ASSET PURCHASE AGREEMENT
By and Between
TREND-LINES, INC.
and
GOLF ACQUISITION LIMITED PARTNERSHIP
Dated as of December 31, 1997
TABLE OF CONTENTS
Section 1. Sale and Purchase of Purchased Assets; Related
Transactions 1
1.1 Sale and Purchase of Purchased Assets 1
(a) Leases 2
(b) Inventory 2
(c) Fixed Assets 2
(d) Prepaid Expenses. 2
(e) Contracts 2
(f) Licenses and Permits 2
(g) Intangible Assets 2
(h) Records and Documents 3
(i) Goodwill 3
(j) Warranties 3
(k) Deposits 3
1.2 Excluded Assets. 3
1.3 Method of Conveyance 3
1.4 Assumed Obligations 4
1.5 Excluded Obligations 5
1.6 Effective Time of Closing 6
Section 2. Purchase Price. 6
2.1 Purchase Price 6
2.2 Payment of the Purchase Price 6
2.3 Holdback Funds Escrow 7
2.4 Determination of Inventory 7
2.5 Post-Closing Adjustment. 8
2.6 Allocation 10
Section 3. Representations and Warranties of Seller 11
3.1 Organization and Qualification 11
3.2 Authorization; No Restrictions, Consents or Approvals 11
3.3 Absence of Certain Changes 12
3.4 Taxes 12
3.5 Ownership of Purchased Assets 12
3.6 Leases; Exclusive Possession; Not in Default 13
3.7 Contracts and Other Documents 13
3.8 Labor Difficulties 14
3.9 ERISA; Employee Benefit Plans 14
3.10 Employees 15
3.11 Licenses and Permits 15
3.12 INTENTIONALLY OMITTED 15
3.13 Compliance With Law 16
3.14 Intangible Assets 16
3.15 Pending Litigation 16
3.16 Customer List 16
3.17 Financial Statements 16
3.18 INTENTIONALLY OMITTED 17
3.19 Inventory 17
3.20 Suppliers 17
3.21 No Third Party Option 17
3.22 Certain Land Use Matters 18
(a) Condition of Leased. 18
(b) Public Utilities 18
(c) Legal Compliance 18
3.23 Environmental Matters 18
Section 4. Representations and Warranties of Buyer 21
4.1 Organization and Qualification 21
4.2 Authorization; No Restrictions, Consents or Approvals 21
4.3 Pending Litigation 21
4.4 . Financial Statements 22
Section 5. Post-Closing Covenants 22
5.1 NVB Signage and Labels 22
5.2 . Cooperation 22
5.3 Returns 22
5.4. Post-Closing Access 23
5.5. Covenant Not to Compete 23
5.6 Cooperation in Third-Party Litigation 24
5.7. Discharge of Business Obligations 25
5.8 Certain Employment Matters 25
5.9 Gift Certificates Fund 25
5.10 Further Assurances 26
Section 6. Survival of Representations and Warranties and
Covenants; Indemnification. 26
6.1. Survival of Representations and Warranties and
Covenants 26
6.2. Indemnification by Seller 26
6.3. Indemnification by Buyer 28
6.4. Indemnification Payments 29
6.5. Procedure for Third Party Claims 29
6.6. INTENTIONALLY OMITTED 30
6.7. Remedies Cumulative 30
6.8. Successors 30
Section 7. Brokerage. 30
7.1. Finders and Brokers Fees. 30
Section 8. General Provisions 31
8.1. Sales and Transfer Taxes 31
8.2. No Third Party Beneficiaries 31
8.3. Expenses of the Parties; Certain Litigation 31
8.4. Amendment and Waiver 31
8.5. Miscellaneous 31
8.6. Binding Effect 31
8.7. Publicity 31
8.8. Complete Agreement 32
8.9. Notices 32
8.10. Assignment 33
8.11. Severability 33
8.12. Effect of Investigation 33
SCHEDULES
Schedule 1.1(a): Leases
Schedule 1.1(e): Contracts
Schedule 1.2: Excluded Assets
Schedule 1.3(a): Permitted Liens
Schedule 1.4: Assumed Obligations
Schedule 2.2: Payment of Purchase Price
Schedule 2.5.1(a): Interim Date Balance Sheet
Schedule 2.5.2(c): Examples
Schedule 3.2: Seller's Authorization; No Restrictions,
Consents or Approvals
Schedule 3.3: Disclosure of Certain Changes
Schedule 3.6(b)(i): Knowledge of Seller
Schedule 3.6(b)(ii): Knowledge of Buyer
Schedule 3.8: Labor Difficulties
Schedule 3.13: Legal Compliance
Schedule 3.15: Pending Litigation
Schedule 3.17: Financial Statements
Schedule 3.23(b)(iii): Hazardous Materials
Schedule 4.4: Financial Statements
CROSS REFERENCE SHEET
Each of the following terms is defined in this Agreement in the
respective Section referenced adjacent to such term.
Defined Term Section Reference
Agreement Preamble
Area Section 5.5(a)
AA Section 2.5.1(c)
Assumed Obligations Section 1.4
Best Knowledge Section 3.6(b)
Business Recitals
Buyer Preamble
Buyer Indemnitee(s) Section 6.2
Buyer's Aggregate Threshold Amount Section 6.3(b)
Buyer's Audited Financial Statements Section 4.4
Buyer's Current Plan Section 5.8
Buyer's Disclosure Letter Section 4
Buyer's Indemnification Cap Section 6.3(b)
Buyer's Physical Inventory Count Section 2.4(a)
Buyer's Physical Inventory Count Papers Section 2.4(c)
Buyer's Threshold Amount Section 6.3(b)
Buyer's Six Month Financial Statements Section 4.4
Closing Section 1.6
Contracts Section 1.1(e)
Contract Tangible Net Worth Section 2.5.1(a)
Credit Obligations Section 1.5(i)
Disclosed Exceptions Sections 3 and 4
Effective Time of Closing Section 1.6
Employee Benefit Plans Section 3.9
Employee List Section 3.10
Employee Non-Vacation Compensation Section 3.10
Environmental Compliance Liability Section 3.23
Environmental Conditions Section 3.23
Environmental Laws Section 3.23
Environmental Notice Section 3.23
Excluded Assets Section 1.2
Excluded Obligations Section 1.5
Escrow Agreement Section 2.3
Final Accounting Section 5.9
Final Tangible Net Worth Section 2.5.1(a)
Fixed Assets Section 1.1(c)
GAAP Section 2.4(d)
Gift Certificate Fund Section 5.9
Gift Certificates/Store Credits Section 1.5(k)
Hazardous Materials Section 3.23
Holdback Fund Section 2.3
Household Hazardous Waste Section 3.23(b)(iii)
Independent Accountant Section 2.5.1(d)
Intangible Assets Section 1.1(j)
Interim Date Balance Sheet Section 2.5.1(a)
Interim Date Balance Sheet Work Papers Section 2.5.1(b)
Inventory Section 1.1(b)
Knowledge Section 3.6(b)
Laws Section 3.13
Leases Section 1.1(a)
Leased Premises Recitals
Licenses and Permits Section 1.1(f) and 3.11
Liens Section 1.3(a)
Losses Section 6.2
Monthly Accounting Section 5.9
Nine Month Financial Statements Section 3.17
NVB Schedule 1.2
NVB Franchise Schedule 1.2
Permitted Liens Section 1.3(a)
Person Section 1.5(b)
Post-Closing Access Section 5.4
Post-Closing Adjustment Section 2.5.1(a)
Prepaid Expenses Section 1.1(d)
Purchase Price Section 2.1
Purchased Assets Section 1.1
Records Section 1.1(h)
Release Section 3.23
Response Action Section 3.23
Seller Preamble
Seller Indemnitee(s) Section 6.3
Seller's Aggregate Threshold Amount Section 6.2(a)(vi)
Seller's Audited Financial Statements Section 3.17
Seller's Disclosure Letter Section 3.2
Seller's Indemnification Cap Section 6.2(a)(vi)
Seller's Indemnification Obligation Fund Section 6.4
Seller's Indemnification Obligations Section 6.4
Seller's Threshold Amount Section 6.2(a)(vi)
Services Agreement Section 3.2
Store Employees Section 5.8
Stores Recitals
Subleases Section 3.6
Taxes Section 3.4
Transfer Taxes Section 1.3(b)
Year End Balance Sheet Section 2.5.1(c)
Year End Balance Sheet Work Papers Section 2.5.1(c)
Year End Date Section 2.5.1(c)
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into this
31st day of December, 1997 (the "Agreement") by and between TREND-
LINES, INC., a Massachusetts corporation (the "Buyer"), and GOLF
ACQUISITION LIMITED PARTNERSHIP, a Massachusetts limited
partnership (the "Seller").
WHEREAS, Seller operates thirteen (13) golf and tennis
retail stores (the "Stores") located in southern Maine, eastern
Massachusetts and southern New Hampshire on premises leased from
third parties and set forth on Schedule 1.1(a) (the "Leased
Premises"), which offer golf and tennis sporting goods and
sportswear (collectively, the "Business"); and
WHEREAS, Buyer wishes to purchase from Seller, and Seller
desires to sell to Buyer, certain of the assets of Seller,
including, without limitation, all of the Seller's interests and
rights in and under the Leases (as defined herein) and certain
related contracts used in conducting the Business, as more fully
described herein, it being the intention of Buyer to employ such
assets as part of its own business and not to continue Seller's
enterprise as such, it being understood that, subject to specific
exceptions to the contrary as expressly set forth herein, Buyer
shall not be deemed a successor to, or a continuation of, Seller;
and
WHEREAS, subject to the foregoing, Seller desires to sell
and Buyer desires to purchase the Purchased Assets (as defined
herein), in accordance with the terms, conditions, and agreements
hereinafter contained.
NOW, THEREFORE, in consideration of the mutual premises and
the covenants and promises hereinafter contained, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto intending to be
legally bound hereby agree as follows:
Section 1. Sale and Purchase of Assets; Related Transactions
1.1 Sale and Purchase of Purchased Assets. On the terms
and subject to the conditions set forth in this Agreement, Seller
does hereby agree to sell, convey, transfer and assign to Buyer,
and Buyer does hereby agree to purchase and accept from Seller,
all right, title and interest of Seller in and to certain of the
assets of Seller used in or related to the Business, including,
without limitation, the assets described in subsections (a)
through (m) hereof, as such assets shall exist at the Effective
Time of Closing (as defined herein) (but excluding the Excluded
Assets, as defined herein) (collectively, the "Purchased
Assets"), free and clear of all Liens, except Permitted Liens (as
each such term is defined herein).
(a) Leases Seller's leases of the Premises
listed on Schedule 1.1(a), complete copies of which leases have
been delivered by Seller to Buyer (the "Leases").
(b) Inventory. All goods and merchandise (including,
but not limited to, tennis and private label tennis and golf
equipment and sportswear) held by Seller for sale in the ordinary
conduct of Seller's Business, including, but not limited to,
packaging materials related thereto (the "Inventory").
(c) Fixed Assets. All equipment, leasehold
improvements, fixtures, motor vehicles, construction in progress,
parts, furniture, furnishings, office and computer equipment and
other fixed assets and equipment now owned by Seller and used in
the Business, other than those constituting Excluded Assets,
including, without limitation, any of the following: electric
panels, switchboards, lighting equipment, wiring, shelving,
office partitions, wall-to-wall carpeting, drapery rods, venetian
blinds, window shades, screens, screen doors, storm windows and
doors, awnings, shutters, kitchen equipment, fixtures and trade
fixtures and telephone and computer systems (the "Fixed Assets").
(d) Prepaid Expenses. All prepaid obligations and
expenses, utility deposits and other items of property of a
similar nature benefiting Seller, the Business or the Purchased
Assets, excluding any prepaid expenses which Seller shall have
terminated as of the Effective Time of Closing or prepaid items,
the benefits of which have been fully received by Seller prior to
the Effective Time of Closing, to the extent so received by
Seller (the "Prepaid Expenses").
(e) Contracts. All contracts, contract rights,
agreements, vendor agreements, purchase orders, sales orders,
commitments, supply agreements, and equipment, real estate and
other leases (in addition to the Leases set forth on Schedule
1.1(a) in respect of the Business in which Seller has any present
or future right or interest prior to or at the Effective Time of
the Closing, including, without limitation, those set forth on
Schedule 1.1(e) (the "Contracts").
(f) Licenses and Permits. All right, title and
interest in and to all licenses, permits, approvals, and
authorizations including, without limitation, applications
therefor, relating to Seller's operation of the Business which
are held by or have been granted to, or have been applied for, by
Seller, to the extent assignment or transfer is permitted by
applicable Law (the "Licenses and Permits").
(g) Intangible Assets. All right, title and interest
of Seller with respect to the Business in and to all inventions,
technology, slogans, data, studies, customer lists, supplier
lists, advertising lists, restrictive covenants, computer
software (including documentation and related object and source
codes, indemnity rights, and other intangible assets now used or
presently planned to be used by Seller in connection with and
relating to the Business and all of the goodwill associated
therewith, but excluding therefrom the intangible assets owned
directly or indirectly by "NVB" or otherwise related to the "NVB
Franchise" (as each such term is defined on Schedule 1.2) (the
"Intangible Assets").
(h) Records and Documents. All books, files, papers,
technical and research analyses, sales, marketing and other
studies, data and plans, records and other data pertaining to the
Business or to Persons employed in respect to the Business (to
the extent permitted by Law), or relating to any of the Purchased
Assets including, without limitation, all manuals, purchase
orders, invoices, items of payment, correspondence, internal
memoranda, forecasts, price lists, sales records, personnel
records (to the extent permitted by Law), customer lists,
financial records and other written or printed materials or
materials in any other medium whatsoever relating to any of the
foregoing, financial or otherwise (collectively, the "Records")
excluding therefrom (a) such Records as Buyer may from time
advise Seller to retain, (b) such Records of Seller pertaining to
NVB or otherwise related to the NVB Franchise, and (c) such
Records of Seller pertaining to partnership matters of its
limited or general partners and similar documents not material to
the operations of Seller.
(i) Goodwill. All of the goodwill of the Business and
the operation thereof, but excluding therefrom the goodwill
associated with or owned directly or indirectly by NVB or
otherwise related to the NVB Franchise and those other items that
are set forth on Schedule 1.2.
(j) Warranties. All warranties and guaranties made to
or in favor of the Seller or with respect to the Purchased Assets
and any components thereof.
(k) Deposits. All deposits made by customers for
goods, merchandise or services not yet delivered or rendered as
of the Effective Time of Closing.
1.2 Excluded Assets. Anything to the contrary herein
provided notwithstanding, the Purchased Assets shall not include
the assets listed on Schedule 1.2, all of which shall be retained
by Seller (the "Excluded Assets") and shall not be sold,
assigned, transferred, conveyed or delivered to Buyer.
1.3 Method of Conveyance
(a) Upon payment of the Purchase Price, less the
amount of the Holdback Fund described in Section 2.3, the sale,
transfer, conveyance, assignment and delivery by Seller of the
Purchased Assets to Buyer in accordance with Section 2 shall be
effected as of the Effective Time of Closing by Seller's
execution and delivery of one or more bills of sale, assignments,
and other instruments of conveyance and transfer, as Buyer
reasonably deems necessary to vest in Buyer good and clear record
and marketable title to, the Purchased Assets, free and clear of
any and all liens, encumbrances, claims, charges, security
interests, rights of Seller and any third party, rights of
redemption, equities, and any other restrictions of any kind or
nature whatsoever, including any leases, escrows, options,
security or other deposits, rights of redemption, chattel
mortgages, conditional sales contracts, collateral security
arrangements and other title or interest retention arrangements
(collectively, "Liens"), except for (i) Liens for current taxes
not yet due, (ii) undetermined and inchoate Liens arising or
potentially arising under statutory provisions which have not at
the time been filed or registered in accordance with applicable
Law (as defined herein) or of which written notice has not been
duly given in accordance with applicable Law or which, though
filed or registered, relate to obligations not due or delinquent,
(iii) Liens, if any, which are specifically identified in
Schedule 1.3(a), (iv) Liens, if any, created by Buyer, and (v)
Liens which are or which relate only to the Assumed Obligations
(collectively, "Permitted Liens").
(b) Seller shall be responsible for and shall pay all
transfer taxes, recording fees and documentary stamps
(collectively, "Transfer Taxes"), payable by reason of the
purchase and sale of the Purchased Assets to Buyer, assignment of
the Leases to Buyer or Buyer's assumption of the Assumed
Obligations hereunder.
(c) Seller covenants and agrees that if either (i) any
of the Purchased Assets cannot be transferred or assigned by
Seller without the consent of or notice to a third party and in
respect of which any necessary consent or notice has not been
obtained or given as of the Effective Time of Closing, or (ii)
any of the Purchased Assets are non-assignable in their nature,
Seller hereby transfers to Buyer all of Seller's beneficial
interest in and to the same, in any event, and Seller covenants
and agrees, (x) to hold such Purchased Assets in trust for, and
for the benefit of, Buyer; and (y) to use its best efforts to
obtain and secure and will have obtained and secured such consent
within thirty (30) days of the date hereof and to give such
notice as may be required to effect valid transfer(s) or
assignment(s) of such Purchased Assets; and (z) to make or
complete such transfer(s) or assignment(s) as soon as possible.
1.4 Assumed Obligations. On the terms and subject to the
conditions set forth in this Agreement, Buyer does hereby agree
to assume and, subject to all rights of offset, defenses, causes
of action, counterclaims and claims of any nature against third
parties that may be available to Buyer in respect of the Assumed
Obligations, does hereby agree to satisfy and discharge, as the
same shall become due, without duplication (a) all of Seller's
obligations under the Contracts and the Leases which are
specifically identified in Schedule 1.4, and are assigned to
Buyer at Closing, if and to the extent assignable, but only to
the extent any such obligations arise and accrue after the
Effective Time of Closing and then only in respect of events and
time periods occurring after the Effective Time of Closing; (b)
all of Seller's obligations under all Licenses and Permits which
are transferred to Buyer hereunder, if and to the extent
transferable, but only to the extent any such liabilities and
obligations accrue after the Effective Time of Closing and then
only in respect of events and time periods occurring after the
Effective Time of Closing; (c) all trade payables which arise in
connection with the operation of the Business and which are
specifically identified in Schedule 1.4, and are assumed by Buyer
at Closing; and (d) all of Seller's obligations under those
Accounts Payable, Accrued Liabilities, Sales Taxes Payable and
Gift Certificate Liabilities which in each case are specifically
included and reflected on the Closing Date Balance Sheet of
Seller, as described in Section 2.5 and delivered to Buyer
thereunder, and which are assumed by Buyer at Closing
(collectively, the "Assumed Obligations").
1.5 Excluded Obligations. Buyer is not assuming, and
Seller shall remain fully responsible for, all past, present and
future indebtedness, liabilities, obligations, contracts and
commitments of Seller and any predecessors in interest of the
Business, known or unknown, fixed or contingent, whether arising
out of or resulting from the Business or the assets thereof, or
otherwise, that are not included and reflected on the Year End
Balance Sheet or that are not otherwise Assumed Obligations
(collectively, the "Excluded Obligations"). Without limiting the
foregoing, the Excluded Obligations shall include, but not be
limited to, any and all liabilities arising from or related to:
(a) the negligent acts or omissions of Seller, whether
in tort or otherwise;
(b) product liability or similar claims for injury to
any person, corporation, association, partnership, limited
liability company, joint venture, organization, business,
individual, government or any agency or political subdivision
thereof or any other entity (a "Person") or property with respect
to products purchased or sold by Seller prior to the Effective
Time of Closing;
(c) any liability of Seller for Taxes (other than
Sales Tax Payable which are specifically included and reflected
on the Year End Balance Sheet or real and personal property taxes
levied on property of Seller used in connection with the Business
and which are subject to the Closing Apportionments in accordance
with Section 5.1 hereof);
(d) any suits, actions, or claims alleging
infringement by Seller, prior to Closing, of patents, trademarks,
trade names or other intellectual property rights held by others;
(e) any liability in respect of any Environmental
Condition or any Environmental Compliance Liability;
(f) any warranty (whether or not provided by any
manufacturer or vendor) or other contingent liability with
respect to (iii) products purchased or sold by Seller prior to
the Effective Time of Closing or (iv) services provided by Seller
prior to the Effective Time of Closing;
(g) any liability for commitments made by Seller
relating to the employment, relocation or termination (including,
but not limited to, severance pay) of any employee, officer or
agent of Seller;
(h) any liability owed to NVB or in respect of the NVB
Franchise;
(i) any liability in respect of that certain Revolving
Loan, Term Loan and Security Agreement between Seller and
Greyhound Financial Corporation, dated as of June 30, 1994, and
all of "Borrower's Obligation" (as defined thereunder) thereunder
and related Loan Documents (collectively, the "Credit
Obligations"), all of which have been satisfied and discharged
contemporaneously with the Closing;
(j) any debts, liabilities or obligations of Seller or
its Affiliates which conflict with or are contrary to the
representations and warranties of Seller set forth in this
Agreement or which are covered by Seller's indemnity provided for
in Section 6.2;
(k) any undisclosed liability, indebtedness or
obligation existing in respect to any Contract or Lease which,
although comprising a part of the Assumed Obligations pursuant to
Section 1.4, is not revealed or reasonably contemplated by the
terms of the Contracts or Leases furnished to Buyer, the
Schedules to this Agreement or otherwise disclosed with
specificity in writing to Buyer, other than gift certificates and
store credits issued by Seller prior to the Effective Time of
Closing, all or a portion of which items shall be covered by the
Gift Certificates Fund as provided for under Section 5.9
(collectively the "Gift Certificates/Store Credits"); and
(l) any other suits, actions or claims (excluding
therefrom claims arising from Gift Certificates/Store Credits
(which shall be covered by the provisions of Section 5.9 in
respect of the Gift Certificates Fund) and customer returns made
after the Effective Time of Closing for merchandise purchased
prior to such Effective Time of Closing (which shall be reflected
on the Year End Balance Sheet in accordance with GAAP,
consistently applied, and Section 5.3) against Seller.
All Excluded Obligations shall remain the sole
responsibility of Seller, and Seller agrees to indemnify, in
accordance with Section 6.2 hereof, Buyer from and against, any
and all such indebtedness, obligations and liabilities.
1.6 Effective Time of Closing. The closing (the "Closing")
of the transactions contemplated by this Agreement has occurred
contemporaneously with the execution and delivery of this
Agreement and shall be deemed to be effective for all purposes as
of 12:00 p.m. December 31, 1997 (the "Effective Time of
Closing").
Section 2. Purchase Price.
2.1 Purchase Price. Subject to the adjustment provisions
of Section 2.5, and upon the terms and subject to the conditions
contained in this Agreement, Seller does hereby convey, transfer,
assign and deliver to Buyer the Purchased Assets in exchange for
(a) Buyer's assumption of the Assumed Obligations; and (b)
Buyer's payment to Seller of the aggregate purchase price (the
"Purchase Price"), which shall be equal to the sum of (i) the
Tangible Net Worth of Seller (as defined herein) plus (ii)
$6,000,000.
2.2 Payment of the Purchase Price. Buyer does hereby tender
to Seller the Purchase Price, less the amounts set forth in
Section 2.3 (the "Holdback Fund") and in Section 6.4 (the
"Seller's Indemnification Obligations Fund"), respectively, the
payment of which shall be effected by wire transfer in
immediately available funds on or before 2:00 p.m. on January 6,
1998, subject to subsequent adjustment, if any, pursuant to
Section 2.5. The amount so paid on January 6, 1998, subject to
subsequent adjustment, has been derived in the manner reflected
on Schedule 2.2.
2.3 Holdback Funds Escrow. A portion of the Purchase
Price, in the amount of $250,000, shall constitute the Holdback
Fund and shall be held by the law firms of Xxxxxxxx & Xxxx LLP
and Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
(collectively, the "Escrow Agents") in an interest bearing
account (the "Holdback Fund"), under an Escrow Agreement of even
date herewith by and among Buyer, Seller and the Escrow Agents
(the "Escrow Agreement"), to fund the Post-Closing Adjustment,
which Escrow Agreement shall also provide for the separate
holding and disbursement of funds for the Seller's
Indemnification Obligations and the Gift Certificates Fund,
respectively, and shall be disbursed pursuant to and in
accordance with the terms of Section 2.5 and the Escrow
Agreement.
2.4 Determination of Inventory. The quantity and valuation
of the Inventory shall be determined as follows:
(a) The value of the Inventory as of the Effective
Time of Closing shall be determined from the books and records of
Seller. A physical inventory was taken after the close of
business on December 30, 1997 and completed prior to 11:59 p.m.
on December 31, 1997, and the books and records of Seller shall
be adjusted for Inventory quantities as of December 31, 1997, and
such Inventory shall be valued in accordance with paragraph (b)
of this Section 2.4. Such physical inventory was conducted by
Seller's representatives at Seller's expense subject to review by
Buyer's representatives at Buyer's expense. Notwithstanding any
provision herein to the contrary, Buyer shall conduct its own
physical inventory with the assistance of RGIS ("Buyer's Physical
Inventory Count") at the Stores and shall use its best commercial
efforts, including, but not limited to, diverting RGIS personnel
from performing inventory counts at Buyer's other retail stores,
to cause such Count to be completed by the close of business on
January 10,1998. Any difference (positive or negative) between
the value of the Inventory as based on Buyer's Physical Inventory
Count and the Seller's perpetual Inventory shall be reflected by
an adjustment, positive or negative, as the case may be, in the
Inventory to be reflected on the Year End Balance Sheet; and the
expenses incurred to perform the Buyer's Physical Inventory Count
shall be paid by Buyer and Seller in equal shares.
(b) Buyer shall use its best efforts to cause RGIS to
give priority to performing Buyer's Physical Inventory Counts at
the Westwood, Woburn, Framingham, Boston, Nashua, New Hampshire
and Salem, Massachusetts Stores. Until all Buyer's Physical
Inventory Counts are completed, Buyer shall exercise all
commercially reasonable efforts to protect and afford security to
the Inventory and shall prohibit access by any person during non-
business hours to any Store as to which the Buyer's Physical
Inventory Count is not complete (and Buyer shall afford Seller,
at its request, access to alarm company records to check store
access events during non-business hours).
Pursuant to agreement with the Buyer, Seller intends to
retain and place in Stores for which the Buyer's Physical
Inventory Count is not completed, Cambridge Associates' inventory
security personnel who shall act as agents of the Seller to
observe the Buyer's Physical Inventory Count and to ensure the
security and integrity of the Inventory. In connection with such
activities, such inventory security personnel may, among other
things, observe registers, check sales receipts for merchandise
removed from any Store, and monitor store-room and loading dock
activities. The Buyer shall cooperate with the inventory
security personnel in connection with such efforts.
(c) At the time the Buyer's Physical Inventory Count
is complete, a copy thereof shall be delivered to Buyer together
with other relevant documents in connection with the preparation
of such Count (collectively, the "Buyer's Physical Inventory
Count Papers"). Unless Seller provides written notice of a
specific objection to the Buyer's Physical Inventory count before
the close of business on the second Business Day after the date
of Seller's receipt of the Buyer's Physical Inventory Count
Papers, such Buyer's Physical Inventory Count shall become
binding upon Buyer and Seller and will form the basis of the
computation under the third sentence of Section 2.4(a). If
Buyer, by written notice to Seller before the close of business
on such second Business Day objects to the Buyer's Year End
Inventory Count, then those aspects as to which the specific
objection was made shall not become binding. Buyer and Seller
will discuss such objection and, if they reach written agreement
concerning the aspects as to which objection was made, then the
terms of such Agreement, and the aspects of the Buyer's Physical
Inventory Count not objected to, shall be binding upon Buyer and
Seller and will form the basis for the computation under the
third sentence of Section 2.4(a). If a written agreement is not
reached within two (2) Business Days after Seller gives notice of
an objection, then those aspects of Buyer's Physical Inventory
Count or the entire Buyer's Physical Inventory Count, as
applicable, as to which objection is made shall be submitted to
RGIS for another and final physical count. RGIS shall be
requested to perform its physical account and to submit a written
report of the same within two (2) Business Days of instructions
to such effect from Buyer and Seller provided that such
instruction shall be limited to the scope of the matters as to
which Buyer and Seller have not reached agreement pursuant to the
second preceding sentence. Such final physical count shall be
deemed to be not appealable and binding upon Buyer and Seller and
will form the basis for the computation under the third sentence
of Section 2.4(a). All of the fees and disbursements of RGIS
shall be shared equally by Buyer and Seller.
(d) The Inventory reflected on the Interim Date
Balance Sheet was valued, and the Inventory to be reflected on
the Year End Balance Sheet (as defined herein) shall be valued,
at the lower of cost (on a first-in, first-out basis) or market
in accordance with generally accepted accounting principles
("GAAP"), consistently applied, provided, however, that in no
event shall the reserve for inventory (the "Inventory Reserve")
to be reflected thereon exceed $50,000 even if it would be
inconsistent with GAAP.
(e) Any disagreement regarding the quantity or value
of the Inventory, or both, shall be resolved in the manner and at
the time described in Section 2.5.1.
2.5 Post-Closing Adjustment.
2.5.1 (a) The Purchase Price will be adjusted (the
"Post-Closing Adjustment"), dollar for dollar following the
Effective Time of Closing (i) to the extent that the Tangible Net
Worth of Seller as of December 31, 1997 (the "Final Tangible Net
Worth") shown upon the Year End Balance Sheet differs from the
Tangible Net Worth of Seller at November 30, 1997 (the "Contract
Tangible Net Worth") shown upon the Interim Date Balance Sheet of
Seller dated as of November 30, 1997 (the "Interim Date Balance
Sheet") attached to Schedule 2.5.1(a).
(b) For purposes of this Agreement, Tangible Net Worth
shall mean total assets (other than Excluded Assets) less
intangible assets (including, but not limited to, the intangible
assets owned directly or indirectly by NVB or otherwise related
to the NVB Franchise) less total liabilities (other than Excluded
Obligations) as reflected on the Interim Date Balance Sheet and
on the Year End Balance Sheet, respectively. In determining
Tangible Net Worth, except for the Inventory Reserve and except
for the application of Section 5.3, there should be no deduction
for any Inventory which is determined not to be salable in the
ordinary course of business as previously conducted by Seller.
The Interim Date Balance Sheet was prepared by Seller and
delivered to Buyer prior to the date hereof, and Seller has made
available to Buyer all of Seller's work papers and other relevant
documents in connection with the preparation of the Interim Date
Balance Sheet (collectively, the "Interim Date Balance Sheet Work
Papers").
(c) The Tangible Net Worth, as of December 31, 1997
(the "Year End Date"), shall be determined by Seller and
reflected on the Balance Sheet of Seller dated as of the Year End
Date (the "Year End Balance Sheet"). As promptly as possible and
in any event within sixty (60) days after the date hereof, Seller
shall prepare the Year End Balance Sheet, with the assistance and
cooperation of Buyer, which Year End Balance Sheet shall be
audited and accompanied by a report from Xxxxxx Xxxxxxxx LLP
("AA"), Seller's independent certified public accountants, which
shall state, among other things, that the Year End Balance Sheet,
as of the Year End Date, fairly represents, in all material
respects, the financial position of Seller as of the Year End
Date, in conformity with GAAP consistently applied. At the time
the Year End Balance Sheet is delivered to Buyer, Seller shall
make available to Buyer all of Seller's work papers and other
relevant documents in connection with the preparation of the Year
End Balance Sheet (collectively, the "Year End Balance Sheet Work
Papers"). Buyer shall pay AA for its fees in connection with
auditing the Year End Balance Sheet and Seller shall reimburse
Buyer for such portion of such fees as shall be equal to the
amount paid by Seller to AA for the audit of Seller's 1996
Audited Financial Statements against receipt of reasonable
evidence as to the payment of such fees by Seller.
(d) Unless Buyer provides written notice of a specific
objection to the Year End Balance Sheet before the close of
business on the tenth (10th) Business Day after the date of
Buyer's receipt of the Year End Balance Sheet and the Year End
Balance Sheet Work Papers, such Year End Balance Sheet shall
become binding upon Buyer and Seller and will form the basis of
the computation under Section 2.5.2. If Buyer, by written notice
to Seller before the close of business on such tenth (10th)
business day, objects to the Year End Balance Sheet, then those
aspects as to which the specific objection was made shall not
become binding. Buyer and Seller will discuss such objection
and, if they reach written agreement concerning the aspects as to
which objection was made, then the terms of such agreement, and
the aspects of the Year End Balance Sheet not objected to, shall
be binding upon Buyer and Seller and will form the basis for the
computation under Section 2.5.2. If a written agreement is not
reached within ten (10) business days after Buyer gives notice of
an objection, then those aspects as to which objection is made
shall be submitted to Deloitte Touche LLP (Boston Office) (the
"Independent Accountant"), whose fees and disbursements shall be
shared equally by Buyer and Seller. The Independent Accountant
shall resolve the dispute and submit a written statement of such
resolution, provided, that the review of the Independent
Accountant will be restricted as to scope to address only those
matters as to which Buyer and Seller have not reached agreement
pursuant to the second preceding sentence. Such written
statement, together with those aspects of the Year End Balance
Sheet not objected to, shall become final, non-appealable and
binding upon Buyer and Seller and will form the basis for the
computation under Section 2.5.2. In the event that Deloitte
Touche LLP (Boston Office) is unable or refuses to serve as the
Independent Accountant and in the event the parties are unable to
agree upon another Independent Accountant, the Independent
Accountant shall be chosen by the Resident Manager of the Boston
Office of AA.
2.5.2 (a) If the Contract Tangible Net Worth is greater
than the Final Tangible Net Worth, then the difference shall be
subtracted from the Holdback Fund and if the amount of such
deficiency is greater than the amount of the Holdback Fund,
Seller shall pay to Buyer an amount equal to such deficiency.
Payment shall be made not more than ten (10) Business Days
following the determination of the Final Tangible Net Worth
pursuant to Section 2.5.1 hereof in the manner described above,
and such amount (exclusive of the interest accrued with respect
to the Holdback Fund while it was held in the Holdback Escrow)
shall bear interest from the date hereof to the date of payment
at the rate of eight percent (8%) per annum for up to the first
twenty-one (21) Business Days following the date the Seller's
books are closed and made available to the Independent Accountant
for purposes of the Independent Accountant beginning its audit
work in respect of the Year End Balance Sheet and at the rate of
twelve (12%) percent per annum thereafter. If the amount to be
deducted from the Holdback Fund is less than the full amount
thereof, Buyer shall direct the Escrow Agents to promptly pay the
balance thereof (including any accrued but unpaid interest) to
Seller in accordance with the provisions of the Escrow Agreement.
(b) If the Contract Tangible Net Worth is less than the
Final Tangible Net Worth, then the difference, plus the amount of
the Holdback Fund (including the interest accrued with respect
tot he Holdback Fund while it was held in the Holdback Escrow)
shall be paid to Seller not more than ten (10) Business Days
following the determination of the Final Tangible Net Worth
pursuant to Section 2.5.1 hereof in the manner described above,
and the amount of such difference shall bear interest from the
date hereof to the date of payment at the rate of 8% per annum
for up to the first twenty-one (21) Business Days following the
date the Seller's books are closed and made available to the
Independent Accountant beginning its audit work in respect of the
Year End Balance Sheet and at the rate of twelve percent (12%)
per annum thereafter.
(c) Schedule 2.5.2(c) sets forth a series of computation
examples to illustrate the provisions set forth in this
paragraph. For purposes of this Agreement, the term "Business
Day" shall mean any day which is not a Saturday, Sunday, or a day
on which banks in the City of Boston, Massachusetts are required
by law, executive order or governmental decree to be closed.
2.6 Allocation. Seller and Buyer agree that the Purchase
Price shall be allocated among the Purchased Assets first, dollar
for dollar to reflect the applicable book values of the total
assets as reflected on the Closing Date Balance Sheet (other than
Excluded Assets and intangible assets) and second to goodwill.
Seller further agrees to cooperate with Buyer in completing and
delivering to Buyer or the Internal Revenue Service such
information concerning the determination of the purchase price as
may be required pursuant to the Internal Revenue Code.
Section 3. Representations and Warranties of Seller
To induce Buyer to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, except as
set forth (the "Disclosed Exceptions") in the disclosure letter
delivered to Buyer by Seller on or prior to the date of the
execution hereof (the "Seller's Disclosure Letter"), which is
hereby made an integral part of this Agreement as if fully set
forth herein, Seller hereby makes each of the representations and
warranties set forth in this Section 3, each of which shall
survive the execution and delivery to the extent set forth in
Section 6, all of which are material and have been relied upon by
the Buyer and each of which shall be true and correct in all
respects as of the date hereof. References to Schedules in this
Section 3 shall be deemed to refer to the Schedules set forth in
the Seller's Disclosure Letter, unless otherwise indicated.
Seller hereby represents and warrants to Buyer as follows:
3.1 Organization and Qualification. Seller is a limited
partnership duly organized, validly existing and in good standing
under the laws of the Commonwealth of Massachusetts. Seller has
all requisite power and authority to own those properties and
conduct those businesses presently owned or conducted by it, and
is duly qualified to do business as it is now being conducted and
is in good standing as a foreign limited partnership in each
other jurisdiction where the property owned, leased or used by it
or the conduct of its business makes such qualification
necessary.
3.2 Authorization; No Restrictions, Consents or Approvals.
Seller has full power and authority to enter into and perform
this Agreement and the Services Agreement dated as of the date
hereof and executed and delivered by Seller and Buyer (the
"Services Agreement") and all partnership and partner action
necessary to authorize the execution and delivery of this
Agreement and the Services Agreement and the performance by it of
its obligations hereunder and thereunder has been duly taken.
Each of this Agreement and the Services Agreement has been duly
executed by Seller and constitutes the legal, valid, binding and
enforceable obligation of Seller, enforceable against Seller in
accordance with its terms. The execution and delivery of this
Agreement and the Services Agreement and the sale of the
Purchased Assets and the consummation of the transactions
contemplated herein and therein, do not (i) conflict with or
violate any of the terms of the Limited Partnership Agreement of
Seller or any applicable Law which would have a Material Adverse
Effect, (ii) result in the creation or imposition of any Lien on
any of the Purchased Assets, (iii) conflict with, or result in or
constitute a default under or breach or violation of or grounds
for termination of, any license, permit or other governmental
authorization to which Seller is a party or by which Seller may
be bound, or result in the violation by Seller of any Law to
which Seller or any assets of Seller may be subject, which would
materially adversely affect the Purchased Assets or the
transactions contemplated herein and therein. Except as set
forth in Schedule 3.2, no authorization, consent or approval of,
notice to, or filing with, any public body or governmental
authority or any other person is necessary in connection with the
execution and delivery by Seller of this Agreement, the Services
Agreement or the performance by Seller of its obligations
hereunder or thereunder. For purposes of this Agreement, the term
"Material Adverse Effect" with respect to the Seller shall mean
any change, effect or circumstance that, individually or when
taken together with all other changes, effects or circumstances
that have occurred prior to the date hereof or is reasonably
likely to be materially adverse to (i) the Purchased Assets or
(ii) Buyer's title to the Purchased Assets or (iii) the
transactions contemplated herein and the Services Agreement..
3.3 Absence of Certain Changes. Except to the extent set
forth on Schedule 3.3, since November 30, 1997, there has not
been any material adverse change, or to Seller's Knowledge
development involving a prospective material adverse change, with
respect to the Purchased Assets including, but not limited to,
(i) any damage or destruction or property loss whether or not
covered by insurance, materially and adversely affecting the
Purchased Assets, (ii) any increase in the compensation or bonus,
incentive compensation, profit sharing, retirement, insurance,
medical reimbursement or other employee benefit plan or
arrangement payable or owed or to become payable or owed by
Seller with respect to the Store Employees (as defined herein),
other than increases made on the basis of historical practice and
in the ordinary course of business and compensation increases
attendant to promotions and falling within the normal range for
the new position (iii) any release or waiver of any material
right or claim of Seller with respect to any of the Leases,
Contracts or the Licenses and Permits, (iv) any Lien on any of
the Purchased Assets, or (vi) any material change by Seller in
accounting principles or methods.
3.4 Taxes. Seller with respect to the Business has
timely-filed (timely being understood to include all properly
granted extensions) all returns required to be filed by it with
respect to all federal, state and local and foreign income,
payroll, withholding, excise, sales, personal property, use,
business and occupation, franchise and occupancy, real estate or
other taxes (all of the foregoing taxes including interest and
penalties thereon and including estimated taxes, being
hereinafter collectively, the "Taxes") and has paid all Taxes
which are shown to have become due pursuant to such returns and
has paid all other Taxes for which it has received a notice of
assessment or demand for payment or has otherwise been made aware
of a deficiency. All such returns or reports are true and
correct in all material respects.
3.5 Ownership of Purchased Assets. Subject to the Sale to
Buyer pursuant to this Agreement, Seller is the owner of, and
holds good and clear record and marketable title to, the
Purchased Assets free and clear of any Liens, except Permitted
Liens, if any. Seller does hereby transfer to the Buyer good and
clear marketable title (and, to Seller's Knowledge with respect
to leasehold interests under the Leases, insurable at normal
rates with respect to the tangible assets constituting part of
the Purchased Assets), under all applicable Laws, in and to all
of the Purchased Assets, free and clear of all Liens, except
Permitted Liens.
3.6 Leases; Exclusive Possession; Not in Default. (a)
Seller enjoys exclusive, peaceful and undisturbed possession
under the Leases (subject to the provisions thereof) and personal
property leases constituting part of the Purchased Assets to
which Seller is a party. Seller has posted security deposits for
the performance of its obligations under the Leases as set forth
on Schedule 1.1(a), and, to the best of Seller's Knowledge, there
are no claims or charges against such security deposits which
have been asserted or, for which there exists a legal basis for
such assertion. With respect to the Leases and such personal
property leases, the consent of only the landlords and those
lenders under financing documents identified as Contracts on
Schedule 1.4 have been required for and have been obtained by
Seller to consummate the transactions required by this Agreement
and the same do not breach, or constitute a default of, such
leases. Schedule 1.1(a) contains a list of the Leases covering
the Stores, and any subleases (the "Subleases") thereunder as to
which Seller is lessor, sublessee or sublessor. A copy of each
such Lease and Sublease has been provided to Buyer. No other
real property (owned or leased) is used in connection with the
Business. No partner of Seller, nor any Affiliate of Seller,
owns directly or indirectly, in whole or in part, any of the real
properties described on Schedule 1.1(a) or any interest therein.
Seller is not in default with respect to any term or condition of
any Lease, nor, to the best Knowledge of Seller, has any event
occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder, would
cause the acceleration of any obligation of Seller or the
creation of a Lien, except as provided on Schedule 3.2, or
interfere with Seller's right to occupy any leasehold, which
default or acceleration would have a material adverse effect on
the Purchased Assets taken as a whole. For purposes of this
Agreement, the term "Affiliate" means any Person that directly or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Person
specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether
by contract or otherwise and, in any event, without limitation of
the foregoing, any Person owning 10% or more of the voting
securities of another Person shall be deemed to control that
Person.
(b) For purposes of this Agreement, the term
"Knowledge" or "Best Knowledge" shall mean, (a) with respect to
Seller, the actual knowledge of any of the individuals listed on
Schedule 3.6(b)(i) and (b) with respect to Buyer, the actual
knowledge of any of the individuals listed on Schedule
3.6(b)(ii). Neither the listing nor description of any item or
matter in any Schedule, Exhibit or Annex hereto, nor the
furnishing or availability for review of any document referred to
herein, and any Agreement, Instrument or Document given in
connection herewith, or in any such Schedule, Exhibit or Annex
shall be construed to modify, qualify or disclose an exception to
any representation or warranty, except solely to the extent that
such representation or warranty relates to the existence or non-
existence of the item, matter or document itself.
3.7 Contracts and Other Documents. Schedule 1.1(e) sets
forth a complete listing or description of all Contracts
(excluding from such listing or descriptions (i) purchaser orders
of merchandise ordered in the ordinary course of business and
(ii) contracts which do not involve payment or receipt of more
than $10,000) to which Seller is a party in connection with the
Business. Each of the Contracts is valid, binding and
enforceable in accordance with its terms, and is in full force
and effect; there are no existing defaults on the part of Seller
or, to the best of Seller's Knowledge, any other party, under any
Contract, and no event of default under any such Contract has
occurred and is continuing which (whether with or without the
giving of notice, lapse of time or both, or the happening of any
other event) would constitute a default under such Contract; each
such Contract will, subject to obtaining any applicable consent
continue to be in full force and effect on the same terms and
conditions without the need for any action on the part of Buyer
except for Buyer's performance of the Assumed Obligations; to the
best of Seller's Knowledge, each such Contract reflects the
complete understanding among the parties thereto; and complete
copies of each such Contract including all amendments thereto,
have been delivered to Buyer at or prior to the date hereof.
Seller's interest in each of the Contracts is free and clear of
all Liens (other than any created by Buyer). Except for those
Contracts which are listed on Schedule 1.1(e), or which have been
entered into by Seller in the ordinary course of business and do
not involve payment or receipt of more than $10,000, Seller is
not a party to any Contract or similar document. Neither Seller
nor, to the best of Seller's Knowledge, any other party is in
default under any Contract.
3.8 Labor Difficulties. Except as set forth in Schedule
3.8, to the best of Seller's Knowledge, with respect to the
Business (i) Seller is not a party to a union agreement or
collective bargaining agreement and no attempt to organize any
Store Employees of Seller has been made, proposed or threatened;
(ii) there is no labor strike, formal dispute, formal grievance,
arbitration proceeding, general slowdown or stoppage, or charge
of unfair labor practice pending before a court, regulatory body
or arbitration tribunal, or, to the best of Seller's Knowledge,
threatened against or affecting the Purchased Assets or the
Business, and no event has occurred which would constitute
reasonable grounds for such a strike, dispute, grievance,
proceeding or charge; (iii) no union representation question
exists respecting any Store Employees of Seller; (iv) there are
no charges or complaints of discrimination pending before the
United States Equal Employment Opportunity Commission or any
other federal, state, local or foreign agency or tribunal against
Seller; (v) Seller does not presently employ, and at no time
during the past year did it employ, any illegal alien; and (vi)
Seller is in compliance with all federal, state and local labor
and employment-related Laws.
3.9 ERISA; Employee Benefit Plans. Seller does not
currently sponsor or maintain and has not at any time since
September 2, 1974 sponsored or maintained any qualified or
nonqualified "employee pension plan" as that term is defined in
Section 3(2) of ERISA. Seller does not currently sponsor or
maintain with respect to its Store Employees any plan or any type
of benefit offered under any arrangement subject to
characterization as an "employee welfare benefit plan" within the
meaning of Section 3(3) of ERISA (collectively referred to as the
"Employee Benefit Plans") other than as reflected on the Employee
List. Seller has not received any written notice of
noncompliance, and to Seller's Knowledge, Seller is in compliance
with all terms of the Employee Benefit Plans and with ERISA, and
all other applicable Laws as they affect Seller and its Store
Employees, except to the extent that failure to comply would not
have a Material Adverse Effect. Seller has not received written
notice of, and to Seller's Knowledge there are no demands by any
Store Employee (or beneficiary or dependent of any Store
Employee) for benefits, except those benefits pending payment or
satisfaction in the ordinary course of business.
3.10 Employees. Seller has delivered to Buyer an
accurate and complete list (the "Employee List") of: (i) the
names and current salaries or wage rate and Employee Benefit
Plans benefits, as applicable, of all of Seller's employees,
including but not limited to, the Store Employees. Except as set
forth on the Employee List, there are no bonuses, profit sharing,
incentives, commissions or other compensation of any kind,
including severance benefits (collectively "Employee Non-Vacation
Compensation") due to or expected by present or former employees
of Seller with respect to the Business as of the date hereof
which have not been fully paid prior to such date or are expected
to be paid by Seller within thirty (30) days hereafter. All
accrued vacation time and pay earned by the Store Employees (and
such of Seller's non-Store Employees who become employees or
independent consultants of Buyer) prior to and subsequent to
December 31, 1997, shall be timely paid or awarded or credited,
as the case may be, by Buyer in accordance with Buyer's customary
employee benefit plans, policies, programs and arrangements
maintained by Buyer for its own comparable employees.
3.11 Licenses and Permits. To Seller's Knowledge,
Seller has obtained, has fully paid for, and has in full force
and effect all such licenses, franchises, permits, approvals,
certificates, certifications and other authorizations from all
applicable governmental authorities which have been material and
necessary for the conduct of the Business as currently conducted
and the ownership, use, occupancy and operation of the Purchased
Assets and the Leased Premises or otherwise relating to the Store
Locations (the "Licenses and Permits"). To Seller's Knowledge,
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not
result in the revocation, cancellation, suspension, modification,
or limitation of any of such Licenses and Permits and will not
give to any Person any right to revoke, cancel, suspend, modify,
or limit any of such Licenses and Permits. To Seller's Knowledge,
all such Licenses and Permits are transferable to Buyer.
3.12 INTENTIONALLY OMITTED.
3.13 Compliance With Law. Except as set forth in
Schedule 3.13, with respect to the Purchased Assets and the
Leased Premises, Seller has at all times operated in compliance
in all material respects to the extent necessary with all
applicable federal, state, local, or other laws, rules,
regulations, guidelines, orders, injunctions, building and other
codes, ordinances, permits, licenses, authorizations, judgments,
decrees of federal, state, local, foreign or other authorities,
and all orders, writs, decrees and consents of any governmental
or political subdivision or agency thereof, or any court or
similar Person established by any such governmental or political
subdivision or agency thereof (collectively, the "Laws"),
including but not limited to all applicable Laws relating to the
safe conduct of business, employment discrimination, wages and
hours, employment of illegal aliens, collective bargaining, the
payment of withholding and social security taxes, product
labeling, antitrust, consumer protection, occupational safety and
health, consumer product safety, the importation of goods and
product liability, except to the extent that failure to comply
would not have a Material Adverse Effect; and to Seller's
Knowledge, no event has occurred which would constitute
reasonable grounds for a claim that non-compliance has occurred
or is occurring.
3.14 Intangible Assets. Seller owns all rights and
interest to or possesses valid and binding licenses or other
rights to use the Intangible Assets free and clear of all Liens
(other than Permitted Liens) or distribution rights. Seller is
not required to pay any royalty, license fee or similar
compensation with respect to the Intangible Assets in connection
with the current or prior conduct of its Business. No written
claims have been asserted by any Person with respect to the use
of the Intellectual Property or Intangible Assets by Seller. To
Seller's Knowledge, no Person is infringing upon the Intangible
Assets. No Person, other than Seller, owns or has any
proprietary, financial or other interest, direct or indirect, in
whole or in part, in any Intangible Asset.
3.15 Pending Litigation. Except as set forth in
Schedule 3.15, with respect to the Business, the Leased Premises
and the Contracts, there are no actions, suits, claims,
enforcement actions, or proceedings pending or threatened against
Seller or any Person by reason of it or he being a director,
shareholder, or officer of Seller, whether at law or in equity or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
which, if adversely determined, would have a Material Adverse
Effect nor is there outstanding any writ, order, decree, or
injunction applicable to Seller that (i) calls into question
Seller's authority or right to enter into this Agreement and
consummate the transactions contemplated hereby, or (ii) would
otherwise prevent or delay the transactions contemplated by this
Agreement.
3.16 Customer List. Seller has delivered to Buyer a
copy of Seller's most complete customer list with respect to the
Business.
3.17 Financial Statements. Schedule 3.17 sets forth
(a) the audited financial statements as of December 31, 1996,
which include the balance sheet of Seller as of December 31,
1996, statement of operations and retained earnings of Seller for
the fiscal year ended December 31, 1996, and statement of changes
in financial position of the Business for the fiscal year ended
December 31, 1996, together with the related notes thereto,
including the report thereon of Seller's independent certified
public accountant, AA (collectively, the "Seller's Audited
Financial Statements"), (b) and an interim unaudited balance
sheet of Seller as of September 30, 1997, and an unaudited
statement of operations and retained earnings and an unaudited
statement of changes in financial position of Seller for the nine
month period then ended (collectively, the "Nine Month Financial
Statements") and (c) the Unaudited Interim Date Balance Sheet of
Seller as of November 30, 1997. The Seller's Audited Financial
Statements and the Nine Month Financial Statements are complete
and correct and fairly present the financial condition of Seller
as of the dates thereof and the results of its operations for the
fiscal years and periods ended on such dates. The Seller's
Audited Financial Statements and Nine Month Financial Statements
have been prepared in accordance with GAAP, consistently applied.
To Seller's Knowledge, the Interim Date Balance Sheet as of
November 30, 1997 fairly presents, in all material respects, the
financial condition of Seller as of the Interim Date in
conformity with GAAP, consistently applied with those used in
preparation of the Seller's Audited Financial Statements, and
provides the basis for calculating the Tangible Net Worth of
Seller as of such date.
3.18 INTENTIONALLY OMITTED.
3.19 Inventory. All Inventory of Seller's Business was
acquired and has been maintained in the ordinary course of
Seller's Business and, except to the extent reserves have been
accrued on the Interim Date Balance Sheet in accordance with past
custom and practice of Seller, is of good and merchantable
quality and consists substantially of a quality, quantity and
condition saleable in the ordinary course of Seller's Business.
Seller is not under any liability or obligation with respect to
the return of any Inventory in the possession of wholesalers or
retailers. All inventory items shown on the Interim Date Balance
Sheet are, and those that are existing at the Closing will be,
priced on the first-in, first-out (FIFO) basis at lower of cost
or market, and reflect write-downs to realize values in the case
of items which have become obsolete or unsalable. The values of
the Inventories stated on the Interim Date Balance Sheet reflect
the normal inventory valuation policies of the Seller with
respect to the Business and were determined in accordance with
GAAP, consistently applied. Purchase commitments for Inventory
on order are not in excess of normal requirements, and none are
at prices materially in excess of current market prices. Since
the date of the Interim Date Balance Sheet, no inventory items
have been sold or disposed of except through sales in the
ordinary course of Seller's Business.
3.20 Suppliers. Except with respect to NVB and
Affiliates thereof, Seller has no Knowledge of any supplier's
intention to discontinue or substantially reduce the size or
number of transactions it consummates with Seller as it relates
to the Business prior to Closing or will consummate with Buyer
upon the consummation of the transactions contemplated herein.
3.21 No Third Party Option. There are no existing
agreements, options, commitments or rights with, of or to any
Person to acquire any of Seller's assets, properties or rights
included in the Purchased Assets or any interest therein, except
for those contracts entered into in the ordinary course for the
sale of inventory of Seller.
3.22 Certain Land Use Matters.
(a) Condition of Leased. To Seller's Knowledge,
the improvements upon the Leased Premises are in good condition
and all systems and appliances, including, by way of example
only, to the extent applicable to the Leased Premises, lighting,
heating, cooling, plumbing, electrical, water and gas are in good
working condition. All material defects with respect to the
Leased Premises and Known to Seller, and all systems and
appliances applicable thereto, have been disclosed to Buyer by
Seller in writing.
(b) Public Utilities. Adequate supplies of all
public utilities, including water, sewer, gas, electric,
telephone and drainage facilities and other utilities required by
Law or by the normal use and operation of the Leased Premises are
installed to and connected with the Leased Premises and have been
historically adequate to serve the Leased Premises for normal
usage of the Leased Premises by Seller as an occupant thereof and
its licensees and invitees.
(c) Legal Compliance. Seller has no Knowledge of
any condemnation, environmental, zoning or other land use
regulation proceedings or investigations, either instituted or
planned to be instituted by any Person, which would detrimentally
affect the use and operation of the Leased Premises and for
Buyer's intended purpose or the value of the Leased Premises, nor
has Seller received any written notice of any special assessment
proceedings affecting the Leased Premises. No written notice
from any governmental body has been served upon Seller claiming
or requiring, or calling attention to the need for, any work,
repairs, construction, alterations or installation on or in
connection with the Leased Premises, which has not been complied
with.
3.23 Environmental Matters.
(a) Definitions. As used in this Agreement, the following
terms have the respective meanings set forth below:
"Environmental Compliance Liability" means any and all
liabilities, damages and costs arising under, or related to,
compliance with any Environmental Law applicable to the Business
or the Leased Premises, or any operations or assets associated
therewith, which may result in claims and/or demands by and/or
liabilities to third parties, including but not limited to,
governmental entities.
"Environmental Conditions" shall mean any and all
circumstances with respect to any real property, any and all
circumstances with respect to any soils, bedrock formations,
surface waters, groundwaters, ponds, wetlands, stream sediments,
air and similar environmental media, and any and all
circumstances with respect to any of the structures and any of
the building and construction materials that may require Response
Action and/or that may result in claims and/or demands by and/or
liabilities to third parties including, but not limited to
governmental entities, and either that:
(i) are or were previously located at or near the
Leased Premises; or that
(ii) result or previously resulted from the
operation of Business at the Leased Premises or from the
activities or events that occur or previously occurred at or near
any of the Leased Premises.
This term shall expressly include, but shall not be limited to,
such on-site and off-site circumstances related to any
Environmental Notice or other investigation or proceeding under
the Comprehensive Environmental, Response, Compensation and
Liability Act, 42 U.S.C. 9601 et seq., as amended, ("CERCLA") or
analogous state statute.
"Environmental Laws" means any and all federal, state,
local or municipal written and published Laws, rules, orders,
regulations, statutes, ordinances, codes, or requirements of any
governmental authority regulating or imposing standards of
liability or standards of conduct (including common laws)
concerning air, water, solid waste, Hazardous Materials, worker
and community right-to-know, hazard communication, noise,
radioactive material, resource protection, subdivision, inland
wetlands and watercourses, health protection and other
environmental, health, safety, building, land use, and local
government concerns.
"Environmental Notice" shall mean any summons,
citation, directive, order, claim, pleading, proceeding,
judgment, notice of potential liability, letter or any other
written communication from the United States Environmental
Protection Agency ("USEPA"), or from any other federal, state or
local agency or authority, or from any other entity or any
individual, concerning any intentional or unintentional act or
omission which has resulted in or which may result in the Release
of any Hazardous Material into the environment, including but not
limited to, soils, bedrock formations, surface waters,
xxxxxxxxxxxx, xxxxx, xxxxxxxx, stream sediments, air or other
environmental media, or concerning any violation or alleged
violation of Environmental Laws, and shall expressly include
actions under CERCLA and the imposition of any lien pursuant to
any federal, state or local Environmental Laws.
"Hazardous Materials" means any petroleum, petroleum
products, fuel oil, waste oil, explosives, reactive materials,
ignitable materials, corrosive materials, hazardous chemicals,
hazardous wastes, hazardous substances, extremely hazardous
substances, toxic substances, toxic chemicals, radioactive
materials, medical waste, biomedical waste, infectious materials,
pollutants, toxic pollutants, herbicides, fungicides,
rodenticides, insecticides, contaminant, or pesticides and
including, but not limited to, any other element, compound,
mixture, solution or substance which may pose a present or
potential hazard to human health or the environment.
"Release" means releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, ejecting, escaping,
leaching, disposing, seeping, infiltrating, draining or dumping,
or as otherwise defined under Environmental laws. This term
shall be interpreted to include both the noun form and the verb
form, present, past and future tense, as appropriate.
"Response Action" means any efforts of any governmental
entity, Seller, Buyer, or other Person, or the contractors,
subcontractors or agents of any governmental entity, Seller,
Buyer, or Person, which are made, designed, initiated, or
maintained to address any Environmental Condition or
Environmental Compliance Liability and may include investigation,
remedial design, site monitoring, containment, mitigation, clean-
up, transport, removal, disposal, restoration and other remedial
efforts of any kind, including but not limited to the expenses
incurred by any governmental entity in evaluating, monitoring or
overseeing any Response Action.
(b) Environmental Representations and Warranties by Seller.
Seller hereby represents and warrants to Buyer:
(i) Seller has not received any Environmental Notice
seeking any information or alleging any violation of
Environmental Laws with respect to the Leased Premises.
(ii) Seller has complied with all applicable filing and
notification requirements Known to Seller under applicable
Environmental Laws as in effect as of the date hereof that are
required in connection with the Leased Premises or any activities
conducted by Seller on the Leased Premises at any time prior to
the date hereof, except to the extent that failure to comply
would not have a Material Adverse Effect.
(iii) Except as described in Schedule 3.23(b)(iii),
to Seller's Knowledge, neither Seller nor any other Person, has
caused or permitted the Leased Premises to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process any Hazardous Materials (except in
quantities characterized as "Household Hazardous Waste") at any
time prior to the date hereof, except in compliance with all
applicable Environmental Laws. To Seller's Knowledge, solid
waste generated at the Leased Premises has been disposed of by
properly licensed haulers. Seller has not caused or permitted
the Release of any Hazardous Materials that occurred at,
affected, or related to the Leased Premises, or any of the
activities conducted thereon, whether on-site or off-site of the
Leased Premises, at any time prior to the date hereof, except for
Releases in compliance with all Environmental Laws. To Seller's
Knowledge, the Leased Premises do not contain any Hazardous
Materials except in quantities characterizable as "Household
Hazardous Waste" and no such materials are located on, in, or
under any of the Leased Premises except in compliance with all
Environmental Laws.
(iv) To Seller's Knowledge the Leased Premises and
Seller's historical use thereof and operation therein were and
are in compliance with all Environmental Laws, except to the
extent that failure to comply would not have a Material Adverse
Effect. There are no environmental proceedings, either
instituted or, to the best of Seller's Knowledge, planned to be
instituted, which would detrimentally affect the use and
operation of the Leased Premises for the purposes that Seller
presently uses and operates the Leased Premises.
Section 4. Representations and Warranties of Buyer
To induce Seller to execute and deliver this Agreement and
to consummate the transactions contemplated hereby, except as set
forth (the "Disclosed Exceptions") in the disclosure letter
delivered to the Seller by Buyer on or prior to the date of the
execution hereof (the "Buyer's Disclosure Letter") which is
hereby made an integral part of this Agreement as if fully set
forth herein, the Buyer hereby makes each of the representations
and warranties set forth in this Agreement, including those set
forth in this Section 4, each of which shall survive the
execution and delivery hereof to the extent set forth in Section
6, all of which are material and have been relied upon by Seller
and each of which shall be true and correct in all respects as of
the date hereof. References to Schedules in this Section 4 shall
be deemed to refer to the Schedules set forth in the Buyer's
Disclosure Letter, unless otherwise indicated. Buyer hereby
represents and warrants to Seller as follows:
4.1 Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts. Buyer has all
requisite power and authority to own those properties and conduct
those businesses presently owned or conducted by it, and is duly
qualified to do business as it is now being conducted and is in
good standing as a foreign corporation in each other jurisdiction
where the property owned, leased or used by it or the conduct of
its business makes such qualification necessary.
4.2 Authorization; No Restrictions, Consents or Approvals.
Buyer has full corporate power and authority to enter into and
perform this Agreement and the Services Agreement, and has taken
all necessary action to authorize the execution and delivery of
this Agreement and the Services Agreement and the performance by
it of its obligations hereunder and thereunder. Each of this
Agreement and the Services Agreement has been duly executed by
Buyer and constitutes the legal, valid, binding, and enforceable
obligations of Buyer. The execution and delivery of this
Agreement and the Services Agreement and the consummation by
Buyer of the transactions contemplated herein or therein, do not
(v) conflict with or violate any of the terms of Articles of
Organization or Bylaws of Buyer as each have been amended from
time to time, or any applicable Law, or (vi) conflict with, or
result in a breach of any of the terms of, or result in the
acceleration of any indebtedness or obligations under, any
agreement, obligation, or instrument by which Buyer is bound and
which would materially adversely affect the transactions
contemplated herein or therein. No authorization, consent, or
approval of any governmental authority or any other person is
necessary or required in connection with the execution and
delivery by Buyer of this Agreement or the Services Agreement or
the performance by Buyer of Buyer's obligations hereunder or
thereunder.
4.3 Pending Litigation. There are not actions, suits,
claims, enforcement actions or proceedings pending or threatened
against Buyer or any Person by reason of it or he being a
director or officer of Buyer, whether at law or in equity or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
which, if adversely determined, would have a material adverse
effect (i) on the financial position of Buyer or (ii) that calls
into question Buyer's authority or right to enter into this
Agreement or the Services Agreement and consummate the
transactions contemplated hereby or thereby, or would otherwise
prevent or delay the transactions contemplated by this Agreement
or the Services Agreement.
4.4 . Financial Statements. Schedule 4.4 sets forth (a)
the audited financial statements as of March 1, 1997 which
include the balance sheet of Buyer as of March 1, 1997,
statements of operations, stockholder's equity and cash flows of
Buyer for the fiscal year ended March 1, 1997, together with the
related notes thereto, including the report thereon of Buyer's
independent certified public accountant, AA (collectively, the
"Buyer's Audited Financial Statements"), (b) and an interim
unaudited balance sheet of Buyer as of August 30, 1997 and an
unaudited statement of operations and cash flows of Buyer for the
six month period then ended (collectively, the "Buyer's Six Month
Financial Statements"). The Buyer's Audited Financial Statements
and the Buyer's Six Month Financial Statements are complete and
correct and fairly present the financial condition of Buyer as of
the dates thereof and the results of its operations for the
fiscal year and periods ended on such dates. The Buyer's Audited
Financial Statements and Buyer's Six Month Financial Statements
have been prepared in accordance with GAAP, consistently applied.
Section 5. Post-Closing Covenants. From and after the
Effective Time of Closing, the parties hereto shall be bound by
the following covenants:
5.1 NVB Signage and Labels. Immediately after payment of
the Purchase Price pursuant to Section 2.2, Buyer shall cover all
NVB signage at or on the Leased Premises and shall, within thirty
(30) days thereafter, remove and dispose of all such signage at
its cost. Further, Buyer shall not offer for sale any Inventory
or other Purchased Asset bearing any NVB label, tag, pricing
sticker or other NVB identification.
5.2 . Cooperation. Buyer and Seller agree (a) to
cooperate with each other in determining whether any filings are
required to be made or consents required to be obtained in any
jurisdiction in connection with the consummation of the
transactions contemplated hereby and in making or causing to be
made any such filings promptly and in seeking to obtain in a
timely manner any such consents; and (b) to use all reasonable
efforts to obtain promptly the satisfaction of any other
requirements or conditions to the consummation of the
transactions contemplated herein, including, but not limited to,
those set forth on the Closing Agenda of even date herewith.
Buyer and Seller shall furnish to each other and to each other's
counsel all such information as may be reasonably required in
order to effectuate the foregoing. In addition, Seller shall
furnish to Buyer a complete list of and/or copies of the Licenses
and Permits transferred to Buyer hereunder within forty-five (45)
days of the date hereof.
5.3 Returns. Pending completion of the audit of the Year
End Balance Sheet in accordance with Section 2.5(c), Buyer shall
maintain, with respect to each item of returned merchandise, (i)
a copy of the receipt pertaining to such an item and (ii)
documentation indicating and describing in reasonable detail what
the customer returning such merchandise received in exchange
therefor (e.g. cash, merchandise credit or other merchandise).
Buyer and Seller agree that returns are defined as the negative
sale events that result in the customer's receipt of cash or a
negative commercial credit card transaction in exchange for the
return of merchandise to the inventory of the Buyer. The
merchandise must have been originally purchased at a Store of the
Seller and returned in accordance with the Seller's standard
return policy. Returned products for which either replacement
product of any kind, a gift certificate(s) or other form of
merchandise credit, or placement of an order for merchandise not
currently available, any of which are equal to or greater in
value than the original transaction, will be excluded from the
definition of returns. The reserve for returns, as presented on
the Year End Balance Sheet, shall be calculated by assessing the
original selling prices of items returned in return transactions
during January 1998 less the cost of each such item as carried in
the Seller's December 31, 1997 inventory valuation.
5.4. Post-Closing Access. Buyer shall give to Seller and
its respective authorized representatives such reasonable access,
at Seller's cost and expense, during normal business hours and
upon prior notice ("Post-Closing Access"), to books and records
constituting part of the Purchased Assets, the Leased Premises or
otherwise relating to the Business (including without limitation
all such accounting books and tax records) as Seller may
reasonably require in connection with the preparation and filing
of tax returns or any claim made by any party with respect to a
liability or obligation that is not an Assumed Obligation,
pertaining to any reasonable and proper purpose in connection
with the conduct of the Business prior to the date hereof and to
verify the Accounting provided for under Section 5.9.
5.5. Covenant Not to Compete.
(a) Seller hereby covenants and agrees that for the
period commencing with the date hereof and ending two (2) years
from such date, Seller shall not, within or from a 15 mile radius
of any of Seller's Stores (the "Area"), directly or indirectly,
own, manage, operate, finance, join, control, or participate in
the ownership, management, operation, finance or control of, or
be connected with, in any manner, any entity, business enterprise
or operation engaged in the marketing, sale, licensing or
distribution of golf/tennis equipment or apparel through retail
stores.
(b) In addition to the restrictions imposed by Section
5.5(a), Seller hereby covenants and agrees that for the period
commencing with the date hereof and ending two (2) years from
such date, Seller shall not, directly or indirectly, within the
Area, induce or attempt to induce or influence any current
employee of Seller to terminate his or her employment with Buyer.
(c) Seller shall hold in confidence and refrain from
disclosing, publishing or making use of all Knowledge and
information of a confidential nature relating to the Business
prior to the date hereof, except Knowledge and information which
(i) is or becomes generally available to the public other than as
a result of a disclosure prohibited hereby, or (ii) is required
to be disclosed by Law.
(d) For the purposes of this Agreement, the words
"directly or indirectly" as used in this Section 5.5 herein shall
include, but not be limited to, (i) acting as an agent, officer,
director, representative, consultant, independent contractor, or
employee of any entity or enterprise, and (ii) participating in
any such competing entity or enterprise as an owner, partner,
limited partner, member, joint venturer, material creditor or
stockholder (except as a stockholder holding less than five
percent (5%) interest in a corporation whose shares are traded on
a national securities exchange or in the over-the-counter market
unless Seller controls such corporation, either alone or with
others).
(e) Seller acknowledges that its expertise in the
Business is of a special and unique character, which gives said
expertise a peculiar value, and that a breach by Seller of the
provisions of this Section 5.5 of this Agreement cannot
reasonably or adequately be compensated in damages in an action
at law; and such a breach of any of the provisions contained in
this Agreement will cause Buyer irreparable injury and damage.
Seller further acknowledges that it possesses unique skills,
Knowledge and ability and that competition by it, in violation of
this Agreement or any other breach of the provisions of this
Agreement would be extremely detrimental to Buyer. By reason
thereof, Seller agrees that Buyer shall be entitled, in addition
to any other remedies they may have under this Section 5.5 of
this Agreement or otherwise, to preliminary and permanent
injunctive and other equitable relief to prevent a breach or
curtail any breach or threatened breach of this Section 5.5 of
this Agreement by Seller; provided, however, that no
specification in this Agreement of a specific legal or equitable
remedy shall be construed as a waiver or prohibition against the
pursuing of other legal or equitable remedies in the event of
such a breach.
5.6 Cooperation in Third-Party Litigation.
(a) Seller shall provide such cooperation as Buyer or
its counsel may reasonably request in connection with (i) any
proceedings related to the Business other than the Excluded
Obligations; (ii) Seller's conduct of the Business prior to the
Effective Time of Closing which are hereafter pending or
threatened and to which Buyer is a party, (iii) any proceedings
for which Seller is entitled to indemnification from Buyer under
Section 6.3. Such cooperation shall include, but not be limited
to, making employees of Seller available upon the reasonable
request and at the expense of Buyer or its counsel to consult
with and assist Buyer and its counsel in connection with any such
proceedings and to prepare for and testify in any such
proceedings, including depositions, trials and arbitration
proceedings.
(b) Buyer shall provide such cooperation as Seller or
its counsel may reasonably request in connection with (i) pending
or threatened proceedings set forth in Schedule 3.15; (ii) any
proceedings relating to the Business which are hereafter pending
or threatened and to which Seller is a party; and (iii) any
proceedings for which Buyer is entitled to indemnification from
Seller under Section 6.2 hereof. Such cooperation shall include,
but not be limited to, making employees of Buyer available upon
the reasonable request and at the expense of Seller or its
counsel to consult with and assist Seller and its counsel
regarding any such proceedings and to prepare for and testify in
connection with any such proceedings, including depositions,
trials and arbitration proceedings.
(c) The provisions of this Section 5.6 are not
intended to conflict with, and shall not override the provisions
of Section 6 hereof.
5.7. Discharge of Business Obligations. Seller shall pay
and discharge when due all obligations and liabilities of Seller
with respect to the Business and the Leases incurred prior to the
Effective Time of Closing (except for the Assumed Obligations),
and in furtherance of the foregoing shall discharge on a timely
basis all such liabilities or obligations to employees, trade
creditors, suppliers and customers.
5.8 Certain Employment Matters. The Buyer shall offer to
employ employees currently employed by Seller and located in the
Stores (the "Store Employees"), but Buyer shall not be required
to offer employment to any administrative employee currently
employed by Seller or located at Seller's administrative facility
in Walpole, Massachusetts, except for such administrative
employees as Buyer may desire to employ or to otherwise retain as
independent consultants for transitional matters. The provisions
of this Section 5.8 shall not be construed to create any
liability or obligation to any third party or to limit the rights
and obligations of the Buyer to manage and operate the Business
from and after the date hereof, including management of its
employees, its employment policies and employee benefits, health
and welfare programs, in a manner which it believes in its sole
judgment to be in its best interests. Seller will bear the cost
of any severance or other similar payments for such
administrative employees, and Buyer will bear the cost of any
severance or other similar payments of the non-administrative
employees. Buyer's offer of employment to Store Employees shall
include permitting such Store Employees who so elect to
participate in Buyer's Section 401(k) profit sharing plan, based
on the terms and conditions as now in effect ("Buyer's Current
Plan"), the right of such Store Employees to "roll over" their
respective retirement accounts now maintained with Seller, and
Buyer shall use its best commercially reasonable efforts to amend
Buyer's Current Plan to count for eligibility and vesting
purposes for such electing Store Employees their respective years
of service under the Seller's 401(k) plan.
5.9 Gift Certificates Fund. Buyer shall maintain with the
Escrow Agents under the Escrow Agreement an interest bearing
escrow account for the purpose of processing all Gift
Certificates/Store Credits (the "Gift Certificates Fund") issued
by Seller prior to the Effective Time of Closing. By the tenth
(10th) business day after the end of each calendar month
following the date hereof to and including December, 1999, the
Buyer shall render a monthly accounting (the "Monthly
Accounting") to the Escrow Agents and the Seller of the
activities for such month in respect of Gift Certificates/Store
Credits processed or redeemed at the Stores and the Buyer shall
be entitled to receive from the Gift Certificates Escrow Account
the amounts shown to be due Buyer on such Monthly Accounting. The
initial amount to be deposited in the Gift Certificates Fund
shall be consistent with the amounts for Gift Certificate/Store
Credits reflected on the Interim Date Balance Sheet. Buyer shall
render a final accounting (the "Final Accounting") to Seller of
the Gift Certificates Fund on or before January 15, 1999. The
balance remaining in the Gift Certificates Fund as of January 20,
1999, shall be disbursed to Seller on or before January 30, 1999.
Buyer shall permit Seller and its authorized representatives Post-
Closing Access in accordance with Section 5.4 to verify the
accuracy of any Monthly Accounting and of the Final Accounting.
5.10 Further Assurances. Seller from time to time at
Buyer's request, will execute, acknowledge and deliver to Buyer
such other instruments of conveyance and transfer and will take
such other actions and execute and deliver such other documents,
certifications and further assurances as Buyer may reasonably
require in order to vest more effectively in Buyer, or to put
Buyer more fully in possession of, any of the Purchased Assets
and the Leased Premises. Each of the parties hereto will
cooperate with the other and execute and deliver to the other
parties hereto such other instruments and documents and take such
other actions as may be reasonably requested from time to time by
any other party hereto as necessary to carry out, evidence and
confirm the intended purposes of this Agreement.
Section 6. Survival of Representations and Warranties and
Covenants; Indemnification.
6.1. Survival of Representations and Warranties and
Covenants. The representations, warranties, covenants, and
obligations of Buyer and Seller set forth in this Agreement and
in any certificate, agreement, or instrument delivered in
connection with the transactions contemplated hereby, shall
survive the Closing for the following periods:
(a) with respect to representations, warranties,
covenants, and obligations arising under Section 3.5, Section
3.6, Section 3.23, Section 5 and this Section 6 of this
Agreement, for an indefinite period of time;
(b) with respect to representations, warranties,
covenants and obligations arising under Section 3.4 of this
Agreement, for a period of time prior to the expiration of the
applicable statute of limitations plus three months; and
(c) for all other matters a period through
and including December 31, 1998.
6.2. Indemnification by Seller. (a) In addition to and
not in limitation of Seller's indemnification obligations set
forth elsewhere in this Agreement, Seller shall defend,
indemnify, and hold harmless Buyer and its affiliates and their
respective officers, directors, shareholders, agents and
employees (individually, a "Buyer Indemnitee" and collectively
the "Buyer Indemnitees"), from and against any and all claims,
losses, deficiencies, liabilities, obligations, damages,
penalties, punitive damages, costs, and expenses (including,
without limitation, legal, accounting and consulting fees),
whether or not resulting from third party claims (collectively,
"Losses"), suffered by a Buyer Indemnitee, which arise out of or
result from:
(i) any inaccuracy or misrepresentation in or breach
of any of the representations, warranties, covenants or
agreements made by Seller in this Agreement or in any document,
certificate or affidavit delivered by Seller pursuant to the
provisions of this Agreement the effect of which would have a
Material Adverse Effect (without duplicative regard to references
to "materiality" or Material Adverse Effect" in the context of
any such representation, warranty, covenant or agreement, as
applicable);
(ii) any Environmental Condition or Environmental
Compliance Liability, as those terms are defined in this
Agreement, in respect of the Leased Premises, regardless of
whether any such Environmental Condition, the exposure thereto or
any Environmental Compliance Liability resulted from activities
of Seller or Seller's predecessor in interest in respect of the
Leased Premises, the effect of which would have a Material
Adverse Effect (without duplicative regard to references to
"materiality" or Material Adverse Effect" in the context of any
such representation, warranty, covenant or agreement, as
applicable);
(iii) CERCLA, or similar state law, for materials
handled by or on the Leased Premises whether on-site or
elsewhere, on or prior to the Effective Time of Closing the
effect of which would have a Material Adverse Effect (without
duplicative regard to references to "Materiality" or Material
Adverse Effect" in the context of any such representative,
warranty, covenant or agreement as applicable);
(iv) any Tax, obligation, liability, debt or commitment
of Seller which is not an Assumed Obligation (or is an Excluded
Obligation), whether or not paid by Buyer; and
(v) any other matter related to the conduct of the
Business by Seller or the use or ownership of the Purchased
Assets prior to the Effective Time of Closing (including, but not
limited to, all acts, omissions and conditions existing or
occurring prior to the Effective Time of Closing for which any of
the Buyer Indemnitees is alleged to be liable pursuant to any
successor or similar theory of liability).
(vi) Notwithstanding the foregoing, the Seller shall
not be liable to the Buyer Indemnitees for indemnification claims
under Section 6.2 until the aggregate amount of indemnification
claims under Section 6.2 exceeds $25,000 in the case of a single
claim (the "Seller's Threshold Amount") or $300,000 in the
aggregate in the case of all claims taken together (the "Seller's
Aggregate Threshold Amount"), and in the event such aggregate
claims exceed the Seller's Aggregate Threshold Amount, the Seller
shall be liable for the full amount of such aggregate claims;
provided, however, that Seller shall not be liable for the
payment of indemnification claims asserted by written notice to
the Seller on or before (A) June 30, 1998, in excess of the
aggregate maximum amount of $400,000 or (B) December 31, 1998, in
excess of the aggregate maximum amount of $300,000 (collectively,
the "Seller's Indemnification Caps"), as the case may be; and
provided further, that notwithstanding any provision in this
Agreement to the contrary, the dollar limitations in respect of a
single claim and in respect of the aggregate claims and in
respect of the Seller's Indemnification Caps shall not apply to
(x) claims pertaining to a breach of the representations,
warranties, covenants and obligations contained in Sections 3.4,
3.5 or 3.6 of this Agreement, (y) the covenants and obligations
set forth under Section 5 or (z) any fraud or intentional
misrepresentation on the part of the Seller or things or matters
that are intentionally or fraudulently hidden or concealed by or
on behalf of the Seller. In determining whether the aggregate
amount for which the Buyer Indemnitees are entitled to be
indemnified hereunder is at least the Seller Threshold Amount or
the Seller Aggregate Threshold Amount, as the case may be, or is
or would be in excess of the Seller's Indemnification Caps, as
applicable, any requirement contained in this Agreement that any
misrepresentation or breach of warranty or covenant or event or
fact be "Material" or have a "Material Adverse Effect" in order
to constitute a misrepresentation, omission or breach of
warranty, covenant or agreement under this Agreement shall be
disregarded in its entirety.
6.3. Indemnification by Buyer.(a) Buyer shall defend,
indemnify and hold harmless Seller and Seller's officers,
directors, agents and employees (individually, a "Seller
Indemnitee" and collectively the "Seller Indemnitees") from and
against any and all Losses, suffered by a Seller Indemnitee,
which arise out of or result from (i) any inaccuracy or
misrepresentation in or breach of any of the representations,
warranties, covenants or agreements made by Buyer in this
Agreement or in any document, certificate or affidavit delivered
by Buyer pursuant to the provisions of this Agreement; (ii) any
Taxes arising from the operation by Buyer after the Effective
Time of Closing of the Business purchased by Buyer; (iiii) any of
the Assumed Obligations; or (iv) any other matter related to the
conduct of the Business by Buyer or the use or ownership of the
Purchased Assets after the Effective Time of Closing (but
excluding any acts, omissions and conditions existing or
occurring prior to the Effective Time of Closing for which any of
the Seller Indemnitees is alleged to be liable pursuant to any
successor or similar theory of liability).
(b) Notwithstanding the foregoing, the Buyer shall not be
liable to the Seller Indemnitees for indemnification claims under
Section 6.3 until the aggregate amount of indemnification claims
under Section 6.3 exceeds $25,000 in the case of a single claim
(the Buyer's Threshold Amount") or $300,000 in the aggregate in
the case of all claims taken together (the "Buyer's Aggregate
Threshold Amount"), and in the event such aggregate claims exceed
the Buyer's Aggregate Threshold Amount, the Buyer shall be liable
for the full amount of such aggregate claims; provided, however,
that Buyer shall not be liable for the payment of indemnification
claims asserted by written notice to the Seller on or before (A)
June 30, 1998, in excess of the aggregate maximum amount of
$400,000 or (B) December 31, 1998, in excess of the aggregate
maximum amount of $300,000 (collectively, the "Buyer's
Indemnification Caps") as the case may be; and provided further,
that notwithstanding any provision in this Agreement to the
contrary, the dollar limitations in respect of a single claim and
in respect of the aggregate claims and in respect of the Buyer's
Indemnification Caps shall not apply to (x) claims pertaining to
Buyer's obligations in respect of the Assumed Obligations as set
forth in Section 1.4 of this Agreement or (y) claims pertaining
to any fraud or intentional misrepresentation on the part of the
Buyer or things or matters that are intentionally or fraudulently
hidden or concealed by or on behalf of the Buyer. In determining
whether the aggregate amount for which the Seller Indemnitees are
entitled to be indemnified hereunder is at least the Buyer's
Threshold Amount or the Buyer Aggregate Threshold Amount, as the
case may be, or is or would be in excess of the Buyer's
Indemnification Caps, as applicable, any requirement contained in
this Agreement that any misrepresentation or breach of warranty
or covenant or event or fact be "material" or have a "material"
adverse effect in order to constitute a misrepresentation,
omission or breach of warranty, covenant or agreement under this
Agreement shall be disregarded in its entirety.
6.4. Indemnification Payments. A portion of the Purchase
Price, in the initial amount of Two Hundred Thousand Dollars
($200,000) shall constitute the Seller's Indemnification
Obligations Fund and security for the payment of indemnification
claims under Section 6.2. and 6.5, as applicable ("Seller's
Indemnification Obligations") and shall be held by the Escrow
Agents in an interest bearing account (the "Seller's
Indemnification Obligation Fund") under the Escrow Agreement, and
shall be disbursed pursuant to the provisions of this Section 6.4
and the Escrow Agreement. In the event a Buyer Indemnitee becomes
entitled to indemnification pursuant to Section 6.2 or 6.5 as
applicable, such Buyer Indemnitee shall have the immediate right,
exercisable with notice to Seller, to request payment of the
amount of any such indemnity claim against the Seller's
Indemnification Escrow in accordance with the provisions of the
Escrow Agreement. The rights of each Buyer Indemnitee under this
Section 6.6 shall be in addition to, and not in limitation of,
any other rights which it may have. On or before December 31,
1998, Buyer shall notify Seller of any claim(s) by Buyer
Indemnitees against the Sellers' Indemnification Obligation Fund
for indemnification under Section 6.2 and 6.5, as applicable.
Seller shall have the burden to prove by a preponderance of
evidence that the Buyer Indemnitees were not entitled to
indemnification for the claim or as related to any third party
claims by Buyer Indemnitees under Section 6.5, that the Buyer
Indemnitees did not defend such third party claim in a reasonably
prudent manner. In the event the dollar amount of indemnity
claims for which Buyer Indemnitees have requested payment against
the Seller's Indemnification Obligations Fund on or before June
30, 1998, is less than $100,000 in the aggregate, the amount of
the Seller's Indemnification Obligation Fund in excess of
$100,000 shall be disbursed to Seller in accordance with the
Escrow Agreement. In the event the dollar amount of such
indemnity claims for which Buyer Indemnitees have requested
payment against such Fund on or before June 30, 1998, is more
than $100,000 but less than $200,000 in the aggregate, the
difference between $100,000 and such dollar amount shall be
disbursed to Seller in accordance with the Escrow Agreement.
Subject to the provisions of the Escrow Agreement, all indemnity
payments, whether by Buyer or Seller, to be made under this
Agreement shall be made in immediately available funds.
6.5. Procedure for Third Party Claims
(a) Notice to the indemnifying party shall be given
promptly after receipt by any Seller Indemnitee or Buyer
Indemnitee of actual Knowledge of the commencement of any action
or the assertion of any claim that will likely result in a claim
by it for indemnity pursuant to this Agreement. Such notice
shall set forth in reasonable detail the nature of such action or
claim to the extent known, and include copies of any written
correspondence from the party asserting such claim or initiating
such action. The indemnifying party shall be entitled, at its
own expense, to assume or participate in the defense of such
action or claim. In the event that the indemnifying party
assumes the defense of such action or claim, it shall be
conducted by counsel chosen by such party and approved by the
party seeking indemnification, which approval shall not be
unreasonably withheld.
(b) With respect to actions as to which the
indemnifying party does not exercise its right to assume the
defense, the party seeking indemnification shall assume and
control the defense of and contest such action with counsel
chosen by it and approved by the indemnifying party, which
approval shall not be unreasonably withheld. The indemnifying
party shall be entitled to participate in the defense of such
action, the cost of such participation to be at its own expense.
The indemnifying party shall be obligated to pay the reasonable
attorneys' fees and expenses of the party seeking indemnification
to the extent that such fees and expenses related to claims as to
which indemnification is payable under Sections 6.2 or 6.3, as
such expenses are incurred and in the case of a Buyer Indemnitee
seeking such indemnification, such Buyer Indemnitee shall have
the right, exercisable with notice to Seller, to request payment
of the amount of such indemnity claim against the Seller's
Indemnification Escrow in accordance with the provisions of the
Escrow Agreement. The party seeking indemnification shall have
full rights to dispose of such action and enter into any monetary
compromise or settlement.
(c) Both the indemnifying party and the indemnified
party shall cooperate fully with one another in connection with
the defense, compromise, or settlement of any such claim or
action, including, without limitation, by making available to the
other all pertinent information and witnesses within its control.
6.6. INTENTIONALLY OMITTED.
6.7. Remedies Cumulative. The remedies provided for herein
shall be cumulative and shall not preclude assertion by any party
of any other rights or the seeking of any other remedies against
any other party. Nothing contained in Section 6 shall be
construed in any way to limit, impair or modify any provisions of
this Agreement or to otherwise impose any additional liability or
obligation on Buyer at any time for any liability or obligation
of Seller other than Buyer's obligation to indemnify Seller
hereunder.
6.8. Successors. The merger, consolidation, liquidation,
dissolution or winding up of, or any similar transaction with
respect to, the parties hereto shall not affect in any manner the
obligations of the parties pursuant to Section 6 or any other
term or provision of this Agreement, and the parties covenant and
agree to make adequate provision for their liabilities and
obligations hereunder in the event of any such transaction.
Section 7. Brokerage.
7.1. Finders and Brokers Fees. The parties each agree to be
responsible for its respective broker or finder in connection
with the transactions contemplated by this Agreement and
indemnify and hold harmless one another against any loss,
liability, damage, cost, claim, or expense incurred by reason of
any compensation, including, without limitation, brokerage,
commission, or finder's fee, alleged to be payable because of any
act, omission, or statement of the indemnifying party.
Section 8. General Provisions
8.1. Sales and Transfer Taxes Seller shall pay any and all
taxes, federal, state, or local, in the nature of income, sales,
conveyance, recording, or transfer taxes required to be paid in
respect of the conveyance, assignment, or transfer to Buyer of
the Purchased Assets.
8.2. No Third Party Beneficiaries. Nothing in this
Agreement is intended, nor shall it be construed, to confer any
rights or benefits upon any Person (including, but not limited
to, any employee or former employee of Seller) other than the
parties hereto, and solely to the extent provided in Section 6,
the other Seller Indemnitees and Buyer Indemnitees, and no other
Person shall have any rights or remedies hereunder.
8.3. Expenses of the Parties; Certain Litigation. All
expenses involved in the preparation, authorization, and
consummation of this Agreement, incurred up to and including the
date hereof, including, without limitation, all fees and expenses
of agents, representatives, counsel, and accountants in
connection therewith, shall be borne solely by the party who
shall have incurred the same, and the other party shall have no
liability in respect thereof; provided, however, that nothing
herein shall be construed to release or impair any claim for
damages by any party.
8.4. Amendment and Waiver. This Agreement may not be
changed or terminated orally. No waiver of compliance with any
provision or condition hereof, and no consent provided for herein
shall be effective unless evidenced by an instrument in writing
duly executed by the party hereto sought to be charged with such
waiver or consent.
8.5. Miscellaneous. The Section headings of this Agreement
are for convenience of reference only and do not form a part
hereof and do not in any way modify, interpret, or construe the
intentions of the parties. This Agreement may be executed in one
or more counterparts and all such counterparts shall constitute
one and the same instrument. This Agreement shall be governed by
and construed in accordance with the Laws of the Commonwealth of
Massachusetts; without giving effect to the conflict of laws
principles thereof.
8.6. Binding Effect. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
respective administrators, legal representatives, successors and
permitted assigns.
8.7. Publicity No party hereto or its representatives will,
without the prior written consent of the other parties, disclose
to any other person any information that has been made available
in connection with this Agreement (other than information which
has been published or made publicly available other than by
unauthorized disclosure of a party), make any public announcement
concerning the transactions contemplated hereby or disclose any
of the terms, conditions, or other facts with respect to this
Agreement, except as required by Law. If circumstances make it
impossible to give such prior written notice, then any disclosure
made shall be no more extensive than is necessary to meet the
minimum requirement imposed on the party making such disclosure.
8.8. Complete Agreement. This Agreement and the Exhibits
and Schedules and other documents referred to herein contain the
entire agreement between the parties hereto with respect to the
transactions contemplated herein and supersede all previous
negotiations, commitments, and writings.
8.9. Notices. Any notice, report, demand, waiver, consent
or other communication given by a party under this Agreement
(each a "notice") shall be in writing, may be given by a party or
its legal counsel, and shall deemed to be duly given (i) when
personally delivered, or (ii) upon delivery by United States
Express Mail or similar overnight courier service which provides
evidence of delivery, or (iii) when five (5) days have elapsed
after its transmittal by registered or certified mail, postage
prepaid, return receipt requested, addressed to the party to whom
directed at that party's address as it appears below or another
address of which that party has given notice, or (iv) when
transmitted by telex (or equivalent service), the sender having
received the answer back of the addressee, or (v) when delivered
by facsimile transmission if a copy thereof is also delivered in
person or by overnight courier. Notices of address change shall
be effective only upon receipt notwithstanding the provisions of
the foregoing sentence.
Notice to Buyer shall be sufficient if given to:
Trend-Lines, Inc.
000 Xxxxxxxx Xxxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
ATTN: Xxxxxxx X. Xxxxxx, President
Fax: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxx
Xxxxxx, XX 00000-0000
ATTN: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Notice to Seller shall be sufficient if given to:
Golf Acquisition Limited Partnership
00 Xxxxxxxx Xxxx
Xxxxxx, XX 00000
ATTN: Xx. Xxxx X. Xxxxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxx Xxxx Xxxxxx Xxxxxxx & Xxxxx, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
ATTN: Stanford X. Xxxxxxx, Xx., Esq.
Fax: (000) 000-0000
8.10. Assignment. Except as expressly provided herein,
this Agreement and any rights pursuant hereto shall not be
assignable by either party without the prior written consent of
the other party.
8.11. Severability. If any term or provision of this
Agreement shall be held to be invalid or unenforceable for any
reason, such term or provision shall be ineffective to the extent
of such invalidity or unenforceability without invalidating the
remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or
provisions had not been contained herein.
8.12. Effect of Investigation. Any inspection,
preparation or compilation of information or audit of the
inventories, properties, financial condition or other matters
relating to Seller conducted by or on behalf of Buyer pursuant to
this Agreement shall in no way limit, affect or impair the
ability of Buyer to rely upon the representations, warranties,
covenants and agreements of Seller set forth herein.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed as of the date first above written.
TREND-LINES, INC.
By:/s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President
GOLF ACQUISITION LIMITED PARTNERSHIP
By: GOLF ACQUISITION CORP.
Its sole general partner
By:/s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: Vice President
Schedule 1.2
to the
Asset Purchase Agreement
Excluded Assets
1. Any and all assets, liabilities, rights and obligations
relating to the agreement by and between Seller and [Nevada
Bob's] ("NVB"), including, without limitation, trademarks,
copyrights, tradenames and other franchise rights, as well as
inventory sourced directly or indirectly by or through NVB and
bearing a trademark or label of NVB (or of any derivative of the
name "Nevada Bob's").
2. Cash (other than Store impressed cash funds on hand in
the approximate amount of $300 per Store for which amounts Buyer
should reflect as a credit to Seller in connection with the
calculation of the amount to be subtracted from the Holdback
Fund).
3. Accounts Receivable.
4. Unamortized deferred financing costs.
5. Office furniture utilized by Xxxx X. Xxxxxxxxx.
6. Personal computer utilized by Xxxx X. Xxxxxxxxx.
7. Leased automobile utilized by Xxxx X. Xxxxxxxxx.
8. Amounts prepaid under Xxxx X. Xxxxxxxxx'x life
insurance contract.
9. Office supplies.
10. Entire contents of Xxxx X. Xxxxxxxxx'x office including
pictures on wall.
11. Xxxx X. Xxxxxxxxx'x personal computer, printer, laptop
other printer.
12. Office copier - Canon GP GP55F.
13. 10 lateral file cabinets.
14. Xxxx X. Xxxxxxxxx'x employment agreement.
15. Xxxx X. Xxxxxxxxx'x records and documents.
16. General manager's personal computer, laptop and
printer.
17. Head buyer's laptop and printer.
18. Two sets of X. Xxxxxxxx commemorative club sets.
