a)(vii).
“Key Employees” has the meaning specified in Section 4.18(a).
“Knowledge of Buyer” means, as to a particular matter, the current actual knowledge of
the executive officers of Buyer (as the term “executive officer” is defined in Rule 3b-7 under the
Exchange Act).
“Knowledge of Seller” means, as to a particular matter, the current actual knowledge
of the executive officers of Seller (as the term “executive officer” is defined in Rule 3b-7 under
the Exchange Act), the Chief Executive Officer of the Business and the Vice President — Real
Estate with responsibilities for the Business.
“Lease Agreement Amount” means the Fixed Amount or the Variable Amount, as applicable.
“Lease Agreements” has the meaning specified in Section 4.9(c).
“Leased Real Estate” the leasehold and subleasehold interests of the Companies and the
Subsidiaries in all real property listed on Schedule 4.9(a)(i) of the Seller Disclosure
Schedule.
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“License Agreement” has the meaning specified in Section 6.13.
“Losses” means any and all losses, liabilities, costs, settlement payments, awards,
judgments, fines, penalties, damages, expenses, deficiencies or other charges.
“Marketing Period” has the meaning specified in Section 6.15(a).
“Material Adverse Effect” means any change or effect that, when taken together with
all other changes or effects, has or is reasonably likely to have a material adverse effect on the
assets, results of operations or financial condition of the Business taken as a whole, other than
any change or effect resulting from or relating to (a) general economic conditions, (b) global
financial or capital markets, (c) the retail department store industry generally, (d) the public
disclosure of the transactions contemplated by this Agreement, (e) the consummation of the
transactions contemplated by this Agreement or compliance with the terms of this Agreement
(exclusive of the transactions contemplated by the Plan of Reorganization), (f) any Change In Law
or (g) acts of terrorism or war (whether or not declared); provided, however, that
in the case of each of clauses (f) and (g), only to the extent that the material adverse effect on
the Business is not materially disproportionate to the adverse effect on the retail department
store industry generally.
“NDSG Owned Brands” means the brands set forth in Exhibit A.
“Net Unfunded Benefit Liabilities” has the meaning specified in Section
2.4(b)(v).
“Non-Exclusive Period” has the meaning specified in Section 6.13.
“Non-Prevailing NUBL Party” has the meaning specified in Section 2.4(b)(iv).
“Non-Prevailing WC Party” has the meaning specified in Section 2.4(a)(iv).
“Note Offering” means the offering of senior unsecured notes contemplated by the
Commitment Letters.
“Notes” means the senior unsecured notes contemplated by the Note Offering.
“NUBL Arbitrator” has the meaning specified in Section 2.4(b)(iii).
“NUBL Notice of Disagreement” has the meaning specified in Section 2.4(b)(ii).
“Other Company Guaranties” has the meaning specified in Section 6.7.
“Other Guaranties” has the meaning specified in Section 6.7.
“Owned Real Estate” means the real property listed on Schedule 4.9(a)(ii) of
the Seller Disclosure Schedule, together with all interests of the Companies and the Subsidiaries
in the buildings, structures, installations, fixtures, trade fixtures and other improvements
situated thereon and all easements, rights of way and other rights, interests and appurtenances of
the Companies and the Subsidiaries therein or thereunto pertaining.
“Patent Rights” means all United States patents and applications therefor and all
reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations and
continuations in part thereof.
“PBGC” has the meaning specified in Section 4.16(i).
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“Pension Plan” means any pension plan, as defined in Section 3(2) of ERISA, applied
without regard to the exceptions from coverage contained in Sections 4(b)(4) or 4(b)(5) thereof.
“Permitted Encumbrances” means (a) liens for Taxes and other governmental charges and
assessments which are not yet due and payable, or which are being contested in good faith in
accordance with applicable Requirements of Law; (b) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of
business for sums not yet due and payable and which would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; (c) Encumbrances identified on
Schedule 1.1(b) of the Seller Disclosure Schedule; (d) source code escrow agreements for
Software owned by the Companies or any of the Subsidiaries listed on Schedule 4.14 of the
Seller Disclosure Schedule; (e) Encumbrances evidenced by any security agreement, financing
statement, purchase money agreement, conditional sales contract, capital lease or operating lease,
or by any license, coexistence agreement, undertaking, declaration, limitation of use or consent to
use, in each case that is described in Schedule 4.14 of the Seller Disclosure Schedule or
the non-disclosure of which therein does not constitute a misrepresentation under Section
4.14; and (f) other Encumbrances or imperfections on property which are not material in amount
and do not materially detract from the value, title or possession of or materially impair the
existing use of the property affected by such lien or imperfection.
“Permitted Real Property Exceptions” means, collectively, (a) liens, charges,
encumbrances and exceptions for Taxes and other governmental charges and assessments (including
special assessments) that are not yet due and payable; (b) all Real Estate Agreements; (c) all
matters and exceptions set forth in the title insurance policies or commitments set forth in
Schedule 1.1(c) of the Seller Disclosure Schedule; (d) liens, charges, encumbrances or
title exceptions or imperfections with respect to the Real Estate created by or resulting from the
acts or omissions of Buyer or any of its Affiliates, employees, officers, directors, agents,
representatives, contractors, invitees or licensees; (e) liens, charges, encumbrances and/or title
exceptions or imperfections created by any of the documents to be executed in connection with the
Closing or this Agreement whether prior to, at or after the Closing resulting from the acts or
omissions of Buyer or any of its Affiliates (including the Companies and the Transferring
Subsidiaries at the direction of Buyer pursuant to Section 6.15(b)) or any of their
respective employees, officers, directors, agents, representatives, contractors, invitees or
licensees; (f) all matters that may be shown by a current, accurate survey of the Real Estate; (g)
Requirements of Law, including building and zoning laws, ordinances and regulations now or
hereafter in effect relating to the Real Estate; (h) any and all service contracts and agreements
affecting the Real Estate as of the date hereof, and any and all service contracts and agreements
entered into after the date of this Agreement in accordance with the provisions of this Agreement,
in each case, to the extent in effect as of the Closing; (i) violations of laws, regulations,
ordinances, orders or requirements, if any, arising out of any Change in Law; (j) all matters
disclosed prior to the date hereof in or readily ascertainable from the materials, documents and
reports made available to Buyer in the virtual data room maintained by Seller in Section 9.04
thereof (Real Estate Documents) and Section 9.05 thereof (Existing Title Policies and Commitments);
(k) any Permitted Encumbrance to the extent applicable or relating to, or otherwise affecting, the
Real Estate; and (l) easements, rights of way, restrictions, covenants or other similar matters
that are not material in amount or do not materially detract from the value, title or possession or
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materially impair the existing use of the Real Estate affected by such easement, right of way,
restriction, covenant or other matter.
“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization or Governmental Body, or any department, agency or political subdivision thereof.
“Plan of Reorganization” means the Plan of Reorganization, dated as of the date
hereof, in the form attached hereto as Exhibit M, among Seller, Xxxxxx Xxxxx Holdings,
Inc., CP Holdings Virginia, LLC, Parisian Virginia, LLC, XxXxx’x, Inc., XxXxx’x of Alabama, Inc.,
XxXxx’x Stores Services, Inc., Saks Distribution Centers, Inc., McRIL, LLC, North Park Fixtures,
Inc. and Parisian, Inc., as it may be amended, supplemented or modified after the date hereof
(provided, that if any such amendment, supplement or modification would reasonably be expected to
have an adverse effect on Buyer or any of the Companies or the Transferring Subsidiaries, then it
shall not be effectuated without the prior written consent of Buyer), allowing Seller and its
Affiliates (other than the Companies and the Transferring Subsidiaries) to retain (i) certain
assets not primarily related to the Business, including assets relating primarily to the operation
of the Parisian stores and the Club Xxxxx Xx business, (ii) assets that are used by Seller to
perform its obligations under the Private Brands Agreement and (iii) assets used by Seller to
provide services pursuant to the Buyer Transition Services Agreement.
“Plans” means the Company Plans and Seller Plans.
“Pre-Approved Capital Expenditures” has the meaning specified in Section 6.11.
“Preliminary Purchase Price” means the Purchase Price, either (a) plus the difference
between Preliminary Working Capital and Reference Working Capital, if Preliminary Working Capital
exceeds Reference Working Capital or (b) minus the difference between Reference Working Capital and
Preliminary Working Capital, if Reference Working Capital exceeds Preliminary Working Capital.
“Preliminary Working Capital” has the meaning specified in Section 2.2.
“Prior Year-End Financial Statements” has the meaning specified in Section
4.5.
“Private Brands Agreement” has the meaning specified in Section 6.8(c).
“Program Agreement” has the meaning specified in Section 6.9.
“Purchase Price” has the meaning specified in Section 2.3.
“PWC” has the meaning specified in Section 4.5.
“Real Estate” means the Owned Real Estate and the Leased Real Estate.
“Real Estate Agreements” means all reciprocal easement and operating agreements,
agreements supplemental thereto, easements, Seller’s and each Company’s and Subsidiary’s interests
under any leases or subleases, licenses, occupancy agreements, purchase and lease-termination
options, rights of first refusal or first offer, subordination, non-disturbance and attornment
agreements, and other agreements that run with the land and in each case are appurtenant to the
Real Estate and other agreements (other than Lease Agreements) that relate to the occupancy or
operation of the Real Estate.
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“Reference Net Unfunded Benefit Liabilities” means $45,273,575.
“Reference Net Unfunded Benefit Liabilities Statement” means the net unfunded benefit
liabilities statement set forth in Schedule 1.1(d) of the Seller Disclosure Schedule,
together with supporting documentation.
“Reference Working Capital” has the meaning specified in Section 2.4(a)(v).
“Reference Working Capital Statement” means the working capital statement set forth in
Schedule 1.1(e) of the Seller Disclosure Schedule, together with supporting documentation.
“Register Cash” means the "register” cash for each store of the Business in the amount
set forth on Exhibit B.
“Required Consents” has the meaning specified in Section 7.6.
“Required Financial Information” has the meaning specified in Section 6.16(b).
“Requirements of Law” means any foreign, federal, state and local laws, statutes,
regulations, rules, codes, orders, decrees, directives, decisions, judgments, injunctions, writs or
ordinances enacted, adopted, issued or promulgated by any Governmental Body.
“Retained Employees” has the meaning specified in Section 7.3(a).
“Retained Names and Marks” has the meaning specified in Section 7.1(a).
“SEC” means the United States Securities and Exchange Commission.
“Section 338(h)(10) Elections” has the meaning specified in Section 7.2(e)(i).
“Section 338 Taxes” shall mean Taxes imposed by any taxing jurisdiction with respect
to which a Section 338(h)(10) Election is expressly made in accordance with Section 7.2(e),
or by any other taxing jurisdiction if expressly making a Section 338(h)(10) Election has the
effect of making a Section 338(h)(10) Election in such other jurisdiction, in all cases to the
extent such Taxes are imposed as a result of such Section 338(h)(10) Election.
“Securities” has the meaning specified in Section 2.1.
“Securities Act” means the Securities Act of 1933, as amended.
“Seller” has the meaning specified in the first paragraph of this Agreement.
“Seller Acquisition Proposal” means any proposal or offer with respect to a merger,
acquisition, consolidation or similar transaction involving any purchase of all or substantially
all of the common stock, par value $0.10 per share, of Seller.
“Seller Ancillary Agreements” means all agreements, instruments and documents being or
to be executed and delivered by Seller under this Agreement or in connection herewith.
“Seller Appraiser” has the meaning specified in Section 7.2(e)(iii).
“Seller Disclosure Schedule” has the meaning specified in Section 4.3.
“Seller Flex Plans” has the meaning specified in Section 7.3(i).
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“Seller Group” means any affiliated group of corporations as defined in Section
1504(a) of the Code of which Seller or any predecessor of Seller is or was a member, or any similar
or analogous group of corporations under state, local or foreign tax law of which Seller or any
predecessor of Seller is or was a member.
“Seller Group Member” means (a) Seller and its Affiliates, (b) directors, officers and
employees of Seller and its Affiliates and (c) the successors and assigns of the foregoing.
“Seller Plan” means any Pension Plan or Welfare Plan that is sponsored by Seller in
which any Business Employees are participating or under which any current or former employees of
the Business have accrued any benefits while employed by the Companies and the Subsidiaries and
engaged in the Business to which they remain entitled or with respect to which Seller has any
liability.
“Seller’s DC Plan” has the meaning specified in Section 7.3(j)(i).
“Seller Transition Services Agreement” has the meaning specified in Section
6.8(b).
“Severance Pay Plan” has the meaning specified in Section 4.16(f).
“Software” means computer software programs and related documentation and materials,
whether in source code, object code or human readable form; provided, however, that
Software does not include (a) software that is available generally through retail stores,
distribution networks or is otherwise subject to “shrink-wrap” license or “click-through”
agreements, including any software pre-installed in the ordinary course of business as a standard
part of hardware, equipment or fixtures purchased by Seller, the Companies or any Subsidiary and
used in the Business, or (b) any software that is used by Seller in connection with providing
services under the Buyer Transition Services Agreement.
“Software License Agreement” has the meaning specified in Section 6.8(e).
“Straddle Period” means any taxable year or period beginning on or before and ending
after the Cut-Off Date.
“Subject Lease Agreement” has the meaning specified in Exhibit 2.6(b).
“Subject Store” has the meaning specified in Section 2.6(b).
“Subsidiaries” means XxXxx’x, Inc., a Mississippi corporation, Saks Distribution
Centers, Inc., an Illinois corporation, McRIL, LLC, a Virginia limited liability company, Xxxxxx
Xxxxx Holdings, Inc., a Delaware corporation, CP Holdings Virginia, LLC, a Virginia limited
liability company, PMIN General Partnership, a Virginia general partnership, XxXxx’x Stores
Services, Inc., an Illinois corporation and North Park Fixtures, Inc., a Delaware corporation.
“Tax”
(and, with correlative meaning, “Taxes”) means any federal, state, local
or foreign taxes imposed by any Governmental Body, however denominated, including income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value added, transfer or excise tax, or any other tax,
custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together
with any interest or penalty, imposed by any Governmental Body.
“Tax Package” has the meaning specified in Section 7.2(b)(iii).
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“Tax Return” means any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including any information return, claim for
refund, amended return or declaration of estimated Tax.
“Tax Sharing Agreement” means any written agreement or arrangement for the allocation
or payment of Tax liabilities or payment for Tax benefits with respect to a consolidated, combined
or unitary Tax Return which Tax Return includes or included any Company or any Subsidiary.
“Third Party Brand Licensors” has the meaning specified in Section 6.13.
“Trademark License Agreement” has the meaning specified in Section 6.8(d).
“Trademarks” means (i) registered United States federal and state trademarks, service
marks and trade names, (ii) pending applications to register the foregoing, (iii) industrial
designs and any registrations and applications therefor in the United States, (iv) all internet
uniform resource locators and domain names, and (v) all other rights in the United States in trade
names, logos, slogans, designs, trade dress, common law trademarks and service marks in the United
States.
“Trade Secrets” means confidential ideas, trade secrets, know-how, concepts, methods,
processes, formulae, reports, data, customer lists, mailing lists, business plans, inventions
(whether patentable or not), improvements, technical data or other proprietary information that
provides a competitive advantage and all documentation relating to any of the foregoing.
“Transferring Subsidiaries” means XxXxx’x, Inc., Saks Distribution Centers, Inc. and
McRIL, LLC.
“Transfer Taxes” has the meaning specified in Section 7.2(a)(vi).
“Variable Amount” has the meaning specified in Exhibit 2.6(b)(i).
“WC Arbitrator” has the meaning specified in Section 2.4(a)(iii).
“WC Notice of Disagreement” has the meaning specified in Section 2.4(a)(ii).
“Welfare Plan” means any welfare plan, as defined in Section 3(1) of ERISA, applied
without regard to the exceptions from coverage contained in Sections 4(b)(4) or 4(b)(5) thereof.
“Working Capital” has the meaning specified in Section 2.4(a)(vi).
“Year-End Balance Sheet” has the meaning specified in Section 4.5.
“Year-End Financial Statements” has the meaning specified in Section 4.5.
Section 1.2 Interpretation. In this Agreement (including the Seller Disclosure
Schedule):
(a) words denoting the singular include the plural and vice versa and words denoting any
gender include all genders;
(b) “including” means “including without limitation”;
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(c) “business day” means any day other than a Saturday, Sunday, or a day that is a statutory
holiday under the laws of the United States or the State of Tennessee;
(d) the use of headings is for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement (including the Seller Disclosure Schedule and the Buyer
Disclosure Schedule);
(e) when calculating the period of time within which or following which any act is to be done
or step taken, the date that is the reference day in calculating such period shall be excluded and,
if the last day of such period is not a business day, the period shall end on the next day that is
a business day;
(f) all dollar amounts are expressed in United States funds, and all amounts payable hereunder
shall be paid in United States funds;
(g) money shall be tendered by wire transfer of immediately available federal funds to the
account designated in writing by the party that is to receive such money;
(h) the words “hereof,” “hereby,” “herein,” “hereunder” and similar terms in this Agreement
refer to this Agreement as a whole and not only to a particular Section in which such words appear;
and
(i) references herein to articles, sections, exhibits and schedules mean the articles and
sections of, and the exhibits and schedules attached to, this Agreement.
ARTICLE II
PURCHASE AND SALE
PURCHASE AND SALE
Section 2.1 Purchase and Sale of the Securities. On the terms and subject to the
conditions of this Agreement, on the Closing Date, Seller shall sell, transfer, assign, convey and
deliver to Buyer, free and clear of all Encumbrances, and Buyer shall purchase and accept from
Seller, all of the issued and outstanding equity interests of the Companies (the
“Securities”).
Section 2.2 Determination of Preliminary Working Capital. At least two business days
prior to the Closing Date, Seller shall deliver to Buyer a certificate executed on behalf of Seller
by the Chief Financial Officer of Seller, dated the date of its delivery, stating that there has
been conducted under the supervision of such officer a review of all relevant information and data
then available, including the scanned physical inventory contemplated by Section
2.4(a)(vii), and setting forth Seller’s good faith estimate of Final Working Capital
(“Preliminary Working Capital”).
Section 2.3 Purchase Price. The purchase price for the Securities shall be equal to
$1,150,000,000 minus the Reference Net Unfunded Benefit Liabilities and, if applicable, the
applicable Lease Agreement Amount (the “Purchase Price”), subject to adjustment in
accordance with Section 2.4.
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Section 2.4 Adjustment of Purchase Price.
(a) Purchase Price Adjustment — Working Capital
(i) Within the later of 60 days after the Closing Date and 30 days after delivery to
Buyer pursuant to Section 6.16(c) of the audited balance sheet of the Business as of
January 28, 2006, Seller shall prepare and deliver to Buyer a statement (the “Cut-Off
Date Working Capital Statement”) setting forth Working Capital as of the Effective Time
and each of the line items reflected therein as set forth on the Reference Working Capital
Statement (the determination of Working Capital, as it may be adjusted under this
Section 2.4(a) in the event of a WC Notice of Disagreement, is referred to as
“Final Working Capital”). Buyer shall reasonably assist Seller and its
representatives in the preparation of the Cut-Off Date Working Capital Statement and shall
provide Seller and its representatives reasonable access at all reasonable times to the
personnel, properties, books and records of Buyer, the Companies and the Transferring
Subsidiaries for such purpose. Seller shall provide Buyer and its representatives
reasonable access at all reasonable times to the personnel, properties, books and records
(including work papers) of Seller and its Affiliates for purposes of reviewing the Cut-Off
Date Working Capital Statement.
(ii) The Cut-Off Date Working Capital Statement shall become final and binding upon the
parties on the later of (1) the 30th day following receipt thereof by Buyer and (2) the
90th day after the Closing Date, unless Buyer gives written notice of its
disagreement (“WC Notice of Disagreement”) to Seller before such date. A WC Notice
of Disagreement must set forth Buyer’s determination of Final Working Capital and specify in
reasonable detail the nature of any disagreement with Seller’s determination. The only
disagreements that may be set forth in the WC Notice of Disagreement pursuant to this
Section 2.4(a) are those that relate to (x) any claimed inconsistencies between the
principles used in the preparation of the Cut-Off Date Working Capital Statement and the
principles used in the preparation of the Reference Working Capital Statement; (y) any
disputes regarding the Inventory Schedule pursuant to Section 2.4(a)(viii); or (z)
errors in mathematical computation. Notwithstanding anything to the contrary in this
Section 2.4(a), no disagreement set forth in the WC Notice of Disagreement may
relate to the principles used in the preparation of the Cut-Off Date Working Capital
Statement, so long as those principles are consistently applied with the Reference Working
Capital Statement. If a valid WC Notice of Disagreement is received by Seller in a timely
manner, then the Cut-Off Date Working Capital Statement and the Final Working Capital shall
become final and binding upon the parties on the earlier of (i) the date the parties resolve
in writing any differences they have with respect to all matters specified in the WC Notice
of Disagreement and (ii) the date any disputed matters are finally resolved in writing by
the WC Arbitrator.
(iii) During the 30-day period following the delivery of a WC Notice of Disagreement,
Seller and Buyer shall seek in good faith to resolve in writing any differences that they
may have with respect to any matter specified in the WC Notice of Disagreement. If, at the
end of such 30-day period, Seller and Buyer have not reached agreement on all such matters,
then the matters that remain in dispute shall be promptly submitted to an arbitrator (the
“WC Arbitrator”) for review and resolution. The WC Arbitrator shall be Ernst &
Young LLP, or if Ernst & Young LLP is not available, the WC
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Arbitrator shall be a nationally
recognized independent public accounting firm as shall be agreed upon by the parties in
writing, provided that the WC Arbitrator will not be
an accounting firm used by either Seller or Buyer or any of their respective Affiliates
for audit or valuation purposes. The procedures for the arbitration shall be determined by
the WC Arbitrator. The WC Arbitrator shall render a decision resolving the matters in
dispute within 30 days following completion of the submissions to the WC Arbitrator. Any
item not specifically referred to in the WC Notice of Disagreement shall be deemed final and
binding on Buyer and Seller in the manner set forth in the Cut-Off Date Working Capital
Statement. The WC Arbitrator shall determine Final Working Capital based solely on
presentations made by Seller and Buyer (and not by independent review).
(iv) The Non-Prevailing WC Party in any arbitration before the WC Arbitrator shall pay
the fees and expenses of the WC Arbitrator. A party is the “Non-Prevailing WC
Party” if the WC Arbitrator’s determination of Final Working Capital is closer to the
other party’s determination of Final Working Capital, as submitted to the WC Arbitrator,
than it is to that party’s determination of Final Working Capital, as submitted to the WC
Arbitrator. In resolving any matter specified in the WC Notice of Disagreement, the WC
Arbitrator shall not assign a value to any item greater than the greatest value for such
item claimed by either party or less than the smallest value for such item claimed by either
party.
(v) For purposes of this Agreement, “Reference Working Capital” means
$313,817,851, and “Adjustment Amount” means $4,600,000.
(vi) The term “Working Capital” means (i) the sum of the asset accounts of the
Business included in the Reference Working Capital Statement, less (ii) the sum of the
liability accounts of the Business included in the Reference Working Capital Statement, less
(iii) the Adjustment Amount. The computation of Working Capital will be done in a manner
consistent with the methods used in the preparation of the Reference Working Capital
Statement, and the governing principle will be that the adjustment contemplated by this
Section 2.4(a) can be appropriately measured only when the Reference Working Capital
and the Final Working Capital are computed on the same basis, using the same principles and
methodologies consistently applied. The parties intend for the asset accounts and the
liability accounts included in the Reference Working Capital Statement and the Cut-Off Date
Working Capital Statement to be prepared in accordance with GAAP, applied on a consistent
basis with the policies used by Seller in connection with the preparation of the Year-End
Balance Sheet, it being understood and agreed that (v) only selected accounts are being
included in the Reference Working Capital Statement and the Cut-Off Date Working Capital
Statement, (w) the Reference Working Capital Statement is an average of the specified
account balances during fiscal 2004, certain of which have been averaged on a monthly basis
and certain of which have been averaged on a quarterly basis, and the Cut-Off Date Working
Capital Statement shall be as of the Cut-Off Date (and not an average), (x) allocations
relating to corporate overhead and shared services are not included in the Reference Working
Capital Statement and shall not be included in the Cut-Off Date Working Capital Statement,
(y) the Reference Working Capital Statement does not, and the Cut-Off Date Working Capital
Statement shall not, include any property Tax accounts relating to property Taxes that are
past due
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and payable and (z) the Reference Working Capital Statement does not, and the
Cut-Off Date Working Capital Statement shall not, include any asset or liability that is
retained following the Cut-Off Date by Seller and its Affiliates (other than the Companies
and the Transferring Subsidiaries) pursuant to the terms of this Agreement. To the extent the
Reference Working Capital Statement has not been prepared in accordance with the preceding
sentence, the parties shall work together in good faith to make appropriate adjustments to
such statement. If any such adjustment is made, the Final Working Capital will be computed
on the same basis, using the same principles and methodologies consistently applied.
(vii) Seller will perform a scanned physical inventory within thirty (30) calendar days
prior to January 30, 2006 to determine the quantity of inventory of the Business located on
the Real Estate (the “January Inventory”). Immediately upon completion of any such
inventory tabulation, Seller shall furnish Buyer with a copy of the physical inventory data.
Seller shall prepare a schedule that contains a roll forward of the physical inventory data
to the Cut-Off Date, using Seller’s standard procedures for rolling forward physical
inventory data (the “Inventory Schedule”), and promptly following the completion of
such Inventory Schedule, Seller shall deliver to Buyer a copy of the Inventory Schedule.
(viii) The procedures performed pursuant to Section 2.4(a)(vii) shall be taken
in accordance with Seller’s typical inventory procedures. The cost of taking any such
inventory shall be borne by Seller. At its sole expense, each party may have a reasonable
number of representatives present to observe the taking of the January Inventory and may
verify the January Inventory tabulation as conducted. In the event that there is any
dispute regarding an Inventory Schedule prepared pursuant to Section 2.4(a)(vii),
such dispute shall be resolved in connection with the determination of Final Working
Capital, as set forth in Sections 2.4(a)(ii) — (a)(iv). Subject to the resolution
of any such dispute, the Inventory Schedule as of the Cut-Off Date shall be used for
determination of the applicable line items of the Cut-Off Date Working Capital Statement.
(b) Purchase Price Adjustment — Net Unfunded Benefit Liabilities.
(i) Within the later of 60 days after the Closing Date and 30 days after delivery to
Buyer pursuant to Section 6.16(c) of the audited balance sheet of the Business as of
January 28, 2006, Seller shall prepare and deliver to Buyer a statement (the “Cut-Off
Date NUBL Statement”) setting forth the Net Unfunded Benefit Liabilities and other
information, in each case substantially in the format used in the Reference Net Unfunded
Benefit Liabilities Statement, as of the Cut-Off Date (the determination of Net Unfunded
Benefit Liabilities, as it may be adjusted under this Section 2.4(b) in the event of
a NUBL Notice of Disagreement, is referred to as “Final Net Unfunded Benefit
Liabilities”). Buyer shall reasonably assist Seller and its representatives in the
preparation of the Cut-Off Date NUBL Statement and shall provide Seller and its
representatives reasonable access at all reasonable times to the personnel, properties,
books and records of Buyer, the Companies and the Subsidiaries for such purpose. Seller
shall provide Buyer and its representatives reasonable access at all reasonable times to the
personnel, properties, books and records (including work papers) of Seller and its
Affiliates for purposes of reviewing the Cut-Off Date NUBL Statement.
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(ii) The Cut-Off Date NUBL Statement shall become final and binding upon the parties on
the later of (1) the 30th day following receipt thereof by Buyer and (2) the
90th day after the Closing Date, unless Buyer gives written notice of its
disagreement (“NUBL Notice of Disagreement”) to Seller before such date. A NUBL
Notice of Disagreement must set forth Buyer’s determination of Final Net Unfunded Benefit
Liabilities and specify in reasonable detail the nature of any disagreement with Seller’s
determination. The only disagreements that may be set forth in the NUBL Notice of
Disagreement pursuant to this Section 2.4(b) are those that relate to (x) any
claimed inconsistencies between the principles used in the preparation of the Cut-Off Date
NUBL Statement and the Agreed NUBL Principles or (y) errors in mathematical computation.
Notwithstanding anything to the contrary in this Section 2.4(b), no disagreement set
forth in the NUBL Notice of Disagreement may relate to the Agreed NUBL Principles. If a
valid NUBL Notice of Disagreement is received by Seller in a timely manner, then the Cut-Off
Date NUBL Statement and the Final Net Unfunded Benefit Liabilities shall become final and
binding upon the parties on the earlier of (i) the date the parties resolve in writing any
differences they have with respect to all matters specified in the NUBL Notice of
Disagreement and (ii) the date any disputed matters are finally resolved in writing by the
NUBL Arbitrator.
(iii) During the 30-day period following the delivery of a NUBL Notice of Disagreement,
Seller and Buyer shall seek in good faith to resolve in writing any differences that they
may have with respect to any matter specified in the NUBL Notice of Disagreement. If, at
the end of such 30-day period, Seller and Buyer have not reached agreement on all such
matters, then the matters that remain in dispute shall be promptly submitted to an
arbitrator (the “NUBL Arbitrator”) for review and resolution. The NUBL Arbitrator
shall be a nationally recognized actuarial firm as shall be agreed upon by the parties in
writing, provided that the NUBL Arbitrator will not be an actuarial firm used by either
Seller or Buyer or any of their respective Affiliates. The procedures for the arbitration
shall be determined by the NUBL Arbitrator. The NUBL Arbitrator shall render a decision
resolving the matters in dispute within 30 days following completion of the submissions to
the NUBL Arbitrator. Any item not specifically referred to in the NUBL Notice of
Disagreement shall be deemed final and binding on Buyer and Seller in the manner set forth
in the Cut-Off Date NUBL Statement. The NUBL Arbitrator shall determine Final Net Unfunded
Benefit Liabilities based solely on presentations made by Seller and Buyer (and not by
independent review).
(iv) The Non-Prevailing NUBL Party in any arbitration before the NUBL Arbitrator shall
pay the fees and expenses of the NUBL Arbitrator. A party is the “Non-Prevailing NUBL
Party” if the NUBL Arbitrator’s determination of Final Net Unfunded Benefit Liabilities
is closer to the other party’s determination of Final Net Unfunded Benefit Liabilities, as
submitted to the NUBL Arbitrator, than it is to that party’s determination of Final Net
Unfunded Benefit Liabilities, as submitted to the NUBL Arbitrator. In resolving any matter
specified in the NUBL Notice of Disagreement, the NUBL Arbitrator shall not assign a value
to any item greater than the greatest amount for such item claimed by either party or less
than the smallest amount for such item claimed by either party.
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(v) The term “Net Unfunded Benefit Liabilities” means, as of the Effective
Time, the aggregate amount of the net unfunded benefit liabilities relating to the plans,
agreements and arrangements set forth on the Reference Net Unfunded Benefits
Liabilities Statement calculated using the same items as the Reference Net Unfunded
Benefit Liabilities Statement and in accordance with the Agreed NUBL Principles. Without
limiting the generality of the foregoing, the computation of Net Unfunded Benefit
Liabilities will be done in a manner consistent with methods used in the preparation of the
Reference Net Unfunded Benefit Liabilities, and the governing principle will be that the
adjustment contemplated by this Section 2.4(b) can be appropriately measured only
when the Reference Net Unfunded Benefit Liabilities and the Final Net Unfunded Benefit
Liabilities are computed on the same basis, using the Agreed NUBL Principles.
(c) Purchase Price Adjustment — Settlement.
(i) If Final Working Capital exceeds Reference Working Capital, the Purchase Price (but
not the Preliminary Purchase Price) shall be increased by the amount by which Final Working
Capital exceeds Reference Working Capital. If Reference Working Capital exceeds Final
Working Capital, the Purchase Price (but not the Preliminary Purchase Price) shall be
reduced by the amount by which Reference Working Capital exceeds Final Working Capital.
(ii) If Final Net Unfunded Benefit Liabilities exceeds Reference Net Unfunded Benefit
Liabilities, the Purchase Price (but not the Preliminary Purchase Price) shall be reduced by
the amount by which Final Net Unfunded Benefit Liabilities exceeds Reference Net Unfunded
Benefit Liabilities. If Reference Net Unfunded Benefit Liabilities exceeds Final Net
Unfunded Benefit Liabilities, the Purchase Price (but not the Preliminary Purchase Price)
shall be increased by the amount by which Reference Net Unfunded Benefit Liabilities exceeds
Final Net Unfunded Benefit Liabilities.
(iii) The Purchase Price, as increased or decreased by the adjustments provided for in
paragraphs (i) and (ii) of this Section 2.4(c), is referred to as the “Final
Purchase Price.”
(iv) If the Preliminary Purchase Price is less than the Final Purchase Price, Buyer
shall, and if the Preliminary Purchase Price is more than the Final Purchase Price, Seller
shall, within five business days after both the Cut-Off Date Working Capital Statement and
Cut-Off Date NUBL Statement have become final and binding on the parties, make payment to
the other party of the amount of such difference, together with interest thereon at the
Agreed Rate, calculated on the basis of the number of days elapsed from the Closing Date
through but excluding the payment date. Notwithstanding the foregoing, if one but not both
of the Cut-Off Date Working Capital Statement or the Cut-Off Date NUBL Statement has become
final and binding on the parties, either party may elect to cause settlement of an
adjustment to the Purchase Price in an amount consistent with the first sentence of this
paragraph (iv) and pursuant to Section 2.4(c)(i) or 2.4(c)(ii), as
applicable, within five business days after the Cut-Off Date Working Capital Statement or
the Cut-Off Date NUBL Statement, as the case may be, has become final and binding on the
parties. Except in respect of an adjustment made pursuant to the
17
immediately preceding
sentence, this Section 2.4 shall remain applicable, and the parties shall each
comply, as to the determination of the Final Working Capital or the Final Net
Unfunded Benefit Liabilities, as the case may be, including any resulting adjustment to
the Purchase Price pursuant to Section 2.4(c)(i) or 2.4(c)(ii), as
applicable.
Section 2.5 Leased Department Agreements and Certain Other Agreements. (a)
Exhibit C sets forth each leased department agreement relating both to the Business and to
other businesses of Seller and its Affiliates. The parties agree to use commercially reasonable
efforts to either amend the existing agreements and/or enter into new leased department agreements
with the parties identified in Exhibit C such that each party’s rights and obligations
relate exclusively to its own stores; provided, however, that neither Buyer and its
Affiliates nor Seller and its Affiliates shall be required to make any payments or offer or grant
any accommodation (financial or otherwise) to any third party to effect the foregoing. If such new
leased department agreements are not in effect as of the Effective Time, the parties agree that, to
the maximum extent permitted by Requirements of Law or any such applicable leased department
agreement, to the extent related to the Business, Buyer shall be solely responsible for the
obligations and liabilities of the Business arising under such agreement (but not such agreement
itself), and Buyer shall receive the claims, rights and benefits of Seller and its Affiliates
arising under such agreement or resulting therefrom (but not such agreement itself). Each party
agrees to use commercially reasonable efforts to effect the foregoing.
(a) Exhibit D sets forth certain agreements relating both to the Business and to other
businesses of Seller and its Affiliates. The parties agree to use commercially reasonable efforts
to obtain the necessary approvals, consents and waivers to assign to Buyer that portion of such
agreements (and any applicable schedules thereto) that relate exclusively to the stores of the
Business; provided, however, that neither Buyer and its Affiliates nor Seller and
its Affiliates shall be required to make any payments or offer or grant any accommodation
(financial or otherwise) to any third party to obtain any approval, consent or waiver. If, prior
to the Closing, all necessary approvals, consents and waivers are not obtained with respect to any
such agreement, then (to the maximum extent permitted by Requirements of Law or any such applicable
agreement) to the extent related to the Business, Buyer shall be solely responsible for the
obligations and liabilities of the Business arising under such agreement (but not such agreement
itself), and Buyer shall receive the claims, rights and benefits of Seller and its Affiliates
arising under such agreement or resulting therefrom (but not such agreement itself). Each party
agrees to use commercially reasonable efforts to effect the foregoing.
Section 2.6 Assignment of Certain Contracts. (a) At the Closing, Seller agrees to,
and to cause Seller’s Affiliates to, assign, sell, transfer, convey and deliver to Buyer, and Buyer
agrees to acquire from Seller and its Affiliates, all of Seller’s and its Affiliates’ right, title
and interest as of the Effective Time in all Contracts which, although neither the Companies nor
any of the Transferring Subsidiaries is the contracting party thereto, is in each case solely
related to the Business (other than with respect to purchase orders, which shall be transferred to
Buyer to the extent they relate to the Business), together with those Contracts set forth on
Exhibit 2.6(a) hereto (collectively, the “Assigned Contracts”). At the Closing,
Buyer shall assume, and hereby agrees to pay, perform and observe fully and timely, effective as of
the Effective Time, all liabilities and obligations relating to or arising out of the Assigned
Contracts (collectively, the liabilities and obligations so assumed being referred to as the
“Assumed Contract Liabilities”). Notwithstanding the foregoing, in no event will the
Assumed Contract Liabilities include any
18
liabilities or obligations in respect of indebtedness for
borrowed money incurred prior to the
Closing Date (which shall not be deemed to include capital leases) or any equity or
equity-based awards relating to equity securities of Seller.
(b) Prior to the Closing, Seller shall use its commercially reasonable efforts to obtain the
necessary landlord consent to assign to one of the Companies or the Transferring Subsidiaries the
Subject Lease Agreement and Buyer shall cooperate with the reasonable requests of Seller in
obtaining such consent; provided, however, that (i) neither Seller and its
Affiliates nor Buyer and its Affiliates shall be required to make any payments or offer or grant
any accommodation (financial or otherwise) to any third party to obtain such landlord consent, (ii)
neither Seller nor any of its Affiliates shall be required to make any proposal or request to
assign the Subject Lease Agreement and (iii) no proposal or request to assign the Subject Lease
Agreement shall be made by Buyer or any of its Affiliates without the prior written consent of
Seller. If, prior to the Closing, the necessary landlord consent with respect to the Subject Lease
Agreement has not been obtained (in a form (other than in respect of the amount of rent) reasonably
acceptable to Buyer) or a court or other Governmental Body having jurisdiction over Seller shall
have issued any order, decree or ruling that is then in effect and has the effect of restraining or
prohibiting the assignment of the Subject Lease Agreement, then (v) all assets and liabilities of
Seller, the Companies or the Transferring Subsidiaries solely related to the store (the
“Subject Store”) leased by Seller pursuant to the Subject Lease Agreement shall be excluded
from the transactions contemplated by this Agreement, and the Subject Store shall be deemed for all
purposes of this Agreement not to be included in the Business, (w) all customer lists and credit
card customers who had more purchases at the Subject Store in the most recent month ended prior to
the date hereof (determined by percentage of the total amount charged on the proprietary credit
card bearing the Subject Store’s trade name) than at any other location bearing the same trade
name) shall be excluded from the transactions contemplated by this Agreement, (x) all employees
located at the Subject Store shall not be deemed to be Business Employees, (y) all assets and
liabilities solely related to the Subject Store shall be excluded from the calculations of
Reference Working Capital and Final Working Capital and (z) the Purchase Price shall be reduced by
the Fixed Amount. If the landlord’s consent is obtained (in a form (other than in respect of the
amount of rent) reasonably acceptable to Buyer) and no court or other Governmental Body shall have
issued an order, decree or ruling that is then in effect and has the effect of restraining or
prohibiting the assignment of the Subject Lease Agreement, then the Subject Lease Agreement shall
be assigned to one of the Companies or the Transferring Subsidiaries prior to Closing. In such
case, and if there is an increase in the rent to be paid to such landlord under the Subject Lease
Agreement, then the Purchase Price shall be reduced by the Variable Amount. Certain obligations of
the parties contained in Exhibit 2.6(b)(ii) with respect to the Subject Store are hereby
incorporated by reference herein.
ARTICLE III
CLOSING
CLOSING
Section 3.1 Closing Date. The Closing shall be held at the offices of Sidley Xxxxxx
Xxxxx & Xxxx LLP, 00 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, at 10:00 a.m.
Chicago time on the first business day immediately following the end of one of
Seller’s fiscal weeks and following the date on which all conditions to Closing set forth in
Articles VIII and IX shall have been satisfied or waived (other than those
conditions that are intended to be satisfied at Closing), or at such other place, time and day as
shall be agreed upon
19
by Buyer and Seller; provided, however, that notwithstanding
anything contained herein to the
contrary, the parties acknowledge and agree that the Closing shall not occur before January
30, 2006. The date on which the Closing is actually held is referred to herein as the “Closing
Date,” although the transfer of the Securities shall be effective (other than for Tax purposes)
as of 12:01 a.m., Chicago time (the “Effective Time”) on the Sunday immediately preceding
the Closing Date (the Saturday immediately preceding the Closing Date being the “Cut-Off
Date”).
Section 3.2 Payment on the Closing Date. Subject to fulfillment or waiver (where
permissible) of the conditions set forth in Articles VIII and IX, at the Closing
Buyer shall pay Seller an amount equal to the Preliminary Purchase Price by wire transfer of
immediately available funds to the bank account or accounts specified by Seller.
Section 3.3 Buyer’s Additional Closing Date Deliveries. Subject to fulfillment or
waiver (where permissible) of the conditions set forth in Articles VIII and IX, at
the Closing Buyer shall deliver to Seller all of the following:
(a) Certificate of the secretary or an assistant secretary of Buyer, dated the Closing Date,
in form and substance reasonably satisfactory to Seller, as to (i) no amendments to the articles of
incorporation of Buyer since a specified date; (ii) the bylaws of Buyer; (iii) the resolutions of
the Board of Directors of Buyer authorizing the execution and performance of this Agreement, any
Buyer Ancillary Agreement and the transactions contemplated hereby and thereby; and (iv) incumbency
and signatures of the officers of Buyer executing this Agreement and any Buyer Ancillary Agreement;
(b) The certificate contemplated by Section 9.5, duly executed by a duly authorized
officer of Buyer;
(c) The Private Brands Agreement, Trademark License Agreement, Software License Agreement, the
Buyer Transition Services Agreement and the Seller Transition Services Agreement, in each case duly
executed on behalf of Buyer;
(d) Any real estate transfer Tax declarations required to be executed or filed;
(e) Internal Revenue Service Form 8023, with Section A thereof completed and duly executed by
a duly authorized officer of Buyer; and
(f) The letter of credit required by Section 3(e) of the Private Brands Agreement.
Section 3.4 Seller’s Closing Date Deliveries. Subject to fulfillment or waiver (where
permissible) of the conditions set forth in Articles VIII and IX, at the Closing
Seller shall deliver to Buyer all of the following:
(a) Certificate of the secretary or an assistant secretary of Seller, dated the Closing Date,
in form and substance reasonably satisfactory to Buyer, as to (i) no amendments to the amended and
restated charter of Seller since a specified date; (ii) the amended and restated bylaws of Seller;
(iii) the resolutions of the Board of Directors of Seller authorizing the execution and performance
of this Agreement, any Seller Ancillary Agreement to which Seller is
20
a party and the transactions
contemplated hereby and thereby; and (iv) incumbency and
signatures of the officers of Seller executing this Agreement and any Seller Ancillary
Agreement to which Seller is a party;
(b) Certificate of the secretary or an assistant secretary of each Company and XxXxx’x, Inc.,
Saks Distribution Centers, Inc. and McRIL, LLC, dated the Closing Date, in form and substance
reasonably satisfactory to Buyer, as to (i) the certificate of incorporation or similar
organizational document of such entity and (ii) the by-laws or similar organizational document of
such entity;
(c) The certificate(s), if any, representing all of the Securities, duly endorsed to Buyer or
accompanied by duly executed stock powers or similar instruments of assignment with regard to
uncertificated Securities;
(d) The certificate contemplated by Section 8.5, duly executed by a duly authorized
officer of Seller;
(e) The Private Brands Agreement, Trademark License Agreement, Software License Agreement, the
Buyer Transition Services Agreement, the CLL Licensed Department Agreements (if not previously
executed) and the Seller Transition Services Agreement, in each case, duly executed on behalf of
Seller and, where applicable, the Companies;
(f) The written resignations of the directors or managers, as applicable, of the Companies and
the Transferring Subsidiaries;
(g) Any real estate transfer Tax declarations required to be executed or filed; and
(h) Internal Revenue Service Form 8023, with Sections B and C thereof completed and duly
executed by a duly authorized officer of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate the transactions
contemplated hereby, Seller represents and warrants to Buyer as follows (it being understood that
Seller makes no representation or warranty regarding matters that do not arise out of or relate to
the Business, other than with respect to those matters relating to Seller’s organization, power and
authority set forth in Sections 4.1 and 4.4 and other than with respect to tax
matters to the extent set forth in Section 4.7).
Section 4.1 Organization of Seller. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Tennessee.
Section 4.2 Organization; Power and Authority; Capital Structure of the Companies.
(a) Each of the Companies and the Subsidiaries is a corporation or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its incorporation or
formation. Each of the Companies and the Subsidiaries is duly qualified to transact business and
is in good standing in each jurisdiction where the character of its properties
21
owned or held under lease or the nature of its activities makes such qualifications necessary,
except where the failure to be so qualified or in good standing would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Companies and
the Subsidiaries has the corporate or other organizational power and authority to own or lease and
operate its assets and to carry on the Business in the manner that it was conducted immediately
prior to the date of this Agreement.
(b) The authorized capital stock of Parisian, Inc. consists of 100 shares of common stock, par
value $.01 per share, of which 100 shares are issued and outstanding. Seller is the sole member of
Herberger’s Department Stores, LLC. Seller owns all the outstanding equity interests of
Herberger’s Department Stores, LLC and Parisian, Inc., free and clear of all Encumbrances. All
such capital stock (or, in the case of Herberger’s Department Stores, LLC, membership interests) is
duly authorized, validly issued and outstanding, fully paid and nonassessable, and free of
preemptive rights. Except for this Agreement, there are no commitments to issue or sell any shares
of capital stock or membership interests, as the case may be, or any securities or obligations
convertible into or exchangeable for, or giving any Person any right to acquire from Seller or the
Companies, any shares of capital stock or membership interests, as the case may be, of the
Companies, and no such securities, commitments or obligations are outstanding.
Section 4.3 Subsidiaries and Investments. Except for ownership of capital stock of
the Subsidiaries or as set forth on Schedule 4.3 of the disclosure schedule delivered by
Seller to Buyer concurrently with the execution and delivery of this Agreement (the “Seller
Disclosure Schedule”), the Companies do not, directly or indirectly, own, of record or
beneficially, any outstanding equity interests in any corporation, partnership, limited liability
company joint venture or other entity. Parisian, Inc. owns, directly or indirectly, all the
outstanding capital stock or membership interests, as applicable, of each Subsidiary, free and
clear of all Encumbrances. All such capital stock and other equity interests are duly authorized,
validly issued and outstanding, fully paid and nonassessable, and free of preemptive rights. Other
than pursuant to the Plan of Reorganization, none of the Subsidiaries has any commitment to issue
or sell any shares of its capital stock or other equity interests or securities or any securities
or obligations convertible into or exchangeable for, or giving any Person any right to acquire from
such Subsidiary, any shares of its capital stock or other equity interests or securities, and no
such equity interests or securities or obligations are outstanding.
Section 4.4 Authority of Seller; Conflicts. (a) On or prior to the date of this
Agreement, the Board of Directors of Seller has approved the transactions contemplated in this
Agreement. Seller has all requisite corporate power to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this Agreement by Seller and
the consummation by Seller of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Seller and each of the Seller Ancillary Agreements has
been duly authorized by Seller. No vote of the shareholders of Seller is required to approve this
Agreement or to consummate the transactions contemplated hereby under any Requirements of Law.
This Agreement has been duly executed and delivered by Seller and (assuming the valid
authorization, execution and delivery of this Agreement by Buyer and the validity and binding
effect of this Agreement on Buyer) constitutes the valid and binding obligation of Seller
enforceable against Seller in accordance with its terms, and each of the Seller Ancillary
Agreements, upon execution and delivery by Seller will be (assuming the
22
valid authorization, execution and delivery by Buyer, where Buyer is a party, and any other party
or parties thereto) a legal, valid and binding obligation of Seller enforceable in accordance
with its terms, subject, in the case of this Agreement and each of the Seller Ancillary Agreements,
to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors’ rights generally and to general equity principles.
(b) Except as set forth in Schedule 4.4 of the Seller Disclosure Schedule, the
execution and delivery of this Agreement or any of the Seller Ancillary Agreements by Seller, the
consummation of any of the transactions contemplated hereby or thereby by Seller or compliance with
or fulfillment of the terms, conditions and provisions hereof or thereof by Seller will not:
(i) assuming the receipt of all necessary consents and approvals and the filing of all
necessary documents as described in Section 4.4(b)(ii), result in a breach of the
terms, conditions or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of rights under, or
result in the creation or imposition of any Encumbrance upon any of the Securities or any of
the assets of the Companies or the Subsidiaries with respect to the Business, under (1) the
charter, bylaws or similar organizational documents of Seller, the Companies or any
Subsidiary, (2) any Business Agreement, (3) any Court Order to which Seller, the Companies
or any Subsidiary (with respect to the Business) is a party or by which Seller, the
Companies or any Subsidiary (with respect to the Business) is bound or (4) any Requirements
of Law affecting Seller, the Companies or any Subsidiary (with respect to the Business),
other than, in the case of clauses (2) and (4) above, any such breaches, defaults, rights,
loss of rights or Encumbrances that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect or would not prevent the consummation of any
of the transactions contemplated hereby, or
(ii) require the approval, consent, authorization or act of, or the making by Seller,
the Companies or any Subsidiary of any declaration, filing or registration with, any
Governmental Body, except (1) in connection, or in compliance, with the provisions of the
HSR Act, (2) the filing with the SEC of such reports under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated hereby, (3)
applicable requirements, if any, of the New York Stock Exchange, (4) such consents,
approvals, filings and notices as may be required under any Requirements of Law with respect
to environmental matters pertaining to any notification, disclosure or required approval
triggered by the transactions contemplated by this Agreement, (5) such filings as may be
required in connection with the Taxes described in Section 7.2(a)(vi), and (6) such
other approvals, consents, authorizations, declarations, filings or registrations the
failure of which to be obtained or made would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or would not prevent the
consummation of any of the transactions contemplated hereby.
No representation or warranty is made in this Section 4.4 as to whether any new
governmental approvals, consents, licenses, permits, orders, authorizations, declarations, filings
or registrations will be required as a result of the sale of the Securities to Buyer in order for
Buyer to continue to conduct the Business following the Cut-Off Date in the manner in which the
Business was conducted on or before the Cut-Off Date.
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Section 4.5 Financial Statements. Schedule 4.5 of the Seller Disclosure
Schedule contains (i) the audited balance sheet of the Business as of January 29, 2005 (the
“Year-End Balance Sheet”) and the related audited statement of income, changes in
intercompany investment and cash flows of the Business for the fiscal year then ended
(collectively, the “Year-End Financial Statements”), (ii) the audited balance sheets of the
Business as of January 31, 2004 and the related audited statements of income, changes in
intercompany investment and cash flows of the Business for the fiscal years ended January 31, 2004
and February 1, 2003 (the “Prior Year-End Financial Statements” and, together with the
Year-End Financial Statements, the “Financial Statements”) and (iii) the unqualified report
of PricewaterhouseCoopers LLP (“PWC”) on the Year-End Financial Statements and the Prior
Year-End Financial Statements. Except as expressly disclosed therein, the Financial Statements
fairly present, in all material respects, the assets, liabilities and financial condition of the
Business at their respective dates and the results of operations and cash flows of the Business for
the respective periods covered thereby, and have been prepared in accordance with GAAP on a basis
consistent with the principles historically applied by Seller. Except as expressly provided in
this Agreement, no representation or warranty is made by Seller as to any financial information of
the Companies, the Subsidiaries or the Business provided to Buyer or any of its representatives,
including any financial information provided to Buyer in its due diligence investigation of the
Business or set forth in the Confidential Information Memorandum regarding the Business provided to
Buyer by Xxxxxxx, Sachs & Co and/or Citigroup Global Markets Inc. (the “CIM”). Without
limiting the generality of the foregoing, no representation or warranty is made as to the accuracy,
fairness or reasonableness of any projections provided to Buyer or the assumptions used in
preparing the same, or as to the likelihood that such projections will be achieved.
Section 4.6 Operations Since Financial Statements Date. Since the Financial
Statements Date, there has been no Material Adverse Effect. Except as set forth in Schedule
4.6 of the Seller Disclosure Schedule, since the Financial Statements Date through the date of
this Agreement, the Companies and the Subsidiaries have conducted the Business in the ordinary
course substantially consistent with past practice. Without limiting the generality of the
preceding sentence, except as set forth on Schedule 4.6 of the Seller Disclosure Schedule,
since the Financial Statement Date through the date of this Agreement, the Companies and the
Subsidiaries (with respect to the Business) have not:
(a) made any material change in the Business or their operations, except such changes as may
be required to comply with any applicable Requirements of Law;
(b) purchased or otherwise acquired any assets or made any Capital Expenditures, in each case
that are material, individually or in the aggregate, to the Business (other than (i) purchases of
inventory in the ordinary course of business consistent with past practice, (ii) Capital
Expenditures in the ordinary course of business consistent with past practice or as contemplated by
the fiscal 2005 capital budget made available to Buyer and (iii) Capital Expenditures required
under any Real Estate Agreement or Lease Agreement for capital improvements that are not controlled
exclusively by Seller, the Companies or the Subsidiaries);
(c) transferred any material assets (other than cash) to Seller or any of its Affiliates
(other than the Companies or any Subsidiary);
24
(d) redeemed or otherwise acquired any of its membership interests or shares of its capital
stock or issued any capital stock or membership interests or any option, warrant or right relating
thereto;
(e) (i) granted to any Key Employee any increase in compensation or other material benefits
(other than with respect to any amounts set forth in Schedule 4.18(e) under retention
agreements that do not involve payments by Buyer, the Companies or the Transferring Subsidiaries to
any such Key Employee after the Closing) or granted to any Business Employee any material increase
in compensation or other benefit (other than with respect to any amounts set forth in Schedule
4.18(e) under retention agreements that do not involve payments by Buyer, the Companies or the
Transferring Subsidiaries to any such Key Employee after the Closing) except as required under
existing agreements or in the ordinary course of business consistent with past practice or (ii)
designated any Business Employee as a participant in the Severance Pay Plan pursuant to Section
2.A(ii) of the Severance Pay Plan;
(f) acquired by merging or consolidating with, or by purchasing a substantial portion of the
stock, other equity securities or assets of, any business or any corporation, partnership, limited
liability company association or other business organization or division thereof;
(g) made any material change in the accounting methods or policies applied in the preparation
of the Financial Statements, unless such change is required by GAAP;
(h) sold or otherwise disposed of any assets that are material, either individually or in the
aggregate, to the Business (other than sales of inventory in the ordinary course of business
consistent with past practice);
(i) materially adversely modified or amended any Business Agreement;
(j) amended their articles of incorporation, by-laws or similar organizational documents;
(k) created, incurred or assumed, or agreed to create, incur or assume, any indebtedness for
borrowed money (other than money borrowed or advances from any of its Affiliates in the ordinary
course of business) or granted any Encumbrance with respect to the assets of the Business, in each
case other than Permitted Encumbrances, Permitted Real Property Exceptions and Encumbrances imposed
by the Credit Agreement; or
(l) other than this Agreement and the Plan of Reorganization, agreed to do any of the
foregoing.
Section 4.7 Taxes. Except as set forth on Schedule 4.7 of the Seller
Disclosure Schedule, (i) the Companies and each Subsidiary have filed all material Tax Returns
required to have been filed on or before the date hereof and all such Tax Returns are true,
complete and accurate in all material respects; (ii) the Seller Group has filed all material
consolidated federal, and material consolidated combined or unitary state, Income Tax Returns
required to have been filed by it on or before the date hereof for periods during which any Company
or any Subsidiary was a member of the Seller Group and all such Tax Returns are true, complete and
accurate in all
25
material respects; (iii) all Taxes shown to be due on the Tax Returns referred to in clauses (i) and (ii), and all
Taxes due prior to the date hereof with respect to which no Tax Return is required, have been timely paid; (iv) neither Seller nor
any of its Affiliates, including the Companies and each Subsidiary, has waived in writing any statute of limitations in respect of
Taxes of the Companies or such Subsidiary which waiver is currently in effect; (v) the Tax Returns referred to in clauses (i) and
(ii) relating to federal and state Income Taxes have been examined by the Internal Revenue Service or the appropriate state taxing
authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired; (vi)
no material issues that have been raised in writing by the relevant taxing authority in connection with the examination of the Tax
Returns referred to in clauses (i) and (ii) are currently pending; (vii) all material deficiencies asserted in writing or material
assessments made in writing as a result of any examination of the Tax Returns referred to in clauses (i) and (ii) by any taxing
authority have been paid in full; (viii) neither any of the Companies nor any of the Subsidiaries has been required to make any
disclosure to the IRS with respect to a “listed transaction” within the meaning of § 1.6011-4(b)(2) of the Treasury Regulations; (ix)
within the past three years, neither any of the Companies nor any of the Subsidiaries has participated in any Tax-related amnesty
program established under federal, state, local or foreign Tax law; (x) no Company or Subsidiary has any liability for Taxes of any
Person under § 1.1502-6 of the Treasury Regulations or any similar provision of state, local or foreign law (other than Seller and
the Seller Group members); (xi) there is no contract, agreement, plan or arrangement to which any Company or any Subsidiary is a
party as of the date of this Agreement covering any employee or former employee of any Company or any Subsidiary that, individually
or in the aggregate, would reasonably be expected to give rise to the payment of any amount as a result of the transactions
contemplated by this Agreement that would not be deductible pursuant to Section 162(m) of the Code; (xii) no Company or Subsidiary
that is a limited liability company has elected to be taxed as other than a “partnership” or a “disregarded entity” for federal
income tax purposes; and (xiii) as a direct or indirect result of the transactions contemplated by this Agreement or effected by the
Plan of Reorganization, no payment or other benefit, and no acceleration of the vesting of any options, payments or other benefits,
will be, an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code and the
Treasury Regulations thereunder. Notwithstanding anything to the contrary in this Agreement, nothing in this Section 4.7 shall cause
Seller to be liable for any Taxes for which Seller is not expressly liable pursuant to Section 7.2 (relating to Tax matters).
Section 4.8 Governmental Permits. Except as set forth in Schedule 4.8 of the Seller Disclosure Schedule, the Companies and the Subsidiaries own,
hold or possess all licenses, franchises, permits, privileges, immunities, approvals and other authorizations from a Governmental
Body that are necessary to entitle them to own or lease, operate and use their assets and to carry on and conduct the Business
substantially as conducted immediately prior to the date of this Agreement (collectively, “Governmental Permits”), except for such
Governmental Permits as to which the failure to so own, hold or possess would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each of the Companies and the Subsidiaries (with respect to the Business) has complied
with all terms and conditions of the Governmental Permits, other than those instances of noncompliance which would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect. All material Governmental Permits owned, held or
possessed by the Companies and the Subsidiaries with respect to the Business are set forth in Schedule 4.8 of the Seller Disclosure
26
Schedule. In addition, except as disclosed on Schedule 4.8 of the Seller Disclosure
Schedule, no material Governmental Permits set forth in Schedule 4.8 of the Seller
Disclosure Schedule will expire or terminate as a result of the consummation of the transactions
contemplated by this Agreement.
Section 4.9 Real Property. (a) Schedules 4.9(a)(i) and 4.9(a)(ii) of
the Seller Disclosure Schedule set forth a complete and accurate list by property or project name,
city and state of all Leased Real Estate and Owned Real Estate, respectively. Each of the entities
identified in Schedule 4.9(a)(ii) of the Seller Disclosure Schedule owns fee simple title
to such Owned Real Estate, subject only to Permitted Real Property Exceptions. None of Seller or
its Affiliates (including the Companies and the Transferring Subsidiaries) has granted any
Encumbrance in respect of its leasehold interest in the Leased Real Estate, except for any
Permitted Real Property Exceptions.
(b) Except as set forth in Schedule 4.9(b) of the Seller Disclosure Schedule, to the
Knowledge of Seller, (i) within the immediately preceding 12 month period, there have not been
actual, threatened (in writing) or imminent changes in the zoning of any of the Real Estate or any
part thereof materially and adversely affecting the current use, occupancy or value thereof, (ii)
there is no pending or threatened (in writing) condemnation, expropriation, requisition (temporary
or permanent) or similar proceeding with respect to any Real Estate or any part thereof, which
would materially detract from the value of the Real Estate or materially impair the existing use
thereof and (iii) neither Seller nor any Company or Subsidiary has received any written notice from
any Governmental Body asserting that any Real Estate is not in compliance in all material respects
with all Requirements of Law and any covenants, restrictions or other agreements with or in favor
of any Governmental Body or other Person limiting in any material respect the use of any of the
Real Estate for the purposes permitted by any Requirements of Law governing the applicable zoning
district. The transfers from the applicable Companies and Transferring Subsidiaries of (i) the two
outparcels located at the Yorktown Shopping Center in Lombard, Illinois and (ii) the two outparcels
located at Southridge Mall in Greendale, Wisconsin, in each case as contemplated by the Plan of
Reorganization, will not cause any Real Estate to fail to be in compliance with all Requirements of
Law and any covenants, restrictions or other agreements with or in favor of any Governmental Body
or other Person limiting in any material respect the use of any of the Real Estate for the purposes
permitted by any Requirements of Law governing the applicable zoning district. To the Knowledge of
Seller, Seller has delivered to or otherwise made available for inspection by Buyer true, complete
and correct copies of environmental reports in possession of Seller and its Affiliates pertaining
to the Owned Real Estate.
(c) Except as set forth in Schedule 4.9(c) of the Seller Disclosure Schedule, each
tenant lease and other agreement for the use and occupancy by Seller, the Companies or any
Subsidiary of the Leased Real Estate (collectively, the “Lease Agreements”) and Real Estate
Agreements pertaining to any Real Estate is in full force and effect. Neither Seller nor any of
the Companies or any of the Subsidiaries is in, or to the Knowledge of Seller, is alleged to be in,
material breach or default under any material Lease Agreement or material Real Estate Agreement
pertaining to any Real Estate, and there is no event that, but for the passage of time or the
giving of notice or both would constitute or result in any such material breach or default. Except
as provided in the Lease Agreements (and all guaranties relating thereto) and Real Estate
Agreements, the consummation of the transactions contemplated by this Agreement will not
27
result in any loss or impairment of any of the Companies’ or the Transferring Subsidiaries’
rights under any of the Lease Agreements pertaining to any Real Estate. Seller has made available
to Buyer true, complete and correct copies in all material respects of any and all: (i) Lease
Agreements (and all guaranties relating thereto) and (ii) Real Estate Agreements.
Section 4.10 Personal Property Leases. Schedule 4.10 of the Seller Disclosure
Schedule contains as of the date of this Agreement a list of each material lease or other agreement
or right under which either the Companies or any of the Subsidiaries, with respect to the Business,
is lessee of, or holds or operates, any machinery, equipment, vehicle or other
tangible personal
property owned by a third Person, except those which are terminable by the Companies or the
Subsidiaries without penalty on 90 days’ or less notice or which provide for annual rental payments
of less than $400,000.
Section 4.11 Intellectual Property. (a) Schedule 4.11(a) of the Seller
Disclosure Schedule contains a list, including the owner, user or licensee, of all (i) registered
Copyrights (excluding for these purposes any Copyrights with respect to Software), (ii) Patent
Rights and (iii) Trademark registrations and pending applications to register Trademarks, in each
case which are either owned, used exclusively in the Business or licensed by the Companies or the
Subsidiaries and which are material to the conduct of the Business as currently conducted (on
Schedule 4.11(a) of the Seller Disclosure Schedule all such owned Trademarks are listed
under the heading “Copyrights, Patent Rights and Trademarks” or “List of Private Brand Marks” and
all such licensed Trademarks are listed under the heading “Licensed Marks”).
(b) Schedule 4.11(b) of the Seller Disclosure Schedule sets forth all Software owned,
licensed to or used by Seller, the Companies or the Subsidiaries and which is material to the
conduct of the Business as currently conducted. There have not been any claims, allegations or
demands of any kind against Seller, the Companies or the Subsidiaries concerning any of the owned
or licensed Software set forth in Schedule 4.11(b) of the Seller Disclosure Schedule and,
to the Knowledge of Seller, such owned and licensed Software does not infringe upon or violate any
rights of any other Person. Seller has the right to grant the license contemplated by the Software
License Agreement.
(c) Except as disclosed in Schedule 4.11(c) of the Seller Disclosure Schedule, to the
Knowledge of Seller, the Companies or the Subsidiaries either: (i) own the entire right, title and
interest in and to the Copyrights, Patent Rights and Trademarks listed in Schedule 4.11(a)
of the Seller Disclosure Schedule, free and clear of any Encumbrance (other than Permitted
Encumbrances); or (ii) have a valid contractual right or license to use the same in the conduct of
the Business as currently conducted.
(d) Except as disclosed in Schedule 4.11(d) of the Seller Disclosure Schedule, to the
Knowledge of Seller: (i) all registrations for Copyrights, Patent Rights and Trademarks identified
in Schedule 4.11(a) as being owned by the Companies or the Subsidiaries are in force, and
all registration and renewal fees have been paid, and all applications to register any unregistered
Copyrights, Patent Rights and Trademarks owned by the Companies or the Subsidiaries are pending and
in good standing, all without challenge of any kind; and (ii) the Companies and the Subsidiaries
have the right to bring actions for infringement or unauthorized use of such Copyrights, Patent
Rights, Trademarks and Software owned by the Companies or the Subsidiaries.
28
(e) Except as disclosed in Schedule 4.11(e) of the Seller Disclosure Schedule, to the
Knowledge of Seller, since January 1, 2002 and prior thereto with respect to any matter that has
not been resolved, (i) no infringement by the Companies and the Subsidiaries of, or violation of
any agreements with respect to, any Intellectual Property of any other Person has occurred or
resulted in any way from the conduct of the Business and (ii) no written notice of a claim or
written allegation of any infringement of, or violation of any agreements with respect to, any
Intellectual Property of any other Person has been made or asserted to Seller or any of its
Affiliates, including the Companies and the Subsidiaries, in respect of the conduct of the Business
as currently conducted.
(f) Except as disclosed in Schedule 4.11(f) of the Seller Disclosure Schedule, no
material proceedings are pending or, to the Knowledge of Seller, threatened against the Companies
or the Subsidiaries which challenge the validity or ownership of any Copyright, Patent Rights or
Trademarks owned by the Companies or the Subsidiaries.
(g) Except as disclosed in Schedule 4.11(g) of the Seller Disclosure Schedule or
except in connection with the operation of any leased department, none of the Companies or the
Subsidiaries has licensed any Copyrights, Patent Rights or Trademarks identified on Schedule
4.11(a) of the Seller Disclosure Schedule to any Person (other than their respective
Affiliates).
(h) The consummation of the transactions contemplated by this Agreement will not result in any
material loss or impairment of any of the Companies’ or the Subsidiaries’ rights to use any
Copyrights, Patent Rights or Trademarks identified on Schedule 4.11(a) of the Seller
Disclosure Schedule as being owned by the Companies or the Subsidiaries or Software identified on
Schedule 4.11(b) of the Seller Disclosure Schedule as being owned or licensed by Seller,
the Companies or the Subsidiaries.
(i) None of the Companies or the Subsidiaries has entered into or is otherwise bound by any
consent, forbearance or any settlement agreement that limits the Companies’ or the Subsidiaries’
rights to use any Copyrights, Patent Rights or Trademarks identified on Schedule 4.11(a) of
the Seller Disclosure Schedule or Software identified on Schedule 4.11(b) of the Seller
Disclosure Schedule.
(j) Except as disclosed in Schedule 4.11(j) of the Seller Disclosure Schedule, to the
Knowledge of Seller, no Person is infringing or misappropriating any of the Copyrights, Patent
Rights or Trademarks identified on Schedule 4.11(a) of the Seller Disclosure Schedule as
being owned by the Companies or the Subsidiaries or Software identified on Schedule 4.11(b)
of the Seller Disclosure Schedule identified as being owned or licensed by Seller, the Companies or
the Subsidiaries.
(k) Schedule 4.11(k) of the Seller Disclosure Schedule contains a list of the
trademark registrations in Canada owned by the Companies and the Transferring Subsidiaries. Except
as disclosed in Schedule 4.11(k) of the Seller Disclosure Schedule, no material proceedings
are pending or, to the Knowledge of Seller, threatened against the Companies or the Subsidiaries
which challenge the validity or ownership of any trademark listed on Schedule 4.11(k) of
the Seller Disclosure Schedule.
29
(l) Schedule 4.11(l) of the Seller Disclosure Schedule contains a list of trademark
registrations and applications that may previously have been used in connection with the conduct of
the Business and which, to the Knowledge of Seller, are owned by one of the Companies or the
Transferring Subsidiaries.
Section 4.12 Title to Property. Except for assets disposed of in the ordinary course
of business consistent with past practice, the Companies and the Subsidiaries have valid title to
each item of equipment and other tangible personal property reflected on the Financial Statements
as owned by the Companies and the Subsidiaries, free and clear of all Encumbrances,
except for Permitted Encumbrances.
Section 4.13 No Violation, Litigation or Regulatory Action. Except as set forth in
Schedule 4.13 of the Seller Disclosure Schedule:
(i) to the Knowledge of Seller, the Companies and the Subsidiaries have complied with
all applicable Requirements of Law and Court Orders in respect of the Business, other than
(A) those instances of noncompliance that are not material to the Business and (B) matters
relating to Taxes or compliance with Environmental Laws or Environmental Permits, all
representations with respect to which are the subject of Sections 4.7 and
4.17, respectively;
(ii) as of the date hereof, there are no lawsuits, claims, suits, proceedings or
investigations pending (with respect to which the Companies or any Subsidiary has been
served or notified) or, to the Knowledge of Seller, threatened against the Companies or any
of the Subsidiaries in respect of the Business which would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and
(iii) as of the date hereof, there is no action, suit or proceeding pending or, to the
Knowledge of Seller, threatened that questions the legality of the transactions contemplated
by this Agreement or any of the Seller Ancillary Agreements.
Section 4.14 Contracts. Except as set forth in Schedule 4.14 of the Seller
Disclosure Schedule, as of the date of this Agreement, neither the Companies nor any of the
Subsidiaries (with respect to the Business) is a party to or bound by:
(i) any Contract for the future purchase or sale of real property;
(ii) any Contract for the purchase by the Companies or any of the Subsidiaries of
services (including advertising), supplies, components or equipment which involved the
payment of more than $500,000 in the fiscal year ended January 29, 2005 or is reasonably
expected to involve the payment of more than $500,000 in the current fiscal year (other than
Contracts relating to the purchase of merchandise in the ordinary course);
(iii) any Contract for the sale by the Companies or any of the Subsidiaries of any
services or products which involved the payment of more than $500,000 in the fiscal year
ended January 29, 2005 or is reasonably expected to involve the payment of more than
$500,000 in fiscal 2005;
30
(iv) any loan agreements, promissory notes, indentures, letters of comfort, letters of
credit, bonds or other instruments involving indebtedness for borrowed money in an amount in
excess of $500,000 or any guaranties of any such indebtedness;
(v) any mortgage agreement, deed or trust, security agreement, purchase money
agreement, conditional sales contract or capital lease created or assumed by, or permitted
to be created by written instrument made or accepted by, the Companies or the Subsidiaries
(other than (1) any purchase money agreement, conditional sales contract or capital lease
evidencing liens only on tangible personal property under which there exists an aggregate
future liability not in excess of $500,000 per contract or lease, (2) protective filings of
financing statements under the Uniform Commercial Code, (3) agreements evidencing
Encumbrances created by a landlord of Leased Properties and (4) any Permitted Real Property
Exceptions);
(vi) any license of Intellectual Property or Software received from or granted to third
parties which is material to the conduct of the Business as currently conducted, including
source code escrow agreements for Software (other than (1) any Intellectual Property or
Software being provided to Buyer pursuant to the Buyer Transition Services Agreement and (2)
non-exclusive implied licenses and non-exclusive, non-negotiated licenses for the use of
third-party Intellectual Property in connection with the sale of products or services);
(vii) any material partnership, joint venture or other similar agreement or
arrangement;
(viii) any Tax Sharing Agreement;
(ix) any Contract relating to business acquisitions or dispositions not yet
consummated; or
(x) any covenant not to compete that materially restricts the operation of the Business
as presently conducted, other than those providing for non-competition with a licensed
department within a particular store location.
Schedule 4.14 of the Seller Disclosure Schedule also sets forth those Assigned
Contracts that would be required to be set forth pursuant to clauses (i)-(x) above.
Section 4.15 Status of Contracts. Except as set forth in Schedule 4.15 of the
Seller Disclosure Schedule, each of the leases, contracts, licenses and other agreements listed in
Schedules 4.10 and 4.14 of the Seller Disclosure Schedule and Exhibit
2.6(a) (collectively, the “Business Agreements”) is in full force and effect. Neither
the Companies nor any of the Subsidiaries is in, or, to the Knowledge of Seller, is alleged to be
in, material breach or default under any of the Business Agreements. Seller has made available in
all material respects true, complete and correct copies of all Business Agreements to Buyer.
Section 4.16 ERISA. (a) Each Welfare Plan and Pension Plan maintained in connection
with the Business or in which at least one Business Employee participates is listed on Schedule
4.16(a) of the Seller Disclosure Schedule, and Seller has made available to Buyer either
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a true and correct copy of each such plan or a summary plan description used in connection
with such plan. With respect to each Company Plan, Seller has also made available to Buyer (as
applicable) the most recent actuarial and trust reports, the most recent Form 5500 and all
schedules thereto, the most recent IRS determination letter and, in the case of a Company Plan that
is funded through a trust, copies of such trust.
(b) Except as set forth in Schedule 4.16(b) of the Seller Disclosure Schedule, to the
Knowledge of Seller, with respect to each Welfare Plan and Pension Plan required to be listed on
Schedule 4.16(a) of the Seller Disclosure Schedule, (i) each such plan has been maintained
and operated in compliance in all material respects with the applicable requirements of the Code
and ERISA and the regulations issued thereunder and (ii) no material litigation or asserted claims
against the Companies or any of the Subsidiaries (with respect to the Business) exist with respect
to any such plan other than claims for benefits in the normal course of business.
(c) Except as set forth in Schedule 4.16(c) of the Seller Disclosure Schedule, each
Company Plan which is intended to be “qualified” within the meaning of Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue Service as to its
qualification under the Code, and Seller has no Knowledge of an occurrence of an event since the
date of such determination letter that would reasonably be expected to materially adversely affect
such qualification.
(d) None of the Company Plans has incurred any “accumulated funding deficiency” (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of each of the Company Plans ended prior to the date of this Agreement.
(e) Any material employee benefits other than those listed in Schedule 4.16(a) of the
Seller Disclosure Schedule relating to the Business which are in effect as of the Cut-Off Date and
as to which the Companies or any of the Subsidiaries (with respect to the Business) has or may have
in the future any liability (other than regular wages or salary), such as any bonus, incentive or
annual profit sharing programs, any fringe benefits described in Section 132 of the Code, any
education assistance plans under Section 127 of the Code and any dependent care assistance plans
under Section 129 of the Code are listed in Schedule 4.16(e) of the Seller Disclosure
Schedule, and any written document which exists with respect to any such employee benefit has been
made available to Buyer by Seller.
(f) Schedule 4.16(f) of the Seller Disclosure Schedule identifies (i) the position of
each Business Employee who is a participant in the Saks Incorporated Amended and Restated 2000
Change in Control and Material Transaction Severance Plan (the “Severance Pay Plan”) and
(ii) the category of severance benefits to which each such Business Employee is entitled under the
Severance Pay Plan. A revised Schedule 4.16(f), which shall include the names of the
individuals who are participants in the Severance Pay Plan, shall be delivered by Seller to Buyer
at the Closing. Except as set forth in Schedule 4.16(f) of the Seller Disclosure Schedule,
the execution of, and performance of the transactions contemplated in, this Agreement will not
constitute an event under any Company Plan that will result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
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increase in benefits or obligation to fund benefits with respect to any current or former
employee or beneficiary thereof.
(g) Except as set forth in Schedule 4.16(g) of the Seller Disclosure Schedule, neither
any Company nor any Subsidiary maintains or is obligated to provide benefits under any life,
medical or health Company Plan (other than as an incidental benefit under a Company Plan qualified
under Section 401(a) of the Code) that provides benefits to retirees or other terminated employees
other than benefit continuation rights under COBRA.
(h) Neither any Company, any Subsidiary nor any other Person controlled by or under common
control with any of the foregoing within the meaning of Section 4001 of ERISA has at any time
within the six years preceding the Closing Date contributed to any “multiemployer plan,” as that
term is defined in Section 4001 of ERISA.
(i) No action by Seller or any of its Affiliates, including the Companies and the
Subsidiaries, pursuant to this Agreement will result in any liability to the Pension Benefit
Guaranty Corporation (“PBGC”) under Section 4062, 4063, 4064 or 4069 of ERISA, or
otherwise, with respect to any Company or any Subsidiary or any Person controlled by or under
common control with any of the foregoing within the meaning of Section 4001 of ERISA, and, to the
Knowledge of Seller, no event or condition exists or has existed which would reasonably be expected
to result in any material liability to the PBGC with respect to any Company, any Subsidiary or any
other such entities. Except as set forth in Section 4.16(i) of the Seller Disclosure
Schedule, no “reportable event” (other than a reportable event for which the 30-day notice
requirement has been waived) within the meaning of Section 4043 of ERISA has occurred prior to the
date hereof with respect to any Company Plan that is a defined benefit plan under Section 3(35) of
ERISA.
Section 4.17 Environmental Compliance. Except as set forth in Schedule 4.17
of the Seller Disclosure Schedule: (i) to the Knowledge of Seller, each of the Companies and
Subsidiaries is and has been in compliance in all material respects with all applicable
Environmental Laws and Environmental Permits; (ii) there are no material actions or proceedings
pending, or to the Knowledge of Seller, threatened, against any Company or any Subsidiary with
respect to the Business (or against Seller relating to any Company or any Subsidiary with respect
to the Business) alleging noncompliance with or liability under any Environmental Law and neither
any Company nor any Subsidiary is subject to any order, decree, injunction or lien by any
Governmental Body or any claim filed by any third Person relating to liability under any
Environmental Law; and (iii) none of the Companies or any of the Subsidiaries has received written
notice that such Company or Subsidiary is liable under Environmental Laws relating to the off-site
disposal of wastes generated by the operations of any Company or any Subsidiary and, to the
Knowledge of Seller, neither the Companies nor the Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled, or released any Hazardous
Materials in a manner that has given or would to give rise to material liabilities under applicable
Environmental Laws, including any material liability for response costs, corrective action costs,
personal injury, property damage, natural resources damage or attorney or consultant fees under
Environmental Laws; (iv) to the Knowledge of Seller, none of the Real Estate (including soils,
groundwater, surface water, buildings, or other structures) is contaminated with any Hazardous
Material in such a manner or concentration that any Company or any Subsidiary would be required
under any Environmental
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Laws to remedy the existence of such Hazardous Material and all properties formerly owned,
leased or operated by the Company or any Subsidiary were not contaminated with Hazardous Material
during the period of ownership or operation by any Company or any Subsidiary in such a manner or
concentration that any Company or Subsidiary would be required under any Environmental Law to
remedy the existence of such Hazardous Material.
Section 4.18 Employee Relations and Agreements. (a) Schedule 4.18(a) of the
Seller Disclosure Schedule contains a true and complete listing (excluding names and any other
personally identifying information), as of a recent date, of all Business Employees whose annual
base salaries exceed $150,000 (“Key Employees”), their annual base salary and date of hire.
(b) Since the Financial Statements Date through the date of this Agreement, except as
disclosed on Schedule 4.18(b) of the Seller Disclosure Schedule or as has occurred in the
ordinary course of business consistent with past practices, neither the Companies nor any
Subsidiary has: (i) increased in any material respect the compensation payable or to become payable
to or for the benefit of any Business Employees, (ii) provided any Business Employees with any
material increase in security or tenure of employment, (iii) increased in any material respect the
amount payable to any Business Employees upon the termination of such persons’ employment, or (iv)
increased, augmented or improved in any material respect the benefits granted to or for the benefit
of its Business Employees under any bonus, profit sharing, pension, retirement, deferred
compensation, insurance or other direct or indirect benefit plan or arrangement, in each case,
except as may be required under existing agreements.
(c) Except as set forth in Schedule 4.18(c) of the Seller Disclosure Schedule, neither
the Companies nor any of the Subsidiaries is a party to any collective bargaining agreement or
other contract with any labor union representing Business Employees.
(d) Except as set forth in Schedule 4.18(d) of the Seller Disclosure Schedule, no
union or similar organization represents any Business Employees and, to the Knowledge of Seller, no
such organization is attempting to organize such employees.
(e) Except as set forth in Schedule 4.18(e) of the Seller Disclosure Schedule, no
director, officer or employee of the Companies or any of the Subsidiaries is a party to any
employment or other agreement with the Companies or its Subsidiaries that entitles him or her to
material compensation or other material consideration (other than any retention agreements that do
not involve payments by Buyer, the Companies or the Subsidiaries to any such director, officer or
employee after the Closing). Schedule 4.18(e) sets forth a list of the position of each
Key Employee who is party to a retention agreement (which shall not involve payments by Buyer, the
Companies or the Transferring Subsidiaries to any such Key Employee following the Closing) and the
amount to which such Key Employee is entitled under such retention agreement.
(f) Since February 2, 2003 there has been no material walk out, strike, slowdown, picketing or
work stoppage by employees of any Company or any Subsidiary. During that period each Company and
each Subsidiary has complied in all material respects with all applicable Requirements of Law
relating to the employment of labor, including those relating to wages, hours and collective
bargaining.
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(g) There is no pending or, to the Knowledge of Seller, threatened action, complaint,
arbitration, proceeding or investigation against any Company or any Subsidiary by or before (or, in
the case of any threatened matter, that could be brought before) any court, Governmental Body,
administrative agency, board, commission or arbitrator brought by or on behalf of any prospective,
current or former employees of any Company or any Subsidiary that would reasonably be expected to
have a Material Adverse Effect.
(h) Schedule 4.18(h) of the Seller Disclosure Schedule sets forth for each Company and
each Subsidiary, each (i) agreement (other than under any employee benefit plan) with any Key
Employee the benefits of which are contingent or vest, or the terms of which are materially
altered, upon the occurrence of a transaction involving any Company or any Subsidiary of the nature
contemplated by this Agreement and (ii) agreement with any Key Employee providing any term of
employment or compensation guarantee.
Section 4.19 Insurance. True and complete copies or accurate summaries of all
insurance policies relating to the Business have been made available to Buyer. To the Knowledge of
Seller, Seller has not taken any action or omitted to take any action that would be reasonably
likely to cause any such insurance policy to cease to be in full force and effect.
Section 4.20 Sufficiency of Assets. To the Knowledge of Seller, the assets of the
Companies and the Subsidiaries constitute all of the assets necessary and sufficient to operate the
Business as heretofore conducted by the Companies and the Subsidiaries other than (a) assets that,
individually and in the aggregate, are not material to the Business, (b) items identified in
Schedule 4.20 of the Seller Disclosure Schedule as being excluded, (c) assets, properties
and rights that are used by Seller to provide services pursuant to the Buyer Transition Services
Agreement, (d) Software subject to the Software License Agreement, (e) assets, properties or rights
that are used by Seller to perform its obligations under the Private Brands Agreement and (f) the
shared contracts, agreements and arrangements identified by category in Schedule 4.20 of
the Seller Disclosure Schedule. Nothing in this Section 4.20 constitutes an additional
representation or warranty with respect to title to or the condition of any assets or properties
(whether real or personal, tangible or intangible, owned, leased or held under license), any and
all representations or warranties with respect to which are set forth in other sections of this
Article IV.
Section 4.21 No Brokers. No broker, investment banker or other Person, other than
Xxxxxxx, Xxxxx & Co. and Citigroup Global Markets Inc., the fees and expenses of which will be paid
by Seller, is entitled to any broker’s, finder’s or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements made by or on behalf
of Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate the transactions
contemplated hereby, Buyer hereby represents and warrants to Seller as follows:
Section 5.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania. Buyer has the
corporate power and corporate authority to own or lease and operate its assets and
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to carry on its businesses in the manner that they were conducted immediately prior to the
date of this Agreement.
Section 5.2 Authority of Buyer; Conflicts. (a) Buyer has the corporate power and
corporate authority to execute, deliver and perform this Agreement and each of the Buyer Ancillary
Agreements. The execution, delivery and performance of this Agreement and the Buyer Ancillary
Agreements by Buyer have been duly authorized and approved by Buyer’s board of directors and do not
require any further authorization or consent of Buyer or its shareholders. This Agreement has been
duly authorized, executed and delivered by Buyer and (assuming the valid authorization, execution
and delivery of this Agreement by Seller) is the legal, valid and binding agreement of Buyer
enforceable in accordance with its terms, and each of the Buyer Ancillary Agreements has been duly
authorized by Buyer and upon execution and delivery by Buyer will be (assuming the valid
authorization, execution and delivery by Seller, where a Seller is a party, and any other party or
parties thereto) a legal, valid and binding obligation of Buyer enforceable in accordance with its
terms, subject, in the case of this Agreement and each of the Buyer Ancillary Agreements, to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating
to or affecting creditors’ rights generally and to general equity principles.
(b) Except as set forth in Schedule 5.2 of the disclosure schedule delivered by Buyer
to Seller concurrently with the execution of this Agreement (the “Buyer Disclosure
Schedule”), the execution and delivery of this Agreement or any of the Buyer Ancillary
Agreements by Buyer, the consummation of any of the transactions contemplated hereby or thereby by
Buyer and compliance with or fulfillment of the terms, conditions and provisions hereof or thereof
by Buyer will not:
(i) assuming the receipt of all necessary consents and approvals and the filing of all
necessary documents as described in Section 5.2(b)(ii), result in a breach of the
terms, conditions or provisions of, or constitute a default, an event of default or an event
creating rights of acceleration, termination or cancellation or a loss of rights under (1)
the articles of incorporation or bylaws of Buyer, (2) any note, instrument, contract,
agreement, mortgage, lease, franchise or financial obligation to which Buyer is a party or
any of its properties is subject or by which Buyer is bound, (3) any Court Order to which
Buyer is a party or by which it is bound or (4) any Requirements of Law affecting Buyer,
other than, in the case of clauses (2) and (4) above, any such breaches, defaults, rights or
loss of rights that, individually or in the aggregate, would not materially impair the
ability of Buyer to perform its obligations hereunder or prevent the consummation of any of
the transactions contemplated hereby, or
(ii) require the approval, consent, authorization or act of, or the making by Buyer of
any declaration, filing or registration with, any Governmental Body, except for (1) in
connection, or in compliance, with the provisions of the HSR Act, (2) the filing with the
SEC of such reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (3) applicable requirements,
if any, of Nasdaq, (4) such consents, approvals, filings and notices as may be required
under any Requirements of Law with respect to environmental matters pertaining to any
notification, disclosure or required approval triggered by the transactions contemplated by
this Agreement, (5) such filings as may be required in
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connection with the Taxes described in Section 7.2(a)(vi) and (6) such
approvals, consents, authorizations, declarations, filings or registrations the failure of
which to be obtained or made would not, individually or in the aggregate, materially impair
the ability of Buyer to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated hereby.
Section 5.3 No Violation, Litigation or Regulatory Action. Except as set forth in
Schedule 5.3 of the Buyer Disclosure Schedule:
(i) as of the date hereof, there are no lawsuits, claims, suits, proceedings or
investigations pending (with respect to which Buyer has been served or otherwise notified)
or, to the Knowledge of Buyer, threatened against Buyer or its subsidiaries which would,
individually or in the aggregate, materially impair the ability of Buyer to perform its
obligations hereunder or prevent the consummation of any of the transactions contemplated
hereby; and
(ii) as of the date hereof, there is no action, suit or proceeding pending or, to the
Knowledge of Buyer, threatened that questions the legality of the transactions contemplated
by this Agreement or any of the Buyer Ancillary Agreements.
Section 5.4 Financing. Buyer has, or has received binding (subject to the terms and
conditions thereof) written commitments from financially responsible financial institutions to
obtain, the funds (the “Financing”) necessary to consummate the transactions contemplated
by this Agreement (collectively, the “Commitment Letters”). Buyer has provided Seller with
true and complete copies of all Commitment Letters. Except as permitted pursuant to Section
6.15(a), none of the Commitment Letters has been amended or modified, and the respective
commitments contained in the Commitment Letters have not been withdrawn or rescinded. The
Commitment Letters are in full force and effect. There are no conditions precedent or other
contingencies related to the funding of the full amount of the Financing, other than as set forth
or contemplated in the Commitment Letters. As of the date of this Agreement, Buyer does not have
any reason to believe that any of the conditions to the Financing will not be satisfied or that the
Financing will not be available on the Closing Date. Buyer shall keep Seller informed with respect
to all material activity concerning the status of such Financing, and shall give Seller prompt
notice of any material adverse change with respect to such Financing. Buyer has provided Seller
with a description of the proposed sources and uses of the Financing. As of the date hereof, Buyer
reasonably believes that such sources and uses are true and correct in all material respects.
Buyer shall promptly inform Seller in writing of any change in such sources and uses so that the
representations and warranties contained in this paragraph remain true and correct in all material
respects.
Section 5.5 Solvency. Assuming the Closing has occurred and that the Financing (or
alternative financing as contemplated by Section 6.15(a)) has been obtained, immediately
following the consummation of the transactions contemplated by this Agreement, (a) the fair value
of the assets of Buyer and each of its subsidiaries will exceed their respective debts and
liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the
property of Buyer and each of its subsidiaries will be greater than the amount that will be
required to pay the probable liability of their respective debts and other liabilities,
subordinated, contingent or otherwise, as such debts and liabilities, subordinated, contingent or
otherwise,
37
become absolute and matured; (c) Buyer and each of its subsidiaries will be able to pay their
respective debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) neither Buyer nor any of its subsidiaries will
have unreasonably small capital with which to conduct the business in which they are engaged as
such business is now conducted and is proposed to be conducted following the Effective Time.
Section 5.6 Investment Intent. Buyer is acquiring the Securities as an investment for
its own account and not with a view to the distribution thereof. Buyer shall not sell, transfer,
assign, pledge or hypothecate any of the Securities in the absence of registration under, or
pursuant to an applicable exemption from, federal and applicable state securities laws.
Section 5.7 No Brokers. No broker, investment banker or other Person, other than
Lazard Frères & Co. LLC, the fees and expenses of which will be paid by Buyer, is entitled to any
broker’s, finder’s or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of Buyer.
ARTICLE VI
ACTION PRIOR TO THE CLOSING DATE
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the following actions between the
date hereof and the Closing Date:
Section 6.1 Access to and Use of Information. Subject to Buyer’s obligations under
the Confidentiality Agreement, Seller shall afford to the officers, employees and authorized
representatives of Buyer (including independent public accountants and attorneys) reasonable access
during normal business hours, upon reasonable advance notice, to the offices, properties and
business and financial records (including computer files, retrieval programs and similar
documentation) of the Companies and the Subsidiaries to the extent Buyer shall reasonably deem
necessary for Buyer to operate the Business after the Effective Time and shall furnish to Buyer or
its authorized representatives such additional information concerning the Business (as conducted by
the Companies and the Subsidiaries) as shall be reasonably requested; provided,
however, that Seller shall not be required to violate any obligation of confidentiality to
which Seller, the Companies or any Subsidiary is subject (although Seller shall use commercially
reasonable efforts to cause such obligation of confidentiality to be waived, provided it is
understood that Seller shall not be required to make any payments or offer to grant any
accommodation, financial or otherwise, to any third party to obtain any such waiver) or to waive
any privilege which any of them may possess in discharging its obligations pursuant to this
Section 6.1; provided, further, Seller shall not be required to furnish or
otherwise make available to Buyer competitively sensitive information relating to areas of the
Business in which Buyer or its Affiliates compete against the Companies and Subsidiaries; and,
provided, further, that neither Buyer nor any of its officers, employees, agents or
representatives shall have access to any personnel of the Business or any other businesses of
Seller or any of its Affiliates other than the persons identified on Schedule 6.1 of the
Seller Disclosure Schedule without Seller’s prior written consent, which shall not be unreasonably
withheld or delayed. Buyer agrees that such investigation shall be conducted in such a manner as
not to interfere unreasonably with the operations of the Companies, the Subsidiaries or Seller.
Seller acknowledges and agrees that Buyer shall have the right to disclose confidential information
of the Business in any confidential information or offering memorandum related to the Financing
(which memorandum may be used
38
by Buyer’s Financing sources in their marketing of the Financing) to the extent that counsel
to Buyer advises Buyer that such disclosure would be necessary if the confidential information or
offering memorandum were to satisfy the requirements of a registered public offering of the
securities pursuant to a Registration Statement on Form S-1 or Buyer’s Financing sources advise
Buyer that the absence of such disclosure would materially adversely affect the marketing of the
Financing; provided, that Buyer shall include appropriate and customary confidentiality
legends in such confidential offering memorandum; and provided further, that Buyer
shall provide Seller with a reasonable right to review any portion of the confidential offering
memorandum relating to the Business or the transactions contemplated hereby.
Section 6.2 Notifications. Each of Buyer and Seller shall promptly notify the other
of any action, suit or proceeding that shall be instituted or threatened against such party to
restrain, prohibit or otherwise challenge the legality of any transaction contemplated by this
Agreement. Each party hereto shall promptly notify the other of any lawsuit, claim, proceeding or
investigation that may be threatened, brought, asserted or commenced against any of the Companies
or any Subsidiary, Seller or Buyer, as the case may be, that would have been listed in Schedule
4.13 of the Seller Disclosure Schedule or Schedule 5.3 of the Buyer Disclosure
Schedule, as the case may be, if such lawsuit, claim, proceeding or investigation had arisen prior
to the date hereof.
Section 6.3 Consents of Third Parties; Governmental Approvals.
(a) During the period prior to the Closing Date, Buyer shall act diligently and reasonably,
and Seller, upon the request of Buyer, shall use its commercially reasonable efforts to cooperate
with Buyer, in attempting to secure any consents, waivers and approvals of any third party
(including any Governmental Body) required to be obtained to consummate the transactions
contemplated by this Agreement; provided, however, that notwithstanding anything to
the contrary in this Agreement, such action shall not include any requirement of Seller or any of
its Affiliates (including the Companies and the Transferring Subsidiaries on or prior to the
Closing Date) or Buyer or any of its Affiliates to pay money to any third party, commence or
participate in any litigation, offer or grant any accommodation or undertake any obligation or
liability (in each case financial or otherwise) to any third party (including any Governmental
Body); provided, further, that prior to the Closing neither Buyer nor its officers,
employees or authorized representatives may contact any customer, supplier, lessor or other third
party (other than any Governmental Body) in connection with any such consent without Seller’s prior
written consent (which consent shall not be unreasonably withheld or delayed).
(b) Upon the terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other party in doing all things
necessary, proper or advisable to consummate, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including: (i) obtaining all necessary actions or
non-actions, waivers, consents and approvals from all Governmental Bodies and making all necessary
registrations and filings (including filings with Governmental Bodies) and taking all steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Body (including those in connection with the HSR Act as provided in Section
6.5), (ii) defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the transactions
39
contemplated hereby, including seeking to have any stay or temporary restraining order entered
into by any court or other Governmental Body vacated or reversed, (iii) in the case of Buyer,
promptly, if required by any Governmental Body in order to consummate the transactions contemplated
hereby, taking all steps and making all undertakings to secure antitrust clearance (including steps
to effect the sale or other disposition of particular properties of Buyer, its subsidiaries and/or
the Companies and the Transferring Subsidiaries and to hold separate such properties pending such
sale or other disposition unless any such action would reasonably be expected to have a material
adverse effect on Buyer and its subsidiaries, taken as a whole, or the Business, assuming for these
purposes that the transactions contemplated by this Agreement have not been completed), (iv)
keeping the other party informed in all material respects of any material communication received by
such party from, or given by such party to, any Governmental Body and of any material communication
received or given in connection with any proceeding by a private party relating to the transactions
contemplated by this Agreement, in each case regarding any of the transactions contemplated hereby,
(v) permitting the other party to review any material communication delivered to, and consulting
with the other party in advance of any meeting or conference with, any Governmental Body relating
to the transactions contemplated by this Agreement or in connection with any proceeding by a
private party, and giving the other party the opportunity to attend and participate in such
meetings and conferences (to the extent permitted by such Governmental Body or private party), and
(vi) executing and delivering any additional instruments necessary to consummate the transactions
contemplated by this Agreement. No party to this Agreement shall consent to any voluntary delay of
the consummation of the transactions contemplated hereby at the behest of any Governmental Body
without the consent of the other party to this Agreement, which consent shall not be unreasonably
withheld or delayed.
Section 6.4 Operations Prior to the Closing Date. (a) Seller shall use its
commercially reasonable efforts to, and to cause the Companies and the Subsidiaries to, operate and
carry on the Business in the ordinary course and substantially as operated immediately prior to the
date of this Agreement. Consistent with the foregoing, Seller shall use its commercially
reasonable efforts to, and shall cause the Companies and the Subsidiaries to use their commercially
reasonable efforts consistent with good business practice to, preserve the goodwill of the
suppliers, contractors, licensors, employees, customers, distributors and others having business
relations with the Companies and the Subsidiaries (with respect to the Business).
(b) Notwithstanding Section 6.4(a), except as set forth on Schedule 6.4 of the
Seller Disclosure Schedule, except as contemplated by this Agreement (including Section
6.10) or except with the express written approval of Buyer (which Buyer agrees shall not be
unreasonably withheld or delayed), Seller shall not (with respect to the Business) permit the
Companies and the Subsidiaries, other than in the ordinary course of business consistent with past
practice, to:
(i) make any material change in the Business or their operations, except such changes
as may be required to comply with any applicable Requirements of Law;
(ii) purchase or otherwise acquire any assets or make any Capital Expenditures, in each
case that are material, individually or in the aggregate, to the Business (other than (A)
purchases of inventory in the ordinary course of business consistent with past practice, (B)
Pre-Approved Capital Expenditures and Approved
40
Capital Expenditures, (C) Capital Expenditures required under any Real Estate Agreement
or Lease Agreement for capital improvements that are not controlled exclusively by Seller,
the Companies or the Subsidiaries (so long as any such Capital Expenditures are disclosed to
Buyer in writing prior to any expenditure or commitment therefor), and (D) Capital
Expenditures required by any Governmental Body;
(iii) exercise any option to extend a lease listed on Schedule 4.9(a)(i) or
materially adversely amend or modify any Lease Agreement (other than the lease modifications
contemplated by Section 2.6(b)) or Real Estate Agreement;
(iv) create, incur or assume, or agree to create, incur or assume, any indebtedness for
borrowed money (other than money borrowed or advances from any of its Affiliates in the
ordinary course of business) or grant any Encumbrance with respect to the assets of any of
the Companies or any of the Subsidiaries, in each case other than Permitted Encumbrances,
Permitted Real Property Exceptions and Encumbrances imposed by the Credit Agreement;
(v) transfer any material assets (other than cash in excess of Register Cash prior to
the Effective Time and other than amounts that have been withheld from Business Employees
and retained by Seller and its Affiliates) to Seller or any of its Affiliates (other than
the Companies or any Subsidiary);
(vi) institute any increase in the benefits available under any profit-sharing, bonus,
incentive, deferred compensation, insurance, pension, retirement, medical, hospital,
disability, welfare or other employee benefit plan with respect to any Business Employees,
other than as expressly required by the terms of any such plan as in effect on the date of
this Agreement or Requirements of Law;
(vii) (A) grant to any Key Employee any increase in compensation or other material
benefits (excluding any retention agreements that do not involve payments by Buyer, the
Companies or the Subsidiaries to any such Key Employee after the Closing) or grant to any
Business Employee any material increase in compensation or other benefits (excluding any
retention agreements that do not involve payments by Buyer, the Companies or the
Subsidiaries to any such Key Employee after the Closing) except as may be required under
existing agreements or (B) designate any Business Employee as a participant in the Severance
Pay Plan pursuant to Section 2.A(ii) of the Severance Pay Plan;
(viii) redeem or otherwise acquire any shares of their capital stock or issue any
capital stock or any option, warrant or right relating thereto;
(ix) enter into or amend any collective bargaining agreement;
(x) acquire by merging or consolidating with, or by purchasing a substantial portion of
the stock or assets of, any business or any corporation, partnership, limited liability
company association or other business organization or division thereof;
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(xi) sell or otherwise dispose of any assets that are material, either individually or
in the aggregate, to the Business (other than sales of inventory in the ordinary course of
business consistent with past practice);
(xii) materially adversely modify or amend any Business Agreement;
(xiii) make any material change in the accounting methods or policies applied in the
preparation of the Financial Statements, unless such change is required by GAAP;
(xiv) amend the charter, bylaws or similar organizational documents of the Companies or
any of the Subsidiaries; or
(xv) agree to do any of the foregoing.
Section 6.5 Antitrust Law Compliance. As promptly as practicable after the date
hereof, Buyer and Seller shall file with the United States Federal Trade Commission (the
“FTC”) and the Antitrust Division of the United States Department of Justice (the
“DOJ”) the notifications and other information required to be filed under the HSR Act, or
any rules and regulations promulgated thereunder, with respect to the transactions contemplated
hereby. Each party warrants that all such filings by it will be, as of the date filed, true and
accurate in all material respects and in material compliance with the requirements of the HSR Act
and any such rules and regulations. Each of Buyer and Seller (i) agrees to make available to the
other such information as each of them may reasonably request relative to its business, assets and
property as may be required of each of them to file any additional information requested by such
agencies under the HSR Act and any such rules and regulations, (ii) shall request early termination
of the thirty (30) day notification period provided for under the HSR Act and (iii) shall keep each
other apprised of the status of any communications with, and inquiries or requests for additional
information from, the FTC or the DOJ.
Section 6.6 Termination of Certain Intercompany Accounts; Intercompany Agreements.
(a) At or prior to the Closing, Seller shall release, cancel, terminate or otherwise settle in the
most tax-efficient manner all intercompany accounts among Seller and its Affiliates relating to the
Companies and the Transferring Subsidiaries at or prior to the Effective Time. For the avoidance
of doubt, Reference Working Capital and Final Working Capital shall be determined without giving
effect to any intercompany accounts or the cancellation thereof.
(b) All rights and obligations of Seller and its Affiliates (other than the Companies and the
Transferring Subsidiaries), on the one hand, and of the Companies and the Transferring
Subsidiaries, on the other hand, under agreements (other than the Buyer Ancillary Agreements and
the Seller Ancillary Agreements) (together, the “Intercompany Agreements”) between Seller
and its Affiliates (other than the Companies and the Transferring Subsidiaries), on the one hand,
and the Companies and the Transferring Subsidiaries, on the other hand, including any Tax Sharing
Agreement, shall terminate or otherwise be released, including by way of assignment of rights and
obligations of a Company or a Subsidiary to Seller or one of its Affiliates, as of the Effective
Time. Following the Effective Time, neither Seller and its Affiliates (other than the Companies
and the Transferring Subsidiaries), on the one hand, nor the Companies and the Transferring
Subsidiaries, on the other hand, shall have any obligation or liability to the other with respect
to the Intercompany Agreements.
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Section 6.7 Indebtedness; Release of Guaranties. Prior to the Closing, Buyer shall
(a) obtain letters of credit in replacement of the letters of credit of Seller or any Affiliate of
Seller set forth in Schedule 6.7 of the Seller Disclosure Schedule (the “Identified
Guaranties”), which shall be effective as of the Effective Time and shall be in such form and
from such financial institutions satisfactory to the holder of such Identified Guaranty, and (b)
cause Seller or such Affiliate to be fully released, as of the Cut-Off Date, in respect of all
obligations under such Identified Guaranties. With respect to any other obligations of Seller
under any guaranties, letters of credit, letters of comfort, bid bonds or performance or surety
bonds or cash or other collateral obtained or given by Seller relating to the Business which Seller
notifies Buyer in writing (the “Other Guaranties”), Buyer shall use commercially reasonable
efforts to cause Seller to be fully released, in each case, effective as promptly as practicable
after the Cut-Off Date, in respect of all obligations of Seller and any of its Affiliates under any
such Other Guaranties. With respect to any obligations of any Company or any Subsidiary under any
guaranties, letters of credit, letters of comfort, bid bonds or performance or surety bonds or cash
or other collateral obtained or given by any Company or any Subsidiary relating to any business of
Seller and its Affiliates other than the Business (the “Other Company Guaranties”), Seller
shall use commercially reasonable efforts to cause each Company and each Subsidiary to be fully
released, in each case, effective as promptly as practicable after the Cut-Off Date, in respect of
all obligations of any Company and any of their Affiliates under any such Other Company Guaranties.
If, at or prior to the Closing, after using commercially reasonable efforts to do so, Buyer or
Seller, as the case may be, is unable to effect such a substitution and release with respect to (i)
any Other Guaranty, (ii) any Identified Guaranty or any Other Company Guaranty, Buyer shall
indemnify Seller against any and all Loss or Expense arising from such Other Guaranty or such
Identified Guaranty and Seller shall indemnify Buyer and its Affiliates, including the Companies
and the Transferring Subsidiaries, against any and all Loss and Expense arising from such Other
Company Guaranty. Without limiting the foregoing, after the Closing, Buyer will not, and will not
permit any of is Affiliates to, renew, extend, amend or supplement any loan, contract, lease or
other obligation that is covered by an Other Guaranty or an Identified Guaranty without providing
Seller with evidence reasonably satisfactory to Seller that Seller’s Other Guaranty or Identified
Guaranty has been released and Seller will not, and will not permit any of its Affiliates to,
renew, extend, amend or supplement any loan, contract, lease or other obligation that is covered by
an Other Company Guaranty without providing Buyer with evidence reasonably satisfactory to Buyer
that such renewal, extension, amendment or supplement has been released. Any cash or other
collateral posted by Seller or one of its Affiliates in respect of any Other Guaranty or any
Identified Guaranty shall be delivered to Seller.
Section 6.8 Ancillary Agreements. (a) At the Closing, Seller and Buyer shall enter
into an agreement substantially in the form of Exhibit E providing for certain transition
services by Seller and its Affiliates for Buyer and its Affiliates after the Effective Time (the
“Buyer Transition Services Agreement”).
(b) At the Closing, Seller and Buyer shall enter into an agreement substantially in the form
of Exhibit F providing for certain transition services by Buyer and its Affiliates for
Seller and its Affiliates after the Effective Time (the “Seller Transition Services
Agreement”).
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(c) At the Closing, the Companies and Seller shall enter into an agreement substantially in
the form of Exhibit G, providing for the purchase and sale by the Companies of private
brands after the Effective Time (the “Private Brands Agreement”).
(d) At the Closing, Buyer will cause the Companies and the Transferring Subsidiaries to enter
into a trademark and trade name license agreement substantially in the form of Exhibit H,
granting Seller and Affiliates of Seller the right to use the NDSG Owned Brands (the “Trademark
License Agreement”).
(e) At the Closing, Buyer and Seller shall enter into an agreement substantially in the form
of Exhibit I, providing Buyer and its Affiliates after the Effective Time with a
non-exclusive license to use certain Software owned by Seller and its Affiliates and used in
connection with the conduct of the Business (the “Software License Agreement”).
(f) At or prior to the Closing, Seller and the Companies will enter into one or more
agreements substantially in the form of Exhibit J, relating to the operation of the Club
Xxxxx Xx business (the “CLL Licensed Department Agreements”).
Section 6.9 Household. As promptly as practicable after the date hereof (but
effective at the Effective Time), Buyer shall, with respect to stores operated by the Companies and
the Transferring Subsidiaries, either (a) enter into a program agreement with Household Bank (SB),
N.A. (“Household Bank”) that is acknowledged by Household Bank to satisfy the requirements
set forth in Section 9.05(f) of the Program Agreement dated as of April 15, 2003 and as amended as
of April 15, 2003 and June 15, 2004 by and among Seller, XxXxx’x, Inc. and Household Bank (the
“Program Agreement”) (which acknowledgment is in a form reasonably satisfactory to Seller)
or (b) (i) purchase the “Accounts” and “Account Receivables” (as each such term is defined in the
Program Agreement) associated with such stores from Household Bank for the price set forth in
Section 9.05(b) of the Program Agreement and (ii) pay over to Seller on the effective date of such
purchase cash in the amount equal to the difference between (x) the amount paid to Household Bank
in connection with such purchase and (y) the amount equal to the price set forth in Sections
9.06(b)(i) and (ii) of the Program Agreement multiplied by a fraction, the numerator of which shall
be the sum of the Account Receivables associated with the stores of the Business (as of the date of
purchase) and the denominator of which shall be the sum of the Account Receivables associated with
all stores (including the stores of the Business) covered by the Program Agreement (as of the date
of purchase). Buyer agrees to obtain all necessary consents and approvals from all Governmental
Bodies and to make all necessary registrations and filings in order to effect this Section
6.9. At Buyer’s request, Seller agrees to use commercially reasonable efforts to cooperate
with Buyer in complying with this Section 6.9; provided, however, that
Seller and its Affiliates shall not be required to make any payments or offer or grant any
accommodation (financial or otherwise) to any third party with respect to this Section 6.9.
Section 6.10 Treatment of Specified Assets and Liabilities. (a) Prior to the Cut-Off
Date, Seller shall be entitled to cause the transfer (by dividend or otherwise) of the following
assets of the Companies and the Subsidiaries to an Affiliate of Seller: (i) any cash, cash
equivalents or marketable securities held by the Companies or the Transferring Subsidiaries (other
than Register Cash, such assets of any trust maintained by the Companies and the Transferring
Subsidiaries for the purpose of paying benefits under any of the Company Plans and
44
amounts withheld from Business Employees to the extent the corresponding obligation with
respect to the payment of such amounts is the responsibility of Buyer, the Companies or the
Transferring Subsidiaries pursuant to the terms of this Agreement), (ii) unless prohibited by the
Program Agreement, any receivables, (iii) the downtown Des Moines, Iowa Younkers store and any
assets (together with all liabilities) exclusively related thereto (other than those exclusively
relating to Business Employees) and (iv) furniture, fixtures or equipment used primarily by the
employees listed on Exhibit L. Seller acknowledges and agrees that it will pay in full any
and all checks and bank drafts outstanding as of the Effective Time and not yet debited against the
accounts maintained by Seller or any of its Affiliates (including the Companies and the
Transferring Subsidiaries) on behalf of the Companies and the Transferring Subsidiaries (which
accounts shall be retained by Seller).
(b) Prior to the Closing, Seller and its Affiliates shall be entitled to effectuate the
transactions contemplated by the Plan of Reorganization.
(c) Notwithstanding anything to the contrary in this Agreement, all receipts by and
receivables of Seller, the Companies or any Subsidiaries received or arising on or before the
Cut-Off Date (including the receivable associated with the sale of the downtown Des Moines, Iowa
Younkers), including cash (excluding Register Cash, assets of any trust maintained by the Companies
and the Transferring Subsidiaries for the purpose of paying benefits under any of the Company Plans
and amounts withheld from Business Employees to the extent the corresponding obligation with
respect to the payment of such amounts is the responsibility of Buyer, the Companies or the
Transferring Subsidiaries pursuant to the terms of this Agreement), checks and bank drafts (whether
cleared before or after the Effective Time), and proceeds from third-party credit card or debit
card transactions (whether posted before or after the Effective Time) shall be excluded from the
transactions contemplated hereby, and Buyer shall cause payment in an aggregate amount equal to
such receipts and receivables to be made by Buyer, the Companies or the Transferring Subsidiaries
to Seller immediately after Seller makes demand therefor to the extent that cash in respect of such
receipts and receivables is actually received by Buyer, any Company or any Transferring Subsidiary
or any of their respective Affiliates; provided, however, that (i) this Section
6.10(c) shall not affect accounts and account receivables owned by Household Bank and (ii)
Seller shall cause the Companies and the Transferring Subsidiaries to be in possession of the
Register Cash at the opening of the stores of the Companies and the Transferring Subsidiaries on
the day after the Cut-Off Date. For the avoidance of doubt, Reference Working Capital and Final
Working Capital shall be determined without giving effect to any such cash, checks, bank drafts,
proceeds or receivables.
(d) Buyer and Seller acknowledge that the stores of the Business may have cash, checks and
bank drafts on hand greater than Register Cash as of the day after the Cut-Off Date. Buyer and
Seller will determine as soon as practicable in accordance with Seller’s standard cash accounting
procedures the actual amount of cash, checks and bank drafts in the stores of the Companies and
Transferring Subsidiaries as of the start of business on the day after the Cut-Off Date and provide
Buyer notice of such amounts. Without in any way limiting Seller’s rights under Section
6.10(c), Buyer and Seller will settle via wire transfer of immediately available funds within
two business days after the parties reach agreement with respect thereto any variance from the
Register Cash, together with interest thereon at the Agreed Rate, calculated on the basis of the
number of days elapsed from the Cut-Off Date through but excluding the payment date.
45
(e) Seller shall indemnify Buyer, the Companies and the Transferring Subsidiaries against any
and all Loss or Expense arising in connection with any indebtedness for borrowed money of Seller
and its Affiliates (including the Companies and the Subsidiaries) incurred on or prior to the
Effective Time (which shall not be deemed to include capital leases).
(f) Seller shall be responsible for and pay any amounts that are ultimately determined to be
due and owing to the landlord for the matters set forth in the letters attached hereto as
Schedule 6.10(f) of the Seller Disclosure Schedule. Seller shall be entitled to any
refunds arising out of the matters set forth in such letters. From and after the Effective Time,
neither Seller nor Buyer shall settle these amounts without the prior written consent of the other
party (such consent not to be unreasonably withheld or delayed); provided, however,
that Seller shall be entitled to settle these amounts without the consent of Buyer if the
settlement solely involves the payment of money by Seller.
Section 6.11 Capital Expenditures Prior to Closing. Notwithstanding anything to the
contrary contained herein, Seller and its Affiliates may (without Buyer’s consent) make and
undertake any work contemplated by Capital Expenditures described on Schedule 6.11 of the
Seller Disclosure Schedule (collectively, the “Pre-Approved Capital Expenditures”),
together with the Approved Capital Expenditures. Buyer will at Closing pay to Seller the
documented amount expended by Seller or its Affiliates on account of all Pre-Approved Capital
Expenditures and any Approved Capital Expenditures made after the date hereof and prior to the
Closing, and Buyer will assume responsibility for and release Seller from liability for all such
Capital Expenditures.
Section 6.12 Name Change. Prior to the Closing, Seller shall take all necessary
action to change the corporate name of Parisian, Inc. to Xxxxxx Xxxxx Xxxxx & Co., including the
filing of amendments to the articles of incorporation of Parisian, Inc. with the Secretary of State
of the State of Alabama (or other appropriate Governmental Body). Within 30 days after the date
hereof, Buyer shall advise Seller of the corporate names Buyer has selected for XxXxx’x, Inc. and
Saks Distribution Centers, Inc., which corporate names shall not include the name “Saks,”
“Parisian” or any other trade name of Seller or any of its Affiliates not included in the Business
or any variation thereof, and, prior to the Closing, Seller shall take all necessary action to
change the corporate names of XxXxx’x, Inc. and Saks Distribution Centers, Inc. to the corporate
names so selected, including the filing of amendments to the certificate or articles of
incorporation of XxXxx’x, Inc. and Saks Distribution Centers, Inc. with the Secretary of State of
the state of such entity’s incorporation (or other appropriate Governmental Body). In addition,
prior to the Closing or within ten (10) business days thereafter, Seller shall take all necessary
action to change the corporate name of Xxxxxx Xxxxx Xxxxx Insurance Services, Inc. to a name to be
selected by Seller which corporate name shall not include the name “Xxxxxx Xxxxx Xxxxx” or any
other trade name of the Companies and the Transferring Subsidiaries or any variation thereof.
Section 6.13 Third Party Brands. During the period prior to the Effective Time, Buyer
and Seller shall cooperate in good faith and use commercially reasonable efforts so that Buyer and
its Affiliates will have, as of the Effective Time, a license from each of the owners or licensors
of the private brands set forth on Exhibit A of the Private Brands Agreement (collectively, the
“Third Party Brand Licensors”). Buyer and Seller acknowledge and agree that any such
license shall be conditioned upon: (i) the agreement that Seller currently has in place
46
with the Third Party Brand Licensor (each, a “License Agreement”) being amended to
relieve Seller of any and all liability or obligation for minimum royalty amounts as provided in
Exhibit B of the Private Brands Agreement or in Section 1(h) thereto allocable to the Business, as
applicable, and (ii) neither Seller nor Buyer being required to enter into any agreement with a
Third Party Brand Licensor that alters the economic or other terms of the License Agreements in a
manner that is adverse to Seller or Buyer after segregating sales of the Business and the other
businesses of Seller and crediting each such business with its pro rata share of any volume
discounts or similar incentives. For a period of five (5) years following the Closing (the
“Non-Exclusive Period”), neither Buyer and its Affiliates (including the Companies and the
Transferring Subsidiaries following the Effective Time), on the one hand, nor Seller and its
Affiliates, on the other hand, shall negotiate with or enter into any agreement with any Third
Party Brand Licensor that provides for the grant of exclusive rights to either Buyer, Seller or any
of their respective Affiliates to the exclusion of the other; provided, however,
that with respect to the Third Party Brand Licensor set forth on Schedule 6.13 of the
Seller Disclosure Schedule, the parties acknowledge and agree that the Non-Exclusive Period shall
be fifteen (15) years.
Section 6.14 No Solicitation. (a) After the date hereof and prior to the earlier of
the Closing and the date on which this Agreement is terminated, Seller shall not, nor shall it
authorize or permit any of its Affiliates, advisors or agents, directly or indirectly, to (a)
knowingly solicit, initiate or encourage the making of any Alternative Proposal or (b) engage in
any negotiations concerning, or provide any confidential information or data to, or have any
discussions with, any Person or group relating to an Alternative Proposal; provided,
however, that, nothing contained in this Agreement shall prevent Seller or its Board of
Directors from engaging in any of the activities described in clause (a) or (b) above in respect of
any Seller Acquisition Proposal or any proposal or offer relating exclusively to assets and
properties not being sold pursuant to this Agreement.
(b) For purposes of this Agreement, “Alternative Proposal” means any proposal with
respect to any purchase of all or substantially all of the assets used in the Business, whether by
merger, consolidation, acquisition of equity securities or assets, or otherwise (other than any
transaction with Buyer or its Affiliates); provided, however, that, for the
avoidance of doubt, any Seller Acquisition Proposal and any proposal or offer relating exclusively
to assets and properties of Seller and/or its Affiliates not being sold pursuant to this Agreement
shall in no event be deemed to be an Alternative Proposal.
Section 6.15 Financing. (a) Buyer shall use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or
advisable to arrange the Financing on the terms and conditions described in the Commitment Letters
(provided that Buyer may replace or amend the Commitment Letters to add lenders, lead arrangers,
bookrunners, syndication agents or similar entities which had not executed the Commitment Letters
as of the date hereof, or otherwise so long as the terms would not adversely impact the ability of
Buyer to consummate the transactions contemplated hereby or the likelihood of consummation of the
transactions contemplated hereby), including using reasonable best efforts to (i) maintain in
effect the Financing commitments, (ii) satisfy on a timely basis all conditions applicable to Buyer
to obtaining the Financing set forth therein, (iii) enter into definitive agreements with respect
thereto on the terms and conditions contemplated by the Commitment Letters or on other terms that
would not adversely impact the ability of Buyer to consummate the transactions contemplated hereby
or the likelihood of consummation
47
of the transactions contemplated hereby, (iv) consummate the Financing at or prior to Closing
(including utilizing the Bridge Facility or any similar facility available to Buyer or any of its
Affiliates to effectuate the Closing as provided below) and (v) ensure that the disclosures made by
Buyer in response to representations and warranties contained in any definitive financing documents
are not materially inconsistent with the disclosures contained in the Seller Disclosure Schedule.
If any portion of the Financing becomes unavailable on the terms and conditions contemplated in the
Commitment Letters, Buyer shall use its reasonable best efforts to arrange to obtain alternative
financing from alternative sources in an amount sufficient to consummate the transactions
contemplated by this Agreement as promptly as practicable following the occurrence of such event
but no later than the Closing Date. Buyer shall give Seller prompt notice of any material breach
by any party to the Commitment Letters of which Buyer becomes aware, any termination of the
Commitment Letters or any change in circumstances that causes Buyer to believe that any of the
conditions to the Financing will not be satisfied. Buyer shall keep Seller informed on a
reasonably current basis in reasonable detail of the status of its efforts to arrange the
Financing. In connection with performing its obligations under this Section 6.15(a), Buyer
shall use its reasonable best efforts to not interfere unreasonably with the duties of the
officers, employees and advisors of Seller, the Companies, the Subsidiaries or any of their
respective Affiliates. For the avoidance of doubt, in the event that (x) all or any portion of the
Financing structured as a Note Offering has not been consummated, (y) all closing conditions
contained in Article VIII (other than Section 8.7) shall have been satisfied or
waived and (z) the Bridge Facility (or alternative bridge financing obtained in accordance with
this Section 6.15(a)) is available on the terms and conditions described in the Commitment
Letters (or replacements thereof as contemplated by this Section 6.15(a)), then Buyer shall
close such bridge facility and borrow amounts thereunder sufficient to consummate the transactions
contemplated by this Agreement no later than the later of (x) fifteen (15) days after the last day
of the Marketing Period and (y) February 27, 2006. “Marketing Period” shall mean the first
period of 15 consecutive calendar days after the Initiation Date (A) throughout which (1) Buyer
shall have the Required Financial Information and (2) nothing has occurred and no condition exists
that would cause any of the conditions set forth in Sections 8.3 or 8.4 to fail to
be satisfied assuming the Closing were to be scheduled for any time during such 15 consecutive
calendar day period, and (B) at the end of which the conditions set forth in Sections 8.1,
8.2, 9.1 and 9.2 shall be satisfied. “Initiation Date” means the
earlier of (x) the date that the road show relating to the Note Offering begins and (y) the latest
of (A) January 23, 2006, (B) thirty (30) days after the Required Financial Information has been
provided to Buyer and (C) five (5) business days after the financial information required pursuant
to Section 6.15(b)(viii) has been delivered to Buyer. On or prior to the Initiation Date,
Buyer may deliver to Seller a certificate executed on behalf of Buyer by its Chief Financial
Officer certifying that (i) Buyer is marketing the Notes in good faith and reasonably anticipates
that the pricing of the Note Offering will occur within 21 calendar days after the Initiation Date
and (ii) the representations and warranties of Buyer contained in Section 5.4 are true and
correct as of the date of such certificate and (iii) Buyer reasonably believes that the
representations and warranties of Buyer contained in Section 5.4 will continue to be true
and correct during the Marketing Period.
(b) Prior to the Closing, Seller shall provide, and shall cause the Companies and the
Transferring Subsidiaries to provide, and shall use its reasonable best efforts to cause the
respective officers, employees, representatives and advisors, including legal and accounting, of
Seller, the Companies and the Transferring Subsidiaries to provide, to Buyer all reasonable
48
cooperation requested by Buyer in connection with the Financing, including (i) participation
in meetings, presentations, road shows, due diligence sessions and sessions with rating agencies,
(ii) assistance in connection with the preparation by Buyer of materials for rating agency
presentations, offering documents, private placement memoranda, bank information memoranda,
prospectuses and similar documents required in connection with the Financing, (iii) executing and
delivering any pledge and security documents or other financing documents as may be reasonably
requested by Buyer (it being understood that, notwithstanding anything contained herein to the
contrary, any documents executed by any Company or any Transferring Subsidiary shall be
unilaterally revocable by the applicable Company or Transferring Subsidiary as to such Company or
Transferring Subsidiary prior to the Effective Time without notice or penalty of any kind and
Seller shall not be obligated to execute any documents), (iv) furnishing Buyer and its Financing
sources with the Required Financial Information, (v) cooperating with Buyer to help Buyer satisfy
the conditions set forth in the Commitment Letters, (vi) cooperating with Buyer to help Buyer
obtain accountants’ comfort letters, legal opinions, surveys and title insurance, (vii) providing
the internal income statements of the Business in the quarterly format of Item 15.134 in Seller’s
virtual data room, including the calculation of EBITDA (after the allocation of certain corporate
expenses and shared services), together with a schedule of working capital of the Business
consistent with the format provided on page 3 of Item 15.098 of Seller’s virtual data room and, in
each such case, for the comparable period for the prior fiscal year, within 12 business days after
the end of each fiscal month of Seller prior to the Closing Date, (viii) providing a forecast,
including adjusted EBITDA, prepared in good faith for the fiscal quarter and year ended January 28,
2006 and the actual financial statements for the comparable prior periods for the Business in each
such case in a form similar to the Financial Statements on or prior to January 10, 2006 and (ix)
permitting the prospective lenders involved in the Financing to evaluate the current assets, cash
management and accounting systems, policies and procedures relating thereto of the Companies and
the Transferring Subsidiaries solely for the purposes of establishing collateral arrangements;
provided, that nothing contained in this Section 6.15(b) shall require such
cooperation to the extent it would interfere in any material respect with the business or
operations of Seller, the Companies or the Transferring Subsidiaries. Buyer shall, promptly upon
request by Seller, reimburse Seller for all documented out-of-pocket costs incurred by Seller, the
Companies, the Transferring Subsidiaries or any of their respective Affiliates in connection with
the cooperation contemplated by this Section 6.15(b). The parties acknowledge and agree
that notwithstanding anything contained herein to the contrary, following the Closing, Seller and
its Affiliates shall have no liability of any kind or nature relating to or arising out of Seller’s
obligations under this Section 6.15(b).
Section 6.16 SEC Financial Statements. The following financial information shall be
delivered to Buyer in a timely manner:
(a) Seller shall deliver to Buyer no later than November 4, 2005: (i) management’s discussion
and analysis of financial condition and results of operations with respect to the Financial
Statements and (ii) the unaudited balance sheet of the Business as of July 30, 2005 and the related
unaudited statements of income, intercompany investment and cash flows for the six-month period
then ended, and for the corresponding period of the preceding fiscal year, together with
management’s discussion and analysis of financial condition and results of operations for the
respective periods covered thereby. The financial statements delivered pursuant to clause (ii)
above shall be in a form that, at the time of delivery, Seller
49
reasonably believes to have been prepared in accordance with GAAP as required by Regulation
S-X.
(b) Seller shall deliver to Buyer no later than December 15, 2005 the unaudited balance sheet
of the Business as of October 29, 2005 and the related unaudited statements of income, intercompany
investment and cash flows for the nine-month period then ended, and for the corresponding period of
the preceding fiscal year, together with management’s discussion and analysis of financial
condition and results of operations for the respective periods covered thereby (the financial
statements, reports and other information described in this Section 6.16(b) and Section
6.16(a), the “Required Financial Information”). The financial statements delivered
pursuant to this paragraph (b) shall be in a form that, at the time of delivery, Seller reasonably
believes to have been prepared in accordance with GAAP as required by Regulation S-X.
(c) Provided that Buyer provides Seller and its representatives with reasonable access to the
personnel, properties, books and records of the Companies and the Transferring Subsidiaries, Seller
shall deliver to Buyer no later than April 29, 2006 (i) the audited balance sheets of the Business
as of January 28, 2006 and the related audited statements of income, intercompany investment and
cash flows for the fiscal year ended January 28, 2006, together with management’s discussion and
analysis of financial condition and results of operations for the periods covered thereby and (ii)
the unqualified report of PWC on such financial statements. Buyer and its Affiliates (including
the Companies and the Transferring Subsidiaries following the Effective Time) shall provide Seller
with all assistance requested by Seller that is necessary or desirable for Seller to satisfy its
obligations under to this Section 6.16(c). Buyer shall reimburse Seller for 50% of the
reasonable out-of-pocket costs and expenses paid by Seller to PWC in connection with the financial
statements and related matters contemplated by this Section 6.16(c) to the extent such
costs and expenses are in addition to those otherwise incurred by Seller in connection with the
preparation of its audited consolidated financial statements for its 2005 fiscal year. The
financial statements delivered pursuant to this Section 6.16(c) shall be in a form that, at
the time of delivery, Seller reasonably believes to have been prepared in accordance with GAAP as
required by Regulation S-X.
(d) Seller shall use its reasonable best efforts to obtain PWC’s consent to include the
Financial Statements and the financial statements described in Section 6.16(c)(i) in
Buyer’s filings with the SEC and any offering memorandum related to the Financing. Each of Buyer
and Seller shall bear 50% of the reasonable out-of-pocket costs and expenses paid to PWC in
connection with obtaining such consents.
ARTICLE VII
ADDITIONAL AGREEMENTS
ADDITIONAL AGREEMENTS
Section 7.1 Use of Names. (a) Seller is not conveying ownership rights or granting
Buyer, the Companies or any of the Subsidiaries a license to use any of the tradenames, service
marks or trademarks of Seller or any Affiliate of Seller (other than trademarks and service marks
included in the Trademarks identified on Schedule 4.11(a) of the Seller Disclosure Schedule
as being owned by the Companies or any of the Subsidiaries) (collectively, the “Retained Names
and Marks”) and, after the Closing, Buyer shall not permit the Companies or any Affiliate of
the Companies to use in any manner the names or marks of Seller or any
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Affiliate of Seller or any word that is confusingly similar in sound or appearance to such
names or marks, except as provided in this Section 7.1. In the event Buyer or any
Affiliate of Buyer violates any of its obligations under this Section 7.1, Seller and its
Affiliates may proceed against it in law or in equity for such damages or other relief as a court
may deem appropriate. Buyer acknowledges that a violation of this Section 7.1 may cause
Seller and its Affiliates irreparable harm which may not be adequately compensated for by money
damages. Buyer therefore agrees that in the event of any actual or threatened violation of this
Section 7.1, Seller and each of its Affiliates shall be entitled, in addition to other
remedies that they may have, to a temporary restraining order and to preliminary and final
injunctive relief against Buyer or such Affiliate of Buyer to prevent any violations of this
Section 7.1, without the necessity of posting a bond.
(b) Buyer shall cause the Companies and the Transferring Subsidiaries to cease promptly, but
in no event later than 180 days after the Cut-Off Date, using any (i) advertising or promotional
materials and (ii) any stationery, business cards, business forms and other similar items owned by
any of the Companies or any of the Transferring Subsidiaries as of the Closing Date, in each case
that contain anywhere thereon any of the Retained Names and Marks; provided,
however, that Buyer shall cause each of the Companies and the Transferring Subsidiaries,
when using items referred to in clause (ii) in the context of entering into or conducting
contractual relationships, to make reasonably clear to all other applicable parties that Buyer, one
of the Companies or one of the Transferring Subsidiaries, rather than Seller or any Affiliate of
Seller (other than the Companies or the Transferring Subsidiaries), is the party entering into or
conducting the contractual relationship; and provided, further, that Buyer shall
ensure that personnel of the Companies and the Transferring Subsidiaries using such items shall
not, and shall have no authority to, hold themselves out as officers, employees or agents of Seller
or any Affiliate of Seller.
(c) Buyer shall cause the Companies and the Transferring Subsidiaries to cease promptly, but
in no event later than 180 days after the Closing Date, using any packaging materials owned by the
Companies or the Subsidiaries as of the Closing Date that contain anywhere thereon any of the
Retained Names and Marks, unless such materials are changed to completely and permanently cover,
delete or obliterate the Retained Names and Marks or anything confusingly similar thereto.
(d) The Companies and the Transferring Subsidiaries shall have the right to exhaust all
inventories of finished products owned or ordered by any of them as of the Cut-Off Date that
contain as part of the physical products themselves (e.g., embroidered on a shirt or a label on a
shirt, but not product packaging covered by clause (c) above) any of the Retained Names and Marks,
provided that Buyer shall cause the Companies and the Transferring Subsidiaries to use all
commercially reasonable efforts to dispose of such finished products promptly after the Cut-Off
Date.
(e) Other than as permitted under clauses (b) through (d) above, Buyer shall not and shall
cause the Companies and the Transferring Subsidiaries not to use, without the prior written consent
of Seller, any of the Retained Names and Marks (or anything confusingly similar thereto) in any
manner whatsoever.
(f) At the Closing, Buyer will cause the Companies and the Transferring Subsidiaries to enter
into a short-term trademark and trade name license agreement that grants
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Seller and Affiliates of Seller the right to use the Trademarks specified on Schedule
4.11(a), other than those Trademarks that are the subject of the Trademark License Agreement,
in a manner substantially similar to the manner in which Seller and Affiliates of Seller use such
Trademarks as of the date of this Agreement for a period of up to 180 days following the Cut-Off
Date (including the trade name for the Subject Store if the Subject Store is excluded from the
transaction, provided that, Seller shall use commercially reasonable efforts to
cease using the trade name for such store prior to such 180-day period). If the Subject Store is
excluded from the transactions contemplated hereby, in no event shall Seller have the right to use
any of the Trademarks specified in Schedule 4.11(a) at the Subject Store in connection with
any “liquidation” or “going out of business sale,” it being understood and agreed that Seller shall
be entitled to conduct clearance or other single store sales promotions. Except as provided in
such short-term trademark and trade name license agreement or the Trademark License Agreement,
Seller shall not, and Seller shall not permit any of its Affiliates to use in any manner the names
or marks of the Companies and the Transferring Subsidiaries or any word that is confusingly similar
in sound or appearance to such names or marks. Seller agrees that in the event of any actual or
threatened violation of this paragraph (f), Buyer and each of its Affiliates shall be entitled, in
addition to other remedies that they may have, to a temporary restraining order and to preliminary
and final injunctive relief against Seller or such Affiliate of Seller to prevent any violations of
this paragraph (f), without the necessity of posting a bond.
Section 7.2 Tax Matters. (a) Liability for Taxes. (i) Seller shall be
liable for and pay, and pursuant to Article X (and subject to the limitations thereof)
shall indemnify and hold harmless each Buyer Group Member against any and all Taxes (A) imposed on
any of the Companies or any Subsidiary pursuant to § 1.1502-6 of the Treasury Regulations or
similar provision of state, local or foreign law solely as a result of the Companies or such
Subsidiary having been a member of the Seller Group, (B) imposed on any of the Companies or any
Subsidiary, or for which any of the Companies or any Subsidiary may otherwise be liable, for any
taxable year or period that ends on or before the Cut-Off Date and, with respect to any Straddle
Period, the portion of such Straddle Period ending on and including the Cut-Off Date, (C)
attributable to the Plan of Reorganization, (D) that are Section 338 Taxes, (E) imposed on any of
the Companies or any Subsidiary as a result of any transaction (other than the transactions
expressly contemplated by this Agreement) occurring between the Cut-Off Date and the Closing that
are not in the ordinary course of business or (F) imposed as a result of a disallowance, pursuant
to a final determination, of Tax benefits claimed by Buyer or any of its Affiliates pursuant to the
last sentence of Section 7.2(a)(v) or of 50% of Tax benefits claimed by Buyer or any of its
Affiliates pursuant to the fifth sentence of Section 7.3(a); provided,
however, that Seller shall not be liable for or pay, and does not agree to indemnify or
hold harmless any Buyer Group Member from and against, (I) Taxes to the extent taken into account
as a liability on the final Cut-Off Date Working Capital Statement and (II) property Taxes to the
extent such Taxes are not due and payable prior to the Cut-Off Date (Taxes described in this
proviso, hereinafter “Excluded Taxes”). Except for any real property tax refund
attributable to the Business, Seller shall be entitled to any refund of (or credit for) Taxes for
which Seller is liable pursuant to this Section 7.2.
(ii) Buyer shall be liable for and pay, and pursuant to Article X (and subject
to the limitations thereof) shall indemnify and hold harmless each Seller Group Member from
and against, (A) any and all Taxes imposed on any of the Companies or any
52
Subsidiary, or for which any of the Companies or any Subsidiary may otherwise be
liable, for any taxable year or period that begins after the Cut-Off Date and, with respect
to any Straddle Period, the portion of such Straddle Period beginning immediately after the
Cut-Off Date and (B) Excluded Taxes; provided, however, that to the extent
provided in Section 7.2(a)(i), Seller shall be liable for Taxes specified in clauses
(C), (D), (E) and (F) thereof. Buyer shall be entitled to any refund of (or credit for)
Taxes for which Buyer is liable pursuant to this Section 7.2 and any real property
tax refund attributable to the Business.
(iii) For purposes of paragraphs (a)(i) and (a)(ii), whenever it is
necessary to determine the liability for (or refunds with respect to) Taxes of any of the
Companies or a Subsidiary for a Straddle Period, the determination of the Taxes of such
Company or Subsidiary for the portion of the Straddle Period ending on and including, and
the portion of the Straddle Period beginning after, the Cut-Off Date shall be determined by
assuming that the Straddle Period consisted of two taxable years or periods, one which ended
at the close of the Cut-Off Date and the other which began at the beginning of the day
following the Cut-Off Date, and items of income, gain, deduction, loss or credit of the
Companies or such Subsidiary for the Straddle Period shall be allocated between such two
taxable years or periods on a “closing of the books basis” by assuming that the books of the
Companies or such Subsidiary were closed at the close of the Cut-Off Date, and by assuming
that the Companies and the Subsidiaries ceased filing consolidated, combined or unitary Tax
Returns with Seller’s Group as of the close of the Cut-Off Date; provided,
however, that nothing in this paragraph shall cause Buyer to be liable for any Taxes
specified in Sections 7.2(a)(i)(C), (D), (E) and (F), and
provided, further, however, that exemptions, allowances or deductions that
are calculated on an annual basis, such as the deduction for depreciation, shall be
apportioned between such two taxable years or periods on a daily basis.
(iv) If, as a result of any action, suit, investigation, audit, claim, assessment or
amended Tax Return, there is any change after the Cut-Off Date in an item of income, gain,
loss, deduction, credit or amount of Tax that results in an increase in a Tax liability for
which Seller would otherwise be liable pursuant to paragraph (a) of this Section
7.2, and such change is reasonably expected based on reasonable assumptions to be agreed
upon by Buyer and Seller to result in a decrease in the Tax liability of any of the
Companies, any Subsidiary, Buyer or any Affiliate or successor of any thereof for any
taxable year or period beginning after the Cut-Off Date or for the portion of any Straddle
Period beginning after the Cut-Off Date, Seller shall not be liable pursuant to such
paragraph (a) with respect to such increase to the extent of the present value of such
decrease (as jointly determined by Buyer and Seller based on reasonable assumptions) (and,
to the extent such increase in Tax liability is paid to a taxing authority by Seller or any
Affiliate thereof, Buyer shall pay Seller an amount equal to the present value of such
decrease).
(v) Buyer shall pay over to Seller and its Affiliates an amount equal to the Tax
benefit, if any, available to Buyer or its Affiliates (including, after the Effective Time,
any of the Companies or the Transferring Subsidiaries), at such time such Tax benefit is or
would be actually realized by Buyer or any of its Affiliates, as a result of compensation
(including any deduction for amounts treated as compensation under §
53
1.83-7 of the Treasury Regulations) paid or payable by Seller or any of its Affiliates
(with a Seller Affiliate excluding, after the Effective Time, the Companies and the
Transferring Subsidiaries) in cash, stock or other property. In addition, Buyer shall pay
to Seller and its Affiliates the amount of any Tax benefit available to Buyer as a result of
any retention bonuses paid or payable by Buyer or any of its Affiliates (as described in
Section 7.3(b) hereof). The parties agree that such Tax benefit shall be claimed by
Buyer or an Affiliate of Buyer on its Tax Returns and the payment to Seller with respect to
such Tax Benefit shall be calculated assuming a 38.5% combined effective federal, state and
local tax rate, and amounts owing pursuant to the preceding sentence in respect of any
retention bonus shall be payable no later than 90 days after the date such bonus is paid.
(vi) Except as provided in the immediately following sentence, Buyer shall pay, and
agrees to indemnify and hold harmless each Seller Group Member from and against, (A) 50
percent of any and all real property transfer or gains Taxes, sales Taxes, use Taxes, stamp
Taxes, stock transfer Taxes, or other similar Taxes imposed on the transactions contemplated
by this Agreement (collectively, “Transfer Taxes”) and (B) 100% of any and all
Transfer Taxes imposed on the transactions contemplated by Section 3.11 of the Plan of
Reorganization. Seller shall pay, and agrees to indemnify and hold harmless each Buyer
Group Member from and against (A) 50 percent of any and all Transfer Taxes imposed on the
transactions contemplated by this Agreement, (B) 100% of any and all Transfer Taxes imposed
on the transactions contemplated by the Plan of Reorganization (other than Section 3.11
thereof) and (C) 100% of any and all incremental Transfer Taxes imposed as a result of the
Section 338(h)(10) Elections.
(b) Tax Returns. (i) Seller shall timely file or cause to be timely filed when due
(taking into account all extensions properly obtained) (I) all Income Tax Returns that are required
to be filed by or with respect to the Companies and each Subsidiary for taxable years or periods
ending on or before the Closing Date and Seller shall remit, or cause to be remitted, any Taxes
shown to be due in respect of such Tax Returns; and (II) all non-Income Tax Returns with respect to
the Companies and each Subsidiary that are due on or before the Cut-Off Date, and Seller shall
remit, or cause to be remitted, any Taxes shown to be due in respect of such Tax Returns. Buyer
(or Seller on Buyer’s behalf if and to the extent provided in the Buyer Transition Services
Agreement) shall timely file or cause to be timely filed when due (taking into account all
extensions properly obtained) all other Tax Returns that are required to be filed by or with
respect to the Companies and each Subsidiary and Buyer shall remit or cause to be remitted any
Taxes due in respect of such Tax Returns. With respect to Tax Returns to be filed by Seller,
unless contrary to Requirements of Law or as otherwise contemplated by this Agreement, such Tax
Returns shall be filed in a manner consistent with past practice and no position shall be taken,
election made or method adopted that is inconsistent with positions taken, elections made or
methods used in prior periods in filing such Tax Returns, in each case if doing so would reasonably
be expected to materially adversely affect the Tax liability of Buyer, the Companies, any
Subsidiary or any Affiliate thereof for any period after the Cut-Off Date. With respect to Tax
Returns to be filed by Buyer that relate, in whole or in part, to Taxable periods ending prior to
the Cut-Off Date or any Straddle Period (other than Tax Returns relating to property Taxes for
which Buyer is wholly liable), (I) unless contrary to Requirements of Law or as otherwise
contemplated by this Agreement, such Tax Returns shall be filed in a manner consistent with past
practice and no position shall be taken, election made, or method adopted that is inconsistent
54
with positions taken, elections made or methods used in prior periods in filing such Tax
Returns and (II) such Tax Returns shall be submitted to Seller not later than 30 days prior to the
due date for filing such Tax Returns (or, if such due date is within 45 days following the Cut-Off
Date, as promptly as practicable following the Cut-Off Date) for review and approval by Seller,
which approval may not be unreasonably withheld or delayed, but may in all cases be withheld or
delayed in the sole discretion of Seller if (A) such Tax Returns were not prepared in accordance
with clause (I) of this sentence or (B) such Tax Returns relate to a Straddle Period ending on the
Closing Date. Seller or Buyer shall pay the other party for the Taxes for which Seller or Buyer,
respectively, is liable pursuant to paragraph (a) of this Section 7.2 but which are payable
with any Tax Return to be filed by the other party pursuant to this paragraph (b) upon the written
request of the party entitled to payment, setting forth in reasonable detail the computation of the
amount owed by Seller or Buyer, as the case may be, but in no event shall such payment be requested
earlier than 15 business days prior to the due date for paying such Taxes.
(ii) None of Buyer or any Affiliate of Buyer shall (or shall cause or permit the
Companies or any Subsidiary to) amend, refile or otherwise modify (or grant an extension of
any statute of limitation with respect to) any Tax Return relating in whole or in part to
the Companies or any Subsidiary with respect to any taxable year or period ending on or
before the Cut-Off Date without the prior written consent of Seller, which consent may be
withheld in the sole discretion of Seller. None of Buyer or any Affiliate of Buyer shall
(or shall cause or permit the Companies or any Subsidiary to) amend, refile or otherwise
modify (or grant an extension of any statute of limitation with respect to) any Tax Return
relating in whole or in part to the Companies or any Subsidiary with respect to any Straddle
Period without the prior written consent of Seller, which consent may not be unreasonably
withheld or delayed; provided, however, that in the case of any Straddle
Period ending on the Closing Date (other than such a Straddle Period relating to property
Taxes for which Buyer is wholly liable), Seller’s consent may be withheld in the sole
discretion of Seller.
(iii) Buyer shall promptly cause each of the Companies and each Subsidiary to prepare
and provide to Seller a package of Tax information materials, including, without limitation,
schedules and work papers (the “Tax Package”) required by Seller to enable Seller to
prepare and file all Tax Returns required to be prepared and filed by it pursuant to
paragraph (b)(i). The Tax Package shall be completed in accordance with past practice,
including past practice as to providing such information and as to the method of computation
of separate taxable income or other relevant measure of income of each of the Companies and
each Subsidiary. Buyer shall cause the Tax Package to be delivered to Seller within 60 days
after the Closing Date.
(c) Contest Provisions. (i) Buyer shall promptly notify Seller in writing upon
receipt by Buyer, any of its Affiliates, either of the Companies or any Subsidiary of notice of any
pending or threatened federal, state, local or foreign Tax audits, examinations or assessments
which might affect the Tax liabilities for which Seller may be liable pursuant to this Section
7.2.
(ii) Seller shall have the sole right to represent each Company’s and each Subsidiary’s
interests in any Tax audit or administrative or court proceeding relating to Taxes for which
Seller may be liable pursuant to this Section 7.2, and to employ counsel of its
choice at its expense. None of Buyer, any of its Affiliates, any of the Companies or
55
any Subsidiary may settle any Tax claim for any Taxes for which Seller may be liable
pursuant to this Section 7.2, without the prior written consent of Seller, which
consent may be withheld in the sole discretion of Seller.
(iii) Seller shall promptly notify Buyer in writing upon receipt by Seller or any of its
Affiliates of notice of any pending or threatened federal, state, local or foreign Tax
audits, examinations or assessments with respect to Taxes for which Buyer is liable pursuant
to this Section 7.2.
(iv) Buyer shall have the sole right to represent each Company’s and each Subsidiary’s
interests in any Tax audit or administrative or court proceeding relating to Taxes for which
Buyer may be liable pursuant to this Section 7.2, and to employ counsel of its
choice at its expense. None of Seller or any of its Affiliates may settle any Tax claim for
any Taxes for which Buyer may be liable pursuant to this Section 7.2, without the
prior written consent of Buyer, which consent may be withheld in the sole discretion of
Buyer.
(v) Notwithstanding the foregoing clauses of this Section 7.2(c), in the case
of any Straddle Period (other than a Straddle Period ending after the Cut-Off Date and on or
before the Closing Date and other than a Straddle Period relating to property Taxes for
which Buyer is wholly liable): (A) Seller and Buyer shall promptly notify the other party in
writing upon receipt by Seller or Buyer, respectively, of notice of any pending or
threatened federal, state, local or foreign Tax audits, examinations or assessments relating
to such Straddle Period, (B) Seller shall have the right to represent each Company’s and
each Subsidiary’s interest in any Tax audit or administrative or court proceeding relating
to Taxes in respect of such Straddle Period, provided that Buyer shall be entitled to
participate at its expense in any Tax Audit or administrative or court proceeding relating
(in whole or in part) to Taxes attributable to the portion of such Straddle Period beginning
after the Cut-Off Date and, with the written consent of Seller, and at Buyer’s sole expense,
may assume the entire control of such audit or proceeding, and (C) neither Seller nor Buyer
nor any Affiliate of either of them may settle any Tax claim for any Taxes relating to such
Straddle Period without the prior written consent of the other party, which consent shall
not be unreasonably withheld or delayed.
(vi) Notwithstanding the foregoing clauses of this Section 7.2(c), in the case
of any Straddle Period ending after the Cut-Off Date and on or before the Closing Date
(other than a Straddle Period relating to property Taxes for which Buyer is wholly liable):
(A) Buyer shall promptly notify Seller in writing upon receipt by Buyer or any of its
Affiliates of notice of any pending or threatened federal, state, local or foreign Tax
audits, examinations or assessments relating to such Straddle Period, (B) Seller shall have
no obligation to notify Buyer upon receipt by Seller or any of its Affiliates of any such
notice, (C) Seller shall have the sole right to represent each Company’s and each
Subsidiary’s interest in any Tax audit or administrative or court proceeding relating to
Taxes in respect of such Straddle Period, and (D) Seller shall have the sole right to settle
any Tax Claim for any Taxes relating to such Straddle Period, and neither Buyer nor any
Affiliate of Buyer may settle any Tax claim for any Taxes relating to such Straddle Period
without the prior written consent of Seller, which consent may be withheld in the sole
discretion of Seller.
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(vii) Notwithstanding the foregoing clauses of this Section 7.2(c), in the case
of any Straddle Period relating to property Taxes for which Buyer is wholly liable: (A)
Seller shall promptly notify Buyer in writing upon receipt by Seller or any of its
Affiliates of notice of any pending or threatened federal, state, local or foreign Tax
audits, examinations or assessments relating to property Taxes imposed with respect to such
Straddle Period, (B) Buyer shall have no obligation to notify Seller upon receipt by Buyer
of any such notice, (C) Buyer shall have the sole right to represent each Company’s and each
Subsidiary’s interest in any Tax audit or administrative or court proceeding relating to
property Taxes in respect of such Straddle Period, and (D) Buyer shall have the sole right
to settle any Tax Claim for property Taxes relating to such Straddle Period, and neither
Seller nor any Affiliate of Seller may settle any Tax claim for property Taxes relating to
such Straddle Period without the prior written consent of Buyer, which consent may be
withheld in the sole discretion of Buyer.
(d) Assistance and Cooperation. After the Closing Date, each of Seller and Buyer
shall (and cause their respective Affiliates to):
(i) assist the other party in preparing any Tax Returns which such other party is
responsible for preparing and filing in accordance with Section 7.2(b);
(ii) cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns of the Companies and each Subsidiary;
(iii) make available to the other and to any taxing authority as reasonably requested
all information, records, and documents relating to Taxes of the Companies and each
Subsidiary;
(iv) provide timely notice to the other in writing of any pending or threatened Tax
audits or assessments of the Companies and each Subsidiary for taxable periods for which the
other may have a liability under this Section 7.2;
(v) furnish the other with copies of all correspondence received from any taxing
authority in connection with any Tax audit or information request with respect to any such
Tax;
(vi) timely sign and deliver such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or
other reports with respect to, Transfer Taxes; and
(vii) timely provide to the other party powers of attorney or similar authorizations
necessary to carry out the purposes of this Section 7.2.
(e) Election Under Section 338(h)(10). (i) In connection with the purchase of the
Securities hereunder, Seller and Buyer shall make a joint election for Parisian, Inc., XxXxx’x,
Inc. and Saks Distribution Centers, Inc. under Section 338(h)(10) of the Code and under any
applicable similar provisions of state or local law (collectively, the “Section 338(h)(10)
Elections”). Seller and Buyer shall within 30 days after the completion of the Asset
Allocation Statement on IRS Form 8883, but in no event later than 15 days prior to the due date for
filing
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Internal Revenue Service Form 8023, exchange completed and executed copies of Internal Revenue
Service Form 8023, required schedules thereto, and any similar state and local forms. If any
changes are required in these forms as a result of information which is first available after these
forms are prepared, the parties will promptly agree on such changes.
(ii) Buyer and Seller shall negotiate in good faith to agree upon and draft (A) a
schedule for IRS Form 8883 determining and allocating the Adjusted Deemed Sales Price, as
defined in Treas. Reg. § 1.338-4, for each Company and Subsidiary for which Section
338(h)(10) Elections will be made, among the assets of such Company and Subsidiary and (B) a
schedule determining and allocating the purchase price for Herberger’s Department Stores,
LLC among the assets thereof, (the “Allocation Schedule”). The Allocation Schedule
shall be reasonable and shall be prepared in accordance with Sections 338(h)(10) and 1060 of
the Code and the Treasury Regulations thereunder (as applicable). Buyer and Seller each
agrees that promptly upon receiving said Allocation Schedule it shall return an executed
copy thereof to the other party. Buyer and Seller each agrees to file all federal, state,
local and foreign Tax Returns in accordance with the Allocation Schedule.
(iii) In the event that Buyer and Seller, after negotiating in good faith, cannot agree
upon the fair market value of one or more assets to be included in the Allocation Schedule,
Buyer shall appoint an independent appraiser (the “Buyer Appraiser”) and Seller
shall appoint an independent appraiser (the “Seller Appraiser”) to conduct an
appraisal of the fair market value of each such asset as to which Buyer and Seller shall
have not been able to agree as of the Closing Date. The Buyer Appraiser and the Seller
Appraiser shall seek to reach agreement upon the fair market value of each such asset. If
the Buyer Appraiser and the Seller Appraiser reach such agreement with respect to any of
such assets, the fair market value as so agreed shall be deemed to be the fair market value
of such asset. If the Seller Appraiser and the Buyer Appraiser are not able to reach
agreement on the fair market value of any such assets, the Seller Appraiser and the Buyer
Appraiser shall select a third independent appraiser (the “Independent Appraiser”)
to conduct and deliver to Buyer and Seller an appraisal of the fair market value of each
such asset as to which the Buyer Appraiser and the Seller Appraiser have not been able to
agree as of the Closing Date. The Allocation Schedule shall be prepared in accordance with
the appraisal so conducted by the Independent Appraiser. The fees and expenses of the
Seller Appraiser shall be borne by Seller, the fees and expenses of the Buyer Appraiser
shall be borne by Buyer and the fees and expenses of the Independent Appraiser shall be
borne 50% by Buyer and 50% by Seller.
Section 7.3 Employees and Employee Benefits.
(a) Offers of Employment. Buyer will cause the Companies and the Transferring
Subsidiaries to continue the employment effective immediately after the Cut-Off Date of all
Business Employees, including each such employee on medical, disability, family or other leave of
absence as of the Effective Time. Within ten business days prior to the Effective Time, Seller
will provide to Buyer a list showing the names of each Business Employee then on leave of absence
(and such list shall be updated as of the Cut-Off Date). The continued employment immediately
following the Cut-Off Date of each Business Employee shall in each case provide at least the same
base wages and annual base salary provided to each such
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employee on the Cut-Off Date for a period of at least one (1) year following the Cut-Off Date.
Buyer shall honor and be responsible for all obligations to Business Employees with respect to
performance bonuses in respect of the fiscal year ending January 28, 2006 that become payable after
the Cut-Off Date and shall calculate such performance bonuses in accordance with Seller’s past
practices (without any amendment or modification to the fiscal 2005 bonus plan in effect as of the
end of the 2005 fiscal year); provided, that Seller shall reimburse Buyer (within five
business days following the date on which Seller receives written notice specifying in reasonable
detail the amount paid with respect to such performance bonuses) on an after-tax basis for 50% of
all such performance bonuses that are paid by Buyer to such Business Employees (assuming for these
purposes a 38.5% combined effective federal, state and local tax rate). The parties agree that the
Tax benefit of such bonus payments shall be claimed by Buyer or an Affiliate of Buyer on its Tax
Returns. The Business Employees who are employees of the Companies and the Transferring
Subsidiaries immediately following the Cut-Off Date are referred to as “Retained
Employees.” Nothing in this Section 7.3(a) shall obligate Buyer or the Companies and
the Transferring Subsidiaries to continue the employment of any such Retained Employee for any
specific period (it being understood that Buyer, the Companies and the Transferring Subsidiaries
shall be obligated to pay severance benefits pursuant to Section 7.3(d)).
(b) Individual Employment Contracts. As of the Effective Time, Buyer will assume, or
will cause the Companies and the Transferring Subsidiaries to assume or retain, as the case may be,
Seller’s, the Companies’ or the Subsidiaries’ obligations under all Employment Agreements set forth
on Schedule 7.3(b) of the Seller Disclosure Schedule, and all of the obligations as the
employer under such contracts and agreements; provided, however, that in no event
shall Buyer, the Companies or the Transferring Subsidiaries have any obligations under such
Employment Agreements as in effect at the Effective Time relating to or arising out of equity-based
compensation and Seller shall indemnify and hold Buyer harmless against any liabilities or
obligations arising in respect thereof. Seller agrees to reimburse Buyer for the portion of those
retention bonus payments payable after the Closing Date as provided in the retention bonus
agreements table set forth at the end of Schedule 4.18(e) of the Seller Disclosure
Schedule, it being understood that Buyer shall make such payments to the applicable Business
Employees and shall comply with Section 7.2(a)(v) in connection therewith. Seller will
reimburse Buyer within five business days after receiving a written notice from Buyer that Buyer
has paid such amounts. The payment from Seller to Buyer pursuant to the preceding sentence shall
be treated by the parties for Tax purposes as an adjustment to the Purchase Price. Amounts owing
by Seller may be net of amounts payable by Buyer pursuant to Section 7.2(a)(v).
(c) Buyer’s Employee Benefit Plans Generally. As of the Effective Time and for a
period of at least one (1) year thereafter, Buyer shall provide, or shall cause the Companies and
the Transferring Subsidiaries to provide, each Retained Employee with employee benefits that are
comparable, in the aggregate, to the benefits provided to such Retained Employee immediately prior
to the Effective Time (other than (I) any employee benefits providing equity or equity-traded
awards or (II) any defined benefit pension plan). After the Effective Time, except as otherwise
provided in the following subsections of this Section 7.3, the following shall apply:
(i) As of the Effective Time, Buyer will assume, or will cause the Companies and the
Transferring Subsidiaries to continue, all Company Plans that are set forth in Schedule
4.16(a) of the Seller Disclosure Schedule (other than with respect to equity or
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equity-based awards); provided, however, that Buyer shall (subject to
the terms thereof and any applicable Requirements of Law) have the right to terminate any
such Company Plans at any time after the Effective Time; provided, further,
however, that Seller shall remain responsible for all liabilities and obligations
under the Xxxxxx Xxxxx Xxxxx & Co. Supplemental Executive Retirement Plan with respect to
the individuals set forth on Schedule 7.3(c)(i).
(ii) As of the Effective Time, Buyer will assume, or will cause the Companies and the
Transferring Subsidiaries or Buyer’s or the Companies’ or the Transferring Subsidiaries’
Pension Plans or Welfare Plans (collectively, “Buyer’s Plans”), as applicable, to
assume, all liabilities and obligations for benefits payable under each Seller Plan set
forth on Schedule 7.3(c)(ii) of the Seller Disclosure Schedule to or with respect to
(A) any Business Employee, including any employee on medical, disability, family or other
leave of absence as of the Cut-Off Date, (B) any former employee of the Business who on the
date the individual’s most recent termination of employment from Seller and all of the
Affiliates of Seller occurred was engaged in the Business and (C) any dependent or former
dependent of any such employee or former employee, including any dependent or former
dependent entitled to COBRA coverage assumed by Buyer under Section 7.3(h)
(collectively, “Covered Persons”). Such assumed liabilities include liabilities
that relate to events occurring or expenses incurred at or prior to the Effective Time but
that have not been paid as of the Effective Time, but only to the extent that the
non-payment of such benefits is consistent with Seller’s past practice regarding the time at
which benefits are paid following the establishment of the liability to pay such benefits.
In addition, with respect to such liabilities, Seller agrees to remit to Buyer any insurance
proceeds actually received by Seller in respect thereof. Any such benefits related to
events occurring or expenses incurred after the Effective Time shall be determined under the
terms of Buyer’s Plans, except as provided to the contrary in the following subsections of
this Section 7.3.
(iii) Buyer shall give, or cause the Companies and the Transferring Subsidiaries to
give, each Retained Employee credit under applicable Buyer’s Plans or personnel policies
that cover the Retained Employee, including any vacation, sick leave and severance policies,
for purposes of eligibility, vesting and entitlement to vacation, sick leave and severance
benefits (excluding accrual of benefits under any defined benefit pension plan) for the
Retained Employee’s service with Seller and its Affiliates prior to the Cut-Off Date, shall
allow such Retained Employees to participate in the applicable Buyer’s Plan providing
welfare benefits (including medical, life insurance, long-term disability insurance and
long-term care insurance) without regard to preexisting-condition limitations under any
Pension Plans or Welfare Plans, waiting periods, evidence of insurability or other
exclusions or limitations not imposed on the Retained Employee by the corresponding Plans
immediately prior to the Cut-Off Date, and shall credit the Retained Employee with any
expenses that were covered by the Plans for purposes of determining deductibles, co-pays and
other applicable limits under Buyer’s Plans. To the extent any Retained Employee or covered
dependent is hospitalized as of the Effective Time under any Seller Plan providing medical
benefits, such person will continue to be covered under the medical coverage provided by
Seller until the date they are released from the hospital and Buyer, the Companies or the
Subsidiaries shall reimburse Seller for
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any documented expenses not paid for by Seller’s insurance provider associated with
such extended hospital stay that are incurred after the Cut-Off Date.
(iv) No portion of the assets of any trust or other fund maintained by Seller for the
purpose of paying benefits under any of the Seller Plans will be transferred to Buyer, the
Companies, the Subsidiaries or any Buyers Plan.
(d) Severance Benefits. If any Retained Employee is involuntarily terminated by
Buyer, the Companies or the Subsidiaries within 12 months following the Cut-Off Date, Buyer will
provide, or cause the Companies and the Transferring Subsidiaries to provide, to the Retained
Employee under Buyer’s Plans benefits that are at least equal to the severance pay and other
benefits offered to comparably placed employees of Buyer. Buyer and Seller agree that the
transactions contemplated by this Agreement shall be treated as if they were a “change of control”
under the Severance Pay Plan. If any Business Employee identified in Schedule 4.16(f) of
the Seller Disclosure Schedule as eligible to participate in the Severance Pay Plan as of the date
of this Agreement becomes entitled to severance benefits under the Severance Pay Plan pursuant to
the “change of control” provisions thereunder (giving effect to the treatment of the transactions
contemplated by this Agreement as a “change of control” under the Severance Pay Plan), Buyer will
provide to such Business Employee the severance pay and other benefits provided under the Severance
Pay Plan in lieu of any severance to which such Business Employee would be entitled under any
Buyer’s Plans.
(e) Vacation Pay and Personal Holidays. Buyer shall cause the Companies and the
Transferring Subsidiaries to continue to credit to each Retained Employee in accordance with the
terms and conditions of Buyer’s Plans all vacation and personal holiday pay that the Retained
Employee is entitled to use but has not used as of the Effective Time to the extent the relevant
plan, policy or arrangement is set forth on Schedule 4.16(e) of the Seller Disclosure
Schedule, and shall assume all liability for the payment of such amounts to the extent accrued
prior to the Effective Time pursuant to the Seller vacation and personal holiday pay policies
listed in Schedule 4.16(e) of the Seller Disclosure Schedule.
(f) Disability Benefits and Leaves. Buyer will, or will cause the Companies and the
Transferring Subsidiaries to, assume all liabilities with respect to Covered Persons payable under
any Seller Plan providing disability benefits, whether related to a disability that occurred before
or after the Cut-Off Date. Except as provided in the previous sentence, (i) Seller and the Seller
Plans shall retain the liability for all long-term disability benefits payable to any Covered
Person under the terms of Seller’s long-term disability plans after the Cut-Off Date with respect
to any disability that occurred prior to the Cut-Off Date (but not with respect to any reoccurrence
of such a disability after the Cut-Off Date), (ii) Buyer, the Companies, the Subsidiaries or a
Buyer’s Plan shall assume the liability for all short-term disability benefits payable to any
Retained Employee under any Seller Plan providing short-term disability benefits that are payable
following the Cut-Off Date with respect to any disability that occurred prior to the Cut-Off Date
(determined under the terms of the Seller Plan or personnel policy that applies to the disabled
Retained Employee immediately prior to the Cut-Off Date) until the date, if any, on which the
Retained Employee qualifies for long-term disability benefits under the Seller Plans, and (iii)
Buyer’s Plans will govern the determination of what, if any, short-term and long-term disability
benefits will be paid to any Retained Employee whose disability occurs after the Effective Time (or
which reoccurs after the Effective Time). If any Retained Employee is on
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any form of leave of absence at the Effective Time (including any leave subject to the Family
and Medical Leave Act of 1993 or comparable state law), Buyer shall reinstate, or shall cause the
Companies or the Transferring Subsidiaries to reinstate, such Retained Employee to active
employment upon the expiration of the leave to the extent such reinstatement is required by any
applicable law or regulation or by the Companies’ and the Subsidiaries’ personnel policies and
shall satisfy any other obligation with respect to such Retained Employee as required under any
applicable law or regulation or the Companies’ and the Subsidiaries’ personnel policies (copies of
which have been made available to Buyer) upon the expiration of such leave.
(g) Medical and Dental Plan Liabilities. Buyer shall, or shall cause the Companies,
the Subsidiaries or the applicable Buyer’s Plan to, assume and pay any benefits or expenses covered
by the group medical and dental plans included within the Seller Plans that were incurred with
respect to services performed for Covered Persons prior to the Effective Time but have not been
paid by the Plans prior to the Cut-Off Date. If Buyer provides such Buyer’s Plans to a Retained
Employee following the Cut-Off Date, Buyer shall pay or shall cause the applicable Buyer’s Plan to
assume and pay any such benefits or expenses that are incurred with respect to services performed
for the Retained Employee or the Retained Employee’s dependents after the Effective Time.
(h) COBRA Coverage. Effective as of the Effective Time, Buyer shall provide, or shall
cause the Companies or the Transferring Subsidiaries to, assume and satisfy (or cause a Buyer’s
Plan to satisfy) all entitlements under Code Section 4980B, Part 6 or 7 of Title I of ERISA, or any
similar state law (collectively, “COBRA”) with respect to any Company Plan or Seller Plan
subject to COBRA of any Business Employee or former employee of the Business engaged in the
Business at the time of termination of employment, or any dependent or former dependent of any such
employee or former employee, whose qualifying event occurred prior to the Cut-Off Date at a time
when the employee or former employee was on the payroll of the Companies or the Subsidiaries and
engaged in the Business, (or whose qualifying event occurs at the Cut-Off Date as a result of the
transactions covered by this Agreement), including any obligations to such individuals currently on
such COBRA continuation coverage and any obligations to any such individual whose period for
electing such COBRA continuation coverage has not yet expired.
(i) Flexible Spending Accounts. Buyer will, or will cause the Companies or the
Subsidiaries to, credit each Retained Employee (and any former employee of the Business or
dependent or former dependent of an employee or former employee who has COBRA rights described in
Section 7.3(h) with respect to flexible spending accounts) under a health care and
dependent care flexible spending account plan or plans maintained by Buyer or the Companies or the
Subsidiaries (“Buyer’s Flex Plans”) with a balance (positive or negative) as of the Cut-Off
Date equal to the balance credited to the individual under the applicable health care and dependent
care flexible spending account plans included within the Seller Plans listed in Schedule
4.16(a) of the Seller Disclosure Schedule (“Seller Flex Plans”) as of the Cut-Off Date
(“Aggregate Flex Plan Balances”), and will reimburse each such individual for expenses
incurred during the current plan year of such Seller Flex Plan (whether incurred before or after
the Cut-Off Date) that had not been reimbursed under such Seller Flex Plan prior to the Cut-Off
Date (to the same extent such eligible expense would have been reimbursable under such Seller Flex
Plan). As soon as reasonably practicable following the Cut-Off Date, Seller shall transfer assets
to Buyer’s Flex Plan equal to the Aggregate Flex Plan Balances and Buyer, the Companies, the
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Subsidiaries and Seller will treat the arrangement described in this Section 7.3(i) as
a spin-off of the applicable portions of the Seller Flex Plans and a merger of such portions into
Buyer’s Flex Plans.
(j) Retirement and 401(k) Plans.
(i) Buyer, the Companies and the Transferring Subsidiaries will have no liability for
benefits payable under the Saks Incorporated 401(k) Retirement Plan (“Seller’s DC
Plan”). Seller shall take or cause to be taken all actions necessary to fully vest
Retained Employees under Seller’s DC Plan.
(ii) Buyer either currently maintains, or will establish or cause the Companies or the
Subsidiaries to establish, not later than 90 days after the Cut-Off Date, one or more
qualified defined contribution plans (“Buyer’s DC Plan”) that contain or will
contain all provisions necessary for the acceptance of direct rollovers (in the form of cash
and notes relating to plan participant loans) of “eligible rollover distributions” as
defined in the Code and applicable regulations that Retained Employees are eligible to
receive from the Seller’s DC Plan without adversely affecting the qualified status of
Seller’s DC Plan. Buyer’s DC Plan will contain provisions to permit any such direct
rollover to include the promissory note or notes representing any plan loans outstanding to
the Retained Employee under Seller’ DC Plan on the date of the direct rollover, and Buyer,
the Companies, the Subsidiaries and Seller will cooperate with each other to enable such
direct rollovers to occur before such loans become defaulted. Seller agrees not to place
any such loans in default for at least 90 days following the Cut-Off Date.
(k) Workers’ Compensation Liabilities. As of the Effective Time, Buyer will cause the
Companies and the Transferring Subsidiaries to assume (or reimburse Seller and the other Seller
Affiliates for) all liabilities and obligations relating to compensation and benefits under any
state workers’ compensation or similar law payable following the Effective Time to or with respect
to any Retained Employee, or to any former employee of the Business, who in either case was
employed by the Companies or the Subsidiaries on the date the claim arose or the incident on which
the claim is based occurred.
Section 7.4 Securities Law Legends. Buyer agrees and understands that the Securities
have not been, and will not be, registered under the Securities Act or the securities laws of any
state and that the Securities may be sold or disposed of only in one or more transactions
registered under the Securities Act and applicable state securities laws or as to which an
exemption from the registration requirements of the Securities Act and applicable state securities
laws is available. Buyer acknowledges and agrees that no Person has any right to require Seller to
cause the registration of any of the Securities. The certificates, if any, representing the
Securities shall contain a legend substantially similar to the following and other legends
necessary or appropriate under applicable state securities laws:
THE SHARES [MEMBERSHIP INTERESTS] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS A REGISTRATION
STATEMENT UNDER THE ACT AND ANY
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APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SHARES [MEMBERSHIP INTERESTS]
IS EFFECTIVE OR UNLESS THE COMPANY IS IN RECEIPT OF AN OPINION OF COUNSEL
SATISFACTORY TO IT TO THE EFFECT THAT SUCH SHARES [MEMBERSHIP INTERESTS] MAY BE SOLD
WITHOUT REGISTRATION UNDER THE ACT AND SUCH LAWS.
Section 7.5 Insurance; Risk of Loss. Seller will, or will cause the Companies and the
Subsidiaries to, keep insurance policies currently maintained by Seller or the Companies or the
Subsidiaries (with respect to the Business), or suitable replacements therefor, in full force and
effect through the close of business on the Closing Date, and Buyer shall become solely responsible
for all insurance coverage and related risk of loss based on events occurring after the Closing
Date with respect to the Companies, the Transferring Subsidiaries and their respective businesses,
assets and current or former employees. All proceeds of insurance payable (in excess of any
deductible, retention or self-insurance amount) in respect of any event that occurs on or before
the Cut-Off Date, to the extent that the proceeds are for damaged properties or assets of any
Company or any Subsidiary (with respect to the Business) and would otherwise be payable to Seller
or its Affiliates, shall be received by Seller and (a) to the extent the damage to the properties
or assets of any Company or any Subsidiary to which the proceeds pertain has not been repaired or
restored or paid for by Seller, shall be paid over to Buyer at the Closing, or, if no proceeds have
been received before the Closing, Seller shall assign any of its claims thereto to Buyer promptly
following the Closing Date, and (b) to the extent the damage to the properties or assets of any
Company or any Subsidiary to which the proceeds pertain has been repaired or restored or paid for
by Seller, shall be retained by Seller on or prior to the Closing, or, if no proceeds have been
received before the Closing, Seller shall be entitled to all claims thereto. Provided that Seller
complies with Seller’s obligations under this Section 7.5, neither the occurrence of any
casualty damage nor the payment, receipt or collection of insurance proceeds shall be included or
accounted for in any way under the provisions of Section 2.4 or in the determination of
Final Working Capital. To the extent that after the Closing any party hereto requires any
information regarding claim data, payroll or other information in order to make filing with
insurance carriers or self insurance regulators from another party hereto, the other party will
promptly supply such information.
Section 7.6 Consents. Buyer acknowledges that (i) certain consents (including
consents contingent on the fulfillment of certain conditions), approvals, waivers, agreements, or
actions of, or (with or without lapse of time) notice to, third parties relating to the
transactions contemplated by this Agreement may be required under instruments, contracts,
commitments, agreements or arrangements (the “Required Consents”), which Required Consents
have not been obtained or are themselves subject to conditions not fulfilled as of the Closing, and
(ii) certain new governmental franchises, approvals, permits, licenses, orders, registrations,
certificates, variances and similar rights may be required in order for Buyer to conduct the
Business following the Closing in the same manner in which the Business was conducted before the
Closing. Except as otherwise expressly provided in this Section 7.6, and subject to
compliance with Section 6.3, Seller shall not have any liability whatsoever to Buyer
arising out of or relating to the failure to obtain any Required Consents or any such governmental
franchises, approvals, permits, licenses, orders, registrations, certificates, variances, or
similar rights that may be required. Subject to Seller’s compliance with Section 6.3 and
this Section 7.6, no representation,
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warranty or covenant of Seller contained herein shall be breached or deemed breached, and no
condition shall be deemed not satisfied, based on (A) the failure to obtain any such Required
Consents or any such governmental franchises, approvals, permits licenses, orders, registrations,
certificates, variances or similar rights, provided the need for such Required Consent has been set
forth in the Seller Disclosure Schedule if required to be so disclosed pursuant to the terms of
this Agreement, or (B) any lawsuit, action, claim, proceeding or investigation commenced or
threatened by or on behalf of any Person arising out of or relating to the failure to obtain any
such Required Consents or any such governmental franchises, approvals, permits, licenses, orders,
registrations, certificates, variances or similar rights; provided, however, that
nothing stated herein shall supersede the conditions set forth in Sections 8.2 and
8.3 or the obligations of Seller under Section 6.3 or this Section 7.6.
Seller shall cooperate with Buyer in any commercially reasonable manner in connection with Buyer
obtaining any Required Consents and any governmental franchises, approvals, permits, licenses,
orders, registrations, certificates, variances or similar rights; provided,
however, that such action shall not include any requirement of Seller or any of its
Affiliates to commence or participate in any litigation, make any payments or offer or grant any
accommodation or undertake any liability or obligation (in each case financial or otherwise) to any
third party (including any Governmental Body).
Section 7.7 Fees and Expenses. Except as provided in Section 7.2 or in this
Section 7.7 or as otherwise expressly provided in this Agreement, whether or not the
transactions contemplated hereby are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby, including the fees and disbursements
of counsel, financial advisors and accountants, shall be paid by the party incurring such costs and
expenses, provided that (i) all expenses incurred in connection with obtaining updated title
commitments shall be paid by Buyer and (ii) Seller shall be responsible for all fees and expenses
related to the Plan of Reorganization and the transactions contemplated thereby.
Section 7.8 Gift Cards, Etc; Return Policies. Following the Cut-Off Date, without
recourse to Seller or any of its Affiliates (other than the Companies and the Transferring
Subsidiaries), Buyer shall manage and honor, in accordance with their respective terms, all gift
certificates, gift cards, merchandise vouchers, coupons and refunds purchased, issued or earned in
connection with the Business on or before the Cut-Off Date. For the 180-day period following the
Cut-Off Date, Buyer shall honor all return policies of the Business with respect to products sold
by any Company or any Subsidiary in connection with the conduct of the Business on or before the
Cut-Off Date, without recourse to Seller or any of its Affiliates (other than the Companies and the
Transferring Subsidiaries).
Section 7.9 HIPAA Confidentiality. Buyer shall enter into such confidentiality
agreements with respect to all books and records of Seller relating to the Retained Employees as
may be required under the Health Insurance Portability and Accountability Act of 1996, as amended,
and the rules and regulations promulgated thereunder (“HIPAA”). Seller may withhold from
Buyer any portions of such books and records that contain protected health information on Retained
Employees or their dependents to the extent Seller reasonably determines based on advice of counsel
that disclosure of such information to Buyer would violate HIPAA. Seller will cooperate with Buyer
to the extent that, in connection with making offers of employment to Business Employees, Buyer
seeks any release of records from any Business Employee as may be required under HIPAA.
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Section 7.10 Non-Solicitation of Employees.
(a) Neither Seller nor any of its Affiliates shall (i) for a period of one year from the
Cut-Off Date, solicit the services, as employee, consultant or otherwise (or cause or seek to cause
to leave the employ of Buyer or any of its subsidiaries) of any of Buyer’s or its subsidiaries’
non-clerical employees (including any non-clerical Retained Employee) or (ii) for a period of two
years from the Cut-Off Date, solicit the services, as employee, consultant or otherwise (or cause
or seek to cause to leave the employ of Buyer or any of its subsidiaries) of any of Buyer’s or its
subsidiaries’ employees at or above the level of store manager (including any Retained Employee at
or above the level of store manager); provided, however, that the foregoing shall
not apply (x) with respect to an employee as to whom conversations were initiated by such employee
after such employee was discharged from employment with Buyer or any of its subsidiaries or six
months after such employee resigned from employment with Buyer or any of its subsidiaries, as the
case may be, or (y) with respect to any public advertisement or general solicitation (or any hiring
pursuant thereto) that is not specifically targeted at such employees. Each of Buyer and Seller
agrees to cooperate with the other party to correct any inadvertent breach of this Section
7.10(a) by Seller or any of its Affiliates.
(b) Except pursuant to Section 7.14 or as agreed by the parties pursuant to Section
1(j) of the Private Brands Agreement and Section 24 of the Buyer Transition Services Agreement,
neither Buyer nor any of its Affiliates shall (i) for a period of one year from the Cut-Off Date,
solicit the services, as employee, consultant or otherwise (or cause or seek to cause to leave the
employ of Seller or any of its subsidiaries) of any of Seller’s or its subsidiaries’ non-clerical
employees or (ii) for a period of two years from the Cut-Off Date, solicit the services, as
employee, consultant or otherwise, (or cause or seek to cause to leave the employ of Seller or any
of its subsidiaries) of any of the Seller’s or its subsidiaries’ employees at or above the level of
store manager; provided, however, that the foregoing shall not apply (x) with
respect to any employee as to whom conversations were initiated by such employee after such
employee was discharged from employment with Seller or any of its subsidiaries or six months after
such employee resigned from employment with Seller or any of its subsidiaries, as the case may be,
or (y) with respect to any public advertisement or general solicitation (or any hiring pursuant
thereto) that is not specifically targeted at such employees. Each of Buyer and Seller agrees to
cooperate with the other party to correct any inadvertent breach of this Section 7.10(b) by
Buyer or any of its Affiliates.
Section 7.11 Certain Litigation. Following the Closing, Buyer shall comply with the
obligations set forth in item 3 of Schedule 4.13 of the Seller Disclosure Schedule.
Section 7.12 Transfer/License of Certain Assets. At Closing, Seller shall either (i)
assign to Buyer, on an “AS IS, WHERE IS” basis and without any representation or warranty of any
kind or (ii) allow Buyer to use on a royalty-free basis the assets specified on Schedule
7.12 of the Seller Disclosure Schedule. In addition, Seller will assign to Buyer at the
Closing all those “shrink-wrap” licenses or “click-through” agreements that are assignable without
the consent of the licensor or other party thereto with respect to software pre-installed in the
ordinary course of business as a standard part of hardware, equipment or fixtures that are owned by
the Companies or the Transferring Subsidiaries immediately after the Cut-Off Date.
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Section 7.13 Confidentiality. After the Closing, Seller shall hold, and shall cause
each of its Affiliates to hold, in strict confidence from any Person all proprietary information
regarding the Business (the “Confidential Information”), unless legally compelled, required
by any Governmental Body or required by the rules of any stock exchange to disclose such
information. As used herein, “Confidential Information” does not include any information
that: (i) is or becomes generally available to the public other than as a result of a disclosure by
Seller; (ii) becomes available to Seller from a Person other than Buyer or its Affiliates who is
not, to the Knowledge of Seller, subject to any legally binding obligation to keep such information
confidential; or (iii) Seller demonstrates is or was independently developed by it or on its behalf
following the Closing Date without the direct or indirect use of any of the Confidential
Information.
Section 7.14 Private Brands Personnel. Within a reasonable period of time following
the date hereof, Seller shall inquire of personnel in its private brands organization as to whether
such individuals are interested in interviewing with Buyer for employment. Promptly following the
Closing, Seller shall facilitate interviews with Buyer for personnel interested in seeking
employment with Buyer. Buyer shall coordinate with Seller all communications to such personnel and
Seller shall reasonably cooperate with Buyer in this effort. Buyer agrees and acknowledges that
Seller shall have the right to approve the transfer date of employment of any such employee, which
approval shall not be unreasonably withheld or delayed.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall, at the option of Buyer (to the extent
permissible under applicable law), be subject to the satisfaction, on or prior to the Closing Date,
of the following conditions:
Section 8.1 HSR Act. The waiting period (and any extension thereof) applicable to the
consummation of the transactions contemplated hereby under the HSR Act shall have expired or been
terminated.
Section 8.2 No Order. No court or other Governmental Body having jurisdiction over
Buyer or Seller shall have issued any order, decree or ruling which is then in effect and has the
effect of restraining or prohibiting the purchase and sale of the Securities.
Section 8.3 Representations and Warranties. The representations and warranties of
Seller contained in the first four sentences of Section 4.4(a) and in Sections
4.2(b), 4.3 and 4.21 shall be true and correct in all material respects in each
case as of the Closing Date, as though made on the Closing Date (or on the date when made in the
case of any representation or warranty which specifically relates to an earlier date), except for
those changes or transactions therein permitted by this Agreement or resulting from any change or
transaction consented to in writing by Buyer. All other representations and warranties of Seller
contained in this Agreement, when read without any exception or qualification for materiality or
Material Adverse Effect, shall be true and correct on the Closing Date as though made on the
Closing Date (or on the date when made in the case of any representation or warranty which
specifically relates to an earlier date), except for (a) changes or transactions therein permitted
by this Agreement or resulting from any change or transaction consented to in writing by Buyer and
(b) failures of
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representations and warranties to be true and correct which, individually or in the aggregate,
are not reasonably expected to have a Material Adverse Effect.
Section 8.4 Performance of Obligations. Seller shall have performed in all material
respects all of its covenants and agreements required by this Agreement to be performed at or prior
to the Closing.
Section 8.5 Closing Certificate. There shall have been delivered to Buyer a
certificate dated the Closing Date, signed on behalf of Seller by a duly authorized executive
officer of Seller, confirming the satisfaction of the conditions set forth in Sections 8.3
and 8.4.
Section 8.6 Release of Encumbrances and Guaranties. Buyer shall have received
reasonably satisfactory evidence that (a) any Encumbrances imposed by the Credit Agreement on the
assets of the Companies and the Transferring Subsidiaries and (b) any guaranties by the Companies
or the Transferring Subsidiaries pursuant to the Credit Agreement and the Indentures have been, or
promptly following the Closing will be, released.
Section 8.7 Financing. Provided that Buyer has complied with its obligations under
Section 6.15(a) and under the Commitment Letters (except to the extent any failure to
comply by Buyer with its obligations under the Commitment Letters was caused by a breach by Seller
of any of its obligations under Section 6.15(b) or 6.16), Buyer shall have
available to it the proceeds of the Financing contemplated by the Commitment Letters or such other
substitute financing in accordance with Section 6.15(a).
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall, at the option of the Seller (to the
extent permissible under applicable law), be subject to the satisfaction, on or prior to the
Closing Date, of the following conditions:
Section 9.1 HSR Act. The waiting period (and any extension thereof) applicable to the
consummation of the transactions contemplated hereby under the HSR Act shall have expired or been
terminated.
Section 9.2 No Order. No court or other Governmental Body having jurisdiction over
Buyer or Seller shall have issued any order, decree or ruling which is then in effect and has the
effect of restraining or prohibiting the purchase and sale of the Securities.
Section 9.3 Representations and Warranties. The representations and warranties of
Buyer contained in this Agreement, when read without any exception or qualification for
materiality, shall be true and correct in all material respects on the Closing Date as though made
on the Closing Date, except for changes or transactions therein permitted by this Agreement or
resulting from any change or transaction consented to in writing by Seller.
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Section 9.4 Performance of Obligations. Buyer shall have performed in all material
respects all of its covenants and agreements required by this Agreement to be performed at or prior
to the Closing.
Section 9.5 Closing Certificate. There shall have been delivered to Seller a
certificate dated the Closing Date, signed on behalf of Buyer by a duly authorized executive
officer of Buyer, confirming the satisfaction of the conditions set forth in Sections 9.3
and 9.4.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification by Seller. (a) From and after the Closing, Seller
agrees to indemnify and hold harmless each Buyer Group Member from and against any and all Losses
and Expenses incurred by such Buyer Group Member in connection with or arising from:
(i) any breach of any warranty or the inaccuracy of any representation of Seller
contained in this Agreement (including the last sentence of each of Sections
6.16(a), (b) and (c)) or the certificate delivered by or on behalf of
Seller pursuant to Section 8.5;
(ii) any breach by Seller of, or failure by Seller to perform, any of its covenants or
obligations contained in this Agreement (including its indemnification obligations set forth
in Section 7.2 and excluding the last sentence of each of Sections 6.16(a),
(b) and (c)); and
(iii) any obligation or liability of Buyer and its Affiliates (including the Companies
and the Transferring Subsidiaries) arising out of or relating to the Business that are
assumed or retained by Seller or its Affiliates (other than the Companies and the
Transferred Subsidiaries) pursuant to the terms of this Agreement;
(iv) any obligation or liability of the Companies or the Subsidiaries relating to the
period on or prior to the Cut-Off Date that does not arise out of or relate to the Business;
(v) any obligation or liability of the Companies or the Subsidiaries to the extent
caused by the Plan of Reorganization or the transactions contemplated thereby (other than
Section 3.11 thereof);
(vi) any liability of Buyer and its Affiliates (including the Companies and the
Transferring Subsidiaries) arising out of or relating to the matter set forth on
Schedule 10.1(a)(vi) of the Seller Disclosure Schedule; and
(vii) any liability of Buyer and its Affiliates (including the Companies and the
Transferring Subsidiaries) arising out of or relating to the matters set forth on
Schedule 10.1(a)(vii) of the Seller Disclosure Schedule, to the extent relating to
acts, errors or omissions of Seller, the Companies or the Subsidiaries occurring prior to
the Cut Off Date;
69
provided, however, that Seller shall be required to indemnify and hold harmless
each Buyer Group Member under Section 10.1(a)(i) with respect to Losses and Expenses
incurred only to the extent that:
(x) the amount of Loss and Expense suffered by Buyer Group Members related to each
individual claim exceeds $50,000 (it being understood that such $50,000 shall be a
deductible for which Seller shall bear no indemnification responsibility);
(y) the aggregate amount of such Losses and Expenses (other than Losses and Expenses
excluded by clause (x) above) exceeds $11,000,000 (it being understood that such $11,000,000
shall be a deductible for which Seller shall bear no indemnification responsibility); and
(z) the aggregate amount required to be paid by Seller pursuant to Section
10.1(a)(i) shall not exceed fifteen percent (15%) of the Purchase Price.
(b) The indemnification provided for in Section 10.1(a) shall terminate on March 31,
2007 (and no claims shall be made by any Buyer Group Member under Section 10.1(a)
thereafter), except that the indemnification by Seller shall continue as to:
(i) the covenants of Seller set forth in Sections 7.10 and 12.6, which
shall survive for the periods of time set forth in such sections;
(ii) the covenants of Seller set forth in Sections 6.7, 6.10(e),
7.2, 7.3 and 7.7, which shall survive until the expiration of the
relevant statutory period of limitations applicable to the underlying claim, giving effect
to any waiver, mitigation or extension thereof;
(iii) the obligations of Seller pursuant to Sections 10.1(a)(iii), Section
10.1(a)(iv), Section 10.1(a)(v), Section 10.1(a)(vi), and Section
10.1(a)(vii), which shall survive indefinitely; and
(iv) the representations and warranties set forth in the first four (4) sentences of
Section 4.4(a) and Sections 4.2(b), 4.3 and 4.21, each of
which shall survive until the expiration of the relevant statutory period of limitations
applicable to the underlying claim, giving effect to waiver, mitigation or extension
thereof; and
(v) any Losses or Expenses of which any Buyer Group Member has validly given a Claim
Notice to Seller in accordance with the requirements of Section 10.3 on or prior to
the date such indemnification would otherwise terminate in accordance with this Section
10.1(b), as to which the obligation of Seller shall continue solely with respect to the
specific matters in such Claim Notice until the liability of Seller shall have been
determined pursuant to this Article X, and Seller shall have reimbursed all Buyer
Group Members for the full amount of such Losses and Expenses that are payable with respect
to such Claim Notice in accordance with this Article X.
Section 10.2 Indemnification by Buyer. (a) From and after the Closing, Buyer agrees
to indemnify and hold harmless each Seller Group Member from and against any and all Losses and
Expenses incurred by such Seller Group Member in connection with or arising from:
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(i) any breach of any warranty or the inaccuracy of any representation of Buyer
contained in this Agreement or the certificate delivered by or on behalf of Buyer pursuant
to Section 9.5;
(ii) any breach by Buyer of, or failure by Buyer to perform, any of its covenants and
obligations contained in this Agreement (including its indemnification obligations set forth
in Section 7.2);
(iii) any liability or obligation of any kind arising out of or relating to the
Financing contemplated by the Commitment Letters;
(iv) the Assumed Contract Liabilities;
(v) any obligation or liability of Seller or its Affiliates to the extent caused by
Section 3.11 of the Plan of Reorganization; and
(vi) any liability or obligation of the Companies or the Subsidiaries arising out of or
relating to the Business (other than those items for which Buyer is entitled to
indemnification from Seller under Section 10.1(a) without regard to any limitations
on indemnification set forth in Section 10.1(b) or the proviso to Section
10.1(a)).
(b) The indemnification provided for in Section 10.2(a) shall terminate on March 31,
2007 (and no claims shall be made by any Seller Group Member under Section 10.2(a)
thereafter), except that the indemnification by Buyer shall continue as to:
(i) the covenants of Buyer set forth in Sections 7.10 and 12.6 which
shall survive for the periods of time set forth in such sections;
(ii) the covenants of Buyer set forth in Sections 6.7, 6.10,
7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7,
7.8, 7.9 and 7.11 which shall survive until the expiration of the
relevant statutory period of limitations applicable to the underlying claim, giving effect
to any waiver, mitigation or extension thereof;
(iii) the obligations of Buyer pursuant to Sections 10.2(a)(iii),
10.2(a)(iv), Section 10.2(a)(v) and Section 10.2(a)(vi), which shall
survive indefinitely;
(iv) the representations and warranties set forth in the first two (2) sentences of
Section 5.2(a) and Sections 5.6 and 5.7, each of which shall survive
until the expiration of the relevant statutory period of limitations applicable to the
underlying claim, giving effect to waiver, mitigation or extension thereof; and
(v) any Losses or Expenses of which any Seller Group Member has validly given a Claim
Notice to Buyer in accordance with the requirements of Section 10.3 on or prior to
the date such indemnification would otherwise terminate in accordance with this Section
10.2(b), as to which the obligation of Buyer shall continue solely with respect to the
specific matters in such Claim Notice until the liability of Buyer shall have been
determined pursuant to this Article X, and Buyer shall have reimbursed all Seller
Group Members for the full amount of such Losses and Expenses that are payable with respect
to such Claim Notice in accordance with this Article X.
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Section 10.3 Notice of Claims. Any Buyer Group Member or Seller Group Member seeking
indemnification hereunder (the “Indemnified Party”) shall give promptly to the party
obligated to provide indemnification to such Indemnified Party (the “Indemnitor”) a notice
(a “Claim Notice”) describing in reasonable detail the facts giving rise to the claim for
indemnification hereunder and shall include in such Claim Notice (if then known) the amount or the
method of computation of the amount of such claim, and a reference to the provision of this
Agreement or any other agreement, document or instrument executed hereunder or in connection
herewith upon which such claim is based; provided, however, that a Claim Notice in
respect of any action at law or suit in equity by or against a third Person as to which
indemnification will be sought shall be given promptly after the action or suit is commenced.
Section 10.4 Determination of Amount. (a) In calculating any Loss or Expense there
shall be deducted any insurance recovery in respect thereof (and no right of subrogation shall
accrue hereunder to any insurer). Each party agrees to use commercially reasonable efforts to make
any such insurance recovery. Buyer and Seller agree that, for purposes of computing the amount of
any indemnification payment under this Article X, any such indemnification payment shall be
treated as an adjustment to the Purchase Price for all Tax purposes. If Seller is required to
indemnify a Buyer Group Member pursuant to the provisions of Section 10.1, and the cost,
expense or liability for which the indemnification is sought under Section 10.1 has
provided any Buyer Group Member with a Tax benefit actually saved or recovered, the amount of such
Tax benefit that has been realized or received, after taking into consideration all costs and
expenses incurred in obtaining such Tax savings, shall reduce Seller’s liability to indemnify a
Buyer Group Member under Section 10.1. If Buyer is required to indemnify a Seller Group
Member pursuant to the provisions of Section 10.2, and the cost, expense or liability for
which the indemnification is sought under Section 10.2 has provided any Seller Group Member
with a Tax benefit actually saved or recovered, the amount of such Tax benefit that has been
realized or received, after taking into consideration all costs and expenses incurred in obtaining
such Tax savings, shall reduce Buyer’s liability to indemnify a Seller Group Member under
Section 10.2.
(b) After the giving of any Claim Notice pursuant to Section 10.3, the amount of
indemnification to which an Indemnified Party shall be entitled under this Article X shall
be determined: (i) by the written agreement between the Indemnified Party and the Indemnitor; (ii)
by a final judgment or decree of any court of competent jurisdiction; or (iii) by any other means
to which the Indemnified Party and the Indemnitor shall agree. The judgment or decree of a court
shall be deemed final when the time for appeal, if any, shall have expired and no appeal shall have
been taken or when all appeals taken shall have been finally determined. The Indemnified Party
shall have the burden of proof in establishing the amount of Losses and Expenses suffered by it.
Section 10.5 Third Person Claims. (a) Any party seeking indemnification provided for
under this Agreement in respect of, arising out of or involving a claim or demand made by any third
Person against the Indemnified Party shall notify the Indemnitor in writing, and in reasonable
detail, of the third Person claim within five business days after receipt by such Indemnified Party
of written notice of the third Person claim. Thereafter, the Indemnified Party shall deliver to
the Indemnitor, within 10 business days after the Indemnified Party’s receipt thereof, copies of
all notices and documents (including court papers) received by the Indemnified Party relating to
the third Person claim. Notwithstanding the foregoing, should a party be physically served with a
complaint with regard to a third Person claim, the Indemnified Party
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shall notify the Indemnitor with a copy of the complaint within five business days after
receipt thereof and shall deliver to the Indemnitor within seven business days after the receipt of
such complaint copies of notices and documents (including court papers) received by the Indemnified
Party relating to the third Person claim. The failure to give notice as provided in this
Section 10.5 shall not relieve the Indemnitor of its obligations hereunder except to the
extent it shall have been prejudiced by such failure.
(b) In the event any legal proceeding shall be threatened or instituted or any claim or demand
shall be asserted by any Person in respect of which payment may be sought by one party hereto from
the other party under the provisions of this Article X, the Indemnified Party shall
promptly cause written notice of the assertion of any such claim of which it has knowledge which is
covered by this indemnity to be forwarded to the Indemnitor. Any notice of a claim by reason of
any of the representations, warranties or covenants contained in this Agreement shall contain a
reference to the provision of this Agreement or any other agreement, document or instrument
executed hereunder or in connection herewith upon which such claim is based, the facts giving rise
to an alleged basis for the claim and the amount of the liability asserted against the Indemnitor
by reason of the claim. In the event of the initiation of any legal proceeding against the
Indemnified Party by a third Person, the Indemnitor shall have the sole and absolute right after
the receipt of notice, at its option and at its own expense, to be represented by counsel of its
choice and to control, defend against, negotiate, settle or otherwise deal with any proceeding,
claim, or demand which relates to any loss, liability or damage indemnified against hereunder;
provided, however, that the Indemnified Party may participate in any such
proceeding with counsel of its choice and at its expense. The parties hereto agree to cooperate
fully with each other in connection with the defense, negotiation or settlement of any such legal
proceeding, claim or demand. To the extent the Indemnitor elects not to defend such proceeding,
claim or demand or fails to acknowledge such Indemnitor’s obligations hereunder with respect to any
such proceeding, claim or demand to the extent the Indemnified Party is entitled to indemnification
pursuant to this Article X, and the Indemnified Party defends against or otherwise deals
with any such proceeding, claim or demand, the Indemnified Party may retain counsel, at the expense
of the Indemnitor, and control the defense of such proceeding. Neither the Indemnitor nor the
Indemnified Party may settle any such proceeding which settlement obligates the other party to pay
money, to perform obligations or to admit liability without the consent of the other party, such
consent not to be unreasonably withheld or delayed; provided, that, if the
Indemnitor wishes to settle any such proceeding which settlement involves only the payment of money
and includes a full release of the Indemnified Party, and the Indemnified Party does not consent to
such settlement, the Indemnitor shall not have any liability or obligation in excess of the
proposed settlement amount. After any final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent jurisdiction and the time in which to
appeal therefrom has expired, or a settlement shall have been consummated, or the Indemnified Party
and the Indemnitor shall arrive at a mutually binding agreement with respect to each separate
matter alleged to be indemnified by the Indemnitor hereunder, the Indemnified Party shall forward
to the Indemnitor notice of any sums due and owing by it with respect to such matter and the
Indemnitor shall pay all of the sums so owing to the Indemnified Party by wire transfer, certified
or bank cashier’s check within 30 days after the date of such notice.
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(c) To the extent of any inconsistency between this Section 10.5 and Section
7.2(c) (relating to Tax contests), the provisions of Section 7.2(c) shall control with
respect to Tax contests.
(d) Notwithstanding any provisions of Section 10.3 or this Section 10.5 to the
contrary, Seller hereby acknowledges its indemnification obligations under Section
10.1(a)(vi) without regard to receipt of a Claim Notice or any other notices contemplated by
Section 10.3 or this Section 10.5 and hereby elects to continue to be represented
by counsel of its choice and to control, defend against, negotiate, settle or otherwise deal with
the matter set forth on Schedule 10.1(a)(vi) of the Seller Disclosure Schedule or any
proceeding, claim, or demand that relates thereto.
Section 10.6 Limitations. (a) In any case where an Indemnified Party recovers from
third Persons any amount in respect of a matter with respect to which an Indemnitor has indemnified
it pursuant to this Article X, such Indemnified Party shall promptly pay over to the
Indemnitor the amount so recovered (after deducting therefrom the full amount of the expenses
incurred by it in procuring such recovery), but not in excess of the sum of (i) any amount
previously so paid by the Indemnitor to or on behalf of the Indemnified Party in respect of such
matter and (ii) any amount expended by the Indemnitor in pursuing or defending any claim arising
out of such matter.
(b) In the event that Seller is conducting any defense against a third Person claim for which
a Buyer Group Member has sought indemnification pursuant to Section 10.1(a), expenses
incurred by Seller in connection therewith, including legal costs and expenses, shall constitute
Expenses for purposes of determining the maximum aggregate amount to be paid by Seller pursuant to
Section 10.1(a).
(c) EXCEPT FOR DAMAGES IN RESPECT OF FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IN NO
EVENT SHALL ANY PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOSS OF
REVENUES OR PROFITS), EXEMPLARY OR PUNITIVE DAMAGES, ARISING UNDER ANY LEGAL OR EQUITABLE THEORY,
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, ALL OF WHICH ARE HEREBY EXCLUDED BY AGREEMENT
OF THE PARTIES REGARDLESS OF WHETHER OR NOT ANY PARTY TO THIS AGREEMENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. Notwithstanding the foregoing, the failure of Seller to deliver any
financial statements and other materials required by Section 6.16(c) on or prior to the
date on which such materials are required to be delivered pursuant to Section 6.16(c) shall
be deemed to be direct damages to Buyer in an amount that is equal to the additional interest that
would be payable to holders of the then outstanding Notes if a Registration Default (as defined in
the Commitment Letters) had first occurred on the date that Seller was obligated to deliver to
Buyer such information and such Registration Default was cured on the date of delivery of such
information; provided, that the parties acknowledge and agree that Seller shall have no
liability under Section 6.16(c), unless Buyer has satisfied its obligations under
Section 6.16(c).
(d) Except for remedies that cannot be waived as a matter of law and injunctive and
provisional relief (including, but not limited to, specific performance), if the Closing occurs,
this Article X shall be the exclusive remedy of the parties hereto for breaches of
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this Agreement (including any covenant, obligation, representation or warranty contained in
this Agreement or in any certificate delivered pursuant to this Agreement) or otherwise in respect
of the sale of the Securities contemplated hereby. In furtherance of the foregoing, each party
hereto hereby waives, to the fullest extent permitted under applicable law, any and all rights,
claims and causes of action of such party against the other party arising under this Agreement or
under any certificate delivered pursuant to this Agreement as a matter of equity or under or based
upon any federal, state, provincial, local or foreign statute, law, ordinance, rule or regulation
(including those relating to Environmental Laws) or arising under or based upon common law or
otherwise, except that this Section 10.6(d) shall not limit the remedies of a party with
respect to a claim based on fraud.
Section 10.7 Mitigation. Each of the parties agrees to take all reasonable steps to
mitigate their respective Losses and Expenses upon and after becoming aware of any event or
condition which could reasonably be expected to give rise to any Losses and Expenses that are
indemnifiable hereunder.
ARTICLE XI
TERMINATION
TERMINATION
Section 11.1 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual written consent of Buyer and Seller;
(b) by Seller upon 15 business days’ notice to Buyer if any of the conditions in Article
IX shall have become incapable of fulfillment at the Closing, and shall not have been waived in
writing by Seller; provided, that, Seller’s right to terminate this Agreement
pursuant to this Section 11.1(b) shall not be available to Seller if Seller’s failure to
fulfill any of its obligations contained in this Agreement has been the cause of, or resulted in,
the failure of the conditions of Article IX to be capable of fulfillment at the Closing;
(c) by Buyer upon 15 business days’ notice to Seller if any of the conditions in Article
VIII shall have become incapable of fulfillment at the Closing, and shall not have been waived
in writing by Buyer; provided, that, Buyer’s right to terminate this Agreement
pursuant to this Section 11.1(c) shall not be available to Buyer if Buyer’s failure to
fulfill any of its obligations contained in this Agreement has been the cause of, or resulted in,
the failure of the conditions of Article VIII to be capable of fulfillment at the Closing;
(d) by Buyer or Seller if any court or other Governmental Body having jurisdiction over Buyer
or Seller shall have issued a final and non-appealable order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the purchase and sale of the Securities;
(e) by Buyer or Seller if the Closing shall not have occurred on or before March 20, 2006 (or
such later date as may be agreed to in writing to Buyer and Seller); provided,
however, that either party may by written notice to the other party delivered on or before
March 20, 2006 extend such date until any date prior to May 8, 2006 if the failure of the Closing
to have
75
occurred on or before March 20, 2006 shall have resulted from the failure of the condition set
forth in Sections 8.1 and 9.1; provided, further, that the right to
terminate this Agreement pursuant to this Section 11.1(e) shall not be available to any
party whose failure to fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Closing to have occurred on or prior to the aforesaid
date; or
(f) if Buyer has not delivered the certificate described in the last sentence of Section
6.15(a), by Seller at any time after the later of January 30, 2006 and the Initiation Date or,
if Buyer has delivered such certificate, by Seller at any time after the later of (x) February 13,
2006 and (y) six (6) days after the last day of the Marketing Period; provided, that in no
event shall Seller have the right to terminate this Agreement pursuant to this Section
11.1(f) at any time after the pricing of the Note Offering shall have occurred and prior to the
settlement date therefor stated in the offering materials dated the date of pricing.
Section 11.2 Notice of Termination. Any party desiring to terminate this Agreement
pursuant to Section 11.1 shall give written notice of such termination to the other party
to this Agreement.
Section 11.3 Effect of Termination. If this Agreement is terminated pursuant to this
Article XI, all further obligations of the parties under this Agreement shall terminate
without any liability to the other party (other than this Section 11.3 (Effect of
Termination), the penultimate sentence of Section 6.15(b), Section 7.7 (Fees and
Expenses), and Article XII (Miscellaneous), which provisions shall each survive such
termination); provided, however, that nothing in this Section 11.3 shall
relieve any party from any liability for a willful breach of this Agreement.
ARTICLE XII
MISCELLANEOUS
MISCELLANEOUS
Section 12.1 Survival of Representations and Warranties. The representations and
warranties contained in this Agreement shall survive the Closing only for the period during which
an indemnification claim is permitted to be made pursuant to Article X, after which time
such representations and warranties shall terminate and the parties shall have no rights or
remedies thereafter with respect to any breach of such representations or warranties.
Section 12.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of
New York.
Section 12.3 No Public Announcement. Neither Buyer nor Seller shall, without the
approval of the other, make any press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the extent that any such party shall
be so obligated by law, in which case the other party shall be advised and the parties shall use
their commercially reasonable efforts to cause a mutually agreeable release or announcement to be
issued; provided, however, that the foregoing shall not preclude communications or
disclosures necessary to implement the provisions of this Agreement or to comply with SEC
disclosure obligations or the rules of any United States or foreign stock exchange.
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Section 12.4 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be delivered personally, by facsimile or sent by private
courier or by registered or certified mail, and shall be deemed given when so delivered personally,
by facsimile or by private courier or, if mailed, two business days after the mailing, as follows:
If to Buyer, to:
The Bon-Ton Stores, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Vice President and General Counsel
0000 Xxxx Xxxxxx Xxxxxx
Xxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Vice President and General Counsel
with a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx and Xxxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxx and Xxxxx Xxxxxx
If to Seller, to:
Saks Incorporated
000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Executive Vice President and General Counsel
000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Executive Vice President and General Counsel
with a copy to:
Sidley Xxxxxx Xxxxx & Xxxx LLP
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx and Xxxx X. Xxxxxxxx
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx and Xxxx X. Xxxxxxxx
or to such other address as such party may indicate by a notice delivered to the other party
hereto.
Section 12.5 Successors and Assigns. (a) The rights of either party under this
Agreement shall not be assignable by such party hereto prior to the Closing without the prior
written consent of the other party, except that Buyer may assign its rights hereunder to any direct
or indirect wholly owned subsidiary of Buyer that agrees in writing to bound by the terms of this
Agreement (it being understood that no such assignment shall relieve Buyer of any of its
obligations hereunder).
(b) Following the Closing, neither party may assign any of its rights hereunder to any third
Person without the prior written consent of the other party, except that either party may assign
its rights hereunder to an Affiliate. Any assignment hereunder (whether before or after the
Closing) shall not relieve the assigning party of its obligations hereunder. This
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Agreement shall be binding upon and inure to the benefit of the parties hereto and their
successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any Person other than the parties and successors and assigns
permitted by this Section 12.5 any right, remedy or claim under or by reason of this
Agreement.
Section 12.6 Access to Records after Closing. (a) For a period of six years after
the Closing Date, Seller and its representatives shall have reasonable access to all of the books
and records of the Companies and the Transferring Subsidiaries which Buyer or any of its Affiliates
may retain after the Closing Date to the extent that such access may reasonably be required by
Seller in connection with matters relating to or affected by the operations of the Companies and
the Transferring Subsidiaries prior to the Cut-Off Date. Such access shall be afforded by Buyer
upon receipt of reasonable advance notice and during normal business hours. Seller shall be solely
responsible for any costs or expenses incurred by it pursuant to this Section 12.6(a). If
Buyer, the Companies or the Subsidiaries shall desire to dispose of any of such books and records
prior to the expiration of such six-year period, Buyer shall, prior to such disposition, give
Seller a reasonable opportunity, at Seller’s expense, to segregate and remove such books and
records as Seller may select.
(b) For a period of six years after the Closing Date, Buyer and its representatives shall have
reasonable access to all of the books and records relating to the Business, the Companies and the
Subsidiaries which Seller or any of its Affiliates may retain after the Closing Date. Such access
shall be afforded by Seller and its Affiliates upon receipt of reasonable advance notice and during
normal business hours. Buyer shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 12.6(b). If Seller or any of its Affiliates shall desire to
dispose of any of such books and records prior to the expiration of such six-year period, Seller
shall, prior to such disposition, give Buyer a reasonable opportunity, at Buyer’s expense, to
segregate and remove such books and records as Buyer may select.
(c) Within sixty (60) days after the Closing, Seller shall, at Buyer’s sole cost and expense,
deliver to Buyer, at such location as Buyer shall designate, all files, correspondence and other
materials in the possession of Seller or its Affiliates, relating to the Real Estate and all
original documents relating to the Real Estate, including the Lease Agreements and the Real Estate
Agreements in the possession of Seller or its Affiliates.
Section 12.7 Entire Agreement; Amendments. This Agreement, the exhibits and schedules
referred to herein, the documents delivered pursuant hereto and the Confidentiality Agreement
contain the entire understanding of the parties hereto with regard to the subject matter contained
herein or therein, and supersede all other prior representations, warranties, agreements,
understandings or letters of intent between or among any of the parties hereto. This Agreement
shall not be amended, modified or supplemented except by a written instrument signed by an
authorized representative of each of the parties hereto.
Section 12.8 Interpretation. Articles, titles and headings to sections herein are
inserted for convenience of reference only and are not intended to be a part of or to affect the
meaning or interpretation of this Agreement. The schedules and exhibits referred to herein shall
be construed with and as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein. Disclosure of any fact or item in any schedule of the disclosure schedule
shall be deemed disclosure with respect to each other Section or Subsection of this Agreement to
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the extent such disclosure is reasonably clear on its face that it would apply to such other
Section or Subsection. Neither the specification of any dollar amount in any representation or
warranty contained in this Agreement nor the inclusion of any specific item in any schedule hereto
is intended to imply that such amount, or higher or lower amounts, or the item so included or other
items, are or are not material, and no party shall use the fact of the setting forth of any such
amount or the inclusion of any such item in any dispute or controversy between the parties as to
whether any obligation, item or matter not described herein or included in any Schedule is or is
not material for purposes of this Agreement. Unless this Agreement specifically provides
otherwise, neither the specification of any item or matter in any representation or warranty
contained in this Agreement nor the inclusion of any specific item in any Schedule hereto is
intended to imply that such item or matter, or other items or matters, are or are not in the
ordinary course of business, and no party shall use the fact of the setting forth or the inclusion
of any such item or matter in any dispute or controversy between the parties as to whether any
obligation, item or matter not described herein or included in any schedule is or is not in the
ordinary course of business for purposes of this Agreement. Seller may, from time to time prior to
or at the Closing, by notice in accordance with the terms of this Agreement, supplement, amend or
create any schedule, in order to add information or correct previously supplied information. No
such amendment shall be evidence, in and of itself, that the representations and warranties in the
corresponding section are no longer true and correct in all material respects. It is specifically
agreed that such schedules may be amended to add immaterial, as well as material, items thereto.
No such supplemental, amended or additional schedule shall be deemed to cure any breach for
purposes of Sections 8.3 or 10.1(a)(i) unless Buyer gives written notice to Seller
stating that such supplemental, amended or additional schedule cures such breach. No such
supplemental, amended or additional schedule shall be deemed to cure any breach for purposes of
Sections 9.3 or 10.2(a)(i) unless Seller gives written notice to Buyer stating that
such supplemental, amended or additional schedule cures such breach.
Section 12.9 Waivers. Any term or provision of this Agreement may be waived, or the
time for its performance may be extended, by the party or parties entitled to the benefit thereof.
Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if,
as to any party, it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of any party thereafter to enforce each and every such provision.
No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section 12.10 Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law, but in case any one
or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other provisions hereof,
unless such a construction would be unreasonable.
Section 12.11 Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be considered an original instrument, but all of which shall
be considered one and the same agreement, and shall become binding when one or
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more counterparts have been signed by each of the parties hereto and delivered to Seller and
Buyer.
Section 12.12 Further Assurances. On and after the Closing Date each party hereto
shall take such other actions and execute such other documents and instruments of conveyance and
transfer as may be reasonably requested by the other party hereto from time to time to effectuate
or confirm the transfer of the Securities to Buyer in accordance with the terms of this Agreement.
Without limiting the generality of the foregoing, on and after the Closing Date, Buyer and its
Affiliates (including for purposes of this Section 12.12, the Companies and the
Transferring Subsidiaries) shall use commercially reasonable efforts to transfer to Seller and its
Affiliates (i) any assets of the Companies and the Transferring Subsidiaries that do not primarily
arise out of or relate to the Business, (ii) any assets relating primarily to the operation of the
Parisian stores or the Club Xxxxx Xx business, (iii) assets that are used by Seller to perform its
obligations under the Private Brands Agreement, (iv) assets that are used by Seller to perform its
obligations under the Buyer Transition Services Agreement and (v) all Contracts that relate to
businesses of Seller other than the Business (except for the Assigned Contracts).
Section 12.13 Disclaimer of Warranties. Seller makes no representations or warranties
with respect to any projections, forecasts or forward-looking information provided to Buyer. There
is no assurance that any projected or forecasted results will be achieved. EXCEPT AS TO THOSE
MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT AND THE
CERTIFICATE DELIVERED BY SELLER PURSUANT TO SECTION 3.4(d), SELLER IS SELLING THE
SECURITIES (AND THE BUSINESS AND ASSETS OF THE COMPANIES AND THE SUBSIDIARIES REPRESENTED THEREBY)
ON AN “AS IS, WHERE IS” BASIS AND SELLER DISCLAIMS ALL OTHER WARRANTIES, REPRESENTATIONS AND
GUARANTEES WHETHER EXPRESS OR IMPLIED. EXCEPT AS TO THOSE MATTERS EXPRESSLY COVERED BY THE
REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT AND THE CERTIFICATE DELIVERED BY SELLER PURSUANT
TO SECTION 3.4(d), SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO FITNESS,
NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES
WHATSOEVER. Buyer acknowledges that neither Seller nor any of its representatives or any other
Person has made any representation or warranty, express or implied, as to the accuracy or
completeness of any memoranda, charts or summaries heretofore made available by Seller or its
representatives to Buyer or any other information which is not included in this Agreement or the
schedules hereto, and neither Seller nor any of its representatives or any other Person will have
or be subject to any liability to Buyer, any Affiliate of Buyer or any other Person resulting from
the distribution of any such information to, or use of any such information by, Buyer, any
Affiliate of Buyer or any of their agents, consultants, accountants, counsel or other
representatives.
Section 12.14 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any court of the United States or any
state having jurisdiction, this being in addition to any other remedy to which they are entitled at
law or in equity.
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Section 12.15 Waiver of Jury Trial. Each party hereto waives the right to a trial by
jury in any litigation, proceeding or other legal action in connection with or relating to this
Agreement, any Seller Ancillary Agreement or any Buyer Ancillary Agreement or the transactions
contemplated hereby or thereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first above written.
| SAKS INCORPORATED |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxxx X. Xxxxxxxx | |||
| Title: | Executive Vice President and Chief Financial Officer | |||
| THE BON-TON STORES, INC. |
||||
| By: | /s/ Xxxxx Xxxxxxx | |||
| Name: | Xxxxx Xxxxxxx | |||
| Title: | President and Chief Executive Officer | |||
Signature Page to Purchase Agreement
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