ASSET PURCHASE AGREEMENT
by and among
THE RIGHT START, INC.,
TOY SOLDIER, INC.,
ROYAL VENDEX KBB N.V.,
F.A.O. XXXXXXX
and
QUALITY FULFILLMENT SERVICES, INC.
Dated November 19, 2001
TABLE OF CONTENTS
Page
Article 1. DEFINITIONS AND USAGE..........................................................................1
1.1 DEFINITIONS....................................................................................1
1.2 USAGE.........................................................................................14
Article 2. SALE AND TRANSFER OF ASSETS; CLOSING..........................................................15
2.1 ASSETS TO BE SOLD.............................................................................15
2.2 EXCLUDED ASSETS...............................................................................16
2.3 CONSIDERATION.................................................................................17
2.4 LIABILITIES...................................................................................19
2.5 CLOSING.......................................................................................22
2.6 CLOSING OBLIGATIONS...........................................................................22
2.7 CONSENTS......................................................................................25
Article 3. Representations and Warranties of Sellers and Shareholder.................................26
3.1 ORGANIZATION AND GOOD STANDING................................................................26
3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT........................................................26
3.3 CAPITALIZATION................................................................................27
3.4 FINANCIAL STATEMENTS..........................................................................28
3.5 BOOKS AND RECORDS.............................................................................28
3.6 SUFFICIENCY OF ASSETS.........................................................................28
3.7 DESCRIPTION OF OWNED REAL PROPERTY............................................................28
3.8 DESCRIPTION OF LEASED REAL PROPERTY...........................................................29
3.9 TITLE TO ASSETS; ENCUMBRANCES.................................................................29
3.10 CONDITION OF ASSUMED STORES AND PROPERTIES....................................................29
3.11 ACCOUNTS RECEIVABLE...........................................................................29
3.12 INVENTORIES...................................................................................30
3.13 NO UNDISCLOSED LIABILITIES....................................................................30
3.14 TAXES.........................................................................................30
3.15 NO MATERIAL ADVERSE CHANGE....................................................................30
3.16 EMPLOYEE BENEFITS.............................................................................31
3.17 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS...............................32
3.18 LEGAL PROCEEDINGS; ORDERS.....................................................................34
3.19 ABSENCE OF CERTAIN CHANGES AND EVENTS.........................................................34
3.20 CONTRACTS; NO DEFAULTS........................................................................35
3.21 [RESERVED]....................................................................................37
3.22 ENVIRONMENTAL MATTERS.........................................................................37
3.23 EMPLOYEES.....................................................................................38
3.24 LABOR DISPUTES; COMPLIANCE....................................................................38
3.25 INTELLECTUAL PROPERTY ASSETS..................................................................39
3.26 [Reserved]....................................................................................42
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3.27 [Reserved]....................................................................................42
3.28 RELATIONSHIPS WITH RELATED PERSONS............................................................42
3.29 BROKERS OR FINDERS............................................................................43
3.30 SECURITIES LAW MATTERS........................................................................43
3.31 DISCLOSURE....................................................................................43
Article 4. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER.................................................43
4.1 ORGANIZATION AND GOOD STANDING................................................................43
4.2 AUTHORITY; NO CONFLICT........................................................................44
4.3 CERTAIN PROCEEDINGS...........................................................................44
4.4 BROKERS OR FINDERS............................................................................45
Article 5. REPRESENTATIONS AND WARRANTIES OF BUYER.......................................................45
5.1 ORGANIZATION AND GOOD STANDING................................................................45
5.2 AUTHORITY; NO CONFLICT........................................................................45
5.3 CERTAIN PROCEEDINGS...........................................................................46
5.4 BROKERS OR FINDERS............................................................................46
5.5 GOVERNMENTAL CONSENTS.........................................................................46
Article 6. REPRESENTATIONS AND WARRANTIES OF PARENT......................................................47
6.1 ORGANIZATION AND GOOD STANDING................................................................47
6.2 AUTHORITY; NO CONFLICT........................................................................47
6.3 CERTAIN PROCEEDINGS...........................................................................48
6.4 BROKERS OR FINDERS............................................................................48
6.5 GOVERNMENTAL CONSENTS.........................................................................48
6.6 PARENT PREFERRED STOCK........................................................................48
6.7 EXCHANGE ACT REPORTS..........................................................................48
Article 7. COVENANTS OF SELLERS PRIOR TO CLOSING.........................................................49
7.1 ACCESS AND INVESTIGATION......................................................................49
7.2 OPERATION OF THE BUSINESS OF SELLERS..........................................................49
7.3 NEGATIVE COVENANT.............................................................................50
7.4 REQUIRED APPROVALS............................................................................51
7.5 NOTIFICATION..................................................................................51
7.6 NO SOLICITATION...............................................................................51
7.7 BEST EFFORTS..................................................................................52
7.8 CHANGE OF NAME................................................................................52
7.9 PAYMENT OF LIABILITIES........................................................................52
7.10 TREATMENT OF AGED INVENTORIES.................................................................52
7.11 DUE DILIGENCE ASSISTANCE......................................................................52
Article 8. COVENANTS OF BUYER PRIOR TO CLOSING...........................................................53
8.1 REQUIRED APPROVALS............................................................................53
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8.2 BEST EFFORTS..................................................................................53
8.3 NOTIFICATION..................................................................................53
Article 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.........................................53
9.1 ACCURACY OF REPRESENTATIONS...................................................................53
9.2 SELLER'S PERFORMANCE..........................................................................54
9.3 CONSENTS......................................................................................54
9.4 ADDITIONAL DOCUMENTS..........................................................................54
9.5 NO PROCEEDINGS................................................................................55
9.6 GOVERNMENTAL AUTHORIZATIONS...................................................................55
9.7 NO CONFLICT...................................................................................55
9.8 EMPLOYEES.....................................................................................55
Article 10. CONDITIONS PRECEDENT TO SELLERS' AND SHAREHOLDER'S OBLIGATION TO CLOSE........................55
10.1 ACCURACY OF REPRESENTATIONS...................................................................56
10.2 BUYER'S PERFORMANCE...........................................................................56
10.3 CONSENTS......................................................................................56
10.4 ADDITIONAL DOCUMENTS..........................................................................56
10.5 NO INJUNCTION.................................................................................57
10.6 NO PROCEEDINGS................................................................................57
10.7 ASSIGNMENTS...................................................................................57
10.8 NO CONFLICT...................................................................................57
10.9 REPLACEMENT LETTERS OF CREDIT.................................................................57
10.10 SHAREHOLDERS AGREEMENT........................................................................58
10.11 XXXX-XXXXX-XXXXXX.............................................................................58
Article 11. TERMINATION...................................................................................58
11.1 TERMINATION EVENTS............................................................................58
11.2 EFFECT OF TERMINATION.........................................................................59
11.3 BREAK-UP FEE..................................................................................59
Article 12. ADDITIONAL COVENANTS..........................................................................59
12.1 EMPLOYEES AND EMPLOYEE BENEFITS...............................................................59
12.2 PAYMENT OF TAXES RESULTING FROM SALE OF ASSETS................................................63
12.3 RESTRICTIONS ON SHAREHOLDER DISSOLUTION AND DISTRIBUTIONS.....................................64
12.4 PARENT SHAREHOLDER MEETING....................................................................64
12.5 ASSISTANCE IN PROCEEDINGS.....................................................................64
12.6 NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT..........................................64
12.7 CUSTOMER AND OTHER BUSINESS RELATIONSHIPS.....................................................65
12.8 RETENTION OF AND ACCESS TO RECORDS............................................................65
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12.9 REGISTRATION RIGHTS...........................................................................66
12.10 SELLER FINANCIALS.............................................................................66
Article 13. INDEMNIFICATION; REMEDIES.....................................................................66
13.1 SURVIVAL......................................................................................66
13.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS AND SHAREHOLDER..................................67
13.3 INDEMNIFICATION AND REIMBURSEMENT BY BUYER....................................................67
13.4 LIMITATIONS ON AMOUNT--SELLERS AND SHAREHOLDER................................................68
13.5 LIMITATIONS ON AMOUNT--BUYER..................................................................68
13.6 TIME LIMITATIONS..............................................................................68
13.7 APPLICATION AGAINST OUTSTANDING AMOUNT OF SUBORDINATED NOTES FOR INDEMNITY PAYMENTS BY
SELLERS OR SHAREHOLDER........................................................................69
13.8 THIRD-PARTY CLAIMS............................................................................69
13.9 OTHER CLAIMS..................................................................................71
13.10 INDEMNIFICATION IN CASE OF STRICT LIABILITY OR INDEMNITEE NEGLIGENCE..........................71
Article 14. POST-CLOSING MATTERS..........................................................................71
14.1 ALLOCATION....................................................................................71
14.2 FURTHER ASSURANCES............................................................................71
14.3 REMOVING EXCLUDED ASSETS......................................................................72
14.4 OPERATING AGREEMENT...........................................................................72
14.5 OPERATION OF CLOSURE STORES...................................................................72
Article 15. GENERAL PROVISIONS............................................................................73
15.1 EXPENSES......................................................................................73
15.2 PUBLIC ANNOUNCEMENTS..........................................................................73
15.3 NOTICES.......................................................................................73
15.4 JURISDICTION; SERVICE OF PROCESS..............................................................75
15.5 ENFORCEMENT OF AGREEMENT......................................................................75
15.6 WAIVER; REMEDIES CUMULATIVE...................................................................75
15.7 ENTIRE AGREEMENT AND MODIFICATION.............................................................76
15.8 DISCLOSURE LETTER.............................................................................76
15.9 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS.............................................76
15.10 SEVERABILITY..................................................................................76
15.11 CONSTRUCTION..................................................................................77
15.12 GOVERNING LAW.................................................................................77
15.13 EXECUTION OF AGREEMENT........................................................................77
15.14 SHAREHOLDER OBLIGATIONS.......................................................................77
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EXHIBITS
EXHIBIT 2.1(l)........................................................................................Cash Accounts
EXHIBIT 2.6(a)(i)......................................................................................Xxxx of Sale
EXHIBIT 2.6(a)(ii)..............................................................Assignment and Assumption Agreement
EXHIBIT 2.6(a)(iii).................................................................Real Property Lease Assignments
EXHIBIT 2.6(a)(iv)................................................................Intellectual Property Assignments
EXHIBIT 2.6(a)(v)..................................................................Investment Representation Letter
EXHIBIT 2.6(a)(x).....................................................................Transition Services Agreement
EXHIBIT 2.6(a)(xi)..............................................................................Operating Agreement
EXHIBIT 2.6(a)(xii)........................................................................Intercreditor Agreements
EXHIBIT 2.6(b)(i)............................................................................Parent Preferred Stock
EXHIBIT 2.6(b)(ii)...............................................................................Subordinated Notes
EXHIBIT 2.6(b)(iii)........................................................................Buyer Security Agreement
EXHIBIT 2.6(b)(iv).........................................................................................Guaranty
EXHIBIT 2.6(b)(v).........................................................................Parent Security Agreement
EXHIBIT 2.6(b)(xiv)..........................................................................Shareholders Agreement
EXHIBIT 6.2(b)...............................................................................Restrictions on Parent
EXHIBIT 6.7........................................................................................Material Changes
EXHIBIT 9.3.......................................................................................Material Consents
EXHIBIT 9.4(a).........................................................Opinion of Kronish Xxxx Xxxxxx & Xxxxxxx LLP
EXHIBIT 9.4(b).....................................................................Opinion of Shareholder's Counsel
EXHIBIT 9.6.............................................................................Governmental Authorizations
EXHIBIT 10.3...........................................................................Consents Required By Sellers
EXHIBIT 10.4.............................................................................Opinion of Buyer's Counsel
EXHIBIT 14.1...........................................................................Allocation of Purchase Price
SCHEDULE A - Assumed Stores and Facilities
SCHEDULE B - Closure Stores
SCHEDULE C - Required Stores
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INDEX OF DEFINITIONS
Accounts Receivable...............................................................................................1
Aged Inventories..................................................................................................1
Assets............................................................................................................1
Assignment and Assumption Agreement...............................................................................1
Assumed Liabilities...............................................................................................1
Assumed Stores and Properties.....................................................................................1
Balance Sheet.....................................................................................................1
Best Efforts......................................................................................................2
Xxxx of Sale......................................................................................................2
Breach............................................................................................................2
Bulk Sales Laws...................................................................................................2
Business Day......................................................................................................2
Buyer.............................................................................................................2
Buyer Indemnified Persons.........................................................................................2
Buyer Security Agreement..........................................................................................2
Closing...........................................................................................................2
Closing Date......................................................................................................2
Closing Documents.................................................................................................2
Closing Financial Statements......................................................................................2
Closure Stores....................................................................................................2
COBRA.............................................................................................................2
Code..............................................................................................................3
Consent...........................................................................................................3
Contemplated Transactions.........................................................................................3
Contract..........................................................................................................3
Copyrights........................................................................................................3
Damages...........................................................................................................3
Disclosure Letter.................................................................................................3
Distribution Centers..............................................................................................3
Effective Time....................................................................................................3
Employee Plans....................................................................................................3
Encumbrance.......................................................................................................3
Environment.......................................................................................................3
Environmental Law.................................................................................................4
Environmental, Health and Safety Liabilities......................................................................3
ERISA.............................................................................................................5
Exchange Act......................................................................................................5
Excluded Assets...................................................................................................5
GAAP..............................................................................................................5
Governing Documents...............................................................................................5
Governmental Authorization........................................................................................5
Governmental Body.................................................................................................5
Guaranty..........................................................................................................6
Hazardous Activity................................................................................................6
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Hazardous Material................................................................................................6
HSR Act...........................................................................................................6
Improvements......................................................................................................6
Indemnified Person................................................................................................6
Indemnifying Person...............................................................................................6
Indemnity Obligation..............................................................................................6
Intellectual Property Assets......................................................................................6
Intellectual Property Assignments.................................................................................6
Intercreditor Agreements..........................................................................................6
Inventories.......................................................................................................7
IRS...............................................................................................................7
Knowledge.........................................................................................................7
Lease.............................................................................................................7
Legal Requirement.................................................................................................7
Liability.........................................................................................................7
Marks.............................................................................................................7
Material Adverse Impact...........................................................................................7
Material Consents.................................................................................................8
Occupational Safety and Health Law................................................................................8
Operated Stores...................................................................................................8
Operating Agreement...............................................................................................8
Operating Working Capital Ongoing Business........................................................................8
Order.............................................................................................................8
Ordinary Course of Business.......................................................................................8
Parent............................................................................................................9
Parent Preferred Stock............................................................................................9
Parent Security Agreement.........................................................................................9
Part..............................................................................................................9
Patents...........................................................................................................9
Permitted Encumbrances............................................................................................9
Person............................................................................................................9
Physical Inventory................................................................................................9
Physical Inventory Date...........................................................................................9
Principal Seller..................................................................................................9
Proceeding........................................................................................................9
Purchase Price....................................................................................................9
Real Property Lease...............................................................................................9
Real Property Lease Assignments...................................................................................9
Record............................................................................................................9
Registration Rights Agreement.....................................................................................9
Related Person....................................................................................................9
Release..........................................................................................................11
Remedial Action..................................................................................................11
Representative...................................................................................................11
Required Stores..................................................................................................11
Retained Liabilities.............................................................................................11
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Xxxxxxx Agreement................................................................................................11
Xxxxxxx Consent..................................................................................................11
SEC..............................................................................................................11
Securities Act...................................................................................................11
Seller Contract..................................................................................................11
Sellers..........................................................................................................12
Sellers' Closing Documents.......................................................................................12
Shareholder......................................................................................................12
Shareholders Agreement...........................................................................................12
Software.........................................................................................................12
Subordinated Notes...............................................................................................12
Subsidiary.......................................................................................................12
Superior Proposal................................................................................................12
Takeover Proposal................................................................................................12
Tangible Personal Property.......................................................................................13
Tax..............................................................................................................13
Tax Return.......................................................................................................13
Third Party......................................................................................................13
Third-Party Claim................................................................................................13
Threat of Release................................................................................................13
Transferred Stores and Properties................................................................................13
Transition Services Agreement....................................................................................13
WARN Act.........................................................................................................14
Xxxxx............................................................................................................14
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is dated November 19, 2001, by and
among THE RIGHT START, INC., a California corporation ("Parent"); TOY SOLDIER,
INC., a Delaware corporation ("Buyer"); F.A.O. XXXXXXX, a New York corporation
("Principal Seller"); QUALITY FULFILLMENT SERVICES, INC., a Virginia corporation
(together with Principal Seller, "Sellers"); and ROYAL VENDEX KBB N.V., a
Netherlands corporation ("Shareholder").
RECITALS
Shareholder indirectly owns one hundred percent of the issued and outstanding
shares of capital stock of each Seller. Each Seller desires to sell, and Buyer
desires to purchase, the Assets of Sellers for the consideration and on the
terms set forth in this Agreement.
The parties, intending to be legally bound, agree as follows:
Article 1.........DEFINITIONS AND USAGE
1.1 DEFINITIONS
For purposes of this Agreement, the following terms and variations thereof have
the meanings specified or referred to in this Section 1.1:
"Accounts Receivable"-- (a) all trade accounts receivable and other
rights to payment from customers of Sellers and the full benefit of all
security for such accounts or rights to payment, including all trade
accounts receivable representing amounts receivable in respect of goods
shipped or products sold or services rendered to customers of Sellers,
(b) all other accounts or notes receivable of Sellers and the full
benefit of all security for such accounts or notes and (c) any claim,
remedy or other right related to any of the foregoing.
"Aged Inventories" -- Inventories that are deemed 1999 or older in
accordance with the aging procedures historically employed by Sellers.
"Assets"-- as defined in Section 2.1.
"Assignment and Assumption Agreement"-- as defined in Section
2.6(a)(ii).
"Assumed Liabilities"-- as defined in Section 2.4(a).
"Assumed Stores and Facilities"-- those retail stores, Distribution
Centers and corporate offices listed in Schedule A.
"Balance Sheet"-- as defined in Section 3.4.
"Best Efforts"-- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that
result as expeditiously as possible, provided, however, that a Person
required to use Best Efforts under this Agreement will not be thereby
required to take actions that would result in a material adverse change
in the benefits to such Person of this Agreement and the Contemplated
Transactions or to dispose of or make any change to its business,
expend any material funds, file and prosecute any litigation, or incur
any other material burden.
"Xxxx of Sale"-- as defined in Section 2.6(a)(i).
"Breach"-- any breach of, or any inaccuracy in, any representation or
warranty or any breach of, or failure to perform or comply with, any
covenant or obligation, in or of this Agreement or any other Contract,
or any event which with the passing of time or the giving of notice, or
both, would constitute such a breach, inaccuracy or failure.
"Bulk Sales Laws"-- as defined in Section 7.10.
"Business Day"-- any day other than (a) Saturday or Sunday or (b) any
other day on which banks in the States of Massachusetts or New York are
permitted or required to be closed.
"Buyer"-- as defined in the first paragraph of this Agreement.
"Buyer Indemnified Persons"-- as defined in Section 13.2.
"Buyer Security Agreement"-- as defined in Section 2.6(b)(iii).
"Closing"-- as defined in Section 2.5.
"Closing Balance Sheet"-- as defined in Section 2.3(c).
"Closing Date"-- the date on which the Closing actually takes place.
"Closing Documents"-- the Xxxx of Sale, the Assignment and Assumption
Agreement, the Real Property Lease Assignments, the Intellectual
Property Assignments, the Investment Representation Letter, the
Transition Services Agreement, the Operating Agreement, the
Registration Rights Agreement, the Shareholders Agreement, the
Subordinated Notes, the Parent Preferred Stock, the Buyer Security
Agreement, the Parent Security Agreement, the Guaranty and the
Intercreditor Agreements.
"Closure Stores" -- those retail stores of Principal Seller listed as
such in Schedule B.
"COBRA"-- as defined in Section 3.16(f).
2
"Code"-- the Internal Revenue Code of 1986.
"Consent"-- any approval, consent, ratification, waiver or other
authorization, the lack of which would have a Material Adverse Impact.
"Contemplated Transactions"-- all of the transactions contemplated by
this Agreement.
"Contract"-- any agreement, contract, Lease, consensual obligation,
promise or undertaking (whether written or oral and whether express or
implied).
"Copyrights"-- as defined in Section 3.25(a)(iii).
"Damages"-- as defined in Section 13.2.
"Disclosure Letter" -- the disclosure letter delivered by Sellers and
Shareholder to Buyer concurrently with the execution and delivery of
this Agreement.
"Distribution Centers" -- the Assumed Stores and Facilities marked with
an asterisk on Schedule A.
"Effective Time"-- 12:01 a.m. on January 6, 2002, or such other time
as shall be agreed by the parties.
"Employee Plans" -- as defined in Section 3.16(a).
"Encumbrance" -- any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, mortgage, or right of first
option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity
interest), transfer, receipt of income or exercise of any other
attribute of ownership.
"Environment" -- soil, land surface or subsurface strata, surface
waters (including navigable waters and ocean waters), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor
air), plant and animal life and any other environmental medium or
natural resource.
"Environmental, Health and Safety Liabilities" -- any cost, damages,
expense, liability, obligation or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law,
including those consisting of or relating to:
(a) any environmental, health or safety matter or condition
(including on-site or off-site contamination,
occupational safety and health and regulation of any
chemical substance or product);
(b) any fine, penalty, judgment, award, settlement, legal
or administrative proceeding, damages, loss, claim,
3
demand or response, remedial or inspection cost or
expense arising under any Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or
corrective action, including any cleanup, removal,
containment or other remediation or response actions
("Cleanup") required by any Environmental Law or
Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any
Governmental Body or any other Person) and for any
natural resource damages; or
(d) any other compliance, corrective or remedial measure
required under any Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial" and "response action" include the types
of activities covered by the United States Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA).
"Environmental Law"-- any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees or the
public of intended or actual Releases of pollutants or
hazardous substances or materials, violations of
discharge limits or other prohibitions and the
commencement of activities, such as resource extraction
or construction, that could have significant impact on
the Environment;
(b) preventing or reducing to acceptable levels the Release
of pollutants or hazardous substances or materials into
the Environment;
(c) reducing the quantities, preventing the Release or
minimizing the hazardous characteristics of wastes that
are generated;
(d) assuring that products are designed, formulated,
packaged and used so that they do not present
unreasonable risks to human health or the Environment
when used or disposed of;
(e) protecting resources, species or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil
or other potentially harmful substances;
(g) cleaning up pollutants that have been Released,
preventing the Threat of Release or paying the costs of
such clean up or prevention; or
4
(h) making responsible parties pay private parties, or
groups of them, for damages done to their health or the
Environment or permitting self-appointed
representatives of the public interest to recover for
injuries done to public assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974.
"Exchange Act" -- the Securities Exchange Act of 1934.
"Excluded Assets" -- as defined in Section 2.2.
"GAAP" -- generally accepted accounting principles for financial
reporting in the United States.
"Governing Documents" -- with respect to any particular entity, (a) if
a corporation, the articles or certificate of incorporation and the
bylaws; (b) if a general partnership, the partnership agreement and any
statement of partnership; (c) if a limited partnership, the limited
partnership agreement and the certificate of limited partnership; (d)
if a limited liability company, the articles of organization and
operating agreement; (e) if another type of Person, any other charter
or similar document adopted or filed in connection with the creation,
formation or organization of the Person; (f) all equityholders'
agreements, voting agreements, voting trust agreements or other
agreements or documents relating to the organization, management or
operation of any Person or relating to the rights, duties and
obligations of the equityholders of any Person; and (g) any amendment
or supplement to any of the foregoing.
"Governmental Authorization" -- any Consent, license or registration
needed to operate the Assumed Stores and Facilities or the Transferred
Stores and Facilities, as the case may be (i.e., excluding any building
permits, certificates of occupancy or completion or statutory notices
obtained or delivered by or to Sellers in the Ordinary Course of
Business), granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal
Requirement.
"Governmental Body"-- any:
(a) nation, state, county, city, town, borough, village,
district or other jurisdiction;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any
nature (including any agency, branch, department,
board, commission, court, tribunal or other entity
5
exercising governmental or quasi-governmental powers);
(d) multinational organization or body;
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power; or
(f) official of any of the foregoing.
"Guaranty" -- as defined in Section 2.6(b)(iv).
"Hazardous Activity" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment or
use (including any withdrawal or other use of groundwater) of Hazardous
Material in, on, under, about or from any of the Assumed Stores and
Facilities or any part thereof into the Environment.
"Hazardous Material" -- any substance, material or waste which is
regulated by any Governmental Body, including any material, substance
or waste which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste," "restricted
hazardous waste," "contaminant," "toxic waste" or "toxic substance"
under any provision of Environmental Law, and including petroleum,
petroleum products, asbestos, presumed asbestos-containing material or
asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls.
"HSR Act" -- the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act.
"Improvements" -- tenant improvements constructed or installed by
either Seller and affixed to the premises demised under the Real
Property Leases for the Assumed Stores and Facilities.
"Indemnified Person"-- as defined in Section 13.9.
"Indemnifying Person"-- as defined in Section 13.9.
"Indemnity Obligation" -- as defined in Section 13.8.
"Intellectual Property Assets" -- as defined in Section 3.25(a).
"Intellectual Property Assignments" -- as defined in Section
2.6(a)(iv).
"Intercreditor Agreements" - the Subordination and Intercreditor
Agreements among Sellers, Shareholder and Xxxxx, in substantially the
form of Exhibit 2.6(a)(xii).
6
"Inventories" -- all inventories of Sellers, wherever located,
including all finished goods, work in process, raw materials, spare
parts and all other materials and supplies to be used or consumed by
either Seller in the production of finished goods.
"IRS" -- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"Knowledge" -- an individual will be deemed to have Knowledge of a
particular fact or other matter if:
(a) that individual is actually aware of that fact or matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of that fact or matter in the
ordinary course of conducting his affairs and
performing the duties of his job.
A Person (other than an individual) will be deemed to have Knowledge of
a particular fact or other matter if any individual who is serving as a
director of such Person or an officer of that Person (or in any similar
capacity) who in the ordinary course of discharging his or her duties
would likely have obtained knowledge of a particular fact, has
Knowledge of that fact or other matter (as set forth in (a) and (b)
above.)
"Lease" -- any Real Property Lease for the occupancy of any of the
Assumed Stores and Facilities, the Transferred Stores and Facilities or
the Operated Stores, as the case may be, or any lease or rental
agreement, license, right to use or installment and conditional sale
agreement to which either Seller is a party and any other Seller
Contract pertaining to the leasing or use of any Tangible Personal
Property.
"Legal Requirement"-- any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance,
principle of common law, code, regulation, statute or treaty.
"Liability" -- with respect to any Person, any liability or obligation
of such Person of any kind, character or description, whether known or
unknown, absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or
several, due or to become due, vested or unvested, executory,
determined, determinable or otherwise, and whether or not the same is
required to be accrued on the financial statements of such Person.
"Marks" -- as defined in Section 3.25(a)(i).
"Material Adverse Impact" -- a material adverse effect, individually or
in the aggregate, with all such effects, (i) on the ability of Sellers
and Shareholder, individually or in the aggregate, to consummate the
Contemplated Transactions, (ii) on the ability of Buyer after the
Closing to promote and conduct the retail sale of merchandise through
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the use of the Assumed Stores and Facilities or the Transferred Stores
and Facilities, as the case may be, on the internet or through
catalogues in a manner substantially similar to the manner in which
Sellers conducted such activities at such locations prior to the
Closing Date or (iii) on the business, properties, results of
operations or financial condition of the Sellers' business related to
the Assumed Stores and Facilities or the Transferred Stores and
Facilities, as the case may be, taken as a whole.
"Material Consents" -- as defined in Section 9.3.
"Occupational Safety and Health Law" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, including the Occupational
Safety and Health Act, and any program, whether governmental or private
(such as those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working
conditions.
"Operated Stores" -- the Assumed Stores and Facilities not transferred
to Buyer on the Closing Date, which are to be operated by Buyer under
the Operating Agreement.
"Operating Agreement" -- an agreement among Buyer, Parent, Sellers and
Shareholder in substantially the form of Exhibit 2.6(a)(xi) pursuant to
which Buyer is authorized and obligated to operate the Operated Stores.
"Operating Working Capital Ongoing Business" -- the current portion of
the Assets transferred to the Buyer on the Closing Date minus the
current portion of Assumed Liabilities assumed by the Buyer on the
Closing Date and further reduced by the sum of (A) 50% of the cost of
the Aged Inventories up to $4 million located in the Assumed Stores and
Facilities (other than the Distribution Centers) as of the respective
Physical Inventory Dates and (B) 100% of the cost of the Aged
Inventories in excess of $4 million located in any Assumed Stores and
Facilities (other than the Distribution Centers) as of the respective
Physical Inventory Dates. The value of the Assets and Assumed
Liabilities reflected in Operating Working Capital Ongoing Business
shall be determined in accordance with GAAP on a basis consistent with
Seller's existing practices, except that Aged Inventories shall be
valued in accordance with this definition.
"Order" -- any order, injunction, judgment, decree, ruling, assessment
or arbitration award of any Governmental Body or arbitrator.
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the Ordinary Course of Business only if
that action:
(a) is consistent in nature, scope and magnitude with the
past practices of such Person and is taken in the
ordinary course of the normal, day-to-day operations
of such Person; and
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(b) does not require authorization by the board of
directors or shareholders of such Person (or by any
Person or group of Persons exercising similar
authority) and does not require any other separate or
special authorization of any nature.
"Parent" -- as defined in the first paragraph of this Agreement.
"Parent Preferred Stock" -- as defined in Section 2.6(b)(i).
"Parent Security Agreement" -- as defined in Section 2.6(b)(v).
"Part" -- a part or section of the Disclosure Letter.
"Patents" -- as defined in Section 3.25(a)(ii).
"Permitted Encumbrances" -- as defined in Section 3.9.
"Person" -- an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture or other
entity or a Governmental Body.
"Physical Inventory" -- as defined in Section 2.3(c).
"Physical Inventory Date" -- the date(s) in January 2002 on which Buyer
conducts a physical inventory in each of the Assumed Stores and
Facilities.
"Principal Seller" -- as defined in the first paragraph of this
Agreement.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial
or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Body or arbitrator.
"Purchase Price" -- as defined in Section 2.3.
"Real Property Lease" -- any lease or rental agreement under which
either Seller is a tenant that demises real property occupied by any of
the Assumed Stores and Facilities.
"Real Property Lease Assignments" -- as defined in Section 2.6(a)(iii).
"Record" -- information that is inscribed on a tangible medium or that
is stored in an electronic or other medium and is retrievable in
perceivable form.
"Registration Rights Agreement" -- a registration rights agreement
between Parent and Seller pursuant to the provisions of Section 12.9.
"Related Person" --
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With respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
any one or more members of such individual's Family;
(c) any Person in which members of such individual's Family
hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which one or more members of
such individual's Family serves as a director, officer,
partner, executor or trustee (or in a similar
capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by or is directly or
indirectly under common control with such specified
Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer,
partner, executor or trustee of such specified Person
(or in a similar capacity);
(d) any Person in which such specified Person holds a
Material Interest; and
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a
similar capacity).
For purposes of this definition, (a) "control" (including
"controlling," "controlled by," and "under common control with") means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise, and shall
be construed as such term is used in the rules promulgated under the
Securities Act; (b) the "Family" of an individual includes (i) the
individual, (ii) the individual's spouse, (iii) any other natural
person who is related to the individual or the individual's spouse
within the second degree and (iv) any other natural person who resides
with such individual; and (c) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of voting securities or other voting interests
representing at least ten percent (10%) of the outstanding voting power
of a Person or equity securities or other equity interests representing
at least ten percent (10%) of the outstanding equity securities or
equity interests in a Person.
10
"Release" -- any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the Environment or into or out of any
property.
"Remedial Action" -- all actions, including any capital expenditures,
required or voluntarily undertaken (a) to clean up, remove, treat or in
any other way address any Hazardous Material or other substance; (b) to
prevent the Release or Threat of Release or to minimize the further
Release of any Hazardous Material or other substance so it does not
migrate or endanger or threaten to endanger public health or welfare or
the Environment; (c) to perform pre-remedial studies and investigations
or post-remedial monitoring and care; or (d) to bring the Assumed
Stores and Facilities or the Transferred Stores and Facilities, as the
case may be, and the operations conducted thereon into compliance with
Environmental Laws and related Governmental Authorizations.
"Representative" -- with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, accountant,
financial advisor, legal counsel or other representative of that
Person.
"Required Stores" -- the 0xx Xxxxxx Xxx Xxxx store, the San Francisco
store, the Las Vegas store, the Orlando store, the Boston flagship
store, the King of Prussia store, the Seattle store, the Tyson's Corner
store and any seven (7) additional stores, all as identified on
Schedule C attached hereto.
"Retained Liabilities" -- as defined in Section 2.4(b).
"Xxxxxxx Agreement" -- the Agreement dated as of July 17, 1985 among
the Christiana Companies, Inc., Principal Seller, Xxxxx Xxxx Xxxxx
International AG and Xxxxx Xxxx Xxxxx - U.S.A., Inc., as amended by the
Amendment dated July 25, 1990, the Second Amendment Agreement, dated as
of December 1, 1997, the Third Amendment Agreement, dated as of
February 1, 1999, and the Fourth Amendment Agreement, dated as of March
10, 1999, with respect to the license of the name "F.A.O. Xxxxxxx" for
advertising, promotional and any other business purpose in connection
with the retail catalogue, internet retail, products licensing and
wholesale distribution business of Principal Seller.
"Xxxxxxx Consent" -- the Consent of the Xxxxxxx Family Investors to the
assignment to Buyer of Sellers' rights under the Xxxxxxx Agreement as
part of the Contemplated Transactions.
"SEC" -- the United States Securities and Exchange Commission.
"Securities Act" -- as defined in Section 3.3.
"Seller Contract" -- any Contract (other than a Real Property Lease,
Real Property Lease Assignment, lease or rental agreement providing for
the occupancy of real property occupied by any of the Closure Stores or
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any other Contract relating solely to the Closure Stores and contracts
terminated or rescinded or purported to be terminated or rescinded by a
Seller prior to the Effective Time) (a) under which either Seller has
or may acquire any rights or benefits, including vendor warranties and
non-capital equipment leases; (b) under which either Seller has or may
become subject to any obligation or liability; or (c) by which either
Seller or any of the Assets is or may become bound.
"Sellers"-- as defined in the first paragraph of this Agreement.
"Sellers' Closing Documents"-- as defined in Section 3.2(a).
"Shareholder"-- as defined in the first paragraph of this Agreement.
"Shareholders Agreement" -- the Shareholders Agreement (Tag Along
Rights and Voting Rights) among Sellers, certain holders of Parent's
common stock and Parent, in substantially the form of Exhibit
2.6(b)(xiv).
"Software"-- all computer software and subsequent versions thereof,
including source code, object, executable or binary code, objects,
comments, screens, user interfaces, report formats, templates, menus,
buttons and icons and all files, data, materials, manuals, design notes
and other items and documentation related thereto or associated
therewith.
"Subordinated Notes" -- as defined in Section 2.6(b)(ii).
"Subsidiary" -- with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise
having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests
having such power only upon the happening of a contingency that has not
occurred), are held by the Owner or one or more of its Subsidiaries.
"Superior Proposal" -- any Takeover Proposal which the Board of
Directors of Shareholder or Principal Seller determines in good faith,
taking into account the estimated time required to consummate the
offer, the Persons making the offer and the legal, financial,
regulatory and other aspects of the offer deemed appropriate by the
Board of Directors of Principal Seller, is reasonably capable of being
completed and if consummated, would result in a transaction that is
more favorable to its stockholders (in their capacities as
stockholders) from a financial point of view than the Contemplated
Transactions.
"Takeover Proposal" -- any bona fide proposal or offer from any Person
relating to any direct or indirect acquisition or purchase of a
business that constitutes a significant portion of the net revenues,
net income or the assets of either Seller or a significant portion of
the voting power of either Seller, any tender offer or exchange offer
that if consummated would result in any Person beneficially owning a
12
significant portion of the voting power of either Seller, or any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving either Seller
pursuant to which any third party or the shareholders of any third
party would beneficially own directly or indirectly a significant
portion of the voting power of either Seller or any resulting parent
company of either Seller, other than the Contemplated Transactions.
"Tangible Personal Property" -- all machinery, equipment, trade
fixtures, tools, furniture, office equipment, computer hardware,
supplies, materials, vehicles and other items of tangible personal
property (other than Inventories) of every kind owned or leased by
either Seller (wherever located and whether or not carried on such
Seller's books), together with any express or implied warranty by the
manufacturers or sellers or lessors of any item or component part
thereof and all maintenance records and other documents relating
thereto.
"Tax" -- any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental,
windfall profit, customs, vehicle, airplane, boat, vessel or other
title or registration, capital stock, franchise, employees' income
withholding, foreign or domestic withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, value added, alternative, add-on minimum and other tax, fee,
assessment, levy, tariff, charge or duty of any kind whatsoever and any
interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any Governmental
Body or payable under any tax-sharing agreement or any other Contract.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or
other document or information filed with or submitted to, or required
to be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any Tax or
in connection with the administration, implementation or enforcement of
or compliance with any Legal Requirement relating to any Tax.
"Third Party" -- a Person that is not a party to this Agreement.
"Third-Party Claim" -- any claim against any Indemnified Person by a
Third Party, whether or not involving a Proceeding.
"Threat of Release" -- a reasonable likelihood of a Release that may
require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Transferred Stores and Facilities" -- those Assumed Stores and
Facilities transferred, sold and conveyed to Buyer hereunder.
"Transition Services Agreement" -- an agreement among Parent, Buyer and
Sellers in substantially the form of Exhibit 2.6(a)(x) pursuant to
which Buyer provides certain services with respect to the Closure
Stores.
00
"XXXX Xxx" -- as defined in Section 2.4(b)(xi).
"Xxxxx" -- Xxxxx Fargo Retail Finance LLC.
1.2 USAGE
(a) Interpretation. In this Agreement, unless a clear contrary intention
appears:
(i) the singular number includes the plural number and vice versa;
(ii) reference to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are not
prohibited by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement, document or instrument means such
agreement, document or instrument as amended or modified and in effect
from time to time in accordance with the terms thereof;
(v) reference to "dollars" or "$" means United States dollars;
(vi) reference to any Legal Requirement means such Legal Requirement as
amended, modified, codified, replaced or reenacted, in whole or in
part, and in effect from time to time, including rules and regulations
promulgated thereunder, and reference to any section or other provision
of any Legal Requirement means that provision of such Legal Requirement
from time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section
or other provision;
(vii) "hereunder," "hereof," "hereto," and words of similar import shall be
deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof;
(viii) "including" (and with correlative meaning "include") means including
without limiting the generality of any description preceding such term;
(ix) "or" is used in the inclusive sense of "and/or";
(x) with respect to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding"; and
14
(xi) references to documents, instruments or agreements shall be deemed to
refer as well to all addenda, exhibits, schedules or amendments
thereto.
(b) Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with
GAAP.
(c) Legal Representation of the Parties. This Agreement was negotiated by
the parties with the benefit of legal representation, and any rule of
construction or interpretation otherwise requiring this Agreement to
be construed or interpreted against any party shall not apply to any
construction or interpretation hereof.
Article 2. SALE AND TRANSFER OF ASSETS; CLOSING
2.1 ASSETS TO BE SOLD
Upon the terms and subject to the conditions set forth in this Agreement, at the
Closing, but effective as of the Effective Time, each Seller shall sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from
such Seller, free and clear of any Encumbrances other than Permitted
Encumbrances, all of such Seller's right, title and interest in and to all of
such Seller's property and assets, real, personal or mixed, tangible and
intangible, of every kind and description, wherever located, including the
following (but excluding the Excluded Assets):
(a) all real property leasehold interests with respect to the Assumed Stores and
Facilities, including the Real Property Leases described in Part 3.8;
(b) all Tangible Personal Property at or related to the Assumed Stores and
Facilities, including those items listed in Part 2.1(b) and Tangible Personal
Property located at the Closure Stores that Buyer, on or before December 15,
2001, notifies Principal Seller it will acquire and agrees to pay all costs and
expenses of removal and delivery of such items to Buyer and that such removal
and delivery shall not interfere with the liquidation and closing of the Closure
Stores;
(c) all Inventories located at, or in transit to or otherwise allocable to the
Assumed Stores and Facilities, excluding Aged Inventories located at the
Distribution Centers on the Closing Date;
(d) all Accounts Receivable;
(e) all Seller Contracts, including those listed in Part 3.20(a), and all
outstanding offers or solicitations made by or to either Seller to enter into
any Contract;
(f) all Governmental Authorizations with respect to the Assumed Stores and
Facilities and all pending applications for building permits or renewals of any
existing Governmental Authorization with respect to the Assumed Stores and
Facilities, in each case to the extent transferable to Buyer, including those
listed in Part 3.17(b);
15
(g) all data and Records related to the operations of each Seller, including
client and customer lists and Records, referral sources, research and
development reports and Records, production reports and Records, service and
warranty Records, equipment logs, operating guides and manuals, financial and
accounting Records, creative materials, advertising materials, promotional
materials, studies, reports, correspondence and other similar documents and
Records and, subject to Legal Requirements, copies of all personnel Records and
other Records described in Section 2.2(h);
(h) all of the intangible rights and property of each Seller, including
Intellectual Property Assets, going concern value, goodwill, telephone, telecopy
and e-mail addresses and listings and those items listed in Part 3.25(d), (e),
(f) and (h);
(i) all insurance benefits, including rights and proceeds, arising from or
relating to (x) physical damage to the Assumed Stores and Facilities or the
related Tangible Personal Property or (y) the Assets or the Assumed Liabilities
prior to the Effective Time to the extent reflected on the Closing Balance
Sheet;
(j) all claims and judgments in favor of either Seller against third parties
relating to the Assets, whether xxxxxx or inchoate, known or unknown, contingent
or noncontingent, including all such claims listed in Part 2.1(j);
(k) all rights of each Seller relating to deposits and prepaid expenses, claims
for refunds and rights to offset in respect thereof that are not listed in Part
2.2(f) and that are not excluded under Section 2.2(f); and
(l) all cash, cash equivalents and short-term investments as described in
Exhibit 2.1(l).
All of the property and assets to be transferred to Buyer hereunder are herein
referred to collectively as the "Assets."
Notwithstanding the foregoing, the transfer of the Assets pursuant to this
Agreement shall not include the assumption of any Liability related to the
Assets unless Buyer expressly assumes that Liability pursuant to Section 2.4(a).
2.2 EXCLUDED ASSETS
Notwithstanding anything to the contrary contained in Section 2.1 or elsewhere
in this Agreement, the following assets of each Seller (collectively, the
"Excluded Assets") are not part of the sale and purchase contemplated hereunder,
are excluded from the Assets and shall remain the property of such Seller after
the Closing:
(a) all Real Property Leases with respect to the Closure Stores;
(b) all Aged Inventories at the Distribution Centers, and all Inventories and
Tangible Personal Property located at the Closure Stores other than such
Tangible Personal Property selected by Buyer for acquisition pursuant to Section
2.1(b);
16
(c) all claims and judgments in favor of each Seller against third parties
relating to the Closure Stores, whether xxxxxx or inchoate, known or unknown,
contingent or noncontingent;
(d) all minute books, stock Records and corporate seals;
(e) the shares of capital stock of such Seller held in treasury;
(f) those rights relating to deposits and prepaid expenses and claims for
refunds and rights to offset in respect thereof listed in Part 2.2(f) or
directly related to the operations of the Closure Stores;
(g) all insurance policies and rights thereunder (except to the extent specified
in Section 2.1(i) and (j));
(h) all of the Seller Contracts listed in Part 2.2(h);
(i) all personnel Records and other Records that such Seller is required by law
to retain in its possession;
(j) all claims for refund of Taxes and other governmental charges of whatever
nature;
(k) all rights in connection with and assets of the Employee Plans;
(l) all rights of such Seller under the Closing Documents to which it is a party
or registered owner; and
(m) the property and assets expressly designated in Part 2.2(m).
2.3 CONSIDERATION
(a) Initial Purchase Price. The initial purchase price for the Assets (the
"Initial Purchase Price") consists of (i) the parties' estimate of Operating
Working Capital Ongoing Business which is $33 million plus (ii) $5 million.
The Initial Purchase Price also includes Buyer's assumption of
the Assumed Liabilities, and is subject to adjustment as set forth in Section
2.3(c), (d), (e) and (f) below.
(b) Payment of Initial Purchase Price. The Initial Purchase Price is payable on
the Closing Date through Buyer's delivery of the Parent Preferred Stock and the
Subordinated Notes, registered in the names of Sellers in such denominations as
shall be specified by Sellers, and Buyer's assumption of the Assumed
Liabilities. The agreed value of the Parent Preferred Stock is $20 million. The
original aggregate principal amount of the Subordinated Notes is $18 million;
provided, however, that such principal amount shall be adjusted downward by
$1,000 times the number of Operated Stores not transferred to Buyer on the
Closing Date.
17
(c) On or before February 12, 2002, or if the Closing Date is not January 5,
2002, the 15th day of the first calendar month that next follows the Closing
Date, Buyer shall deliver to Sellers and Shareholder an unaudited consolidated
balance sheet of Buyer as at the Closing Date which reflects the results of the
physical inventory conducted on the Physical Inventory Dates and the closing of
Sellers' financial books (the "Closing Balance Sheet"), together with Buyer's
calculation of Operating Working Capital Ongoing Business (the "Closing
Operating Working Capital Ongoing Business" and, together with the Closing
Balance Sheet, the "Closing Statement"). The determinations set forth in the
Closing Statement shall be final and binding on the parties hereto unless timely
disputed by Sellers or Shareholder pursuant to Section 2.3(d).
(d) If Sellers or Shareholder dispute the determinations made by Buyer in the
Closing Statement, Sellers or Shareholder shall deliver to Buyer written notice
of such dispute within 15 days of receipt of the Closing Statement, setting
forth the nature of the dispute and their determination of the proper
calculation (the "Notice of Dispute"). Unless Buyer shall, within 10 days of
receipt of a Notice of Dispute, notify Sellers and Shareholder in writing that
it challenges the calculation in the Notice of Dispute, Buyer will be deemed
conclusively to have accepted such calculation. If Buyer so notifies Seller and
Shareholder, the dispute shall be submitted within 10 days of such notification
to KPMG LLP ("KPMG") for its determination of the dispute, which determination
shall be a final and binding determination on the parties hereto. The costs and
expenses incurred in connection with a determination by KPMG shall be allocated
by KPMG, in its discretion, in proportion to the relative success of the parties
as to the dispute.
(e) If the Operating Working Capital Ongoing Business determined in accordance
with Section 2.3(c) and (d) is greater than the estimated Operating Working
Capital Ongoing Business specified in Section 2.3(a), Buyer shall promptly, but
in no event later than 10 days following the date of determination, pay Sellers
an amount equal to the absolute value of the difference between the Operating
Working Capital Ongoing Business determined in accordance with Section 2.3(c)
and (d) and the estimated Operating Working Capital Ongoing Business specified
in Section 2.3(a) (the "Settlement Balance"). Such payment shall be made by
delivery of immediately available funds, if the Settlement Balance is less than
or equal to $3.3 million, or if the Settlement Balance exceeds $3.3 million, by
delivery of $3.3 million of immediately available funds and Buyer's unsecured
negotiable promissory notes due six months after the Closing Date, with interest
at 8% per annum, to the extent of the remainder.
(f) If the Operating Working Capital Ongoing Business determined in accordance
with Section 2.3(c) and (d) is less than the estimated Operating Working Capital
specified in Section 2.3(a), Sellers shall promptly, but in no event later than
10 days following the date of final determination, pay Buyer an amount equal to
the Settlement Balance in immediately available funds.
(g) If during the process of determining Operating Working Capital Ongoing
Business in accordance with Section 2.3(c) the parties reach agreement as to a
portion of the Operating Working Capital Ongoing Business (the "Agreed
Portion"), the parties shall in good faith make any payment that would be
required under Section 2.3(e) as if the Agreed Portion were the finally
determined Operating Working Capital Ongoing Business and shall pay any
difference between the Settlement Balance resulting from the finally determined
Operating Working Capital Ongoing Business and the Settlement Balance resulting
18
from the Agreed Portion upon final determination of the Operating Working
Capital Ongoing Business. For example, if the parties dispute a factor (such as
shrink) used to calculate Operating Working Capital Ongoing Business and a
payment would be due to one party regardless of which party's position prevails,
payment shall be made promptly based on the position that results in the lesser
payment amount while the parties work to resolve their dispute with regard to
the greater payment amount.
2.4 LIABILITIES
(a) Assumed Liabilities. On the Closing Date, but effective as of the
Effective Time, Buyer shall assume and agree to discharge only the
following Liabilities of Sellers (the "Assumed Liabilities"):
(i) any trade account payable reflected on the Closing Balance Sheet (other
than a trade account payable to Shareholder or a Related Person of
either Seller or Shareholder) that remains unpaid at the Effective
Time;
(ii) any Liability to the employees of either Seller employed at the Assumed
Stores and Facilities for payroll, accrued but unused vacation time,
accrued but unused sick leave and payroll taxes, as long as such
Liability is included as a current liability in the Closing Balance
Sheet;
(iii) Liabilities directly arising out of Buyer's prosecution of the claims
relating to Intellectual Property Assets listed in Part 2.1(j);
(iv) any other Liability of either Seller included as a current liability in
the Closing Balance Sheet other than Taxes due as a result of sales of
inventories made by Sellers prior to the Effective Time; and
(v) any Liability of Sellers under Seller Contracts and Real Property
Leases assumed by Buyer to the extent arising after the Closing Date.
(b) Retained Liabilities. The Retained Liabilities shall remain the sole
responsibility of and shall be retained, paid, performed and
discharged by Sellers. "Retained Liabilities" shall mean every
Liability of either Seller other than the Assumed Liabilities,
including:
(i) any Liability arising out of or relating to products of either Seller
to the extent sold prior to the Effective Time other than to the
extent assumed under Section 2.4(a)(iii);
(ii) any Liability under any Seller Contract assumed by Buyer pursuant to
Section 2.4(a) that arises after the Effective Time to the extent
arising out of or resulting from any Breach that occurred prior to the
Effective Time;
19
(iii) any Liability for Taxes arising as a result of either Seller's
operation of its business or ownership of the Assets prior to the
Effective Time, including any deferred Taxes of any nature;
(iv) any Liability under any Seller Contract or Real Property Lease not
assumed by Buyer;
(v) any Environmental, Health and Safety Liabilities arising out of or
relating to the operation of either Seller's business prior to the
Closing or either Seller's leasing, ownership or operation of real
property prior to the Closing;
(vi) any Liability under or relating to the Employee Plans or relating to
workers' compensation, unemployment benefits, pension benefits,
employee stock option or profit-sharing plans, health care plans or
benefits or any other employee plans or benefits of any kind for either
Seller's employees or former employees or both;
(vii) any Liability resulting from or relating to either Seller's or any of
its Related Person's "complete withdrawal" or "partial withdrawal" (as
defined in ERISA Sections 4203 and 4205) from a multiemployer plan as
defined in Section 3(37) of ERISA;
(viii) any Liability or obligation arising out of, related to, or in
connection with any collective bargaining agreement or arbitration
award thereunder to which either Seller is a party, successor or
otherwise bound;
(ix) any Liability or obligation arising out of, related to, or in
connection with any employment agreement to which either Seller is a
party successor, or otherwise bound;
(x) any Liability arising out of, related to, or in connection with the
classification or treatment as an "independent contractor" of any
individual who should have been classified or treated as an
"employee";
(xi) any Liability arising out of, related to, or in connection with the
Worker Adjustment and Retraining Notification Act ("WARN Act"), or any
similar state or local statute, law or regulation, subject, however, to
the obligation of Buyer to indemnify Seller pursuant to Section 13.3(b)
in the event Buyer fails to offer employment to Active Employees as
provided in Section 12.1(b)(i);
(xii) any Liability under any employment, severance, retention or termination
agreement with any employee of either Seller or any of its Related
Persons other than to the extent assumed under Section 2.4(a)(ii);
(xiii) any Liability arising out of, related to, or in connection with any
employment-related or termination-of-employment-related claims,
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charges, controversies, lawsuits, administrative actions or charges,
complaints, demands, liens, grievances, actions, suits, causes of
action, obligations, debts, damages, judgments, awards, orders or
liabilities of whatever kind or nature in law, equity or otherwise,
pending or threatened, related to acts or omissions occurring prior to
the Effective Time, or with respect to any Hired Active Employee
related to acts or omissions occurring prior to the time such employee
becomes a Hired Active Employee, arising out of, related to, or in
connection with any Legal Requirement, or under any collective
bargaining agreement or employment agreement (express or implied), or
otherwise involving the hiring, employment or termination of
employment of any employee or employees or independent contractors,
wrongful discharge, breach of contract, equal employment opportunity,
discrimination, any other form of alleged unlawful employment practice
or unfair labor practice, or failure to comply with any applicable
law, duty imposed by law, contract, collective bargaining agreement or
arbitration award;
(xiv) any Liability of either Seller to Shareholder or a Related Person of
either of the Sellers or Shareholder;
(xv) any Liability to indemnify, reimburse or advance amounts to any
officer, director, employee or agent of either Seller, other than to
the extent assumed under Section 2.4(a)(iii);
(xvi) any Liability to distribute to any of either Seller's shareholders or
otherwise apply all or any part of the consideration received
hereunder;
(xvii) any Liability to the extent arising out of any Proceeding pending as
of the Effective Time;
(xviii) any Liability arising out of any Proceeding commenced after the
Effective Time to the extent arising out of or relating to any
occurrence or event happening prior to the Effective Time;
(xix) any Liability to the extent arising out of or resulting from either
Seller's compliance or noncompliance with any Legal Requirement or
Order of any Governmental Body;
(xx) any Liability of either Seller, Shareholder or any Related Person of
any of them under this Agreement or any other document executed in
connection with the Contemplated Transactions;
(xxi) any Liability of either Seller or Shareholder to a Related Person of
any of them;
(xxii) any Liability of either Seller based upon such Seller's acts or
omissions occurring after the Effective Time; and
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(xxiii) any contingent liability.
2.5 CLOSING
The purchase and sale provided for in this Agreement (the "Closing") will take
place at the offices of Buyer's counsel at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
commencing at 10:00 a.m. (local time) on the later of (a) January 7, 2002, or
(b) the date which is two (2) Business Days following the date all of the
conditions to closing set forth in Articles 9 and 10 have been met, but in no
event later than January 31, 2002, unless Buyer and Principal Seller otherwise
agree. Subject to the provisions of Article 11, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.5 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement. In such a situation, the Closing will occur as soon as practicable,
subject to Article 11.
2.6 CLOSING OBLIGATIONS
In addition to any other documents to be delivered under other provisions of
this Agreement, at the Closing:
(a) Sellers and Shareholder, as the case may be, shall deliver to Buyer:
(i) a xxxx of sale for all of the Assets that are Tangible Personal
Property in substantially the form of Exhibit 2.6(a)(i) (the "Xxxx of
Sale") executed by each Seller;
(ii) an assignment of all of the Assets that are intangible personal
property (other than Intellectual Property Assets), in substantially
the form of Exhibit 2.6(a)(ii), which assignment shall also contain
Buyer's undertaking and assumption of the Assumed Liabilities (the
"Assignment and Assumption Agreement") executed by each Seller;
(iii) for each interest in a Real Property Lease for the Transferred Stores
and Facilities an Assignment and Assumption of Lease in substantially
the form of Exhibit 2.6(a)(iii) or such other appropriate document or
instrument of transfer, as the case may require (the "Real Property
Lease Assignments"), together with such other items as may be
reasonably required by Third Parties as a condition to the assignment
of the Real Property Leases for the Transferred Stores and Facilities,
each in form reasonably satisfactory to Buyer and its counsel and
Seller and its counsel and executed by the Seller that is party to such
Real Property Lease;
(iv) assignments of all Intellectual Property Assets and separate
assignments of all registered Marks, Patents and Copyrights (the
"Intellectual Property Assignments") in substantially the form of
Exhibit 2.6(a)(iv) executed by each Seller;
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(v) an investment letter addressed to Buyer and Parent in substantially
the form of Exhibit 2.6(a)(v) (the "Investment Representation Letter")
executed by each Seller;
(vi) the executed acknowledgement of each Seller to the Subordinated Note
it holds;
(vii) such other bills of sale, assignments, certificates of title, documents
and other instruments of transfer and conveyance as may reasonably be
requested by Buyer, each in form and substance reasonably satisfactory
to Buyer and its legal counsel and executed by each Seller;
(viii) a certificate executed by each Seller and Shareholder as to the
accuracy of their representations and warranties as of the date of this
Agreement and as of the Closing in accordance with Section 9.1 and as
to their compliance with and performance of their covenants and
obligations to be performed or complied with at or before the Closing
in accordance with Section 9.2;
(ix) a certificate of the Secretary of each Seller certifying, as complete
and accurate as of the Closing, attached copies of the Governing
Documents of such Seller, certifying and attaching all requisite
resolutions or actions of such party's board of directors (and
shareholders, if applicable) approving the execution and delivery of
this Agreement and the consummation of the Contemplated Transactions
and the change of name contemplated by Section 7.8 and certifying to
the incumbency and signatures of the officers of such party executing
this Agreement and any other document relating to the Contemplated
Transactions and accompanied by the requisite documents for amending
the relevant Governing Documents of Principal Seller required to
effect such change of name in form sufficient for filing with the
appropriate Governmental Body;
(x) the Transition Services Agreement, in substantially the form of
Exhibit 2.6(a)(x) executed by Sellers
and Shareholder;
(xi) the Operating Agreement, in substantially the form of Exhibit
2.6(a)(xi), executed by Sellers and Shareholder; and
(xii) the Intercreditor Agreements, in substantially the form of Exhibit
2.6(a)(xii), executed by Sellers and Shareholder.
(b) Buyer shall deliver to Sellers and Shareholder, as the case may be:
(i) Series H Contingent Convertible Preferred Stock Certificates
representing 20,000 shares of such preferred stock with a liquidation
preference of $20,000,000, issued by Parent pursuant to a Certificate
of Determination in the form of Exhibit 2.6(b)(i) (the "Parent
Preferred Stock");
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(ii) subordinated notes issued by Buyer in the form of Exhibit 2.6(b)(ii)
(the "Subordinated Notes") in the aggregate principal amount set forth
in Section 2.3;
(iii) a security agreement executed by Buyer granting a subordinated security
interest in the Assets to secure the Subordinated Notes, and affording
Buyer's trade creditors rights to share in the proceeds of the
collateral thereunder on a pro rata basis in substantially the form of
Exhibit 2.6(b)(iii) (the "Buyer Security Agreement");
(iv) a guaranty executed by Parent in favor of the holders of the
Subordinated Notes of Buyer's obligations under the Subordinated Notes,
in substantially the form of Exhibit 2.6(b)(iv)(the "Guaranty");
(v) a security agreement executed by Parent granting a subordinated
security interest in certain assets of Parent to secure the Guaranty,
and affording Parent's trade creditors rights to share in the proceeds
of the collateral thereunder on a pro rata basis in substantially the
form of Exhibit 2.6(b)(v)(the "Parent Security Agreement");
(vi) the Assignment and Assumption Agreement executed by Buyer;
(vii) the Real Property Lease Assignments executed by Buyer, together with
such other items as may be reasonably required by Third Parties as a
condition to the assignment of the Real Property Leases for the
Transferred Stores and Facilities;
(viii) a certificate executed by Buyer and Parent as to the accuracy of their
representations and warranties as of the date of this Agreement and as
of the Closing in accordance with Section 10.1 and as to their
compliance with and performance of their covenants and obligations to
be performed or complied with at or before the Closing in accordance
with Section 10.2;
(ix) a certificate of the Secretary of Buyer and Parent certifying, as
complete and accurate as of the Closing, attached copies of the
Governing Documents of Buyer and Parent and certifying and attaching
all requisite resolutions or actions of Buyer's and Parent's board of
directors approving the execution and delivery of this Agreement and
the consummation of the Contemplated Transactions and certifying to the
incumbency and signatures of the officers of Buyer and Parent executing
this Agreement and any other document relating to the Contemplated
Transactions;
(x) such other instruments as may reasonably be requested by Sellers to
evidence the assumption by Buyer of the Contracts included in the
Assets, each in form and substance satisfactory to Sellers and their
legal counsel and executed by Buyer;
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(xi) the Operating Agreement, executed by Buyer and Parent;
(xii) the Transition Services Agreement, executed by Buyer and Parent;
(xiii) the Registration Rights Agreement, executed by Parent; and
(xiv) the Shareholders Agreement, in substantially the form of Exhibit
2.6(b)(xiv), executed by Parent and the shareholders of Parent named
therein.
2.7 CONSENTS
(a) If there are any Material Consents that have not yet been obtained (or
otherwise are not in full force and effect) as of the Closing, in the case of
each Seller Contract or Real Property Lease as to which such Material Consents
were not obtained (or otherwise are not in full force and effect) (a "Restricted
Material Contract"), Buyer may waive the condition of Buyer's obligations
hereunder as to any such Restricted Material Contract and either:
(i) elect to have the applicable Seller continue its Best Efforts to
obtain the Material Consent until the termination of the Operating
Agreement; or
(ii) elect to have the applicable Seller retain the Restricted Material
Contract and all Liabilities arising therefrom or relating thereto;
provided, however, that this option shall not be available with respect
to any Real Property Lease.
If Buyer elects to have Sellers continue their Best Efforts to obtain Material
Consents and the Closing occurs, notwithstanding Sections 2.1 and 2.4, neither
this Agreement nor the Assignment and Assumption Agreement nor the Operating
Agreement nor any other document related to the consummation of the Contemplated
Transactions shall constitute a sale, assignment, assumption, transfer,
conveyance or delivery or an attempted sale, assignment, assumption, transfer,
conveyance or delivery of any Restricted Material Contract, and following the
Closing, the parties shall use Best Efforts, and cooperate with each other, to
obtain the Material Consent relating to each Restricted Material Contract as
quickly as practicable.
(b) If there are any Consents not listed on Exhibit 9.3 necessary for the
assignment and transfer of any Seller Contracts to Buyer (the "Nonmaterial
Consents") which have not yet been obtained (or otherwise are not in full force
and effect) as of the Closing, Buyer shall elect at the Closing, in the case of
each of the Seller Contracts as to which such Nonmaterial Consents were not
obtained (or otherwise are not in full force and effect) (a "Restricted
Nonmaterial Contract"), either to:
(i) accept the assignment of such Restricted Nonmaterial Contract, in which
case, as between Buyer and the applicable Seller, such Restricted
Nonmaterial Contract shall, to the maximum extent practicable and
25
notwithstanding the failure to obtain the applicable Nonmaterial
Consent, be transferred at the Closing pursuant to the Assignment and
Assumption Agreement as elsewhere provided under this Agreement; or
(ii) reject the assignment of such Restricted Nonmaterial Contract, in which
case, notwithstanding Sections 2.1 and 2.4, (A) neither this Agreement
nor the Assignment and Assumption Agreement nor any other document
related to the consummation of the Contemplated Transactions shall
constitute a sale, assignment, assumption, conveyance or delivery or an
attempted sale, assignment, assumption, transfer, conveyance or
delivery of such Restricted Nonmaterial Contract, and (B) the
applicable Seller shall retain such Restricted Nonmaterial Contract and
all Liabilities arising therefrom or relating thereto.
Article 3. Representations and Warranties of Sellers and
Shareholder
Each of the Sellers and Shareholder represent and warrant, jointly and
severally, to Buyer and Parent as follows:
3.1 ORGANIZATION AND GOOD STANDING
Part 3.1(a) contains a complete and accurate list of each Seller's
jurisdiction of incorporation and any other jurisdictions in which it is
qualified to do business as a foreign corporation. Each Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under the Seller Contracts and Real Property Leases (and on the Closing Date,
the Real Property Lease Assignments) except to the extent that failure to have
such power or authority would not have a Material Adverse Impact. Each Seller is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except to the extent that failure
to be so qualified would not have a Material Adverse Impact.
3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding obligation of each
Seller and Shareholder, enforceable against each of them in accordance with its
terms, subject to applicable laws relating to bankruptcy, insolvency,
reorganization, moratorium or receivership and to general principles of equity.
Upon the execution and delivery by Sellers and Shareholder of each Closing
Document and other agreement to be executed or delivered by any or all of
Sellers and Shareholder at the Closing (collectively, the "Sellers' Closing
Documents"), each of Sellers' Closing Documents will constitute the legal, valid
and binding obligation of each Seller and Shareholder party thereto, as the case
may be, enforceable against each of them in accordance with its terms, subject
to applicable laws relating to bankruptcy, insolvency, reorganization,
moratorium or receivership and to general principles of equity. Each Seller has
all necessary right, power and authority to execute and deliver this Agreement
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and the Sellers' Closing Documents to which it is a party and to perform its
obligations under this Agreement and the Sellers' Closing Documents to which it
is a party, and such action has been duly authorized by all necessary action by
Sellers' shareholders and board of directors. Shareholder has all necessary
legal capacity to enter into this Agreement and the Seller's Closing Documents
to which Shareholder is a party and to perform its obligations hereunder and
thereunder.
(b) Except as set forth in Part 3.2(b), assuming all Consents have been obtained
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) Breach (A) any provision of any of the Governing Documents of either
Seller or (B) any resolution adopted by the board of directors or the
shareholder of either Seller;
(ii) Violate or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any
remedy or obtain any relief in a manner that would have a Material
Adverse Impact under any Legal Requirement or any Order to which either
Seller or Shareholder, or any Assets, may be subject;
(iii) contravene, conflict with or result in a violation or breach of any of
the terms or requirements of, or give any Governmental Body the right
to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by either Seller or that
otherwise relates to the Assets or to the business of either Seller, in
each case, in a manner that would have a Material Adverse Impact;
(iv) result in Buyer becoming the successor to or otherwise bound by any
collective bargaining agreement, arbitration award thereunder, or
employment agreements, except as set forth in Part 3.2(b)(iv);
(v) Breach any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel, terminate or modify,
any Seller Contract unless, in each case, it would not reasonably be
expected to have a Material Adverse Impact; or
(vi) result in the imposition or creation of any Encumbrance upon or with
respect to any of the Assets, other than those imposed or created by
Buyer's actions.
(c) Except as set forth in Part 3.2(c) or where the failure to give notice or
obtain consent would not have a Material Adverse Impact, neither of the Sellers
nor Shareholder is required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
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3.3 CAPITALIZATION
Shareholder is and will be on the Closing Date the indirect owner of 100% of the
outstanding equity securities of each Seller, free and clear of all
Encumbrances.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) a consolidated unaudited balance sheet of
KBB Retail U.S.A. Inc. and its Subsidiaries, including each of the Sellers
(collectively, "KBB"), as at February 3, 2001 (including the notes thereto, the
"Balance Sheet"), and the related unaudited statements of income, changes in
shareholders' equity and cash flows for the fiscal year then ended, including in
each case the notes thereto, reviewed by Principal Seller's chief financial
officer; (b) a consolidated unaudited balance sheet of KBB as at fiscal year end
in each of the two (2) fiscal years prior to the fiscal year ended February 3,
2001 and the related unaudited statements of income, changes in shareholders'
equity and cash flows for each of the fiscal years then ended, including in each
case the notes thereto, reviewed by Principal Seller's chief financial officer;
and (c) a consolidated unaudited balance sheet of KBB as at November 4, 2001
(the "Interim Balance Sheet") and the related unaudited statement of income, for
the nine-month period ended November 4, 2001 reviewed by Principal Seller's
chief financial officer; and (d) consolidated profit and loss statements of KBB
with respect to the Assumed Stores and Facilities only for the nine-month period
ended November 4, 2001, reviewed by Principal Seller's chief financial officer.
Such financial statements fairly present the financial condition and the results
of operations, changes in shareholders' equity and cash flows of Sellers (or of
the Assumed Stores and Facilities, as the case may be) as at the respective
dates of and for the periods referred to in such financial statements. The
financial statements referred to in this Section 3.4 reflect and will reflect
the consistent application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial statements. The
financial statements have been and will be prepared from and are in accordance
with the accounting Records of KBB. Neither KBB nor any Subsidiary of KBB other
than Sellers had any substantial business during the periods presented.
3.5 BOOKS AND RECORDS
The books of account and other financial Records of each Seller, all of which
have been made available to Buyer, are complete and correct and represent
actual, bona fide transactions and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of internal
controls. The minute books of each Seller for the current and most recently
completed fiscal year, all of which have been made available to Buyer, contain
accurate and complete Records of all material corporate action taken by the
shareholders, the board of directors and committees of the board of directors of
such Seller.
3.6 SUFFICIENCY OF ASSETS
Except as set forth in Part 3.6, the Assets (a) constitute all of the
assets, tangible and intangible, of any nature whatsoever, necessary to operate
each Seller's business at the Assumed Stores and Facilities substantially in the
manner presently operated by such Seller and (b) include all material assets of
such Seller with respect to the Assumed Stores and Facilities.
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3.7 DESCRIPTION OF OWNED REAL PROPERTY
Sellers have no fee ownership interest in any real property.
3.8 DESCRIPTION OF LEASED REAL PROPERTY
Part 3.8 contains a correct list of all Real Property Leases by location,
including lessor's name, the applicable lease date and the expiration date.
3.9 TITLE TO ASSETS; ENCUMBRANCES
(a) Each Seller owns good and marketable title to its respective leasehold
estates pursuant to the Real Property Leases, free and clear of any
Encumbrances, other than:
(i) liens for Taxes for the current tax year which are not yet due and
payable (each, a "Tax Lien"); and
(ii) those described in Part 3.9(a) ("Real Estate Encumbrances" and,
together with the Tax Liens, the "Permitted Real Estate Encumbrances").
(b) Sellers own good and transferable title to all of the other Assets free and
clear of any Encumbrances other than those described in Part 3.9(b) and those
that would not have a Material Adverse Impact ("Permitted Non-Real Estate
Encumbrances" and, together with the Permitted Real Estate Encumbrances,
"Permitted Encumbrances").
(c) True and complete copies of all material instruments, agreements and other
documents pertaining to the Seller's interests in Real Property Leases have been
made available to Buyer.
3.10 CONDITION OF ASSUMED STORES AND PROPERTIES
(a) All Improvements are in compliance with all applicable Legal Requirements
and are in operating repair and in good condition, ordinary wear and tear and
uninsured losses excepted. To the Knowledge of each Seller, there is no existing
or proposed plan to modify or realign any street or highway or any existing or
proposed eminent domain proceeding that would result in the taking of all or any
part of any Assumed Stores and Facilities or that would prevent or hinder the
continued use of any Assumed Stores and Facilities as heretofore used in the
conduct of the business of either Seller at Assumed Stores and Facilities.
(b) Each item of Tangible Personal Property at or related to the Assumed Stores
and Facilities is in operating repair and good condition, ordinary wear and tear
excepted, and is suitable for immediate use in the Ordinary Course of Business.
Except as disclosed in Part 3.10(b), all such Tangible Personal Property is in
the possession of Sellers.
3.11 ACCOUNTS RECEIVABLE
(a) Except as disclosed in Part 3.11(a), all Accounts Receivable that are
reflected on the Closing Balance Sheet or on the accounting Records of Sellers
as of the Closing Date represent or will represent valid obligations arising
29
from sales actually made or services actually performed by Sellers in the
Ordinary Course of Business or payments actually made pursuant to Real Property
Leases or other Contracts. Except to the extent paid prior to the Closing Date,
such Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Closing Balance Sheet
(which reserves are adequate and calculated consistent with past practice and
will not represent a material adverse change in the composition of such Accounts
Receivable in terms of aging). Subject to such reserves, each of such Accounts
Receivable either has been or will be collected in full, without any setoff,
within ninety (90) days after the day on which it first becomes due and payable.
There is no contest, claim, defense or right of setoff, other than returns in
the Ordinary Course of Business of either Seller, under any Contract with any
account debtor of an Account Receivable relating to the amount or validity of
such Account Receivable.
3.12 INVENTORIES
(a) All items included in the Inventories at the Assumed Stores and Facilities
consist of finished goods of a quality and quantity usable and saleable in the
Ordinary Course of Business of Sellers except for Aged Inventories and items of
below-standard quality, all of which have been or will be valued in the Closing
Balance Sheet as specified in the calculation of Operating Working Capital
Ongoing Business or transferred to the Closure Stores. All of the Inventories
other than Aged Inventories have been valued on an average cost basis consistent
with Sellers' past practices. Inventories reflected on the Closing Balance Sheet
do not include any Inventories not owned by the Sellers, including goods already
sold. Inventories now on hand that were purchased after the date of the Balance
Sheet or the Interim Balance Sheet were purchased in the Ordinary Course of
Business of Sellers at a cost not exceeding market prices prevailing at the time
of purchase. The quantities of each item of Inventories are not excessive but
are reasonable in the present circumstances of Sellers. Sellers have no
work-in-process Inventories.
(b) Since October 30, 2001, no inventory, goods, stock or merchandise from any
Closure Store has been or will be returned to a Distribution Center, other than
inventory, goods, stock or merchandise returned in the Ordinary Course of
Business of Sellers.
3.13 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.13, neither Seller has any Liability
except for Liabilities that will be satisfied or discharged prior to Closing or
reflected or reserved against in the Closing Balance Sheet, other than
Liabilities related to the Closure Stores and Liabilities that would not have a
Material Adverse Impact.
3.14 TAXES
There are no Encumbrances on any of the Assets that arose in connection
with any failure (or alleged failure) to pay any Tax, and neither Seller has
Knowledge of any basis for assertion of any claims attributable to Taxes which,
if adversely determined, would result in any such Encumbrance.
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3.15 NO MATERIAL ADVERSE CHANGE
Since the date hereof, there has not occurred any event that would have a
Material Adverse Impact and no event has occurred that may result in a Material
Adverse Impact other than, in each case, (i) changes in economic conditions
generally or in any area where Assumed Stores and Facilities are located, (ii)
changes in the toy industry generally and (iii) the opening of toy stores in
competition with Sellers.
3.16 EMPLOYEE BENEFITS
(a) Set forth in Part 3.16(a) is a complete and correct list of all "employee
benefit plans" as defined by Section 3(3) of ERISA, all specified fringe benefit
plans as defined in Section 6039D of the Code, and all other bonus,
incentive-compensation, deferred-compensation, profit-sharing, stock-option,
stock-appreciation-right, stock-bonus, stock-purchase, employee-stock-ownership,
savings, severance, change-in-control, supplemental-unemployment, layoff,
salary-continuation, retirement, pension, health, life-insurance, disability,
accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or
welfare plan, and any other employee compensation or benefit plan, agreement,
policy, practice, commitment, contract or understanding (whether qualified or
nonqualified, currently effective or terminated, written or unwritten) and any
trust, escrow or other agreement related thereto that (i) is maintained or
contributed to by either Seller or any other corporation or trade or business
that is a United States entity and that is controlled by, controlling or under
common control with either Seller (within the meaning of Section 414 of the Code
or Section 4001(a)(14) or 4001(b) of ERISA) and that is a United States domestic
entity ("ERISA Affiliate") or has been maintained or contributed to in the last
three (3) years by Seller or any ERISA Affiliate, or with respect to which
either Seller or any ERISA Affiliate has or may have any liability, and (ii)
provides benefits, or describes policies or procedures applicable to any current
or former director, officer, employee or service provider of either Seller or
any ERISA Affiliate, or the dependents of any thereof, regardless of how (or
whether) liabilities for the provision of benefits are accrued or assets are
acquired or dedicated with respect to the funding thereof, or with respect to
which either Seller may have any liability (collectively the "Employee Plans").
Set forth in Part 3.16(a) is a complete and correct list of all ERISA Affiliates
of each Seller during the last three (3) years.
(b) Each Seller has made available to Buyer true, accurate and complete copies
of (i) the documents comprising each Employee Plan (or, with respect to any
Employee Plan which is unwritten, a detailed written description of eligibility,
participation, benefits, funding arrangements, assets and any other matters
which relate to the obligations of such Seller or any ERISA Affiliate); (ii) all
trust agreements, insurance contracts or any other funding instruments related
to the Employee Plans; (iii) all rulings, determination letters, no-action
letters or advisory opinions from the IRS, the U.S. Department of Labor or any
other Governmental Body that pertain to each Employee Plan and any open requests
therefor; (iv) the most recent actuarial and financial reports (audited and/or
unaudited) and the annual reports filed with any Government Body with respect to
the Employee Plans during the current year and each of the three preceding
years; (v) all collective bargaining agreements pursuant to which contributions
to any Employee Plan(s) have been made or obligations incurred (including both
pension and welfare benefits) by such Seller or any ERISA Affiliate, and all
collective bargaining agreements pursuant to which contributions are being made
or obligations are owed by such entities; (vi) all securities registration
statements filed with respect to any Employee Plan; (vii) all contracts with
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third-party administrators, actuaries, investment managers, consultants and
other independent contractors that relate to any Employee Plan, and (viii) all
summary plan descriptions, summaries of material modifications and memoranda,
employee handbooks and other written communications regarding the Employee
Plans.
(c) Except as disclosed in Part 3.16(c), full payment has been made of all
amounts that are required under the terms of each Employee Plan to be paid as
contributions with respect to all periods prior to and including the last day of
the most recent fiscal year of such Employee Plan ended on or before the date of
this Agreement and all periods thereafter prior to the Closing Date. Each Seller
has paid in full all required insurance premiums, subject only to normal
retrospective adjustments in the ordinary course, with regard to the Employee
Plans for all policy years or other applicable policy periods ending on or
before the Closing Date.
(d) Neither Seller nor any entity that, at any time during the six-year period
ending on the date of this Agreement, was required to be treated as a single
employer together with either Seller has ever maintained a plan that is or was
subject to Title IV of ERISA.
(e) Each Seller has, at all times, complied, and currently complies, in all
material respects with the applicable continuation requirements for its welfare
benefit plans, including (1) Section 4980B of the Code (as well as its
predecessor provision, Section 162(k) of the Code) and Sections 601 through 608,
inclusive, of ERISA, which provisions are hereinafter referred to collectively
as "COBRA" and (2) any applicable state statutes mandating health insurance
continuation coverage for employees.
(f) There is no material pending or threatened Proceeding relating to any
Employee Plan, nor is there any basis for any such Proceeding. Neither of the
Sellers nor any fiduciary of an Employee Plan has engaged in a transaction with
respect to any Employee Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject such Seller or Buyer to
a Tax or penalty imposed by either Section 4975 of the Code or Section 502(l) of
ERISA or a violation of Section 406 of ERISA.
(g) Each Seller has maintained workers' compensation coverage as required by
applicable state law through purchase of insurance and not by self-insurance or
otherwise except as disclosed to Buyer on Part 3.16(g).
(h) Except for the continuation coverage requirements of COBRA, neither Seller
has any obligations or potential liability for benefits to employees, former
employees or their respective dependents following termination of employment or
retirement under any of the Employee Plans that are Employee Welfare Benefit
Plans.
3.17 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.17(a) and with respect to the Assumed
Stores and Facilities only:
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(i) each Seller is, and at all times since October 30, 1998, has been, in
full compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership
or use of any of the Assets except in each case to the extent
noncompliance would not have a Material Adverse Impact;
(ii) no event has occurred or circumstance exists that (with or without
notice or lapse of time) (A) may constitute or result in a violation by
either Seller of, or a failure on the part of either Seller to comply
with, any Legal Requirement or (B) may give rise to any obligation on
the part of either Seller to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature except in case of (A)
and (B) above to the extent such event would not have a Material
Adverse Impact; and
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(iii) neither Seller has received, at any time since October 30, 1998, any
notice or other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any actual,
alleged, possible or potential violation of, or failure to comply with,
any Legal Requirement or (B) Sellers' failure to comply with any
actual, alleged, possible or potential obligation on the part of such
Seller to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature except in each case to the extent such
violation or obligation would not have a Material Adverse Impact.
(b) Part 3.17(b) contains a complete and accurate list of each material
Governmental Authorization that is held by each Seller related to the Assumed
Stores and Properties or that otherwise relates to the Assets. Each Governmental
Authorization listed in Part 3.17(b) is valid and in full force and effect
except to the extent the failure of such Governmental Authorization to be valid
and in full force and effect would not have a Material Adverse Impact. Except as
set forth in Part 3.17(b):
(i) each Seller is, and at all times since October 30, 1998, has been, in
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.17(b),
except to the extent that failure to comply with such Governmental
Authorization would not have a Material Adverse Impact;
(ii) no event has occurred or circumstance exists that may subject to
applicable notice and grace periods (A) constitute or result directly
or indirectly in a violation of or a failure to comply with any term
or requirement of any Governmental Authorization listed or required to
be listed in Part 3.17(b) except to the extent that such event or
circumstance would not have a Material Adverse Impact or (B) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any
Governmental Authorization listed in Part 3.17(b) except to the extent
such event or circumstance would not have a Material Adverse Impact;
and
(iii) all applications required to have been filed for the renewal of the
Governmental Authorizations listed in Part 3.17(b) have been duly filed
on a timely basis with the appropriate Governmental Bodies, and all
other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with
the appropriate Governmental Bodies, except to the extent that failure
to timely file such application would not have a Material Adverse
Impact.
3.18 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.18(a), there is no pending or, to either
of the Sellers' or Shareholder's Knowledge, threatened Proceeding:
(i) by or against either Seller or that otherwise relates to or may affect
the Assets that would reasonably be expected to have a Material
Adverse Impact; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, any of the Contemplated
Transactions.
To the Knowledge of Sellers and Shareholder, no event has occurred or
circumstance exists that is reasonably likely to give rise to or serve as a
basis for the commencement of any Proceeding of the type described in clause (i)
or (ii) above. Each Seller has made available to Buyer copies of all pleadings,
correspondence and other documents relating to each Proceeding listed in Part
3.18(a).
(b) Except as set forth in Part 3.18(b):
(i) there is no Order to which either Seller, its business or any of the
Assets is subject that would have a Material Adverse Impact; and
(ii) to the Knowledge of Sellers, no officer, director, agent or employee of
either Seller is subject to any Order that prohibits such officer,
director, agent or employee from engaging in or continuing any conduct,
activity or practice relating to the business of either Seller.
3.19 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.19 or as required or otherwise contemplated by
this Agreement, since the date of the Balance Sheet, each Seller has conducted
its business at the Assumed Stores and Facilities only in the Ordinary Course of
Business and other than in the Ordinary Course of Business there has not been
any:
(a) amendment to the Governing Documents of either Seller;
(b) damage to or destruction or loss of any Asset that would have a
Material Adverse Impact;
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(c) entry into, termination of or receipt of notice of termination of any Seller
Contract, the termination of which would have a Material Adverse Impact, other
than terminations resulting from the disclosure of the Contemplated
Transactions;
(d) sale (other than sales of Inventories in the Ordinary Course of Business),
lease or other disposition of any Asset or property of either Seller (including
the Intellectual Property Assets) or the creation of any Encumbrance on any
Asset, other than sales and Encumbrances that would not have a Material Adverse
Impact and any sale, lease or other disposition related to the Closure Stores;
(e) indication by any landlord, vendor or supplier of an intention to
discontinue or change the terms of its relationship with either Seller which
discontinuance or change would have a Material Adverse Impact, other than any
such indication resulting from the disclosure of the Contemplated Transactions;
(f) material change in the accounting methods used by either Seller; or
(g) Contract by either Seller to do any of the foregoing.
3.20 CONTRACTS; NO DEFAULTS
(a) Except for purchase orders for acquisition of Inventories in the Ordinary
Course of Business, Part 3.20(a) contains an accurate and complete list, and,
other than with respect to oral contracts, Sellers have made available to Buyer
accurate and complete copies, of:
(i) each Seller Contract that involves future performance of services or
future delivery of goods or materials by, for or to either Seller of an
amount or value in excess of Ten Thousand dollars ($10,000) annually or
Fifty Thousand dollars ($50,000) in the aggregate;
(ii) each Seller Contract that was not entered into in the Ordinary Course
of Business;
(iii) each Seller Contract affecting the ownership of, leasing of, title to,
use of, or any leasehold or other interest in any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than Ten Thousand dollars ($10,000) and having a
remaining term of less than one year);
(iv) each Seller Contract with any labor union or other employee
representative of a group of employees relating to wages, hours and
other conditions of employment;
(v) each Seller Contract (however named) involving a sharing of profits,
losses, costs or liabilities by either Seller with any other Person;
(vi) each Seller Contract containing covenants that in any way purport to
restrict either Seller's business activity with respect to the Assumed
Stores and Facilities or limit the freedom of either Seller to engage
in any line of business or to compete with any Person;
35
(vii) each Seller Contract providing for payments to or by any Person based
on sales, purchases or profits, other than direct payments for goods;
(viii) each Seller Contract for future capital expenditures with respect to
the Assumed Stores and Facilities in excess of Ten Thousand dollars
($10,000) in any year or Fifty Thousand dollars ($50,000) in the
aggregate;
(ix) each written warranty, guaranty and/or other similar undertaking with
respect to contractual performance extended by either Seller other than
in the Ordinary Course of Business; and
(x) each amendment, supplement and modification (whether oral or written)
in respect of any of the foregoing.
(b) Except as set forth in Part 3.20(b), Shareholder has no and may not acquire
any rights under, and Shareholder has no and may not become subject to any
obligation or liability under, any Seller Contract that relates to the Assumed
Stores and Facilities or any of the Assets except in connection with any sale,
lease or disposition related to the Closure Stores.
(c) Except as set forth in Part 3.20(c), assuming all Material Consents
have been obtained:
(i) each Contract identified or required to be identified in Part 3.20(a)
and which is to be assigned to or assumed by Buyer under this Agreement
is in full force and effect and is valid and enforceable in accordance
with its terms; and
(ii) each Contract identified or required to be identified in Part 3.20(a)
and which is being assigned to or assumed by Buyer (other than the Real
Property Leases for the Assumed Stores and Facilities that are not the
Required Stores) is assignable by either Seller to Buyer without the
consent of any other Person.
(d) Except as set forth in Part 3.20(d):
(i) each Seller is, and at all times since October 30, 1998, has been, in
compliance with all applicable terms and requirements of each Contract
to which such Seller is a party which is being assumed by Buyer, except
for any noncompliance that would not have a Material Adverse Impact;
(ii) to the Knowledge of Sellers, each other Person that has or had any
obligation or liability under any Contract which is being assigned to
Buyer is, and at all times since October 30, 1998, has been, in full
compliance with all applicable terms and requirements of such Contract
except for any noncompliance that would not have a Material Adverse
Impact;
36
(iii) to the Knowledge of Sellers, no event has occurred or circumstance
exists that subject to applicable notice and cure periods may
contravene, conflict with or result in a Breach of, or give either
Seller or other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or
payment under, or to cancel, terminate or modify, any Contract that is
being assigned to or assumed by Buyer, other than occurrences or
circumstances that would not have a Material Adverse Impact;
(iv) no event has occurred or circumstance exists under or by virtue of any
Contract that (with or without notice or lapse of time) would cause the
creation of any Encumbrance affecting any of the Assets, other than
Encumbrances that would not have a Material Adverse Impact; and
(v) neither Seller has given to or received from any other Person, at any
time since October 30, 1998, any notice or other communication (whether
oral or written) regarding any actual, alleged, possible or potential
violation or Breach of, or default under, any Contract which is being
assigned to or assumed by Buyer, other than any such violation or
Breach that would not have a Material Adverse Impact.
(e) Except with respect to the Real Property Leases, there are no pending
renegotiations of, attempts to renegotiate or outstanding rights to renegotiate
any material amounts paid or payable to either Seller under current or completed
Seller Contracts with any Person having the contractual or statutory right to
demand or require such renegotiations and no such Person has made written demand
for such renegotiations.
(f) Each Seller Contract relating to the sale, design, manufacture or provision
of products or services by, for or to either Seller has been entered into in the
Ordinary Course of Business of such Seller and has been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in violation of
any Legal Requirement, except to the extent such violation would not have a
Material Adverse Impact.
3.21 [RESERVED]
3.22 ENVIRONMENTAL MATTERS
Except as disclosed in Part 3.22:
(a) The operations of each of the Assumed Stores and Facilities by Sellers are,
and at all times have been, in full compliance with, and have not been and are
not in violation of, any Environmental Law. Neither of the Sellers nor
Shareholder has any Knowledge or any basis to expect, nor has any of them or any
other Person for whose conduct they are or may be held to be responsible
received, any actual or threatened Order, notice or other communication from (i)
any Governmental Body or private citizen acting in the public interest or (ii)
the current or prior owner or operator of any Assumed Stores and Facilities, of
any actual violation or failure to comply with any Environmental Law, or of any
actual obligation to undertake or bear the cost of any Environmental, Health and
Safety Liabilities with respect to any Assumed Stores and Facilities. To the
Knowledge of Sellers, there has been no Release or Threat of Release of any
37
Hazardous Materials at or from any Assumed Stores and Facilities, and no
Hazardous Activity has been conducted or is being conducted by Sellers with
respect to any Assumed Stores and Facilities.
(b) To the Knowledge of Sellers, there are no pending or, threatened claims,
Encumbrances, or other restrictions of any nature (other than those described in
the Real Property Leases) resulting from any Environmental, Health and Safety
Liabilities or arising under or pursuant to any Environmental Law with respect
to or affecting any Assumed Stores and Facilities, nor does either Seller or any
other Person for whose conduct either Seller is or may be held responsible have
any Environmental, Health and Safety Liabilities with respect to any Assumed
Stores and Facilities.
(c) Each Seller has made available to Buyer true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by such Seller pertaining to Hazardous Materials or Hazardous Activities in, on,
or under the Assumed Stores and Facilities, or concerning compliance, by such
Seller or any other Person for whose conduct it is or may be held responsible,
with Environmental Laws other than reports, studies, notices, analyses, tests or
monitoring information delivered to Seller in connection with its operation of
the Assumed Stores and Facilities in the Ordinary Course of Business.
3.23 EMPLOYEES
(a) Assuming compliance by Buyer with its obligations under Section 12.1(b),
neither Seller has violated the WARN Act or any similar state or local Legal
Requirement.
(b) Neither Seller is subject to any affirmative action obligations, including
implementation of an Affirmative Action Plan pursuant to Executive Order 11246,
except as described in Part 3.23(b).
3.24 LABOR DISPUTES; COMPLIANCE
(a) Each Seller has complied in all respects with all Legal Requirements arising
out of, related to, or in connection with employment practices, terms and
conditions of employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, leaves of absence, collective bargaining
and other requirements under applicable law, the payment of social security and
similar Taxes and occupational safety and health. Neither Seller is liable for
the payment of any Taxes, fines, penalties, judgments, awards, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
(b) Except as disclosed in Part 3.24(b), since October 30, 1998, neither Seller
has received notice of any pending or threatened claims, charges, controversies,
lawsuits, administrative actions or charges complaints, demands, liens,
grievances, actions, suits, causes of action, obligations, debts, damages,
judgments, awards, orders or liabilities of whatever kind or nature in law,
equity or otherwise, related to actions or events occurring prior to the
Effective Time, arising out of, related to, or in connection with any
employment-related Legal Requirement, or under any collective bargaining
agreement or employment agreement (express or implied), or otherwise involving
the hiring, employment or termination of employment of any employee or employees
or independent contractors, wrongful discharge, breach of contract, equal
38
employment opportunity, discrimination, any other form of alleged unlawful
employment practice or unfair labor practice, or failure to comply with any
applicable law, duty imposed by law, contract, collective bargaining agreement
or arbitration award;
(c) Except as disclosed in Part 3.24(c), (i) since October 30, 1998, neither
Seller has been, and neither is now, a party to, a successor to, or bound by any
collective bargaining agreement other labor contract, or any arbitration award
thereunder affecting any of the Assumed Stores and Facilities; (ii) since
October 30, 1998, there has not been, there is not presently pending or
existing, and to Sellers' Knowledge there is not threatened, any strike,
slowdown, picketing, work stoppage or other labor dispute affecting any of the
Assumed Stores and Facilities; (iii) to Sellers' Knowledge, since October 30,
1998, no event has occurred and no circumstance exists that could provide the
basis for any work stoppage or other labor dispute affecting any of the Assumed
Stores and Facilities; (iv) there is not pending or, to Sellers' Knowledge,
threatened against or affecting either Seller any Proceeding relating to the
alleged violation of any Legal Requirement pertaining to labor relations or
employment matters affecting any of the Assumed Stores and Facilities, including
any charge or complaint filed with the National Labor Relations Board or any
comparable Governmental Body, and there is no organizational activity or other
labor dispute against or affecting any of the Assumed Stores and Facilities; (v)
no application or petition for an election of or for certification of a
collective bargaining agent is pending with respect to any of the Assumed Stores
or Facilities; (vi) no grievance or arbitration Proceeding exists that might
have an adverse effect upon any of the Assumed Stores and Facilities; (vii)
there is no lockout of any employees at any of the Assumed Stores or Facilities
by either Seller, and no such action is contemplated by either Seller; and
(viii) there is no pending charge of discrimination filed against or threatened
against either Seller with the Equal Employment Opportunity Commission or
similar Governmental Body.
3.25 INTELLECTUAL PROPERTY ASSETS
(a) The term "Intellectual Property Assets" means all intellectual property
owned or licensed (as licensor or licensee) by either Seller in which such
Seller has a proprietary interest, including:
(i) such Seller's name, all assumed fictional business names, trade names,
registered and unregistered trademarks, service marks and applications,
including Principal Seller's rights under the Xxxxxxx Agreement and the
Marks used by such Seller on internet web sites (collectively, "Marks";
the Marks the loss of the rights to which would cause a Material
Adverse Impact are referred to herein as "Material Marks");
(ii) all patents, patent applications, inventions and discoveries that have
been identified by either Seller as potentially patentable
(collectively, "Patents");
39
(iii) all registered and unregistered copyrights in both published works and
unpublished works, including copyrightable portions of Sellers'
internet web sites (collectively, "Copyrights");
(iv) all know-how, trade secrets, confidential or proprietary information,
customer lists, Software, technical information, data, process
technology, plans, drawings and blue prints that are (A) not publicly
available or otherwise known within Sellers' industry and (B) are of
value to Sellers due to their confidential proprietary nature
(collectively, "Trade Secrets"); and
(v) all rights in internet domain names currently used by such Seller
(collectively "Net Names").
(b) Part 3.25(b) contains a complete and accurate list, and, other than with
respect to oral contracts, each Seller has made available to Buyer accurate and
complete copies, of all Seller Contracts relating to the Intellectual Property
Assets, except for any license implied by the sale of a product and perpetual,
paid-up licenses for commonly available Software programs with a value of less
than Ten Thousand dollars ($10,000) under which such Seller is the licensee.
Except as set forth in Part 3.25(b), there are no outstanding and, to Sellers'
Knowledge, no threatened disputes or disagreements with respect to any such
Contract.
(c) Except as set forth in Part 3.25(c), the Intellectual Property Assets are
all those necessary for the operation of each Seller's business related to the
Assumed Stores and Facilities as it is currently conducted. Each Seller is the
owner or licensee of all right, title and interest in and to each of its
Intellectual Property Assets, free and clear of all Encumbrances, and has the
right to use without payment to a Third Party all of the Intellectual Property
Assets, all of the foregoing other than as reflected in the licenses listed in
Part 3.25(c).
(d) Sellers' retention of a limited license to use the name "F.A.O. Xxxxxxx" to
operate the Operated Stores and complete closure of the Closure Stores as
provided in the Transition Services Agreement and the Operating Agreement will
not constitute a Breach of the Xxxxxxx Agreement.
(e)
(i) Part 3.25(e) contains a complete and accurate list of all registered
Marks, Marks in process or being registered and all other Material
Marks.
(ii) Except as set forth in Part 3.25(e), all Material Marks have been, or
are in the process of being, registered, and the Xxxx licensed under
the Xxxxxxx Agreement has been registered, with the United States
Patent and Trademark Office, are currently in compliance with all
formal Legal Requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable in the United States by one
40
or both of the Sellers and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the Closing
Date except for responses and other correspondence with the U.S.
Patent and Trademark Office in connection with pending trademark
applications in the Ordinary Course of Business.
(iii) Except as set forth in Part 3.25(e), no Xxxx is now involved in any
opposition, invalidation or cancellation Proceeding and, to Sellers'
Knowledge, no such action is threatened with respect to any of the
Marks. To Sellers' knowledge, no Xxxx has been involved in any such
Proceeding, except for such Proceedings that would not have a Material
Adverse Impact.
(iv) To Sellers' Knowledge, there is no potentially conflicting trademark or
trademark application of any other Person with respect to any of the
Marks.
(v) To Sellers' Knowledge, no Xxxx is infringed or is being challenged or
threatened in any way, and none of the Marks infringes or is alleged to
infringe any trade name, trademark or service xxxx of any other Person.
To Sellers' Knowledge, none of the Material Marks has been challenged
or threatened in any way, except as would not have a Material Adverse
Impact.
(vi) All products and materials containing a registered Xxxx xxxx the proper
federal registration notice where permitted by law, except to the
extent failure to bear such notice would not have a Material Adverse
Impact.
(f)
(i) Part 3.25(f) contains a complete and accurate list of all registered
Copyrights owned by either Seller.
(ii) All of the registered Copyrights are currently in compliance with
formal Legal Requirements, except as set forth in Part 3.25(f) are
valid and enforceable, and are not subject to any maintenance fees or
taxes or actions falling due within ninety (90) days after the date of
Closing.
(iii) Except as set forth in Part 3.25(f), to Sellers' Knowledge, no
Copyright is infringed or is being challenged or threatened in any
way. To Sellers' Knowledge, none of the subject matter of any of the
registered Copyrights infringes or is alleged to infringe any
copyright of any Third Party or is a derivative work based upon the
work of any other Person. To Sellers' Knowledge, none of the subject
matter of any of the unregistered Copyrights infringes or is alleged
to infringe any copyright of any Third Party or is a derivative work
based upon the work of any other Person, except as would not have a
Material Adverse Impact. To Sellers' Knowledge, no Copyright has been
challenged or threatened in any way, except as would not have a
Material Adverse Impact.
(iv) All works encompassed by the Copyrights have been marked with the
proper copyright notice, except to the extent failure to bear such
notice would not have a Material Adverse Impact.
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(g) To Sellers' Knowledge, no material Trade Secrets (A) are part of the public
knowledge or literature or have, to Sellers' Knowledge, been used, divulged or
appropriated either for the benefit of any Person (other than the Sellers) or to
the detriment of the Sellers or (B) are subject to any adverse claim or are
being challenged or threatened in any way or infringe any intellectual property
right of any other Person.
(h)
(i) Part 3.25(h) contains a complete and accurate list of all Net Names.
(ii) Except as set forth in Part 3.25(h), all Net Names have been registered
in the name of the applicable Seller and are in compliance with all
formal Legal Requirements.
(iii) No Net Name is now involved in any dispute, opposition, invalidation or
cancellation Proceeding and, to Sellers' Knowledge, no such action is
threatened with respect to any Net Name.
(iv) Except as set forth in Part 3.25(h), to Sellers' Knowledge, there is no
domain name registered by any other Person which would or would
potentially conflict with or infringe any Net Name.
(v) Except as set forth in Part 3.25(h), to Sellers' Knowledge, no Net Name
has been challenged, interfered with or threatened in any way, and no
Net Name infringes, interferes with or is alleged to interfere with or
infringe the trademark, copyright or domain name of any other Person,
except in each case as would not have a Material Adverse Impact.
3.26 [Reserved]
3.27 [Reserved]
3.28 RELATIONSHIPS WITH RELATED PERSONS
Neither Shareholder nor any Related Person of Shareholder or either Seller owns,
or since February 4, 2000, has owned, of record or as a beneficial owner, an
equity interest or any other financial or profit interest in any Person that has
(a) had a material financial interest in any transaction with either Seller
other than transactions disclosed in Part 3.28, each of which has been conducted
in the Ordinary Course of Business with the applicable Seller at substantially
prevailing market prices and on substantially prevailing market terms or (b)
engaged in competition with either Seller with respect to any line of the
products or services of such Seller (a "Competing Business") in any market
presently served by Seller. Except as set forth in Part 3.28, neither
Shareholder nor any Related Person of Shareholder or either Seller is a party to
any Contract with, or has any claim or right against, either Seller, and no
obligations under any such Contract is included in Assumed Liabilities.
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3.29 BROKERS OR FINDERS
Neither of the Sellers nor any of their respective Representatives has incurred
any obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payments in connection with the
sale of such Seller's business or the Assets or the Contemplated Transactions,
except any Liability incurred by Sellers to Xxxxxx Xxxxxxx & Co. Incorporated,
which Liability shall be paid by Sellers or Shareholder.
3.30 SECURITIES LAW MATTERS
(a) Each Seller is acquiring its respective interest in the Parent Preferred
Stock and the Subordinated Notes for its own account and not with a view to
resale or distribution thereof except in compliance with the Securities Act of
1933, as amended (the "Securities Act").
(b) Each Seller confirms that such Seller has had the opportunity to review the
following information regarding the management and financial condition of
Parent: (i) its Form 10-K for the fiscal year ending February 3, 2001; (ii) its
proxy statement for its most recent annual meeting of shareholders, held June
29, 2001; (iii) its Form 10-Q for the quarter ended August 4, 2001; (iv) its
Form 8-K filed September 20, 2001; (v) its Form 8-K/A filed October 1, 2001; and
(vi) Parent's other filings made under the Exchange Act.
(c) Each Seller confirms that Buyer has made available to such Seller and its
Representatives the opportunity to ask questions of the officers and management
employees of Buyer and to acquire such additional information about the business
and financial condition of Buyer as Seller has requested, and all such
information has been received.
3.31 DISCLOSURE
No representation or warranty or other statement made by either of the Sellers
or Shareholder in this Agreement, the Disclosure Letter, any supplement to the
Disclosure Letter, the certificates delivered pursuant to Section 2.6(a) or
otherwise in connection with the Contemplated Transactions contains any untrue
statement of material fact or omits to state a material fact necessary to make
any such representation, warranty or other statement, in light of the
circumstances in which it was made, not misleading.
Article 4. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder represents and warrants to Buyer and Parent as follows:
4.1 ORGANIZATION AND GOOD STANDING
Shareholder is a corporation duly organized, validly existing and in good
standing under the laws of the Netherlands, with full corporate power and
authority to conduct its business as it is now conducted.
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4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding obligation of
Shareholder, enforceable against Shareholder in accordance with its terms,
subject to applicable laws relating to bankruptcy, insolvency, moratorium and
receivership, and general principles of equity. Upon the execution and delivery
by Shareholder of each Closing Document and other agreement to be executed or
delivered by Shareholder at Closing (collectively, the "Shareholder's Closing
Documents"), each of the Shareholder's Closing Documents will constitute the
legal, valid and binding obligation of Shareholder, enforceable against
Shareholder in accordance with its respective terms, subject to applicable laws
relating to bankruptcy, insolvency, moratorium and receivership, and general
principles of equity. Shareholder has all necessary right, power and authority
to execute and deliver this Agreement and the Shareholder's Closing Documents
and to perform its obligations under this Agreement and the Shareholder's
Closing Documents, and such action has been duly authorized by all necessary
corporate action.
(b) Shareholder shall vote, and shall cause each of its direct and indirect
Subsidiaries to vote, in favor of the execution of this Agreement to the extent
required to ensure all necessary corporate and shareholder action on the part of
each Seller has been taken (and the votes of Shareholder and such Subsidiaries
are the only votes required therefor).
(c) Neither the execution and delivery of this Agreement by Shareholder nor the
consummation or performance of any of the Contemplated Transactions by
Shareholder will give any Person the right to prevent, delay or otherwise
interfere with any of the Contemplated Transactions pursuant to:
(i) any provision of Shareholder's Governing Documents;
(ii) any resolution adopted by the board of directors or the shareholders
of Shareholder;
(iii) any Legal Requirement or Order to which Shareholder may be subject; or
(iv) any Contract to which Shareholder is a party or by which Shareholder
may be bound.
Shareholder is not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions other than
Consents listed in Part 4.2(c).
4.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Shareholder and
that challenges, or may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated Transactions. To
Shareholder's Knowledge, no such Proceeding has been threatened.
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4.4 BROKERS OR FINDERS
Neither Shareholder nor any of its Representatives has incurred any obligation
or Liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with the Contemplated
Transactions, except any Liability incurred by Shareholder to Xxxxxx Xxxxxxx &
Co., Incorporated, which Liability shall be paid by Shareholder.
Article 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller and Shareholders as follows:
5.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full corporate power and authority
to conduct its business as it is now conducted and as proposed to be conducted.
5.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to applicable
laws relating to bankruptcy, insolvency, moratorium and receivership, and
general principles of equity. Upon the execution and delivery by Buyer of each
Closing Document and other agreement or instrument to be executed or delivered
by Buyer at Closing (collectively, the "Buyer's Closing Documents"), each of the
Buyer's Closing Documents will constitute the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its respective
terms, subject to applicable laws relating to bankruptcy, insolvency, moratorium
and receivership, and general principles of equity. Buyer has all necessary
right, power and authority to execute and deliver this Agreement and the Buyer's
Closing Documents and to perform its obligations under this Agreement and the
Buyer's Closing Documents, and such action has been duly authorized by all
necessary corporate and shareholder action.
(b) Neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
will give any Person the right to prevent, delay or otherwise interfere with any
of the Contemplated Transactions pursuant to:
(i) any provision of Buyer's Governing Documents;
(ii) any resolution adopted by the board of directors or the shareholders
of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be bound.
45
Buyer is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
(c) Upon consummation of the Contemplated Transactions, Buyer will not have
unreasonably small capital with which to conduct its proposed business.
5.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been threatened.
5.4 BROKERS OR FINDERS
Neither Buyer nor any of its Representatives has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with the Contemplated
Transactions.
5.5 GOVERNMENTAL CONSENTS
Except for any notification required under the HSR Act, there are no
registrations, qualifications or filings with any Governmental Body necessary in
connection with the execution and delivery of this Agreement by Buyer, the
performance of its obligations hereunder, or the consummation by Buyer of the
transactions contemplated hereby.
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Article 6. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Sellers and Shareholder as follows:
6.1 ORGANIZATION AND GOOD STANDING
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of California, with full corporate power and
authority to conduct its business as it is now conducted.
6.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, subject to
applicable laws relating to bankruptcy, insolvency, moratorium and receivership
and general principles of equity. Upon the execution and delivery or issuance by
Parent of each Closing Document to be executed and delivered or issued by Parent
(collectively, the "Parent's Closing Documents"), each of the Parent's Closing
Documents will constitute the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its respective terms, subject to
applicable laws relating to bankruptcy, insolvency, reorganization, moratorium
and receivership and general principles of equity. Parent has all necessary
right, power and authority to execute and deliver this Agreement and the
Parent's Closing Documents and to perform its obligations under this Agreement
and the Parent's Closing Documents, and such action has been duly authorized by
all necessary corporate action.
(b) Except as described in Exhibit 6.2(b), neither the execution and delivery of
this Agreement by Parent nor the consummation or performance of any of the
Contemplated Transactions by Parent will give any Person the right to prevent,
delay or otherwise interfere with any of the Contemplated Transactions pursuant
to:
(i) any provision of Parent's Governing Documents;
(ii) any resolution adopted by the board of directors or the shareholders
of Parent;
(iii) any Legal Requirement or Order to which Parent may be subject; or
(iv) any Contract to which Parent is a party or by which Parent may be
bound.
Except as described in Exhibit 6.2(b), Parent is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
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6.3 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Parent and that
challenges, or may have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of the Contemplated Transactions. To Parent's
Knowledge, no such Proceeding has been threatened.
6.4 BROKERS OR FINDERS
Neither Parent nor any of its Representatives has incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with the Contemplated
Transactions.
6.5 GOVERNMENTAL CONSENTS
Except for any notification required under the HSR Act and filings required
under the Exchange Act, there are no registrations, qualifications or filings
with any Governmental Body necessary in connection with the execution and
delivery of this Agreement by Parent, the performance of its obligations
hereunder, or the consummation by Parent of the transactions contemplated
hereby.
6.6 PARENT PREFERRED STOCK
At the Closing, the shares of Parent Preferred Stock to be issued to Sellers as
contemplated hereby will be duly authorized, validly issued, fully paid and
non-assessable.
6.7 EXCHANGE ACT REPORTS
(a) Parent has timely filed all forms, reports and documents required to be
filed by it with the SEC (the "SEC Reports"). The SEC Reports, including any SEC
Reports filed with the SEC after the date of this Agreement and on or prior to
the Closing Date (i) at the time filed, complied in all material respects with
the requirements of all applicable securities laws and other applicable laws and
(ii) did not, at the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact required to be stated in such
SEC Reports or necessary in order to make the statements in such SEC Reports, in
light of the circumstances under which they were made, not misleading.
(b) Each of the financial statements of Parent (including in each case any
related notes) contained in the SEC Reports, including any SEC Reports filed
after the date of this Agreement and on or prior to the Closing Date, complied
as to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP, applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q or Form 8-K of the SEC),
and fairly presented in all material respects the financial position of Parent
and its consolidated subsidiaries as at the respective dates and the
consolidated results of operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount or effect.
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(c) Except as set forth on Exhibit 6.7, since the date of filing of the last SEC
Report filed, there has not been any material adverse change in the business,
properties, results of operations, financial condition or capitalization of
Parent; provided, however, that the events of September 11, 2001, though they
may have resulted in such a change, are specifically excluded.
Article 7. COVENANTS OF SELLERS PRIOR TO CLOSING
7.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, and upon reasonable
advance notice received from Buyer, each Seller shall (and Shareholder shall
cause each Seller to) (a) afford Buyer, Parent and their respective
Representatives and prospective lenders and their Representatives (collectively,
"Buyer Group") full and free access, during regular business hours, to such
Seller's personnel, Contracts, Governmental Authorizations, books and Records
and other documents and data, such rights of access to be exercised in a manner
that does not unreasonably interfere with the operations of such Seller; (b)
furnish Buyer Group with copies of all such Contracts, Governmental
Authorizations, books and Records and other existing documents and data
(excluding Government Authorizations related to the Closure Stores) as Buyer may
reasonably request; (c) furnish Buyer Group with such additional financial,
operating and other relevant data and information as Buyer may reasonably
request; and (d) otherwise cooperate and assist, to the extent reasonably
requested by Buyer, with Buyer Group's investigation of the properties, assets
and financial condition related to each Seller. In addition, Buyer shall have
the right to have the property encumbered by the Real Property Leases for the
Assumed Stores and Facilities and the Tangible Personal Property at the Assumed
Stores and Facilities inspected by Buyer Group, at Buyer's sole cost and
expense, for purposes of determining the physical condition and legal
characteristics of such property.
7.2 OPERATION OF THE BUSINESS OF SELLERS
Between the date of this Agreement and the Closing, with respect to the Assumed
Stores and Facilities each Seller shall (and Shareholder shall cause each Seller
to):
(a) conduct its business only in the Ordinary Course of Business;
(b) except as otherwise directed by Buyer in writing, and without making
any commitment on Buyer's behalf, use its Best Efforts to preserve
intact its current business organization, keep available the services
of its officers, employees and agents and maintain its relations and
good will with suppliers, customers, landlords, creditors, employees,
agents and others having business relationships with it; provided,
however, that Principal Seller's actions in connection with the
closing and liquidation of the Closure Stores shall not be deemed or
construed to violate this Section 7.2;
(c) confer with Buyer prior to implementing operational decisions of a
material nature;
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(d) otherwise report periodically to Buyer concerning the status of its
business, operations and finances;
(e) make no material changes in management personnel without prior
consultation with Buyer;
(f) maintain the Assets in a state of repair and condition that complies
with Legal Requirements and is consistent with the requirements and
normal conduct of such Seller's business;
(g) keep in full force and effect, without amendment, all material rights
relating to such Seller's business;
(h) comply with all Legal Requirements and contractual obligations
applicable to the operations of such Seller's business;
(i) continue in full force and effect the insurance coverage under the
policies currently in force or substantially equivalent policies;
(j) except as required to comply with ERISA or to maintain qualification
under Section 401(a) of the Code, not amend, modify, terminate,
establish or agree to establish any Employee Plan without the express
written consent of Buyer, and except as required under the provisions
of any Employee Plan, not make any contributions to or with respect to
any Employee Plan without the express written consent of Buyer,
provided that Seller shall contribute that amount of cash to each
Employee Plan necessary to fully fund all of the benefit liabilities
of such Employee Plan on a plan-termination basis as of the Closing
Date;
(k) cooperate with Buyer and assist Buyer in identifying the Governmental
Authorizations required by Buyer to operate the business from and
after the Closing Date and either transferring existing Governmental
Authorizations of Seller to Buyer, where permissible, or cooperating
with Buyer in obtaining new Governmental Authorizations for Buyer;
(l) upon reasonable request from time to time, at its sole cost and
expense, execute and deliver all documents, make all truthful oaths,
testify in any Proceedings and do all other acts that may be
reasonably necessary or desirable in the reasonable opinion of Buyer
to consummate the Contemplated Transactions, all without further
consideration; and
(m) maintain all books and Records of such Seller relating to such
Seller's business in the Ordinary Course of Business.
7.3 NEGATIVE COVENANT
Except as otherwise expressly permitted herein, between the date of this
Agreement and the Closing Date, neither Seller shall, and Shareholder shall not
permit either Seller to, without the prior written Consent of Buyer, (a) take
any affirmative action, or fail to take any reasonable action within its
control, as a result of which any of the changes or events listed in Sections
3.15 or 3.19 would be likely to occur; (b) make any modification to any material
Contract or Governmental Authorization other than those related to Closure
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Stores; (c) except at the Closure Stores, allow the levels of merchandise,
supplies or other materials included in the Inventories to vary materially from
the levels customarily maintained; or (d) enter into any compromise or
settlement of any litigation, proceeding or governmental investigation relating
to the Assets or the Assumed Liabilities.
7.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Shareholder and
Sellers shall make all filings required by Legal Requirements to be made by them
in order to consummate the Contemplated Transactions (including all filings
under the HSR Act). Sellers and Shareholder also shall cooperate with Parent,
Buyer and their Representatives with respect to all filings that Parent or Buyer
elects to make or, pursuant to Legal Requirements, shall be required to make in
connection with the Contemplated Transactions. Sellers and Shareholder also
shall cooperate with Parent, Buyer and their Representatives in obtaining all
Material Consents (including taking all actions requested by Parent or Buyer to
cause early termination of any applicable waiting period under the HSR Act).
7.5 NOTIFICATION
Between the date of this Agreement and the Closing, Sellers and Shareholder
shall promptly notify Buyer in writing if any of them becomes aware of (a) any
fact or condition that causes or constitutes a Breach of any of Sellers' or
Shareholder's representations and warranties made as of the date of this
Agreement or (b) the occurrence after the date of this Agreement of any fact or
condition that would or be reasonably likely to (except as expressly
contemplated by this Agreement) cause or constitute a Breach of any such
representation or warranty had that representation or warranty been made as of
the time of the occurrence of, or Sellers' or Shareholder's discovery of, such
fact or condition. Should any such fact or condition require any change to the
Disclosure Letter, Principal Seller shall promptly deliver to Buyer a supplement
to the Disclosure Letter specifying such change. Such delivery shall not affect
any rights of Buyer under Section 11.2 and Article 13. During the same period,
Sellers and Shareholder also shall promptly notify Buyer of the occurrence of
any Breach of any covenant of Sellers or Shareholder in this Article 7 or of the
occurrence of any event that may make the satisfaction of the conditions in
Article 9 impossible or unlikely.
7.6 NO SOLICITATION
Until such time as this Agreement shall be terminated pursuant to Section 11.1,
(a) Except as set forth in Section 7.6(b), neither Seller nor Shareholder, nor
any agent, advisor or other representative of either Seller or Shareholder
(including Xxxxxx Xxxxxxx & Co. Incorporated), shall directly or indirectly in
any manner solicit, initiate, encourage or entertain any inquiries or proposals
from, discuss or negotiate with, provide any nonpublic information to or
consider the merits of any inquiries or proposals from any Person (other than
Buyer and Parent), or assist any such Person with due diligence investigation,
or participate in any management presentation to any such Person, relating to
any business combination transaction involving either Seller, including the sale
by Shareholder of Sellers' stock, the merger or consolidation of either Seller
or the sale of either Seller's business or any of the Assets other than in the
51
Ordinary Course of Business (a "Business Combination"). Each Seller and
Shareholder shall notify Buyer of any such proposal (whether or not in writing)
within forty-eight (48) hours of receipt of the same by such Seller or
Shareholder; and
(b) Shareholder shall not directly or indirectly in any manner solicit or
initiate, any inquiries or proposals from any Person (other than Buyer and
Parent), or assist any such Person with due diligence investigation, or
participate in any management presentations to any such Person, relating to any
Business Combination; provided, however that employees of Shareholder shall be
permitted to entertain proposals and negotiate regarding a Business Combination.
7.7 BEST EFFORTS
Sellers and Shareholder shall use their Best Efforts to cause the conditions in
Article 9 and Sections 10.3 and 10.8 to be satisfied.
7.8 CHANGE OF NAME
As soon as practicable after the Closing Date, Principal Seller shall (a) amend
its Governing Documents and take all other actions necessary to change its name
to one sufficiently dissimilar to Principal Seller's present name, in Buyer's
judgment, to avoid confusion and (b) take all actions reasonably requested by
Buyer to enable Buyer to use Principal Seller's present name in any
jurisdiction.
7.9 PAYMENT OF LIABILITIES
Each Seller shall pay or otherwise satisfy in the Ordinary Course of Business
all of its Liabilities and obligations relating to the Assumed Stores and
Facilities. Buyer and each Seller hereby waive compliance with the bulk-transfer
provisions of the Uniform Commercial Code (or any similar law) ("Bulk Sales
Laws") in connection with the Contemplated Transactions.
7.10 TREATMENT OF AGED INVENTORIES
From and after the date hereof, Sellers shall not transfer any Aged Inventories
located at Closure Stores or Distribution Centers to any of the Assumed Stores
and Facilities. During the sixty day period immediately following the Closing
Date, Sellers may remove any Aged Inventories from any Distribution Centers at
their sole cost and expense and Buyer shall reasonably cooperate to permit such
removal. To the extent any Aged Inventories at any Distribution Center remain at
such Distribution Center after the 60th day following the Closing Date, Buyer
may dispose of such Aged Inventories at its sole cost and expense without
further obligation therefor to Sellers for such Inventories.
7.11 DUE DILIGENCE ASSISTANCE
Prior to Closing, Sellers shall use their Best Efforts to assist Buyer with the
timely preparation of all financial and operating data, due diligence schedules
and other disclosure materials as Buyer may reasonably request in order to
satisfy the conditions to closing a revolving loan transaction with Xxxxx or any
other lender.
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Article 8. COVENANTS OF BUYER PRIOR TO CLOSING
8.1 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Parent and Buyer
shall make, or cause to be made, all filings required by Legal Requirements
(including all filings under the HSR Act) to be made by it to consummate the
Contemplated Transactions. Parent and Buyer also shall cooperate, and cause
their Related Persons to cooperate, with Sellers and Shareholder (a) with
respect to all filings Sellers and Shareholder elect to make or, pursuant to
Legal Requirements shall be required to make in connection with the Contemplated
Transactions and (b) in obtaining all Consents identified in Part 3.2(c).
8.2 BEST EFFORTS
Buyer shall use its Best Efforts to cause the conditions in Article 10 and
Sections 9.3 and 9.7 to be satisfied. Buyer shall use its Best Efforts,
cooperate with and deliver the information and instruments reasonably requested
by Sellers and Shareholder in connection with Sellers' and Shareholder's efforts
to obtain the Consents identified in Part 3.2(c).
8.3 NOTIFICATION
Between the date of this Agreement and the Closing, Buyer and Parent shall
promptly notify Principal Seller in writing if any of them becomes aware of (a)
any fact or condition that causes or constitutes a Breach of any of Buyer's or
Parent's representations and warranties made as of the date of this Agreement or
(b) the occurrence after the date of this Agreement of any fact or condition
that would or would be reasonably likely to (except as expressly contemplated by
this Agreement) cause or constitute a Breach of any such representation or
warranty had that representation or warranty been made as of the time of the
occurrence of, or Buyer's or Parent's discovery of, such fact or condition.
During the same period, Buyer and Parent also shall promptly notify Principal
Seller of the occurrence of any Breach of any covenant of Buyer or Parent in
this Article 8 or of the occurrence of any event that may make the satisfaction
of the conditions in Article 10 impossible or unlikely.
Article 9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Assets and to take the other actions required
to be taken by Buyer at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Buyer, in whole or in part):
9.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and Shareholder's representations and warranties in this
Agreement (considered collectively), and each of these representations and
warranties (considered individually), shall have been accurate in all material
respects as of the date of this Agreement, and shall be accurate in all material
respects as of the time of the Closing as if then made, without giving effect to
any materiality qualifiers therein or to any supplement to the Disclosure
Letter.
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9.2 SELLER'S PERFORMANCE
All of the covenants and obligations that Sellers and Shareholder are required
to perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and obligations
(considered individually), shall have been duly performed and complied with in
all material respects, including (a) the assignment to Buyer of Real Property
Leases for the Required Stores and (b) the assignment to Buyer of all rights of
Principal Seller under the Xxxxxxx Agreement.
9.3 CONSENTS
Each of the Consents identified in Exhibit 9.3 (the "Material Consents") shall
have been obtained and shall be in full force and effect.
9.4 ADDITIONAL DOCUMENTS
Sellers and Shareholder shall have caused the documents and instruments required
by Section 2.6(a) and the following documents to be delivered (or tendered
subject only to Closing) to Buyer:
(a) an opinion of Kronish Xxxx Xxxxxx & Xxxxxxx LLP, dated the Closing Date,
covering the legal matters described in Exhibit 9.4(a), with customary
assumptions, exceptions, limitations and qualifications, in form and substance
satisfactory to Buyer;
(b) an opinion of internal Netherlands counsel to Shareholder, dated the Closing
Date, covering the legal matters described in Exhibit 9.4(b), with customary
assumptions, exceptions, limitations and qualifications, in form and substance
satisfactory to Buyer;
(c) the certificate of incorporation and all amendments thereto of each Seller,
duly certified as of a recent date by the Secretary of State of the jurisdiction
of such Seller's incorporation;
(d) if requested by Buyer, any Consents or other instruments that may be
required to permit Buyer's qualification in each jurisdiction in which either
Seller is licensed or qualified to do business as a foreign corporation under
the name "F.A.O. Xxxxxxx" or "F.A.O. Schweetz" or any derivative thereof;
(e) Releases of all Encumbrances on the Assets, other than Permitted
Encumbrances;
(f) certificates dated as of a date not earlier than the fifteenth day prior to
the Closing as to the good standing of each Seller and payment of all applicable
state Taxes by such Seller in its jurisdiction of incorporation, executed by the
appropriate officials of such jurisdiction; and
(g) such other documents as Buyer may reasonably request for the purpose of:
54
(i) evidencing the accuracy of any of either Seller's representations and
warranties;
(ii) evidencing the performance by either Seller or Shareholder of, or the
compliance by either Seller or Shareholder with, any covenant or obligation
required to be performed or complied with by such Seller or Shareholder;
(iii) evidencing the satisfaction of any condition referred to in this Article
9; or
(iv) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
9.5 NO PROCEEDINGS
Since the date of this Agreement, there shall not have been commenced and be
continuing against Buyer, or against any Related Person of Buyer, any Proceeding
(a) involving any challenge to, or seeking Damages or other relief in connection
with, any of the Contemplated Transactions or (b) that has the effect of
preventing, delaying, making illegal, imposing limitations or conditions on or
otherwise interfering with any of the Contemplated Transactions; provided that
the provisions of this Section 9.5 shall not apply to a Proceeding that Buyer,
Parent or any Related Party of Buyer or Parent shall have directly or indirectly
solicited or encouraged.
9.6 GOVERNMENTAL AUTHORIZATIONS
Buyer shall have received the Governmental Authorizations listed on Exhibit 9.6.
9.7 NO CONFLICT
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of or cause Buyer or
any Related Person of Buyer to suffer any adverse consequence under any Legal
Requirement or Order that has been published, introduced or otherwise proposed
by or before any Governmental Body, excluding Bulk Sales Laws, after the date of
this Agreement.
9.8 EMPLOYEES
Substantially all Active Employees of Sellers shall be available for hiring by
Buyer, in accordance with Section 12.1(b), on and as of the Closing Date.
Article 10. CONDITIONS PRECEDENT TO SELLERS' AND SHAREHOLDER'S
OBLIGATION TO CLOSE
The obligations of Sellers and Shareholder to sell the Assets and to take the
other actions required to be taken by Sellers and Shareholder at the Closing are
55
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Sellers and Shareholder in
whole or in part):
10.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Parent's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), shall have been accurate in all material respects as
of the date of this Agreement and shall be accurate in all material respects as
of the time of the Closing as if then made.
10.2 BUYER'S PERFORMANCE
All of the covenants and obligations that Buyer or Parent is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), shall have been performed and complied with in all
material respects.
10.3 CONSENTS
Each of the Consents identified in Exhibit 10.3 shall have been obtained and
shall be in full force and effect.
10.4 ADDITIONAL DOCUMENTS
Buyer and Parent shall have caused the documents and instruments required by
Section 2.6(b) and the following documents to be delivered (or tendered subject
only to Closing) to Sellers and Shareholder:
(a) an opinion of Buyer's general counsel, dated the Closing Date, covering the
legal matters described in Exhibit 10.4, with customary assumptions, exceptions,
limitations and qualifications, in form and substance satisfactory to Principal
Seller;
(b) such other documents as Principal Seller may reasonably request for
the purpose of
(i) evidencing the accuracy of any representation or warranty of Buyer or
Parent;
(ii) evidencing the performance by Buyer of, or the compliance by Buyer and
Parent with, any covenant or obligation required to be performed or
complied with by Buyer and Parent;
(iii) evidencing the satisfaction of any condition referred to in this
Article 10; or
(iv) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions;
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(c) the certificate of incorporation of Parent, including the Certificate of
Determination for the Parent Preferred Stock, duly certified as of a recent date
by the Secretary of State of the State of California; and
(d) any filings necessary under the Uniform Commercial Code to evidence the
security interests granted by Buyer and Parent in their respective assets.
10.5 NO INJUNCTION
There shall not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the consummation of the Contemplated Transactions and
(b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
10.6 NO PROCEEDINGS
Since the date of this Agreement, there shall not have been commenced and be
continuing against either Seller or Shareholder, or against any Related Person
of either Seller or Shareholder, any Proceeding (a) involving any challenge to,
or seeking Damages or other relief in connection with, any of the Contemplated
Transactions or (b) that has the effect of preventing, delaying, making illegal,
imposing limitations or conditions on or otherwise interfering with any of the
Contemplated Transactions; provided that the provisions of this Section 10.6
shall not apply to a Proceeding that Shareholder, either Seller or any Related
Party of Shareholder or either Seller shall have directly or indirectly
solicited or encouraged.
10.7 ASSIGNMENTS
Landlords under Real Property Leases for the Required Stores shall have agreed
to the assignment of such leases to Buyer.
10.8 NO CONFLICT
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of or cause
Shareholder or either Seller or any Related Person of Shareholder or either
Seller to suffer any adverse consequence under any Legal Requirement or Order
that has been published, introduced or otherwise proposed by or before any
Governmental Body, excluding Bulk Sales Laws, after the date of this Agreement.
10.9 REPLACEMENT LETTERS OF CREDIT
Buyer shall have caused all outstanding letters of credit supporting Inventories
in transit to Sellers or obligations under Real Property Leases with respect to
Assumed Stores and Facilities to be collateralized, supported or replaced by
letters of credit issued for the account of Buyer or Parent.
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10.10 SHAREHOLDERS AGREEMENT
Each of Xxxx Xxxxx and Xxxxx Xxxxxxxx Investment Management, Inc. shall have
executed and delivered the Shareholders Agreement.
10.11 XXXX-XXXXX-XXXXXX
The waiting period under the HSR Act shall have expired or been terminated.
Article 11. TERMINATION
11.1 TERMINATION EVENTS
By notice given prior to or at the Closing, subject to Section 11.2, this
Agreement may be terminated as follows:
(a) by Buyer if a material Breach of any provision of this Agreement has been
committed by either Seller or Shareholder and such Breach has not been (i) cured
within 10 days of receipt by Principal Seller of written notice of such Breach
or (ii) waived by Parent or Buyer;
(b) by Principal Seller if a material Breach of any provision of this Agreement
has been committed by Buyer or Parent and such Breach has not been (i) cured
within 10 days of receipt by Buyer of written notice of such Breach or (ii)
waived by Principal Seller;
(c) by Buyer if any condition in Article 9 has not been satisfied by January 31,
2002 or if satisfaction of such a condition by such date is or becomes
impossible (other than through the failure of Buyer or Parent to comply with its
obligations under this Agreement), and Buyer has not waived such condition on or
before such date;
(d) by Principal Seller if any condition in Article 10 has not been satisfied by
January 31, 2002 or if satisfaction of such a condition by such date is or
becomes impossible (other than through the failure of either Seller or
Shareholder to comply with its obligations under this Agreement), and Principal
Seller has not waived such condition on or before such date;
(e) by mutual consent of Buyer and Principal Seller;
(f) by Shareholder if a Superior Proposal is received;
(g) by Buyer if the Closing has not occurred on or before January 31, 2002, or
such later date as the parties may agree upon, unless Buyer or Parent is in
material Breach of this Agreement;
(h) by Principal Seller at any time that is after November 30, 2001, and prior
to such time as either (x) Xxxxx has given its consent to the Contemplated
Transactions or (y) Buyer and Parent have each waived in writing the Xxxxx
consent as a condition to Closing;
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(i) by Buyer or Principal Seller at any time that is after November 30, 2001,
and prior to such time as the Xxxxxxx Consent has been either granted or deemed
granted by the passage of time; or
(j) by Principal Seller if the Closing has not occurred on or before January 31,
2002, or such later date as the parties may agree upon, unless either Seller or
Shareholder is in material Breach of this Agreement.
11.2 EFFECT OF TERMINATION
Each party's right of termination under Section 11.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of such
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 11.1, all obligations of the parties under this
Agreement will terminate, except that the obligations of the parties in this
Section 11.2, Section 11.3 and Article 15 (except for those in Section 15.5)
will survive; provided, however, that if this Agreement is terminated because of
a Breach of this Agreement by a nonterminating party or because one or more of
the conditions to the terminating party's obligations under this Agreement is
not satisfied as a result of such nonterminating party's failure to comply with
its obligations under this Agreement, the terminating party's right to pursue
all legal remedies will survive such termination unimpaired. If this Agreement
is terminated pursuant to Section 11.1(g), (h), (i) or (j), the parties shall
not be obligated to pay any amounts to one another with respect to such
termination.
11.3 BREAK-UP FEE
In the event of any termination of this Agreement pursuant to Section 11.1(f),
Buyer shall be entitled to receive a "break-up" fee of $1,500,000. Sellers and
Shareholder shall be jointly and severally liable for the payment of such
break-up fee, which shall be due and payable in full immediately upon
Shareholder's termination of this Agreement pursuant to Section 11.1(f). Such
payment shall be liquidated damages for any such termination and shall be
Buyer's and Parent's exclusive remedy therefor. Notwithstanding the foregoing
Buyer and Parent shall not be limited to such liquidated damages and shall be
entitled to contract damages for any termination of this Agreement pursuant to
Section 11.1(a).
Article 12. ADDITIONAL COVENANTS
12.1 EMPLOYEES AND EMPLOYEE BENEFITS
(a) Definition of Active Employees. For the purpose of this Agreement, the term
"Active Employees" shall mean all employees employed on the Closing Date by
either Seller (excluding employees employed at the Closure Stores) who are:
(i) bargaining unit employees currently covered by a collective bargaining
agreement or
(ii) employed exclusively in such Seller's business as currently conducted,
including employees on temporary leave of absence, including family
medical leave, military leave, temporary disability or sick leave, but
excluding employees on long-term disability leave.
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(b) Employment of Active Employees by Buyer.
(i) Buyer is not obligated to hire any particular Active Employee. Prior
to the Closing, Buyer shall solicit employment applications from and
may interview all Active Employees. Buyer shall provide preferential
consideration to all Active Employees who have submitted employment
applications and who are employed at the Assumed Stores and Facilities
(other than at Sellers' corporate offices) and shall offer employment
to substantially all of such Active Employees, effective as of the
Effective Time. Buyer will provide each Seller with a list of Active
Employees to whom Buyer has made an offer of employment that has been
accepted to be effective on the Closing Date (the "Hired Active
Employees"). Subject to Legal Requirements, Buyer will have reasonable
access to the Properties and personnel Records (including performance
appraisals, disciplinary actions and grievances) of each Seller for
the purpose of preparing for and conducting employment interviews with
Active Employees and will conduct the interviews as expeditiously as
possible prior to the Closing Date. Access will be provided by each
Seller upon reasonable prior notice during normal business hours.
Buyer will not hire any Active Employee who refuses to execute a
severance benefits release in favor of Sellers and Shareholders in
form and substance satisfactory to Sellers and their counsel.
(ii) Neither Seller nor Shareholder nor their respective Related Persons
shall solicit the continued employment of any Active Employee (unless
and until Buyer has informed Principal Seller in writing that the
particular Active Employee will not receive an employment offer from
Buyer) or the employment of any Hired Active Employee after the
Closing. Buyer shall inform Principal Seller promptly of the identities
of those Active Employees to whom it will not make employment offers.
(iii) It is understood and agreed that (A) Buyer's obligation to extend
offers of employment as set forth in this Section 12.1 shall not
constitute any commitment, Contract or understanding (expressed or
implied) of any obligation on the part of Buyer to a post-Closing
employment relationship of any fixed term or duration or upon any
terms or conditions other than those that Buyer may establish pursuant
to individual offers of employment, and (B) employment offered by
Buyer to any applicant is "at will" and may be terminated by Buyer or
by an employee at any time with or without cause or with or without
notice (subject to any written employment contract that expressly
rejects the "at will" employment relationship and subject to Legal
Requirements). While employment offered by Buyer is "at will" only,
and without creating a right to continued employment for any employee,
Buyer agrees, for the sole benefit of Sellers, that subject to
economic considerations not now contemplated and the absence of cause,
Buyer will not discharge Hired Active Employees for a reasonable
period of time after the Closing Date.
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(c) Salaries and Benefits.
(i) Each Seller and Shareholder shall be responsible for (A) the payment
of all wages and other remuneration due to Active Employees with
respect to their services as employees of such Seller through the
close of business on the day prior to the Closing Date, including pro
rata bonus payments earned prior to the Closing Date; (B) the payment
of any termination or severance payments; (C) reimbursing Buyer for
its actual costs in the provision of health plan continuation coverage
for Sellers' employees and former employees in accordance with the
requirements of COBRA and Sections 601 through 608 of ERISA; and (D)
subject to Buyer's compliance with the terms of Section 12.1(a), any
and all payments to employees required under the WARN Act, in each
case, to the extent not included as a Liability on the Closing Balance
Sheet.
(ii) Each Seller shall be liable for any claims made or charges incurred by
Active Employees and their beneficiaries under the Employee Plans. For
purposes of the immediately preceding sentence, a charge will be deemed
incurred, in the case of hospital, medical or dental benefits, when the
services that are the subject of the charge are performed and, in the
case of other benefits (such as disability or life insurance), when an
event has occurred or when a condition has been diagnosed that entitles
the employee to the benefit.
(d) No Transfer of Assets or Liabilities. Neither Sellers nor Shareholder nor
their respective Related Persons will make any transfer of pension or other
employee benefit plan assets or liabilities to Buyer or to employee benefit plan
maintained by Buyer.
(e) Collective Bargaining Matters. Buyer is not obligated to assume any
collective bargaining agreements under this Agreement; provided, however, that
Buyer shall indemnify Sellers for any Liability arising from a claim or
grievance under the collective bargaining agreement for Principal Seller's San
Francisco store caused by Buyer's failure to assume such collective bargaining
agreement or to offer employment as of the Closing Date to substantially all
Active Employees covered by such collective bargaining agreement in accordance
with Section 12.1(b).
(f) General Employee Provisions.
(i) Sellers and Buyer shall provide each other with such plan documents and
summary plan descriptions, employee data or other information as may be
reasonably required to carry out the arrangements described in this
Section 12.1.
(ii) If any of the arrangements described in this Section 12.1 are
determined by the IRS or other Governmental Body to be prohibited by
law, Sellers and Buyer shall modify such arrangements to as closely as
possible reflect their expressed intent and retain the allocation of
economic benefits and burdens to the parties contemplated herein in a
manner that is not prohibited by law.
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(iii) Buyer shall not have any responsibility, liability or obligation,
whether to Active Employees, former employees, their beneficiaries or
to any other Person, with respect to any employee benefit plans,
practices, programs or arrangements (including the establishment,
operation or termination thereof and, except as specified in paragraph
(j) of this Section 12.1, the provision of COBRA coverage extension)
maintained by either Seller.
(g) Past Service Credit
Buyer shall provide each Hired Active Employee with benefits comparable to those
offered to Parent's current employees on the date of this Agreement. Buyer shall
take such actions as are necessary to ensure that the Hired Active Employees'
service with Sellers completed prior to the Closing ("Past Service") shall be
considered as service with Buyer completed after the Closing for all purposes
under any welfare benefit plan (as defined in Section 3(1) of ERISA) or vacation
policy or sick pay policy maintained by Buyer or any entity that is treated as a
single employer together with Buyer under Section 414 of the Code (a "Buyer
ERISA Affiliate") in which the Hired Active Employees are eligible to
participate. Buyer shall take such actions as are necessary to ensure that the
Hired Active Employees' Past Service shall be considered as service with Buyer
completed after the Closing for eligibility and vesting (but not benefit
accrual) purposes under any pension plan (as defined in Section 3(2) of ERISA)
maintained by Buyer or any Buyer ERISA Affiliate in which the Hired Active
Employees are eligible to participate.
(h) Employee Welfare Plans
Buyer shall take such actions as are necessary to ensure that the group health
plan maintained by Buyer or any Buyer ERISA Affiliate in which the Hired Active
Employees are eligible to participate (the "Buyer's Health Plan") shall waive
any preexisting condition provisions with respect to the Hired Active Employees
and shall provide that any expenses incurred by the Hired Active Employees under
either of Seller's group health plans during the calendar year in which the
Closing occurs shall be taken into account under Buyer's Health Plan after the
Closing for the purposes of deductible, co-payment and out-of-pocket limitations
under Buyer's Health Plan.
(i) Comparable Compensation
For the 12-month period following the Closing Date, Buyer shall provide cash
compensation for the Hired Active Employees that is substantially comparable to
the cash compensation provided to them by the Sellers immediately prior to the
Closing Date.
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(j) COBRA Coverage After Closing
Buyer shall arrange to provide COBRA group health plan continuation coverage
with respect to the COBRA qualified beneficiaries under Sellers' group health
plans whose COBRA qualifying events occur on or prior to the Closing Date or as
a result of closing the Closure Stores, but Sellers and Shareholder shall be
jointly and severally liable for any and all net costs and expenses incurred by
Buyer in connection with providing such coverage. Shareholder shall reimburse,
or shall cause one of the Sellers to reimburse, Buyer for any and all net costs
and expenses incurred by Buyer or a Buyer ERISA Affiliate in connection with
providing such coverage. Shareholder shall cause any such reimbursement to be
paid to, and received by, Buyer, or a Buyer ERISA Affiliate designated by Buyer,
pursuant to the provisions of the Transition Services Agreement. Sellers
acknowledge that Buyer provides benefits on a self-insured basis and that
reimbursement will be made on a claims made basis.
(k) COBRA Information
Within five days after the Closing Date, Buyer shall supplement the Disclosure
Letter with an additional Part 3.16(k), which shall contain a true and correct
list of the persons who are then covered under a Seller's group health plan
pursuant to the application of COBRA (including persons who were enrolled in a
Seller's group health plan by a COBRA qualified beneficiary after the occurrence
of a COBRA qualifying event), and, with respect to each such person, (1) the
nature of the COBRA qualifying event that entitled such person to COBRA
continuation coverage (or the other reason the person is covered under a
Seller's group health plan), (2) the date on which such person's COBRA
qualifying event occurred, (3) the date on which such person's COBRA
continuation coverage will expire (based upon current facts), and (4) the
address of such person. Part 3.16(k) shall contain a true and correct list of
the persons who are then eligible to elect continuation coverage under a
Seller's group health plan pursuant to the application of COBRA but have not yet
done so, and, with respect to each such person, (1) the nature of the COBRA
qualifying event that entitles such person to COBRA continuation coverage, (2)
the date on which such person's COBRA qualifying event occurred, (3) the most
recent date on which such person was given a notification of his right to elect
COBRA continuation coverage with respect to a Seller's group health plan, (4)
the date on which such person's COBRA continuation coverage, if elected, would
expire (based upon current facts), and (5) the address of such person. Part
3.16(k) shall also contain a true and correct list of every then current
employee of a Seller who is participating in a Seller's group health plan and,
with respect to each such employee, (1) the address of such employee, (2) the
name and address of such employee's spouse if the spouse is covered under the
Seller's group health plan, and (3) the name and address of each such employee's
dependent children who are covered under the Seller's group health plan. All
technical terms used in this Section 3.16(k) shall have the meanings ascribed to
them in COBRA.
12.2 PAYMENT OF TAXES RESULTING FROM SALE OF ASSETS
Buyer shall be liable for, and shall pay in a timely manner, all Taxes resulting
from or payable in connection with the sale of the Assets pursuant to this
Agreement, regardless of the Person on whom such Taxes are imposed by Legal
Requirements.
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12.3 RESTRICTIONS ON SHAREHOLDER DISSOLUTION AND DISTRIBUTIONS
Shareholder shall not dissolve, or make any distribution of the proceeds
received by it pursuant to this Agreement, until the lapse of more than two (2)
years after the Closing Date.
12.4 PARENT SHAREHOLDER MEETING
Parent agrees to call a shareholder meeting to approve the convertibility of the
Parent Preferred Stock and an increase in Parent's authorized common stock
sufficient to allow conversion of the Parent Preferred Stock as soon as
practicable; provided that Sellers have provided the financial statements
required by Section 12.10.
12.5 ASSISTANCE IN PROCEEDINGS
The parties shall cooperate with each other and with their respective counsel in
the contest or defense of, and make available their personnel and provide any
testimony and access to their books and Records in connection with, any
Proceeding involving or relating to (a) any Contemplated Transaction or (b) any
action, activity, circumstance, condition, conduct, event, fact, failure to act,
incident, occurrence, plan, practice, situation, status or transaction on or
before the Closing Date involving Sellers' respective businesses or Shareholder.
12.6 NONCOMPETITION, NONSOLICITATION AND NONDISPARAGEMENT
(a) Noncompetition. For a period of three (3) years after the Closing Date,
Sellers and Shareholder, and any of them, shall not, anywhere in the United
States of America, directly or indirectly invest in, own, manage, operate,
finance, control, advise, render services to or guarantee the obligations of any
Person engaged in or planning to become engaged in the retail sale of toys,
games, children's products or candy ("Competing Business"), provided, however,
that Sellers may purchase or otherwise acquire up to (but not more than) five
percent (5%) of any class of the securities of any Person (but may not otherwise
participate in the activities of such Person) if such securities are listed on
any national or regional securities exchange or have been registered under
Section 12(g) of the Exchange Act. Nothing in this Section 12.6 shall be
construed to restrict Principal Seller's operation of the Closure Stores or its
liquidation of the Aged Inventory or its ownership of equity securities of
Parent or the Subordinated Notes.
(b) Nonsolicitation. For a period of two (2) years after the Closing Date,
neither of the Sellers nor Shareholder shall, directly or indirectly:
(i) cause, induce or attempt to cause or induce any supplier, licensee,
licensor, franchisee, employee, consultant or other business relation
of Buyer to cease doing business with Buyer or in any way interfere
with its relationship with Buyer;
(ii) cause, induce or attempt to cause or induce any supplier, licensee,
licensor, franchisee, employee, consultant or other business relation
of either Seller or of Shareholder on the Closing Date or within the
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year preceding the Closing Date to cease doing business with Buyer or
in any way interfere with its relationship with Buyer; or
(iii) hire, retain or attempt to hire or retain any employee or independent
contractor of Buyer or in any way interfere with the relationship
between Buyer and any of its employees or independent contractors.
(c) Nondisparagement. After the Closing Date, neither of the Sellers nor
Shareholder shall disparage Buyer or any of Buyer's shareholders, directors,
officers, employees or agents.
(d) Modification of Covenant. If a final judgment of a court or tribunal of
competent jurisdiction determines that any term or provision contained in
Section 12.6(a) through (c) is invalid or unenforceable, then the parties agree
that the court or tribunal will have the power to reduce the scope, duration or
geographic area of the term or provision, to delete specific words or phrases or
to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision. This Section 12.6
will be enforceable as so modified after the expiration of the time within which
the judgment may be appealed. This Section 12.6 is reasonable and necessary to
protect and preserve Buyer's legitimate business interests and the value of the
Assets and to prevent any unfair advantage conferred on either Seller.
12.7 CUSTOMER AND OTHER BUSINESS RELATIONSHIPS
For a period of one year after the Closing, Sellers and Shareholder will
cooperate with Buyer in its efforts to continue and maintain for the benefit of
Buyer those business relationships of Sellers and Shareholder existing prior to
the Closing relating to the Assumed Stores and Facilities to be operated by
Buyer after the Closing, including relationships with lessors under the Real
Property Leases, employees, regulatory authorities, licensors, customers,
suppliers and others. Sellers will use commercially reasonable efforts to
satisfy the Retained Liabilities other than Liabilities arising from the Real
Property Leases for the Closure Stores in a manner that is not detrimental to
any of such relationships. Sellers and Shareholder will refer to Buyer all
inquiries relating to the Assumed Stores and Facilities. Buyer expressly
acknowledges that Sellers' and Shareholder's negotiations with lessors under the
Real Property Leases for the Closure Stores in connection with the liquidation
and closing of the Closure Stores shall not be deemed or construed to violate
this Section 12.7.
12.8 RETENTION OF AND ACCESS TO RECORDS
For a period of six (6) years after the Closing Date, Buyer shall retain those
Records of each Seller delivered to Buyer. Buyer also shall provide Principal
Seller, Shareholder and their Representatives reasonable access thereto, during
normal business hours and on at least three days' prior written notice, to
enable them to prepare financial statements or tax returns, deal with tax audits
and for other reasonable business purposes. After the Closing Date, each Seller
shall provide Buyer and its Representatives reasonable access to Records that
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are Excluded Assets, during normal business hours and on at least three days'
prior written notice, for any reasonable business purpose specified by Buyer in
such notice.
12.9 REGISTRATION RIGHTS
Following the requisite shareholder approval contemplated by Section 12.4,
Parent agrees to register the common stock issuable upon conversion of the
Parent Preferred Stock on substantially the same terms it agreed to provide
registration rights to Athanor Holdings, LLC ("Athanor") in connection with its
investment in Parent's Series E Convertible Preferred Stock; provided that (a)
Shareholder shall have a one-time right to demand on behalf of the then holder
or holders of such common stock the registration of all or part of such common
stock at any time after the second anniversary of the Closing Date, and such
registration shall be subject to more limited blackout rights than Athanor,
including that Parent will have the right to prohibit sales pursuant to such
registration or, in case of a firm commitment underwritten public offering, to
delay the commencement of such registration, at (i) the commencement of the
"road show" for any registered offering of securities by Parent and for 180 days
thereafter; provided, however, that all directors, executive officers and five
percent holders of Parent's common stock agree to the same restrictions and (ii)
for 90 days in any 12 month period if and when the board of directors of Parent
reasonably determines in good faith that there is material undisclosed
information for which immediate disclosure would be adverse to Parent; (b) in
the event Shareholder exercises its demand right in clause (a), Parent will use
its commercially reasonable efforts to cause its officers to participate in
"road shows" with respect to the offering; and (c) the holders of such Common
Stock shall have piggyback rights with respect to any registration statement on
Form S-3 filed pursuant to the exercise of registration rights by any other
holder of securities of Parent.
12.10 SELLER FINANCIALS
Sellers and Shareholder shall provide Parent, Buyer and their Representatives
audited income statements of KBB for the three fiscal years of KBB preceding the
Closing Date, audited balance sheets of KBB as of the end of its last two fiscal
years preceding the Closing Date and unaudited income statements for, and a
balance sheet as of the end of, the period that began at the end of KBB's last
preceding fiscal year and ended at the end of KBB's most recently completed full
fiscal quarter preceding the Closing Date which unaudited statements shall have
been reviewed in accordance with SAS71.
Article 13. INDEMNIFICATION; REMEDIES
13.1 SURVIVAL
All representations warranties, covenants and obligations in this Agreement, the
Disclosure Letter, the supplements to the Disclosure Letter, the certificates
delivered pursuant to Section 2.7 and any other certificate or document
delivered pursuant to this Agreement shall survive the Closing and the
consummation of the Contemplated Transactions, subject to Section 13.7. The
right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected by
any investigation (including any environmental investigation or assessment)
conducted with respect to, or any Knowledge acquired (or capable of being
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acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation.
The waiver of any condition based upon the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, reimbursement or other
remedy based upon such representations, warranties, covenants and obligations.
13.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS AND SHAREHOLDER
Subject to the limitations set forth in Sections 13.5 and 13.6, each Seller and
Shareholder, jointly and severally, will indemnify and hold harmless Buyer, and
its Representatives, shareholders, subsidiaries and Related Persons
(collectively, the "Buyer Indemnified Persons"), and will reimburse the Buyer
Indemnified Persons for any loss, liability, claim, damage, expense (including
costs of investigation and defense and reasonable attorneys' fees and expenses)
or diminution of value, whether or not involving a Third-Party Claim
(collectively, "Damages"), arising from or in connection with:
(a) any breach of, or inaccuracy in, any representation or warranty (without
giving effect to any materiality qualifier therein) made by either of the
Sellers or Shareholder in (i) this Agreement (without giving effect to any
supplement to the Disclosure Letter), (ii) the Disclosure Letter, (iii) the
supplements to the Disclosure Letter, (iv) the certificates delivered pursuant
to Section 2.6, (v) any transfer instrument or (vi) any other certificate,
document, writing or instrument delivered by either of the Sellers or
Shareholder pursuant to this Agreement;
(b) any Breach of any covenant or obligation of either of the Sellers or
Shareholder in this Agreement or in any other certificate, document, writing or
instrument delivered by such Seller or Shareholder pursuant to this Agreement;
(c) the failure to pay, perform or discharge any Liability arising out of
Sellers' ownership or operation of the Assets prior to the Effective Time other
than the Assumed Liabilities; or
(d) the failure to pay, perform or discharge any Retained Liabilities.
Notwithstanding the foregoing, no Buyer Indemnified Persons shall be entitled to
indemnification with respect to any Liability reflected on the Closing Balance
Sheet.
13.3 INDEMNIFICATION AND REIMBURSEMENT BY BUYER
Buyer and Parent, jointly and severally, will indemnify and hold harmless each
Seller, Shareholder and their respective Related Parties (collectively, the
"Seller Indemnified Persons"), and will reimburse each Seller Indemnified
Person, for any Damages arising from or in connection with:
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(a) any Breach of any representation or warranty made by Buyer or Parent in this
Agreement or in any certificate, document, writing or instrument delivered by
Buyer or Parent pursuant to this Agreement;
(b) any Breach of any covenant or obligation of Buyer or Parent in this
Agreement or in any other certificate, document, writing or instrument delivered
by Buyer or Parent pursuant to this Agreement;
(c) any obligations of Buyer to bargain with the collective bargaining
representatives of Active Hired Employees subsequent to the Closing;
(d) any Liability of Sellers resulting from Buyer's determination not to assume
the collective bargaining agreement related to the San Francisco store; or
(e) the failure to pay, perform or discharge any Assumed Liabilities.
13.4 LIMITATIONS ON AMOUNT--SELLERS AND SHAREHOLDER
Buyer shall not have the right to make a claim against Sellers and Shareholder
for Damages under Section 13.2(a) until the total of all Damages with respect to
such matters exceeds $1,000,000 (the "Threshold Amount"), provided that once the
Threshold Amount is reached, Sellers and Shareholder shall be jointly and
severally liable for all such Damages up to $10,000,000. Notwithstanding the
foregoing, this Section 13.4 shall not apply to claims under Section 13.2(b)
through (c) or to matters arising in respect of Section 3.2(a), 3.9(a) or (b),
3.22 or 3.30.
13.5 LIMITATIONS ON AMOUNT--BUYER
No Seller Indemnified Party shall have the right to make a claim against Buyer
or Parent under Section 13.3(a) until the total of all Damages with respect to
such matters exceeds the Threshold Amount, provided that once the Threshold
Amount is reached, Buyer and Parent shall jointly and severally be liable for
all such Damages (including that portion below the Threshold Amount) up to
$10,000,000. Notwithstanding the foregoing, this Section 13.5 will not apply to
claims under Section 13.3(b) through (d) or matters arising in respect of
Sections 5.4 or 6.4 or Article 12.
13.6 TIME LIMITATIONS
(a) If the Closing occurs, Sellers and Shareholder will have liability for
indemnification with respect to any Breach of (i) a covenant or obligation to be
performed or complied with prior to the Closing Date (other than those in
Sections 2.1 and 2.4(b) and Articles 11 and 12, as to which a claim may be made
at any time) or (ii) a representation or warranty (other than those in Section
3.2(a), 3.9(a) or (b), 3.22 or 3.30) only if on or before the second anniversary
of the Closing Date, Buyer or Parent notifies Principal Seller of a claim
specifying the factual basis of the claim in reasonable detail to the extent
then known by Buyer.
(b) If the Closing occurs, Buyer and Parent will have liability for
indemnification with respect to any Breach of (i) a covenant or obligation to be
performed or complied with prior to the Closing Date or (ii) a representation or
68
warranty (other than that set forth in Section 5.4, only if on or before the
second anniversary of the Closing Date, Principal Seller notifies Buyer or
Parent of a claim specifying the factual basis of the claim in reasonable detail
to the extent then known by either Seller or Shareholder.
13.7 APPLICATION AGAINST OUTSTANDING AMOUNT OF SUBORDINATED NOTES
FOR INDEMNITY PAYMENTS BY SELLERS OR SHAREHOLDER.
When an indemnification or reimbursement obligation arises under Section 13.2 on
the part of Sellers or Shareholder (an "Indemnification Obligation"), the party
with such Indemnification Obligation shall then have the right to pay such
Indemnification Obligation by delivering written notice that the amount of such
Indemnification Obligation shall be credited as a payment by Buyer against the
aggregate principal amount of the Subordinated Notes (to the extent such
noticing party holds such notes) to the extent of up to 50% of the amount of the
Indemnification Obligation specified in such notice. Upon such written notice
and payment to Buyer of the remaining 50% of the amount of the related
Indemnification Obligation, the principal of the Subordinated Notes held by the
noticing party shall be credited and deemed paid to the extent so specified. The
Sellers and Shareholder giving such notice shall make a notation of the amount
of such reduction on the schedule attached to the Subordinated Notes; provided
that failure to make such notation will not affect the reduction.
13.8 THIRD-PARTY CLAIMS
(a) Promptly after receipt by a Person entitled to indemnity under Section 13.2
or 13.4 (an "Indemnified Person") of notice of the assertion of a Third-Party
Claim against it, such Indemnified Person shall give notice to the Person
obligated to indemnify under such Section (an "Indemnifying Person") of the
assertion of such Third-Party Claim, provided that the failure to notify the
Indemnifying Person will not relieve the Indemnifying Person of any liability
that it may have to any Indemnified Person, except to the extent that the
Indemnifying Person demonstrates that the defense of such Third-Party Claim is
prejudiced by the Indemnified Person's failure to give such notice.
(b) If an Indemnified Person gives notice to the Indemnifying Person pursuant to
Section 13.9(a) of the assertion of a Third-Party Claim, the Indemnifying Person
shall be entitled to participate in the defense of such Third-Party Claim and,
to the extent that it wishes (unless (i) the Indemnifying Person is also a
Person against whom the Third-Party Claim is made and the Indemnified Person
determines in good faith that joint representation would be inappropriate or
69
(ii) the Indemnifying Person fails to provide reasonable assurance to the
Indemnified Person of its financial capacity to defend such Third-Party Claim
and provide indemnification with respect to such Third-Party Claim), to assume
the defense of such Third-Party Claim with counsel reasonably satisfactory to
the Indemnified Person. After notice from the Indemnifying Person to the
Indemnified Person of its election to assume the defense of such Third-Party
Claim, the Indemnifying Person shall not, so long as it diligently conducts such
defense, be liable to the Indemnified Person under this Article 13 for any fees
of other counsel or any other expenses with respect to the defense of such
Third-Party Claim, in each case subsequently incurred by the Indemnified Person
in connection with the defense of such Third-Party Claim, other than reasonable
costs of investigation. If the Indemnifying Person assumes the defense of a
Third-Party Claim, (i) such assumption will conclusively establish for purposes
of this Agreement that the claims made in that Third-Party Claim are within the
scope of and subject to indemnification, and (ii) no compromise or settlement of
such Third-Party Claims may be effected by the Indemnifying Person without the
Indemnified Person's Consent, which consent will not be unreasonably withheld,
unless (A) there is no finding or admission of any violation of Legal
Requirement or any violation of the rights of any Person and (B) the sole relief
provided is monetary damages that are paid in full by the Indemnifying Person,
and (iii) the Indemnified Person shall have no liability with respect to any
compromise or settlement of such Third-Party Claims effected without its
Consent. If notice is given to an Indemnifying Person of the assertion of any
Third Party Claim and the Indemnifying Person does not, within ten (10) days
after the Indemnified Person's notice is given, give notice to the Indemnified
Person of its election to assume the defense of such Third Party Claim, the
Indemnified Person may undertake the defense, compromise or settlement (without
admitting liability of the Indemnified Person) thereof on behalf of and for the
account and risk of the Indemnifying Person by counsel or other representatives
designated by the Indemnified Person. No compromise or settlement of any
Third-Party Claims may be effected by an Indemnified Person without the
Indemnifying Person's Consent, which Consent will not be unreasonably withheld.
(c) Notwithstanding the foregoing, if an Indemnified Person determines in good
faith that there is a reasonable probability that a Third-Party Claim may
adversely affect it or its Related Persons other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the Indemnified Person may, by notice to the Indemnifying Person, assume the
exclusive right to defend, compromise or settle such Third-Party Claim, but the
Indemnifying Person will not be bound by any determination of any Third-Party
Claim so defended for the purposes of this Agreement or any compromise or
settlement effected without its Consent (which may not be unreasonably
withheld).
(d) Notwithstanding the provisions of Section 15.4, each party hereto hereby
consents to the nonexclusive jurisdiction of any court in which a Proceeding in
respect of a Third-Party Claim is brought against any Buyer Indemnified Person
or Seller Indemnified Person for purposes of any claim that a Buyer Indemnified
Person or Seller Indemnified Person may have under this Agreement with respect
to such Proceeding or the matters alleged therein and agree that process may be
served on Sellers and Shareholder, Buyer and Parent with respect to such a claim
anywhere in the world.
(e) With respect to any Third-Party Claim subject to indemnification under this
Article 13: (i) both the Indemnified Person and the Indemnifying Person, as the
case may be, shall keep the other Person fully informed of the status of such
Third-Party Claim and any related Proceedings at all stages thereof where such
Person is not represented by its own counsel, and (ii) the parties agree (each
at its own expense) to render to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with each other
in order to ensure the proper and adequate defense of any Third-Party Claim.
(f) With respect to any Third-Party Claim subject to indemnification under this
Article 13, the parties agree to cooperate in such a manner as to preserve in
full (to the extent possible) the confidentiality of all Confidential
Information and the attorney-client and work-product privileges. In connection
therewith, each party agrees that: (i) it will use its Best Efforts, in respect
of any Third-Party Claim in which it has assumed or participated in the defense,
70
to avoid production of Confidential Information (consistent with applicable law
and rules of procedure), and (ii) all communications between any party hereto
and counsel responsible for or participating in the defense of any Third-Party
Claim shall, to the extent possible, be made so as to preserve any applicable
attorney-client or work-product privilege.
13.9 OTHER CLAIMS
A claim for indemnification for any matter not involving a Third-Party Claim may
be asserted by notice to the party from whom indemnification is sought and,
subject to Sections 13.4, 13.5 and 13.6, shall be paid promptly after such
notice.
13.10 INDEMNIFICATION IN CASE OF STRICT LIABILITY OR INDEMNITEE NEGLIGENCE
THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE 13 SHALL BE ENFORCEABLE
REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT OR FUTURE ACTS,
CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES
LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH
LAW OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT) AND REGARDLESS
OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT)
ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE
OF THE PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY
IMPOSED UPON THE PERSON SEEKING INDEMNIFICATION.
Article 14. POST-CLOSING MATTERS
14.1 ALLOCATION
Prior to the Closing, the parties shall negotiate in good faith to arrive at an
agreed allocation of the Purchase Price which allocation shall be in a manner
consistent with Treasury Regulation Section 1.1060-1. The agreed allocation of
the Purchase Price shall be attached hereto as Exhibit 14.1. After the Closing,
the parties shall make consistent use of the allocation, fair market value and
useful lives specified in Exhibit 14.1 for all Tax purposes and in all filings,
declarations and reports with the IRS in respect thereof, including the reports
required to be filed under Section 1060 of the Code. Buyer shall prepare and
deliver IRS Form 8594 to Sellers within forty-five (45) days after the Closing
Date to be filed with the IRS. In any Proceeding related to the determination of
any Tax, neither of Buyer or Parent nor either of the Sellers or the Shareholder
shall contend or represent that such allocation is not a correct allocation.
14.2 FURTHER ASSURANCES
The parties shall cooperate reasonably with each other and with their respective
Representatives in connection with any steps required to be taken as part of
their respective obligations under this Agreement, and shall (a) furnish upon
71
request to each other such further information; (b) execute and deliver to each
other such other documents; and (c) do such other acts and things, all as the
other party may reasonably request for the purpose of carrying out the intent of
this Agreement and the Contemplated Transactions.
14.3 REMOVING EXCLUDED ASSETS
Within a reasonable time, but no later than the sixtieth (60th) day following
the Closing Date, Sellers shall remove all Excluded Assets from all Transferred
Stores and Properties (except to the extent Buyer subleases or licenses space to
either Seller). Such removal shall be done in such manner as to avoid any damage
to the Transferred Stores and Properties and any disruption of the business
operations to be conducted by Buyer after the Closing. Any damage to the Assets
or to the Transferred Stores and Properties resulting from such removal shall be
paid by Sellers promptly. Should Sellers fail to remove the Excluded Assets as
required by this Section 14.3 or to advise Buyer how the Excluded Assets should
be handled (at Seller's sole cost and expense) within 15 days of receipt by
Principal Seller of a written notice specifying the location and nature of the
Excluded Assets, Buyer shall have the right, but not the obligation, (a) to
remove the Excluded Assets at Sellers' cost and expense; (b) to store the
Excluded Assets and to charge Sellers all storage costs associated therewith;
(c) to treat the Excluded Assets as unclaimed and to proceed to dispose of the
same under the laws governing unclaimed property; (d) to exercise any other
right or remedy conferred by this Agreement or otherwise available at law or in
equity or (e) to dispose of such Excluded Assets at its sole cost and expense
and without further obligation therefor to Sellers.
14.4 OPERATING AGREEMENT
All of the Assumed Stores and Facilities that do not become Transferred Stores
and Facilities as of the Closing Date are referred to herein as the "Operated
Stores." The parties hereby agree that each Operated Store shall be included in
Transferred Stores and Facilities immediately upon Buyer's receipt of a Consent
to the assignment of the associated Real Property Lease executed by the related
landlord, and a Real Property Lease Assignment for such Operated Store executed
by Buyer and the applicable Seller, at any time after the Closing Date and prior
to the termination of the Operating Agreement. Any Operated Stores that do not
become Transferred Stores and Facilities prior to the termination of the
Operating Agreement shall, upon such termination, become and be Closure Stores.
Buyer shall operate the Operated Stores on behalf of Sellers pursuant to and in
accordance with the Operating Agreement for the term provided in the Operating
Agreement.
14.5 OPERATION OF CLOSURE STORES
Buyer shall provide certain services to Sellers with respect to the Closure
Stores pursuant to the Transition Services Agreement. Buyer shall have no
ownership interest in or liability with respect to the Closure Stores. To the
extent requested by Buyer with respect to any Closure Store, Sellers shall keep
Buyer advised as to the status of landlord negotiations. Until such time as an
agreement to terminate the Real Property Lease with respect to the Closure Store
is executed, Buyer shall have the right but not the obligation, upon reasonable
notice to Principal Seller, to designate a Closure Store as one of the Assumed
Stores and Facilities (a "New Assumed Store") and to purchase such New Assumed
Store on the terms set forth herein. If a Closure Store is designated as a New
Assumed Store after the Closing, immediately upon such designation, the New
72
Assumed Store shall become an Operated Store and shall be operated by Buyer in
accordance with the terms of the Operating Agreement. The purchase price for
each New Assumed Store shall be paid by issuance of an additional Subordinated
Note in the amount of the Operating Working Capital Ongoing Business associated
with such New Assumed Store on the date such Closure Store becomes a New Assumed
Store, determined based on a physical inventory.
Article 15. GENERAL PROVISIONS
15.1 EXPENSES
Except as otherwise provided in this Agreement, each party to this Agreement
will bear its respective fees and expenses incurred in connection with the
preparation, negotiation, execution and performance of this Agreement and the
Contemplated Transactions, including all fees and expense of its
Representatives. If this Agreement is terminated, the obligation of each party
to pay its own fees and expenses will be subject to any rights of such party
arising from a Breach of this Agreement by another party.
15.2 PUBLIC ANNOUNCEMENTS
Any public announcement, press release or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Parent and Shareholder determines. Except with the
prior consent of Parent and Shareholder or as permitted by this Agreement or as
required by any applicable Legal Requirement, none of Buyer, Parent, either of
the Sellers, Shareholder or any of their Representatives shall disclose to any
Person any information about the Contemplated Transactions, including the status
of such discussions or negotiations, the execution of any documents (including
this Agreement) or any of the terms of the Contemplated Transactions or the
related documents (including this Agreement). Sellers and Buyer will consult
with each other concerning the means by which Sellers' employees, customers,
suppliers and others having dealings with each Seller will be informed of the
Contemplated Transactions.
15.3 NOTICES
All notices, Consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment (provided a copy is
promptly sent by U.S. Mail, certified return receipt requested); or (c) received
or rejected by the addressee, if sent by certified mail, return receipt
requested, in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or
person as a party may designate by notice to the other parties):
Principal Seller (before the Closing):
F.A.O. Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxx, Chief Executive Officer
Fax no.: (000) 000-0000
E-mail address: xxxxxxx@xxx.xxx
73
with a mandatory copy to:
with a mandatory copy to:
Kronish Xxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxx
Fax no.: (000) 000-0000
E-mail address: xxxxxxxxxx@xxxxxxx.xxx
Shareholder and Principal Seller after the Closing:
Royal Vendex KBB X.X.
Xx Xxxxxxx 0, XX-0000
Postbus 7997, 1008 AD
Amsterdam, The Netherlands
Attention: Xx Xxxxxxx, Chief Executive Officer
Fax no.: x00 00 0000 000
E-mail address: xxxxxxx.x@xxxxxxxxx.xx
with a mandatory copy to:
Kronish Xxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxx
Fax no.: (000) 000-0000
E-mail address: xxxxxxxxxx@xxxxxxx.xxx
Buyer:
Toy Soldier, Inc.
00000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx/Legal
Fax no.: (000) 000-0000
E-mail address: xxxxxx@xxxxxxxxxx.xxx
xxxxxx@xxxxxxxxxx.xxx
with a mandatory copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx Xxx
Fax no.: (000) 000-0000
E-mail address: xxxx@xxxxxxxxx.xxx
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15.4 JURISDICTION; SERVICE OF PROCESS
Any Proceeding arising out of or relating to this Agreement or any Contemplated
Transaction may be brought in the courts of the State of New York, County of New
York, or, if it has or can acquire jurisdiction, in the United States District
Court for the Southern District of New York, and each of the parties irrevocably
submits to the exclusive jurisdiction of each such court in any such Proceeding,
waives any objection it may now or hereafter have to venue or to convenience of
forum, agrees that all claims in respect of the Proceeding shall be heard and
determined only in any such court and agrees not to bring any Proceeding arising
out of or relating to this Agreement or any Contemplated Transaction in any
other court. The parties agree that either or both of them may file a copy of
this paragraph with any court as written evidence of the knowing, voluntary and
bargained agreement between the parties irrevocably to waive any objections to
venue or to convenience of forum. Process in any Proceeding referred to in the
first sentence of this section may be served on any party anywhere in the world.
15.5 ENFORCEMENT OF AGREEMENT
Sellers and Shareholder acknowledge and agree that Buyer and Parent would be
irreparably damaged if any of the provisions of Section 12.6 this Agreement are
not performed in accordance with their specific terms and that any Breach of
this Agreement by either of the Sellers or Shareholder could not be adequately
compensated in all cases by monetary damages alone. Accordingly, in addition to
any other right or remedy to which Buyer and Parent may be entitled, at law or
in equity, it shall be entitled to enforce Section 12.6 of this Agreement by a
decree of specific performance and to temporary, preliminary and permanent
injunctive relief to prevent Breaches or threatened Breaches of any of the
provisions of this Agreement, without posting any bond or other undertaking.
15.6 WAIVER; REMEDIES CUMULATIVE
Except as otherwise provided herein, the rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither any failure nor any
delay by any party in exercising any right, power or privilege under this
Agreement or any of the documents referred to in this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or any of the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of that party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
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15.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements, whether written or oral, between
the parties with respect to its subject matter (other than the Confidentiality
Agreement dated September 19, 2001, between Parent and Shareholder and the
Confidentiality Agreement dated November 19, 2001, among Parent, Sellers and
Shareholder (the "NDAs")) and constitutes (together with the NDAs, the
Disclosure Letter, the Exhibits and other documents delivered pursuant to this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may not
be amended, supplemented, or otherwise modified except by a written agreement
executed by the party to be charged with the amendment.
15.8 DISCLOSURE LETTER
The information in the Disclosure Letter constitutes (i) exceptions to
representations, warranties, covenants and obligations of Sellers and
Shareholder as set forth in this Agreement or (ii) descriptions or lists of
assets and liabilities and other items referred to in this Agreement. If there
is any inconsistency between the statements in this Agreement and those in the
Disclosure Letter the statements in this Agreement will control. Any fact or
item which is disclosed on any Part of the Disclosure Letter in such a way as to
make its relevance to a representation or warranty made elsewhere in this
Agreement or to information called for by another Part of the Disclosure Letter
reasonably apparent, shall be deemed to be an exception to such representation
or warranty, or to be disclosed on such other Part of the Disclosure Letter
notwithstanding the omission of a reference or cross reference thereto. Any fact
or item disclosed on any Part of the Disclosure Letter shall not by reason only
of such inclusion be deemed to be material and shall not be employed as a point
of reference in determining any standard of materially under this Agreement.
15.9 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations under
this Agreement without the prior written consent of the other parties, except
that Buyer may collaterally assign its rights hereunder to any financial
institution providing financing in connection with the Contemplated Transactions
and Sellers or either of them may assign their respective rights hereunder to
Shareholder (or to any direct or indirect wholly-owned Subsidiary of
Shareholder, so long as such Subsidiary also assumes all of such Seller's
obligations hereunder). Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement, except such rights
as shall inure to a successor or permitted assignee pursuant to this Section
15.9.
15.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any court
76
of competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
15.11 CONSTRUCTION
The headings of Articles and Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Articles," "Sections" and "Parts" refer to the corresponding
Articles, Sections and Parts of this Agreement and the Disclosure Letter.
15.12 GOVERNING LAW
This Agreement will be governed by and construed under the laws of the State of
New York without regard to conflicts-of-laws principles that would require the
application of any other law.
15.13 EXECUTION OF AGREEMENT
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
shall constitute effective execution and delivery of this Agreement as to the
parties and may be used in lieu of the original Agreement for all purposes.
Signatures of the parties transmitted by facsimile shall be deemed to be their
original signatures for all purposes.
15.14 SHAREHOLDER OBLIGATIONS
The liability of Shareholder hereunder shall be joint and several with Sellers.
Where in this Agreement provision is made for any action to be taken or not
taken by Sellers, Shareholder undertakes to cause Sellers to take or not take
such action, as the case may be. Without limiting the generality of the
foregoing, Shareholder shall be jointly and severally liable with Sellers for
the indemnities set forth in Article 13. The liability of Parent hereunder shall
be joint and several with Buyer. Where in this Agreement provision is made for
any action to be taken or not taken by Buyer, Parent undertakes to cause Buyer
to take or not take such action, as the case may be. Without limiting the
generality of the foregoing, Parent shall be jointly and severally liable with
Buyer for the indemnities set forth in Article 13.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
THE RIGHT START, INC. ROYAL VENDEX KBB N.V.
By: /s/ Xxxxx X. Xxxxx By: /s/ Eic ter Hark
------ ----------------- ------ ---------------------------------
Title: President and CEO Title: Director of Corporate Development
------ ----------------- ------ ---------------------------------
TOY SOLDIER, INC. F.A.O. XXXXXXX
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxx Xxxxxxx
------ ----------------- ------ ---------------------------------
Title: President Title: President
------ ----------------- ------ ---------------------------------
QUALITY FULFILLMENT SERVICES, INC.
By: /s/ Xxx Xxxxxxx
----------------------
Title: Chairman
---------------
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SCHEDULE A
Assumed Stores
FIFTH AVENUE, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
BOSTON, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000
SAN FRANCISCO, 00 Xxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000
LAS VEGAS, 0000 Xxx Xxxxx Xxxx. X., Xxx. X-00, Xxx Xxxxx, XX 00000
ORLANDO, 0000 Xxxxxxxxxxxxx Xxxxx, Xxx. 0000, Xxxxxxx, XX 00000
COUNTRY CLUB PLAZA, 000 X. 00xx Xx., Xxxxxx Xxxx, XX 00000
MALL OF AMERICA, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, XX 000000
TYSONS II, 0000 X Xxxxxxxxxxxxx, Xx., XxXxxx, XX 00000
BELLEVUE SQUARE, Space #2070, Xxxxxxxx, XX 00000-0000
WESTCHESTER, 000 Xxxxxxxxxxx Xxx., Xxxxx Xxxxxx, XX 00000
KING OF PRUSSIA, 000 X. Xxxxx Xx., Xxxx xx Xxxxxxx, XX 00000
XXXXXX'X MARKET, Los Angeles, CA
LENOX SQUARE, 0000 Xxxxxxxxx Xxxx, Xxxxxxx, XX 00000
CENTER@ POST OAK, 0000 Xxxxxxxxxx Xx., Xxxxxxx, XX 00000
CITY CENTER, 0000 Xxxxx Xxxxxx, Xxxxxxx, XX 00000
TROY, 0000 X. Xxx Xxxxxx Xx., #X-000, Xxxx, XX 00000
AVENTURA, 00000 Xxxxxxxx Xxxx., Xxxxx #0000, Xxxxxxxx, XX 00000
CITYPLACE, 000 Xxxxxxxx Xxx., Xxxxx #000, Xxxx Xxxx Xxxxx, XX
MALL OF GEORGIA, 0000 Xxxxxx Xxxxx XX-00, Xxxxxx, XX 00000
BAL HARBOUR, 0000 Xxxxxxx Xxxxxx, Xxx Xxxxxxx, XX 00000-0000
CHESTNUT HILL, 000 Xxxxxxxx Xxxxxx, Xxx #00, Xxxxxxxx Xxxx, XX 00000
WATERTOWER PLACE, 000 X. Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000 (retail and storage)
HOME OFFICE, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
*NEW JERSEY WHSE, 000 Xxxxxx Xxxxxx, Xxxxxxxx, XX 00000
*WAREHOUSE, 0000 Xxxx Xxxx, Xxxxx X, Xxx Xxxxx, XX
*QUALITY FULFILLMENT SERVICES, 3342 aka 0000-0 Xxxxxxx Xxx. X.X., Xxxxxxx, XX
00000
*TOTAL FULFILLMENT SERVICES, 000 Xxxxxxx Xxxx Xxxx, Xxxxx, XX 00000
*Las Vegas Visual Workshop, 0000-0000 Xxxxxxx Xx., Xxxxxxxx #0, Xxx Xxxxx, XX
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* Distribution Center
SCHEDULE B
Closure Stores
GLENDALE GALLERIA, 0000 Xxxxxxxx Xxxxxxxx, Xxxxxxxx, XX 00000
GEORGETOWN PARK, 0000 X Xx. XX, Xxxxxxxxxx, XX 00000
CHICAGO, 000 X. Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000
DALLAS NORTHPARK, 000 Xxxxxxxxx Xxxxxx, Xxxxxx, XX 00000
SOUTH COAST PLAZA, 0000 Xxxxxxx Xx., Xxxxx Xxxx, XX 00000
TAMPA WEST SHORE PLAZA, 000 Xxxx Xxxxx Xxxxx, Xxxxx, XX 00000
TOWSON TOWN CENTER, 000 Xxxxxxx Xxxxxx Xx., Xxxxxx, XX 00000
STAMFORD TOWN CENTER, 000 Xxxxxxxxx Xxxxx, Xxxxxxxx, XX 00000
PALM BEACH GARDENS, 0000 XXX Xxxx., #X000, Xxxx Xxxxx Xxxxxxx, XX 00000
MENLO PARK, 000 Xxxxx Xxxx, Xxxxx #0000, Xxxxxx, XX 00000
SCOTTSDALE FASHION SQUARE, 0000 X. Xxxxxxxxx Xx., Xxxxxxxxxx, XX 00000
XX. XXXXX, Xxxxxxxx, #0000, Xx. Xxxxx, XX 00000
SUNSET SCHWEETZ, 0000 Xxxxxx Xxxxx Xxxxx #000, Xxxxx Xxxxx, XX 00000
CIRCLE CENTRE MALL, 00 X. Xxxxxxxx Xx., Xxxxxxxxxxxx, XX 00000
ARDEN FAIR, 0000 Xxxxx Xxx, Xxxxxxxxxx, XX 00000
XXXXXX PLAZA, 000 Xxxxxx Xxxxx, Xxx Xxxxx, XX 00000-0000
SUNSET, 0000 Xxxxxx Xxxxx Xxxxx #000, Xxxxx Xxxxx, XX 00000
ROOSEVELT FIELD, Space #2084, Xxxxxx Xxxx, XX 00000
THE SOURCE, 0000 Xxx Xxxxxxx Xxxx, Xxxxxxxx, XX 00000
00xx - 00xx XXXXXX XXXXXXXXX, Xxx Xxxx, XX
SCHEDULE C
Required Stores
FIFTH AVENUE, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
BOSTON, 000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000
SAN FRANCISCO, 00 Xxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000
LAS VEGAS, 0000 Xxx Xxxxx Xxxx. X., Xxx. X-00, Xxx Xxxxx, XX 00000
ORLANDO, 0000 Xxxxxxxxxxxxx Xxxxx, Xxx. 0000, Xxxxxxx, XX 00000
KING OF PRUSSIA, 000 X. Xxxxx Xx., Xxxx xx Xxxxxxx, XX 00000
CITY CENTER, 0000 Xxxxx Xxxxxx, Xxxxxxx, XX 00000
TYSONS II, 0000 X Xxxxxxxxxxxxx, Xx., XxXxxx, XX 00000
Plus 7 of the following:
COUNTRY CLUB PLAZA, 000 X. 00xx Xx., Xxxxxx Xxxx, XX 00000
MALL OF AMERICA, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxxxx, XX 000000
XXXXXXXX XXXXXX, Xxxxx #0000, Xxxxxxxx, XX 98004-5028
WESTCHESTER, 000 Xxxxxxxxxxx Xxx., Xxxxx Xxxxxx, XX 00000
LENOX SQUARE, 0000 Xxxxxxxxx Xxxx, Xxxxxxx, XX 00000
TROY, 0000 X. Xxx Xxxxxx Xx., #X-000, Xxxx, XX 00000
AVENTURA, 00000 Xxxxxxxx Xxxx., Xxxxx #0000, Xxxxxxxx, XX 00000
CITYPLACE, 000 Xxxxxxxx Xxx., Xxxxx #000, Xxxx Xxxx Xxxxx, XX
MALL OF GEORGIA, 0000 Xxxxxx Xxxxx XX-00, Xxxxxx, XX 00000
BAL HARBOUR, 0000 Xxxxxxx Xxxxxx, Xxx Xxxxxxx, XX 00000-0000
CHESTNUT HILL, 000 Xxxxxxxx Xxxxxx, Xxx #00, Xxxxxxxx Xxxx, XX 00000
WATERTOWER PLACE, 000 X. Xxxxxxxx Xxxxxx, Xxxxxxx, XX 00000 (retail and storage)
XXXXXX'X MARKET, Los Angeles, CA
CENTER@POST OAK, 0000 Xxxxxxxxxx Xx., Xxxxxxx, XX 00000
