ASSET PURCHASE AGREEMENT
Asset Purchase Agreement, made this 8th day of May 1998, by
and among PIERCING PAGODA, INC., a Delaware corporation ("Buyer");
SEDGWICK SALES, INC., a Nevada corporation ("Seller"); XXXXXX X. XXXXXXXX
("DMS"), XXXXXXX X. XXXXXXX ("GKS"); THE SEDGWICK FAMILY TRUST (the
"Trust"); and the undersigned beneficiary of the Trust (the "Beneficiary"
and, collectively with the Trust, the "Shareholders"); provided that DMS
and GKS are signatories of this Agreement solely for purposes of agreeing
to enter into the Non-competition Agreement (as defined below) on the
terms set forth below and the Beneficiary shall only have liability
hereunder to the extent, if any, that she receives, directly or
indirectly, distributions of cash or other consideration from the Trust.
BACKGROUND
Seller operates approximately 157 retail kiosk stores under
the names Golden Chain Gang, Golden Chain International, Grand Illusions
and Sedgwick Solid Gold International (the "Names") which sell primarily
gold-plated jewelry (the "Business"). The Trust owns one hundred percent
(100%) of the outstanding capital stock of Seller. The Beneficiary is the
primary beneficiary of the Trust.
Buyer desires to purchase, and Seller desires to sell, the
Assets (as defined below) on the terms set forth below.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties, intending to be legally bound hereby,
agree as follows:
1. Sale and Purchase of Assets. On the Closing Date (as
hereinafter defined) and subject to the terms and conditions contained in
this Agreement, Seller shall sell, transfer, assign and deliver to Buyer,
and Buyer shall purchase, assume and accept from Seller, free and clear
of all liens and encumbrances, all right, title and interest in and to
all of the following assets owned by Seller (the "Assets"):
(a) Seller's interest in the one hundred and seven
(107) existing or pending leases for Seller's kiosk stores listed in
Schedule 1(a) attached hereto, and the leases for any other locations as
to which an Additional Store Exercise is made pursuant to Section 4 below
(the "Stores"); and
(b) Store kiosks and any and all leasehold
improvements, fixtures, benches, point-of-sale registers, telephones,
credit authorization devices, stools, safes, security panels and existing
security systems at the Stores (all of which are being sold "as is, where
is" without warranty or representation except as specifically set forth
herein); except to the extent that Buyer in its discretion determines not
to acquire any such assets; provided that Seller must consent, such
consent not to be unreasonably withheld or delayed, to any decision by
Buyer not to acquire a Store kiosk; provided that Buyer's covenant to
dispose of such assets, including without limitation paying off or
otherwise eliminating Seller's obligations under the leases for the
Stores, at Buyer's sole cost and expense, shall be a permissible
condition to the granting of Seller's consent hereunder. As to any
pending Stores for which a kiosk has not yet been constructed, Buyer
shall be responsible for constructing, installing and paying for such
kiosk.
2. Excluded Assets. The Assets do not include cash,
receivables, prepaid rents, inventory, personal vehicles, home office
building and any other assets of Seller not identified in Section 1
above.
3. Assumption of Certain Liabilities. Subject to the terms
and conditions of this Agreement, Buyer shall assume and perform and pay
those liabilities and obligations of Seller accruing or arising on and
after the applicable Closing Date (as provided in Section 7 below): (i)
with respect to the Stores' utilities
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and merchant association dues and expenses and (ii) under the Stores'
leases. With the exception of the liabilities and obligations to be assumed
by Buyer pursuant to the preceding sentence and the other provisions of this
Agreement, Buyer shall not assume and shall in no event be liable for any
other debts, liabilities or obligations of Seller, whether fixed or
contingent, known or unknown, liquidated or unliquidated, secured or
unsecured, or otherwise and regardless of when they arose or arise. The
obligations of Buyer pursuant to this Section 3 shall be evidenced by a
lease assignment and assumption agreement setting forth such obligations, in
the form attached hereto as Exhibit "A" (the "Assignment and Assumption
Agreement"). All liabilities and obligations of Seller not assumed by Buyer
pursuant to this Section 3 shall hereinafter be referred to as the "Retained
Liabilities."
4. Purchase Price.
(a) The consideration paid or payable to Seller by Buyer in
exchange for the sale, transfer, assignment and delivery of the Assets,
(the "Purchase Price"), shall be Three Million Dollars ($3,000,000.00),
of which One Hundred Thousand Dollars ($100,000) was previously paid into
an escrow account (the "Escrow") by Buyer with CoreStates Bank, N.A. (the
"Escrow Agent") pursuant to the terms of an escrow agreement (the "Escrow
Agreement"), which amount shall be returned to Buyer if the Closing does
not occur unless the failure to close results from the breach of this
Agreement by Buyer; minus (A) any unpaid amounts due to landlords with
respect to the leases of the Stores arising prior to the Closing Date
(not including Buyer's share of any Administrative Fees as referred to in
section 17(n)); and (B) Fifteen Thousand Dollars ($15,000) per Store
lease not assigned to Buyer (excluding the first seven such non-assigned
Store leases) by December 31, 1998 on commercially reasonable terms,
provided that, notwithstanding anything contained in this Agreement to
the contrary, the adjustment pursuant to this clause (B) shall not exceed
Ninety Thousand Dollars ($90,000) in the aggregate (the adjustments
pursuant to the immediately preceding clauses (A) and (B) are
collectively referred to as the "Lease Assignment Adjustment"). Ninety
Thousand Dollars ($90,000) of the Purchase Price shall be paid on June 1,
1998 for the Initial Stores as provided in Section 7 below. With respect
to any Remaining Stores not acquired by Buyer hereunder, Seller shall use
its reasonable efforts to provide Buyer with an opportunity to negotiate
for the acquisition of such Remaining Stores that Seller or its licensed
operators desire to sell or close from time to time in the future.
(b) All funds due Seller under this Agreement or the Escrow
Agreement shall be paid by wire transfer to an account designated by
Seller, or by certified or bank treasurer's check drawn to the order of
Seller, as Seller directs.
(c) The total of One Hundred Thousand Dollars ($100,000)
remaining in Escrow after Closing shall secure Seller's obligations with
respect to the Lease Assignment Adjustment and with respect to the
payment of Administrative Fees to landlords pursuant to Section 17(n);
provided that, when all but thirteen (13) of the landlord consents have
been received, then the Escrow agent shall immediately release to Seller
Fifteen Thousand Dollars ($15,000) of the escrowed funds for each consent
received thereafter; provided further that, to the extent that the Escrow
is insufficient to pay to Buyer any amount owing on account of the Lease
Assignment Adjustment or such Administrative Fees, Seller and
Shareholders shall remain liable for the payment of such amount. Upon the
earlier of (i) the assignment of all but seven (7) Store leases and the
tender of Seller's share of all such Administrative Fees; or (ii)
December 31, 1998, the remaining amount in the Escrow shall be released
to Buyer and/or Seller in accordance with the foregoing. Seller and Buyer
shall issue joint instructions to the Escrow Agent to release to Seller
and/or Buyer, as applicable, the Escrow in accordance with this Section
4. If there is a dispute as to such instructions, such dispute shall be
resolved in accordance with Section 5.
(d) As detailed on Exhibit B, Seller currently intends to
dispose of approximately seventeen (17) of its current locations and to
sell approximately thirty-one (31) stores to licensed operators that
would operate gold-plated jewelry businesses using the Names or other
names selected by the licensed operators. Any of the thirty-one (31)
stores currently scheduled to be transferred to licensed operators in
accordance with the preceding sentence which are not ultimately
transferred to such licensed operators (the "Remaining Stores") shall be
disclosed to Buyer in writing by Seller (a (4(d) Notice") promptly upon
Seller's becoming aware that any such Remaining Store's sale to a
licensed operator is not likely to be completed. Buyer shall have the
right and option, at Buyer's sole election to be made by written notice
to Seller within ten (10) business days following Buyer's receipt of the
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applicable 4(d) Notice, to (i) acquire any of the Remaining Stores
specified by Buyer in such 4(d) Notice without the payment of any
additional consideration; provided that the total of the number of Stores
so specified plus the number of Stores on Schedule 1(a) does not exceed
one hundred ten (110); and (ii) purchase none, any or all of such
Remaining Stores without inventory from Seller at the price of Eighteen
Thousand Dollars ($18,000) each, payable in cash at Closing, with Buyer
accepting the kiosk and assuming the lease therefor as of the Closing;
provided that if, as a result of the timing of the applicable 4(d)
Notice, the purchase of the applicable Remaining Store cannot be
completed by the Closing Date, the purchase shall be completed as soon as
practicable thereafter. Buyer's election to acquire Remaining Stores
pursuant to 4(d)(i) or 4(d)(ii) shall be referred to as an Additional
Store Exercise.
5. Disputes. In the event there is a dispute as to any matter
arising under this Agreement, the disputing party shall notify the other
in writing of such dispute and the basis therefor promptly and the
parties shall attempt to resolve such dispute. In the event the parties
are unable to resolve such dispute within thirty (30) days, they shall
reduce to writing those points on which they agree and those points on
which they disagree and shall (i) retain as arbitrator the Chicago,
Illinois office of Xxxxxx Xxxxxxxx LLP or, failing their agreement to act
as arbitrator, such other independent accounting firm as may be mutually
agreed upon by the parties to review such matters as to which the parties
have not agreed in writing and (ii) request such arbitrator to act as
promptly as practicable in accordance with its own rules to resolve all
such disputed matters within thirty (30) days after being retained by the
parties. The decision of the arbitrator shall be in writing and shall be
final, non-appealable and binding on Seller and Buyer, and the fees and
expenses, if any, of such arbitrator shall be paid one-half by Seller and
one-half by Buyer. Nothing herein shall limit Buyer's right to seek
injunctive or other equitable relief in the event of a breach of the
non-competition agreement referred in Section 9.
6. Allocation of Assets, Liabilities and Purchase Price. The
Purchase Price shall be allocated among the Assets as set forth on the
Schedule attached hereto as Exhibit "C", provided that in the event of an
adjustment to the Purchase Price hereunder such adjustment shall be
applied prorata to the Assets itemized thereon. Such allocations shall be
binding on the parties and all income tax or other information returns,
including IRS Form 8594 ("Asset Acquisition Statement Under Section
1060"), shall be filed in a manner consistent with such allocations.
7. Closing. The consummation and closing of the transactions
provided for herein ("Closing") shall take place on July 1, 1998 (the
"Closing Date"); provided however that Buyer and Seller shall have shared
access to the Stores commencing at 12:01 a.m. on Monday, June 29, 1998
(the "Entry Date") through the Closing Date for the purpose of completing
Seller's closeout sales, cleaning, packing unsold merchandise, bringing
in Buyer's new merchandise and other pre-Closing transitional activities,
and Buyer shall be solely responsible for all employee wages, costs and
benefits from and after the Entry Date, including without limitation the
wages of all former employees of Seller who participate in such
activities, regardless of whether such individuals are acting for Buyer
or for Seller; provided that Buyer will provide reimbursement with
respect to, but will not include on its payroll, employees of Seller that
Buyer does not choose to hire; provided further that the Closing Date for
the purchase of the Stores at 000 Xxxxxxxx Xxxx, Xxxxxxxxxx, XX; 00
Xxxxxxxx, Xxxxxxxx, XX; and 000 Xxxxxxxxx, Xxxxxxxx, XX (collectively,
the "Initial Stores") shall be June 1, 1998. The aggregate purchase price
for the Initial Stores shall be Ninety Thousand Dollars ($90,000) payable
on June 1, 1998. Buyer and Seller shall cooperate with respect to closing
documentation for the Initial Stores which shall be substantially similar
to that contemplated by Sections 13 and 14 below.
8. Activities and Agreements Prior to Closing.
(a) Between the date of this Agreement and the Closing Date,
Seller shall:
(i) continue to operate the Business at the Stores and
use the Assets in the ordinary and usual course of business and
consistent with past practice; provided, however, that Seller shall be
entitled to conduct such "inventory liquidation," or "change of
ownership" or similar promotions as Seller desires;
(ii) consult with Buyer with respect to Seller's new
leases, if any, and lease renewal issues.
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(iii) comply with all material provisions of the leases
for the Stores and applicable laws, rules and regulations.
(iv) promptly notify Buyer if Seller shall learn of any
event, matter or condition which has come to their attention which would
constitute at the Closing Date a material breach of any representation,
warranty or covenant made by Seller in this Agreement or in any other
agreement, document or instrument delivered in connection herewith or
which would otherwise give rise to a claim of indemnification by Buyer
against Seller.
(v) forward to Buyer a copy of: (A) any notice of
default received or issued by the Seller under the leases for the Stores
and (B) any written notice of violation of any law, rule or regulation
received by Seller with respect to the Stores or the Assets.
(vi) notify Buyer of any material adverse change to any
of the Stores or Assets.
(vii) from and after the Announcement Date agreed upon
by Buyer and Seller as set forth in Section 17(m) below, permit Buyer and
its representatives reasonable access to the Stores and Assets and all
records relating to them, during business hours and upon reasonable prior
written notice.
(viii) Seller shall mail, or otherwise provide for
payment of, by May 25, 1998, all rent and other charges relating to the
Stores due on or before June 1, 1998.
(ix) Seller shall provide to Buyer by June 17, 1998
(and by May 18, 1998 with respect to the Initial Stores): (A) reasonable
details relating to rent and other charges under the Store leases, and
(B) payroll information, including without limitation, W-4 forms and
social security numbers, relating to Store employees to the extent such
information is not included in Schedule 10(f).
(x) In the event Closing does not occur, Seller and
Shareholders shall be jointly liable to reimburse Buyer for any payments
made by Buyer on account of July 1998 Store rent and related charges
(other than with respect to the Initial Stores).
(b) Between the date of this Agreement and the Closing Date,
Seller shall not, without the consent of Buyer:
(i) except for assigning the leases for the Stores to
Buyer, amend, modify, supplement, extend or terminate any of the Stores'
leases or waive any rights thereunder.
(ii) make any material change in compensation or
benefits of the employees of the Business.
(iii) enter into any contract, commitment or other
transaction affecting the Assets, Stores or any of its current locations,
other than in furtherance of the transaction contemplated in this
Agreement or in the ordinary and usual course of business and consistent
with past practice or as otherwise contemplated hereby.
9. Non-Competition Agreement. As partial consideration for
the Purchase Price, Seller, Shareholders, DMS and GKS shall execute
non-competition agreements in the form attached hereto as Exhibit "D".
10. Representations and Warranties of Seller. As a material
inducement to Buyer to enter into this Agreement and to close hereunder,
Seller makes the following representations and warranties to Buyer. In
those cases where the following warranties and representations refer to
"Seller's knowledge," this shall mean and be limited to the actual
personal knowledge of Xxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxxxx, as of
the date hereof, and shall not extend to the knowledge, express, implied
or imputed, of any other person or organization:
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(a) Corporate Status; Authority. Seller is a
corporation duly organized, validly existing and in good standing under
the laws of Nevada. Seller has the corporate power and authority to own
its properties and to carry on the Business as it is now being conducted.
Seller has the full power and authority to execute and deliver this
Agreement and any and all other documents or instruments to be executed
and/or delivered by Seller in connection herewith, including, but not
limited to the assignments of the Stores' leases, subject to the
landlords' consents (collectively, the "Purchase Documents"), and to
perform its obligations hereunder and thereunder.
(b) Due Authorization; Validity of Agreement. The
execution, delivery and performance of this Agreement and the Purchase
Documents by Seller have been duly authorized and approved by all
necessary corporate action on the part of Seller. This Agreement has been
duly executed and delivered by Seller and, assuming the due execution and
delivery of this Agreement by Buyer, constitutes the valid and binding
obligation of Seller, enforceable against it in accordance with its
terms, except as such enforceability may be limited by the effect of
bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by general principles of equity. Assuming due execution and
delivery by Buyer, the Purchase Documents will constitute the valid and
binding obligations of Seller, enforceable against it in accordance with
their respective terms.
(c) Title to Assets. Seller has good title to all the
Assets, which at the time of transfer will be free and clear of all
liens, mortgages, pledges, security interests, restrictions on transfer,
prior assignments, encumbrances and claims (all of the foregoing are
collectively referred to as "Liens"), except for the restrictions on
transfer and assignment contained in the Stores' leases which have not
been waived. None of the Assets is held by Seller on consignment.
Attached as Schedule 10(c) are copies of all mortgages, UCC statements
and any other documents evidencing Liens on the Assets (not including
statutory landlord s liens or liens or security interests created by the
Store leases which are not, to the best of Seller's knowledge, evidenced
by UCC-1 filings) and a list of all secured parties holding Liens (not
including statutory landlord s liens or liens or security interests
created by the Store leases which are not, to the best of Seller's
knowledge, evidenced by UCC-1 filings) on the Assets as of the date
hereof.
(d) Leases. To the best of Seller's knowledge, all of
the leases for the Stores are valid, binding and enforceable against
Seller in accordance with their respective terms except as such
enforceability may be limited by the effect of bankruptcy, insolvency or
similar laws affecting creditors' rights generally or by general
principles of equity. Seller and, to the best of Seller's knowledge, all
other parties to any of the Stores' leases have performed all obligations
required to be performed to date under such leases and neither Seller
nor, to the best of Seller's knowledge, any such other party is in
default or in arrears under the terms thereof. To the extent such are
contained in Seller's files, or are otherwise reasonably available to
Seller, Seller has delivered to Buyer true and correct copies of all the
Stores leases.
(e) Litigation. To the best of Seller's knowledge,
Seller is not a party to or threatened with any suit, action,
arbitration, administrative or other proceeding or any governmental
investigation with respect to the Assets, the Stores or any Employees
which would prevent the consummation of the transaction contemplated
hereby; however, as of the date of this Agreement Seller is aware of the
following claims:
(i) a suit by Xxxxxx Xxxxxxxx, an employee of
Seller's Store No. 331 in Victorville, California, alleging liability by
Seller for injuries allegedly occurring in the course and scope of her
employment which would have been covered by Worker s Compensation
insurance but for an alleged lapse of Seller's coverage and the ensuing
bankruptcy of the carrier; and
(ii) a small-claims court suit by Xxxxxxx Xxxx,
customer of Seller's Store No. 308 in Mobile, Alabama, alleging defective
product, fraud and misrepresentation;
(iii) a claim by X. Xxxxxx, alleged customer of
Seller's Store No. 204 in Harlingen, Texas, alleging defective product; and
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(iv) a claim by Xxxxx Guess, customer of Bel Air
Mall in Mobile, Alabama alleging, inter alia, false imprisonment;
and Seller and Shareholders hereby agree to indemnify, defend and hold
Buyer harmless for, from and against the foregoing claims and any and all
such claims arising from the conduct of Seller's business at any of the
Stores prior to the Closing Date in accordance with the provisions of
Section 16 below.
(f) Employees. Attached as Schedule 10(f) is a list of
all Seller's Store employees (the "Employees") which identifies their
names, addresses, respective employment status (full-time, part-time,
leave of absence, etc.), and their respective gross rate of compensation,
two-year wage history, two-year bonus and incentive program history,
title, original date of hire and accrued unused vacation time, as
reflected in Seller's current records. There are no written employment
agreements, consulting or services agreements or severance agreements
with respect to the Employees to which the Seller is a party or by which
it is bound that will survive the Closing, and to the best of Seller's
knowledge no Employee or former employee of any Store claims the
existence of any such agreements, express or implied. There are no
policies or, to the best of Seller's knowledge, understandings of the
Seller rendering any of the Employees other than at-will employees. To
Seller's knowledge, Seller maintains a good working relationship with the
Employees. During the past 12 months there have been no, and currently
there are no, strikes, slow downs, work stoppages, grievance proceedings,
arbitrations or, to Seller's knowledge, material labor disputes involving
the Employees, pending or, to the knowledge of Seller, threatened against
or involving the Seller, except as set forth in Section 10(e) above.
(g) Attached as Schedule 10(g) are monthly sales
reports for each Store for each month beginning April 1995.
(h) Agreement Not in Breach of Other Instruments
Affecting Seller. The execution and delivery of this Agreement, the
consummation of the transactions provided for herein and the fulfillment
of the terms hereof by Seller, will not result in the breach of any of
the terms and provisions of, or constitute a default under, or conflict
with, or cause any acceleration of any obligation of Seller under, any
agreement, indenture or other instrument to which Seller is bound, any
judgment, decree, order or award of any court, governmental body or
arbitrator or any applicable law, rule or regulation; except that Buyer
and Seller mutually acknowledge that the transfer of the Stores without
prior landlord consent may, in some cases, constitute a default under the
leases for such Stores and entitle such landlords to pursue remedies as
provided in such leases.
(i) Brokerage Commissions. There is no corporation,
firm or person entitled to receive from Seller any brokerage commission
or finder's fee in connection with this Agreement or the transactions
provided for herein.
11. Representations, Warranties and Agreements of Buyer. As a
material inducement to Seller to enter into this Agreement and to close
hereunder, Buyer makes the following representations, warranties, and
agreements to and with Seller:
(a) Corporate Status; Authority. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware, and has the corporate power to acquire the Assets
to be acquired hereunder. Buyer has the full power and authority to
execute and deliver this Agreement and the Purchase Documents and perform
its obligations hereunder and thereunder.
(b) Due Authorization; Validity of Agreement. The
execution, delivery and performance of this Agreement and the Purchase
Documents have been duly authorized and approved by all necessary
corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and, assuming the due execution and
delivery of this Agreement by Seller, constitutes the valid and binding
obligation of Buyer, enforceable in accordance with its terms, except as
such enforceability may be limited by the effect of bankruptcy,
insolvency or similar laws affecting creditor's rights generally or by
general principles of equity. Assuming due execution and delivery by
Seller, the Purchase Documents will constitute the valid and binding
obligations of Buyer, enforceable against it in accordance with their
respective terms.
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(c) Agreement Not in Breach of Other Instruments. The
execution and delivery of this Agreement, the consummation of the
transactions provided for herein and the fulfillment of the terms hereof
by Buyer, will not result in the breach of any of the terms and
provisions of, or constitute a default under, or conflict with, or cause
any acceleration of any obligation of Buyer under, any agreement,
indenture or other instrument to which Buyer is bound, any judgment,
decree, order or award of any court, governmental body or arbitrator or
any applicable law, rule or regulation.
(d) Brokerage Commissions. There is no corporation,
firm or person entitled to receive from Buyer any brokerage commission or
finder's fee in connection with this Agreement or the transaction
provided for herein, and Buyer hereby agrees to indemnify, defend and
hold Seller harmless for, from and against any and all claims to such a
fee or commission made by any person claiming by or through Buyer.
12. Survival of Representations and Warranties. All
representations and warranties of the parties hereto in this Agreement
shall survive Closing until January 31, 2000.
13. Closing Deliveries by Seller. On the Closing Date, Seller
shall deliver or cause to be delivered to Buyer the following:
(a) [Intentionally Deleted.]
(b) Non-Competition Agreements. Non-Competition
Agreements in the form of Exhibit "D", executed by Seller, the Shareholders,
DMS and GKS.
(c) Xxxx of Sale and General Assignment. A Xxxx of Sale
and General Assignment, in the form of Exhibit "E", executed by Seller,
transferring to Buyer good title to all of the personal property included
in the Assets.
(d) Store Lease Assignment. The Assignment and
Assumption Agreement for each Store lease in the form of Exhibit "A",
executed by Seller as to leases the assignment of which has not been
consented to by the landlord prior to Closing (the "Non-consented
Leases"), and a specific Assignment and Assumption Agreement with Lessor
Consent Agreement for each Store lease received by Seller in form
reasonably acceptable to Buyer, Seller and the applicable landlord on or
before the Closing Date which is executed by the landlord, Buyer and
Seller.
(e) Payoff Letter from Secured Lender. A payoff letter
from any party holding a security interest in any of the Assets releasing
such security interest and agreeing to execute Uniform Commercial Code
UCC-3 termination statements and other documents as may be required to
evidence the release of such security interest of record.
(f) Certified Corporate Resolutions. Corporate
resolutions adopted by the board of directors of Seller and, if required
by law, by the shareholders of Seller, certified by Seller's Corporate
Secretary, approving this Agreement and the Purchase Documents and
authorizing the consummation of the transactions contemplated hereby.
(g) Schedule of Security Deposits. A schedule of all
security and construction deposits held by any landlords under the Store
leases.
(h) Schedule of Insurance. A schedule of existing
workers compensation insurance coverages for Employees and of liability
policies covering the Business with evidence that Seller shall continue
to be covered with respect to personal liability for events occurring
prior to the Closing Date.
(i) Assets. All of the Assets capable of being
delivered in physical form shall be made available to Buyer at Seller's
locations.
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(j) Shareholder; Beneficiary. The Trust is the sole
shareholder of Seller. The Beneficiary is the primary beneficiary of the
Trust.
14. Closing Deliveries by Buyer. On the Closing Date, Buyer
shall deliver or cause to be delivered to Seller the following:
(a) [Intentionally Deleted.]
(b) Non-Competition Agreements. A Non-Competition
Agreements, in the form of Exhibit "D", executed by Buyer.
(c) Store Lease Assignment. The Assignment and
Assumption Agreement for each Non-consented Lease in the form of Exhibit
"A", executed by Buyer and a specific Assignment and Assumption Agreement
with Lessor Consent Agreement for each Store lease received by Seller or
Buyer on or before the Closing Date which is executed by the landlord,
Seller and Buyer.
(d) Certificates Confirming Approval of this Agreement.
Officer's Certificates of Buyer, certifying that all necessary corporate
action by Buyer has been taken to approve this Agreement and authorize
the consummation of the transactions contemplated hereby.
(e) Additional Sums. Any additional funds not
previously deposited under Section 4(a) or (b) which Escrow Agent
requests in order to close the Escrow.
15. Covenants Extending Beyond Closing.
(a) Further Assurances. Seller and Shareholders agree
to execute and/or obtain and deliver all such other instruments and take
all such other action as Buyer may reasonably request from time to time,
before or after the Closing Date and without payment of further
consideration, in order to effectuate the transactions provided for
herein, including, without limitation, the execution and delivery by
Seller of such further instruments of conveyance and transfer as may be
necessary to convey and transfer more completely to the Buyer the Assets
being purchased hereunder; and the obtaining and filing of properly
executed termination statements in each applicable jurisdiction as to any
security interests that are currently of record. The parties shall
cooperate fully with each other and with their respective counsel in
connection with any steps required to be taken as part of their
respective obligations under this Agreement.
(b) WARN Act Liability; Employees. Buyer intends, but
shall have no obligation, to hire most of Seller's Employees. Seller
shall provide Buyer with reasonable mutually agreeable access to Seller's
supervisory Employees. Seller shall indemnify Buyer for any WARN Act
liability
(c) Employee Benefits. Seller shall compensate all
Employees for vacations earned or accrued through June 28, 1998 (May 31,
1998 with respect to the Initial Stores) in accordance with Seller's
policies and shall provide all required COBRA notices. With respect to
Employees hired by Buyer who had, on or immediately prior to the Closing
Date, been receiving health or dental coverage with respect to
themselves, their spouses and/or dependents under an employee welfare
benefit plan maintained by Seller, Buyer agrees to cover, or make
coverage available to, such Employees, spouses and/or dependents under
Buyer's existing health and dental benefit arrangements, under the same
terms as available to Buyer's other employees; provided, however, that
such individuals, to the extent practicable, shall not be subjected to
any waiting period or preexisting condition, limitation or exclusion.
Seller shall have no responsibilities for any claims incurred under or
premium payments with respect to such plans or arrangements.
(d) Gift Certificates; Store Credits; Coupons. For a
period of six (6) months following the Closing Date, Seller shall
reimburse Buyer for the amounts of any gift certificates, store credits
and coupons
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actually issued by Seller prior to Closing, if any, which gift certificates,
store credits and coupons were issued not more than one year prior to the
date of honor and which have been honored by Buyer, within ten (10) days
after Buyer has submitted proof that such gift certificates, store credits
and coupons have been honored.
(e) Lay-Away and Store Deposits; Repairs. For a period
of ninety (90) days following the Closing Date, Seller shall reimburse
Buyer for any verifiable lay-away deposits or special order deposits
accepted prior to Closing by any of the Stores which are honored by Buyer
during such period, within ten (10) days of Seller's receipt of proof
from Buyer that such lay-away deposits or special order deposits have
been honored by Buyer. Seller shall use its best efforts to return all
such deposits and complete repairs on or prior to the Closing and shall
be responsible for repairs submitted prior or subsequent to the Closing
Date. Seller shall provide to Buyer a telephone number at which Seller
may be contacted by its customers to resolve all issues relating to such
deposits and repairs.
(f) Security Deposits. Seller shall use reasonable
efforts to obtain reimbursement from the landlords of the Stores of the
security deposits and construction deposits made pursuant to the leases
for such Stores and listed on the schedule delivered on the Closing Date;
however, if Seller is unable to obtain such reimbursement, but the
landlord acknowledges in writing that Buyer will receive credit for such
deposits, Buyer promptly shall pay the amount of such security deposits
and construction deposits to Seller.
(g) Store Leases. Buyer shall assume the obligations
and liabilities of Seller under the Store leases, notwithstanding that
the landlord parties to such leases have not consented to the assignment
of such leases to Buyer as of the Closing Date. Seller shall pay all
amounts owed to landlords under the Store leases through the day prior to
the applicable Closing Date, excepting therefrom one-half of the amount
of any Administrative Fees as provided for in Section 17(n), and Buyer
shall pay all sums due from and after the applicable Closing Date. Buyer
and Seller shall use their best efforts to obtain landlord consents from
the remaining landlords on or before December 31, 1998. Buyer shall be
responsible for obtaining landlord consents, provided however that for a
period of six months after closing, for no separate consideration, Seller
shall provide reasonable assistance in obtaining lease assignments and
otherwise dealing with landlords on issues pertinent to such assignments
and consents. Seller shall also use its best efforts to cause its
licensed operators that desire to dispose of their locations to negotiate
first with Buyer prior to transferring such locations to any third
parties.
(h) Trust. The Trust shall not make any distributions
to or for the benefit of any beneficiary other than the Beneficiary
unless such other beneficiary agrees to be liable hereunder jointly and
severally with the Beneficiary, but only to the extent of any
distributions to or for the benefit of such other beneficiary from the
Trust. Such other beneficiary shall also be entitled to the limitations
on liability applicable to Shareholders set forth elsewhere in this
Agreement.
16. Indemnification by Seller, Shareholders and Buyer.
(a) Indemnification by Seller. Seller and Shareholders
shall jointly and severally defend, indemnify and hold Buyer and its
officers, directors and shareholders harmless from and against any
damage, claim, liability, loss, expense, cost or deficiency, including
reasonable attorneys' fees and costs ("Damages") resulting from (i) any
breach of any representation or warranty made by Seller in Section 10,
(ii) any claims incurred or benefits accrued on or prior to the Closing
Date with respect to employee benefits and employee benefit plans under
ERISA (the "Benefit Plans") maintained, sponsored or contributed to by
Seller, any premiums or contributions due with respect to the Benefit
Plans based on service on or prior to the Closing Date or the requirement
to provide or make available to any employee who is terminated on or
prior to the Closing Date any benefits under the Benefit Plans, including
COBRA continuation coverage required under Section 4980B of the Internal
Revenue Code of 1986 and (iii) the Retained Liabilities; provided that
Seller and Shareholders shall have no liability related to the failure to
have a Store lease assigned in excess of the Lease Assignment Adjustment,
provided that they comply with Section 15(g).
(b) Indemnification by Buyer. Buyer shall defend,
indemnify and hold Seller and its officers, directors and shareholders
harmless from and against any Damages resulting from (i) any breach of
any representation or warranty made by Buyer in Section 11, (ii) any WARN
Act liability if more than the number of
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Employees (excluding Employees at Seller' headquarters office) that would
trigger such Act either are not offered employment by Buyer or are offered
employment by Buyer and are terminated by Buyer within sixty (60) days after
the Closing Date, (iii) the liabilities assumed pursuant to Section 3 and
(iv) the operation of the Stores and the employment of the Employees after
Closing (each an "Indemnity Claim").
(c) Notice to Indemnifying Party. Promptly after the
assertion of any claim by any governmental authority or other third party
("Third Party Claim") or the occurrence of any event which may give rise
to a claim for indemnification under this Section 16, the indemnified
party shall give the indemnifying party written notice of such event or
Third Party Claim, including copies of any summons, complaint or other
pleading which may have been served on the indemnified party and any
written claim, demand, invoice, billing or other document evidencing or
asserting a Third Party Claim.
(d) Third Party Claims. The rights of indemnification
under this Section 16 with respect to any Third Party Claim shall be
subject to the following terms and conditions:
(i) The indemnifying party, at its expense, shall
have the sole and exclusive right to pay, compromise, settle or otherwise
dispose of any Third Party Claim. Unless the indemnified party otherwise
agrees, however, no such settlement shall limit, restrict or otherwise
adversely affect the right of the indemnified party to carry on or
conduct its business (then or in the future), or require any payment to
be made by the indemnified party (except as may be paid or reimbursed by
the indemnifying party). In addition, no settlement shall be entered into
which does not include the delivery by the Third Party of a full and
final release of the indemnified party from all liability in respect of
such Third Party Claim.
(ii) The indemnifying party, at its expense, shall
be entitled to participate in and to the extent it wishes, to direct the
defense, including the selection of counsel reasonably satisfactory to
the indemnified party, of any such Third Party Claim. The indemnified
party shall cooperate in all reasonable respects with the indemnifying
party and such counsel in the investigation, discovery and pre-trial
phases, trial and appeal of such Third Party Claim. The indemnified party
shall at all times have the right to participate in the defense of any
Third Party Claim and to employ its own counsel, but the fees and
expenses of such counsel shall be the indemnified party's own expense
unless the employment of such counsel shall have been authorized by the
indemnifying party in connection with the defense of any such Third Party
Claim, or unless and so long as the indemnifying party shall not have
employed counsel to have charge of the defense of any such Third Party
Claim within a reasonable period after notice thereof, in neither of
which events such fees and expenses shall be borne by the indemnifying
party.
(iii) Notwithstanding anything in this Section 16(d)
to the contrary, if there is a reasonable probability that any Third
Party Claim may materially and adversely affect the indemnified party,
other than as a result of money damages or other money payments, the
indemnified party shall have the right, at its own cost and expense, to
defend, compromise or settle such Third Party Claim; provided, that the
indemnifying party shall not be liable for any payment in settlement of
any Third Party Claim without its prior consent, which shall not be
unreasonably withheld.
(e) Limitations on Liability. The liability of the
parties hereto under this Section 16 shall be subject to the following
limitations:
(i) The indemnifying party shall not be obligated
to indemnify the indemnified party under this Section 16 for Damages
resulting from a breach or alleged breach of a representation or warranty
in this Agreement if the indemnified party has not given the indemnifying
party notice of such Damages prior to the expiration of the survival
period for such representation or warranty as stated in Section 12.
(ii) The aggregate liability of Seller and
Shareholders under Section 16(a)(i) shall not exceed Three Million
Dollars ($3,000,000).
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(iii) No liability shall be enforced against the
indemnifying party to the extent of any insurance proceeds that the
indemnified party receives with respect to any Damages.
17. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay
on the part of any party to exercise any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of
any right preclude any other or further exercise of the same or of any
other right nor shall any waiver of any right with respect to any
occurrence be construed as a waiver of such right with respect to any
other occurrence. No waiver shall be effective unless it is in writing
and is signed by the party asserted to have granted such waiver.
(b) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement,
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania (notwithstanding any conflict-of-law
doctrines of any state to the contrary) and without the aid of any canon,
custom or rule of law requiring construction against the draftsman.
(c) Waiver. Any failure of Seller or Buyer to comply
with any obligation, covenant, agreement or condition contained herein
may be expressly waived in writing by Buyer in the case of any such
failure by Seller or by Seller in the case of any such failure by Buyer,
but such waiver or failure to insist upon strict compliance shall not
operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or
on behalf of any party hereto, such consent shall be given in writing in
a manner consistent with the requirements for a waiver of compliance as
set forth in this Section 17(c).
(d) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received
only when delivered (personally, by courier service such as Federal
Express, or by other messenger) or four (4) business days following the
day when deposited in the United States mails, registered or certified
mail, postage prepaid, return receipt requested, addressed as set forth
below:
(i) If to Sellers, Shareholders, DMS or GKS:
Sedgwick Sales, Inc.
0000 Xxxxx Xxxxxx
Xxx Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, President
with a copy to:
Sedgwick Sales, Inc.
0000 Xxxxx Xxxxxx
Xxx Xxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, General Counsel
(ii) If to Buyer:
Piercing Pagoda, Inc.
0000 Xxxxx Xxxxx
X.X. Xxx 00000
Xxxxxx Xxxxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxx, President
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With a copy to:
Wolf, Block, Xxxxxx and Xxxxx-Xxxxx
Twelfth Floor Packard Building
S.E. Xxxxxx 00xx xxx Xxxxxxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in
conformity with the provisions of this paragraph for the giving of
notice.
(e) Exhibits and Schedules. All Exhibits and Schedules
attached hereto are hereby incorporated by reference into, and made a
part of, this Agreement.
(f) Binding Nature of Agreement. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and permitted
assigns. Seller may not assign any of their rights or obligations
hereunder. Buyer may assign any or all of its rights hereunder to any
affiliate of Buyer; provided, however, that Buyer shall remain
responsible for the performance of all of their obligations under this
Agreement notwithstanding any such assignment.
(g) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to
be an original as against any party whose signature appears thereon, and
all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories.
(h) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no
provision shall be affected or rendered invalid or unenforceable by
virtue of the fact that for any reason any other or others of them may be
invalid or unenforceable in whole or in part.
(i) Number of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including
Saturdays, Sundays and holidays; provided, however, that if the final day
of any time period falls on a Saturday, Sunday or holiday on which
federal banks are or may elect to be closed, then the final day shall be
deemed to be the next day which is not a Saturday, Sunday or such
holiday.
(j) Entire Agreement. This Agreement (including the
Exhibits and Schedules hereto) contains the entire understanding among
the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as
herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of
the terms hereof. This Agreement may not be modified or amended other
than by an agreement in writing.
(k) Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement
and shall not affect its interpretation.
(l) No Third Party Beneficiaries. This Agreement shall
inure to the benefit of the parties to this Agreement only and not to the
benefit of any third party, including Seller's employees.
(m) Publicity. Without the prior written consent of the
other, which either party may deny or delay in its sole, absolute and
unfettered discretion, neither Buyer nor Seller, nor any officer,
employee or other entity or person acting on their behalf, shall issue a
press release or otherwise discuss, disclose or publicize, formally or
informally, the execution of this Agreement or the pendency or
consummation of the transaction contemplated hereby prior to 3:00 p.m.
Eastern Daylight Time on May 18, 1998 (the "Announcement Time"); except
that (i) Seller shall have the right to earlier confidentially disclose
this Agreement and the transaction contemplated hereby to Sanwa Bank
California in accordance with the terms of certain credit facilities
69
between Seller and said bank; (ii) Seller may disclose the transaction to
its regional managers and district managers on May 16, 1998 who will be
instructed not to discuss the acquisition prior to noon on May 18, 1998;
(iii) Seller may inform the balance of its employees on May 18, 1998
pursuant to materials that include a communique from Buyer; (iv) Buyer
may disclose the transaction to its regional managers and district
managers on May 18, 1998 who will be instructed not to discuss the
acquisition prior to noon on May 18, 1998; and (v) Buyer may issue a
press release and make statements to analysts disclosing the acquisition
on May 14, 1998 provided that such release and statements do not disclose
the name of Seller. The parties shall mutually agree on the form and
content of any press release or other public announcement regarding the
execution of this Agreement or the consummation of the transaction
contemplated hereby; provided that, except as provided above, no such
announcement shall be made prior to the Announcement Time. The parties
shall also coordinate with respect to notices to Employees and landlords,
such notices to be made only from and after the Announcement Time.
(n) Expenses. The parties hereto shall each pay the
expenses incurred by them in connection with the origin, negotiation and
performance of this Agreement and the agreements contemplated hereby;
provided, however, that Seller and Buyer shall each be responsible for
one-half of the assignment, transfer, administrative or similar fees,
only if any, to be paid to landlords of the Stores in connection with the
assignment of the Stores' leases (herein "Administrative Fees").
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered as of the date first above
written.
PIERCING PAGODA, INC.
By:
Xxxx X. Xxxxxxxxx, President
SEDGWICK SALES, INC.
By:
Xxxxxx X. Xxxxxxxx, President
Xxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxxxx
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