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ASSET PURCHASE AGREEMENT
by and among
EUCLID LOGISTICS, INC.
HANOVER DIRECT, INC.
XXXXXX HOLDINGS, INC.
and
THE XXXXXX COMPANY
Dated as of August 19, 1999
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TABLE OF CONTENTS
Section Page
1. PURCHASE AND SALE OF ASSETS .............................................1
1.1 Purchased Assets ..................................................1
1.1.1 Intellectual Property Rights ...............................1
1.1.2 Eligible Inventory .........................................2
1.1.3 Prepaid Expenses ...........................................2
1.1.4 Contract and Other Rights ..................................2
1.1.5 Other Assets ...............................................2
1.2 Excluded Assets ...................................................2
1.2.1 Cash and Investments .......................................2
1.2.2 Receivables ................................................2
1.2.3 Inventory ..................................................2
1.2.4 Fixed Assets ...............................................2
1.2.5 Other Excluded Assets ......................................2
1.3 Names Following the Closing .......................................2
1.4 Documentation .....................................................2
1.5 Certain Consents to Assignment ....................................3
1.6 Closing; Closing Date .............................................3
1.7 Effective Time ....................................................3
2. PURCHASE PRICE; PAYMENT .................................................3
2.1 Purchase Price; Payment ...........................................3
2.2 Allocation of Purchase Price ......................................4
2.3 Signing Deposit ...................................................4
2.4 Purchase Price Adjustment .........................................4
2.5 Transfer Taxes ....................................................5
3. ASSUMPTION OF LIABILITIES ...............................................6
3.1 Assumed Liabilities ...............................................6
3.1.1 Executory Agreements .......................................6
3.1.2 Membership Programs ........................................6
3.1.3 Customer Returns and Credits ...............................6
3.1.4 Merchandise Purchase Orders ................................6
3.2 Liabilities Not Assumed ...........................................6
3.2.1 Accounts Payable and Accrued Liabilities ...................6
3.2.2 Violation of Representations, Etc ..........................6
3.2.3 Undisclosed Liabilities ....................................6
3.2.4 Contingent Liabilities .....................................6
3.2.5 Taxes Due on Sale ..........................................7
3.2.6 Other Taxes ................................................7
3.2.7 Pension and Other Employee Plans ...........................7
3.2.8 Personal Injury, Products Liability and Recall Claims ......7
3.2.9 Environmental Matters ......................................7
3.2.10 Infringements ..............................................7
3.2.11 Indebtedness ...............................................7
3.2.12 Litigation .................................................7
3.2.13 Excluded Assets ............................................7
3.3 Retained Liabilities ..............................................7
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4. REPRESENTATIONS AND WARRANTIES OF HANOVER AND SELLERS ...................8
4.1 Organization / Qualification ......................................8
4.2. Authority .........................................................8
4.3 No Violation ......................................................8
4.4 Financial Information .............................................8
4.5 Liabilities and Obligations .......................................9
4.6 Absence of Certain Changes ........................................9
4.7 Tax Returns and Reports ...........................................9
4.8 Title to and Condition of Assets .................................10
4.9 Contracts ........................................................10
4.10 Eligible Inventory ...............................................10
4.11 Litigation .......................................................10
4.12 Insurance ........................................................11
4.13 Intellectual Property ............................................11
4.14 Legal Compliance .................................................11
4.15 Suppliers ........................................................12
4.16 Membership Programs ..............................................12
4.17 Merchandise Returns / Credits ....................................12
4.18 Disclosure .......................................................12
4.19 Investment Representations .......................................12
5. REPRESENTATIONS AND WARRANTIES OF BUYER ................................13
5.1 Organization / Qualification .....................................13
5.2 Authority ........................................................13
5.3 No Violation .....................................................13
5.4 Capitalization ...................................................13
5.5 Disclosure .......................................................14
5.6 Validity of Shares ...............................................14
6. COVENANTS ..............................................................14
6.1 Conduct of Business; No Material Change ..........................14
6.2 Maintain Business as Going Concern ...............................14
6.3 August Catalog ...................................................14
6.4 Investigation ....................................................14
6.5 Supplements to Exhibits ..........................................14
6.6 Exclusivity ......................................................14
7. CONDITIONS TO CLOSING ..................................................15
7.1 Mutual Conditions ................................................15
7.1.1 No Suit ...................................................15
7.1.2 Subordination .............................................15
7.2 Conditions to Buyer's Obligations ................................15
7.2.1 Representations and Warranties ............................15
7.2.2 Certificate ...............................................15
7.2.3 Opinion ...................................................15
7.2.4 Consents and Approvals ....................................15
7.2.5 No Material Adverse Change ................................16
7.2.6 Services Agreement ........................................16
7.2.7 Financing .................................................16
7.2.8 Liens .....................................................16
7.2.9 Closing Documents .........................................16
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7.3 Conditions to Hanover's and Sellers' Obligations .................16
7.3.1 Representations and Warranties ............................16
7.3.2 Certificate ...............................................17
7.3.3 Opinion ...................................................17
7.3.4 Approvals .................................................17
7.3.5 Closing Documents .........................................17
8. TERMINATION ............................................................17
8.1 Termination of Agreement .........................................17
8.2 Remedies .........................................................18
9. INDEMNIFICATION ........................................................18
9.1 Indemnification of Buyer .........................................18
9.2 Indemnification of Hanover and Sellers ...........................19
9.3 Method of Asserting Claims .......................................20
9.4 Payments .........................................................20
9.5 Nature and Survival of Representations ...........................20
10. OTHER AGREEMENTS .......................................................21
10.1 Noncompetition/Nonsolicitation ...................................21
10.2 Membership Programs ..............................................21
10.3 Customer Returns and Credits .....................................21
10.4 Transition Services ..............................................22
10.5 Purchase Option ..................................................22
11. GENERAL PROVISIONS .....................................................22
11.1 Entire Agreement .................................................22
11.2 Waiver ...........................................................22
11.3 Amendments .......................................................22
11.4 Expenses .........................................................22
11.5 Notices ..........................................................23
11.6 Assignment .......................................................23
11.7 Commissions and Finder's Fees ....................................24
11.8 Severability .....................................................24
11.9 Counterparts .....................................................24
11.10 Headings .........................................................24
11.11 Instruments of Further Assurance .................................24
11.12 Publicity ........................................................24
11.13 No Third Party Beneficiaries .....................................24
11.14 Waiver of Trial by Jury ..........................................24
11.15 Cumulative Remedies ..............................................24
11.16 Governing Law ....................................................24
APPENDIX OF DEFINITIONS ......................................................26
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EXHIBITS
Exhibit A Opinion of Counsel to Hanover and Sellers
Exhibit B Form of Direct Marketing Services Agreement
Exhibit C Opinion of Counsel to Buyer
Exhibit D Rights and Preferences of Preferred Stock
SCHEDULES
Schedule 1.2 Excluded Assets
Schedule 2.2 Purchase Price Allocations
Schedule 4.1 Foreign Qualifications
Schedule 4.3 No Violation; Consents
Schedule 4.4 Financial Information
Schedule 4.5 Liabilities and Obligations
Schedule 4.6 Absence of Certain Changes
Schedule 4.7 Tax Returns and Reports
Schedule 4.8 Title to and Condition of Assets
Schedule 4.9 Contracts
Schedule 4.11 Litigation
Schedule 4.13 Intellectual Property
Schedule 4.14 Legal Compliance
Schedule 4.15 Principal Suppliers
Schedule 4.16 Membership Programs
Schedule 4.17 Merchandise Returns
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into as of
August 19, 1999, by and among Euclid Logistics, Inc., an Illinois corporation
("Buyer"); Hanover Direct, Inc., a Delaware corporation ("Hanover"); Xxxxxx
Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Hanover
("AHI"); and The Xxxxxx Company, a South Dakota corporation and an indirect
wholly-owned subsidiary of Hanover ("TAC"). AHI and TAC are collectively
referred to herein as the "Sellers".
Capitalized terms used but not defined herein shall have the respective
meanings set forth in the Appendix to Definitions attached hereto and made a
part hereof.
RECITALS:
WHEREAS, Hanover, through Sellers, is a direct marketer of golf equipment
and related apparel and accessories (the "Business"); and
WHEREAS, Sellers wish to sell, transfer and assign to Buyer, and Buyer
wishes to purchase from Sellers, certain of the assets of Sellers used in the
Business, upon the terms and conditions set forth herein; and
WHEREAS, Hanover is the indirect owner of all of each Seller's capital
stock and will substantially benefit from the transactions contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and in reliance upon the representations and warranties
hereinafter set forth, the parties agree as follows.
1. PURCHASE AND SALE OF ASSETS.
1.1 Purchased Assets. On the terms and subject to the conditions
contained herein, Hanover and/or Sellers agree to sell to Buyer, and Buyer
agrees to purchase from Hanover and/or Sellers at the Closing and on the Closing
Date (as each such term is defined in Section 1.6 hereof), free and clear of all
liens, claims and encumbrances, certain of the assets, interests, properties,
rights and privileges of every kind and description, owned or used by Hanover
and/or Sellers in connection with the Business (the "Purchased Assets"), but not
including those assets and properties specifically excluded by Section 1.2
hereof. The Purchased Assets shall include only the following:
1.1.1 Intellectual Property Rights. All (i) Trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (ii) Copyrights, copyrightable works and all applications,
registrations, and renewals in connection therewith; (iii) advertising, catalog
artwork and rights associated therewith, (iv) trade secrets and confidential
business information (including all customer and vendor lists, pricing and cost
information, and business and marketing plans and proposals), (v) electronic
domain names, addresses or locations or any other form of online address, and
all telephone numbers, and (vi) other intellectual property rights employed or
utilized in the conduct of the Business, including, without limitation those
described on Schedule 4.13 hereof (collectively, the "Intellectual Property
Rights").
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1.1.2 Eligible Inventory. All Eligible Inventory.
1.1.3 Prepaid Expenses. All prepaid expenses, deposits or
related assets relating to the Business, including, without limitation, all
prepaid advertising.
1.1.4 Contract and Other Rights. All of each Seller's rights
and interests in, to and under the contracts described in Schedule 4.9 hereof,
except as provided in Section 1.5 hereof; and all other claims, rights and
causes of action of each Seller against third parties relating to the Business.
1.1.5 Other Assets. All other assets of Hanover and/or Sellers
used primarily in the conduct of the Business, whether tangible, intangible or
mixed and whether or not reflected in the Financial Information (as defined in
Section 4.4 hereof) or on Sellers' books or records, including all books,
records and files (including all customer and vendor computer files and other
records), and permits and licenses to the extent transferable under law.
1.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, the following assets (the "Excluded Assets") shall not be sold
to Buyer and shall be retained by Hanover and/or Sellers.
1.2.1 Cash and Investments. All of the xxxxx cash, cash on
deposit in banks or other financial institutions, and funds in payroll accounts
of Hanover and/or Sellers; and all certificates of deposit, bonds, stock and
other securities and investments of Hanover and/or Sellers.
1.2.2 Receivables. All of Hanover and/or Sellers' trade
receivables, note receivables and other accounts receivable, including any
intercompany accounts receivable).
1.2.3 Inventory. All inventory other than Eligible Inventory.
1.2.4 Fixed Assets. All fixed assets, equipment, computer
hardware, vehicles, fixtures, furniture and similar tangible personal property
employed by Hanover and/or Sellers in the conduct of the Business.
1.2.5 Other Excluded Assets. (i) All of Hanover's and Sellers'
rights under this Agreement, (ii) Hanover and Sellers' corporate minute books
and related records, (iii) all personnel records, (iv) all income tax returns
and related tax records, and (v) any other assets described on Schedule 1.2
hereof.
1.3 Names Following the Closing. Immediately following the Closing,
each Seller shall (and Hanover shall cause any of its other Affiliates which use
the "Xxxxxx" name in its corporate name to) amend its certificate or articles of
incorporation so as to change its name to a name which does not include the
"Xxxxxx" name, and neither Hanover, Sellers nor any of their Affiliates shall
thereafter use such name or other names acquired by Buyer hereunder or names
confusingly similar thereto.
1.4 Documentation. In order to effectuate the sale, conveyance,
transfer and assignment contemplated by Section 1.1 hereof, Hanover and Sellers
shall execute and deliver on the Closing Date all such bills of sale and other
documents or instruments of conveyance. transfer or assignment as shall be
necessary or appropriate to vest or confirm in Buyer, all right, title and
interest of Hanover and Sellers in and to all of the Purchased Assets, all of
which documents shall be in form and substance satisfactory to counsel for
Buyer, acting reasonably.
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1.5 Certain Consents to Assignment. Hanover and Sellers agree that
after the execution of this Agreement, at Buyer's request, they will use their
Reasonable Efforts to obtain consents to assignment for all contracts or
agreements, which require consent to assignment and which are being transferred
to Buyer hereunder, whether or not Buyer has agreed to waive such consents as a
condition to Closing, including but not limited to those consents described in
Schedule 4.3 hereto.
To the extent that the assignment of any right or agreement the
benefit of which is to be acquired by Buyer pursuant to this Agreement shall
require the consent of any other party, and Buyer shall have waived the
obtaining of such consent prior to Closing, this Agreement shall not constitute
a contract to assign the same until such consent is obtained. Hanover, Sellers
and Buyer shall use their respective Reasonable Efforts after the Closing to
obtain any consent necessary to any such assignment. If any such consent is not
obtained, (i) this Agreement shall not constitute or be deemed to be a contract
to assign the same if an attempted assignment without such consent, approval or
waiver would constitute a breach of such right or agreement or create in any
party thereto the right or power to cancel or terminate such right or agreement;
and (ii) Hanover and Sellers will cooperate with Buyer, at Buyer's expense, in
any reasonable arrangement requested by Buyer designed to provide to Buyer the
benefit, monetary or otherwise, of Sellers' rights under such right or
agreement, including enforcement of any and all rights of Sellers against the
other party thereto arising out of a breach or cancellation thereof by such
other party.
1.6 Closing; Closing Date. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Lord, Bissell & Brook, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, at
9:00 a.m. (Chicago time), sixty (60) days from the date hereof or at such other
time, date or place as may be mutually agreed upon by Buyer and Hanover (the
"Closing Date").
At the Closing, (i) Hanover and Sellers shall sell, transfer,
assign, convey and deliver to Buyer the Purchased Assets, (ii) Buyer shall
assume the Assumed Liabilities (as defined in Section 3 hereof), (iii) Hanover
and Sellers will deliver to Buyer the various agreements, certificates, opinions
and documents referred to in Section 7.2 below, (iv) Buyer will deliver to
Hanover and Sellers the various agreements, certificates, opinions and documents
referred to in Section 7.3 below, and (v) Buyer will pay to Hanover and Sellers
the portion of the Purchase Price payable at Closing in accordance with Section
2.1 hereof.
1.7 Effective Time. Title to the Purchased Assets shall be deemed to
have been transferred to Buyer at 12:01 a.m. (Chicago time) on the Closing Date.
2. PURCHASE PRICE; PAYMENT.
2.1 Purchase Price: Payment. Subject to adjustment as provided in
Section 2.4 hereof, Buyer agrees to pay, and Hanover and Sellers agree to
accept, as the "Purchase Price" for the covenant not to compete described in
Section 10.1 hereof, and for the Purchased Assets the following:
(i) the assumption, payment, performance and discharge, when
and as due, of the Assumed Liabilities (as such term is defined in
Section 3 hereof);
(ii) the sum of $1,400,000 payable in cash at Closing by wire
transfer of immediately available funds to an account designated by
Sellers or otherwise as the parties may agree;
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(iii) the sum of $400,000, without interest, payable in cash
within sixty (60) days following the Closing Date by wire transfer
of immediately available Funds to an account designated by Sellers
or otherwise as the parties may agree;
(iv) the sum of $244,000, without interest, payable in cash
within ninety (90) days following the Closing Date by wire transfer
of immediately available funds to an account designated by Sellers
or otherwise as the parties may agree; and
(v) a certificate for 1,988,000 shares of Preferred Stock, to
be delivered at the Closing.
2.2 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets and the covenant not to compete contained
in Section 10.1 hereof, as set forth on Schedule 2.2 hereto. The parties agree
that the allocation set forth in Schedule 2.2 shall be used by them and
respected for all purposes, including income tax purposes, and that the parties
shall follow such allocation for all reporting purposes. The allocations set
forth on Schedule 2.2 shall be appropriately adjusted by the parties to reflect
the adjustments to the Purchase Price pursuant to Section 2.4 hereof.
2.3 Signing Deposit. Hanover and Sellers acknowledge that Buyer has
previously deposited with Hanover the sum of $50,000, which is being held by
Hanover in an interest bearing money market account (the "Signing Deposit"). At
the Closing, Buyer shall receive a credit against the Purchase Price for the
amount of the Signing Deposit plus all accrued interest thereon. In the event
this Agreement is terminated by either party pursuant to Article 8 hereof,
Hanover shall promptly return the Signing Deposit and all accrued interest
thereon to Buyer, except as otherwise provided in Section 8.2(b) hereof.
2.4 Purchase Price Adjustment. The Purchase Price shall be subject
to adjustment following the Closing Date in the manner described below.
(a) Within thirty (30) days prior to the Closing Date, Hanover
and/or Sellers will conduct a physical count of the Eligible Inventory to be
included in the Purchased Assets. Hanover will give five (5) days prior written
notice to Buyer of the date such inventory count will be conducted and Buyer
and/or its accountants shall have the right to observe such inventory count.
(b) As soon as reasonably practicable after the Closing Date and in
any event no later than forty-five (45) days after the Closing Date, Hanover
and/or Sellers will prepare and present to Buyer the following statements
prepared as of 12:01 a.m. (Chicago time) on the Closing Date statements
indicating: (i) the amount of Eligible Inventory included in the Purchased
Assets, (ii) the amount of prepaid advertising included in the Purchased Assets,
determined in accordance with Sellers' normal accounting practices, consistently
applied, and (iii) the number of Active Customers of the Business (the "Initial
Closing Statements").
(c) Upon receipt of the Initial Closing Statements, Buyer and its
accountants shall be permitted during the succeeding thirty (30) day period to
examine the accounting records and work papers prepared by Hanover and/or
Sellers or their accountants in connection with the preparation of the Initial
Closing Statements. If Buyer agrees to the Initial Closing Statements, they
shall become the final closing statements (the "Final Closing Statements"). If
Buyer does not agree to the Initial Closing Statements, it shall within thirty
(30) days after delivery of the Initial Closing Statements by Hanover and/or
Sellers, prepare and deliver to Hanover a list of disputed adjustments (the
"Disputed Adjustments") to the Initial Closing Statements. Buyer and Hanover
shall use their best efforts to resolve the Disputed Adjustments. If Buyer and
Hanover are able to reach an
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agreement on the Disputed Adjustments, the Initial Closing Statements shall be
amended to reflect such agreement and shall become the Final Closing Statements.
(d) If Buyer and Hanover are unable to reach an agreement on the
Disputed Adjustments within thirty (30) days after receipt by Buyer of the
Disputed Adjustments, then the Disputed Adjustments shall be resolved by a
nationally-recognized firm of certified public accountants mutually acceptable
to Buyer and Hanover (the "Accounting Referee"). The parties shall use their
Reasonable Efforts to cause the Accounting Referee to promptly review the
Disputed Adjustments and determine the final value of each of the Disputed
Adjustments. In making such determination, the Accounting Referee shall consider
only the items or amounts in dispute (and any other items or amounts relating
thereto), and the determination of each Disputed Adjustment's value, as so
computed, shall not, in any event, be less than zero or greater than the amount
of the Disputed Adjustments. Such determination shall be made within thirty (30)
days after the date on which the Accounting Referee receives notice of the
Disputed Adjustments. The Initial Closing Statements shall then be amended to
reflect the determination of the final value of each of the Disputed Adjustments
and shall become the Final Closing Statements, which shall be conclusive and
binding on the parties to this Agreement for purposes of determining any
adjustment of the Purchase Price pursuant to this Section 2.4 and shall be
non-appealable. The fees, costs and expenses of the Accounting Referee in
conducting such review shall be shared equally by Buyer and Hanover.
(e) The amount of the Purchase Price shall be adjusted based on the
Final Closing Statements as follows:
(i) The Purchase Price shall be either (A) increased by the amount
of Eligible Inventory reflected on the Final Closing Statement in excess
of $2,500,000, subject to a maximum increase of no more than $600,000, or
(B) decreased by the amount of Eligible Inventory reflected on the Final
Closing Statement less than $2,500,000;
(ii) The Purchase Price shall be either (A) increased by the amount
of prepaid advertising reflected on the Final Closing Statement in excess
of $400,000, subject to a maximum increase of no more than $50,000, or (B)
decreased by the amount of prepaid advertising reflected on the Final
Closing Statement less than $400,000; and
(iii) The Purchase Price shall be either (A) increased by an amount
equal to $8 multiplied by the number of Active Customers reflected on the
Final Closing Statement greater than 97,000, subject to a maximum increase
of no more than $160,000, or (B) decreased by an amount equal to $8
multiplied by the number of Active Customers reflected on the Final
Closing Statement less than 97,000.
Within five (5) business days after the determination of the Final Closing
Statements, either Buyer shall pay to Sellers the amount of the net increase in
Purchase Price or Sellers shall pay to Buyer the amount of the net decrease in
the Purchase Price, in each case as determined as provided in this Section
2.4(e). The parties agree that any amounts due to Buyer pursuant to this Section
2.4(e) shall be first offset against the payments due to Sellers pursuant to
Section 2.l(iii) and (iv) hereof and next by the redemption of shares of the
shares of Preferred Stock issued pursuant to Section 2.1(v) hereof Any remaining
amounts due to Buyer pursuant to this Section 2.4(e) shall be paid in cash.
2.5 Transfer Taxes. Buyer agrees to reimburse Sellers for fifty
percent (50%) of the first $20,000 of any sales, use, transfer taxes or
assessments incurred by Sellers and arising from, based upon or related to the
sale, transfer and delivery of the Purchased Assets pursuant to this Agreement.
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3. ASSUMPTION OF LIABILITIES.
3.1 Assumed Liabilities. At the Closing, Buyer shall assume and
agree to perform and discharge when and as due the following liabilities and
obligations which accrue on or following the Closing Date, and no others (the
"Assumed Liabilities"):
3.1.1 Executory Agreements. Liabilities and obligations which
accrue on or following the Closing Date under the contracts described on
Schedule 4.9 hereof.
3.1.2 Membership Programs. Sellers' liabilities and
obligations to members as of the Closing Date under the membership programs of
the Business to the extent disclosed on Schedule 4.16 hereof for the balance of
the current membership year, subject to Sellers' obligations under Section 10.2
hereof.
3.1.3 Customer Returns and Credits. Sellers' liabilities and
obligations for (i) customer credits issued prior to the Closing Date in the
ordinary course of business, (ii) merchandise returns for products purchased
prior to the Closing Date in accordance with Sellers' merchandise return policy
disclosed on Schedule 4.17 hereof, and (iii) gift certificates for the Business
sold prior to the Closing Date in the ordinary course of business, in each case,
subject to Sellers' obligations under Section 10.3 hereof.
3.1.4 Merchandise Purchase Orders. Seller's liabilities and
obligations for trade payables arising from merchandise ordered but not received
by Seller prior to the Closing Date which have been approved in writing by Buyer
on or prior to the Closing Date.
3.2 Liabilities Not Assumed. Except as specifically provided in
Section 3.1 hereof, Buyer shall not assume, or in any way become liable for, any
liabilities or obligations of Hanover, Sellers, or any of their Affiliates or
the Business of any kind or nature, whether accrued, absolute, contingent or
otherwise, or whether due or to become due, or otherwise, whether known or
unknown, arising out of events, transactions or facts which shall have occurred,
arisen or existed on or prior to the Closing Date, which liabilities and
obligations, if ever in existence, shall continue to be liabilities and
obligations of Hanover, Sellers or their Affiliates, as the case may be.
Specifically, but without limiting the foregoing, Buyer shall not assume or be
liable for the following debts, liabilities and obligations (the "Excluded
Liabilities"):
3.2.1 Accounts Payable and Accrued Liabilities. Accounts
payable and accrued liabilities of Sellers incurred in the ordinary course of
the Business, including any liabilities or obligations to Hanover or any of its
Affiliates.
3.2.2 Violation of Representations, Etc. Debts, obligations or
liabilities which arise or exist in violation of any of the representations,
warranties, covenants or agreements of Hanover and/or Sellers contained in this
Agreement or in any statement or certificate delivered to Buyer by or on behalf
of Hanover and/or Sellers on or before the Closing Date pursuant to this
Agreement or in connection with the transactions contemplated hereby.
3.2.3 Undisclosed Liabilities. Debts, obligations or
liabilities of any kind or nature, whether absolute, accrued, contingent or
otherwise, required by this Agreement to be disclosed to Buyer, if not so
disclosed in writing and specifically assumed in writing by Buyer.
3.2.4 Contingent Liabilities. Contingent liabilities of
Hanover or Sellers of any kind arising or existing on or prior to the Closing
Date, including, but not limited to, claims,
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proceedings or causes of action which are currently, or hereafter become, the
subject of claims, assertions, litigation or arbitration.
3.2.5 Taxes Due on Sale. Except as provided in Section 2.5
hereof, debts, obligations or liabilities of Hanover or Sellers for Federal,
state, county, local, foreign or other income, sales, use or transfer taxes or
assessments (including interest and penalties thereon, if any) of any kind
whatsoever arising from, based upon or related to the sale, transfer or delivery
of the Purchased Assets pursuant to this Agreement.
3.2.6 Other Taxes. Debts, obligations or liabilities of
Hanover or Sellers, whether absolute, accrued, contingent or otherwise, for (i)
Federal and state income taxes; (ii) all franchise taxes of Sellers (including
interest and penalties thereon, if any); and (iii) any other Taxes of Hanover or
Sellers.
3.2.7 Pension and Other Employee Plans. Debts, obligations or
liabilities under any pension, profit sharing, savings, retirement, health,
medical, life, disability, dental, deferred compensation, stock option, bonus,
incentive, severance pay, group insurance or other similar employee plans or
arrangements, or under any policies, handbooks, or custom or practice, or any
employment agreements, whether express or implied, applicable to any of Hanover
and/or Sellers' employees at any time through and including the Closing Date.
3.2.8 Personal Injury, Products Liability and Recall Claims.
Debts, expenses, obligations or liabilities of Hanover and/or Sellers arising
out of any claim for personal injury (including worker's compensation or
otherwise), property damage, product recall, product liability or strict
liability, arising from events (including the shipment of goods) occurring on or
prior to the Closing Date (whether or not such claim is then asserted).
3.2.9 Environmental Matters. Any debts, expenses, obligations
or liabilities arising out of claims alleging damage to the environment or
similar claims with respect to the conduct of the Business or the ownership or
operation by Hanover and/or Sellers of real property on or before the Closing
Date.
3.2.10 Infringements. Any liability or obligation of Hanover
and/or Sellers arising out of any wrongful or unlawful violation or infringement
of any proprietary right of any person or entity occurring on or prior to the
Closing Date.
3.2.11 Indebtedness. Any liabilities or obligations in respect
of the borrowing of money or issuance of any note, bond, indenture, loan, credit
agreement or other evidence of indebtedness or direct or indirect guaranty or
assumption of indebtedness, liabilities or obligations of others, whether or not
disclosed in this Agreement or otherwise, of or by Hanover and/or Sellers.
3.2.12 Litigation. Debts, expenses, obligations or liabilities
of Hanover or Sellers arising out of any claim, action, suit or proceeding
pending as of the Closing Date or arising out of or relating to matters or
events occurring on or prior to the Closing Date (whether or not such claim is
then asserted).
3.2.13 Excluded Assets. Any liabilities or obligations arising
out of or relating to the Excluded Assets.
3.3 Retained Liabilities. After the Closing, Hanover and Sellers,
jointly and severally, agree to pay, perform and discharge, as and when due. all
of the liabilities and obligations
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of each Seller arising or existing prior to the Closing Date, other than the
Assumed Liabilities (the "Retained Liabilities").
4. REPRESENTATIONS AND WARRANTIES OF HANOVER AND SELLERS.
Hanover and Sellers, jointly and severally, represent and warrant to
Buyer as follows:
4.1 Organization / Qualification. Hanover and each Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all requisite corporate power and
authority to own or hold under lease its properties and assets and to carry on
its business as now conducted. Each Seller is duly qualified to do business and
is in good standing as a foreign corporation in every jurisdiction in which the
nature of its activities or the ownership or leasing of property requires such
qualification, except where the failure to so qualify would not have a Material
Adverse Effect, and such jurisdictions are listed on Schedule 4.1. True and
complete copies of the certificate of incorporation, as amended to date, and the
by-laws, as amended to date, of each Seller have been furnished to Buyer.
4.2. Authority. Hanover and each Seller has all necessary power and
authority (corporate or otherwise) to make, execute and deliver this Agreement
and all other agreements and documents to be executed and delivered by it
pursuant hereto, and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of this Agreement and the other
agreements and documents to be executed and delivered herewith, and the
consummation of the transactions contemplated hereby and thereby, have been duly
approved and authorized by all necessary corporate actions on behalf of Hanover
and Sellers. This Agreement constitutes, and all other agreements and documents
to be executed and delivered by Hanover and each Seller to Buyer hereunder will
constitute, the valid and binding agreements of such parties, enforceable in
accordance with their respective terms (subject, as to the enforcement of
remedies, to general equitable principles and to bankruptcy, insolvency and
similar laws effecting creditors' rights generally).
4.3 No Violation. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
constitute a violation of, or be in conflict with, or result in a cancellation
of, or constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, obligation or liability affecting the Purchased Assets
pursuant to, or result in the creation or imposition of any security interest,
lien, or other encumbrance upon, any of the Purchased Assets under: (a) any term
or provision of the certificate of incorporation or by-laws (or other organic
document) of Hanover or either Seller; (b) any statute or law; (c) any judgment,
decree, order, regulation or rule of any court or governmental authority; or (d)
any contract, agreement, indenture, lease or other commitment to which Hanover
or either Seller is a party or is bound, or cause any change in the rights or
obligations of any party under any such contract, agreement, indenture, lease,
or other commitment that would have a Material Adverse Effect.
Except as set forth on Schedule 4.3 hereto, no consent of, or notice
to, any federal, state, local or foreign authority, or any private person or
entity, is required to be obtained or given by Hanover or either Seller in
connection with the execution, delivery or performance of this Agreement or any
other agreement or document to be executed, delivered or performed hereunder by
Hanover or either Seller, or to enable Buyer to continue to conduct the Business
after the Closing.
4.4 Financial Information. Schedule 4.4 hereto contains true and
correct copies of the following financial information: (i) the unaudited balance
sheet of the Business, together with
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the related financial information at and for each of the 1996, 1997 and 1998
fiscal years; and (ii) the unaudited balance sheet of the Business, together
with the related financial information at and for the six (6) month period ended
June 30, 1999 (the "Interim Financials"). The financial information described in
clauses (i) and (ii) above is referred to herein as the "Financial Information".
Each of the balance sheets included in the Financial Information
fairly present the assets and liabilities of the Business as at the respective
dates thereof, and the financial information regarding variable contribution are
complete and accurate and fairly present the variable contribution of the
Business for the periods therein referred to, all in accordance with Sellers'
normal accounting practices, consistently applied.
4.5 Liabilities and Obligations. There are no liabilities or
obligations (direct or indirect, contingent or absolute, matured or unmatured)
of any nature whatsoever with respect to the Business, whether arising out of
contract, tort, statute or otherwise, which are not reflected, reserved against
or given effect to in the balance sheet included in the Interim Financials
except: (a) liabilities and obligations incurred in the ordinary course of
business since the date of the balance sheet included in the Interim Financials,
which are of the same nature as those set forth in such balance sheet, or (b)
liabilities and obligations which are specifically disclosed in Schedule 4.5. To
Seller's Knowledge, there is no basis for assertion against Hanover and/or
Sellers of any liabilities or obligations with respect to the Business which are
not adequately reflected, reserved against or given effect to in the balance
sheet included in the Interim Financials or in Schedule 4.5 except for
liabilities and obligations described in clause (a) above.
4.6 Absence of Certain Changes. Except as disclosed in Schedule 4.6,
since March 27, 1999, there has not been: (a) any material adverse change in the
condition (financial or otherwise) of the Purchased Assets, liabilities, results
of operation or business prospects of the Business; (b) any damage, destruction
or loss (whether or not covered by insurance) materially and adversely affecting
the Purchased Assets, liabilities, financial condition, results of operations or
business prospects of the Business; (c) any change in the accounting methods or
practices followed by Hanover and/or Sellers with respect to the Business or any
change in depreciation or amortization policies or rates theretofore adopted;
(d) any material change by Hanover or Sellers of their selling, advertising or
marketing practices with respect to the Business, or (e) any sale, lease,
abandonment or other disposition by Hanover or Sellers of any intangible assets
of the Business, or any cancellation of any material claims held by Hanover or
Sellers with respect to the Business.
4.7 Tax Returns and Reports. All returns and reports relating to
Taxes with respect to the Business (the "Tax Returns") required to be filed by
Hanover and/or Sellers through the date hereof have been, and as to Tax Returns
required to be filed through the Closing Date will be, timely filed with the
appropriate governmental authorities in all jurisdictions in which such Tax
Returns are required to be filed, and all such Tax Returns are or will be true
and correct and prepared in accordance with applicable law and regulations and
properly reflect, or will properly reflect, the Taxes of Hanover and Sellers for
the periods covered thereby.
Except as set forth on Schedule 4.7, all Taxes due and payable by
Hanover and Sellers with respect to the Business for all periods prior to and
through the date hereof have been, and through the Closing Date will be, duly
and properly computed, reported, fully paid and discharged. There are no unpaid
Taxes with respect to any period prior to and through the date hereof, and there
will not be any unpaid Taxes with respect to any period through the Closing
Date, which are or could become a lien on the Purchased Assets, except for
current Taxes not yet due and payable.
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Neither Hanover nor either Seller has received any notice of
assessment or proposed assessment by the Internal Revenue Service ("IRS") or any
other governmental authority in connection with any Tax Returns and there are no
pending tax examinations of or tax claims asserted against Hanover or Sellers,
except as disclosed in Schedule 4.7. To Seller's Knowledge, there has been no
intentional disregard of any statute, regulation, rule or revenue ruling in the
preparation of any Tax Return. Neither Hanover nor either Seller has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
Except as disclosed in Schedule 4.7. there are no Tax liens on any
of the Purchased Assets, except for liens for current taxes not yet due and
payable and there is no basis for any additional assessment of any Taxes with
respect to the Business. Neither Hanover nor Seller has waived any law or
regulation fixing, or consented to the extension of, any period of time for
assessment of any Taxes which waiver or consent is currently in effect.
Hanover and/or Sellers have withheld and paid all Taxes with respect
to the Business required to have been withheld and paid in connection with
amounts paid or due and owing to any employee, creditor, independent contractor,
or other third party and has properly reflected the status of all employees and
independent contractors in connection therewith as required by all applicable
laws.
4.8 Title to and Condition of Assets. Hanover and/or Sellers are the
owner of, and have good and marketable title to, all of the Purchased Assets,
free and clear of all mortgages, liens, pledges, charges, security interests,
encumbrances or other third party interests of any nature whatsoever, except
for: (a) the lien of current taxes not yet due and payable, and (b) other title
exceptions disclosed and described in Schedule 4.8 hereto.
4.9 Contracts. Except as set forth in Schedule 4.9. Hanover and/or
Sellers are not a party to, or bound by, any oral or written contracts,
agreements, commitments or understandings with respect to the Business: (a) for
the purchase of Inventory or other products involving the payment of in excess
of $10,000 per annum or the term of which at any time exceeded ninety (90) days
(including, without limitation, vendor supply contracts or purchase orders); (b)
for the purchase of advertising or marketing services or other services
involving the payment of in excess of $10,000 per annum or the term of which at
any time exceeded ninety (90) days; (c) relating to the ownership, use or
licensing of any Intellectual Property Rights; or (d) which are material to the
Business.
All of the contracts listed on Schedule 4.9 hereof constitute the
legal, valid and binding obligations of the respective parties thereto, are in
full force and effect, and neither Hanover, Sellers, nor, to Seller's Knowledge,
any other party thereto has violated any provision of, or committed or failed to
perform any act which with notice, lapse of time or both would constitute a
default under the provisions of any such contract. Correct and complete copies
of all written contracts disclosed on Schedule 3.1.1 or Schedule 4.9 hereof have
been provided to Buyer.
4.10 Eligible Inventory. All Eligible Inventory included in the
Purchased Assets will at the Closing Date be valued, at purchased cost, before
valuation reserves, in accordance with Sellers' normal accounting practices,
consistently applied.
4.11 Litigation. Except as disclosed in Schedule 4.11, there are no
lawsuits, proceedings, claims or governmental investigations pending or, to
Seller's Knowledge, threatened against, or involving, Hanover or Sellers which
relate to the Business, and there is no basis known to Hanover or Sellers for
any such action. Except as set forth in Schedule 4.11, there are no
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judgments, consents, decrees, injunctions, or any other judicial or
administrative mandates outstanding against Hanover or Sellers applicable to the
Business.
4.12 Insurance. Hanover and Sellers maintain insurance in such
amounts and against such risks as are usual and customary and adequate to
protect the Business and the Purchased Assets. All such policies are (and
pending Closing will continue to be) in full force and effect, and Hanover
and/or Sellers are not in default in any material respect with respect to any
provision contained in any insurance policies, nor has Hanover and/or Sellers
failed to give any notice or present any claim thereunder in due and timely
fashion.
4.13 Intellectual Property. Schedule 4.13 hereto lists the current
interests of Hanover and each Seller in all Intellectual Property Rights used in
the conduct of the Business, including, without limitation (i) all Trademarks,
service marks, trade dress, logos, trade names, together with all derivations
and combinations thereof, and all applications, registrations, and renewals in
connection therewith, (ii) all Copyrights, copyrightable works and all
applications, registrations, and renewals in connection therewith, (iii) to
Seller's Knowledge, a list of all catalogs used in the conduct of the Business
since January 1, 1996, (iv) all customer and vendor lists, and (v) all
electronic domain names, addresses or locations or any other form of online
address, and all telephone numbers used in the conduct of the Business.
Except as described in Schedule 4.13 Hanover and/or Sellers are the
sole and exclusive owners of all of the Intellectual Property Rights, and has
the sole and exclusive right to use such rights or receive the payments of fees
and royalties described therein. No other person or entity owns any right, title
or interest not specified in Schedule 4.13, or has any right to a royalty or
payment of any kind from Hanover or Sellers with respect to the Intellectual
Property Rights. There are no asserted claims or litigation challenging or
threatening to challenge the right, title and interest of Hanover and/or Sellers
to use the Intellectual Property Rights.
The operation of the Business does not violate any rights of others
in the Intellectual Property Rights, no further rights or licenses with respect
thereto are required by Hanover and/or Sellers for the conduct of the Business
as now being conducted by it, and the Intellectual Property Rights are not being
violated or infringed by others. The consummation of the transactions
contemplated by this Agreement will not alter or impair any of the Intellectual
Property Rights.
4.14 Legal Compliance. To Seller's Knowledge, Hanover and Sellers
are not in violation of any law, regulation or order of any court or federal,
state, municipal, foreign or other governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, laws,
regulations, orders, restrictions and compliance schedules applicable to
environmental standards, immigration, controls, wages and hours, civil rights
and occupational health and safety) with respect to the Business and neither
Hanover nor Sellers have received any notice of claimed noncompliance.
To Seller's Knowledge, Hanover and/or Sellers possess or have
applied for all material governmental and other permits, licenses, consents,
certificates, orders, authorizations and approvals (the "Approvals") to own the
Purchased Assets and to carry on the Business as now conducted. Neither Hanover
nor Sellers have received any notice of proceedings relating to the revocation
or modification of any such Approvals which, singly or in the aggregate, if the
subject of an unfavorable ruling or finding, could have a Material Adverse
Effect. The Approvals are identified in Schedule 4.14. Hanover and/or Sellers
are operating in substantial compliance with the provisions, terms and
conditions of the Approvals.
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4.15 Suppliers. Schedule 4.15 sets forth a list of each Person
supplying goods or other services to the Business during the 1997 and 1998
calendar years and the first six (6) months of 1999, showing in each case the
approximate sales volume of products from such supplier during each such period.
Since January 1, 1999, there has not been any material adverse change in the
business relationship of Hanover or Sellers with any such supplier. To Seller's
Knowledge, no supplier listed on Schedule 4.15 intends to cease selling to or
dealing with Buyer after the Closing nor intends to alter in any material
respect the amount of sales or the extent of dealings with Buyer after the
Closing.
4.16 Membership Programs. Schedule 4.16 sets forth (i) a description
of all membership programs applicable to customers of the Business or any other
program which entitles customers of the Business to purchase goods from the
Business at a discount or on other preferential terms, and (ii) a membership
list for each such membership program which includes the expiration date of the
current membership term for each such member.
4.17 Merchandise Returns / Credits. Except as set forth on Schedule
4.17 hereof, (i) no customer of the Business has any right to return any goods
for credit or refund pursuant to any formal or informal policy or practice of
Hanover and/or Sellers, and (ii) neither Hanover nor either Seller has given any
express or implied warranties in connection with merchandise sales by the
Business. The current merchandise return policy for the Business is fully
described on Schedule 4.17 hereof. Since January 1, 1999, Hanover and Sellers
have not issued any customer credits or sold any gift certificates other than in
the ordinary course of business, consistent with their past practices.
4.18 Disclosure. No representation or warranty of Hanover or Sellers
made hereunder contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. Copies of all documents referred to herein or in the
Schedules have been delivered to Buyer, are true, correct and complete copies
thereof, and include all amendments, supplements or modifications thereto or
waivers thereunder. Except as expressly set forth in this Agreement and the
Schedules, neither Hanover nor either Seller has knowledge of any facts which
will or may reasonably be expected to have any Material Adverse Effect.
4.19 Investment Representations.
(a) Hanover and each Seller represents that it is an "accredited investor"
as such term is defined in Rule 501 of Regulation D under the Securities Act.
(b) Hanover and each Seller represents that (i) it does not presently
intend to sell or otherwise transfer or dispose of the Preferred Stock received
by Sellers pursuant to this Agreement, (ii) it is acquiring the Preferred Stock
for its own account and not for that of any other persons, and without a view to
or in connection with any distribution thereof which is in violation of the
Securities Act or in violation of any applicable state securities laws, (iii) it
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment in the Preferred
Stock and (iv) it has been afforded the opportunity to ask such questions and
receive such other information from Buyer's representatives as they deem
necessary in order to evaluate its investment in the Preferred Stock.
(c) Hanover and each Seller understand and acknowledge that the Preferred
Stock to be issued by Buyer pursuant to this Agreement will not have been
registered under the Securities Act or qualified under any applicable state
securities laws on the date of its issuance and will constitute "restricted
securities" within the meaning of Rule 144 of the Securities Act and therefore
may not
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be resold unless registered under the Securities Act or sold pursuant to an
exemption from registration. The certificates representing the Preferred Stock
acquired by Sellers shall bear such legend as Buyer deems necessary or
appropriate to comply with the Securities Act and any other applicable federal
and state laws.
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to Hanover and Sellers as follows:
5.1 Organization / Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Illinois, and
has all requisite corporate power and authority to own or hold under lease its
properties and assets and to carry on its business as now conducted. Buyer is
duly qualified to do business and is in good standing as a foreign corporation
in every jurisdiction in which the nature of its activities or the ownership or
leasing of property requires such qualification, except where the failure to so
qualify would not have a material adverse effect upon its assets, properties,
financial condition, results of operation or business prospects. True and
complete copies of the articles of incorporation, as amended to date, and the
by-laws, as amended to date, of Buyer have been furnished to Sellers.
5.2 Authority. Buyer has all requisite power and authority
(corporate or otherwise) to make, execute and deliver this Agreement and all
other agreements and documents to be executed and delivered by Buyer pursuant
hereto and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and all other agreements and documents
to be executed and delivered by Buyer pursuant hereto, and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary action on Buyer's part and this Agreement and all other agreements
and documents to be executed and delivered by Buyer pursuant hereto constitute
the valid and binding agreements of Buyer, enforceable in accordance with their
respective terms (subject, as to the enforcement of remedies, to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
creditors' rights generally).
5.3 No Violation. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
constitute a violation of, or be in conflict with, or result in a cancellation
of, or constitute a default under, or create (or cause the acceleration of the
maturity of) any debt, obligation or liability affecting, or result in the
creation or imposition of any security interest, lien, or other encumbrance
upon, any of the assets of Buyer under: (a) any term or provision of the
certificate of incorporation or by-laws (or other organic document) of Buyer;
(b) any statute or law; (c) any judgment, decree, order, regulation or rule of
any court or governmental authority; (d) any contract, agreement, indenture,
lease or other commitment to which Buyer is a party or is bound; or (e) cause
any material change in the rights or obligations of any party under any such
contract, agreement, indenture, lease, or other commitment.
No consent of, or notice to, any federal, state or local authority,
or any other person or entity is required to be obtained or made by Buyer in
connection with the execution, delivery and performance of this Agreement and
the other agreements and documents to be executed, delivered and performed by
Buyer pursuant hereto.
5.4 Capitalization. As of the date hereof, Buyer's authorized
capital stock consists of 100,000 shares of common stock, no par value, of which
1,000 shares are currently issued and outstanding. On or prior to the Closing
Date, Buyer shall amend its articles of incorporation to increase its authorized
capital stock to: (i) at least 5,000,000 shares of common
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xxxxx, xx xxx xxxxx, xxx (xx) 1,988,000 shares of Preferred Stock. As of the
Closing Date, no more than 2,325,000 shares of Buyer's common stock shall be
issued and outstanding.
5.5 Disclosure. No representation or warranty of Buyer made
hereunder contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
5.6 Validity of Shares. The Preferred Stock to be issued pursuant to
Section 2.1(v) hereof, when issued in accordance with this Agreement, will be
validly issued, fully paid and non-assessable.
6. COVENANTS.
Hanover and Sellers, jointly and severally, covenant and agree with
Buyer that from the date hereof until the Closing or other termination of this
Agreement:
6.1 Conduct of Business; No Material Change. Hanover and Sellers
will conduct the Business only in the ordinary course and will make no material
change in the operation of the Business. Without limiting the generality of the
foregoing, Hanover and Sellers will not make or permit any change in the
Business which, if occurring prior to the date hereof, would have been subject
to disclosure pursuant to Section 4.6(c) through (e) hereof, or take any actions
that would render any representation or warranty contained in Section 4 hereof
inaccurate as of the Closing Date, except for changes permitted or contemplated
by this Agreement.
6.2 Maintain Business as Going Concern. Hanover and Sellers will
preserve the Business and will use their best efforts to preserve the goodwill
of the suppliers, customers and others having business relations with the
Business.
6.3 August Catalog. Hanover and Sellers, in consultation with Buyer,
shall continue the design and development of the Xxxxxx'x catalog for August
1999.
6.4 Investigation. Hanover and Sellers shall at all reasonable times
allow Buyer and its representatives full access during normal business hours to
all offices, operations, equipment, property, books, contracts, commitments,
records and affairs of Hanover and Sellers relating to the Business for the
purpose of familiarizing themselves with the operation and conduct of all
aspects of the Business and for the purpose of reasonable inspection,
examination, audit, counting and copying; provided such access shall not
unreasonably interfere with the operation and conduct of the Business. All
information and documents provided by Hanover and Sellers to Buyer in the course
of such investigation by Buyer shall be subject to the terms of that certain
Letter of Intent dated as of July 14, 1999 between Buyer and Hanover.
6.5 Supplements to Exhibits. From time to time prior to the Closing
Date, Hanover and Sellers will promptly supplement or amend any Schedules
provided for in this Agreement (i) if any matter arises hereafter which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in any such Schedule, or (ii) if it
becomes necessary to correct any information in any such Schedule which has
become inaccurate; provided, however, that no such supplement or amendment to
any Schedule shall be considered in determining satisfaction of the conditions
set forth in Section 7.2.1 of this Agreement.
6.6 Exclusivity. Prior to the termination of this Agreement in
accordance with Article 8 hereof, neither Hanover, Sellers nor any of their
Affiliates, will solicit, negotiate, act upon or entertain in any way an offer
from any other Person to purchase any material assets of the
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Business (other than in the ordinary course of business) or furnish any
information to any other Person in that regard.
7. CONDITIONS TO CLOSING.
7.1 Mutual Conditions. The respective obligations of each party to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to Closing of each of the following conditions:
7.1.1 No Suit. No suit, action or other proceeding or
investigation shall to the knowledge of any party hereto be threatened or
pending before or by any governmental agency or by any third party
questioning the legality of this Agreement or the consummation of the
transactions contemplated hereby in whole or in part.
7.1.2 Subordination. Hanover and Sellers shall have agreed to
subordinate the deferred portion of the Purchase Price to Buyer's debt
financing for the transactions contemplated by this Agreement, on such
terms as Buyer, Buyer's lender and Hanover mutually agree.
7.2 Conditions to Buyer's Obligations. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to Closing of each of the following conditions:
7.2.1 Representations and Warranties. All representations and
warranties made by Hanover and Sellers contained in this Agreement shall
be true and correct in all material respects on the date hereof and as of
the Closing Date as though such representations and warranties were made
as of the Closing Date, and Hanover and Sellers shall have duly performed
or complied with all of the obligations to be performed or complied with
by each of them under the terms of this Agreement on or prior to Closing.
7.2.2 Certificate. Hanover and Sellers shall each have
delivered to Buyer a certificate dated as of the Closing Date certifying
that: (a) all of the representations and warranties made by them under
this Agreement and the Schedules hereto are accurate, true and complete in
all material respects, and (b) all of the covenants, obligations and
conditions to be performed as of the Closing on their part under this
Agreement have been duly performed.
7.2.3 Opinion. Buyer shall have received from Brown, Raysman,
Xxxxxxxxx, Xxxxxx & Xxxxxxx, LLP, counsel to Hanover and Sellers, an
opinion of such counsel, dated the Closing Date, in the form attached
hereto as Exhibit A.
7.2.4 Consents and Approvals. All material authorizations,
consents, waivers, approvals or other action required in connection with
the execution, delivery and performance of this Agreement by Hanover and
Sellers and the consummation by such parties of the transactions
contemplated hereby, all as so indicated in Schedule 4.3, shall have been
obtained, and Hanover and Sellers shall have obtained any authorizations,
consents, waivers, approvals or other action required in connection with
the execution, delivery and performance of this Agreement to prevent a
material breach or default by Hanover or Sellers under any contract to
which any of them is a party or for the continuation of any agreement to
which any of them is a party and which relates and is material to the
Business.
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7.2.5 No Material Adverse Change. There shall have occurred no
material adverse change (whether or not covered by insurance) in the
Purchased Assets or business prospects of the Business since the date of
this Agreement.
7.2.6 Services Agreement. At Buyer's option, Buyer and
Keystone Fulfillment, Inc. shall have entered into a Direct Marketing
Services Agreement in the form attached hereto as Exhibit B.
7.2.7 Financing. Buyer shall have obtained equity and/or debt
financing on terms and conditions acceptable to Buyer, in its sole
discretion, in an amount sufficient to complete the transactions
contemplated by this Agreement.
7.2.8 Liens. Hanover and Sellers shall have obtained
appropriate UCC termination statements and/or releases for all liens or
other encumbrances relating to the Purchased Assets.
7.2.9 Closing Documents. The following documents shall have
been delivered to Buyer:
(a) Xxxx of Sale. Xxxx of sale(s) for the assignment, transfer
and conveyance of the Purchased Assets from Hanover and/or Sellers
to Buyer, in form and substance reasonably acceptable to Buyer's
counsel.
(b) Trademark Assignment. An assignment for the trademarks
listed on Schedule 4.13 hereto from Hanover and/or Sellers to Buyer,
in form and substance reasonably acceptable to Buyer's counsel.
(c) Certified Charter. A true and complete copy of the
articles of incorporation of each Seller, certified by its
jurisdiction of incorporation.
(d) Secretary's Certificate. True and complete copies of the
bylaws of each Seller and the resolutions of the board of directors
of each Seller authorizing the execution, delivery and performance
of this Agreement, certified by its Secretary.
(e) Good Standings. Certificates of legal existence and good
standing dated within thirty (30) days prior to the Closing Date for
Hanover from the State of Delaware and each Seller from its
jurisdiction of incorporation and each jurisdiction in which it is
qualified to do business.
(f) Other. Such other documents as counsel for Buyer may
reasonably request.
7.3 Conditions to Hanover's and Sellers' Obligations. The
obligations of Hanover and Sellers to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the Closing
of each of the following conditions:
7.3.1 Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct
in all material respects on the date hereof and as of the Closing Date as
though such representations and warranties were made as of the Closing
Date, and Buyer shall have duly performed or complied with all of the
obligations to be performed or complied with by it under the terms of this
Agreement on or prior to Closing.
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7.3.2 Certificate. Buyer shall have delivered to Hanover and
Sellers a certificate of one of its duly authorized officers, dated as of
the Closing Date certifying that: (a) all of the representations and
warranties made by Buyer under this Agreement and the Schedules hereto are
accurate, true and complete in all material respects, and (b) all of the
covenants, obligations and conditions to be performed as of the Closing on
the part of Buyer under this Agreement have been duly performed.
7.3.3 Opinion. Hanover and Sellers shall have received from
Lord, Bissell & Brook counsel to Buyer, an opinion of such counsel, dated
the Closing Date, in the form attached hereto as Exhibit C.
7.3.4 Approvals. All material authorizations, consents,
waivers, approvals or other action required in connection with the
execution, delivery and performance of this Agreement by Buyer, and the
consummation by Buyer of the transactions contemplated hereby, shall have
been obtained.
7.3.5 Closing Documents. The following documents shall have
been delivered to Hanover and Sellers:
(a) Purchase Price. The portion of the Purchase Price payable
at Closing in accordance with Section 2.1 hereof.
(b) Assumption Agreement. An agreement for the assumption by
Buyer of the Assumed Liabilities, in form and substance reasonably
acceptable to Sellers' counsel.
(c) Certified Charter. A true and complete copy of the
articles of incorporation of Buyer, certified by its jurisdiction of
incorporation.
(d) Secretary's Certificate. True and complete copies of the
bylaws of Buyer and the resolutions of the board of directors of
Buyer authorizing the execution, delivery and performance of this
Agreement, certified by its Secretary.
(e) Good Standing. Certificate of legal existence and good
standing dated within thirty (30) days prior to the Closing Date for
Buyer from the jurisdiction of its incorporation.
(f) Resale Certificate. A Pennsylvania Resale Exemption
certificate with respect to the sale of the Purchased Assets to
Buyer.
(g) Other. Such other documents as counsel for Hanover and
Sellers may reasonably request.
8. TERMINATION.
8.1 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to Closing, as follows:
(a) Outside Closing Date. By Buyer, on one hand, or by Hanover
and Seller, on the other hand, if the Closing shall not have
occurred within sixty (60) days from the date hereof, or such later
date as may be agreed to by Buyer and
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Hanover, provided that the party desiring to terminate this
Agreement did not cause undue delay in fulfilling its obligations
hereunder.
(b) Mutual Consent. By mutual consent of all of the parties
hereto.
(c) Breach. By Buyer, on the one hand, or by Hanover and
Sellers, on the other hand, by reason of the breach by the other in
any material respect of any of its or their representations,
warranties, covenants or agreements contained in this Agreement.
(d) Respective Conditions. By Buyer, on the one hand, or by
Hanover and Sellers, on the other hand, if the conditions precedent
to their respective obligations contained in Sections 7.2 or 7.3
hereof have not been met in all material respects through no fault
of the terminating party.
(e) Mutual Conditions. By Buyer, on the one hand, or by
Hanover and Sellers, on the other hand, if any of the conditions
described in Section 7.1 shall not have been fulfilled through no
fault of the terminating party.
8.2 Remedies. (a) Except as provided in Section 8.2(b) below, in the
event of the termination of this Agreement pursuant to Section 8.1, no party
hereto shall have any liability or further obligation to any other party to this
Agreement, except for any willful breach of this Agreement prior to the
termination of this Agreement as provided herein. The foregoing provision shall
not limit or restrict the availability of specific performance or other
injunctive relief to the extent that specific performance or such other relief
would otherwise be available to a party hereunder.
(b) In the event of a termination of this Agreement (i) by Buyer
pursuant to Section 8.1(a), or Section 8.1(d) solely by reason of the failure of
the condition set forth in Section 7.2.7 (Financing), or (ii) by Hanover and
Sellers pursuant to Sections 8.1(a), (c) or (d) above, Hanover and Seller shall
be entitled to retain, as liquidated damages and not as a penalty, the Signing
Deposit and all accrued interest thereon. In the event of a termination of this
Agreement other than as provided in subclauses (i) or (ii) in the preceding
sentence, Hanover and Sellers shall promptly return the Signing Deposit and all
accrued interest thereon to Buyer.
9. INDEMNIFICATION.
From and after the Closing, the parties shall be indemnified as set
forth below.
9.1 Indemnification of Buyer. Hanover and Sellers, jointly and
severally, covenant and agree with Buyer that they shall reimburse and indemnify
and hold Buyer and its directors, officers, employees and agents (the "Buyer
Indemnified Parties") harmless from, against and in respect of any and all
actions, suits, claims, proceedings, investigations, audits, demands,
assessments, fines, judgments, costs and expenses, (including, without
limitation, reasonable attorneys' fees) ("Claims") incurred by any of Buyer
Indemnified Parties that result from:
(a) any inaccuracy in or breach of any representations or warranties
made by Hanover and Sellers in this Agreement, the Schedules or any other
written statement, list, certificate or other instrument furnished to
Buyer by or on behalf of Hanover or Sellers pursuant to this Agreement;
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(b) any nonfulfillment of any covenant or agreement of any of
Hanover or Sellers under this Agreement;
(c) any and all Retained Liabilities;
(d) any Taxes, payments or accruals for salaries, wages, amounts
payable under Employee Plans or otherwise to employees or agents of
Hanover or Sellers, and other liabilities and obligations of Hanover and
Sellers, in each case relating to and incurred with respect to the periods
prior to the Closing Date, whether or not due or payable prior to the
Closing Date;
(e) any claims or litigation matters which relate or are due to the
conduct of the Business prior to the Closing Date, including, without
limitation, the claims described in Schedule 4.11 hereto;
(f) the failure to comply with statutory provisions relating to bulk
sales and transfers, if applicable;
(g) any fees, expenses or other payments incurred or owed by Hanover
or Sellers to any brokers or comparable third parties retained or employed
by them or their affiliates in connection with the transactions
contemplated by this Agreement;
(h) any claims made by a third party alleging facts which, if true,
would entitle Buyer to indemnification pursuant to (a) through (g) above;
(i) any failure of Hanover or Sellers to comply with their
obligations under this Section 9.1; or
(j) any fees or expenses (including, without limitation, reasonable
attorneys' fees) incurred by Buyer in enforcing its rights hereunder.
9.2 Indemnification of Hanover and Sellers. Buyer covenants and
agrees with Hanover and Sellers that it shall reimburse and indemnify and hold
each of Hanover and Sellers and their respective directors, officers, employees
and agents (the "Seller Indemnified Parties") harmless from, against and in
respect of any and all Claims incurred by any of Seller Indemnified Parties that
result from:
(a) any inaccuracy in or breach of any representations or warranties
made by Buyer in this Agreement, the Schedules or any other written
statement, list, certificate or other instrument furnished to Hanover or
Sellers by or on behalf of Buyer pursuant to this Agreement;
(b) any nonfulfillment of any covenant or agreement of Buyer under
this Agreement;
(c) all Assumed Liabilities;
(d) any Taxes or other liabilities and obligations of Buyer relating
to and incurred with respect to the periods on or prior to the Closing
Date;
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(e) any fees, expenses or other payments incurred or owed by Buyer
to any brokers or comparable third parties retained or employed by them or
their affiliates in connection with the transactions contemplated by this
Agreement;
(f) any claims made by a third party alleging facts which, if true,
would entitle Hanover or Seller to indemnification pursuant to (a) through
(e) above;
(g) any failure of Buyer to comply with its obligations under this
Section 9.2; or
(h) any fees or expenses (including, without limitation, reasonable
attorneys' fees) incurred by Hanover or Sellers in enforcing its rights
hereunder.
9.3 Method of Asserting Claims. The party seeking indemnification
(the "Indemnitee") will give prompt written notice to the other party or parties
(the "Indemnitor") of any Claim which it discovers or of which it receives
notice after the Closing and which might give rise to a Claim by it against
Indemnitor under Section 9 hereof, stating the nature, basis and (to the extent
known) amount thereof; provided that failure to give prompt notice shall not
jeopardize the right of any Indemnitee to indemnification unless such failure
shall have materially prejudiced the ability of the Indemnitor to defend such
Claim.
In case of any Claim or suit by a third party or by any governmental
body, or any legal, administrative or arbitration proceeding with respect to
which Indemnitor may have liability under the indemnity agreement contained in
this Section 9, Indemnitor shall be entitled to participate therein, and, to the
extent desired by it, to assume the defense thereof, and after notice from
Indemnitor to Indemnitee of the election so to assume the defense thereof,
Indemnitor will not be liable to Indemnitee for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof,
other than reasonable costs of investigation, unless Indemnitor does not
actually assume the defense thereof following notice of such election.
Indemnitee and Indemnitor will render to each other such assistance as may
reasonably be required of each other in order to insure proper and adequate
defense of any such suit, Claim or proceeding. If the Indemnitor actually
assumes the defense of the Indemnitee, the Indemnitee will not make any
settlement of any Claim which might give rise to liability of Indemnitor under
the indemnity agreements contained in this Section without the written consent
of Indemnitor, which consent shall not be unreasonably withheld. The Indemnitor
will not make any settlement of any Claim which does not include an
unconditional release of the Indemnitee or would affect the manner in which the
Indemnitee may conduct its business, without the written consent of Indemnitee.
9.4 Payments. Buyer shall have the right to cause any amounts owing
to it by Hanover and/or Sellers pursuant to this Section 9 to be paid by
reduction or offset of such amount(s) against amounts payable by Buyer to
Hanover or Sellers, or any or them, pursuant to this Agreement, including,
without limitation, the deferred portion of the Purchase Price payable pursuant
to Section 2.1 hereof. The rights contained herein shall not be exclusive, but
shall be in addition to any other rights and remedies available to Buyer.
9.5 Nature and Survival of Representations. All statements made by
or on behalf of Hanover and Sellers herein or in the Schedules, shall be deemed
representations and warranties of Hanover and Sellers, regardless of any
investigation made by or on behalf of Buyer. The representations and warranties
made by Hanover and Sellers, on the one hand, and Buyer, on the other hand,
under this Agreement shall survive the Closing for a period (in the absence of a
showing of willful and knowing misrepresentation or breach) for a period of
eighteen (18) months after the Closing Date, except that the representations and
warranties set forth in Section 4.7 (Taxes) shall survive the Closing until
ninety (90) days after the expiration of the applicable statute of limitations.
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10. OTHER AGREEMENTS
10.1 Noncompetition/Nonsolicitation.
(a) For a period ending four (4) years after the Closing Date,
Hanover and its Subsidiaries (including Sellers) shall not, directly or
indirectly, anywhere in the United States and Canada: (i) own, operate or manage
any retail store(s) that principally feature golf equipment and/or golf apparel
and accessories; (ii) engage in the direct marketing (via direct mail,
electronic commerce or otherwise) of golf equipment; or (iii) engage in the
direct marketing (via direct mail, electronic commerce or otherwise) of
catalog(s) that principally feature golf apparel and accessories. For purposes
hereof, "golf apparel and accessories" shall mean apparel and accessories
designed or marketed principally for use by golfers or bearing golf insignia.
(b) After the Closing Date, Hanover and its Subsidiaries (including
Sellers) shall not, directly or indirectly, use for its own behalf or on behalf
of any third party or divulge to any third party the names, addresses or other
customer information contained in the customer lists described on Schedule 4.13
hereof (the "Xxxxxx Customer List"). Without limiting the foregoing, Hanover and
its Subsidiaries (including Sellers) shall not, directly or indirectly, solicit
orders for any products or services from any customers listed on the Xxxxxx
Customer List, provided that the foregoing shall not prohibit Hanover and its
Subsidiaries from soliciting orders from any customer listed on the Xxxxxx
Customer List for products offered through another catalog of Hanover and/or its
Subsidiaries (i) if such customer purchased products from such other catalog
prior to the Closing Date, (ii) after such customer makes an unsolicited
purchase from or request for another catalog of Hanover and/or its Subsidiaries
after the Closing Date, (iii) if such customer is listed on a customer list
acquired by Hanover or its Subsidiaries from a third party, or (iv) if such
customer's name is independently developed by Hanover or its Subsidiaries.
(c) Hanover and Sellers acknowledge that the restrictions contained
in this Section 10.1 are reasonable and necessary to protect the legitimate
interests of Buyer, do not cause it undue hardship, and that any violations of
any provision of this Section 10.1 will result in irreparable injury to Buyer
and that, therefore, Buyer shall be entitled to preliminary and permanent
injunctive relief in any court of competent jurisdiction and to an equitable
accounting of all earnings, profits and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which Buyer may be entitled. In the event that any court having
jurisdiction shall determine that the foregoing restrictive covenant or other
provisions shall be unreasonable or unenforceable in any respect, then such
covenant and other provisions shall be deemed limited to the extent that such
court deems it reasonable and enforceable, and as so limited shall remain in
full force and effect.
10.2 Membership Programs. After the Closing, Sellers shall promptly
reimburse Buyer for all liabilities and obligations to members as of the Closing
Date under the membership programs applicable to the Business disclosed on
Schedule 4.16 hereof for the balance of the current membership year, including,
without limitation: (i) all shipping and handling charges for purchases by
Xxxxxx'x Advantage Club members, (ii) the difference between the advertised or
other standard price and the discounted price paid by Xxxxxx'x Preferred Club
members, and (iii) all refunds of annual membership fees, except, in each case,
to the extent such liability results from Buyer's negligence or wilful
misconduct.
10.3 Customer Returns and Credits. After the Closing, Sellers shall
promptly reimburse Buyer for the following amounts: (i) all customer credits
issued for sales prior to the Closing Date in the ordinary course of business
and honored by Buyer in accordance with their terms within six (6) months after
the Closing Date, (ii) Buyer's actual processing and restocking fee
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and the sales price (less the cost of goods sold for non-defective merchandise,
if applicable) for all merchandise returns within six (6) months following the
Closing Date for products purchased prior to the Closing Date in accordance with
Sellers' merchandise return policy, as described on Schedule 4.17 hereof, and
(iii) the value of gift certificates for the Business sold prior to the Closing
Date in the ordinary course of business and honored by Buyer in accordance with
their terms within six (6) months after the Closing Date.
10.4 Transition Services. For a period of up to thirty (30) days
after the Closing, Hanover and Sellers agree to reasonably cooperate with Buyer
and to provide Buyer with such marketing, merchandising, financial and/or
information services as Buyer shall reasonably request, consistent with
Hanover's and Seller's past practices, in order to effectuate the transition of
the operation of the Business to Buyer, provided that Buyer reimburses Hanover
and Sellers for their reasonable out-of-pocket costs in providing such
assistance and services.
10.5 Purchase Option. If at any time after the Closing Date but
prior to the redemption of all of the shares of Preferred Stock issued to
Hanover pursuant to Section 2.1(v) hereof, Buyer proposes to issue additional
shares of its common stock (an "Issuance"), it shall give notice of such
Issuance to Hanover, which notice shall indicate the number of shares proposed
to be issued by Buyer and price therefor, and any other terms and conditions of
such offer. With respect to each Issuance, Hanover shall have the right and
option (the "Purchase Option") to purchase from Buyer up to fifty percent (50%)
of the amount of common stock being offered by Buyer in such Issuance, upon the
same terms and conditions than those being offered to any other prospective
investors. Each Purchase Option shall be in effect for a period of twenty (20)
days following Hanover's receipt of the notice of such Issuance required above.
Hanover shall exercise a Purchase Option by giving written notice thereof to
Buyer within the twenty (20) day period in which the Purchase Option is in
effect. The Purchase Option may be exercised for all or a part of the amount of
the shares of Buyer's common stock represented by the Purchase Option. The
purchase price payable upon exercise of a Purchase Option shall be paid to Buyer
by Hanover at the closing for the Issuance, which shall take place no earlier
than five (5) days following notice of Hanover's exercise of the Purchase
Option, at which time Buyer shall deliver to Hanover the certificates evidencing
the shares of Buyer's common stock so purchased.
11. GENERAL PROVISIONS.
The parties further covenant and agree as follows:
11.1 Entire Agreement. This Agreement and the other agreements and
documents referred to herein set forth the entire understanding of the parties
with respect to the subject matter hereof. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement.
11.2 Waiver. Any of the terms or conditions of this Agreement may be
waived at any time by the party or parties entitled to the benefit thereof but
only by a written notice signed by the party or parties waiving such terms or
conditions.
11.3 Amendments. This Agreement may be amended, supplemented or
interpreted at any time only by written instrument duly executed by each of the
parties hereto.
11.4 Expenses. Except as set forth in Section 2 hereof, the parties
shall each pay its or their own expenses, including, without limitation, the
expenses of its or their own counsel, investment bankers and accountants,
incurred in connection with the preparation, execution and
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delivery of this Agreement and the other agreements and documents referred to
herein and the consummation of the transactions contemplated hereby and thereby.
All costs and expenses of the parties in enforcing any of the
provisions of this Agreement and the other agreements and documents referred to
herein (including but not limited to reasonable attorneys' fees and court
costs), shall be borne by the party found in default or noncompliance with the
provisions of this Agreement and the other agreements and documents referred to
herein.
11.5 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be by
hand-delivery, certified or registered mail, return receipt requested,
telecopier, or air courier to the parties set forth below. Such notices shall be
deemed given: at the time personally delivered, if delivered by hand; at the
time received if sent certified or registered mail; when receipt is acknowledged
by facsimile equipment if telecopied and if a copy is also promptly mailed by
certified or registered mail; and the next business day after timely delivery to
the courier, if sent by air courier.
If to Buyer: Euclid Logistics, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx Xxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
Copy to: Lord, Bissell & Brook
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 312-443-0336
If to Hanover Hanover Direct, Inc.
or Sellers 0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
Copy to: Brown, Raysman, Xxxxxxxxx, Xxxxxx & Xxxxxxx, LLP
CityPlace I
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
11.6 Assignment. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by any party without the prior written
consent of the other parties hereto. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective heirs, legal representatives, successors and permitted assigns of the
parties hereto.
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11.7 Commissions and Finder's Fees. Buyer, on the one hand, and
Hanover and Seller, jointly and severally, on the other hand, represent and
warrant that none of them has retained or used the services of any individual,
firm or corporation in such manner as to entitle such individual, firm or
corporation to any compensation for brokers' or finders' fees with respect to
the transactions contemplated hereby for which the other may be liable.
11.8 Severability. In the event that any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions of this Agreement shall not be in any way impaired.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Headings. The headings of the Sections and the subsections of
this Agreement are inserted for convenience of reference only and shall not
constitute a part hereof.
11.11 Instruments of Further Assurance. Each of the parties hereto
agrees, upon the request of any of the other parties hereto, from time to time
to execute and deliver to such other party or parties all such instruments and
documents of further assurance or otherwise as shall be reasonable under the
circumstances, and to do any and all such acts and things as may reasonably be
required to carry out the obligations of such requested party hereunder.
11.12 Publicity. No notices to third parties or other publicity,
including press releases, concerning any of the transactions provided for herein
shall be made by any party hereto unless planned and coordinated jointly among
the parties hereto, except to the extent otherwise required by law.
11.13 No Third Party Beneficiaries. Nothing in this Agreement is
intended nor shall it be construed to give any person, firm, corporation or
other entity, other than the parties hereto and their respective successors and
permitted assigns, any right, remedy or claim under or in respect of this
Agreement or any provisions hereof.
11.14 Waiver of Trial by Jury. The parties hereby knowingly,
voluntarily and intentionally waive any right they may have to a trial by jury
in respect to any litigation arising out of, under or in connection with this
Agreement, or any course of conduct, course of dealing, statements (whether
verbal or written) or actions of any party hereto. This provision is a material
inducement for Buyer, Hanover and Sellers entering into this Agreement.
11.15 Cumulative Remedies. All rights and remedies of the parties
hereto are cumulative of each other and of every other right or remedy such
parties may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
11.16 Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the internal laws of the State of New York,
excluding any choice of law rules which may direct the application of the laws
of another jurisdiction.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto on the day and year first above written.
HANOVER DIRECT, INC. EUCLID LOGISTICS, INC.
By By /s/ Xxxx X. Xxxxx
------------------------------ ---------------------------------
Xxxx X. Xxxxx
President
THE XXXXXX COMPANY
By
------------------------------
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto on the day and year first above written.
HANOVER DIRECT, INC. EUCLID LOGISTICS, INC.
By /s/ X. X. Xxxxxxx By:
------------------------------ ---------------------------------
X. X. Xxxxxxx Xxxx X. Xxxxx
Senior V.P President
THE XXXXXX COMPANY
By /s/ X. X. Xxxxxxx
------------------------------
X. X. Xxxxxxx
V.P
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APPENDIX OF DEFINITIONS
The following definitions shall be applicable for purposes of the
Agreement except as otherwise specifically provided to the contrary in the text
of the Agreement.
"Active Customers" shall mean customers, without duplication, that have
made at least one purchase from the Business within twelve (12) months prior to
the Closing Date.
"Affiliates" of a person shall mean any person or entity controlling,
controlled by or under common control with that person. "Control" for this
purpose shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities or interests, by contract, or
otherwise.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Copyright" shall mean all copyrights in published and nonpublished works,
now or hereafter existing, in the United States or any foreign jurisdiction, and
all applications, registrations, and recordings related thereto filed in the
United States Copyright Office or in any other government office or agency in
the United States or any foreign jurisdiction.
"Eligible Inventory" shall mean only inventory: (i) originally purchased
by Hanover and/or Sellers in the ordinary course of business for sale through
the Xxxxxx catalog, (ii) relating to products displayed in Xxxxxx catalogs
mailed prior to, or within fifteen (15) days after, the Closing Date, and (iii)
which otherwise complies with the representations and warranties set forth in
Section 4.10 of this Agreement; provided that Eligible Inventory shall not
include any merchandise the cost of which is assumed by Buyer pursuant to
Section 3.1.4 hereof. For purposes of Section 2.4 of this Agreement, the amount
of Eligible Inventory will be determined in accordance with Sellers' normal
accounting practices, consistently applied, provided that such amount will be
reduced by the amount of all vendor discounts paid or payable to Hanover or its
Affiliates with respect to Eligible Inventory included in the Purchased Assets.
"Knowledge" The phrase "to Seller's knowledge" or similar phrases means
those facts and circumstances known to any director, officer or [ILLEGIBLE]
managerial employee of Sellers, in each case after due inquiry by such persons
to those employees of Hanover or Sellers who in the ordinary course of their
duties would be reasonably likely to have knowledge of the facts or
circumstances in question.
"Material Adverse Effect" shall mean a material adverse effect upon the
Purchased Assets, liabilities, financial condition or results of operation of
Sellers, on the continued conduct of the Business, as presently conducted, or on
the ability of Hanover or Sellers to execute this Agreement and consummate their
respective obligations hereunder.
"Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or department, agency or political
subdivision thereof).
"Preferred Stock" shall mean Buyer's Series A preferred stock, no par
value per share. The rights and preferences of the Preferred Stock are set forth
on Exhibit D hereto.
"Reasonable Efforts" shall mean the good faith effort that a person
ordinarily would use, apply or exercise to protect his own rights and business,
provided that when used in connection with
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the obtaining of a consent, approval or other act of an unaffiliated third
person or governmental authority, "reasonable efforts" shall not require the
commencement of litigation against or acquisition of control of such third
person or the assets or obligations requiring such consent, the acceleration of
payment of any indebtedness or the payment of money.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiary" shall mean any Person with respect to which a specified
Person (or Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Taxes" shall mean all federal, state, local and foreign income, excise,
property, sales, use, payroll, intangibles, franchise and other taxes and
assessments of whatever nature, and all penalties and interest related thereto.
"Trademark" shall mean all business names, logos, service marks,
trademarks, trade names, trade styles, and other business or source identifiers,
and all combinations, contractions, derivatives, expansions, modifications and
variations thereof.
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Exhibit C
Form of Opinion of Buyer's Counsel
October ___, 1999
Hanover Direct, Inc.
Xxxxxx Holdings, Inc.
The Xxxxxx Company
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
We have acted as counsel for Euclid Logistics, Inc., an Illinois
corporation ("Buyer"), in connection with the transactions contemplated by an
Asset Purchase Agreement dated as of August ___, 1999 (the "Agreement") by and
among Buyer; Hanover Direct, Inc., a Delaware corporation ("Hanover"); Xxxxxx
Holdings, Inc., a Delaware corporation ("AHI"); and The Xxxxxx Company, a South
Dakota corporation ("TAC"). AHI and TAC are collectively referred to herein as
the "Sellers". This opinion is being delivered to you pursuant to Section 7.3.3
of the Agreement. Unless otherwise indicated, capitalized terms used herein and
not otherwise defined shall have the meaning given to them in the Agreement.
In so acting, we have reviewed: (i) the Agreement; and (ii) the Assumption
Agreement between Buyer and Sellers (collectively the "Acquisition Documents").
We have also examined originals or copies, certified or otherwise identified to
our satisfaction, of Buyer's certificate or articles of incorporation and
by-laws and such records, documents, certificates and other instruments as in
our judgment are necessary or appropriate to enable us to render the opinions
expressed below. We have relied, to the extent that we deem such reliance
appropriate, upon certificates and other statements of officers of Buyer and of
public officials issued with respect to Buyer. As to certain factual matters, we
have relied, with your permission and without independent investigation, upon
the representations and warranties of Buyer set forth in the Agreement.
In our examination of the aforesaid documents, we have assumed (i) the
genuineness of all signatures (other than those of officers of Buyer) and the
authenticity of all documents purporting to be originals and the conformity to
originals of all documents purporting to be copies and (ii) with respect to
documents to which parties other than or in addition to Buyer are a party, that
each such other party has the requisite power and authority to enter into and
perform its obligations under such documents, that all actions, consents,
approvals, authorization and filings necessary in respect of such parties'
performance thereunder have been taken or received, and that such documents
constitute the valid and binding obligation of each such other party,
enforceable against each such other party in accordance with their respective
terms.
35
Hanover Direct, Inc.
Xxxxxx Holdings, Inc.
The Xxxxxx Company
October ___, 1999
Page 2
Based on the foregoing, and subject to the assumptions, qualifications and
limitations stated herein, we are of the opinion that:
1. Buyer is a corporation validly existing and in good standing under the
laws of the State of Illinois, and has all requisite corporate power and
authority to own its assets and to carry on its business as now conducted.
2. Buyer has all requisite power and authority (corporate or otherwise) to
execute and deliver the Acquisition Documents and to consummate the transactions
contemplated thereby.
3. The execution and delivery of the Acquisition Documents by Buyer, and
the consummation of the transactions contemplated thereby, have been duly
authorized by all necessary corporate action on the part of Buyer, and the
Acquisition Documents constitute the valid and binding agreements of Buyer,
enforceable in accordance with their respective terms.
4. Neither the execution and delivery of the Acquisition Documents, nor
the consummation of the transactions contemplated thereby, will constitute a
violation of, or be in conflict with, or result in a cancellation of, or
constitute a default under, or create (or cause the acceleration of the maturity
of) any debt, obligation or liability affecting, or result in the creation or
imposition of any security interest, lien or other encumbrance upon any of the
assets of Buyer under: (a) any term or provision of the certificate or articles
of incorporation or by-laws of Buyer, (b) to our knowledge, any statute or law,
(c) to our knowledge, any judgement, decree, order, regulation or rule of any
court or governmental authority, or (d) to our knowledge, any contract,
agreement, or other commitment to which Buyer is a party or is bound, or, to our
knowledge, cause any material change in the rights or obligations of any party
under any such contract, agreement, or other commitment, except for liens and
security interests granted by Buyer to its lenders.
5. To our knowledge, no consent of, or notice to, any federal, state or
local authority, or any other person or entity is required to be obtained or
made by Buyer in connection with the execution, delivery and performance of the
Acquisition Documents.
6. To our knowledge, there are no (i) lawsuits, proceedings, claims or
governmental investigations pending or threatened against, or involving, Buyer,
or (ii) judgments, consents, decrees, injunctions, or any other judicial or
administrative mandates outstanding against Buyer.
The foregoing opinions are subject to the following qualifications,
limitations and exceptions.
36
Hanover Direct, Inc.
Xxxxxx Holdings, Inc.
The Xxxxxx Company
October ___, 1999
Page 3
A. Whenever our opinion with respect to the existence or absence of
facts is indicated to be based on our knowledge, we are referring to the
actual knowledge of Lord, Bissell & Brook attorneys who have given
substantive attention to matters concerning Buyer during the course of our
representation of Buyer, which knowledge has been obtained by such
attorneys in their capacity as such. Except as expressly set forth herein,
we have not undertaken any independent investigation to determine the
existence or absence of such facts and no inference as to our knowledge
concerning such facts should be drawn from the fact that such limited
representation has been undertaken by us.
B. Our opinion is subject to any limitations as to the validity,
binding nature or enforceability of the obligations of Buyer under the
Acquisition Documents which might result from (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, and (ii) general equitable
principles and equitable remedies, regardless of whether enforceability is
considered in a proceeding in equity or at law.
C. We express no opinion as to the validity, binding nature or
enforceability of: (i) any rules to choice or conflicts of law, (ii) any
provision releasing a party from, or requiring indemnification of a party
for, liability for its own action or inaction, to the extent such action
or inaction involves gross negligence, recklessness, willful misconduct or
unlawful conduct and such release or indemnification violates public
policy, (iii) any purported waiver by a party of any rights granted
pursuant to statute, or (iv) the waiver by any party of their right to a
trial by jury.
D. We note that the Acquisition Documents provide for the laws of
the State of New York to govern such document. For purposes of this
opinion, we have assumed, with your approval and without independent
investigation, that the relevant laws of the State of New York are
identical in all material respects to the corresponding laws of the State
of Illinois.
We are members of the bar of the State of Illinois and we therefore
express no opinion with respect to any matter which may be governed by the laws
of any jurisdiction other than the State of Illinois and applicable laws of the
United States of America, all as in effect on and as of the date hereof and we
disclaim any obligation to advise you of any changes in such laws which may
hereafter come to our attention.
37
Hanover Direct, Inc.
Xxxxxx Holdings, Inc.
The Xxxxxx Company
October ___, 1999
Page 4
This opinion is limited to the matters set forth herein and no opinion may
be inferred or implied beyond the matters expressly contained herein. This
opinion is rendered to you in connection with the Agreement and the transactions
related thereto and may not be relied upon by any other person or by you for any
other purpose.
Very truly yours,
Lord, Bissell & Brook
38
EXHIBIT D
Rights and Preferences of Preferred Stock
The powers, qualifications, limitations, restrictions and special or
relative rights in respect of the Series A Preferred Stock are as follows:
(i) Amount. The maximum number of shares of Series A Preferred Stock
issuable by the Corporation shall be 1,988,000 shares.
(ii) Issuance: No Transfer. The Series A Preferred Stock shall be issued
only to Hanover Direct, Inc., a Delaware corporation ("Hanover"). The Series A
Preferred Stock may not be sold, assigned or otherwise transferred by Hanover
without the Corporation's prior written consent.
(iii) Dividends.
(a) The holder of record of each share of Series A Preferred Stock
will be entitled to receive, when, as and if declared by the Corporation's board
of directors (the "Board") out of funds of the Corporation legally available
therefor, fully cumulative dividends at the annual rate of five percent (5%) of
the Liquidation Preference (as defined below), payable in equal quarterly
installments of $0.0125 per Preferred Share on the first Business Day (as
defined below) after the end of a Payment Period (as defined below) (each a
"Dividend Payment Date"). Dividends will be payable to holders of record of the
Series A Preferred Stock as they appear on the stock books of the Corporation on
such record dates, not more than 60 days prior to the applicable Dividend
Payment Date, as shall be fixed by the Board. The term "Payment Period" shall
mean the three (3) month periods ending on March 31st, June 30th, September
30th, and December 31st of each year. The term "Business Day" shall mean any day
other than a day on which banking institutions are required or authorized to
close in Chicago, Illinois.
(b) Dividends shall accrue (whether or not declared by the Board)
during each Payment Period and be fully cumulative from the first day of each
Payment Period to the last day of such Payment Period, provided that, for the
first Payment Period, dividends shall accrue and be fully cumulative from the
date of the initial issuance of Series A Preferred Stock and dividends shall
terminate upon the redemption or conversion of the Series A Preferred Stock as
provided herein. Dividends payable for any partial dividend period shall be
calculated on the basis of a 365 day year. Accrued but unpaid dividends shall
not bear interest.
(c) Unless full cumulative dividends on the Series A Preferred Stock
have been paid, the Corporation shall not: (i) declare, pay or set aside for
payment any dividend (other than in shares of Junior Stock (as defined below)),
or other distribution in respect of its Junior Stock, or (ii) call for
redemption, redeem, purchase or otherwise acquire for any consideration (other
than shares of its Junior Stock) any shares of its Junior Stock. The term
"Junior Stock" means the Common Stock and any series of Preferred Stock of the
Corporation other than the Series A Preferred Stock.
39
(iv) Rank. The shares of Series A Preferred Stock shall rank prior to the
shares of Junior Stock upon liquidation, so that in the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Series A Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for distribution to its
shareholders, whether from capital, surplus or earnings, before any distribution
is made to holders of shares of Junior Stock, an amount equal to $1.00 per share
(the "Liquidation Preference") plus an amount equal to all dividends (whether or
not earned or declared) accumulated and unpaid on the shares of the Series A
Preferred Stock to the date of final distribution. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of shares of the Series A
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid, then such assets, or the proceeds thereof, shall be distributable
among such holders ratably in accordance with the respective amounts which would
be payable on such shares if all amounts payable thereon were paid in full.
After payment of the full amount of the Liquidation Preference and such
dividends to which holders of shares of the Series A Preferred Stock are
entitled, the holders of shares of the Series A Preferred Stock will not be
entitled to any further participation in any distribution of assets by the
Corporation. For the purposes hereof, neither a consolidation or merger of the
Corporation with any other corporation, nor a sale or transfer of all or any
part of the Corporation's assets for cash or securities shall be considered a
liquidation, dissolution or winding up of the Corporation.
(v) Voting Rights. The holders of shares of Series A Preferred Stock shall
have no voting rights whatsoever, except for any voting rights to which they may
be entitled under the laws of the State of Illinois.
(vi) Redemption.
(a) To the extent that the Corporation shall have funds legally
available therefor, the Corporation may, at its option, at any time and from
time to time thereafter, redeem all but not less than all of the Series A
Preferred Stock, on at least 10 but no more than 60 days' prior notice mailed to
the holders of the shares to be redeemed at their addresses as shown on the
stock books of the Corporation, for an amount equal to $1.00 per share of Series
A Preferred Stock, together in each case with an amount equal to all dividends
(whether or not earned or declared) accumulated and unpaid to the date fixed for
redemption (the "Redemption Price").
(b) The Corporation shall redeem, from funds legally available
therefor, all of the Series A Preferred Stock at the Redemption Price on
__________,2004 [fifth anniversary of the closing date] (a "Mandatory
Redemption").
(c) If any required notice of a redemption has been given as
provided above, and if on the date fixed for such redemption, funds necessary
for the redemption shall be legally available therefor and shall have been
irrevocably deposited or set aside in trust for the holders of the Series A
Preferred Stock, then, notwithstanding that the certificates representing the
shares so called for redemption shall have not been surrendered, dividends with
respect to the shares so called shall cease
-2-
40
to accrue after the date fixed for redemption, such shares will no longer be
deemed outstanding, the holders thereof shall cease to be shareholders of the
Corporation and all rights whatsoever with respect to the shares so called for
redemption (except the right of the holders to receive the Redemption Price
without interest upon surrender of their certificates therefor) shall terminate.
If funds legally available for such purpose and not sufficient for a redemption
of the Series A Preferred Stock, then the certificates representing such shares
shall be deemed not to be surrendered, such shares shall remain outstanding, and
the rights of holders of the shares of Series A Preferred Stock thereafter shall
continue to be only those of a holder of Series A Preferred Stock. Should any
Series A Preferred Stock required to be redeemed under the terms of any
Mandatory Redemption not be redeemed solely by reason of limitations imposed by
law, such unredeemed shares, or any of them, shall be redeemed on the earliest
possible date thereafter, to the maximum extent permitted by law, that such
shares, or any of them, may be redeemed.
(vii) Conversion.
(a) Subject to and upon compliance with the provisions of this
paragraph (vii), the holder of a share of Series A Preferred Stock shall have
the right, at its option, at any time after _________, 2002 [third anniversary
of the closing date], to convert such share into such number of fully paid and
non-assessable shares of Common Stock (calculated as to each conversion to the
nearest whole share) as the Liquidation Preference of such shares surrendered
for conversion is a multiple of the Conversion Price (as defined below), such
surrender to be made in the manner provided in subparagraph (b) below; provided,
however, that the right to convert shares called for redemption pursuant to
Paragraph (vi) shall terminate at the close of business on the date fixed for
such redemption unless the Corporation shall default in making payment of the
amount payable upon such redemption. In addition, Hanover shall have the right
to convert, at its option, at any time, up to 258,333 shares of Series A
Preferred Stock into shares of Common Stock on the terms set forth above.
(b) In order to exercise the conversion privilege, the holder of
share(s) of Series A Preferred Stock to be converted shall deliver to the
Corporation at its principal executive offices a written notice stating the
number of shares of Series A Preferred Stock the holder has elected to convert
pursuant to this Paragraph (vii), together with the certificate(s) representing
such shares. As promptly as practicable after the surrender by a holder of the
certificates for shares of Series A Preferred Stock as aforesaid, the
Corporation shall issue and deliver to the holder of the Series A Preferred
Stock converting same, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such shares in accordance
with the provisions of this Paragraph (vii). Each conversion shall be deemed to
have been effected immediately prior to the close of business on the date on
which the certificates for shares of Series A Preferred Stock shall have been
surrendered and such notice received by the Corporation as aforesaid, and the
person in whose name or names the certificate for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder of
record of the shares of Common Stock represented thereby at such time on such
date and such conversion shall be at the Conversion Price in effect at such time
on such date. All shares of Common Stock delivered upon conversion of the
-3-
41
Series A Preferred Stock will upon delivery be duly and validly issued and fully
paid and non-assessable, free of all liens, and charges and not subject to any
preemptive rights. Upon the surrender of certificates representing shares of
Series A Preferred Stock, such shares shall no longer be deemed to be
outstanding and all rights of a holder with respect to such shares surrendered
for conversion shall immediately terminate, except the right to receive the
Common Stock, as provided herein.
(c) For purposes of this paragraph, the term "Conversion Price"
shall mean $1.00 per share. If the Corporation shall (i) pay a dividend or make
a distribution on its Common Stock in shares of its Common Stock, (ii) subdivide
its outstanding Common Stock into a greater number of shares, or (iii) combine
its outstanding Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior thereto shall be adjusted so that the holder
of any share of Series A Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock of the
Corporation which he would have owned or have been entitled to receive after the
happening of any of the events described above had such share been converted
immediately prior to the happening of such event. An adjustment made pursuant to
this subparagraph (c) shall become effective immediately after the record date
in the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of subdivision or combination. If any such
dividend or distribution is not so paid or made, the Conversion Price then in
effect shall be appropriately readjusted.
(d) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock for the purpose of effecting
conversions of the Series A Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all outstanding shares of Series A
Preferred Stock not theretofore converted.
(viii) Status. Upon the conversion, redemption or other acquisition by the
Corporation of any shares of Series A Preferred Stock, the shares of Series A
Preferred Stock so converted, redeemed or otherwise acquired by the Corporation
shall be canceled and shall not be reissued by the Corporation.
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42
SCHEDULE 1.2
EXCLUDED ASSETS
None.
