EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made and
entered into as of February 2, 2000 among Filene's Basement Corp., a
Massachusetts corporation, Filene's Basement, Inc., a Massachusetts corporation
and wholly owned subsidiary of Filene's Basement Corp. (collectively, the
"SELLER"), each a debtor and debtor-in-possession in a case pending under
chapter 11 of the Bankruptcy Code, and Base Acquisition Corp., a Delaware
corporation ("PURCHASER").
PRELIMINARY STATEMENT
WHEREAS, Seller is engaged in the retail sale of men's and
women's apparel under the trade name "Filene's Basement" in the Stores (as
defined herein), and under the name "Aisle 3" in the Aisle 3 Stores (as defined
herein); and
WHEREAS, on August 23, 1999 (the "Filing Date"), Seller filed
voluntary petitions with the Bankruptcy Court initiating cases under chapter 11
of the Bankruptcy Code, and has continued in the possession of its assets and in
the management of its business pursuant to sections 1107 and 1108 of the
Bankruptcy Code; and
WHEREAS, Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, substantially all of the assets of the Business
(as defined herein), as well as the inventory held or to be held for sale under
the "Aisle 3" tradename, and Purchaser will assume certain liabilities, all on
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. Unless otherwise defined herein,
the terms defined in the introductory paragraph and the Recitals to this
Agreement shall have the respective meanings specified therein, and the
following terms shall have the meanings specified below:
"Actual Net Asset Value" shall be the actual difference
between those assets and liabilities of the Seller expressly identified on (and
calculated in the same manner as) Exhibit A hereto (as provided by Purchaser).
The Actual Net Asset Value shall be determined as of the Effective Date, and
adjusted from time to time.
"Administrative Expenses" shall mean any cost or expense of
administration of the Cases under sections 503(b) and 507(a)(1) of the
Bankruptcy Code, including, without limitation, allowed reclamation claims.
"Agreement" has the meaning set forth in the preamble and
shall include all Schedules and Exhibits hereto.
"Aisle 3 Stores" shall mean stores operated by the Seller
under the "Aisle 3" tradename.
"Ancillary Agreements" means, collectively, the Interim
Management Agreement, the Xxxx of Sale, the Leasehold Assumption and Assignment
Agreement, Trademark Assignments, the Registration Rights Agreement and any
other documents necessary to effectuate the purchase and sale of the Business
and the Purchased Assets.
"Assigned Leases" means the Leases not eliminated by Purchaser
pursuant to Section 2.8.
"Assumed Contracts" shall mean those rights of Seller under
contracts, leases on personal property, franchises, commitments, agreement or
licenses, or bids or proposals which would result in any of the foregoing,
solely to the extent expressly assumed by the Purchaser in accordance with
Section 2.9, including, without limitation, any Deferred Contracts assumed by
the Seller.
"Assumed Liabilities" has the meaning set forth in Section
2.3.
"Auction" has the meaning set forth in Section 10.1.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
heretofore and hereafter amended, and codified as 11 U. S.C. Section 101,
et seq.
"Bankruptcy Court" means the United States Bankruptcy Court
for the District of Massachusetts, or any other court, having jurisdiction over
the Cases from time to time.
"Bidding Procedures Order" means an order of the Bankruptcy
Court in form and substance reasonably acceptable to Purchaser.
"Xxxx of Sale" means the Xxxx of Sale to be executed at
Closing by Seller and Purchaser.
"Break-up Fee" has the meaning set forth in Section 10.1.
"Business" means the business of Seller relating to the sale
and distribution of men's and women's fashion apparel and accessories under the
"Filene's Basement" trade name.
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"Business Day" means a day, other than a Saturday or a Sunday,
on which the New York Stock Exchange is open for business in the City of
New York.
"Cases" means the Chapter 11 cases of the Seller pending in
the Bankruptcy Court and being jointly administered for procedural purposes as
IN RE FILENE'S BASEMENT CORP., case nos. 99-16984 through 99-16985 (WC4).
"Cash Purchase Price" shall have the meaning set forth in
Section 2.2.
"Closing" shall mean the consummation of the transactions
contemplated herein in accordance with Section 9.1.
"Closing Date" shall have the meaning set forth in Section
9.1.
"Code" means the Internal Revenue Code of 1986, as heretofore
or hereafter amended.
"Common Stock" shall mean the common stock, without par value,
of Value City Department Stores, Inc., as constituted on the Closing Date.
"COTS Software" has the meaning set forth in Section 3.6.
"DIP Facility" has the meaning set forth in Section 2.3.
"Damages" means losses, amounts paid in settlement, claims,
damages, Liabilities, obligations, judgments, settlements and reasonable
out-of-pocket costs and reasonable expenses and attorneys' fees; provided,
however, that Damages shall not include (i) any incidental or consequential
damages or (ii) any special or punitive damages.
"Deferred Contracts" has the meaning set forth in Section 2.9.
"Distribution Center" shall mean the distribution center of
the Seller relating to the Business and/or the Purchased Assets.
"Downtown Boston Lease" means the lease relating to the
Downtown Boston Store located in downtown Boston.
"Downtown Boston Store" means the Store located in downtown
Boston.
"Effective Date" means the effective date of the Interim
Management Agreement.
"Equipment and Fixtures" means, to the extent used or usable
in the Business, (i) cash registers and related equipment and software and
licenses pertaining thereto, credit card processing equipment, all point of
sale, ticketing, telephone and security systems and equipment, furniture,
furnishings, fixtures, trade fixtures and improvements and all signage located
at or affixed to, the Stores or Distribution Center,
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and (ii) to the extent assignable, any rights of Seller to the warranties,
licenses and other similar rights with respect thereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" means (a) any assets of any Plan maintained
by the Seller or its affiliates, unless such Plan is assumed by Purchaser or to
the extent that any assets relating to any Plan are transferred to any employee
benefits plan maintained by Purchaser, in each case on terms mutually agreed
upon by Seller and Purchaser prior to the Closing Date, (b) any rights of Seller
under this Agreement or under any other agreement between Seller and Purchaser,
(c) all real property leases and the proceeds therefrom held by Seller other
than the Assigned Leases, (d) all contracts held by Seller other than the
Assumed Contracts, (e) copies of books and records made at the request of
Seller, or the Official Committee (I.E., the originals shall constitute
Purchased Assets but not any such requested copies thereof) (f) avoidance
actions under chapter 5 of the Bankruptcy Code, (g) such other causes of action
as shall be mutually agreed to by the parties and (h) claims or causes of action
existing as of the Closing Date that relate solely to any of the foregoing
Excluded Assets.
"Excluded Liabilities" has the meaning set forth in Section
2.3.
"Filing Date" has the meaning set forth in the recitals.
"Final Inventory" has the meaning set forth in Section 2.4.
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time, consistently applied.
"Governmental Agency" means (a) any international, foreign,
federal, state, county, local or municipal governmental or administrative agency
or political subdivision thereof, (b) any governmental authority, board, bureau,
commission, department or instrumentality, (c) any court or administrative
tribunal, (d) any non-governmental agency, tribunal or entity that is vested by
a governmental agency with applicable jurisdiction or (e) any arbitration
tribunal or other non- governmental authority with applicable jurisdiction.
"Gross Rings" means gross register receipts less applicable
sales tax.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Installment Purchase Price" has the meaning set forth in
Section 2.2.
"Intellectual Property" means all copyrights, trademarks,
trademark applications, service marks, patents, patent applications and goodwill
associated with the Stores and the Aisle 3 Stores and/or otherwise associated
with the Business, including all trademarks and trademark applications listed on
Schedules 3.6(a) and 3.6(k) attached
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hereto, together with (1) all inventions, processes, production methods,
proprietary information, know-how and trade secrets used in the Business and the
Aisle 3 Stores; (2) all licenses or user or other agreements granted to Seller
with respect to any of the foregoing, in each case whether now or hereafter
owned or used including, without limitation, the licenses or other agreements
with respect to such copyrights, the patents or the trademarks; (3) all
information, customer lists, identification of suppliers, data, plans,
blueprints specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, and the like pertaining to the
operation by Seller of the Business and the Aisle 3 Stores; (4) all field repair
data, sales data and other information relating to sales or service of products
and which pertain to the Business and the Aisle 3 Stores; (5) all accounting
information which pertains to the Business and the Aisle 3 Stores and all media
in which or on which any of the information or knowledge or data or records
which pertain to the Business and the Aisle 3 Stores may be recorded or stored
and all computer programs used for the compilation or printout of such
information knowledge, records or data, and all books and records relating to
the Business and the Aisle 3 Stores (including such books and records as are
contained in computerized storage media), including books and records related to
inventory, purchasing accounting, sales, maintenance, repairs, marketing,
banking, Intellectual Property, shipping records, personnel files for
transferred employees and all files, customer and supplier lists, records,
literature and correspondence related to the Business and the Aisle 3 Stores;
provided, however, that Seller shall be entitled to make and retain copies of
such books and records to the extent they relate to Excluded Assets or Excluded
Liabilities or are otherwise required in the administration of the estates of
Seller and its affiliates and the Cases; (6) all licenses, consents, permits,
variances, certifications and approvals of governmental agencies now or
hereafter held by Seller pertaining to the operation by Seller of the Business
and the Aisle 3 Stores; and (7) all causes of action, claims and warranties now
or hereafter owned or acquired by Seller in respect of any of the items listed
above in this paragraph.
"Interim Management Agreement" shall mean the agreement
between the Purchaser and Seller in the form attached hereto as Exhibit B.
"Inventory Count" has the meaning set forth in Section 2.4.
"Inventory Date" has the meaning set forth in Section 2.4.
"IT Transferred Employees" means those Transferred Employees
whose primary employment responsibilities relate to the information technology
systems of the Business.
"Knowledge" means, generally, as to the officers of the Seller
and, as to the representations and warranties contained herein relating to
specific areas of Seller's Business, as to the employees of Seller who are
charged with the oversight of such specific area of the Seller's Business, (i)
the actual knowledge of such person and (ii) information that should have been
known by such persons, assuming due inquiry.
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"Leased Property" means all of Seller's right, title and
interest, as tenant or direct or indirect sub-tenant, under the Leases.
"Leasehold Assumption and Assignment Agreement" means the
Assumption and Assignment Agreement for Non-Residential Real Property Leases to
be executed at Closing by Purchaser and Seller.
"Leases" means those real property leases more particularly
described on Schedule 1.1(a).
"Letter of Credit Deposit" means the deposit of one million
dollars ($1,000,000) in the form of a Letter of Credit made in the favor of
Seller.
"Liability" or "Liabilities" means any liability, obligation
or claim by a third party (whether known or unknown, asserted or unasserted,
fixed or contingent, accrued or unaccrued, liquidated or unliquidated, and
whether due or to become due), including any liability for Taxes.
"Lien" means any mortgage, pledge, security interest, charge
or other encumbrance.
"Licensed Intellectual Property Agreements" has the meaning
assigned in Section 3.6.
"Licensed Software" has the meaning set forth in Section 3.6
"Market Value" shall mean, in respect of any share of Common
Stock on the Closing Date, the average closing price per share of Common Stock
as reported on the New York Stock Exchange for the twenty Business Days ending
the day prior to the Closing Date.
"Material Adverse Effect" means a material adverse effect with
respect to the Purchased Assets, taken as a whole, other than by reason of any
diminution in the working capital assets or goodwill of Seller by reason of the
ongoing operation of the Business after the Effective Date.
"Material Intellectual Property" has the meaning set forth in
Section 3.6.
"Merchandise" has the meaning set forth in Section 2.4.
"Official Committee" means the Official Committee of Unsecured
Creditors in the Cases, as appointed by the United States Trustee and
reconstituted from time to time.
"On-Order Merchandise" means goods ordered before the
Effective Date in the ordinary course of business, that both (i) have not been
paid for and (ii) have not
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been received at the Stores, the Distribution Center, any of the Seller's
consolidators or the Aisle 3 Stores prior to the Effective Date.
"Order" means an order of the Bankruptcy Court, authorizing,
among other things, the sale of the Purchased Assets to Purchaser and the
assignment of the Assigned Leases and Assumed Contracts to Purchaser, in
accordance with the terms and conditions of this Agreement and pursuant to,
among others, sections 105, 363, 365 and 1146(c) of the Bankruptcy Code, in form
and substance acceptable to Purchaser.
"Owned Software" has the meaning assigned in Section 3.6.
"Permit" means any permit, approval, authorization, license,
variance or permission required by a Governmental Agency under any applicable
law or otherwise relating to the Business.
"Person" means any individual, partnership, corporation,
trust, association, limited liability company, Governmental Agency or other
entity.
"Plan" or "Plans" means all "employee benefit plans", as
defined in Section 3(3) of ERISA, and all other material employee benefit
arrangements, payroll practices, employment agreements, incentive plans, or
other similar compensatory arrangements, whether or not subject to ERISA,
including, without limitation, any such arrangements providing severance pay,
sick leave, vacation pay, salary continuation for disability, retirement
benefits, deferred compensation, bonus pay, incentive pay, stock options,
hospitalization insurance, medical insurance, life insurance, scholarships or
tuition reimbursements, maintained, sponsored, or contributed to by Seller for
the benefit of current or former employees of Seller.
"Priority Unsecured Claims" means those general unsecured
claims arising prior to the Filing Date that are entitled to priority pursuant
to Section 507(a) of the Bankruptcy Code.
"Purchase Price" has the meaning set forth in Section 2.2.
"Purchase Price Adjustment" has the meaning set forth in
Section 2.4
"Purchased Assets" means all right, title and interest of
Seller in and to any and all of the business, properties, assets, goodwill,
rights and claims of whatever kind and nature, real or personal, tangible or
intangible, known or unknown, actual or contingent and wherever situated as the
same may exist on the Closing Date and are related exclusively to the Business
and, as expressly provided below, related to the Aisle 3 Stores, other than the
Excluded Assets. Without limiting the generality of the foregoing, the Purchased
Assets shall include, without limitation, all right, title, and interest of any
Seller in, to and under all of the following:
(a) all assets or other property used by any of the
store operations included in the Stores, the Aisle 3 Stores,
the Seller's consolidators and the Distribution Center;
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(b) all Leases and all Leased Property and (to the
extent owned by Seller) buildings, fixtures, signage, and
improvements thereon and other appurtenances thereto and
rights in respect of any of the foregoing items in this
clause (b);
(c) all Merchandise and other tangible personal
property located in the Stores acquired by Purchaser;
(d) all inventory in stock, on-order or otherwise
intended for resale in the Aisle 3 Stores and located in or
otherwise purchased for Aisle 3 Stores;
(e) all Equipment and Fixtures located in the Stores,
Aisle 3 Stores and Distribution Center, and all Supplies
held by Seller in or for the Stores and the Aisle 3 Stores;
(f) all of the Intellectual Property, including,
without limitation, the trademarks and tradenames "Filene's
Basement," "Filene's Basement of Boston" and "Aisle 3";
(g) to the extent legally assignable, all Permits;
(h) all cash held or received by Seller on account of
sales or receivables created on or after the Effective
Date;
(i) any cash or cash equivalents of Seller (including
for this purpose all (i) collected funds received in bank
accounts of Seller, (ii) amounts in the process of
collection charged on credit cards, (iii) cash
collateralizing outstanding letters of credit, (iv) cash
held in escrow and (v) cash in the Stores);
(j) all credit card receivables, accounts receivable
and notes receivable for sales;
(k) all assets, properties, goodwill, rights and claims
of any kind and nature related to the Business not otherwise
described above;
(l) the Seller's interest in the Michigan Avenue Real
Estate Development right described on Schedule 1.1(b);
(m) the Seller's rights (but not liabilities) under the
Seller's Supplemental Executive Retirement Plan and related
executive severance plans described on Schedule 1.1(c) and
any settlement agreements with respect thereto;
(n) the following, to the extent that they relate
exclusively to any Assumed Liability, Assumed Contract or
Purchased Asset: claims, deposits (including without
limitation deposits for layaway items),
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prepayments, prepaid assets (as adjusted as of the Effective
Date), refunds, causes of action (except as expressly
excluded), rights of recovery, rights of setoff and rights
of recoupment as of the Closing Date;
(o) all Assumed Contracts;
(p) all goodwill associated with the Purchased Assets;
(q) Web sites and Web addresses used in the Business or
otherwise relating to the Purchased Assets;
(r) all cash registers located in the Stores and all
licenses (including software licenses) pertaining thereto;
(s) photos of the Stores and architectural drawings
thereof, if any; and
(t) any "800" or "888" numbers used in the operation of
the Stores by Seller.
"Purchaser" has the meaning set forth in the preamble.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement to be executed at the Closing by Seller and Purchaser, in form
and substance acceptable to Purchaser, Seller and the Official Committee.
"Sale Procedure Motion" has the meaning set forth in Section
10.1.
"Schedules" means the various Schedules referred to in, and
attached to, this Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning set forth in the preamble.
"Stock Consideration" has the meaning set forth in Section
2.2.
"Stores" means the premises described in the Leases listed on
Schedule 1.1(a) and all fixtures, leasehold improvements or signage thereon,
used or held for use by Seller in the Business.
"Supplies" includes, but is not limited to, all labels, hang
tags, bags, boxes, wrapping materials, stationary, hangers and any other
packing, shipping, sales or display supplies relating to the Business.
"Survival Period" has the meaning set forth in Section 3.13.
"Tax Return" means any report, return, information return or
other information required to be supplied to a taxing authority in connection
with Taxes.
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"Tax" or "Taxes" means (i) all federal, state, local and
foreign taxes, including income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, withholding, Social
Security, unemployment, disability, real property, personal property,
registration, environmental, custom duties, value added, alternative or add-on
minimum, estimated or other tax, including any interest, penalties or additions
thereto, whether disputed or not, or (ii) liability for the payment of any
amounts of the type described in (i) as a result of being party to any agreement
or any express or implied obligation to indemnify any other Person, or (iii) in
the case of Seller, liability for the payment of any amount of the type
described in clause (i) as a result of being or having been before the Closing
Date a member of an affiliated, consolidated, combined or unitary group, or a
party to any agreement or arrangement, as a result of which liability of Seller
is determined or taken into account with reference to the liability of any other
Person.
"Trademark Assignments" means all assignment documents in
recordable form necessary to assign all trademarks used in the Business, or
relating to the Purchased Assets, to Purchaser.
"Transaction Taxes" has the meaning set forth in Section 11.1.
"Transferred Employees" means the employees of the Business
who accept and commence employment with Purchaser on or about the Closing
Date.
"Value" means the cost value of Merchandise calculated using
the retail method of accounting, in accordance with past practices and GAAP,
consistently applied.
"Value City" means Value City Department Stores, Inc.
ARTICLE 2
SALE AND PURCHASE OF PURCHASED ASSETS AND
ASSUMPTION OF ASSUMED LIABILITIES
SECTION 2.1. PURCHASE AND SALE OF PURCHASED ASSETS. On the
terms and subject to the conditions set forth in this Agreement, at the Closing,
Purchaser shall purchase from Seller, and Seller shall sell, transfer, assign,
convey and deliver to Purchaser, all of Seller's right, title and interest in
and to the Purchased Assets.
SECTION 2.2. PURCHASE PRICE. The aggregate purchase price for
the Purchased Assets (the "PURCHASE PRICE") shall consist of:
(1) $3,500,000 in cash (the "Cash Purchase Price");
(2) $6,000,000 in cash payable in three equal annual
installments beginning on the first anniversary of the Closing Date, as adjusted
pursuant to Section 2.4 (the "Installment Purchase Price"); and
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(3) Such number of shares of Common Stock of Value City having
a Market Value of $5,500,000 on the Closing Date (the "Stock Consideration").
SECTION 2.3. ASSUMPTION OF LIABILITIES. On the terms and
subject to the conditions set forth in this Agreement, from and after the
Closing, Purchaser will assume and pay, perform, discharge and be responsible
solely for the following liabilities of Seller (the "ASSUMED LIABILITIES"):
(1) The assumption of secured indebtedness incurred in the
Cases pursuant to the $135 million debtor-in-possession financing facility, as
previously or hereafter amended (the "DIP Facility") entered into by Seller on
the Filing Date and approved by the Bankruptcy Court (the "ASSUMED
INDEBTEDNESS"), which shall be paid by Purchaser on the Closing Date, or such
later date to which the lenders under the DIP Facility shall consent.
(2) The payment of an amount of Administrative Expenses and
Priority Unsecured Claims (including, without limitation, accrued and unpaid
expenses) not to exceed the amount of Administrative Expenses and Priority
Unsecured Claims which would cause the Actual Net Asset Value to be less than
$(28,575,000). Purchaser shall have the right to review and/or dispute any and
all of such Administrative Expenses or Priority Unsecured Claims. Such
Administrative Expenses and Priority Unsecured Claims shall be paid by Seller
prior to the Closing Date or by Purchaser after the Closing Date in the ordinary
course when they become due according to their terms.
(3) Ordinary course trade payables and other expenses directly
and solely relating to the operation of the Business from the Effective Date to
the Closing Date shall not be taken into account in the calculation of Actual
Net Asset Value. Such Administrative Expenses shall be paid by Seller prior to
the Closing Date or by Purchaser after the Closing Date in the ordinary course
when they become due according to their terms.
(4) Payment of the difference between (x) all severance
obligations due and owing with respect to employees of Seller as of the date
hereof, including without limitation Transferred Employees, who are terminated
prior to six (6) months after the Closing Date (or nine (9) months in the case
of IT Transferred Employees) (including approximately $1,600,000 for Aisle 3
employees and persons terminated prior to the Effective Date), less (y)
$4,600,000. All other severance obligations shall be included in the calculation
of Actual Net Asset Value. Severance obligations arising from the termination of
Transferred Employees more than six (6) months after the Closing Date (or nine
(9) months in the case of IT Transferred Employees) shall be the obligation of
Purchaser.
(5) The assumption of employee benefits of Transferred
Employees, (including sick pay, personal days, pension and vacation pay);
PROVIDED, HOWEVER, that the amount of accrued vacation pay as of the Effective
Date shall be included in the calculation of the Actual Net Asset Value, and,
for that purpose, the amount of such
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accrued vacation pay of Transferred Employees as of the Effective Date shall be
fixed at $1,000,000.
Except as otherwise expressly provided for herein, Purchaser shall not assume
any other Liabilities of the Seller, including but not limited to any claims
arising prior to the Filing Date or after the Closing Date. Nothing contained in
paragraph (2) above shall constitute an assumption of any particular liabilities
of Seller. Rather, Purchaser is merely agreeing to pay a specified amount of
Seller's Administrative Expenses and Priority Unsecured Claims, and no more. In
the event that the actual Administrative Expenses and Priority Unsecured Claims
of Seller exceeds the amount of the maximum payment obligation of Purchaser set
forth in paragraph (2) above, such claims and related liabilities shall be the
sole and exclusive responsibility of Seller and Purchaser shall not be liable
for payment of any such claims. All liabilities and obligations of Seller of
whatever kind and nature, known or unknown, fixed or contingent, accrued or
unaccrued, other than the Assumed Liabilities, are hereinafter referred to as
the "EXCLUDED LIABILITIES." Purchaser shall not assume or pay, perform,
discharge or be responsible for any of the Excluded Liabilities.
SECTION 2.4. ADJUSTMENT OF PURCHASE PRICE.
(a) Between January 5, 2000 and January 15, 2000 (the
"Inventory Dates"), Seller caused to be taken inventories of the Merchandise in
the Stores, the Aisle 3 Stores, the Seller's consolidators and the Distribution
Center (the "INVENTORY COUNT(S)"). Seller represents that the Inventory Counts
were taken by RGIS Inventory Specialists, and observed by Xxxxxx Xxxxxxxx LLP,
and completed in accordance with past accounting policies and practices of the
Seller and in accordance with GAAP. Seller shall cause either Xxxxxx Xxxxxxxx
LLP or RGIS Inventory Specialists to certify the accuracy of the Inventory
Counts, and thereafter such Inventory Counts shall be deemed accurate by the
parties as of the date such Inventory Counts were taken.
(b) For purposes of calculating the Actual Net Asset Value,
the final inventory shall mean the aggregate Value of all of the Merchandise, as
calculated on their respective Inventory Dates, as adjusted (i) for inventory
associated with Gross Ring sales, (ii) for returns after the Inventory Dates,
(iii) for inventory purchased after the Inventory Dates and (iv) by a shrink
adjustment of 2% (the "Final Inventory"). "MERCHANDISE" shall mean all goods in
stock or intended for resale in the Business, owned by Seller and located at the
Stores, Aisle 3 Stores, Seller's consolidators or Distribution Center or in
transit among the Distribution Center, the Seller's consolidators, the Stores or
the Aisle 3 Stores on the Effective Date.
(c) Merchandise located in any Aisle 3 Stores, and any Stores
which are eliminated from Purchased Assets by Purchaser pursuant to Section 2.8,
shall nevertheless be included in the Final Inventory.
(d) The Actual Net Asset Value shall be calculated in a manner
consistent with the calculation set forth on Exhibit A and adjusted from time to
time to reflect the amount of the actual disbursements by Purchaser for Assumed
Liabilities; PROVIDED, HOWEVER, that the amount of accrued vacation pay of
Transferred Employees as
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of the Effective Date shall be fixed at $1,000,000. The Purchase Price shall be
adjusted as follows (the "Purchase Price Adjustment"): In the event that the
Actual Net Asset Value, shall be greater than $(20,425,000), then the Purchase
Price shall be increased, on a dollar-for-dollar basis, by the difference
between the Actual Net Asset Value and $(20,425,000). Any such increase shall be
paid by the Purchaser in three equal annual installments beginning on the first
anniversary of the Closing Date. As an example, in the event that the Actual Net
Asset Value shall be $(19,000,000), then the Purchase Price shall be increased
by $1,425,000, or the difference between $(20,425,000) and $(19,000,000). In the
event that the Actual Net Asset Value shall be less than $(22,575,000), then the
Purchase Price shall be decreased, on a dollar-for-dollar basis, by the
difference between the Actual Net Asset Value and $(22,575,000). Any such
reduction shall be deducted by the Purchaser first, PRO RATA from each
successive payment of the Installment Purchase Price, second, from the Stock
Consideration, and third, from the Cash Purchase Price, until such reduction is
satisfied. As an example, in the event that the Actual Net Asset Value shall be
$(25,000,000), then the Purchase Price shall be decreased by $2,425,000, or the
difference between $(22,575,000) and $(25,000,000).
SECTION 2.5. DEPOSIT. Promptly following the execution of this
Agreement, Purchaser shall deliver to Seller a Letter of Credit made in favor of
the Seller in the amount of one million dollars ($1,000,000), as a deposit
toward payment of the Cash Purchase Price.
SECTION 2.6. PAYMENT OF AGGREGATE PURCHASE PRICE.
(a) At the Closing, Purchaser shall:
(i) authorize the Payment of the Letter of Credit to
Seller as and for a portion of the Purchase Price;
(ii) pay the balance of the Cash Purchase Price; and
(iii) cause Value City to issue the Stock Consideration
to the Seller.
(b) Any and all sums to be paid by Purchaser at Closing shall
be paid by wire transfer to Seller or as otherwise designated by Seller in
writing not less than two (2) business days prior to Closing.
(c) The Installment Purchase Price shall be paid by Purchaser
in three equal annual installments beginning on the first anniversary of the
Closing Date, by wire transfer to Seller or as otherwise designated by Seller in
writing not less than two (2) Business Days prior to the date such payment
becomes due, except to the extent such Installment Purchase Price is subject to
a Purchase Price Adjustment and provided, however, that the payment of the
Installment Purchase Price, or any remaining payments due in connection with the
Installment Purchase Price, shall accelerate and become immediately due and
payable upon the consummation of a sale of all or substantially all of the
assets, a sale of all or substantially all of the shares of capital, or a
liquidation, of Purchaser.
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SECTION 2.7. ALLOCATION OF PURCHASE PRICE. The parties agree
to allocate the cash portion of the Purchase Price for use by the parties in
reporting the transaction contemplated by this Agreement for federal and state
tax purposes within thirty (30) days after the Closing Date; PROVIDED, HOWEVER,
if the parties cannot agree on such allocation, such allocation shall be made by
an accounting firm of nationally recognized standing mutually agreeable to the
parties, which determination shall be final, and whose fees and expenses shall
be split equally between the parties.
SECTION 2.8. PURCHASER'S RIGHT TO ELIMINATE LEASES.
Notwithstanding anything to the contrary set forth in this Agreement, Purchaser
shall have the right through and including the Closing Date to eliminate from
the Purchased Assets hereunder, for any reason whatsoever, up to four (4)
Leases, provided, however, that Purchaser shall not cause Seller to violate the
provisions of the Downtown Boston Lease with regard to which Leases are
eliminated. All Merchandise located in a Store which Lease is eliminated by
Purchaser shall be included in the Purchased Assets and such Merchandise shall
be included in the Final Inventory. No later than the Closing Date, Purchaser
shall notify Seller of its final determination for all Leases pursuant to this
Section 2.8, and after such date, this Section 2.8 shall be deemed to have been
waived with respect to all Leases for which timely notice has not been given
hereunder. There shall be an adjustment to the Purchase Price relating to the
elimination of any such Leases to be calculated by the product of 50% of the
estimated amount of rejection damage claims relating to such rejected Lease(s)
(as calculated in accordance with section 502(b)(6) of the Bankruptcy Code)
multiplied by $0.19, to be adjusted upon final allowance of such rejection claim
so that Seller receives from Purchaser an amount equal to the product of (x) the
allowed amount of such rejection claim, multiplied by (y) the lesser of $0.19 or
the actual percentage recovery of the unsecured creditors of the Seller under a
confirmed chapter 11 plan for Seller. Seller shall promptly deliver to Purchaser
the net proceeds, after cure costs, of the sale of any eliminated Lease(s) upon
the consummation of such sale(s). Upon the occurrence of the Closing Date,
Seller shall be responsible for any obligations under any of the four potential
rejected Leases relating to and prorated to only cover the period from the
Effective Date to the 14th day following delivery of notice to Seller that
Purchaser does not intend to accept an assignment of such Leases.
SECTION 2.9. ASSUMPTION OF CONTRACTS. As soon as possible, but
no later than five (5) Business Days prior to the Closing Date, Purchaser shall
present to Seller a list of those contracts that shall be assumed by and
assigned to Purchaser (the "Assumed Contracts"), and shall identify those
contracts that Purchaser reserves the right to assume (the "Deferred
Contracts"). Purchaser shall have 90 days after the Closing Date to elect to
have a Deferred Contract assumed and assigned to it and assumed by it, PROVIDED,
HOWEVER, that Purchaser shall be responsible for all actual costs and expenses
arising from and after the Closing Date under a Deferred Contract until such
time as Purchaser assumes such Deferred Contract or notifies the Seller of its
rejection of such Deferred Contract during such 90 day period. Upon the
occurrence of the Closing Date, Seller shall be responsible for any obligations
under any of the rejected contracts relating to and prorated to only cover the
period from the Effective Date to the 14th day following
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delivery of notice to Seller that Purchaser does not intend to accept an
assignment of such contracts.
SECTION 2.10. CASUALTY AND CONDEMNATION. In the event of any
damage or destruction by reason of any casualty to any of the Purchased Assets
after the date hereof and prior to the Closing Date, or if prior to the Closing
Date there shall be any taking by condemnation or eminent domain of any of the
Stores, Purchaser shall receive and have the right to receive all insurance or
other proceeds of any nature whatsoever payable in connection with such casualty
or taking.
SECTION 2.11. REGISTRATION RIGHTS AGREEMENT. Seller and
Purchaser agree that with respect to the shares of Common Stock comprising the
Stock Consideration, the parties shall execute a Registration Rights Agreement
pursuant to which the Purchaser will provide certain registration rights under
the Securities Act and the rules and regulations promulgated thereunder, and
applicable state securities laws.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants (except to the extent such
representations and warranties relate to Stores eliminated pursuant to Section
2.8) to Purchaser as of the date hereof and as of the Closing as follows:
SECTION 3.1. AUTHORITY OF SELLER. Each Seller is a corporation
validly existing and in good standing under the laws of the state of
Massachusetts. Subject to the approval of the Bankruptcy Court, Seller has full
corporate power and authority to execute and deliver this Agreement and each of
the Ancillary Agreements to which it is a party, and the execution and delivery
by Seller of this Agreement and the Ancillary Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Seller, and this
Agreement constitutes, and each of the Ancillary Agreements upon its execution
will constitute, the legal, valid and binding obligation of Seller enforceable
in accordance with its terms, subject to issuance of the Order. Subject to any
necessary authorization from the Bankruptcy Court, Seller has full corporate
power and authority to own its properties and to carry on the Business presently
being conducted by it.
SECTION 3.2. NO CONFLICT OR VIOLATION.
(a) The execution, delivery and performance by Seller of this
Agreement and the Ancillary Agreements to which Seller is a party do not and
will not violate or conflict with any provision of the Certificate of
Incorporation or By-laws (or equivalent documents) of Seller and, assuming that
the consents, waivers, authorizations, approvals, declarations, filings and
registrations referred to in Section 3.3 are obtained or made, do not and will
not (i) violate, in any material respect, any provision of law, or any order,
judgment or decree of any court or other Governmental Agency applicable to such
Seller, or (ii) except as permitted by the Order, violate or result in a
material breach of or
15
constitute (with due notice or lapse of time or both) a material default under
any Assigned Lease, loan agreement, mortgage, security agreement, indenture or
other instrument as to which any of the Purchased Assets is subject.
(b) Seller has not entered into any other agreement to sell
the Purchased Assets.
SECTION 3.3. CONSENTS AND APPROVALS. To Seller's Knowledge,
except for consents, approvals or authorizations of, or filings with, the Court,
or as required by the HSR Act, no notice to, filings with, authorization of,
exemption by, or consent of any Governmental Agency is required in order for
Seller to consummate the transactions contemplated hereby.
SECTION 3.4. COMPLIANCE WITH LAW. To Seller's Knowledge, the
Purchased Assets and Seller's use of the Leased Property comply in all material
respects with all laws, regulations, orders, and other legal requirements
applicable to the Business.
SECTION 3.5. SUFFICIENCY AND TITLE TO THE PURCHASED ASSETS.
(a) The Purchased Assets constitute all of the assets and
property used or held for use in the Business, except for the Excluded Assets,
and Seller at the Closing Date will have good and valid title to each of the
Purchased Assets.
(b) The entry of the Order and the delivery to Purchaser of
the instruments of transfer of ownership contemplated by this Agreement will
vest good and valid title to the Purchased Assets in Purchaser, free and clear
of all claims and interests in the Purchased Assets including all Liens thereon.
SECTION 3.6. INTELLECTUAL PROPERTY.
(a) Schedule 3.6(a) sets forth a true and complete list of all
material Intellectual Property which is currently used by Seller in the
operation of the Business (the "Material Intellectual Property"), specifying, as
to each, as applicable, (i) the nature of such Material Intellectual Property
right, (ii) the registration or application numbers, (iii) a brief description
of such Material Intellectual Property right, and (iv) the owner of such
Material Intellectual Property right.
(b) Seller owns and/or has the exclusive right to use by
license, sublicense, agreement or other permission all of the Material
Intellectual Property.
(c) Seller has not taken any action (or failed to take any
action), conducted the Business, or used or enforced any of the Material
Intellectual Property, in each case in a manner that would result in the
abandonment, cancellation, forfeiture, relinquishment, or unenforceability of
any of the Material Intellectual Property.
(d) Seller has taken reasonable steps to protect Seller's
rights in and to each of the items listed on Schedule 3.6(a) that it owns and to
prevent the unauthorized use thereof by any other Person. To Seller's Knowledge,
no other person has infringed or
16
is infringing on any of the Material Intellectual Property in a manner having or
that would reasonably be expected to have a Material Adverse Effect.
(e) To Seller's Knowledge, all items listed on Schedule 3.6(a)
that Seller owns that have been registered have been effectively registered in
accordance with all applicable material legal requirements and are currently in
compliance in all material respects with all applicable legal requirements
(including as to payment of maintenance fees and the like).
(f) Except as set forth on Schedule 3.6(f), Seller has not
been charged with nor is, to the Seller's Knowledge, threatened to be charged
with, with respect to the trademarks, service marks, trade names, patents and
copyrights listed on Schedule 3.6(f), the infringement or other violation of the
intellectual property rights of any other Person having or that would reasonably
be expected to have a Material Adverse Effect. Seller is not aware of any
intellectual property rights of any other Person that would be infringed or
misappropriated by the operation of the Business as presently conducted and as
presently contemplated to be conducted.
(g) Seller represents that it holds good title to the Material
Intellectual Property, free and clear of all Liens. Seller further represents
that there are no interferences, challenges, proceedings or infringement suits
pending or, to the best of its Knowledge, threatened with respect to said
Material Intellectual Property, and Seller is not aware of any conflict with the
rights of others that would result from its use. Seller warrants and represents
that it has not granted a currently existing express or implied license to any
party with respect to the Material Intellectual Property.
(h) Schedule 3.6(h) sets forth a true and complete list of all
software that is owned exclusively by Seller ("Owned Software"), and all
software that is used by Seller in the Business that is not exclusively owned by
Seller (collectively, the "Licensed Software"), excluding software available on
reasonable terms through commercial distributors or in consumer retail stores
for a license fee of no more than $1,000 (collectively, "COTS Software").
(i) Schedule 3.6(i) contains a true and complete list of all
agreements pertaining to any material intellectual property (other than that
covering COTS Software) used or practiced by Seller in the Business as to which
a person other than Seller owns any intellectual property rights (the "Licensed
Intellectual Property Agreements"). Except as may be set forth in Schedule
3.6(i), all Licensed Intellectual Property Agreements are, and until the Closing
will remain in full force and effect, and Seller is not in material breach
thereof, there are no notices of any disputes or disagreements with respect to
any Licensed Intellectual Property Agreement, and the rights licensed under each
Material Intellectual Property Agreement are assignable to Purchaser and shall
be exercisable by Purchaser after the Closing to the same extent exercisable by
Seller prior to the Closing.
(j) Seller warrants and represents that from and after the
Closing, they will cease from all use of the Material Intellectual Property in
any way, and thereafter
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Seller shall at no time adopt or use, without the prior written consent of
Purchaser, any word or xxxx which is likely to be similar to, or confused with
the Intellectual Property.
(k) Schedule 3.6(k) sets forth all Intellectual Property of
the Seller not otherwise considered Material Intellectual Property. As of the
Closing Date, Debtor owns or has right to use all Intellectual Property
necessary to continue to conduct the Business as now or heretofore conducted by
it or proposed to be conducted by it.
SECTION 3.7. BROKERS. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Seller who might be entitled to any fee or commission from
Purchaser in connection with the transactions contemplated by this Agreement.
SECTION 3.8. [Intentionally Omitted]
SECTION 3.9. ABSENCE OF CERTAIN CHANGES. Pending the Effective
Date, Seller shall operate the Business in the ordinary course of business and
consistent with past practices including not taking any markdowns out of the
ordinary course of business.
SECTION 3.10. LABOR MATTERS AND EMPLOYEES.
(a) There is no labor dispute relating to the Business, other
than routine individual grievances, or any activity or proceeding by a labor
union or representative thereof to organize any employees of the Business, which
employees are not subject to a collective bargaining agreement or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to
employees of the Business. Other than an agreement related to certain employees
of the Downtown Boston Store, Seller is not a party to any collective bargaining
agreement relating to any of its employees.
(b) Except as set forth on Schedule 3.10(b), no employee of
Seller will become entitled to any retirement, severance or similar benefit or
enhanced benefit under any Plan solely as a result of the transactions
contemplated hereby which will become a liability of Purchaser.
SECTION 3.11. ENVIRONMENTAL LIABILITIES. Except as set forth
on Schedule 3.11, to the Knowledge of Seller (i) no pollutant, contaminant or
hazardous material has been deposited, leaked, released, or disposed of at, on
or under any real property now owned, leased or operated by Seller, which may
reasonably be expected to result in a Material Adverse Effect ; (ii) no property
(a) now owned, leased or operated by Seller, (b) to which any pollutant,
contaminant or hazardous material located on or resulting from the use of any
Purchased Assets have been transported, or (c) to which Seller has, directly or
indirectly, transported such substances, is listed or proposed for listing on
any federal, state, local or foreign list of sites requiring material
investigation or cleanup; and (iii) there has been no material environmental
investigation, study, audit, test, review or other analysis conducted in
relation to any Purchased Assets which have not been delivered to Purchaser.
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SECTION 3.12. LEASES.
(a) Except as set forth in Section 3.12(d), Seller has
furnished to Purchaser true, correct and complete copies of the Leases, together
with all amendments related thereto. Each Lease is valid, binding and in full
force and effect, enforceable by the lessee in accordance with its terms. All
undisputed rentals due and payable under each Lease have been paid, or will be
cured in accordance with the Order. Seller is the lessee under each Lease.
(b) To Seller's Knowledge, the Stores and the assets located
therein, are in compliance in all material respects with all applicable federal,
state and local laws, the failure of which compliance would result in a material
impediment to occupancy or operation of the Stores.
(c) To Seller's Knowledge, Seller does not own or hold, and is
not obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose the property demised
under any of the Leases that would supercede this Agreement (except as provided
for in the Downtown Boston Lease, which will not affect Seller's ability to
transfer such Downtown Boston Lease to Purchaser in accordance with the terms of
this Agreement or Purchaser's full use and occupation of the existing Leased
Properties). Except as specifically set forth in the Leases and Lease files
maintained at the Seller and recorded documents, there are no other agreements
or understandings, oral or otherwise, relating to the Leases which will be
enforceable against Purchaser after the Closing Date.
(d) To Seller's Knowledge, there are no pending or threatened
condemnation or similar proceedings, with respect to the premises demised under
any of the Leases. Except as disclosed in the Leases, Seller has no Knowledge of
any noncompliance by the lessors of the premises demised under the Leases with
applicable laws relating to asbestos, petroleum and hazardous wastes, PCB's or
other hazardous substances that could result in any material liability with
respect to Seller or Purchaser.
(e) As to any documents relating to the Leased Properties that
have not been supplied to Purchaser prior to the date hereof, there are no
provisions in such documents that would cause material impediment to the
occupancy or operation of the Stores by the Purchaser. Seller shall use all
reasonable efforts to supply such missing documents to Purchaser as soon as
possible after the date hereof.
SECTION 3.13. SURVIVAL. Each of the representations and
warranties of Seller shall survive the Closing for a period of 6 months after
the Closing Date, except for the representations and warranties contained in
Section 3.11, which shall survive the Closing for a period of one year after the
Closing Date (the "SURVIVAL PERIOD").
SECTION 3.14. ISSUANCE OF COMMON STOCK. Seller acknowledges
that the sale of the Stock Consideration issued hereunder has not been
registered under the Securities Act, and that the Stock Consideration may not be
sold, transferred, offered for
19
sale or otherwise disposed of without registration under the Securities Act,
pursuant to an exemption therefrom or in a transaction not subject thereto.
SECTION 3.15. "AS IS PURCHASE" Purchaser hereby acknowledges
and agrees that except as otherwise expressly provided in this Agreement; (i)
Seller makes no representation or warranty whatsoever, express or implied with
respect to any matter relating to the Purchased Assets; and (ii) Purchaser
accepts the Purchased Assets "As Is," "Where Is" (except as otherwise agreed to
herein), and "With Faults."
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
SECTION 4.1. AUTHORITY OF PURCHASER. Purchaser is a
corporation, validly existing, and in good standing under the laws of the State
of Delaware. Purchaser has full corporate power and authority to execute and
deliver this Agreement, and the execution and delivery by Purchaser of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Purchaser, and this Agreement constitutes the legal, valid and binding
obligation of Purchaser enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, or
similar laws from time to time in effect which affect creditors' rights
generally, and by legal and equitable limitations on the enforceability of
specific remedies. Purchaser has full corporate power and authority to own its
properties and to carry on the business presently being conducted by it.
SECTION 4.2. NO CONFLICT OR VIOLATION. The execution, delivery
and performance by each of Purchaser of this Agreement and the Ancillary
Agreements do not and will not violate or conflict with any provision of the
Certificate of Incorporation or By-laws of Purchaser, and will not violate in
any material respect any provision of law, or any order, judgment or decree of
any court or other Governmental Agency applicable to Purchaser, or violate, or
result in a material breach of or constitute (with due notice or lapse of time
or both) a default under any material loan agreement, mortgage, security
agreement, indenture or other instrument to which Purchaser is a party or by
which it is bound.
SECTION 4.3. AVAILABILITY OF FUNDS. Purchaser will at Closing
have available funds sufficient to allow it to pay its obligations pursuant to
Section 2.2 at the times and in the manner set forth in this Agreement.
SECTION 4.4. LITIGATION. There are no actions, causes of
action, claims, suits, proceedings, orders, writs, injunctions, or decrees
pending or, to the knowledge of Purchaser, threatened against Purchaser at law
or in equity or before or by any Governmental Agency, which seeks to restrain or
enjoin the consummation of the
20
transactions contemplated hereby or that shall otherwise materially adversely
affect the ability of Purchaser to perform its obligations hereunder.
SECTION 4.5. ADEQUATE ASSURANCES REGARDING ASSIGNED LEASES. As
of the Closing Date, Purchaser will use its best efforts to satisfy the
conditions contained in sections 365(b)(1)(C) and (f) of the Bankruptcy Code
with respect to the Assigned Leases.
ARTICLE 5
CERTAIN COVENANTS OF SELLER
Except with regard to Stores that are the subject of Leases
eliminated pursuant to Section 2.8, unless otherwise noted herein, Seller
covenants with Purchaser that from and after the date hereof through the Closing
Date or after the Closing Date, as noted herein:
SECTION 5.1. CONDUCT OF BUSINESS BEFORE THE CLOSING DATE.
Prior to the approval of this Agreement by the Bankruptcy Court on terms
satisfactory to the Purchaser, between the date hereof and the Closing Date,
Seller shall not, except as required pursuant to an Order of the Bankruptcy
Court, Bankruptcy Code or the DIP Facility or except with Purchaser's knowledge
and consent during the term of the Interim Management Agreement, (i) make any
material change in the assets, properties, rights and claims which would on the
Closing Date constitute Purchased Assets or the Business as it relates to the
assets, properties, rights and claims which would on the Closing Date constitute
Purchased Assets, (ii) or enter into any transaction respecting the Business,
other than in any such case in the ordinary course of the Business consistent
with Seller's past practices, and, (iii) except with regard to ordering more
inventory, shall continue to operate the Stores and the Business as it relates
to the Purchased Assets in the ordinary course of the Business and (iv) shall
not under any circumstances conduct a liquidation or "GOB" sale at any of the
Stores or "go dark" (Purchaser acknowledges that Seller's Mall of America (MN),
National Press Building (D.C.), Connecticut Avenue (D.C.) and Xxxxx Gallerie
(D.C.) Stores have gone "dark") or close any of the Stores subject to the
Assigned Leases, PROVIDED, HOWEVER, subject to approval of the Bankruptcy Court,
Seller shall conduct liquidation or "GOB" sales at the Aisle 3 Stores. The
parties acknowledge that after the Effective Date, Seller's conduct relating to
the Business shall be subject to and restricted by the Interim Management
Agreement. Without limiting the generality of, but subject to, the foregoing,
unless otherwise consented to in writing by Purchaser, Seller shall, in the
ordinary course of business and consistent with past practices:
(a) Perform all of their material post-petition obligations
under the Assigned Leases in accordance with their terms, except for obligations
which are not required to be performed under the Bankruptcy Code or which are
being disputed by Seller in good faith, and timely exercise any options to
extend or renewals thereunder; PROVIDED, THAT, prior to Seller extending the
term of any Lease pursuant to this Section 5.1(a), Seller shall obtain the
approval of Purchaser to do the same. If Purchaser grants such approval
hereunder, and (i) the Closing does not occur for any reason other than (A)
21
Seller's willful default hereunder, (B) the Bankruptcy Court's failure to
approve the assignment of such Lease, or (C) a successful overbid pursuant to
Section 10.1, or (ii) Purchaser subsequently eliminates such extended Lease
pursuant to Section 2.8, then in that event, Purchaser shall indemnify Seller
for any actual damages incurred as a result of such Lease extension;
(b) Comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the Purchased Assets and Assumed
Liabilities except where compliance is being disputed by Seller in good faith or
excused by the Bankruptcy Code or other applicable law;
(c) Not remove, agree to remove, sell or agree to sell or
otherwise transfer or permit any Person or entity to remove any Equipment or
Fixtures from the Stores, Distribution Center or Aisle 3 Stores (until after
completion of the GOB Sales relating to the Aisle 3 Stores), except for
replacements and refurbishments in the ordinary course of business;
(d) (i) Not amend or modify, in any material respect, or
terminate any of the Assigned Leases or agree or consent to any material
amendments or modifications or terminations thereof, without Purchaser's
consent, not to be unreasonably withheld or delayed and (ii) promptly notify
Purchaser of any amendment or modification to any Assigned Lease;
(e) Not amend or modify the terms of the DIP Facility without
the express written consent or approval of Purchaser, not to be unreasonably
withheld or delayed;
(f) Not change, in any material respect, any of their methods
or procedures relating to accounting for accounts receivable or Merchandise in
the Business;
(g) Promptly notify Purchaser if Seller receives any notices
from any lessor, Governmental Agency, insurance company or any other entity
indicating any material default or the need for any material repairs,
alterations or improvements or any other matter that could reasonably be
expected to materially and adversely affect the Purchased Assets, or that any of
the Leased Properties are or may be in violation of any law;
(h) Promptly notify Purchaser if Seller receives any notices
of or otherwise becomes aware of any condemnation proceedings affecting the
Stores;
(i) Not enter into any material agreements that would be
binding on Purchaser or affect any of the Purchased Assets other than in the
ordinary course of business;
(j) Promptly notify Purchaser of any motion, application,
pleading or Order filed by Seller or the Official Committee with the Bankruptcy
Court or entered in the Cases that affects or may affect the operation of the
Business or the Purchased Assets
22
and promptly deliver a copy of any such motion, application, pleading or Order
to Purchaser; and
(k) Maintain all insurance with respect to the Purchased
Assets as in effect on the date hereof until the Closing Date.
SECTION 5.2. PURCHASER TO APPROVE ALL PURCHASE ORDERS FOR
MERCHANDISE. Seller shall submit, on terms to be agreed upon, all proposed
purchase orders for merchandise after the date hereof to Purchaser for
Purchaser's approval or disapproval in its sole and absolute discretion.
Purchaser shall not be required to assume the liability to pay for, or purchase
on the Closing Date, any merchandise ordered after the date hereof for which it
does not grant approval and such merchandise shall not be considered as
Purchased Assets for purposes of this Agreement, and such merchandise and any
associated liabilities shall belong to Seller.
SECTION 5.3. CONSENTS AND APPROVALS; PERMITS. Seller shall use
its best efforts to obtain (a) entry of the Bidding Procedures Order and the
Order by the Bankruptcy Court, and (b) approval, in the Bidding Procedures
Order, of the obligation set forth in Article X. Seller shall use its best
efforts to transfer all Permits to Purchaser necessary or required for the
operation of the Business.
SECTION 5.4. INFORMATION AND ACCESS. Seller will permit
representatives of Purchaser to have reasonable access during normal business
hours after reasonable notice from Purchaser to Seller, and in a manner so as
not to interfere with the normal operations, to all premises, properties,
personnel, accountants, books, records, contracts and documents of or pertaining
to the Business. Purchaser shall be permitted to interview such of Seller's
personnel as it reasonably requires.
SECTION 5.5. FURTHER ASSURANCES; PRE-CLOSING AND POST-CLOSING
SUPPORT. Upon the request of Purchaser at any time after the approval of the
Order by the Bankruptcy Court, Seller shall forthwith execute and deliver such
documents and take such actions as Purchaser or its counsel may reasonably
request to effectuate the purposes of this Agreement. Subsequent to the approval
of the Order by the Bankruptcy Court, and in consideration of Purchaser's
agreement to close the transactions contemplated by this Agreement in a single
Closing, Seller agrees that for a period of thirty (30) days following the
approval of the Order by the Bankruptcy Court, Seller will provide to Purchaser,
to the extent available, such responsible person or persons as are necessary or
appropriate to facilitate the transition of the Business from Seller to
Purchaser.
SECTION 5.6. BEST EFFORTS. Upon the terms and subject to the
conditions of this Agreement, Seller will use its best efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things necessary or
proper consistent with applicable law to consummate and make effective in the
most expeditious manner practicable the transactions contemplated hereby.
Without limiting the foregoing, Seller will take or cause to be taken by others
all reasonable actions required (i) to complete the calculation of the Actual
Net Asset Value and (ii) to obtain or satisfy all consents and to continue such
efforts as may be required after the Closing Date to facilitate the expeditious
transfer
23
of legal title, or the sublease or sublicense as the case may be, of the
Purchased Assets. Seller and Purchaser will promptly file documentary materials
required by the HSR Act and promptly file any additional information requested
as soon as practicable after receipt of request therefor.
SECTION 5.7. ASSIGNMENT OF LEASES. At the Closing and
effective as of the Closing Date, Seller shall sell, assign and transfer to
Purchaser all their rights under the Assigned Leases, free from all defaults by
Seller and all claims by third parties against Purchaser or the Purchased Assets
relating to any defaults by Seller thereunder.
SECTION 5.8. CURE OF DEFAULTS. Seller shall, on or prior to
the Closing, cure any and all defaults or provide adequate assurance that they
will cure any and all defaults with respect to Assigned Leases and Assumed
Contracts as provided in section 365 of the Bankruptcy Code and as required by
the Bankruptcy Court (and the cost to cure such defaults shall be considered an
Administrative Expense hereunder) so that such Assigned Leases and Assumed
Contracts may be assumed by Seller and assigned to Purchaser as applicable in
accordance with the provisions of section 365 of the Bankruptcy Code and so that
Purchaser shall have no obligations for defaults existing prior to the
assignment.
SECTION 5.9. NAME CHANGE FILINGS. On the Closing Date, or as
promptly as possible thereafter, Seller shall file with the Secretary of State
of the state of Massachusetts an amendment to Seller's Assumed Name certificates
to change its name to a name which does not contain any of the trade names
assigned herein, and shall promptly provide Purchaser with evidence of such
filing. In addition, Seller shall, within 30 days after the Closing Date, take
such actions and file such documents as are necessary to reflect such name
changes in all states in which any such Seller is qualified to do business as a
foreign corporation and will deliver to Purchaser copies of such documents
evidencing such name change filings. Without limiting the foregoing, Seller
shall promptly change its name for all purposes related to the Cases.
SECTION 5.10. LANDLORDS. Seller hereby consents to Purchaser
contacting, engaging in conversations with and executing conditional lease
modifications and other documents with Landlords of the Stores during the period
between the execution of this Agreement and the Closing Dates; PROVIDED, THAT,
Seller shall not be bound by any such action of Purchaser.
SECTION 5.11. ADMINISTRATIVE EXPENSE BAR DATE. Seller shall
promptly after the date hereof file a motion to set a Bar Date to be set for all
claims against Seller arising after the Filing Date against the Seller.
SECTION 5.12. SALE OF AISLE 3 STORE LEASES AND FFE. Seller
shall use its best efforts to cause all of the real property leases relating to
the Aisle 3 Stores and the related furniture, fixtures and equipment to be sold
or otherwise assigned in a commercially reasonable and prudent manner. Prior to
the Closing Date, any net proceeds received by Seller from the disposition of
such assets relating to the Aisle 3 Stores shall be used to reduce the Assumed
Indebtedness, and shall be included in the
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calculation of Actual Net Asset Value for purposes of the Purchase Price
Adjustment pursuant to the provisions of Section 2.2. and 2.4. Purchaser shall
be consulted in connection with each such sale or assignment. After the Closing
Date, any and all proceeds received by Seller from the disposition of such
assets shall remain the property of Seller.
SECTION 5.13. XXXXX 0 XXXXXXXXXXX. Seller shall conduct
liquidation or "GOB" sales of Merchandise at the Aisle 3 Stores. Seller shall
obtain authorization of the Bankruptcy Court for the conduct of such sales. All
proceeds from such sales (after payment of the direct expenses relating to such
sales) shall be used to satisfy the Assumed Indebtedness referred to in Section
2.3.
SECTION 5.14. SURVIVAL. Except as otherwise provided in
Article X, each of the covenants and obligations of Seller shall survive the
Closing.
ARTICLE 6
CERTAIN COVENANTS OF PURCHASER
SECTION 6.1. REASONABLE EFFORTS. Upon the terms and subject to
the conditions of this Agreement, Purchaser will use commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary or proper consistent with applicable law to
consummate and make effective in the most expeditious manner practicable the
transactions contemplated hereby.
SECTION 6.2. CONSENTS AND APPROVALS. Purchaser shall use
commercially reasonable efforts to provide, at Seller's request, assistance in
obtaining the Order.
SECTION 6.3. ADEQUATE ASSURANCES REGARDING ASSIGNED LEASES.
With respect to each Assigned Lease, Purchaser shall provide adequate assurance
as required under the Bankruptcy Code of the future performance of such Assigned
Lease by Purchaser. Purchaser agrees that it will promptly take all actions as
are reasonably required by Seller to assist in obtaining the Bankruptcy Court's
entry of the Order, such as furnishing affidavits, non-confidential financial
information or other documents or information for filing with the Bankruptcy
Court and making Purchaser's employees and representatives available to testify
before the Bankruptcy Court, with respect to demonstrating adequate assurance of
future performance by Purchaser under the Assigned Leases.
SECTION 6.4. CERTAIN EMPLOYEES. Purchaser agrees that it may
interview and have the option to offer employment in comparable positions with
substantially comparable pay to the employees employed in the Business of Seller
as of the Closing Date, including but not limited to Store Managers, Assistant
Store Managers, Distribution Center Mangers, Distribution Center Assistant
Managers and Sales Associates, but Purchaser shall be under no obligation to
offer employment to any of Seller's employees and provided that the offer of
employment to any employee shall not
25
be deemed to be an assumption of any collective bargaining agreement. Purchaser
shall provide Seller with five (5) Business Days notice prior to severing any
employee. In the event Purchaser xxxxxx any employee of Seller prior to the
Closing Date and subsequently rehires such person within twelve (12) months
thereafter, Purchaser will reimburse Seller for any severance payments made to
such employee.
SECTION 6.5. CERTAIN PAYMENTS. In the event Purchaser
determines not to assume the liability of Seller under (i) its agreement with
the employees of the Downtown Boston Store or (ii) its employment agreements and
related retention agreements with Xxxxxx Xxxxxx and Xxxxxx Xxxxxx, Purchaser
shall, upon allowance by final Order of the Bankruptcy Court of any rejection
damage claims relating to such agreements, pay to Seller's estate any amounts
owed upon final allowance of any such claims, equal to the product of (x) the
allowed rejection damage claims, multiplied by (y) the actual percentage
recovery of the unsecured creditors of the Seller under a confirmed chapter 11
plan for Seller (prior to consideration of such rejection claim).
SECTION 6.6. COLLECTION OF RECEIVABLES. In the event any
accounts receivable existing as of the Effective Date and reflected in the
calculation of Actual Net Asset Value are materially past due, the Official
Committee shall have the right to make demand upon Purchaser to initiate and
pursue collection proceedings with respect to such receivable. In the event
Purchaser has not initiated a collection proceeding within 45 days thereafter,
the Official Committee shall have the right to initiate and pursue such
collection proceedings in the Purchaser's stead. Any recoveries resulting from
such collection proceeding shall belong and be immediately paid to Purchaser.
SECTION 6.7. FURTHER ASSURANCES. Upon the request of Seller at
any time after the Closing Date, Purchaser shall forthwith execute and deliver
such documents as Seller or its counsel may reasonably request to effectuate the
purposes of this Agreement, including cooperating with Seller to file and record
all trademark and trade name assignments in the U.S. Patent and Trademark
Office, which filing costs shall be paid by Purchaser. Upon request of Seller or
the Official Committee, Purchaser shall provide Seller reasonable access to the
books, records and employees of the Business, to the extent necessary for Seller
to wind down its estate.
ARTICLE 7
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions
contemplated by this Agreement are subject to the satisfaction (unless waived in
writing by Seller) of each of the following conditions on or prior to the
Closing Date:
SECTION 7.1. REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Purchaser contained in this Agreement shall be
true and correct on and as of the Closing Date in all material respects as
though such representations and warranties were made on and as of the Closing
Date. Purchaser shall have delivered to Seller a certificate signed by officers
of Purchaser, dated the Closing Date, to the
26
foregoing effect; provided, that, absent willful misconduct or fraud, such
officers shall not have any personal liability arising out of or resulting from
such certificate.
SECTION 7.2. COMPLIANCE WITH AGREEMENT. Purchaser shall have
performed and complied in all material respects (and in all respects in the case
of Article 2 hereof) with all covenants and conditions to be performed or,
complied with by it on or prior to the Closing Date. Purchaser shall have
delivered to Seller a certificate signed by an officer of Purchaser, dated the
Closing Date, to the foregoing effect.
SECTION 7.3. CONSENTS. The Bankruptcy Court's entry of the
Order (which is addressed in Article X) shall have been duly obtained and shall
be in full force and effect on the Closing Date .
SECTION 7.4. HSR ACT. All filings under the HSR Act shall have
been made and any required waiting period under such laws (including any
extensions thereof obtained by request or other action of any governmental
authority) applicable to the transactions contemplated hereby shall have expired
or been earlier terminated.
SECTION 7.5. CORPORATE DOCUMENTS. Seller shall have received
from Purchaser (i) copies of the Certificates of Incorporation and Bylaws of
Purchaser and resolutions duly adopted by the board of directors of Purchaser
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and such resolutions shall be in full
force and effect as of the Closing Date, certified by the Secretary of
Purchaser, and (ii) a certificate of incumbency of the officers of Purchaser.
SECTION 7.6. GUARANTY OF VALUE CITY. Value City shall
unconditionally and irrevocably guaranty to Seller Purchaser's obligation to pay
(a) at Closing the Cash Purchase Price, the Stock Consideration and the Letter
of Credit Deposit (as applicable) and (b) any Administrative Expenses and
Priority Unsecured Claims that are Assumed Liabilities and that remain unpaid
thirty (30) days after the Closing Date. The obligations, covenants, agreement
and duties of Value City shall be joint and several with Purchaser, shall be
irrevocable, absolute, and unconditional, shall remain in full force and effect
until payment in full of all payments set forth above, and shall in no way be
affected or impaired by reason of the happening from time to time of any other
event, other than the termination of this Agreement.
SECTION 7.7. CREDIT CARD RECEIVABLES AGREEMENT. Purchaser
shall have used its commercially reasonable efforts to continue or otherwise
replace the Seller's credit card receivables agreement with Monogram Credit Card
Bank of Georgia in order that Seller's liability under such agreement shall be
eliminated.
SECTION 7.8. ENTRY OF THE ORDER. (i) The Bankruptcy Court
shall have entered the Order, (ii) the Order shall not be stayed; and (iii) the
Order shall not modify the terms and conditions of this Agreement or the
transactions contemplated hereby in any way that adversely affects Seller.
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SECTION 7.9. EXECUTION AND APPROVAL OF AGREEMENTS. Purchaser
shall have duly authorized and executed and delivered to Seller this Agreement
and each Ancillary Agreement, including but not limited to the Interim
Management Agreement, and such Ancillary Agreements shall be approved by the
Bankruptcy Court.
ARTICLE 8
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (unless waived in
writing by Purchaser) of each of the following conditions on or prior to the
Closing Date:
SECTION 8.1. REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in this Agreement shall be
true and correct on and as of the Closing Date in all material respects as
though such representations and warranties were made on and as of the Closing
Date, except for those which will not, individually or in the aggregate, have a
material adverse effect on the value of Purchased Assets or Purchaser's ability
to operate the Business on and after the Effective Date . Seller shall have
delivered to Purchaser a certificate signed by the Chief Executive Officer or
the Chief Financial Officer of Seller, dated the Closing Date, to the foregoing
effect; provided, that, absent willful misconduct or fraud, none of such
individuals shall have any personal liability arising out of or resulting from
such certificate.
SECTION 8.2. HSR ACT. All filings under the HSR Act shall have
been made and any required waiting period under such laws (including any
extensions thereof obtained by request or other action of any governmental
authority) applicable to the transactions contemplated hereby shall have expired
or been earlier terminated.
SECTION 8.3. COMPLIANCE WITH AGREEMENT. Seller shall have
performed and complied in all material respects with all material covenants and
conditions to be performed or complied with by them on or prior to the Closing
Date and shall have delivered to Purchaser a certificate signed by an executive
officer of each of Seller, dated the Closing Date, to the foregoing effect,
provided, that, absent willful misconduct or gross negligence, none of such
individuals shall have any personal liability arising out of or resulting from
such certificate.
SECTION 8.4. NO ADVERSE PROCEEDING. As of the Closing Date,
there shall not have been instituted or be pending any suit, action or other
proceeding by any Governmental Agency in which it is sought to restrain or
prohibit the transactions contemplated by this Agreement.
SECTION 8.5. CORPORATE DOCUMENTS. Purchaser shall have
received from Seller (i) copies of the Certificate of Incorporation and By Laws
of Seller and resolutions duly adopted by the board of directors of Seller
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and such resolutions shall be in full
force and effect as of the Closing Date,
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certified by the Secretary of the Seller; and (ii) a certificate of incumbency
of the officers of Seller.
SECTION 8.6. ENTRY OF THE ORDER. (i) The Bankruptcy Court
shall have entered (i) the Bidding Procedures Order; (ii) the Order; (iii) the
Order shall not be stayed; and (iv) the Order as entered by the Bankruptcy
Court, shall not modify the terms and conditions of this Agreement or the
transactions contemplated hereby in any way that materially adversely affects
Purchaser, in its reasonable good faith judgment.
SECTION 8.7. EXECUTION AND APPROVAL OF AGREEMENTS. Seller
shall have duly authorized and executed and delivered to Purchaser this
Agreement and each Ancillary Agreement, including but not limited to the Interim
Management Agreement, and such Ancillary Agreements shall be approved by the
Bankruptcy Court and shall not have been terminated by Seller prior to the
Closing Date.
SECTION 8.8. MATERIAL ADVERSE EFFECT. No Material Adverse
Effect shall have occurred after the date hereof. For the purposes hereof, it
shall be considered a Material Adverse Effect (a)(i) if less than 50% of those
employees designated as "Store Managers" by the Seller as of the date hereof
shall no longer be employed as of the Closing Date and (ii) if less than 50% of
those employees designated as "Distribution Center Managers" by the Seller as of
the date hereof shall no longer be employed as of the Closing Date, PROVIDED,
HOWEVER, that any such employees on the Effective Date for which Purchaser does
not offer employment (on comparable terms and conditions) or prior to the
Closing Date shall not be considered employees on the date hereof, (b) if the
Downtown Boston Lease shall be unable to be assumed and assigned for any reason
whatsoever, including but not limited to by reason of a condemnation or casualty
event or (c) if the lenders under the DIP Facility do not fund under the DIP
Facility in a manner sufficient for Purchaser to operate the Business pursuant
to the Interim Management Agreement.
SECTION 8.9. CALCULATION OF ACTUAL NET ASSET VALUE. The
calculation of the Actual Net Asset Value shall have been completed as soon as
possible after the date hereof, but no later than 10 days prior to the Closing
Date.
SECTION 8.10. KEY EMPLOYEES. Purchaser shall have entered into
employment arrangements with Xxxxxx Xxxxxx and Xxxxxx Xxxxxx, on terms
acceptable to Purchaser.
SECTION 8.11. DELIVERIES AT CLOSING. The delivery by Seller,
at the Closing, of the following, to the extent they are in Seller's possession
or control (except with regard to Leases eliminated pursuant to Section 2.8):
(i) all original Assigned Leases;
(ii) all keys for the Stores;
(iii) all security and alarm codes;
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(iv) all Ancillary Agreements executed by Seller
including assignments for each trademark in recordable form
approved by the U.S. Patent and Trademark Office, from the
proper entity holding title to such trademarks and trade
names;
(v) satisfactory arrangements for the shipping of all
Merchandise and Supplies constituting Purchased Assets which
are not located at a Store at the time of Closing to one
distribution center of Purchaser (such shipping to be at
Seller's sole cost and expense); and
(vi) proper chain of title for trademarks and trade
names, copies of original certificates of trademark,
original renewal certificates, copies of any prior
assignments in recordable form with the U.S. Patent and
Trademark Office, copies of all design work with respect to
any marks with special designs, samples of any labels,
hangtags, bags or other advertisements with respect to each
xxxx and name, the date each xxxx and name was first used in
interstate commerce and whether they are still being used,
and pictures of store signs for "Filene's Basement".
SECTION 8.12. RELEASE OF LIENS. Seller shall have requested
General Electric Capital Corporation and Paragon Capital LLC to deliver to
Purchaser all UCC-3 releases and other release or termination documents,
including those necessary to file with the U.S. Patent and Trademark Office,
necessary to reflect the release of Liens in the Purchased Assets effected by
the Order, upon payment of the Assumed Indebtedness relating to the DIP
Facility.
ARTICLE 9
THE CLOSING; TERMINATION
SECTION 9.1. THE CLOSING. The closing of the purchase and sale
of the Purchased Assets shall proceed as follows:
The closing for the purchase and sale of all Purchased Assets shall be
held within two (2) days after all of the conditions precedent in Articles VII
and VIII have been satisfied or waived (the "CLOSING DATE") and shall be deemed
to have occurred at 12:00 AM Eastern Daylight Time at the beginning of the
Closing Date and shall be held at the offices of Weil, Gotshal & Xxxxxx LLP, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx or at such other place and at such time and on
such date mutually agreeable to the parties hereto. Unless otherwise agreed by
the Purchaser, the Closing Date shall occur no later than March 15, 2000.
SECTION 9.2. TERMINATION. Anything in this Agreement to the
contrary notwithstanding, this Agreement and the transactions contemplated
hereby may be terminated in any of the following ways at any time before the
Closing and in no other manner:
30
(a) By mutual written consent of Purchaser and Seller;
(b) By either Purchaser or Seller if the Closing shall not
have occurred on or prior to March 15, 2000 (or such later date as shall be
mutually agreed to by the parties);
(c) By Purchaser if Seller (i) is in material breach of any
aspect of any of its representations or warranties made in this Agreement, or
(ii) is in material violation or default of any of their covenants or agreements
in this Agreement and such violation or default is not cured on or prior to the
Closing Date, provided Seller shall have at least five (5) days written notice
of such violation or default;
(d) By Seller if Purchaser (i) is in material breach of any
aspect of any of its representations or warranties made in this Agreement, or
(ii) is in material violation or default of any of its covenants or agreements
in this Agreement and such violation or default is not cured on or prior to the
Closing Date, provided purchaser shall have at least five (5) days written
notice of such violation or default;
(e) By Purchaser if Seller is unable to deliver a final Order
of the Bankruptcy Court on or prior to March 10, 2000;
(f) By Purchaser if Seller is unable to obtain an Order to
assign any Assigned Lease, except for those Leases rejected by the Purchaser
pursuant to Section 2.8 or except as provided in Section 2.10;
(g) By Purchaser or Seller if the Actual Net Asset Value shall
be less than $(32,575,000) at the Closing Date; or
(h) By Purchaser if Seller is unable to deliver (a)(i) an
Order of the Bankruptcy Court approving the Interim Management Agreement or (ii)
the Bidding Procedures Order approving, INTER ALIA, the Break-Up Fee, both of
which Orders must be entered by the Bankruptcy Court on or before February 4,
2000 and (b) an Order of the Bankruptcy Court approving the "GOB" sale in
connection with the Aisle 3 Stores, which Order must be entered by the
Bankruptcy Court on or before February 4, 2000.
SECTION 9.3. EFFECTS OF TERMINATION.
(a) Except with regard to the Letter of Credit Deposit as set
forth in clauses (b) and (c) below, in the event this Agreement is terminated
pursuant to Section 9.2, all further obligations of the parties hereunder shall
terminate. However, notwithstanding anything herein to the contrary, if such
termination shall result from the willful failure of any party to perform a
covenant of this Agreement, such party shall be liable for any and all Damages
incurred or suffered by the other party as a result of such failure to perform
PROVIDED, THAT, no party hereto shall be liable for any incidental,
consequential, special or punitive damages.
(b) If this Agreement is terminated as a result of Section
9.2(a), (b), (c), (e), (f), (g) or (h), Seller shall immediately cause the
cancellation or otherwise return
31
the Letter of Credit Deposit to Purchaser. Except as provided in Section 9.3(a),
upon the return of the Letter of Credit Deposit, neither party shall be liable
to the other party (or any stockholder, director, officer, employee, agent,
consultant or representative of such party) to this Agreement.
(c) If this Agreement is terminated pursuant to Section
9.2(d), Seller shall be entitled to draw upon the Letter of Credit Deposit
(including any interest earned thereon), following entry of a final Order of the
Bankruptcy Court determining that this Agreement was properly terminated by
Seller under Section 9.2(d).
(d) The provisions of this Section 9.3 shall survive any
termination hereof pursuant to Section 9.2.
ARTICLE 10
COSTS; BREAK UP FEE; SOLICITATION; TOPPING FEE; COURT APPROVAL
SECTION 10.1. BANKRUPTCY COURT APPROVAL OF SALE PROCEDURES.
Promptly following the date hereof (and in no event later than one (1) Business
Day thereafter), Seller will file a motion (the "SALE PROCEDURE MOTION") with
the Bankruptcy Court requesting the entry of the Bidding Procedure Order (i)
fixing the time, date, and location of a hearing (the "APPROVAL HEARING") to
approve Seller's consummation of this Agreement, (ii) fixing the time and date
of an auction (the "AUCTION") to be held one to three days before the Approval
Hearing at which higher and better offers may be presented to Seller, (iii)
providing that if Seller receives from a third party a higher and better offer
at the Auction, and such third party offer is subsequently approved by the
Bankruptcy Court and closes as provided by its terms or does not close and
Seller is entitled to retain such third party's deposit, then Purchaser will be
entitled to receive from Seller (w) a flat fee payment (not dependent on amounts
actually expended or incurred by Purchaser) in cash or other immediately
available good funds in the amount of $2,000,000, (x) reimbursement of Purchaser
for its actual expenses incurred in connection with this transaction, up to a
maximum of $500,000, including, without limitation, coach airfare and reasonable
travel expenses, outside legal, accounting and other professional fees and
expenses, costs incurred in Purchaser's due diligence investigation of Seller's
expenses, costs incurred in connection with obtaining financing commitments and
(y) all management fees and other amounts owed pursuant to the Interim
Management Agreement (including but not limited to outstanding invoices for
Merchandise shipped by one or more affiliates of Purchaser to Seller after the
Effective Date)(collectively the "BREAK-UP FEE"), which payments shall be made
to Purchaser concurrently with the consummation of such third party sale or
termination if Seller is permitted to retain their deposit, (iv) no prospective
purchaser will be permitted to bid at the Auction unless such party has been
deemed "financially qualified" by the Official Committee's investment advisors,
BDO Xxxxxxx LLP (v) no prospective purchaser who bids for the Purchased Assets
at Auction shall be entitled to purchase the Purchased Assets unless such
prospective purchaser (a) posts a $3 million deposit; (b) offers to purchase the
Purchased Assets for consideration which is greater than the consideration
32
set forth in this Agreement (including all cash, non-cash consideration and
assumed liabilities) by at least the sum of (x) the Break-Up Fee plus (y) $1.5
million, and otherwise on terms at least as favorable to Seller as those set
forth in this Agreement, and (v) after any initial overbid, all further overbids
must be in increments of at least $500,000.00. Should overbidding take place,
Purchaser shall have the right, but not the obligation, to participate in the
overbidding and to be approved as the overbidder at the Approved Hearing based
upon any such overbid. Following the filing of the Sale Procedure Motion, Seller
shall use its best efforts to obtain the Bidding Procedures Order. Seller agrees
that the Break-Up Fee is in the best interests of Seller and its estate, among
other reasons, because the establishment of the Break-Up Fee enhanced the
bidding process and aided in establishing the highest possible purchase price;
and aided in negotiating with Purchaser the highest possible bid for the assets.
SECTION 10.2. BEST EFFORTS. Seller shall use its best efforts
to obtain Bankruptcy Court approval of the Bidding Procedures Orders, and
specifically of the Break Up Fee, and other obligations of Seller under this
Article 10, and notice requirements and other procedures relating to the sale
transaction contemplated by this Agreement in advance of the hearing set by the
Bankruptcy Court to consider approval of the contemplated sale. Seller shall use
its best efforts to obtain approval of the entry of the Order.
SECTION 10.3. MOTIONS. Purchaser shall have the right to
review and approve all motions, pleading, affidavits, and other documents filed
with the Bankruptcy Court by Seller to approve the transactions contemplated by
this Agreement.
ARTICLE 11
TAXES; RECORDS
The parties hereto hereby covenant and agree as follows:
SECTION 11.1. TAXES RELATED TO PURCHASE OF ASSETS. The parties
recognize and acknowledge that the sale, transfer, assignment and delivery of
the Purchased Assets may be exempt under section 1146(c) of the Bankruptcy Code
and the Order from all state and local transfer, recording, stamp or other
similar transfer taxes (collectively, "TRANSACTION TAXES") that may be imposed
by reason of the sale, transfer, assignment and delivery of the Purchased
Assets; provided, however, that if Transaction Taxes are assessed for any
reason, then Seller shall bear the cost of such Transaction Taxes along with any
recording and filing fees. Purchaser and Seller agree to cooperate to determine
the amount of Transaction Taxes payable in connection with the transactions
contemplated under this Agreement. Transaction Taxes shall not include any Taxes
for which Seller is responsible under Section 11.2. Seller shall bear the cost
of any use or sales tax that may be imposed as a result of the transactions
contemplated hereby or, together with Purchaser, jointly seek to establish a
basis for an exemption therefrom. Purchaser and Seller agree to cooperate in the
preparation and filing of any and all required returns for or with respect to
such Transaction Taxes and/or use or sales taxes with any and all appropriate
taxing authorities. It is expressly agreed and understood that
33
the Seller intends to seek Bankruptcy Court approval to exempt the transactions
contemplated by this Agreement under Bankruptcy Code section 1146(c) such that
the transactions will not be the subject of any transfer tax, stamp tax or
similar tax.
SECTION 11.2. COOPERATION ON TAX AND OTHER MATTERS.
(a) Purchaser and Seller agrees to furnish or cause to be
furnished to each other, as promptly as practicable, such information and
assistance relating to the Business (including access to books and records) as
is reasonably necessary for the preparation and filing of any Tax Return, claim
for refund or other required or optional filings relating to tax matters, for
the preparation for and proof of facts during any tax audit, for the preparation
for any tax protest, for the prosecution or defense of any suit or other
proceeding relating to tax matters and for the answer of any governmental or
regulatory inquiry relating to tax matters.
(b) Except as set forth below, Purchaser and Seller shall
retain all books and records with respect to Taxes pertaining to the Purchased
Assets. Each party shall provide the other with at least thirty (30) days prior
written notice before destroying any such books and records, during which period
the party receiving such notice can elect to take possession, at its own
expense, of such books and records. Purchaser and Seller agree that they will
provide access to each other and each other's attorneys, accountants and other
representatives ("AUDITING PARTY") (after reasonable notice and during normal
business hours) to personnel and to such files and records as Auditing Party may
reasonably deem necessary to (i) properly prepare for, file, prove, answer,
prosecute and/or defend any such return, filing, audit, protest, claim, suit,
inquiry or other proceeding or (ii) resolve any claim against the Auditing
Party. Auditing Party shall reimburse the opposite party for any reasonable
out-of-pocket costs incurred by it (but not for overhead or cost of salaries or
benefits of the opposite party's personnel) in providing such access.
ARTICLE 12
RIGHT OF OFFSET
SECTION 12.1. RIGHT OF OFFSET. Seller hereby agrees, in the
event that (i) the parties hereto agree or (ii) the Bankruptcy Court determines
that (x) any representation or warranty of Seller in this Agreement is breached;
or (y) any covenant of undertaking of Seller in this Agreement remains
unfulfilled; or (z) any statement contained in any certificate, schedule,
exhibit, instrument, or paper delivered or to be delivered by Purchaser in
connection with the transactions is untrue, and such breach, non-fulfillment or
untruth shall cause Damages to be incurred by Purchaser, then, as its sole
remedy, Purchaser shall be entitled to offset from each installment of the
Installment Purchase Price, PRO RATA, the actual amount of such Damages, up to a
maximum amount of $6,000,000, PROVIDED, HOWEVER, that Seller shall not be liable
to offset for any Damages with respect to the matters contained in this Section
12.1 until such time as the Damages shall exceed an aggregate amount equal to
$250,000. Notwithstanding anything to the contrary contained herein, Purchaser
shall have the right to offset for
34
Damages directly related to the clean-up, remediation or removal of any
pollutant, contaminant or hazardous material present at or within any of the
real property Purchased Assets to the limits provided herein only to the extent
that Purchaser shall not have, directly or indirectly, caused the incurrence of
any such Damages, including without limitation, by reason of Purchaser's
decision to renovate the real property Purchased Assets.
ARTICLE 13
MISCELLANEOUS PROVISIONS
SECTION 13.1. REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties to this Agreement made in this
Agreement, subject to the exceptions thereto, will not be affected by any
information furnished to, or any investigation conducted by, any of them or
their representatives in connection with the subject matter of this Agreement.
SECTION 13.2. NOTICES. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given (a)
when delivered personally to the recipient, (b) when sent to the recipient by
telecopy (receipt electronically confirmed by sender's telecopy machine) if
during normal business hours of the recipient, otherwise on the next Business
Day, (c) three (3) Business Days after the date when sent to the recipient by
reputable express courier service (charges prepaid) or (d) seven (7) Business
Days after the date when mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such notices, demands and
other communications will be sent to Seller and to Purchaser at the addresses
indicated below:
If to Seller: Filene's Basement Corp.
Filene's Basement, Inc.
00 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy (which Mintz Xxxxx Xxxx Xxxxxx Xxxxxxx and
shall not constitute Popeo PC
notice) to: Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Xxxxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
and
Xxxxxxxx White LLP
000 Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
35
Xxxxxx X. Xxxxxxxxxxx, Esq.
Fax: (000) 000-0000
If to Purchaser: Base Acquisition Corp.
0000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Xxxxxx X. Xxxxxxxx
Fax: (000) 000 0000
and
Schottenstein Stores Corporation
0000 Xxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Xxxxx X. Xxxx
Fax: (000) 000-0000
with a copy (which Weil, Gotshal & Xxxxxx LLP
shall not constitute 000 Xxxxx Xxxxxx
notice) to: Xxx Xxxx, Xxx Xxxx 00000
Xxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
If to the Official Kronish Xxxx Xxxxxx & Xxxxxxx LLP
Committee 1114 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Xxxxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
or to such other address as any party hereto may, from time to time, designate
in writing delivered pursuant to the terms of this Section.
SECTION 13.3. AMENDMENTS. The terms, provisions and conditions
of this Agreement may not be changed, modified or amended in any manner except
by an instrument in writing duly executed by each of the parties hereto.
SECTION 13.4. ASSIGNMENT. This Agreement is binding upon and
inures to the benefit of the successors and assigns of each party to this
Agreement (including any trustee appointed in respect of Seller under the
Bankruptcy Code), but no rights, obligations or liabilities under this Agreement
may be assigned by any party without the prior written consent of the other
parties hereto, except that Purchaser shall have the right, on or prior to the
Closing Date, to assign all or any portion of its rights under this Agreement
(including without limitation assignments of its rights with respect to
individual stores to subsidiaries to be formed), provided, however, that no such
assignment shall relieve Purchaser of its obligations hereunder.
36
SECTION 13.5. ANNOUNCEMENTS. All press releases, notices to
customers and suppliers and other announcements prior to the Closing Date with
respect to this Agreement and the transactions contemplated by this Agreement
shall be approved by both Purchaser and Seller prior to the issuance thereof,
provided that any party may make any public disclosure it believes in good faith
is required by law or regulation (in which case the disclosing party shall
advise the other party prior to making such disclosure and provide such other
party an opportunity to review and comment on the proposed disclosure).
SECTION 13.6. EXPENSES. Except as otherwise set forth in this
Agreement, each party to this Agreement shall bear all of its legal, accounting,
investment banking and other expenses incurred by it or on its behalf in
connection with the transactions contemplated by this Agreement, whether or not
such transactions are consummated.
SECTION 13.7. ENTIRE AGREEMENT. This Agreement and the
Ancillary Agreements constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede and are in full
substitution for any and all prior agreements and understandings between them
relating to such subject matter. The Exhibits and Schedules to this Agreement
are hereby incorporated and made a part hereof and are an integral part of this
Agreement.
SECTION 13.8. DESCRIPTIVE HEADINGS. The descriptive headings
of the several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof
SECTION 13.9. COUNTERPARTS. For the convenience of the
parties, any number of counterparts of this Agreement may be executed by any one
or more parties hereto, and each such executed counterpart shall be, and shall
be deemed to be, an original, but all of which shall constitute, and shall be
deemed to constitute, in the aggregate but one and the same instrument.
SECTION 13.10. LAW; JURISDICTION. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof for so long as Seller is subject to the jurisdiction of the
Bankruptcy Court, the parties hereto irrevocably elect as the sole judicial
forum for the adjudication of any matters arising under or in connection with
this Agreement, and consent to the jurisdiction of, the Bankruptcy Court. After
Seller is no longer subject to the jurisdiction of the Bankruptcy Court, the
parties hereto irrevocably elect as the sole judicial forum for the adjudication
of any matters arising under or in connection with this of Agreement, and
consent to the jurisdiction of the courts of the County of New York, State of
New York or of the United States of America for the Southern District of New
York.
SECTION 13.11. CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party. Any references to any federal, state, local or foreign statute or law
will also refer to all rules and regulations
37
promulgated thereunder, unless the context requires otherwise. Unless the
context otherwise requires: (a) a term has the meaning assigned to it by this
Agreement; (b) an accounting term not otherwise defined has the meaning assigned
to it by GAAP; (c) the word "or" is not exclusive; (d) the words "include",
"includes" and "including" shall be deemed to be followed by the words "without
limitation"; (e) words in the singular include the plural, and in the plural
include the singular; (f) provisions apply to successive events and
transactions; and (g) "$" means the currency of the United States of America.
SECTION 13.12. SEVERABILITY. In the event that any one or more
of the provisions contained in this Agreement or in any other instrument
referred to herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument. Furthermore, in lieu of any such
invalid or unenforceable term or provision, the parties hereto intend that there
shall be added as a part of this Agreement a provision as similar in terms to
such invalid or unenforceable provision as may be possible and be valid and
enforceable.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, Seller and Purchaser have executed and
delivered this Agreement as of the day and year first written above.
BASE ACQUISITION CORP.
By:
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Name:
-------------------------------------
Title:
------------------------------------
FILENE'S BASEMENT CORP.
By:
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Name:
-------------------------------------
Title:
------------------------------------
FILENE'S BASEMENT INC.
By:
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Name:
-------------------------------------
Title:
------------------------------------
