EXHIBIT 2.1
AMENDED AND RESTATED ASSET
PURCHASE AGREEMENT
by and between ▇▇▇▇▇▇ ▇▇▇▇▇▇,INC.,
THE ▇.▇. ▇▇▇▇▇▇ COMPANY,
and
▇.▇. ▇▇▇▇▇▇ SALES COMPANY, INC.
on the one hand
and
CRG ACQUISITION CORP.,
on the other hand
Dated: October 31, 2001
Amending and Restating the Asset Purchase Agreement
dated October 11, 2001
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS..................................................................2
ARTICLE II.
PURCHASE AND SALE OF ASSETS..................................................7
2.1 Sale And Purchase Of Assets............................................7
2.2 Assumption Of Certain Liabilities By Buyer............................10
2.3 Purchase Price........................................................11
2.4 The Closing...........................................................11
2.5 Deliveries at the Closing.............................................11
2.6 Assumed Contracts.....................................................13
2.7 Adjustment Procedure..................................................13
2.8 Adjustment Amount and Payment.........................................14
2.9 Allocation of Purchase Price..........................................15
ARTICLE III.
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION...................15
3.1 Representations and Warranties of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales.....15
3.2 Representations and Warranties of Buyer...............................16
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES CONCERNING THE GIFT BUSINESS.................17
4.1 Organization, Qualification, and Corporate Power......................17
4.2 Noncontravention......................................................18
4.3 Brokers' Fees.........................................................18
4.4 Title to Assets.......................................................18
4.5 Financial Statements..................................................19
4.6 Subsequent Events.....................................................19
4.7 Undisclosed Liabilities...............................................21
4.8 Legal Compliance......................................................21
4.9 Tax Matters...........................................................21
4.10 Real Property.........................................................22
4.11 Intellectual Property.................................................23
4.12 Tangible Assets.......................................................25
4.13 Inventories...........................................................25
4.14 Contracts.............................................................25
4.15 Accounts Receivable...................................................27
4.16 Insurance.............................................................27
4.17 Litigation............................................................27
4.18 Products Liability....................................................27
4.19 Employees.............................................................27
4.20 Employee Benefits.....................................................27
4.21 Environmental, Health, and Safety Matters.............................28
4.22 Certain Business Relationships With ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales...........29
ARTICLE V.
PRE-CLOSING COVENANTS.......................................................29
5.1 General...............................................................29
5.2 Notices and Consents..................................................29
5.3 Operation of Business.................................................29
5.4 Preservation of Business..............................................29
5.5 Full Access...........................................................30
5.6 Notice of Developments................................................30
5.7 Exclusivity...........................................................30
5.8 Title Insurance.......................................................30
5.9 Buyer Actions.........................................................30
5.10 Certain Excluded Licenses.............................................30
ARTICLE VI.
POST-CLOSING COVENANTS......................................................31
6.1 General...............................................................31
6.2 Litigation Support....................................................31
6.3 Transition............................................................31
6.4 Confidentiality.......................................................31
6.5 Covenant Not to Compete...............................................31
6.6 Employee Benefits Matters.............................................32
6.7 WARN Act..............................................................33
6.8 Bulk Sales............................................................33
6.9 Accounts Receivable...................................................33
6.10 Change of Name........................................................34
6.11 Liability Insurance...................................................34
ARTICLE VII.
CONDITIONS TO OBLIGATION TO CLOSE...........................................34
7.1 Conditions to Obligation of Buyer.....................................34
7.2 Conditions to Obligation of Seller and ▇▇▇▇▇▇.........................35
ARTICLE VIII.
INDEMNIFICATION.............................................................36
8.1 Survival of Representations and Warranties............................36
8.2 Indemnification Provisions for Benefit of Buyer.......................36
8.3 Indemnification Provisions for Benefit of Seller and ▇▇▇▇▇▇...........37
8.4 Procedure for Matters Involving Third Parties.........................38
8.5 Notice of Claim.......................................................39
8.6 Limitations on Seller's and ▇▇▇▇▇▇'▇ Indemnification Liability........39
8.7 Limitations on Buyer's Indemnification Liability......................39
8.8 Determination of Adverse Consequences.................................40
8.9 Exclusive Remedy......................................................40
ARTICLE IX.
TAX MATTERS.................................................................40
9.1 Refunds and Tax Benefits..............................................40
9.2 Certain Taxes.........................................................40
9.3 Other Transfer Taxes and Fees.........................................40
ARTICLE X.
TERMINATION.................................................................40
10.1 Termination of Agreement...............................................40
10.2 Effect of Termination..................................................41
ARTICLE XI.
MISCELLANEOUS...............................................................41
11.1 Press Releases and Public Announcements...............................41
11.2 No Third-Party Beneficiaries..........................................41
11.3 Entire Agreement......................................................41
11.4 Succession and Assignment.............................................42
11.5 Counterparts..........................................................42
11.6 Headings..............................................................42
11.7 Notices...............................................................42
11.8 Governing Law.........................................................43
11.9 Amendments and Waivers................................................43
11.10 Severability..........................................................43
11.11 Expenses..............................................................43
11.12 Construction..........................................................43
11.13 Incorporation of Exhibits, Annexes, and Schedules.....................43
ATTACHMENTS
Exhibit A - Assignment/Assumption Agreement
Exhibit B - ▇▇▇▇ of Sale
Exhibit C - Lease Agreement
Exhibit D - Transition Services Agreement
Exhibit E - Accounting Procedures
Exhibit F - Financial Statements
Exhibit G - Purchase Price Allocation
Annex I - Disclosure Schedules
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
This AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this "Agreement") is
made the 31st day of October, 2001, by and between CRG Acquisition Corp., a
Georgia corporation ("Buyer"), on the one hand, and ▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc., a
Tennessee corporation ("▇▇▇▇▇▇"), The ▇.▇. ▇▇▇▇▇▇ Company, a Delaware
corporation ("▇▇▇▇▇▇"), and ▇.▇. ▇▇▇▇▇▇ Sales Company, Inc., a Delaware
corporation ("▇▇▇▇▇▇ Sales") (▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales are collectively
the "Seller"), on the other hand, and amends and restates in its entirety the
Asset Purchase Agreement by and between Buyer, on the one hand, and ▇▇▇▇▇▇,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, on the other hand, dated October 11, 2001.
RECITALS:
WHEREAS, Seller designs, causes to be manufactured, markets and distributes
baby products, tableware, gift wrap and gift bags and tissue, gift and keepsake
boxes, stationery, wedding products, journals and diaries, guest books, brag
books, bridge card products, photo albums, and storage, memory and scrap books,
remembrance (memory) products, kitchen recipe products, calendars, recipe cards
and storage and address books in North America (the "Gift Business");
WHEREAS, Seller desires to sell, and Buyer desires to purchase,
substantially all the assets of Seller (with certain exceptions) used in
connection with the Gift Business and the assets of ▇▇▇▇▇▇ used exclusively
in the Gift Business and to assume certain of the liabilities and obligations
relating thereto, all upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the parties hereto desire to clarify certain matters set forth
in the Asset Purchase Agreement dated October 11, 2001, as set forth in this
Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, Buyer, ▇▇▇▇▇▇ and Seller (collectively, the
"Parties") agree as follows:
ARTICLE I.
DEFINITIONS
"Accountants" has the meaning set forth in Section 2.7.
"Accounts Receivable" has the meaning set forth in Section 2.1.
"Adjustment Amount" has the meaning set forth in Section 2.8.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages (other than lost profits or punitive damages),
dues, penalties, fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Adverse Environmental Consequences" means Adverse Consequences relating
to any soil, surface water, or groundwater contamination subject to regulation
under any Environmental, Health and Safety Requirements.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Applicable Rate" means the corporate base rate of interest published
from time to time in the Wall Street Journal.
"Assets" has the meaning set forth in Section 2.1.
"Assignment/Assumption Agreement" has the meaning set forth in Section 2.5.
"Assumed Contracts" has the meaning set forth in Section 2.6.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"▇▇▇▇ of Sale" has the meaning set forth in Section 2.5.
"Bulk Sales Laws" has the meaning set forth in Section 6.8.
"Buyer" has the meaning set forth in the preface to this Agreement.
"Buyer Closing Documents" has the meaning set forth in Section 2.5.
"Claim Notice" has the meaning set forth in Section 8.5.
"Closing" has the meaning set forth in Section 2.4.
"Closing Date" has the meaning set forth in Section 2.4.
"Closing Net Asset Value" has the meaning set forth in Section 2.7.
"Closing Statement" has the meaning set forth in Section 2.7.
"Contract Consents" has the meaning set forth in Schedule 2.6.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Disclosure Schedules" has the meaning set forth in ARTICLE IV.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement that is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement that is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement that is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, or pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Equipment" has the meaning set forth in Section 2.1.
"Excluded Assets" has the meaning set forth in Section 2.1.
"Excluded Liabilities" has the meaning set forth in Section 2.2.
"Financial Statements" has the meaning set forth in Section 4.5.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"▇▇▇▇▇▇ Sales" has the meaning set forth in the preface to this Agreement.
"Gift Business" has the meaning set forth in the recitals to this
Agreement.
"Goodwill" means all of Seller's goodwill and going concern value in
connection with the Gift Business and all of Seller's, but not ▇▇▇▇▇▇'▇,
rights under any confidentiality agreements entered into by ▇▇▇▇▇▇ or Seller or
their respective agents with respect to the possible sale of Seller or its
assets, to the extent assignable.
"Hazardous Materials" means (i) any substance, contaminant, material,
element, compound, mixture, solution, waste, chemical orpollutant that is now
or hereafter listed, defined, characterized or regulated as hazardous, toxic,
or dangerous pursuant to any Environmental, Health and Safety Requirements,
(ii) petroleum, petroleum derivatives or by-products, and other hydrocarbons,
(iii) polychlorinated biphenyls, asbestos, radon and urea formaldehyde, and
(iv) radioactive substances, materials or wastes.
"Indebtedness" has the meaning set forth in Section 3.2(g).
"Indemnified Party" has the meaning set forth in Section 8.4.
"Indemnifying Party" has the meaning set forth in Section 8.4.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations relating thereto, (b) all trademarks, service marks, trade dress,
logos, trade names, corporate names, slogans, internet domain names, telephone
numbers, and all goodwill associated therewith, together with all translations,
adaptations, derivations, combinations, applications, registrations, and
renewals relating thereto, (c) all copyrightable works, all copyrights, and
all applications, registrations, and renewals relating thereto, (d) all trade
secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business
and marketing plans and proposals), (e) all computer software (including data
and related documentation), (f) all advertising and promotional materials,
(g) all other proprietary rights, and (h) all copies and tangible embodiments
of the foregoing (in whatever form or medium); provided that Seller shall
not transfer any rights to any use of ▇▇▇▇▇▇'▇ name or variants thereof except
as may be reflected on current inventory or packaging materials and supplies of
advertising or promotional materials existing, on order or in process as of the
date of Closing, which Buyer shall not reprint or reproduce without deletion of
▇▇▇▇▇▇'▇ name.
"Knowledge" means actual knowledge of ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Wash and ▇▇▇▇▇ ▇▇▇▇▇▇, and shall include the
results of any investigation conducted by such persons prior to the Closing
Date, but shall not be construed as imposing any obligation on Seller and
▇▇▇▇▇▇ Sales or such persons to conduct any investigation.
"Lease Agreement" has the meaning set forth in Section 2.5.
"March 31 Special Purpose Statement" has the meaning set forth in
Section 4.5.
"Most Recent Financial Statements" has the meaning set forth in
Section 4.5.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4.5.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4.5.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"▇▇▇▇▇▇" has the meaning set forth in the preface to this Agreement.
"Net Asset Value" has the meaning set forth in Section 2.7.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Owned Real Property" has the meaning set forth in Section 2.1(a).
"Party" has the meaning set forth in the preface to this Agreement.
"Permitted Encumbrances" means (a) mechanic's, materialmen's, and similar
liens for indebtedness not yet overdue, (b) liens for taxes not yet due and
payable and special assessments not yet delinquent, (c) purchase money liens
and liens securing rental payments under capital lease arrangements, which
payments are included in the Assumed Liabilities, (d) other inchoate liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money, (e) recorded easements, covenants and other restrictions
and utility easements, building restrictions, zoning restrictions and other
encumbrances, covenants, rights-of-way, easements, restrictions, applicable
building and zoning laws and other title matters affecting the Property which
do not unreasonably interfere with the current use, enjoyment, or occupancy of
the Property by Seller and (f) matters disclosed in items 1 through 7 of
Disclosure Schedule 4.10(a).
"Person" means an individual, a partnership, a limited liability company,
a corporation, an association, a joint stock company, a trust, a joint venture,
an unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Prepaid Expenses" has the meaning set forth in Section 2.1.
"Property" has the meaning set forth in Section 2.1.
"Purchase Price" has the meaning set forth in Section 2.3.
"Real Estate Conveyances" has the meaning set forth in Section 2.5.
"Regulations" means Treasury Department Regulations, temporary
regulations and proposed regulations promulgated under the Code from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Security Interest" means any mortgage, pledge, lien, charge, or other
security interest, other than (a) mechanic's, materialmen's, and similar
liens, (b) liens for taxes not yet due and payable, (c) purchase money liens
and liens securing rental payments under capital lease arrangements which are
included in the Assumed Liabilities, (d) other inchoate liens arising in the
Ordinary Course of Business and not incurred in connection with the borrowing
of money, and (e) encumbrances, covenants, easements and restrictions
affecting the Real Property other than Permitted Encumbrances.
"Seller" has the meaning set forth in the preface to this Agreement.
"Seller Material Adverse Effect" has the meaning set forth in Section 4.1.
"Seller's Closing Documents" has the meaning set forth in Section 2.5.
"Subsidiary" means any entity the capital stock or equivalent interests
of which is owned by ▇▇▇▇▇▇.
"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.4.
"Transition Services Agreement" has the meaning set forth in Section 6.3.
"WARN Act" has the meaning set forth in Section 6.7.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1 Sale And Purchase Of Assets.
(a) Sale of Assets. Subject to the terms and conditions of this
Agreement, on the Closing Date (as hereinafter defined), Seller shall sell,
assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to Buyer, and Buyer shall purchase,
receive and accept from Seller, all of the assets of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales,
together with all of ▇▇▇▇▇▇'▇ assets used exclusively in connection with the
Gift Business, as the same exist on the Closing Date, other than the Excluded
Assets (as defined below) (collectively, the "Assets"). Without limiting the
generality of the foregoing, the term "Assets" shall include the following:
(i) All office machinery and equipment, furniture and fixtures and
all other items of personal property owned or leased by Seller, the
principal items of which are listed on Schedule 2.1(a)(i) annexed hereto
(the "Equipment");
(ii) All interests in real property (including all buildings and
fixtures thereon) owned (or to be owned as of the Closing Date) or leased
by Seller or ▇▇▇▇▇▇ and used in connection with the Gift Business in
Beacon Falls, Connecticut (the "Owned Real Property"); Carmel, Indiana;
Atlanta, Georgia; Nashville, Tennessee (6th Floor of "BNA Building" and
Opry ▇▇▇▇▇ store only); Clifton, New Jersey; Darien, Connecticut; and
Norwalk, Connecticut described in Schedule 2.1(a)(ii) (collectively, the
"Property");
(iii) All of Seller's and ▇▇▇▇▇▇'▇ rights in and to the Assumed
Contracts (as hereinafter defined);
(iv) All of ▇▇▇▇▇▇'▇ and Seller's rights in Seller's Intellectual
Property and the goodwill associated therewith, including items listed on
Schedules 4.11(a), 4.11(b) and 4.11(c);
(v) All of Seller's accounts receivable (collectively, "Accounts
Receivable");
(vi) All of Seller's prepaid rent and other expenses relating to the
Gift Business (other than Seller's prepaid insurance expense and Seller's
prepaid corporate charge allocation for insurance and benefits, the
"Prepaid Expenses");
(vii) All of Seller's books, records and files to the extent that they
relate primarily to the Gift Business;
(viii) All of Seller's inventory;
(ix) All tangible assets of ▇▇▇▇▇▇ and all tangible assets of Seller,
in each case located in the premises in Shelton, Connecticut, Monroe,
Connecticut, Beacon Falls, Connecticut, Darien, Connecticut, Carmel,
Indiana, New York, New York, Nashville, Tennessee (6th Floor of "BNA
Building" and Opry ▇▇▇▇▇ store only), Clifton, New Jersey, Norwalk,
Connecticut, Bentonville, Arkansas and Atlanta, Georgia; and
(x) All of the Goodwill of Seller.
(b) Excluded Assets. There shall be excluded from the Assets to be
transferred to Buyer hereunder the following assets of Seller and affiliates of
Seller (the "Excluded Assets"):
(i) Cash, cash equivalents and securities of Seller;
(ii) Books and records which may be necessary for Seller to retain
for the purposes of any statute, rule, regulation or ordinance or for
tax returns or for other tax purposes, and the original stock ledger and
minute books of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales relating to meetings of
stockholders and directors, copies of which may be obtained from Seller
on request, at Buyer's expense;
(iii) All claims for, rights to, and payments of, Tax credits,
abatements and refunds of previously paid Taxes, and all other Tax
benefits of Seller, relating to federal, state, local or foreign income,
franchise, sales, use, payroll, withholding and similar Taxes and charges;
(iv) All insurance contracts (including life insurance policies on
the lives of past or present management) and rights of Seller thereunder,
including premium refunds and settlements relating thereto;
(v) All rights in and to the assets of any Employee Benefit Plan;
(vi) Seller's prepaid corporate charge allocation for insurance and
benefits and other expenses;
(vii) Those Assumed Contracts for which a required Contract Consent
(as hereinafter defined) has not been obtained; provided, however, that
this clause (vii) shall not affect the condition to Buyer's obligation to
close set forth in Section 7.1;
(viii) Leases for real property in New York, New York; Monroe,
Connecticut; Bentonville, Arkansas; and Shelton, Connecticut;
(ix) All of Seller's claims and causes of action relating to or
arising out of or in connection with the Gift Business;
(x) Accounts receivable from intercompany accounts;
(xi) The telephone switch and related equipment located on the sixth
floor of ▇▇▇▇▇▇'▇ Nashville, Tennessee property known as "BNA;"
(xii) Leases for leased vehicles not used by active employees of the
Gift Business as of the Closing Date;
(xiii) All shares of the capital stock of each of Seller's Subsidiaries;
and
(xiv) Those additional assets, including contracts, identified on
Schedule 2.1(b) hereto.
(c) Sale and Transfer of Assets. Seller covenants that the sale and
transfer of the Assets by Seller to Buyer as of the Closing Date shall be made
free and clear of all liabilities, Security Interests, liens, claims and
encumbrances, except (i) Assumed Liabilities (as hereinafter defined);
(ii) Permitted Encumbrances; and (iii) as otherwise specifically provided in
this Agreement.
2.2 Assumption Of Certain Liabilities By Buyer.
(a) Assumed Liabilities. On the Closing Date, Buyer shall assume and
thereafter shall pay and perform, satisfy and otherwise discharge the following
liabilities and obligations that arise from the Gift Business (the "Assumed
Liabilities"):
(i) All obligations and liabilities arising or accruing under the
Assumed Contracts or other agreements or leases included in the Assets
(other than liabilities arising from breach thereof prior to Closing);
(ii) All obligations and liabilities that arise out of operation of
the Gift Business from and after the Closing Date; and
(iii) All liabilities reflected as liabilities on the March 31 Special
Purpose Statement (as hereinafter defined) except as discharged prior to
Closing and all such liabilities incurred thereafter in the Ordinary
Course of Business, as of the Closing.
(b) Excluded Liabilities. Except as otherwise specifically provided in
Section 2.2(a) and elsewhere in this Agreement, Buyer shall not assume and
shall in no event be liable for any liabilities, debt or obligations of Seller,
whether accrued, absolute, matured, known or unknown, liquidated or
unliquidated, contingent or otherwise, including without limitation:
(i) Any liabilities of Seller for federal, state, local or foreign
Taxes, except as provided in Section 9.2;
(ii) Any indebtedness or other obligation to ▇▇▇▇▇▇ or its affiliates,
including without limitation, loans, advances, tax sharing agreement
obligations, obligations to accept returns of merchandise from ▇▇▇▇▇▇,
and intercompany accounts;
(iii) Any severance liabilities in favor of the employees of Seller
arising prior to the Closing Date;
(iv) All liabilities resulting from, arising out of, relating to, in
the nature of, or caused by any breach of contract, breach of warranty,
tort, infringement, violation of law, or environmental matter caused by
Seller's conduct of the Gift Business prior to the Closing Date,
including without limitation those arising under Environmental, Health
and Safety requirements;
(v) All liabilities resulting from, arising out of, or relating to
any Employee Benefit Plan for the benefit of Seller's employees;
(vi) Any liabilities arising out of or related to any leased vehicles
which are not currently used by active employees of Seller arising prior
to the Closing Date;
(vii) Any liabilities and obligations relating to the Excluded Assets;
and
(viii) Any supplemental pension liabilities or obligations to former
employees.
The foregoing obligations and liabilities not assumed by Buyer and described
in this Section 2.2(b) are hereinafter called the "Excluded Liabilities."
2.3 Purchase Price.
Buyer agrees to pay to Seller at the Closing $30,500,000 (such amount,
plus or minus the Adjustment Amount, if any, is referred to herein as the
"Purchase Price") by Fedwire electronic fund transfer.
2.4 The Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC in
Nashville, Tennessee commencing at 9:00 a.m., local time, on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at the Closing itself) or such other date as Buyer and Seller may
mutually determine (the "Closing Date").
2.5 Deliveries at the Closing.
(a) Documents to be Delivered by Seller. At the Closing, Seller shall
deliver to Buyer the following:
(i) An Assignment and Assumption Agreement (the "Assignment/Assump-
tion Agreement") and a ▇▇▇▇ of Sale (the "▇▇▇▇ of Sale") in the forms
attached hereto as Exhibits "A" and "B";
(ii) For each interest in real property identified on Disclosure
Schedules 4.10(a) and 4.10(b), a recordable special warranty deed, but
subject to the Permitted Encumbrances, an Assignment and Assumption of
Lease or such other appropriate document or instrument of transfer, as the
case may require, each in the form and substance satisfactory to Buyer
and its counsel and executed by Seller or ▇▇▇▇▇▇, as applicable (the
"Real Estate Conveyances");
(iii) The Transition Services Agreement (as hereinafter defined);
(iv) The Lease Agreement in the form attached hereto as Exhibit "C"
(the "Lease Agreement") relating to the Owned Real Property;
(v) All such other reasonably necessary instruments of transfer and
conveyance, including assignments and transfers of the Intellectual
Property, that Buyer may request at or prior to the Closing; provided
that such instruments shall not contain any representations and
warranties other than those contained in this Agreement, or otherwise
alter or expand upon such representations and warranties (collectively,
with the Assignment/Assumption Agreement, the ▇▇▇▇ of Sale, the
Transition Services Agreement, the Lease Agreement and the Real Estate
Conveyances, "Seller's Closing Documents");
(vi) Copies of confidentiality agreements described in Section
4.14(e); and
(vii) The certificates and other documents required to be delivered by
Seller on or before the Closing Date pursuant to Section 7.1 hereof or
any other provision of this Agreement.
(b) Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Sellers the following:
(i) The consideration specified in Section 2.3;
(ii) The Assignment/Assumption Agreement attached as Exhibit A hereto;
(iii) The Real Estate Conveyances (with respect to the assumption of
leases and as required for a special warranty deed under Connecticut law
and practice);
(iv) The Transition Services Agreement (as hereinafter defined;
(v) The Lease Agreement related to the Owned Real Property;
(vi) All such other reasonably necessary documents or agreements
reflecting the assumption of the Assumed Liabilities as Sellers may
request at or prior to the Closing provided that such instruments shall
not contain any obligations, representations and warranties on the part
of Buyer other than those contemplated in this Agreement, or otherwise
alter or expand upon such obligations, representations or warranties
(collectively, with the Assignment/ Assumption Agreement, the Transition
Services Agreement, the Lease Agreement, and the Real Estate Conveyances,
the "Buyer Closing Documents"); and
(vii) The certificates and other documents required to be delivered by
Buyer on or before the Closing Date pursuant to Section 7.2 hereof or any
other provision of this Agreement.
(c) Other Actions. On the Closing Date, Seller and Buyer shall take all
such other steps in their reasonable control as may be necessary to fulfill the
conditions to Closing set forth in Sections 7.1 and 7.2 hereof.
2.6 Assumed Contracts.
(a) Assumed Contracts. Buyer shall assume at the Closing the obligations
under all the contracts and agreements relating to the Gift Business included
in the Assets (the "Assumed Contracts"), including those listed on
Schedule 2.6(a) hereto, which lists all such contracts and agreements providing
for payment by third parties to Seller of, or payment by Seller or ▇▇▇▇▇▇ in
respect of the Gift Business, of, more than $50,000 since August 31, 2000.
(b) Consents. Seller shall promptly request and use its reasonable efforts
to obtain consent to the assignment to Buyer of Assumed Contracts listed on
Schedule 2.6(b) requiring consent (collectively, the "Contract Consents").
If any Contract Consent is not obtained and Buyer nevertheless elects to close,
Buyer thereby waives the condition set forth in Section 7.1(c) and such Assumed
Contract shall not be assigned to Buyer. Seller shall use its reasonable best
efforts, however, to keep the relevant Assumed Contract in effect and to give
Buyer the benefit of such Assumed Contract to the same extent as if it had not
been excluded from the Assets, and Buyer shall perform the obligations under
such Assumed Contract on behalf of Seller to the extent that such obligations
would have existed if such Assumed Contract had been assigned to Buyer. Seller
shall be responsible in the first instance for payment of transfer fees and
expenses associated with obtaining Contract Consents not to exceed $150,000;
then Buyer shall be responsible for any additional transfer fees and expenses
up to $75,000 in the aggregate; and Seller shall continue to use its reasonable
efforts to obtain consent to any other such assignment. If after the Closing
Date any such Contract Consent is obtained, Buyer shall assume such Assumed
Contract as of the date of such Contract Consent. Nothing in this Agreement
shall be construed as an attempt to assign any agreement or other instrument
that is by its terms nonassignable without the consent of the other party
thereto.
2.7 Adjustment Procedure.
(a) "Net Asset Value" shall mean the amount calculated based on the
Closing Statement by subtracting liabilities reflected on the Closing Statement
from assets reflected on the Closing Statement.
(b) Seller, with the participation and cooperation of Buyer, shall conduct
a physical inventory count as of the close of business on the Closing Date,
conducted in a manner consistent with Seller's practice in preparing the
March 31 Special Purpose Statement (as hereinafter defined). Seller shall
prepare a Statement of Assets and Liabilities of Seller as of the Closing Date
(the "Closing Statement") on the same basis and applying the same accounting
principles, policies and practices that were used in preparing the March 31
Special Purpose Statement attached as Exhibit F, which principles, policies
and practices are described on Exhibit E hereto, except as set forth in
Section 2.7(e). Seller shall then determine the Net Asset Value as of the
Closing Date (the "Closing Net Asset Value") based upon the Closing Statement.
Seller shall deliver the Closing Statement and its determination of the Closing
Net Asset Value to Buyer within sixty (60) days following the Closing Date.
(c) If, within sixty (60) days following delivery of the Closing Statement
and the Closing Net Asset Value calculation, Buyer has not given Seller written
notice of its objection as to the Closing Net Asset Value calculation (which
notice shall state the basis of Buyer's objection), then the Closing Net Asset
Value calculated by Seller shall be binding and conclusive on the parties and
be used in computing the Adjustment Amount (as hereinafter defined). Seller
shall provide to Buyer and its representatives such workpapers and other
documents and information as Buyer may reasonably request in connection with
Buyer's review of the Closing Statement and the calculation of the Closing Net
Asset Value.
(d) If Buyer duly gives Seller such notice of objection, and if Seller
and Buyer fail to resolve the issues outstanding with respect to the Closing
Statement and the calculation of the Closing Net Asset Value within thirty (30)
days of Seller's receipt of Buyer's objection notice, Seller and Buyer shall
submit the issues remaining in dispute to KPMG (the "Accountants") for
resolution, solely applying the principles, policies and practices referred to
in Section 2.7(b), including Exhibit E. If issues are submitted to the
Accountants for resolution, (i) Seller and Buyer shall furnish or cause to be
furnished to the Accountants such work papers and other documents and
information relating to the disputed issues as the Accountants may request and
are available to that party or its agents and shall be afforded the opportunity
to present to the Accountants any material relating to the disputed issues and
to discuss the issues with the Accountants; (ii) the determination by the
Accountants, as set forth in a notice to be delivered to both Seller and Buyer
within sixty (60) days of the submission to the Accountants of the issues
remaining in dispute, shall be final, binding and conclusive on the parties and
shall be used in the calculation of the Closing Net Asset Value; and
(iii) Seller and Buyer will each bear the fees and costs of the Accountants for
such determination as determined by the Accountants based upon their assessment
of the relative positions of the Buyer and Seller.
(e) The accounts receivable included in the Assets shall be valued at
their aggregate face amount, without regard to any reserve for bad debts or
returns. Publishing rights reflected as assets will be $211,009, and capitalized
internet costs shall not exceed $40,000. All leasehold improvements and other
capitalized assets related to the New York showroom and any other lease which
expires on or expired before the closing date will be written off.
2.8 Adjustment Amount and Payment.
The "Adjustment Amount" (which may be a positive or negative number) will
be equal to the amount determined by subtracting the Closing Net Asset Value
from $47,000,000. If the Adjustment Amount is positive, the Adjustment Amount
shall be paid by Fedwire fund transfer by Seller to an account specified by
Buyer. If the Adjustment Amount is negative, the Adjustment Amount shall be
paid by Fedwire fund transfer by Buyer to an account specified by Seller. All
payments shall be made together with interest at the Applicable Rate, which
interest shall begin accruing on the Closing Date and end on the date that
payment is made. Seller or Buyer, as the case may be, shall make the wire
transfer payment provided for in this Section 2.8, within three (3) business
days after the calculation of the Closing Net Asset Value and the Adjustment
Amount becomes binding and conclusive on the Parties pursuant to Section 2.7.
2.9 Allocation of Purchase Price.
Buyer and Seller agree to allocate (for federal Tax purposes) the Purchase
Price and the Assumed Liabilities to the Assets in the manner set forth on
Exhibit G. Seller and Buyer further agree to cooperate in preparing and filing
Form 8594 to be filed with the IRS reflecting the allocation set forth on
Exhibit G and acknowledge and agree that such allocation was determined by
arm's length negotiations and that none of them will take a position on any tax
return, before any governmental agency charged with the collections of any
income tax, or in any judicial proceeding, that is inconsistent with such
allocation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
3.1 Representations and Warranties of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales.
Each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, jointly and severally, represents
and warrants to Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this
Section 3.1) with respect to ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, except as set
forth in Annex I.
(a) Organization. Each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales is a corporation
duly organized, validly existing, and in good standing under the laws of its
State of incorporation.
(b) Authorization of Transaction. Each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales
has full corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder, as applicable. This Agreement and
each of the Seller Closing Documents to which each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ or ▇▇▇▇▇▇
Sales is a party constitutes the valid and legally binding obligation of ▇▇▇▇▇▇,
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, respectively, enforceable in accordance with its terms
and conditions.
(c) Noncontravention. Except as set forth on Schedule 4.2, neither the
execution and the delivery of this Agreement by ▇▇▇▇▇▇, nor the consummation of
the transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
▇▇▇▇▇▇ is subject or any provision of its charter or bylaws or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which ▇▇▇▇▇▇ is a party or by which ▇▇▇▇▇▇
is bound or to which any of ▇▇▇▇▇▇'▇ assets is subject. ▇▇▇▇▇▇ need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a Seller Material Adverse Effect or a material adverse
effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
(d) Shares. ▇▇▇▇▇▇ holds of record and owns beneficially all issued and
outstanding shares of capital stock of ▇▇▇▇▇▇. ▇▇▇▇▇▇ holds of record and owns
beneficially all issued and outstanding capital stock of ▇▇▇▇▇▇ Sales.
3.2 Representations and Warranties of Buyer.
Buyer represents and warrants to ▇▇▇▇▇▇ and Seller that the statements
contained in this Section 3.2 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3.2).
(a) Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. Buyer has full corporate power and
authority to execute and deliver this Agreement and the Buyer Closing Documents
and to perform its obligations under this Agreement and the Buyer Closing
Documents. Each of this Agreement and the Buyer Closing Documents constitutes
the valid and legally binding obligation of Buyer, enforceable in accordance
with its terms and conditions. Buyer need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated by this
Agreement by Buyer or the Buyer Closing Documents will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Buyer is subject or any provision of its articles or certificate
of incorporation or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Buyer is a party or by which it is bound or to which any of its assets
is subject.
(d) Brokers' Fees. Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which ▇▇▇▇▇▇ or Seller could become liable or
obligated.
(e) Sufficient Funds. Buyer has or will have at Closing sufficient funds
to consummate the transactions contemplated hereby, including, without
limitation, to pay the Purchase Price in accordance with the terms of this
Agreement, and has all requisite power and authority to make payment of such
funds in the manner described herein and such funds are and will be at the time
of the consummation of the transactions hereby contemplated free and clear of
all claims, liens and encumbrances. To the extent such funds have been or will
be obtained through any loan or financing arrangement, the execution, delivery
and performance of any agreements relating to such arrangements, by Buyer and
the other party or parties have been duly and validly authorized by all
necessary corporate action on the part of Buyer and such other party or parties
and constitute valid and binding obligations of Buyer and such other party or
parties in accordance with their terms. At or prior to Closing, all conditions
to the obligations of the other party or parties to such loan or financing
arrangements to make the loans contemplated thereby will have been fulfilled or
waived.
(f) Capitalization. The authorized equity securities of Buyer consist of
ten million (10,000,000) shares of common stock, par value one dollar ($1.00)
per share, of which at least 4.5 million (4,500,000) shares are issued and
outstanding (the "Shares"). There are no contracts relating to the issuance,
sale or transfer of any equity securities or other securities of Buyer, other
than customary stock transfer restrictions among the shareholders. Buyer has
net assets consisting of cash in an amount of not less than $9,000,000.
(g) Solvency. Both before and after giving effect to the transactions
contemplated by the terms and provisions of this Agreement, Buyer (i) owns
assets whose fair saleable value is greater than the amount required to pay all
of Buyer's Indebtedness (including contingent debts and liabilities), (ii) was
and is able to pay all of its Indebtedness as such indebtedness matures, and
(iii) had and has capital sufficient to carry on its business and transactions
and all business and transactions in which it is about to engage. For purposes
of this Agreement, the term "Indebtedness" means, without duplication (x) all
items which in accordance with generally accepted accounting principles (GAAP)
consistently applied would be included in determining total liabilities as
shown as a liability on a balance sheet of Buyer as of the date on which
Indebtedness is to be determined, and (y) all obligations of any other person
or entity which such Buyer has guaranteed or insured.
(h) Bank Commitment. Buyer has delivered to Seller a copy of relevant
portions of the executed commitment letter from its lender undertaking to
provide financing for the transactions contemplated hereby, and such commitment
letter is binding on the lender and Buyer and is in full force and effect. Such
commitment has not been amended, modified or rescinded.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES CONCERNING THE GIFT BUSINESS
▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, jointly and severally represent and
warrant to Buyer that the statements contained in this ARTICLE IV are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this ARTICLE IV), except
as set forth in the disclosure schedules delivered by Seller to Buyer on the
date hereof (the "Disclosure Schedules").
4.1 Organization, Qualification, and Corporate Power.
Each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such qualification
is required, except where the lack of such qualification would not have a
material adverse effect on the business, financial condition, operations, or
results of operations ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales taken as a whole (a "Seller
Material Adverse Effect"). Each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales has full corporate
power and authority to carry on the businesses in which it is engaged and to
own and use the Assets owned and used by it. Disclosure Schedule 4.1 lists the
states of incorporation of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, and the jurisdictions in
which each is qualified to do business.
4.2 Noncontravention.
Except as set forth on Disclosure Schedule 4.2, neither the execution and
the delivery of this Agreement, nor the consummation of the transactions
contemplated by this Agreement or the Seller's Closing Documents by Seller,
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales is subject
or any provision of the charter, certificate of incorporation or articles of
incorporation, as applicable, or bylaws of either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales or
(b) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales
is a party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets), as
applicable, except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Security
Interest would not have a Seller Material Adverse Effect or a material adverse
effect on the ability of the Parties to consummate the transactions contemplated
by this Agreement. Seller is not required to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
Seller Material Adverse Effect or a material adverse effect on the ability of
the Parties to consummate the transactions contemplated by this Agreement. For
purposes of this Section 4.2 only, failure to receive a waiver or consent
required under licenses with revenues to Seller of less than $500,000 for the
period April 1, 2000 to March 31, 2001 will not be deemed to have a Seller
Material Adverse Effect or a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement, and are
not scheduled.
4.3 Brokers' Fees.
None of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales has any liability or obligation to
pay any fees or commissions to any broker, finder, or agent (other than to UBS
Warburg, LLC, for which payment ▇▇▇▇▇▇ is responsible and against which payment
▇▇▇▇▇▇ and Seller, jointly and severally, will indemnify and hold harmless the
Buyer) with respect to the transactions contemplated by this Agreement.
4.4 Title to Assets.
Seller has, will have, or will cause to be sold, assigned, transferred,
conveyed or delivered, good and marketable title to, or a valid leasehold
interest in, the Assets, subject to the Permitted Encumbrances, but free and
clear of all Security Interests, except for properties and assets disposed of
in the Ordinary Course of Business since the date of the Most Recent Financial
Statements. The Assets constitute all the material assets and rights used in the
conduct of the Gift Business, except for those assets and rights which will be
provided to Buyer by ▇▇▇▇▇▇ pursuant to the Transition Services Agreement
attached hereto as Exhibit D.
4.5 Financial Statements.
Seller has supplied to Buyer the following financial statements
(collectively, the "Financial Statements"):
(a) Audited Special Purpose Statement of Assets and Liabilities and
Special Purpose Statement of Revenues and Expenses before interest expense and
Taxes ("March 31 Special Purpose Statement") as of and for the fiscal year ended
March 31, 2001 (the "Most Recent Fiscal Year End"), which include the financial
results of the Gift Business only; and
(b) Unaudited Statement of Assets and Liabilities and Statement of
Revenues and Expenses before interest expense and Taxes (the "Most Recent
Financial Statements") as of and for the three (3) months ended June 30, 2001
(the "Most Recent Fiscal Month End"), which include the financial results of
the Gift Business only.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the assets and liabilities of Seller as of
such dates and the revenues and expenses before income taxes and interest
expense for such periods, are consistent with the books and records of
Seller; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments which will not be material,
individually or in the aggregate and lack footnotes and other presentation
items.
4.6 Subsequent Events.
Except as set forth in Disclosure Schedule 4.6, since the Most Recent
Fiscal Month End, there has not been any material adverse change in the
business, financial condition, operations, or results of operations of Seller.
Without limiting the generality of the foregoing, since that date:
(a) Seller has not sold, leased, transferred, or assigned any assets,
tangible or intangible, outside the Ordinary Course of Business;
(b) Seller has not entered into any agreement, contract, lease, or
license outside the Ordinary Course of Business;
(c) Seller has not accelerated, terminated, made material modifications
to, or canceled any agreement, contract, lease, or license involving more than
$50,000 to which either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales is a party;
(d) Seller has not imposed any Security Interest upon any of its assets,
tangible or intangible;
(e) Seller has not made any capital expenditures outside the Ordinary
Course of Business;
(f) Seller has not made any equity investment in any other Person and
has not made any loan to any other Person outside the Ordinary Course of
Business;
(g) Seller has not created, incurred, assumed, or guaranteed more than
$50,000 in aggregate indebtedness for borrowed money and capitalized lease
obligations and all of such obligations will be reflected on the Closing
Statement if outstanding at Closing;
(h) Seller has not granted any license or sublicense of any material
rights under or with respect to any Intellectual Property;
(i) there has been no material change made or authorized in the charter,
certificate of incorporation or articles of incorporation, as applicable, or
bylaws of ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales;
(j) Seller has not experienced any material damage, destruction, or loss
(whether or not covered by insurance) to its properties;
(k) Seller has not has made any loan to any of its or ▇▇▇▇▇▇'▇ directors
or officers, or to employees in an amount above $5,000, or entered into any
other transaction with any of its or ▇▇▇▇▇▇'▇ directors, officer and employees
outside the Ordinary Course of Business which will be binding upon Buyer;
(l) Seller has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any existing
such contract or agreement;
(m) Seller has not granted any increase in the base compensation of any
of its employees outside the Ordinary Course of Business and a listing, by
employee and amount, of all such increases within the Ordinary Course of
Business has been provided by Buyer;
(n) Seller has not made any other material change in employment terms for
any of its employees outside the Ordinary Course of Business for which Buyer
may become responsible;
(o) Seller has not unreasonably delayed or accelerated the payment of
any liability, including but not limited to, any vendor payables and has
continued to pay all such liabilities in the Ordinary Course of Business;
(p) Seller has not cancelled, compromised, waived or released any right
or claims, or requested any customer to accelerate the payment of any Accounts
Receivable outside the Ordinary Course of Business or granted to any customer
any extension of time for the payment of any Accounts Receivable outside the
Ordinary Course of Business;
(q) Seller has not received any notice that any supplier or customer of
the Seller has taken or contemplates any steps intended to disrupt the business
relationship of Seller with such supplier or customer, and to the Knowledge of
Seller, none of such customers has entered into agreements or expressed any
intention to enter into agreements with other suppliers for the goods sold by
Seller;
(r) Seller has not made any purchase commitments for merchandise or other
products in excess of the normal, ordinary and usual requirements of the Gift
Business or at any price in excess of the then market price or upon terms and
conditions more onerous than those usual and customary for Seller, or made any
change in the Seller's selling, pricing, advertising or personnel practices
inconsistent with its prior practices.
4.7 Undisclosed Liabilities.
Except as set forth on Disclosure Schedule 4.7, to the Knowledge of Seller,
Seller has no liability (and there is no basis for any present or future
actions, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against Seller giving rise to any liability), except for (i) liabilities
set forth on the face of the Most Recent Financial Statements and
(ii) liabilities which have arisen after the Most Recent Fiscal Month End in
the Ordinary Course of Business.
4.8 Legal Compliance.
Except as set forth on Disclosure Schedule 4.8, each of Seller and Seller's
Affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure to so comply, except where the failure to comply would
not have a Seller Material Adverse Effect.
4.9 Tax Matters.
(a) Each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales has filed all Tax Returns which were
required to be filed or has received, and is currently under, an extension of
time for the filing of any such Tax Return which was required to be filed and
has not been filed. All such filed Tax Returns were correct and complete in all
material respects. All Taxes shown on such filed Tax Returns have been paid.
(b) Each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.
(c) There is no material dispute or claim concerning any Tax liability of
either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales either (i) claimed or raised by any authority in
writing or (ii) as to which ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales has Knowledge based upon
personal contact with any agent of such authority.
(d) Except as shown on Disclosure Schedule 4.9, neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇
Sales 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.
(e) Each Affiliated Group has filed or made appropriate provision to file
all Tax Returns that it was required to file for each taxable period during
which either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales was a member of the group, and has paid all
Taxes shown thereon as owing, except where a failure to file or pay Taxes would
not have a Seller Material Adverse Effect.
4.10 Real Property.
(a) Disclosure Schedule 4.10(a) lists and describes briefly all real
property owned by ▇▇▇▇▇▇, or which will be owned by ▇▇▇▇▇▇ as of the Closing.
▇▇▇▇▇▇ Sales owns no real property. With respect to each such parcel of Owned
Real Property:
(i) ▇▇▇▇▇▇ has, or will have at or prior to Closing, good and
marketable title to the parcel of real property, free and clear of any
Security Interest, except any Permitted Encumbrances;
(ii) there are no pending or, to the Knowledge of ▇▇▇▇▇▇ and ▇▇▇▇▇▇
Sales, threatened condemnation proceedings, lawsuits, or administrative
actions relating to the real property or other matters affecting
materially and adversely the current use, occupancy, or value thereof;
(iii) the buildings and improvements located on such parcel are
located within the boundary lines of such parcel, are not in material
violation of applicable setback requirements, zoning laws, and ordinances
(and none of the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted nonconforming
structure" classifications), and do not encroach on any easement which may
burden the land, except where the failure to be located within such
boundary lines, such violations or such encroachments would not have a
material adverse effect on the operations of the Gift Business as
currently conducted;
(iv) all facilities have received all approvals of governmental
authorities (including material licenses and permits) required in
connection with the ownership or operation thereof, and have been operated
and maintained in accordance with applicable laws, rules, and regulations
in all material respects;
(v) there are, or will be at Closing, no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any party
or parties the right of use or occupancy of any portion of the parcel of
real property; and
(vi) there are, or will be at Closing, no outstanding options or
rights of first refusal to purchase the parcel of real property, or any
portion thereof or interest therein.
(b) Disclosure Schedule 4.10(b) lists and describes briefly all real
property leased or subleased to either of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales. Seller has
delivered to Buyer correct and complete copies of the leases and subleases
listed in Disclosure Schedule 4.10(b) (as amended to date). With respect to
each lease and sublease listed in Disclosure Schedule 4.10(b), except as set
forth in Schedule 4.2, and with respect to any third party, to Seller's
Knowledge:
(i) the lease or sublease is legal, valid, binding, enforceable, and
in full force and effect in all material respects and will be in full
force and effect in all material respects immediately following the
Closing;
(ii) no party to the lease or sublease is in material breach or
default, and no event has occurred which, with notice or lapse of time,
would constitute a material breach or default or permit termination,
modification, or acceleration thereunder;
(iii) no party to the lease or sublease has repudiated any material
provision thereof;
(iv) there are no material disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(v) neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇ Sales has assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
(vi) all facilities leased or subleased thereunder have received all
approvals of governmental authorities (including material licenses and
permits) required in connection with the operation thereof, and have been
operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects.
(c) To Seller's Knowledge, there is no condemnation, expropriation or
other proceeding in eminent domain, pending or threatened, affecting any parcel
of Property or any portion thereof or interest therein. There is no injunction,
decree, order, writ or judgment outstanding, nor any claims, litigation,
administrative actions or similar proceedings, pending, in each case naming
▇▇▇▇▇▇ or Seller as a party, or to Seller's Knowledge, threatened, relating to
the ownership, lease, use or occupancy of the Property owned by Seller or any
portion thereof, or the operation of the Gift Business as currently conducted
thereon.
(d) Seller has not received any notice of violation of any applicable
law with respect to the Property owned by ▇▇▇▇▇▇.
(e) Seller has not received any notice from any governmental authority or
other entity having jurisdiction over the Property owned by ▇▇▇▇▇▇ threatening
a supervision, revocation, modification or cancellation of a certificate or
permit required to occupy the Property.
4.11 Intellectual Property.
(a) Except as set forth on Schedule 4.11(a), Seller owns and possesses or
has the right to use, and the Assets include, all Intellectual Property used in
the operation of the Gift Business as presently conducted. Except as set forth
on Disclosure Schedule 4.11(a), Seller has not interfered with, infringed upon,
misappropriated, or violated any Intellectual Property rights of third parties
in any material respect, and none of the directors and officers of ▇▇▇▇▇▇ and
▇▇▇▇▇▇ Sales has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales must license or refrain
from using any Intellectual Property rights of any third party). To the
Knowledge of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, no third party has interfered with,
infringed upon, misappropriated, or violated any material Intellectual Property
rights of either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales in any material respect.
(b) Disclosure Schedule 4.11(b) identifies each (i) registered patent,
copyright, trademark and service ▇▇▇▇ which has been issued to either ▇▇▇▇▇▇ or
▇▇▇▇▇▇ Sales, (ii) pending patent, trademark copyright, trademark and service
▇▇▇▇ application or application for registration filed by either ▇▇▇▇▇▇ or
▇▇▇▇▇▇ Sales, and (iii) material license, agreement, or other permission which
any of Seller and ▇▇▇▇▇▇ Sales has granted to any third party with respect to
any of its Intellectual Property. Seller has made available to Buyer correct
and complete copies of all such patents, copyrights, trademarks and service
marks, including all registrations, applications, licenses, agreements, and
permissions relating thereto (as amended to date). Disclosure Schedule 4.11(b)
also identifies each material trade name, unregistered trademark and
unregistered service ▇▇▇▇ used by either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales in connection
with the Gift Business. With respect to each item of Intellectual Property
required to be identified in Disclosure Schedule 4.11(b):
(i) ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales possess all right, title, and interest in
and to the item owned or used by such party, free and clear of any
Security Interest, license, or other restriction;
(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of ▇▇▇▇▇▇ and
▇▇▇▇▇▇ Sales, is threatened which challenges the legality, validity,
enforceability, use, or ownership of the item;
(iv) neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇ Sales has ever agreed to indemnify any
Person for or against any interference, infringement, misappropriation,
or other conflict with respect to the item; and
(v) no loss or expiration of the item is threatened or pending,
except for items expiring at the end of their terms.
(c) Disclosure Schedule 4.11(c) identifies each material item of
Intellectual Property that any third party owns and that either ▇▇▇▇▇▇ or
▇▇▇▇▇▇ Sales uses pursuant to license, sublicense, agreement, or permission.
Seller has delivered to Buyer correct and complete copies of the 25 licenses,
sublicenses, agreements, and permissions (as amended to date) producing the
highest revenues in the period April 1, 2000 to March 31, 2001, as listed on
Schedule 4.11(c). With respect to each item of Intellectual Property required
to be identified in Disclosure Schedule 4.11(c):
(i) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable, and in full force and effect
in all material respects;
(ii) no party to the license, sublicense, agreement, or permission is
in material breach or default, and no event has occurred which with
notice or lapse of time would constitute a material breach or default or
permit termination, modification, or acceleration thereunder;
(iii) no party to the license, sublicense, agreement, or permission
has repudiated any material provision thereof;
(iv) as to each licensee, Seller has paid or accrued all royalties
due and payable;
(v) neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇ Sales has granted any sublicense or
similar right with respect to the license, sublicense, agreement, or
permission.
(d) Schedule 2.6(b) includes all licenses for which annual sales of
product for Seller's fiscal year ended March 31, 2001 were greater than
$500,000, which require consent to transfer or assign to Buyer.
4.12 Tangible Assets.
Except as set forth on Schedule 4.12, the buildings, machinery, equipment,
and other tangible assets included within the Assets (except those that Seller
has fully depreciated prior to the Closing) are free from material defects,
have been maintained in accordance with normal industry practice, and are in
good operating condition and repair (subject to normal wear and tear).
4.13 Inventories.
Seller is not in possession of any inventory not owned by Seller, including
goods already sold. Inventories now on hand that were purchased after the date
of the Most Recent Financial Statements were purchased in the Ordinary Course of
Business in reasonable quantities at a cost not exceeding market prices
prevailing at the time of purchase. Schedule 4.13 lists all locations where
Seller's inventory is located.
4.14 Contracts.
Disclosure Schedule 4.14 lists the following contracts and other agreements
to which either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $50,000 per annum;
(b) any agreement (or group of related agreements) for the purchase or
sale of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services, the performance of which
will extend over a period of more than one year or involve consideration in
excess of $50,000 per annum.
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation or under which it has imposed a Security
Interest on any of its owned assets, tangible or intangible;
(e) any material agreement concerning confidentiality or noncompetition
including all confidentiality agreements in favor of ▇▇▇▇▇▇ or Seller relating
to the sale of the Gift Business or any interest therein (a list of, and copies
of which, agreements will be provided at Closing), to the extent such agreements
are assignable and to the extent third parties' obligations thereunder will
survive the Closing under this Agreement;
(f) any material agreement between either Seller and any of its Affiliates
(other than ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales), except to the extent such agreement will
be superseded or replaced by the Transition Services described hereinafter;
(g) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other material plan or arrangement for the
benefit of its current or former directors, officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in excess
of $75,000 or providing material severance benefits;
(j) any agreement under which it has advanced or loaned any amount to any
of its directors or officers, or to its employees in an amount of $10,000 or
more;
(k) any agreement under which the consequences of a default or termination
could have a Seller Material Adverse Effect; or
(l) any other agreement (or group of related agreements) the performance
of which involves consideration paid by Seller in excess of $50,000 per annum
which cannot be terminated on no more than 30 days' notice without breach
thereof.
Seller has delivered to Buyer a correct and complete copy of each written
agreement listed in Disclosure Schedule 4.14, except confidentiality agreements
listed pursuant to subsection (e) above. With respect to each such agreement
except confidentiality agreements listed pursuant to subsection (e) above, as
to which no representation is made; (x) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (y) neither
▇▇▇▇▇▇ nor ▇▇▇▇▇▇ Sales nor to the Knowledge of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, any
other party is in material breach or default, and no event has occurred prior
to Closing which with notice or lapse of time would constitute a material breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (z) neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇ Sales nor, to the Knowledge of
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, any other party has repudiated any material provision
of the agreement.
4.15 Accounts Receivable.
All accounts receivable of Seller arise from the sale of inventory in the
Ordinary Course of Business, and are reflected fairly on the books and records
of Seller.
4.16 Insurance.
▇▇▇▇▇▇ for the benefit of Seller maintains and has maintained for the
preceding three years insurance policies (including, as applicable, policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) appropriate to the size and nature of the Gift
Business. With respect to each such insurance policy, the policy is, or was at
the time of its effective date of coverage, legal, valid, binding, enforceable,
and in full force and effect in all material respects. ▇▇▇▇▇▇'▇ and Seller's
general liability and umbrella insurance policies with respect to the Gift
Business are occurrence-based policies.
4.17 Litigation.
Disclosure Schedule 4.17 sets forth each instance in which either ▇▇▇▇▇▇
or ▇▇▇▇▇▇ Sales (a) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (b) is a party or, to the Knowledge of ▇▇▇▇▇▇ and
▇▇▇▇▇▇ Sales, is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator or mediator.
4.18 Products Liability.
To the Knowledge of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇
Sales has any liability arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product sold by Seller
prior to the Closing.
4.19 Employees.
To the Knowledge of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, no executive, key employee,
or significant group of employees plans to terminate employment with either
▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales during the next twelve months, other than ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇ ▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇. Neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇ Sales
is a party to or bound by any collective bargaining agreement, nor has any of
them experienced any strike or material grievance, claim of unfair labor
practices, or other collective bargaining dispute within the past three years.
Neither ▇▇▇▇▇▇ nor ▇▇▇▇▇▇ Sales has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales.
4.20 Employee Benefits.
(a) Disclosure Schedule 4.20 lists each Employee Benefit Plan that either
▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales maintains or to which either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales
contributes. Seller has delivered to Buyer (i) a copy of each such Employee
Benefit Plan, (ii) a copy or written summary of all other written and unwritten
compensation plans, performance compensation plans, vacation plans, bonus plans,
incentive plans, deferred compensation agreements, individual (unqualified)
pension and retirement plans, profit sharing plans, and group or individual
medical, health, dental, accident, disability, life and other employee benefit,
insurance, and other plans or arrangements providing for benefits for employees
of Seller, and (iii) a complete description of all written and unwritten
policies and practices describing termination payments and benefits to
terminated employees of the Seller.
(b) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) has been maintained, funded and administered in accordance
with its terms and complies in form and in operation with the applicable
requirements of ERISA, the Code, and other applicable laws.
(c) Seller does not contribute to, has no obligation to contribute to,
and has no liability (including any withdrawal liability as defined in ERISA
Section 4201) under or with respect to any Multiemployer Plan.
(d) Seller does not maintain, contribute to or have any obligation to
contribute to, or have any liability or potential liability with respect to any
Employee Welfare Benefit Plan providing medical, health, or life insurance or
other welfare-type benefits for directors, officers or employees already retired
or terminated as of the date of this Agreement, retired or terminated or future
retired or terminated directors, officers or employees of Seller (or any spouse
or other dependent thereof) other than in accordance with COBRA.
4.21 Environmental, Health, and Safety Matters.
(a) Each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ Sales, and their respective Affiliates is in
compliance, in all material respects, with all Environmental, Health, and Safety
Requirements.
(b) Without limiting the generality of Section 4.21(a), each of ▇▇▇▇▇▇,
▇▇▇▇▇▇ Sales, and their respective Affiliates, has obtained and is in compliance
with, in all material respects, all material permits, licenses and other
authorizations that are required pursuant to Environmental, Health, and Safety
Requirements for the operation of its business, and a list of all such permits,
licenses and other authorizations, is set forth on Schedule 4.21(b).
(c) Except as set forth in Disclosure Schedule 4.21(c) none of Seller,
▇▇▇▇▇▇ Sales, or their respective Affiliates has received any written notice
from any federal, state, local or foreign governmental authority regarding any
actual or alleged material violation of Environmental, Health, and Safety
Requirements, and there is no material liability or potential material liability
(whether accrued, absolute, contingent, unliquidated or otherwise), including
any material investigatory, remedial or corrective obligations, relating to
any of them or their facilities arising under Environmental, Health, and Safety
Requirements.
(d) Except as set forth in Disclosure Schedule 4.21(d), to the Knowledge
of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, none of the following exists at any property or
facility owned or operated by ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales: (i) underground storage
tanks, (ii) asbestos containing material in any friable and damaged form or
condition, or (iii) landfills, surface impoundments, or Hazardous Material
disposal areas.
(e) Neither ▇▇▇▇▇▇, ▇▇▇▇▇▇ Sales, nor any of their respective Affiliates
has treated, stored, disposed of, arranged for the disposal of, transported,
handled, or released any Hazardous Materials in a manner that has given or is
likely to give rise to material liabilities, including any material liability
for response costs, corrective action costs, personal injury, property damage,
or natural resources damages, pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or the Solid Waste
Disposal Act, as amended, or any other Environmental, Health, and Safety
Requirements.
(f) Neither this Agreement nor the consummation of the transaction that
is the subject of this Agreement will result in any material obligations for
site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
4.22 Certain Business Relationships With ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales.
Except as set forth on Disclosure Schedule 4.22 and except for services
comparable to those to be made available under the Transition Services
Agreement, none of ▇▇▇▇▇▇ and its Affiliates (other than ▇▇▇▇▇▇ and ▇▇▇▇▇▇
Sales) has been involved in any material business arrangement or relationship
with either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales within the past 12 months.
ARTICLE V.
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
5.1 General.
Each of the Parties will use their reasonable best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
ARTICLE VII).
5.2 Notices and Consents.
Seller shall give any notices to third parties, and will use its reasonable
best efforts to obtain the Contract Consents. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3.1,
Section 3.2(b), and Section 4.2.
5.3 Operation of Business.
▇▇▇▇▇▇ will not cause or permit ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales to engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, without
the prior written consent of Buyer, ▇▇▇▇▇▇ will not cause or permit ▇▇▇▇▇▇ and
▇▇▇▇▇▇ Sales, except in the Ordinary Course of Business, to engage in any
practice, take any action, or enter into any transaction of the type described
in Section 4.6.
5.4 Preservation of Business.
Each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales will keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees, other than with respect to Ceres Candles & Gifts, Inc.
5.5 Full Access.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ will permit, and will cause ▇▇▇▇▇▇ Sales to permit,
representatives of Buyer to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of Seller, to
all premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to Seller. Buyer will treat and hold
as such any Confidential Information it receives from Nelson, Gibson, and ▇▇▇▇▇▇
Sales in the course of the reviews contemplated by this Section 5.5, will not
use any of the Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason whatsoever, will
return to Nelson, Gibson, and ▇▇▇▇▇▇ Sales all tangible embodiments (and all
copies) of the Confidential Information in its possession.
5.6 Notice of Developments.
Seller will give prompt written notice to Buyer of any material adverse
development causing a breach of any of the representations and warranties in
Section 3.1 or ARTICLE IV. Buyer will give prompt written notice to Seller of
any material adverse development causing a breach of any of Buyer's
representations and warranties in Section 3.2 or any material change in Buyer's
capitalization. No disclosure by any Party pursuant to this Section 5.6 shall be
deemed to amend or supplement the Disclosure Schedules or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
5.7 Exclusivity.
▇▇▇▇▇▇ will not, and will not cause or permit any of either ▇▇▇▇▇▇ or
▇▇▇▇▇▇ Sales to, (a) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the Assets, of
Seller (including any acquisition structured as a merger, consolidation, or
share exchange) or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. ▇▇▇▇▇▇ will not vote its shares of voting stock in ▇▇▇▇▇▇, and will
not permit ▇▇▇▇▇▇ to vote its shares of voting stock in ▇▇▇▇▇▇ Sales, in favor
of any such acquisition, regardless of how such transaction may be structured.
5.8 Title Insurance.
Seller has obtained a commitment for policies of title insurance (most
recent ALTA form) (the "Title Commitment") issued by Lawyers Title Insurance
Corporation. Buyer shall be responsible for paying, and Seller will reimburse
Buyer for one-half of, the costs of this Title Commitment, whether or not the
transaction contemplated by this Agreement is consummated; provided, however,
that such payment by Seller shall not exceed $250.00. Buyer shall pay the costs
of any title insurance obtained under the Title Commitment.
5.9 Buyer Actions.
Buyer agrees not to take any action that would cause a breach of
Section 3.2(f), Section 3.2(g), or Section 3.2(h) or would otherwise cause
Buyer to be unable to fund the Purchase Price or become insolvent.
5.10 Certain Excluded Licenses.
The Excluded Assets include licenses from Precious Moments and Media Arts
Group, Inc. that are used in part in the Gift Business. ▇▇▇▇▇▇ shall use its
reasonable efforts prior to Closing to obtain for the benefit of Buyer licenses
for such products (at no cost to Seller or ▇▇▇▇▇▇) for use by Buyer consistent
with the current use by Seller in the Gift Business, and to assist Buyer in
establishing a relationship with the relevant licensor and obtaining the ability
to sell any existing inventory. Seller's obligations to use reasonable efforts
under this section terminate upon Closing.
ARTICLE VI.
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
6.1 General.
In case at any time after the Closing, any further action is necessary to
carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party reasonably may request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under ARTICLE VIII). Seller acknowledges and agrees
that from and after the Closing, Buyer will be entitled to possession of all
documents, books, records (including tax records), agreements, and financial
data of any sort relating to the Assets and the Gift Business, except as
provided in Section 2.1(b).
6.2 Litigation Support.
In the event and for so long as any Party or Affiliate actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, judgment or demand in connection with
(a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales, each of the other
Parties will cooperate with such Party and such Party's counsel and cause its
Affiliates so to cooperate in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, at the sole cost
and expense of the contesting or defending Party or Affiliate (unless the
contesting or defending Party is entitled to indemnification therefor under
ARTICLE VIII).
6.3 Transition.
Neither ▇▇▇▇▇▇ nor Seller will take any action that is designed or intended
to have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of either ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales from maintaining the
same business relationships with respect to the Gift Business with Buyer after
the Closing as it maintained with Seller and ▇▇▇▇▇▇ Sales prior to the Closing.
This Section 6.3 shall not prevent ▇▇▇▇▇▇ from performing the Services on behalf
of Buyer as the same are defined in the Transition Services Agreement to be
entered into between ▇▇▇▇▇▇ and Buyer in the form attached hereto as Exhibit D
(the "Transition Services Agreement").
6.4 Confidentiality.
The terms and conditions of that certain Confidentiality Agreement by and
between Buyer and ▇▇▇▇▇▇ are incorporated by reference herein, and shall survive
the Closing indefinitely.
6.5 Covenant Not to Compete.
(a) For a period of two years from and after the Closing Date, neither
▇▇▇▇▇▇, ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales, nor any of their respective subsidiaries will
engage directly or indirectly in any business that the Gift Business conducts
as of the Closing Date including specifically the following lines of business:
baby products, tableware, gift wrap and gift bags and tissue, gift and keepsake
boxes, stationery, wedding products, journals and diaries, guest books, brag
books, bridge card products, photo albums and storage, memory and scrap books,
remembrance (memory) products, kitchen recipe products, calendars, recipe cards
and storage, and address books and candles and other product lines sold by
▇▇▇▇▇▇ or business engaged in by ▇▇▇▇▇▇ as of the date of this Agreement, as
generally reflected in the catalogs attached as Disclosure Schedule 6.5(a)(1)
(in the geographic area in which any of Seller and ▇▇▇▇▇▇ Sales conducts that
business as of the Closing Date); provided, however, that ownership of less than
five percent (5%) of the outstanding stock of any publicly-traded corporation
shall not be deemed to be a breach of this Section 6.5(a), and provided further
that no restrictions shall apply to product lines sold by ▇▇▇▇▇▇ or business
engaged in by ▇▇▇▇▇▇ as of the date of this Agreement, as generally reflected in
the catalogs attached as Disclosure Schedule 6.5(a)(2). The parties acknowledge
that Buyer is particularly concerned about the number of journal and planner
SKU's which may be sold by Seller or ▇▇▇▇▇▇ during the term of this Covenant
Not to Compete. Therefore, Seller and ▇▇▇▇▇▇ agree that during the term of
this Covenant Not to Compete, they shall not increase the number of such SKU's
as reflected in Disclosure Schedule 6.5(a)(2) by more than fifty percent (50%).
(b) If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 6.5 is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
6.6 Employee Benefits Matters.
(a) Buyer agrees that it will offer employment to all employees of Seller
and ▇▇▇▇▇▇ Sales as of the Closing Date which are listed on Disclosure
Schedule 6.6. Effective as of the Closing, Seller and ▇▇▇▇▇▇ Sales and each of
their present and former employees shall cease participating in Seller's
Employee Benefit Plans and those employees that accept employment with Buyer
shall commence participation in Employee Benefit Plans of Buyer, as to which
Buyer shall give credit for service prior to Closing for all purposes to the
extent permitted by law. Any preexisting condition restrictions under Buyer's
healthcare plans shall be waived and such employees shall be given credit in
applying any deductible and co-payment restrictions under such plans for
deductible and co-payment restrictions satisfied by such employees under the
health plans maintained by Seller. Claims incurred for present and former
employees of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales after the Closing Date under the Employee
Benefit Plans maintained by Buyer shall be the responsibility of Buyer and such
Employee Benefit Plans, and Seller shall have no liability for any cost, expense
or liability for any claim arising from any such Employee Benefit Plan for any
period after the Closing Date.
(b) For purposes of employee benefits under Sellers' Employee Benefit
Plans, all of the Gift Business's employees who accept employment with Buyer
shall be considered terminated employees and shall, except as required by COBRA,
have no further rights accrue to them under Sellers' Employee Benefit Plans
after the Closing, but this provision shall not affect any vested rights of any
such employees with respect to such Employee Benefit Plans.
6.7 WARN Act.
Buyer covenants that it will not take any action or fail to take any action
that would cause, on or within ninety (90) days following the Closing Date, a
Plant Closing or Mass Layoff resulting in Employment Loss at any of the
employment sites to be acquired from Seller, as those terms are defined by the
Worker Adjustment and Retraining Notification Act, Section 2101 et seq.
(the "WARN Act"); provided however, nothing in this Section 6.7 shall restrict
Buyer's rights to terminate some or all of the services to be provided by ▇▇▇▇▇▇
under the Transition Services Agreement, subject to the terms thereof, and
provided Buyer gives the ninety (90) days notice required thereunder, Buyer
shall have no liability to Seller for any cost, expense or liability arising
from any Plant Closing or Mass Layoff resulting from any such termination of
services under the Transition Services Agreement. Buyer hereby agrees to
indemnify, defend and hold harmless Seller from any loss, cost, expense or
liability that may be incurred by Seller and ▇▇▇▇▇▇ Sales as a result of any
claim made by an employee of the Gift Business pursuant to the WARN Act, which
claim results (a) from Buyer's not hiring persons who are employees of the Gift
Business at Closing or (b) from any action by Buyer to dismiss, terminate or
otherwise not employ persons who are employees of the Gift Business at Closing
(except those retained by ▇▇▇▇▇▇ or Seller pursuant to the Transition Services
Agreement) after the Closing. Buyer agrees to offer comparable employment to
persons who are employees of the Gift Business at Closing in numbers sufficient
to avoid any WARN Act liability upon Seller as a result of any actions taken
pursuant to this Agreement (without considering any closings or layoffs by
Seller at any location unrelated to this Agreement), but not with respect to any
employees retained by ▇▇▇▇▇▇ or Seller for purposes of providing the services
under the Transition Services Agreement.
6.8 Bulk Sales.
Buyer acknowledges that Seller is not complying with the provisions of the
bulk sales or similar laws of any and all states (the "Bulk Sales Laws"), and
Buyer hereby waives compliance by Seller therewith, but this waiver shall not
limit Seller's indemnification obligations with respect to any Excluded
Liabilities.
6.9 Accounts Receivable.
Beginning 180 days after the Closing, Buyer shall have the right and option
to convey to Seller any notes and accounts receivable included in the Assets
which were outstanding at Closing and which remain outstanding 180 days after
Closing. After notice thereof to Seller, Seller and ▇▇▇▇▇▇, jointly and
severally, agree to reimburse Buyer within 30 days of such notice for such
unpaid amounts, based on the face value of such note or receivable, provided
that Buyer has applied all cash received or all credits issued with respect to
any such obligor thereunder to the oldest amount then outstanding with respect
to any such note or account (except where application of such payment or credit
is specified by such obligor or except where Buyer, in its reasonable judgment,
has placed such customer on COD). Seller shall pay Buyer interest on such
unpaid amounts reimbursed to Buyer, at the Applicable Rate, such interest to be
computed from and after the ninety-first day after the Closing Date, accruing
to the date of reimbursement by Seller. As to any uncollected note or account
retained by Buyer longer than 210 days after the Closing, no recourse against
Seller shall be available.
6.10 Change of Name.
Within 30 days after the Closing Date, each of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales will
change its name to a name which is not similar to "▇.▇. ▇▇▇▇▇▇" and amend their
qualifications in those states to reflect the name change, or withdraw from
those states, where either of said corporations is qualified.
6.11 Liability Insurance.
▇▇▇▇▇▇ and Seller will keep in place liability insurance as they deem
appropriate, covering the operations of the Gift Business prior to the Closing
Date.
ARTICLE VII.
CONDITIONS TO OBLIGATION TO CLOSE
7.1 Conditions to Obligation of Buyer.
The obligation of Buyer to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties set forth in Section 3.1 and
Article 4 shall be true and correct in all material respects at and as of the
Closing Date;
(b) Each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ Sales and ▇▇▇▇▇▇ shall have performed and
complied with all of its covenants hereunder in all material respects through
the Closing;
(c) Seller shall have procured the Contract Consents to the extent
specified in Disclosure Schedule 2.6(b), or with respect to any material
Assumed Contract for which such Contract Consent has not been obtained, Seller
shall have provided Buyer with an alternative arrangement reasonably
satisfactory to Buyer ensuring that following the Closing, Buyer will receive
the benefits under such contract;
(d) No action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, or (iii) affect adversely the right of Buyer
to own the Assets and to operate the Gift Business (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(e) Seller shall have delivered to Buyer a certificate to the effect that
each of the conditions specified in Section 7.1(a)-(d) is satisfied in all
respects;
(f) The relevant parties shall have executed and delivered (or tendered
subject to Closing) the (i) Assignment/Assumption Agreement, (ii) ▇▇▇▇ of Sale;
(iii)Transition Services Agreement, (iv) the Lease Agreement and (v) the Real
Estate Conveyances;
(g) Buyer shall have received from counsel to Seller an opinion in form
and substance reasonably satisfactory to Buyer, addressed to Buyer, and dated
as of the Closing Date;
(h) Buyer shall have received all actions to be taken by ▇▇▇▇▇▇ and Seller
in connection with consummation of the transactions contemplated hereby; and
(i) All certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to Buyer. Buyer may waive any condition specified in this
Section 7.1 if it executes a writing so stating at or prior to the Closing.
7.2 Conditions to Obligation of Seller and ▇▇▇▇▇▇.
The obligation of Seller and ▇▇▇▇▇▇ to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the
following conditions:
(a) The representations and warranties set forth in Section 3.2 shall be
true and correct in all material respects at and as of the Closing Date;
(b) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(c) No action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement or
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(d) Buyer shall have delivered to Seller a certificate to the effect that
each of the conditions specified in Section 7.2(a)-(c) is satisfied in all
respects;
(e) The relevant parties shall have entered into the
(i) Assignment/Assumption Agreement, (ii) Lease Agreement and (iii) Transition
Services Agreement;
(f) Seller shall have received from counsel to Buyer an opinion in form
and substance reasonably satisfactory to Seller, addressed to Seller, and dated
as of the Closing Date;
(g) All actions to be taken by Buyer in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
Seller;
(h) Buyer shall provide valid resale certificates to Seller under the
sales and use tax laws of all states in which Seller maintains inventory; and
(i) Seller shall have received a corrective deed in connection with the
Owned Real Property sufficient for Seller to convey the Owned Real Property to
Buyer.
Seller may waive any condition specified in this Section 7.2 if it executes a
writing so stating at or prior to the Closing.
ARTICLE VIII.
INDEMNIFICATION
8.1 Survival of Representations and Warranties.
All of the representations and warranties of ▇▇▇▇▇▇ and Seller contained
in Section 3.1 and ARTICLE IV shall survive the Closing (unless Buyer had Actual
Knowledge of any misrepresentation or breach of warranty at the time of Closing)
and continue in full force and effect for a period of eighteen months
thereafter, except (a) the representations and warranties set forth in
Sections 4.9, 4.19, 4.20, and 4.21, which shall survive the Closing (unless
Buyer had Actual Knowledge of any misrepresentation or breach of warranty at
the time of Closing) and continue in full force and effect until the applicable
statute of limitations expires (or for a period of five years if there is no
applicable statute of limitations) and (b) the representations and warranties
set forth in ARTICLE III and Section 4.1 shall continue in full force and
effect forever (even if the Party suffering Adverse Consequences resulting
from the breach thereof knew or had reason to know of any misrepresentation
or breach of warranty at the time of the Closing). All of the representations
and warranties of Buyer contained in ARTICLE III shall survive the Closing
(unless Seller knew of any misrepresentation or breach of warranty at the
time of Closing) and continue in full force and effect forever. "Actual
Knowledge" with respect to this Section 8.1 shall mean the actual knowledge
of any of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇.
8.2 Indemnification Provisions for Benefit of Buyer.
(a) In the event Seller or ▇▇▇▇▇▇ breaches (or in the event any third
party alleges facts that, if true, would mean ▇▇▇▇▇▇ or Seller has breached)
any representations, warranties, and covenants of ▇▇▇▇▇▇ or Seller contained
herein, and, if there is an applicable survival period pursuant to Section 8.1
provided Buyer issues a Claim Notice within such survival period, then each of
▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales jointly and severally agrees to indemnify Buyer
from and against the entirety of any Adverse Consequences Buyer may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences suffered after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
(b) Each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales, jointly and severally, agrees
to indemnify Buyer from and against the entirety of any Adverse Consequences
Buyer may suffer resulting from the Excluded Liabilities.
(c) Each of ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇ Sales (collectively, the "Seller
Indemnifying Parties"), jointly and severally, agrees to indemnify Buyer from
and against the entirety of any Adverse Environmental Consequences Buyer may
suffer with respect to the Owned Real Property, subject to the following:
(i) The Seller Indemnifying Parties shall not be required to
indemnify or hold harmless Buyer with respect to any Adverse Environmental
Consequence unless Buyer notifies Seller in writing of any demand that
the Seller Indemnifying Parties indemnify Buyer under the terms of this
Section 8.2(c) (hereinafter referred to as "Indemnification Demand"), not
later than 30 days after Buyer's receipt from any governmental authority
with jurisdiction over the Owned Real Property of written notice or other
indication of, a violation of, or that investigation or cleanup is or may
be required pursuant to, any Environmental Laws relating to the Owned Real
Property. Upon receipt of an Indemnification Demand, the Seller
Indemnifying Parties may, at their option and at their sole expense,
assume the defense of such matter or take any required action at the
Owned Real Property.
(ii) Buyer agrees to give the Seller Indemnifying Parties, their
agents, consultants and representatives, access to the Owned Real Property
in order to allow the Seller Indemnifying Parties to take any required
action at the Owned Real Property and to provide all cooperation
reasonably requested by the Seller Indemnifying Parties in connection
therewith.
(iii) The Seller Indemnifying Parties shall not be required to
investigate or remediate any contamination existing at, on, under or from
the Owned Real Property unless such investigation or remediation is
ordered in writing by a governmental authority with jurisdiction over the
Owned Real Property.
(iv) The Seller Indemnifying Parties' obligation to remediate any
contamination shall not be more stringent than that required to obtain a
"No further remediation required letter", or the equivalent of such
letter, from that governmental authority.
(v) The Seller Indemnifying Parties shall not be obligated to
indemnify Buyer for any Adverse Environmental Consequence to the extent
that it arises from the acts or omissions of any person or entity other
than the Seller Indemnifying Parties after the Closing Date.
(vi) Buyer shall not, without the prior written consent of Seller,
take any actions not required by law that could reasonably be anticipated
to cause the initiation of any Adverse Environmental Consequence or
accelerate the timing of, or increase the costs of, any required
investigation, cleanup or monitoring.
(vii) The Seller Indemnifying Parties' obligation to indemnify Buyer
with respect to any Adverse Environmental Consequence shall terminate in
full at the time that Buyer's Put Option (as defined in the Lease
Agreement) expires, unless either Buyer has exercised that option or
▇▇▇▇▇▇ has exercised its Call Option (as defined in the Lease Agreement).
8.3 Indemnification Provisions for Benefit of Seller and ▇▇▇▇▇▇.
In the event Buyer breaches (or in the event any third party alleges facts
that, if true, would mean Buyer has breached) any representations, warranties,
and covenants of Buyer contained herein, and, if there is an applicable survival
period pursuant to Section 8.1 (provided Seller or ▇▇▇▇▇▇ issues a Claim Notice
within such survival period), then Buyer agrees to indemnify Seller and ▇▇▇▇▇▇
from and against the entirety of any Adverse Consequences Seller or ▇▇▇▇▇▇ may
suffer through and after the date of the claim for indemnification (including
any Adverse Consequences suffered after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of or caused
by the breach (or the alleged breach). Further, Buyer agrees to indemnify Seller
for any sales or use tax liability of Seller caused by Buyer's failure to
provide resale certificates as provided in Section 7.2(h), whether or not the
Seller waives that condition to close. Buyer agrees to indemnify Seller and
▇▇▇▇▇▇ from and against the entirety of any Adverse Consequences Seller or
▇▇▇▇▇▇ may suffer resulting from the Assumed Liabilities.
8.4 Procedure for Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against any other Party (the "Indemnifying Party")
under this ARTICLE VIII, then the Indemnified Party shall promptly issue a
Claim Notice to the Indemnifying Party with respect thereto.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days following the receipt
of the Claim Notice that the Indemnifying Party will indemnify the Indemnified
Party from and against the entirety of any Adverse Consequences the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (ii) the Indemnifying Party provides upon
request the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief, (iv) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not in the
good faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 8.4(b), (i) the Indemnified Party
may retain separate co-counsel at its sole cost and expense and participate in
the defense of the Third Party Claim, (ii) the Indemnified Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnifying
Party, which consent will not be unreasonably withheld and (iii) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party, which consent will not be unreasonably
withheld.
(d) In the event any of the conditions in Section 8.4(b) is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including attorneys' fees and
expenses), and (iii) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to
the fullest extent provided in this ARTICLE VIII.
8.5 Notice of Claim.
A Party suffering Adverse Consequences that gives or could give rise to a
claim for indemnification under this ARTICLE VIII shall promptly notify each
other Party thereof in writing (a "Claim Notice") in accordance with
Section 11.7. The Claim Notice shall contain a brief description of the nature
of the Adverse Consequences suffered and, if practicable, an aggregate dollar
value estimate of the Adverse Consequence suffered. No delay in the issuance of
a Claim Notice shall relieve any Party from any obligation under this Article 8,
unless and solely to the extent such Party is thereby prejudiced.
8.6 Limitations on Seller's and ▇▇▇▇▇▇'▇ Indemnification Liability.
(a) Ceiling: Seller's and ▇▇▇▇▇▇'▇ collective aggregate liability for
indemnification claims under this ARTICLE VIII shall not exceed Four Million
Dollars ($4,000,000), except there shall be no limit as to the claims under
Section 8.2(b) or Section 8.2(c).
(b) Basket/Threshold: Neither ▇▇▇▇▇▇ nor Seller shall have any liability
for indemnification claims under this ARTICLE VIII, unless and until the
aggregate Adverse Consequences claimed under Section 8.2 exceed One Hundred
Fifty Thousand Dollars ($150,000) and then only for an amount by which such
Adverse Consequences exceed One Hundred Fifty Thousand Dollars ($150,000).
(c) Availability of Indemnification: Notwithstanding anything to the
contrary herein, Buyer shall have no right to any indemnification under this
ARTICLE VIII for any matter if the Purchase Price was reduced in connection
with such matter as a result of an adjustment thereto in accordance with
ARTICLE II hereof.
8.7 Limitations on Buyer's Indemnification Liability.
(a) Ceiling: Buyer's aggregate liability for indemnification claims under
this ARTICLE VIII shall not exceed Four Million Dollars ($4,000,000); except
as to claims arising from a breach of Section 3.2(b) or for failure to pay the
Purchase Price or to consummate the transactions contemplated by this Agreement,
Buyer's aggregate liability shall not exceed the Purchase Price.
(b) Basket/Threshold: Buyer shall have no liability for indemnification
claims under this ARTICLE VIII, unless and until the aggregate Adverse
Consequences claimed under Section 8.3 exceed One Hundred Fifty Thousand Dollars
($150,000) and then only for an amount by which such Adverse Consequences
exceed One Hundred Fifty Thousand Dollars ($150,000), except this basket shall
not apply to failure to pay the Purchase Price, to Adverse Consequences Seller
or ▇▇▇▇▇▇ may suffer resulting from the Assumed Liabilities, or to Buyer's
failure to consummate the transactions contemplated by this Agreement.
8.8 Determination of Adverse Consequences.
The Parties shall take into account the time cost of money (using the
Applicable Rate as the discount rate) and Tax benefits and/or consequences in
determining Adverse Consequences for purposes of this ARTICLE VIII.
8.9 Exclusive Remedy. Buyer and Seller acknowledge and agree that the
foregoing indemnification provisions in this ARTICLE VIII shall be the exclusive
remedy of Buyer with respect to, and the transactions contemplated by, this
Agreement.
ARTICLE IX.
TAX MATTERS
9.1 Refunds and Tax Benefits.
Any Tax refunds of ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales that are received by Buyer and
any amounts credited against Tax to which Buyer and ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales
becomes entitled which are not included as Assets on the Closing Statement,
that relate to Tax periods of ▇▇▇▇▇▇ or ▇▇▇▇▇▇ Sales or portions thereof ending
on or before the Closing Date shall be for the account of Seller, and Buyer
shall pay over to Seller any such refund or the amount of any such credit
within 15 days after receipt or entitlement thereto.
9.2 Certain Taxes.
Seller and Buyer agree that inasmuch as the assets purchased hereunder
include substantially all the operating assets of Seller, the sale and purchase
of the assets, other than the motor vehicles and the real property, may be
exempt from sales and or other transfer Taxes in the jurisdictions in which the
Assets are located pursuant to the bulk sale or occasional sale provisions in
the applicable statutes in such jurisdictions, and Buyer, Seller and ▇▇▇▇▇▇
shall treat the transfer of the Assets provided for herein as a bulk or
occasional sale for all purposes; provided, however, that to the extent it
shall be determined after the date of the Agreement that, through no fault or
misrepresentation on the part of Seller, the sale by Seller, and the purchase
by Buyer of all or any portion of the Assets (including the vehicles and the
real property) is subject to a sale, use or other transfer tax or recording Tax,
then such Tax shall be paid by Buyer. The parties shall cooperate with each
other in the preparation, execution and filing of any Tax Returns that may be
required in connection with such Taxes and any related filing fees, notarial
fees and other costs.
9.3 Other Transfer Taxes and Fees.
Seller shall pay transfer Taxes and recording fees at the Closing with
respect to the Owned Real Property. Buyer shall pay any transfer Taxes and
fees at Closing with respect to vehicles and personal property.
ARTICLE X.
TERMINATION
10.1 Termination of Agreement.
Certain of the Parties may terminate this Agreement as provided below:
(a) Buyer and Seller may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written notice to Seller
at any time prior to the Closing (i) in the event Seller has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, Buyer has notified Seller of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach, or
(ii) if the Closing shall not have occurred on or before 11:59 pm on November 7,
2001, by reason of the failure of any condition precedent under Section 7.1
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(c) Seller may terminate this Agreement by giving written notice to Buyer
at any time prior to the Closing (i) in the event Buyer has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, Seller has notified Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach, or
(ii) if the Closing shall not have occurred on or before 11:59 pm on November 7,
2001, by reason of the failure of any condition precedent under Section 7.2
(unless the failure results primarily from Seller itself breaching any
representation, warranty, or covenant contained in this Agreement).
10.2 Effect of Termination.
If any Party terminates this Agreement pursuant to Section 10.1, all
rights and obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Party (except for any liability of any
Party then in breach); provided, however, that the confidentiality provisions
contained in Section 5.5 and Section 6.4 and the reimbursement provisions of
Section 5.8 shall survive termination.
ARTICLE XI.
MISCELLANEOUS
11.1 Press Releases and Public Announcements.
No Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement prior to the Closing without
the prior written approval of Buyer and Seller; provided, however, that any
Party may make any public disclosure it determines in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
best efforts to advise the other Parties prior to making the disclosure).
11.2 No Third-Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.
11.3 Entire Agreement.
This Agreement (including the documents referred to herein) constitutes
the entire agreement among the Parties and, except as provided in Section 6.4,
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
11.4 Succession and Assignment.
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns.
No Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of Buyer and Seller;
provided, however, that Buyer may (a) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (b) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases Buyer nonetheless shall remain responsible for the performance of
all of its obligations hereunder).
11.5 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument.
11.6 Headings.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
11.7 Notices.
All notices, requests, demands, claims, and other communications hereunder
will be in writing. Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given if (and then two business days after) it
is sent by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to Seller or ▇▇▇▇▇▇: Copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Vice President and General Counsel Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC
▇▇▇▇▇▇ ▇▇▇▇▇▇, Inc. AmSouth Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ Email: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
If to Buyer: Copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
Treat Entertainment, Inc. 600 SunTrust Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇ ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇ Email: ▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be made available by giving the other Parties
notice in the manner herein set forth.
11.8 Governing Law.
Except to the extent preempted by federal law (e.g., ERISA), this Agreement
shall be governed by and construed in accordance with the domestic laws of the
State of Tennessee without giving effect to any choice or conflict of law
provision or rule (whether of the State of Tennessee or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Tennessee. Any proceeding arising out of this Agreement shall be
brought in the courts of Tennessee, County of Davidson, or in the United States
District Court for the Middle District of Tennessee.
11.9 Amendments and Waivers.
No amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by Buyer and Seller. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.10 Severability.
Any term or provision of this Agreement that is invalid or unenforceable
in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
11.11 Expenses.
Except as provided herein regarding indemnification matters, each of the
Parties will bear their own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. Seller agrees ▇▇▇▇▇▇ Sales has not borne and will not bear
any of Seller's costs and expenses (including any of its legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
11.12 Construction.
The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation.
11.13 Incorporation of Exhibits, Annexes, and Schedules.
The Exhibits, Annexes, and Disclosure Schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.
[Signature Page to Follow]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER: CRG ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman and CEO
SELLER: THE ▇.▇. ▇▇▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
▇.▇. ▇▇▇▇▇▇ SALES COMPANY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇: ▇▇▇▇▇▇ ▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President