Exhibit 10.1
AGREEMENT ON PLAN OF REORGANIZATION OF
FACTORY CARD OUTLET CORP.
AMONG
FACTORY CARD OUTLET CORP.
FACTORY CARD OUTLET OF AMERICA LTD.
DEBTORS AND DEBTORS-IN-POSSESSION
FACTORY CARD HOLDINGS, INC.
PURCHASER
AND
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
MARCH 26, 2001
AGREEMENT ON PLAN OF REORGANIZATION
This Agreement on Plan of Reorganization is entered into as of March
26, 2001, by and among Factory Card Holdings, Inc., a Nevada corporation (the
"Purchaser"), Factory Card Outlet Corp., a Delaware corporation ("FCOC"),
Factory Card Outlet of America Ltd., an Illinois corporation ("FCOA"), debtors
and debtors-in-possession in Cases No. 99-00685 and 99-00686, respectively
(collectively, the "Case") pending in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"), and the Official Committee of
Unsecured Creditors in the Case (the "Committee").
RECITALS
WHEREAS, FCOC and FCOA are currently operating their business under
chapter 11 of the Bankruptcy Code (as hereinafter defined); and
WHEREAS, the Purchaser has agreed, subject to the terms and
conditions set forth herein, to acquire the stock of FCOC through a plan of
reorganization for FCOC and FCOA and the funding thereof; and
WHEREAS, FCOC, FCOA and the Committee have agreed that it is in the
best interests of FCOC, FCOA, their creditors and estates to enter into the
transactions contemplated by this Agreement with the Purchaser.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I. DEFINED TERMS.
1.1. As used herein the following terms shall have the meanings set
forth below:
"Avalon" means Avalon Group, Ltd., which was engaged by FCO in
November, 1999 as its financial advisor.
"Bankruptcy Code" means Title 11 of the United States Code, 11
U.S.C.ss.ss.101-1330, as amended.
"Business Day" means any day other than a Saturday, Sunday, and any
day which is a legal holiday under the laws of the State of New York, or is a
day on which banks located in the State of New York are authorized or required
by law to close.
"Committee Designees" means the Committee designees named in Section
9.2 below, or such alternate designee appointed by the members of the Committee
permitted to receive certain financial information under Section 3.6 below, and
identified in writing to Reorganized FCO and the Purchaser.
"DIP Facility" means the debtor-in-possession credit facility
extended to FCOA by Xxxxx Fargo Retail Finance, LLC and certain other lenders,
as approved by the Bankruptcy Court pursuant to the order issued April 14, 1999,
as the same is in effect as of the date of this Agreement and as it may, from
time to time, be amended hereafter with the express written consent of the
Purchaser.
"DIP Lender" means Xxxxx Fargo Retail Finance, LLC and the other
lenders currently parties to the DIP Facility, collectively, or any successor
lender(s) with respect to the DIP Facility, if any, as to which the Purchaser
may consent in writing in its sole discretion.
"Environmental Law" means any judgment, decree, order, law, rule or
regulation pertaining to environmental matters, including, without limitation,
those arising under the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Water Pollution Control Act, the Solid Waste Disposal Act, as amended, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, or any other federal, state or local statute, regulation, ordinance, order
or decree relating to health, safety or the environment.
"FCO" means: (i) prior to the Effective Date, collectively, FCOC and
FCOA; and (ii) on and after the Effective Date, Reorganized FCOC, Reorganized
FCOA, or such other entity into which the Assets shall revest pursuant to the
Plan and which shall be the subject of the Transactions with the Purchaser
pursuant hereto and pursuant to the Plan.
"Final" means, with respect to any order, judgment or decree, that
the same shall have been entered by the Bankruptcy Court and either (i) no
appeal shall have been taken therefrom and the time to take such appeal shall
have expired, or (ii) if any appeal or appeals shall have been taken therefrom,
that such order, judgment or decree shall have been affirmed and the time for
the unsuccessful appellant to take any further appeal shall have expired.
"Hazardous Substance" means any hazardous waste, as defined by 42
U.S.C. ss. 6903(5), any hazardous substance as defined by 42 U.S.C. ss.
9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss. 9601(33) or
any toxic substance, oil or hazardous material or other chemical or substance
regulated by any Environmental Laws or other federal, state or local laws, rules
or regulations.
"Permitted Encumbrances" means (i) liens, claims, encumbrances and
rights of third parties expressly described in and arising under the Plan; (ii)
liens, claims and encumbrances consented to in writing by the Purchaser; (iii)
liens for taxes, assessments or governmental charges that are not yet due and
payable or which are being contested in good faith by appropriate proceedings;
(iv) deposits or pledges made in connection with, or to secure payment of,
utilities or similar services, workers' compensation, unemployment insurance,
old age pensions or other social security obligations; (v) warehousemen's,
carriers', mechanics', materialmen's or contractors' liens or encumbrances or
any similar lien or restriction for amounts not yet due and payable; and (vi)
recorded easements and recorded rights-of-way which do not interfere with the
ordinary conduct of the business of FCOC or FCOA.
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"Plan" means the Joint Plan of Reorganization relative to FCOC, as
proposed jointly by FCO and Purchaser, substantially in the form attached hereto
as Exhibit A, as the same may be amended from time to time as mutually agreed
upon by such parties, each in their sole discretion.
"Reorganized FCOA" means FCOA, as reorganized pursuant to the Plan.
"Reorganized FCOC" means FCOC, as reorganized pursuant to the Plan.
1.2. In addition to terms defined above, the terms listed below are
defined in this Agreement in the Sections indicated:
Defined Term Section Reference
------------ -----------------
Approval Date Section 7.1(b)
Assets Section 3.2(a)
Breakup Fee Section 8.2
Case Preamble
Code Section 4.14
Committee Preamble
Designated Leases Section 3.5
Disclosure Statement Section 7.1(a)
Employee Benefit Plans Section 4.14
ERISA Section 4.14
Expense Reimbursement Amount Section 8.2
FCOA Preamble
FCOC Preamble
Financial Statements Section 4.5
Material Adverse Effect Section 4.1
PBGC Section 4.14
Permits Section 4.4
Plan Filing Date Section 7.1(a)
Purchaser Preamble
Stores Section 4.6
Transactions Article II
Other terms are defined elsewhere in this Agreement. Capitalized terms used in
this Agreement but not otherwise defined in this Agreement shall have the
meanings given such terms in the Plan.
ARTICLE II. PURPOSE OF AGREEMENT.
This Agreement shall serve to memorialize the agreements and
understandings among the signatories hereto with respect to the principal terms
of a Plan to be proposed jointly by FCO and the Purchaser which shall be filed
with the Bankruptcy Court, and other agreements among them. The Plan is
presently under review by the parties. Upon finalization of the Plan in form
acceptable to each of the parties hereto, FCO and the Purchaser hereby agree
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jointly to expeditiously propose, file and prosecute the Plan and to consummate
the transactions contemplated hereby and thereby. As part of the Plan, the
Purchaser will engage in the transactions contemplated hereby, whereby Purchaser
will acquire newly issued capital stock of Reorganized FCOC, representing all of
the capital stock of FCOC, and all of the capital stock of FCOA (through FCOC's
sole ownership thereof).
ARTICLE III. CERTAIN FEATURES OF THE PLAN.
3.1. Structure of Transactions. Subject to all of the conditions set
forth herein, including, without limitation, completion of the Plan and the
Disclosure Statement in form satisfactory to Purchaser in its sole discretion
(as regards the Plan) and confirmation of the Plan by the Bankruptcy Court,
Purchaser agrees to acquire: newly issued stock of Reorganized FCOC,
representing all of its capital stock; and all of the capital stock of FCOA
(through FCOC's sole ownership thereof), for the aggregate consideration
described below in this Article III (such acquisition, together with payment of
the consideration referred to below and the other arrangements contemplated
hereby are hereinafter referred to collectively, as the "Transactions").
3.2. Revesting of Assets.
(a) The obligations of the Purchaser hereunder are expressly subject
to the revesting in FCO, on the Effective Date, of all right, title and interest
of FCOA and FCOC in and to all of their respective assets, whether now existing
or hereafter acquired by FCOA and/or FCOC, including, without limitation, all
cash held by FCOC and FCOA, but excluding, however, all leases and executory
contracts designated by Purchaser for rejection by FCOC and FCOA, as the case
may be, pursuant to the Plan (such assets to be revested in FCO are hereinafter
referred to collectively, as the "Assets").
(b) Upon revesting of the Assets in FCO, FCO shall have good title to
all of the Assets free and clear of all liens, claims and encumbrances, other
than Permitted Encumbrances. From and after the date of this Agreement, neither
FCOC nor FCOA shall sell, lease, encumber or otherwise dispose of any right,
title or interest in any of the Assets, except in the ordinary course of
business.
3.3 Capitalization. As of the Closing, Purchaser shall cause FCO to
have (i) equity of at least $6,000,000, (ii) subordinated debt of at least
$4,000,000 (with such subordinated debt to be upon terms and conditions,
including interest rate, term and equity rights, to be set forth in a Plan
Supplement), provided that the level of subordinated debt may be reduced, on a
dollar-for-dollar basis, to the extent that FCO's actual equity as of the
Closing exceeds $6,000,000, and (iii) a subordinated debt-to-equity ratio no
greater than 4:6. Without limiting the generality of the foregoing, Purchaser
shall cause FCO to have borrowing availability of not less than $5,000,000 under
its exit financing arrangements, as of the date of the Closing (but not as of
any future date), after taking into account the distributions to be made on or
before the Initial Distribution Date under the Plan. For purposes of this
Agreement, "subordinated debt" shall mean and be limited to indebtedness to
institutional lenders for borrowed money, which is subordinated to senior
secured financing.
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3.4. Non-Participating Creditors and Interests.
(a) Intercompany Indebtedness. All indebtedness of FCOC or FCOA to
the other shall be cancelled and extinguished (by contribution, distribution, or
otherwise), unless otherwise agreed to by Purchaser.
(b) Avalon. FCO shall terminate its agreement with Avalon by written
notice delivered to Avalon within five (5) Business Days of the date hereof.
3.5. Designated Leases. Attached hereto as Schedule 3.5 is a list of
FCOA leases which Purchaser intends to modify through negotiations with
landlords (the "Designated Leases"). FCOA, FCOC and the Committee hereby consent
to Purchaser entering into discussions and negotiations with applicable
landlords of Designated Leases. FCOA and FCOC shall use commercially reasonable,
good faith efforts, through the Effective Date, to cause the landlords under the
Designated Leases to waive cure payments and/or afford other financial
accommodations to FCOA through modifications of the Designated Leases, in
consultation with Purchaser.
3.6. Continuing Obligations of Reorganized FCO. Without limiting any
other continuing obligations of Purchaser and Reorganized FCO hereunder and
under the Plan, until the Extended Creditor Payment Amount is paid and satisfied
in full, Purchaser shall cause Reorganized FCO to provide to the Committee
Designees, for further distribution only to those existing members of the
Committee, and successors of such members, which members and successors, and the
affiliates thereof, are not now or at relevant times hereafter engaged in
businesses competitive with Reorganized FCO (including the sale at retail of
greeting cards, gift wrap or party supplies), summary balance sheets and summary
statements of income, within 45 days of the end of each fiscal quarter of
Reorganized FCO (or 90 days in the case of the fourth fiscal quarter), provided
that the Committee Designees and any such members of the Committee (or their
successors) to whom such financial statements are permitted to be provided by
the Committee Designees agree to maintain the confidentiality of same pursuant
to written agreements in customary form and substance reasonably acceptable to
Purchaser.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF FCO.
FCOC and FCOA hereby represent and warrant to the Purchaser, jointly
and severally, as follows in this Article IV. The representations and warranties
of FCOC and FCOA hereunder shall be made, or deemed made and restated in full,
as applicable, on and as of each of the following dates, with the same effect as
though such representations and warranties had been made or given at and as of
each such date: (i) the date of this Agreement; (ii) the Plan Filing Date; (iii)
the Approval Date; and (iv) the Effective Date. FCOC and FCOA have furnished to
Purchaser preliminary draft disclosure schedules contemplated by this Article
IV, and shall provide Purchaser with completed disclosure schedules on or before
April 2, 2001 (the "Definitive Schedules").
4.1. Organization; Authority. Each of FCOC and FCOA is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its jurisdiction of incorporation, and each is duly qualified or
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authorized and in good standing as a foreign corporation in all jurisdictions in
which the character of the properties owned or leased or the nature of the
activities conducted by it makes such qualification or authorization necessary,
except for any jurisdiction in which the failure to so qualify would not
individually or in the aggregate have a material adverse effect on the
operations, assets, business or condition (financial or otherwise) of FCOC or
FCOA, as the case may be, or any material adverse affect on the ability of FCO
to perform its obligations under this Agreement or the Plan (with either of the
foregoing referred to as a "Material Adverse Effect"). FCOC and FCOA have
delivered to the Purchaser complete and correct copies of their Certificates of
Incorporation and Bylaws and all amendments thereto. Each of FCOC and FCOA has
full corporate power and authority to own or lease and operate its properties
and to carry on its business as such business is now conducted.
4.2. Approvals; Binding Effect. Except (a) as set forth on Schedule
4.2, (b) for the required approvals of the Bankruptcy Court contemplated hereby,
and (c) if applicable, approvals under the Xxxx-Xxxxx Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), each of FCOC and FCOA has
obtained all necessary authorizations and approvals required for the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by FCOC
and FCOA and, upon approval by the Bankruptcy Court, will constitute, the legal,
valid and binding obligation of FCOC and FCOA enforceable against FCOC and FCOA
in accordance with its terms.
4.3. Noncontravention. The execution and delivery of this Agreement
and the consummation by FCOC and FCOA of the transactions contemplated hereby,
as of the Effective Date, will not (a) violate or conflict with any provision of
the Certificate of Incorporation or Bylaws of FCOC or FCOA, each as amended to
date; or (b) constitute a violation of, or be in conflict with, or constitute or
create a default under, or result in the creation or imposition of any
encumbrance upon any property of FCOC or FCOA pursuant to (i) any agreement or
instrument to which either of them is a party or by which any of their
properties is bound, or (ii) any statute, judgment, decree, order, regulation or
rule of any court or governmental or regulatory authority, to which FCOC or FCOA
is subject (other than required approvals of the Bankruptcy Court required
hereby).
4.4. Governmental Consents; Etc. Except for the required approvals of
the Bankruptcy Court contemplated hereby, and, if applicable, approvals under
the HSR Act, no consent, approval or authorization of, or registration,
qualification or filing with, any governmental agency or authority is required
for the execution and delivery by FCOC and FCOA of this Agreement or for the
consummation by FCOC and FCOA of the transactions contemplated hereby. FCOC and
FCOA have and maintain, and the permits listed on Schedule 4.4 hereto include,
all licenses, permits and other authorizations from all governmental authorities
(collectively, the "Permits") as are necessary or desirable for the conduct of
the business of FCOC and FCOA, except for any Permits the lack of which would
not individually and in the aggregate have a Material Adverse Effect.
4.5. Financial Statements. FCOC and FCOA have delivered to Purchaser
each of the financial statements identified on Schedule 4.5 hereto
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(collectively, the "Financial Statements"). Each of the Financial Statements has
been prepared in accordance with generally accepted accounting principles
(subject, in the case of unaudited financial statements to the absence of
footnotes and, in the case of interim financial statements, to customary
year-end audit adjustments). Each balance sheet included within the Financial
Statements fairly presents the financial condition of FCOC and FCOA as of its
respective date, and each statement of income included in the Financial
Statements fairly presents the results of operations for the period covered
thereby.
4.6. Absence of Certain Changes. Except as set forth in Schedule 4.6
hereto or as otherwise expressly contemplated by this Agreement, since December
1, 2000, each of FCOC and FCOA has in all material respects carried on its
business only in the ordinary course, and there has not been (a) any material
change in the assets, liabilities, sales, income or business of either FCOC or
FCOA or in their relationships with customers or lessors material to FCOC or
FCOA, as the case may be; (b) any acquisition or disposition by either FCOC or
FCOA of any asset or property other than in the ordinary course of business; (c)
any damage, destruction or loss, whether or not covered by insurance, materially
and adversely affecting the properties or business of either FCOC or FCOA; (d)
any increase in the compensation, pension or other benefits payable or to become
payable by either FCOC or FCOA to any of its officers or employees, or any bonus
payments or arrangements made to or with any of them, except for annual merit
increases in wages or salary made in the ordinary course of business and
increases in bonuses made in the ordinary course of business pursuant to the
terms of one or more of the Employee Benefit Plans; (e) any forgiveness or
cancellation of any debt or claim by FCOC or FCOA or any waiver of any right of
material value other than compromises of accounts receivable in the ordinary
course of business; (f) any incurrence by either FCOC or FCOA of any obligations
or liabilities, whether absolute, accrued, contingent or otherwise (including,
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others), other than obligations and liabilities incurred in the
ordinary course of business; (g) any mortgage, pledge, lien, lease, security
interest or other charge or encumbrance (other than Permitted Encumbrances) on
any of the assets, tangible or intangible, of either FCOC or FCOA; (h) any
discharge or satisfaction by either FCOC or FCOA of any lien or encumbrance or
payment by either company of any obligation or liability (fixed or contingent)
other than in the ordinary course of business; (i) any promotions or advertised
sales at the retail store locations of FCOC and FCOA (collectively, the
"Stores"), other than promotions and sales in the ordinary course of business
consistent with historic promotions and sales for previous periods.
4.7. Litigation, Etc. Except as set forth on Schedule 4.7 hereto, no
material action, suit, proceeding or investigation is pending or to the
knowledge of FCOC and FCOA, threatened against either FCOC or FCOA.
4.8. Conformity to Law. Except as set forth on Schedule 4.8, each of
FCOC and FCOA has complied in all material respects with and is in compliance in
all material respects (a) with all laws, statutes, governmental regulations and
all judicial or administrative tribunal orders, judgments, writs, injunctions,
decrees or similar commands applicable to FCOC and FCOA or any of their
properties (including, without limitation, any labor, occupational health,
zoning or other law, regulation or ordinance), and (b) subject to the effect of
the Bankruptcy Code on their right to make payments on account of prepetition
liabilities, with the terms and provisions of all contracts, agreements and
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indentures to which either FCOC or FCOA is a party, or by which either of them
or any of their respective properties is subject.
4.9. Title to Property, Real Property Leases, Etc. Except as set
forth on Schedule 4.9, each of FCOC and FCOA has good and marketable title to
all of its properties and assets, including, without limitation, all those
reflected in the Financial Statements (except for properties or assets sold or
otherwise disposed of in the ordinary course of business since the date of the
Financial Statements), all free and clear of all liens, pledges, charges,
security interests, encumbrances or title retention agreements of any kind or
nature. Schedule 4.9 is a true and complete list of all real estate owned or
leased by FCOC or FCOA (the "Real Estate"). The improvements on the Real Estate
are in good operating condition and repair (ordinary wear and tear excepted). No
material expenditures are required to be made for the repair or maintenance of
any improvements on the Real Estate.
4.10. Environmental Matters. To the best of FCOC's and FCOA's
knowledge, except as set forth on Schedule 4.10, neither FCOC nor FCOA: (a) has
caused any releases of any Hazardous Substance anywhere which requires
remediation or clean-up pursuant to any Environmental Law; and (b) has disposed
of Hazardous Substances anywhere except in compliance in all material respects
with applicable Environmental Laws. Neither FCOC nor FCOA has conducted or
engaged in any operation or activity involving the use, storage or disposal of
any Hazardous Substance except as authorized by applicable Environmental Laws.
There is no pending or, to the best knowledge of FCOC and FCOA, threatened,
lawsuit, action, claim or proceeding by any third party alleging or asserting
that either FCOC or FCOA has violated or is about to violate any applicable
Environmental Law.
4.11. Insurance. Schedule 4.11 lists all policies of fire, liability,
worker's compensation, life, property and casualty and other insurance owned or
held by either FCOC or FCOA or maintained for their benefit. All such policies
(a) are in full force and effect, and (b) are sufficient for compliance by FCOC
and FCOA with all requirements of law and all written agreements to which either
FCOC or FCOA is a party. Neither FCOC nor FCOA is in default in any material
respect with respect to its obligations under any of such insurance policies and
has not received any notification of cancellation of any such insurance
policies.
4.12. Contracts. Schedule 4.12 sets forth a complete and accurate
list of all material contracts to which either FCOC or FCOA is a party or by or
to which either of them or any of their assets or properties is bound or
subject. As used in this Section 4.12, the phrase "material contract" means and
includes every material agreement or material understanding of any kind, written
or oral, which is legally enforceable by or against FCOC or FCOA, and
specifically includes (a) contracts and other agreements with any current or
former officer, director, employee, consultant or shareholder or any
partnership, corporation, joint venture or any other entity in which any such
person has an interest; (b) agreements with any labor union or association
representing any employee; (c) bonds or other security agreements provided by
any party in connection with the business of FCOC or FCOA; (d) contracts and
other agreements for the sale of any of the assets or properties of FCOC or FCOA
other than in the ordinary course of business or for the grant to any person of
any preferential rights to purchase any of said assets or properties; (e) joint
venture agreements relating to the assets, properties or business of FCOC or
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FCOA or by or to which either of them or any of their assets or properties are
bound or subject; (f) contracts or other agreements under which FCOC or FCOA
agrees to indemnify any party, to share tax liability of any party, or to
refrain from competing with any party; (g) any contracts or other agreements
with regard to any indebtedness of FCOC or FCOA; or (h) any other contract or
other agreement whether or not made in the ordinary course of business (other
than inventory purchases) and involving the payment by or to FCOC or FCOA of
more than $50,000. FCOC and FCOA have delivered to the Purchaser true, correct
and complete copies of all such contracts (or written summaries of oral
contracts), together with all modifications and supplements thereto. Except as
set forth on Schedule 4.12 and subject to the following sentence, each of the
contracts listed on Schedule 4.12 is in full force and effect, subject to
possible rejection by FCOC or FCOA as provided under this Agreement. Neither
FCOC nor FCOA is in breach of any of the provisions of any such contract, nor,
to the knowledge of FCOC and FCOA, is any other party to any such contract in
default thereunder, except (a) for any such breach or default that individually
and in the aggregate would not have a Material Adverse Effect, and (b) breaches
or defaults due either to the commencement of the Case or the effect of the
Bankruptcy Code on FCOC and FCOA's right to pay prepetition liabilities.
4.13. Employment of Officers, Employees. Schedule 4.13 lists (a) the
current officers of FCOC and FCOA, and (b) describe all severance, retention,
"stay", change of control and similar agreements, practices and policies for or
involving employees of such companies. FCOC and FCOA have previously furnished
to Purchaser a schedule containing the name and current annual salary and other
compensation payable by FCOC or FCOA to each exempt non-hourly employee of such
companies.
4.14. Employee Benefit Plans.
(a) Except for the arrangements set forth on Schedule 4.14(a),
neither FCOC nor FCOA now maintains or contributes to, or has in the current or
preceding six (6) calendar years maintained or contributed to, any pension,
profit-sharing, deferred compensation, bonus, stock option, share appreciation
right, severance, group or individual health, dental, medical, life insurance,
survivor benefit, or similar plan, policy or arrangement, whether formal or
informal, for the benefit of any director, officer, consultant or employee,
whether active or terminated, of either FCOC or FCOA for which there could b any
current or future liability (collectively, "Employee Benefit Plans").
(b) FCOC and FCOA have heretofore delivered to Purchaser true,
correct and complete copies of each Employee Benefit Plan listed on Schedule
4.14(a) and the most recently received IRS determination letters and any
governmental advisory opinions or rulings with respect to each such Employee
Benefit Plan.
(c) Except as set forth on Schedule 4.14 (c), each Employee Benefit
Plan maintained by FCOC or FCOA is and has heretofore been, or shall, prior to
the Plan Filing Date be, maintained and operated in compliance in all material
respects with the terms of such Employee Benefit Plan and with the requirements
prescribed by any and all statutes, governmental or court orders, or
governmental rules or regulations in effect from time to time, including, but
not limited to, the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Internal Revenue Code of 1986, as amended, ("Code") and
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applicable to such Employee Benefit Plan. Except as set forth on Schedule 4.14
(c), each Employee Benefit Plan which is intended to qualify under Section
401(a) of the Code has been determined to be so qualified by the IRS and nothing
has occurred since the date of the last such determination which has resulted or
is likely to result in the revocation of such determination.
(d) Except as set forth on Schedule 4.14(d):
(i) there is no pending or, to the knowledge of FCOC or
FCOA, threatened legal action, proceeding or investigation, other
than routine claims for benefits, concerning any Employee Benefit
Plan or to the knowledge of FCOC and FCOA, any fiduciary or service
provider thereof and, to the knowledge of FCOC and FCOA, there is no
basis for any such legal action or proceeding;
(ii) no liability (contingent or otherwise) to the Pension
Benefit Guaranty Corporation ("PBGC") or any multi-employer plan has
been incurred by FCOC or FCOA (other than insurance premiums
satisfied in due course);
(iii) no reportable event, or event or condition which
presents a material risk of termination by the PBGC, has occurred
with respect to any Employee Benefit Plan, or any retirement plan of
an affiliate of FCOC or FCOA, which is subject to Title IV of ERISA;
(iv) no Employee Benefit Plan nor, to the knowledge of FCOC
or FCOA, any party in interest with respect thereof has engaged in a
prohibited transaction which could subject either FCOC or FCOA
directly or indirectly to liability under Section 409 or 502(i) of
ERISA or Section 4975 of the Code;
(v) no communication, report or disclosure has been made
which, at the time made, did not accurately reflect the terms and
operations of any Employee Benefit Plan;
(vi) no Employee Benefit Plan provides welfare benefits
subsequent to termination of employment to employees or their
beneficiaries (except to the extent required by applicable state
insurance laws and Title I, Part 6 of ERISA);
(vii) no benefits due under any Employee Benefit Plan have
been forfeited subject to the possibility of reinstatement (which
possibility would still exist at or after Closing); and
(viii) neither FCOC nor FCOA has undertaken in writing to
maintain any Employee Benefit Plan for any period of time, and each
such Employee Benefit Plan is terminable at the sole discretion of
the sponsor thereof, subject only to such constraints as may be
imposed by applicable law.
(e) With respect to each Employee Benefit Plan for which a separate
fund of assets is or is required to be maintained, full payment has been made
of, or an adequate accrual has been made on FCOC's and FCOA's financial
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statements with respect to, all amounts that they are required, under the terms
of each such Employee Benefit Plan, to have paid as contributions to that
Employee Benefit Plan as of the end of the most recently ended plan year of that
Employee Benefit Plan, and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any such Plan.
(f) Except as set forth on Schedule 4.14(f), the execution of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any payment (whether of severance pay or otherwise) becoming due from
any Employee Benefit Plan to any current or former director, officer, consultant
or employee of either FCOC or FCOA or result in the vesting, acceleration of
payment or increases in the amount of any benefit payable to or in respect of
any such current or former director, officer, consultant or employee.
(g) No Employee Benefit Plan maintained by FCOC or FCOA is a
multi-employer plan.
(h) For purposes of this Section 4.14, "multi-employer plan," "party
in interest," "current value," "accrued benefit," "reportable event" and
"benefit liability" have the same meanings assigned such terms under Sections 3,
4043(b) or 4001(a) of ERISA, and "affiliate" means any entity which under
Section 414 of the Code is treated as a single employer with FCOC or FCOA.
4.15. Labor Relations. Except as set forth on Schedule 4.15, each of
FCOC and FCOA is in compliance in all material respects with all federal and
state laws respecting employment and employment practices, terms and conditions
of employment, wages and hours and nondiscrimination in employment, and is not
engaged in any unfair labor practice. Except as set forth on Schedule 4.15,
there is no charge pending or to the knowledge of FCOC or FCOA, threatened
against either FCOC or FCOA alleging unlawful discrimination in employment
practices before any court or agency, and there is no charge of or proceeding
with regard to any unfair labor practice against either FCOC or FCOA pending
before the National Labor Relations Board. There is no labor strike, dispute,
slow-down or work stoppage actually pending or to the knowledge of FCOC or FCOA,
threatened against or involving either FCOC or FCOA. No one has petitioned
within the last five (5) years, and, to the knowledge of FCOC and FCOA, no one
is now petitioning, for union representation of any of either FCOC's or FCOA's
employees. No grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is pending against either FCOC or FCOA, and no
claim therefor has been asserted. To the knowledge of FCOC and FCOA, none of the
employees of either FCOC or FCOA is covered by any collective bargaining
agreement. No collective bargaining agreement is currently being negotiated by
either FCOC or FCOA. Except as fully described on Schedule 4.15, neither FCOC
nor FCOA has experienced any work stoppage during the last twelve months.
4.16. Potential Conflicts of Interest. Except as set forth on
Schedule 4.16, no officer, director or, to the knowledge of FCOC and FCOA,
stockholder of either FCOC or FCOA, or any affiliate of either FCOC or FCOA (a)
owns, directly or indirectly, any interest in (excepting not more than five
percent (5%) stock holdings for investment purposes in securities of publicly
held and traded companies) or is an officer, director, employee or consultant of
11
any person or entity which is a competitor, lessor, lessee, customer or supplier
of either FCOC or FCOA; (b) owns, directly or indirectly, in whole or in part,
any tangible or intangible property which either FCOC or FCOA is using or the
use of which is necessary for the business of either FCOC or FCOA; or (c) has
any cause of action or other claim whatsoever against, or owes any material
amount to, either FCOC or FCOA, except for claims in the ordinary course of
business, such as for accrued vacation pay, accrued benefits under Employee
Benefit Plans and similar matters and agreements.
4.17. Trademarks, Patents, Etc. With the exception of "off-the-shelf"
software publicly available, Schedule 4.17 sets forth a complete and accurate
list of (a) all patents, trademarks, trade names and copyrights registered in
the name of either FCOC or FCOA or used or proposed to be used by either FCOC or
FCOA, all applications therefor, and all licenses (as licensee or licensor) and
other agreements relating thereto, and (b) all written agreements relating to
other technology, know-how and processes which either FCOC or FCOA is licensed
or authorized by others to use, or which either FCOC or FCOA has licensed or
authorized for use by others. Except to the extent set forth in Schedule 4.17,
each of FCOC and FCOA owns or has the sole and exclusive right to use all
patents, trademarks, trade names and copyrights, and has the right without
restrictions to use all technology, know-how and processes, used or necessary
for the ordinary course of business as presently conducted or proposed to be
conducted by it, and the consummation of the transactions contemplated hereby
will not alter or impair any such right. No claims have been asserted, and no
claims are pending, by any person regarding the use of any such patents,
trademarks, trade names, copyrights, technology, know-how or processes, or
challenging or questioning the validity or effectiveness of any license or
agreement, and to the knowledge of FCOC and FCOA, there is no basis for such
claim. To the knowledge of FCOC and FCOA, the use by FCOC and FCOA of such
patents, trademarks, trade names, copyrights, technology, know-how or processes
in the ordinary course of business does not infringe on the rights of any
person.
4.18. Suppliers. Schedule 4.18 sets forth the ten (10) largest
suppliers of each of FCOC and FCOA for fiscal year 2000. Except as set forth on
Schedule 4.18, no supplier of material importance to FCOC or FCOA has cancelled
or otherwise terminated, or to the knowledge of FCOC or FCOA, threatened to
cancel or otherwise to terminate, its relationship with FCOC or FCOA, or has
during the last twelve (12) months decreased materially, or overtly threatened
to decrease or limit materially, its services, supplies or materials for use by
FCOC or FCOA. Neither FCOC nor FCOA has knowledge that any such supplier intends
to cancel or otherwise substantially modify its relationship with FCOC or FCOA,
or to decrease materially or limit its services, supplies or materials to FCOC
or FCOA, and, to the knowledge of FCOC and FCOA, the consummation of the
transactions contemplated hereby will not materially adversely affect the
relationship of FCOC and FCOA with any such supplier or customer.
4.19. No Undisclosed Liabilities. Except to the extent (a) reflected
or reserved against in the Financial Statements, (b) incurred in the ordinary
course of business after the date of the Financial Statements, or (c) described
on any Schedule (including Schedule 4.19), neither FCOC nor FCOA has any
material liabilities or any material obligations of any nature, whether accrued,
absolute, contingent or otherwise (including, without limitation, as guarantor
or otherwise with respect to obligations of others), other than executory
performance obligations with respect to contracts that would not be required to
12
be reflected or reserved against on a balance sheet prepared in accordance with
GAAP or in the footnotes thereto.
4.20. Tax Matters. Except as set forth in Schedule 4.20, FCOC and
FCOA have filed all material tax returns which are required to be filed as of
the date of this Agreement with any foreign, federal, state or local
governmental authority or agency, and have paid, or made adequate provision for
the payment of, all assessments received and all taxes which have or may become
due under applicable foreign, federal, state or local governmental law or
regulations with respect to the periods in respect of which such tax returns
were filed (to the extent such taxes would not be effectively discharged by
virtue of the Plan). FCOC and FCOA do not know of any additional assessments
since the date of such returns. Except as set forth in Schedule 4.20, FCOC and
FCOA have withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party (to the extent such taxes would not be
effectively discharged by virtue of the Plan).
4.21. Indebtedness. After giving effect to approval by the Bankruptcy
Court of the Plan and the Disclosure Statement and confirmation of the same,
neither FCOC nor FCOA will have any indebtedness outstanding except for
indebtedness and obligations under the Plan and chapter 11 exit financing
incurred with the approval of the Purchaser.
4.22. Inventory. The inventory and supplies of FCOC and FCOA are
adequate for their present needs and their needs in the reasonably foreseeable
future, and are in usable and salable condition in the ordinary course of
business. Since the commencement of the Case, FCOC and FCOA have continued to
replenish the Stores with new merchandise in a manner consistent with historic
practices, and all rack jobbers and service vendors have continued to service
the Stores in the ordinary course. FCOC and FCOA have taken permanent markdowns
on their inventories in a manner consistent with historic practices, and have
maintained initial markup (IMU) and maintained markup (MMU) factors consistent
with prior periods. FCOC and FCOA shall deliver to Purchaser copies of all
inventory appraisal reports generated after the date hereof, within three (3)
Business Days of receipt by FCOC or FCOA.
4.23. Minute Books and Capitalization. The minute books and
capitalization information of FCOC and FCOA made available to the Purchaser for
inspection accurately record therein the capitalization of such companies and
all actions taken by the respective Boards of Directors and shareholders of FCOC
and FCOA.
4.24. Broker. Except as described on Schedule 4.24, neither FCOC nor
FCOA nor any affiliate of either of them has retained, utilized or been
represented by any broker, agent, finder or intermediary in connection with the
negotiation or consummation of the transactions contemplated by this Agreement.
4.25. Disclosure. This Agreement, the schedules attached hereto and
any documents, information or materials delivered or to be delivered to the
Purchaser pursuant hereto (including, without limitation, all financial
statements and reports filed by FCOC with the Securities and Exchange
13
Commission, which speak as of the dates indicated thereon) and the consummation
of the transactions contemplated hereby do not contain and do not and will not
contain any untrue statement of a material fact, and do not, and will not, omit
to state a material fact required to be stated herein or therein or necessary to
make the statements contained herein or therein not misleading.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to FCO as follows in
this Article V. The representations and warranties of the Purchaser hereunder
shall be made, or deemed made and restated in full, as applicable, on and as of
each of the following dates, with the same effect as though such representations
and warranties had been made or given at and as of each such date: (i) the date
of this Agreement; (ii) the Plan Filing Date; (iii) the Approval Date; and (iv)
the Effective Date.
5.1. Organization of Purchaser; Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and has full corporate power and authority to enter into
this Agreement, to consummate the Transactions, and to perform its obligations
hereunder.
.
5.2. Corporate Approval; Binding Effect. The Purchaser has obtained
all necessary authorizations and approvals from its Board of Directors required
for the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and constitutes the legal, valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
5.3. Noncontravention. The execution and delivery by the Purchaser of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby will not (a) violate or conflict with any provisions of the
Certificate of Incorporation or Bylaws of the Purchaser, each as amended to
date; or (b) constitute a violation of, or be in conflict with, constitute or
create a default under, or result in the creation or imposition of any lien upon
any property of the Purchaser pursuant to (i) any agreement or instrument to
which the Purchaser is a party or by which the Purchaser or any of its
properties is bound or to which the Purchaser or any of its properties is
subject, or (ii) any statute, judgment, decree, order, regulation or rule of any
court or governmental authority to which the Purchaser is subject.
5.4. Governmental Consents. Except for the approval of the Bankruptcy
Court, no consent, approval or authorization of, or registration, qualification
or filing with, any governmental agency or authority is required for the
execution and delivery by the Purchaser of this Agreement or for the
consummation by the Purchaser of the transactions contemplated hereby.
5.5. Broker. The Purchaser has not retained, utilized or been
represented by any broker, agent, finder or other intermediary which would be
entitled to payment from FCOC or FCOA in connection with the negotiation or
consummation of the transactions contemplated by this Agreement.
14
5.6. Litigation, Etc. No action, suit, proceeding or investigation is
pending or to the knowledge of Purchaser, threatened against Purchaser.
ARTICLE VI. CONDUCT OF BUSINESS PENDING CLOSING
FCOC and FCOA jointly and severally covenant and agree (and, as
regards Section 6.12, Purchaser covenants and agrees) that, from and after the
date of this Agreement and until the Closing, except as otherwise specifically
consented to or approved by the Purchaser (except for Purchaser's obligations
under Section 6.12) in writing:
6.1. Full Access. FCOC and FCOA shall afford to the Purchaser and its
authorized representatives full access during normal business hours to all
properties, books, records, contracts and documents of FCOC and FCOA and a full
opportunity to make such reasonable investigations as they shall desire to make
of FCOC and FCOA, and FCOC and FCOA shall furnish or cause to be furnished to
the Purchaser and its authorized representatives all such information with
respect to the affairs and businesses of FCOC and FCOA as the Purchaser may
reasonably request. All information provided to Purchaser in connection with the
foregoing shall be subject to the provisions of the Confidentiality Agreement
dated November 2, 2000, between FCOC, Beacon Capital Partners LLP and Renasci
Associates.
6.2. Carry on in Regular Course. FCOC and FCOA shall maintain the
Stores and their owned and leased properties consistent with past practice, and
shall carry on their business diligently and substantially in the same manner as
heretofore and not make or institute any unusual or novel methods of purchase,
sale, lease, management, accounting or operation, other than lease modifications
effected after consultation with, and the written consent of, Purchaser.
6.3. No General Increases. Except as set forth on Schedule 6.3, FCOC
and FCOA shall not grant any general or uniform increase in the rates of pay of
their officers or employees, nor grant any general or uniform increase in the
benefits under any bonus or pension plan or other contract or commitment to, for
or with any such officers or employees; and FCOC and FCOA shall not increase the
compensation payable or to become payable to officers, employees or agents, or
increase any bonus, insurance, pension or other benefit plan, payment or
arrangement made to, for or with any such officers, employees or agents, except
for annual merit increases in wages or salary made in the ordinary course of
business and increases in bonuses made in the ordinary course of business
pursuant to the terms of one or more of the Employee Benefit Plans.
6.4. No Dividends, Issuances, Repurchases, Etc. FCOC and FCOA shall
not declare or pay any dividends (whether in cash, shares of stock or otherwise)
on, or make any other distribution in respect of, any shares of their capital
stock, or issue, purchase, redeem or acquire for value any shares of their
capital stock.
6.5. Contracts and Commitments; DIP Financing. FCOC and FCOA shall
not enter into any contract or commitment or engage in any transaction not in
the usual and ordinary course of business and consistent with their current
business practices, except for exit financing arrangements and other
15
transactions approved by Purchaser in its reasonable discretion. Neither FCOC
nor FCOA shall amend, modify, terminate or extend the DIP Facility, or enter
into any substitute DIP facility, without the approval of the Purchaser in its
reasonable discretion.
6.6. Purchase and Sale of Capital Assets. FCOC and FCOA shall not
purchase or sell or otherwise dispose of any capital asset with a market value
in excess of fifty thousand dollars ($50,000), or of capital assets of market
value aggregating in excess of two hundred fifty thousand dollars ($250,000),
without the prior written consent of the Purchaser, and in no event shall
purchase, sell or otherwise dispose of any capital asset other than in the
ordinary course of business.
6.7. Insurance. FCOC and FCOA shall maintain in place their present
insurance coverage.
6.8. Preservation of Organization. FCOC and FCOA shall use
commercially reasonable efforts to preserve their business organization intact,
to keep available to the Purchaser the present key officers and employees of
FCOC and FCOA, and to preserve for the Purchaser the present relationships of
the suppliers and customers of FCOC and FCOA and others having business
relations with either FCOC or FCOA.
6.9. No Default. FCOC and FCOA shall not do any act or omit to do any
act, or permit any act or omission to act, which will cause a material breach of
any contract, commitment or obligation of either FCOC or FCOA.
6.10. Compliance with Laws. FCOC and FCOA shall comply with all laws,
regulations and orders applicable with respect to their business, except where
such noncompliance individually and in the aggregate will not have a Material
Adverse Effect. Without limiting the generality of the foregoing, FCOC and FCOA
shall prepare and file with the Securities and Exchange Commission, on a timely
basis, all reports and documents required to be filed by a reporting company
under the Securities Exchange Act of 1934, as amended, and the related rules and
regulations.
6.11. Advice of Change. FCOC and FCOA will promptly advise the
Purchaser in writing of any material adverse change in the business, condition,
operations, prospects or assets of FCOC and FCOA.
6.12. Satisfaction of Conditions Precedent. The parties hereto will
use their commercially reasonable efforts to cause the satisfaction of the
conditions precedent contained herein, and each will reasonably cooperate with
the other parties hereto with respect to such efforts.
ARTICLE VII. CONDITIONS PRECEDENT; CLOSING; POST-CLOSING
7.1. General Conditions. This Agreement and the obligations of all of
the parties hereunder are subject to the satisfaction of the following
conditions on or before the applicable dates specified:
16
(a) Within ten (10) Business Days of the date of this Agreement,
Purchaser shall have obtained and furnished to FCO copies of commitment letters
regarding the making of $6,000,000 in equity investments in Purchaser and/or FCO
and $4,000,000 in subordinated loans to Purchaser and/or FCO, as contemplated by
Section 3.3, or other evidence reasonably satisfactory to FCO as to Purchaser's
ability to consummate the Closing.
(b) On or before April 16, 2001 (the "Plan Filing Date"), Purchaser
and FCO shall jointly file the Plan and all related disclosure materials (the
"Disclosure Statement"), which Plan (to the extent changed from that attached
hereto) and Disclosure Statement shall be reasonably satisfactory to the
Committee and the other parties to this Agreement.
(c) On or about May 17, 2001 (the "Approval Date"), the Bankruptcy
Court shall have approved the Disclosure Statement and fixed a date for hearing
on confirmation of the Plan.
(d) On or before June 29, 2001, the Bankruptcy Court shall have
confirmed the Plan and the consummation of the within described transactions by
the entry of a confirmation order, which shall subsequently become Final unless
waived by Purchaser.
(e) FCOC and Purchaser shall have made all required filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
waiting period provided for thereunder shall have expired or been terminated
without order by the Federal Trade Commission or Justice Department and without
a second request having been issued with respect thereto.
(f) Concurrently with the Closing, FCO shall repay all amounts
outstanding under the DIP Facility, and shall enter into new financing
arrangements approved by the Purchaser, in accordance with the Plan.
(g) Purchaser shall have received the Definitive Schedules within the
time period specified therefor in Article IV, and shall have approved the
Definitive Schedules within five (5) Business Days of Purchaser's receipt of
same, which approval shall not be unreasonably withheld.
7.2. Additional Conditions. In addition to the conditions described
in Section 7.1 above, the obligations of the Purchaser hereunder are further
subject to the satisfaction of each of the following conditions, on or before
the applicable dates specified, unless waived by Purchaser in its sole
discretion:
(a) On or before April 30, 2001, the Bankruptcy Court shall have
entered an order, in form and substance satisfactory to Purchaser, approving the
break up fee described in Article VIII below.
(b) All representations of FCOC and FCOA hereunder shall be true and
accurate in all material respects at and as of each of the following dates: (i)
the execution and effective date of this Agreement; (ii) the Plan Filing Date;
(iii) the Approval Date; and (iv) the Effective Date.
17
(c) [intentionally omitted]
(d) FCOC and FCOA shall have performed and complied with in all
material respects all of their obligations under this Agreement to be performed
or complied with by them on or prior to the Closing.
(e) There shall not have been or threatened to be any material damage
to or loss or destruction of any properties or assets owned or leased by either
FCOC or FCOA (whether or not covered by insurance) or any material adverse
change in the condition (financial or otherwise), operations, business,
prospects or assets of either FCOC or FCOA or imposition of any laws, rules or
regulations which would materially adversely affect the condition (financial or
otherwise), operations, business, prospects or assets of either FCOC or FCOA.
(f) If and to the extent required by Purchaser, members of senior
management of FCOA designated by Purchaser shall have entered into employment
arrangements mutually satisfactory to Purchaser and such individuals; it being
understood that Purchaser will at a minimum seek assurances that such
individuals will continue to be employed by FCO for at least thirty (30) days
following the date of the Closing.
7.3. Closing. The closing of the Transactions (the "Closing") shall
be held at the offices of FCO's or the Purchaser's counsel as agreed to by FCO
and the Purchaser, at a date and time mutually agreed by the parties. It is
presently contemplated that the Closing will occur on the Business Day
immediately following the Effective Date.
7.4 Management Equity. Purchaser shall cause FCO to continue to offer
employment at current compensation levels to management of FCO for a period of
thirty (30) days following the Closing. By the conclusion of such period,
Purchaser shall (i) issue shares constituting fifteen percent (15%) of
Purchaser's common stock to members of management of FCO designated by Purchaser
in its sole discretion, and (ii) adopt a stock option plan covering ten percent
(10%) of the shares of common stock of Purchaser, with grants to be made
thereunder on such terms and conditions (including, without limitation, vesting
restrictions), at such time or times, to such persons and in such amounts as are
determined to be appropriate at the discretion of the board of directors of
Purchaser.
ARTICLE VIII. BREAKUP FEE AND EXPENSE REIMBURSEMENT
8.1. Acknowledgments. FCO and the Committee acknowledge and agree
that: (i) Purchaser has incurred, and will continue to incur, significant
expenses in conducting and completing its due diligence with respect to FCOC,
FCOA and the Transactions, and structuring and negotiating the Transactions and
the terms of this Agreement; (ii) Purchaser would not have incurred such
expenses and made its offer to enter into the Transactions, unless it received
certain protections in light of the risks associated with entering into
transactions of this type and the complexity of any transaction involving a plan
of reorganization; (iii) Purchaser has provided substantial benefit to the
estates of FCOC and FCOA by agreeing to enter into the Transactions on the terms
18
contemplated hereby, and creating a platform against which competing offers to
enter into the Transactions or similar transactions may be gauged; and (iv) it
is in the best interests of FCOC, FCOA, their estates and creditors to provide
Purchaser with the protections described below in order to facilitate the
consummation of the Transactions.
8.2. Breakup Fee; Expense Reimbursement.
(a) Subject to the terms and conditions below, FCO agrees (i) to pay
to the Purchaser, in cash, a fee in the amount of $600,000 (the "Breakup Fee"),
and (ii) to reimburse Purchaser for the actual, reasonable, documented fees,
costs and expenses incurred by Purchaser in connection with its due diligence
and negotiation of the proposed Transactions (including, without limitation,
fees and expenses of legal counsel, accountants, and financial advisors) in an
amount up to $400,000 (the "Expense Reimbursement Amount"). The Breakup Fee and
Expense Reimbursement Amount shall be payable by FCO to Purchaser in accordance
with Section 8.2(b) below, if by order of the Bankruptcy Court the consummation
of the Transactions by Purchaser pursuant to this Agreement does not occur
because of:
(A) an offer by a person or entity other than the
Purchaser to enter into the Transactions or to purchase all or substantially
all of the assets and/or capital stock of FCO; or
(B) FCO seeks to obtain confirmation of a plan of
reorganization other than the Plan.
(b) The Breakup Fee and Expense Reimbursement Amount shall be allowed
administrative claims payable pari passu with administrative expenses other than
those paid in the ordinary course of business. Payment of the Breakup Fee and
Expense Reimbursement Amount shall be made to Purchaser within ten (10) Business
Days after the earliest to occur of (i) the closing date of a sale of all or
substantially all of the stock or assets of FCOC or FCOA to a third party other
than the Purchaser or (ii) the effective date of a plan of reorganization
contemplating a transaction with or funding by a third party other than the
Purchaser; or (iii) the date of the first distribution to creditors of FCOC and
FCOA (other than payment of administrative expenses, including professionals
fees), in payment of the creditors' prepetition claims.
(c) Notwithstanding the foregoing, neither the Breakup Fee nor the
Expense Reimbursement Amount shall be payable to Purchaser in the event that (i)
Purchaser terminates this Agreement for reasons other than a failure of a
condition to Purchaser's obligations set forth in Article VII hereof, or (ii)
FCO rightfully terminates this Agreement due to a breach of this Agreement by
Purchaser.
ARTICLE IX. GENERAL
9.1. Agreement.Subject to the conditions set forth above, this
Agreement is intended to constitute an agreement by the parties hereto to
participate in a plan of reorganization of FCO on the essential terms outlined
above. Following execution of this Agreement, the provisions hereof will be
19
incorporated into the Plan to be proposed jointly by FCO and the Purchaser, and
to be supported by the Committee, and to be filed with the Bankruptcy Court as
soon as possible. Nothing contained in this Agreement shall be construed to
require any party hereto to prosecute any defense, action or appeal, the conduct
of which, in the opinion of counsel for such party would be frivolous.
9.2. Notices. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid, or if sent by overnight courier, or sent by
written telecommunication, as follows:
If to FCOC and FCOA, to: Factory Card Outlet Corp.
0000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
With a copy sent to: Weil, Gotshal & Xxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
If to the Purchaser, to: Factory Card Holdings, Inc.
000 Xxxx Xxxx., Xxxxx 00-000
Xxxxxxx Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx and Xxxxx Xxxxxx
Fax: (000) 000-0000
With copies sent to: Xxxxxxxxx Traurig, LLP
000 X. Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
And: Xxxxxxxxx Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
In each case in which a notice is sent hereunder, a copy shall contemporaneously
be sent to the Committee Designees, to:
The persons listed on Schedule A
attached hereto
20
With a copy sent to: Otterbourg, Steindler, Houston & Xxxxx, P.C.
000 Xxxx Xxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
Any such notice shall be effective (a) if delivered personally, when received,
(b) if sent by overnight courier, when receipted for, (c) if mailed, three (3)
days after being mailed as described above, and (d) if sent by written
telecommunication, when dispatched.
9.3. Entire Agreement. This Agreement (including the exhibits and
schedules hereto) contains the entire understanding of the parties, supersedes
all prior agreements and understandings relating to the subject matter hereof
and shall not be amended except by a written instrument hereafter signed by all
of the parties hereto. Without limiting the generality of the foregoing, each of
parties acknowledges that no party hereto is making any representation or
warranty relating to the subject matter of this Agreement except as expressly
set forth in this Agreement.
9.4. Governing Law. The validity and construction of this Agreement
shall be governed and construed and enforced in accordance with the internal
laws (and not the choice-of-law rules) of the State of New York. In the event of
dispute between the parties relative to the subject matter of this Agreement,
the parties agree to submit such dispute to the jurisdiction of the Bankruptcy
Court.
9.5. Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
9.6. Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor the obligations of any party
hereunder shall be assignable or transferable by such party without the prior
written consent of the other party hereto; provided, however, that nothing
contained in this Section 9.6 shall prevent the Purchaser, without the consent
of the other parties hereto, (a) from transferring or assigning this Agreement
or its rights or obligations hereunder to another entity controlling, under the
control of, or under common control with the Purchaser, or (b) from assigning
all or part of its rights or obligations hereunder by way of collateral
assignment to any bank or financing institution providing financing for the
acquisition contemplated hereby, but no such transfer or assignment made
pursuant to clauses (a) or (b) shall relieve the Purchaser of its obligations
under this Agreement.
9.7. Severability. In the event that any covenant, condition, or
other provision herein contained is held to be invalid, void or illegal by any
court of competent jurisdiction, the same shall be deemed to be severable from
the remainder of this Agreement and shall in no way affect, impair or invalidate
any other covenant, condition or other provision contained herein.
21
9.8. Further Assurances. The parties agree to take such reasonable
steps and execute such other and further documents as may be necessary or
appropriate to cause the terms and conditions contained herein to be carried
into effect.
9.9. Survival; Limitation on Claims of Purchaser. The representations
and warranties of the parties hereto shall survive the consummation of the
Closing until the second anniversary thereof, except that the representations
and warranties of FCO under Sections 4.9 (first and second sentences only),
4.10, 4.13 (first sentence only), 4.14 and 4.20 shall survive the Closing until
the expiration of the applicable statute of limitations. Purchaser may not
assert any claims against FCO arising from a breach of any representation or
warranty by FCO unless and until the aggregate amount of losses, costs,
expenses, damages and liabilities incurred by Purchaser or FCO relating to such
breach (collectively, "Losses") equal or exceed $50,000, in which event
Purchaser may recover from the first dollar of such Losses. Any claims of
Purchaser arising out of a breach of the representations and warranties of FCOC
and FCOA under this Agreement may be asserted only against FCOC and FCOA, and
Purchaser, FCOC and FCOA may not offset the amount of any Losses against the
payments required to be made under the Plan to holders of General Unsecured
Claims.
9.10. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
the Purchaser, FCO and the Committee, any rights or remedies under or by reason
of this Agreement.
9.11. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.12. Press Releases. The parties hereto shall consult with one
another before making any press releases or other public announcements regarding
the transactions contemplated by this Agreement, from the date hereof through
the date which is thirty (30) days after the Closing.
SIGNATURES ON FOLLOWING PAGE
22
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered as a
sealed instrument as of the date and year first above written.
FACTORY CARD HOLDINGS, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
FACTORY CARD OUTLET CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
FACTORY CARD OUTLET OF AMERICA LTD.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS OF FACTORY CARD OUTLET CORP.
AND FACTORY CARD OUTLET OF AMERICA, LTD.
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Authorized Representative
23
SCHEDULE A
----------------------------------------
Hallmark Marketing/Image Arts, Inc.
2501 XxXxx, Xxx 000000
Xxxxxx Xxxx, XX 00000
Xx. Xxxx Xxxxxxxx
----------------------------------------
Creative Expressions Group, Inc.
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000-0000
Xx. Xxx X. XxXxxx
----------------------------------------
Amscan Inc.
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xx. Xxxxxxx X. Xxxxxxxx
24
----------------------------------------
Contempo Colours, Inc.
Xxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Xx. Xxxxxxxx X. Xxxxxxxx
----------------------------------------
Unique Industries, Inc.
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Xx. Xxxxxxx X. Xxxxxx
----------------------------------------
The Paper Magic Group, Inc., Xxxx Inc.
and Berwick Industries, Inc.
c/o CSS Industries, Inc.
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxxx, XX 00000-0000
Xxxxxxx X. Xxxxx, Esq.
25
----------------------------------------
P.S. Greetings, Inc.
d/b/a Fantus Paper Products
0000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Mr. Xxxx XxXxxxxxx
