EXHIBIT 10.
ASSET PURCHASE AGREEMENT
between
BEST PRODUCTS CO., INC.
Seller,
and
JUBILEE LIMITED PARTNERSHIP III,
▇▇▇▇▇▇▇▇▇ FINANCIAL GROUP, LLC,
ALCO CAPITAL GROUP, INC and
THE NASSI GROUP, LLC
Buyer.
Dated as of October 29, 1996
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT........................................................ 1
ARTICLE 1
DEFINITIONS.................................................................. 1
1.1 Definitions............................................................ 1
1.2 Rules of Construction.................................................. 6
ARTICLE 2
STORE CLOSINGS; PURCHASE AND SALE............................................ 6
2.1 Store Closing Sales.................................................... 6
2.2 Purchase and Sale of Assets............................................ 6
2.3 Excluded Assets........................................................ 7
2.4 Liabilities............................................................ 8
ARTICLE 3
PURCHASE PRICE; ADJUSTMENT................................................... 8
3.1 Purchase Price......................................................... 8
3.2 Inventory.............................................................. 9
3.2.1 Inventory Count................................................. 9
3.2.2 Book Value of the Inventory..................................... 10
3.3 Adjustments to the Cash Consideration.................................. 10
3.3.1 Initial Sales Agreement......................................... 10
3.3.2 Deviation from Projected Book Value of the Assets............... 11
3.3.3 Escrow and Post-Closing Adjustments............................. 12
3.3.4 Failure to Transfer Assets...................................... 12
ARTICLE 4
CLOSING.............................................. 12
4.1 Place and Time......................................................... 12
4.2 Deliveries by Seller................................................... 13
4.3 Deliveries by Buyer.................................................... 13
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ARTICLE 5
STORE CLOSING SALES AND OTHER SALES; OPTION LEASES; PERSONALTY LEASES........ 14
5.1 (a) Store Closing Sales............................................... 14
(b) Option Period; Closing Period..................................... 14
5.2 Assignment of Option Leases........................................... 14
5.3 Payment of Rent and Other Expenses Relating to Option Leases.......... 16
5.4 Extension Order....................................................... 18
5.5 Prosecution, Defense and Settlement of Rejection Claims; Mediation.... 18
6.1 Owned Stores.......................................................... 19
6.1.1 Use of Owned Stores............................................. 19
6.1.2 Relief from Stay................................................ 20
6.2 Headquarters.......................................................... 20
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER..................................... 20
7.1 Organization, Power, Standing and Qualifications...................... 20
7.2 Due Authorization..................................................... 21
7.3 Non-Contravention..................................................... 21
7.4 Real Property......................................................... 21
7.5 Brokers and Finders Fees.............................................. 21
7.6 Full Disclosure....................................................... 21
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF BUYER...................................... 22
8.1 Organization, Power, Standing and Qualifications...................... 22
8.2 Due Authorization..................................................... 22
8.3 Non-Contravention..................................................... 22
8.4 Brokers and Finders Fees.............................................. 22
8.5 Full Disclosure....................................................... 23
8.6 23
8.7 23
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ARTICLE 9
TRANSACTIONS AND CONDUCT OF BUSINESS PENDING CLOSING......................... 23
9.1 Thanksgiving Advertising............................................... 23
9.2 Encumbrance of Assets; Avoidance of Liabilities........................ 24
9.3 Maintenance of Insurance............................................... 24
9.4 Maintenance of Financial Records....................................... 24
9.5 Access................................................................. 24
9.6 Certain Dispositions................................................... 24
9.7 Notices............................................................... 24
ARTICLE 10
CONDITIONS TO BUYER'S OBLIGATION............................................. 25
10.1 Representations and Warranties True as of Closing..................... 25
10.2 Compliance with this Agreement........................................ 25
10.3 Payment............................................................... 25
10.4 Deliveries............................................................ 25
10.5 No Stay............................................................... 25
10.6 Consents and Approvals................................................ 25
10.7 Bankruptcy Court Orders............................................... 25
10.8 Advertising and In-Store Promotions................................... 26
ARTICLE 11
CONDITIONS TO SELLER'S OBLIGATION............................................ 27
11.1 Representations and Warranties True as of Closing..................... 27
11.2 Compliance with Agreement............................................. 27
11.3 Payment............................................................... 27
11.4 Deliveries............................................................ 27
11.5 Consents and Approval................................................. 27
11.6 Bankruptcy Court Orders............................................... 27
ARTICLE 12
CERTAIN TRANSACTIONS AND OBLIGATIONS SUBSEQUENT TO CLOSING................... 27
12.1 Further Assurance of Cooperation...................................... 27
12.2 [Intentionally Deleted.].............................................. 28
12.3 Seller's Retention of Employee Liabilities............................ 28
12.4 [Intentionally Deleted.].............................................. 28
12.5 Tax Matters........................................................... 28
12.6 Bankruptcy Court Orders............................................... 28
12.7 Guaranty............................................................. 29
12.8 Additional Deliveries................................................. 29
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ARTICLE 13
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; TERMINATION.................... 30
13.1 Survival of Representations.......................................... 30
13.2 Indemnification by Seller............................................ 30
13.3 Indemnification by Buyer............................................. 30
13.4 Conditions of Indemnification........................................ 31
13.5 No Setoff............................................................ 32
13.6 [Intentionally Deleted............................................... 32
13.7 Remedies Cumulative.................................................. 32
13.8 Expenses............................................................. 32
13.9 Press Releases....................................................... 32
13.10 Contents of Agreements............................................... 32
13.11 Assignment and Binding Effect........................................ 32
13.12 Waiver............................................................... 32
13.13 Outside Dates........................................................ 33
13.14 Termination.......................................................... 34
13.15 Notices.............................................................. 34
13.16 [Intentionally Deleted............................................... 35
13.17 Severability......................................................... 35
13.18 Governing Law; Submission to Jurisdiction............................ 36
13.19 No Benefit to Others................................................. 36
13.20 Section Headings..................................................... 36
13.21 Schedules and Exhibits............................................... 36
13.22 Counterparts......................................................... 36
13.23 Trial by Jury........................................................ 36
13.24 Preparation of this Agreement........................................ 36
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Exhibits
Exhibit A -- Addendum Filed with this report.
Exhibit 3.3.1(1) -- Initial Sales Agreement Filed previously.
Exhibit 4.3(c) -- Guaranty Filed with this report.
Schedules
Schedule 1.1(1) -- List of Best Stores Available upon request.
Schedule 1.1(2) -- List of Non-operating Stores Available upon request.
Schedule 2.2(i) -- Additional Assets Available upon request.
Schedule 2.2(h) -- Conveyed Real Property Available upon request.
Schedule 2.2(j) -- List of Excluded Assets Available upon request.
Schedule 3.3.1(1)-- Adjustment to Cash Consideration Filed with this report.
Schedule 3.3.2 -- Asset Adjustment Schedule Filed with this report.
Schedule 5.3.1 -- Monthly Payments for Option Leases Available upon request.
Schedule 6.1 -- List of Owned Stores Available upon request.
Schedule 6.2 -- Administrative Services Filed with this report.
Schedule 7.1 -- Seller's Organization Available upon request.
Schedule 7.3 -- Seller's Non-Contravention Available upon request.
Schedule 7.4 -- List of Option Leases Available upon request.
Schedule 9.2 -- Encumbrance of Assets Available upon request.
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AGREEMENT
AGREEMENT made as of the 29th day of October 1996, by and between BEST
PRODUCTS CO., INC., a Virginia corporation, as debtor and debtor in possession
("Seller"), and Jubilee Limited Partnership III, an Ohio limited partnership
("Jubilee"), ▇▇▇▇▇▇▇▇▇ Financial Group, LLC, a Delaware limited liability
company ("▇▇▇▇▇▇▇▇▇"), Alco Capital Group, Inc., a Delaware corporation ("Alco")
and The Nassi Group, LLC, a California limited liability company ("Nassi" and
together with Jubilee, ▇▇▇▇▇▇▇▇▇ and Alco, "Buyer").
PRELIMINARY STATEMENT
A. Seller is a specialty retailer operating (i) large retail stores located
throughout the United States, which sell category-dominant assortments of fine
jewelry and watches and nationally advertised brand name merchandise, including
home furnishings, houseware/tabletop, and electronics, (ii) shopping mall based
jewelry stores, and (iii) certain distribution centers relating to the foregoing
(the "Business").
B. Seller commenced a case under chapter 11 of title 11 of the United
States Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy Code") in the
United States Bankruptcy Court for the Eastern District of Virginia (the
"Bankruptcy Court") on September 24, 1996, which case is stylized as Case No.
96-35267-T (the "Bankruptcy Case").
C. Attached hereto as Exhibit A is the Store Closing Addendum (the
"Addendum") containing further terms and conditions relative to Store Closings
Sales (as hereinafter defined).
D. Upon the terms and subject to the conditions set forth herein, Seller
desires to sell, and Buyer desires to purchase, certain assets of Seller in
accordance with, inter alia, sections 105, 363, 365 and 1146(c) of the
Bankruptcy Code and the applicable Federal Rules of Bankruptcy Procedure.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties herein contained, it is hereby agreed as follows:
2
DEFINITIONS
2.1 Definitions. For purposes of this Agreement, the following terms have
the meanings specified or referred to in this Article 1.
"365 Order" shall have the meaning set forth in Section 12.6(a).
"1146(c) Order" shall have the meaning set forth in Section 12.6(b).
"Addendum" shall have the meaning set forth in the Preliminary Statement to
this Agreement.
"Adjustment Amount" shall have the meaning set forth in Section 3.3.3.
"Alco" shall have the meaning set forth in the Preamble to this Agreement.
"Approval Order" shall have the meaning set forth in Section 10.7(a).
"Assets" shall have the meaning set forth in Section 2.2.
"Asset Adjustment Schedule" shall have the meaning set forth in Section
3.3.2.
"Bankruptcy Case" shall have the meaning set forth in the Preliminary
Statement to this Agreement.
"Bankruptcy Code" shall have the meaning set forth in the Preliminary
Statement to this Agreement.
"Bankruptcy Court" shall have the meaning set forth in the Preliminary
Statement to this Agreement.
"▇▇▇▇▇▇▇▇▇" shall have the meaning set forth in the Preamble to this
Agreement.
"Best Stock" shall have the meaning set forth in Section 8.7.
"Best Stores" shall mean all of Seller's leased and owned store locations,
jewelry stores and leased and owned distribution centers, other than the Las
Vegas, Seattle and Denver warehouses, as set forth in Schedule 1.1(1), including
the Non-Operating Stores.
"Book Value of the Inventory" shall have the meaning set forth in Section
3.2.2. "Business" shall have the meaning set forth in the Preliminary Statement
to this Agreement.
"Business Day" shall mean any day that is not a Saturday, Sunday or day on
which banks located in the City of New York are authorized or required to be
closed.
"Buyer" shall have the meaning set forth in the Preamble to this Agreement.
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"Buyer Group" shall have the meaning set forth in Section 13.2.
"Cash Consideration" shall have the meaning set forth in Section 3.1(a).
"Cash Consideration Escrow Agreement" shall have the meaning set forth in
Section 3.3.3.
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Period" shall have the meaning set forth in Section 2.1.
"Closing Statement" shall have the meaning set forth in Section 3.3.2(a).
"Closing Stores" shall have the meaning set forth in Section 2.1.
"Conveyed Real Property" shall have the meaning set forth in Section
2.1(l).
"Damages" shall have the meaning set forth in Section 13.2.
"Due Diligence Fee" shall mean the fee in the amount of up to Nine Hundred
Thousand Dollars ($900,000) payable by Seller to SBA, as approved by the
Bankruptcy Court subject to and in accordance with the terms of the Initial
Order.
"Encumbrance" shall mean any security interest, mortgage, lien, charge,
claim, right, interest, violation, hypothecation, pledge, equity, encumbrance or
restriction of any kind against Seller (other than those created by Buyer or as
a result of any act of Buyer) including, but not limited to, any restriction on
the use, voting, transfer, receipt of income or other exercise of any attribute
of ownership and any claims or liens with respect to Taxes (including Sales
Taxes and other Transfer Taxes, other than Transfer Taxes in respect of the
transactions contemplated hereby).
"Extension Order" shall have the meaning set forth in Section 5.9.
"Excluded Assets" shall have the meaning set forth in Section 2.3.
"Final Order" shall mean an order of the Bankruptcy Court or a court of
competent jurisdiction that may hear appeals from the Bankruptcy Court which
order is no longer subject to the imposition of any stay pending rehearing,
appeal or any other stay, or subject to review, reversal, modification or attack
by rehearing, appeal, review or writ of certiorari.
"Government Body" shall mean any domestic or foreign national, state,
commonwealth, district, territory, municipality or other local government or
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multi-national body, any subdivision, instrumentality, agency, commission or
authority of any of the foregoing, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
"Guaranty" shall mean the Guaranty between Buyer and Seller, substantially
in the form attached hereto as Exhibit 4.3(c).
"Guaranty Fee" shall have the meaning set forth in Section 4.2(a).
"Headquarters" shall have the meaning set forth in Section 6.2.
"Indemnification Letter of Credit" shall have the meaning set forth in
Section 13.3.
"Indemnified Party" shall have the meaning set forth in Section 13.4.
"Indemnifying Party" shall have the meaning set forth in Section 13.4.
"Initial Order" shall have the meaning set forth in Section 3.3.1.
"Initial Sales" shall have the meaning set forth in Section 3.3.1.
"Initial Sales Agreement" shall have the meaning set forth in Section
3.3.1.
"Initial Stores" shall have the meaning set forth in Section 3.3.1.
"Inventory" shall have the meaning set forth in Section 2.2(c).
"Inventory Count" shall have the meaning set forth in Section 3.2.1.
"Inventory Service" shall have the meaning set forth in Section 3.2.1.
"Jubilee" shall have the meaning set forth in the Preamble to this
Agreement.
"Last Saturday" shall have the meaning set forth in Section 5.3.1.
"Leased Property Payments" shall have the meaning set forth in Section
5.3.1.
"Nassi" shall have the meaning set forth in the Preamble to this Agreement.
"Non-Operating Stores" shall mean those Best Stores set forth on Schedule
1.1(2), which Best Stores are not currently operating and open for business.
"Option Lease" shall have the meaning set forth in Section 5.1(b).
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"Option Period" shall have the meaning set forth in Section 5.1(b).
"Owned Stores" shall have the meaning set forth in Section 6.1.1.
"Person" shall mean any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other entity or
Government Body.
"Per Store Rent" shall have the meaning set forth in Section 6.1.1.
"Personalty Leases" shall mean the personalty covered by all of Seller's
furniture, fixture, computer and equipment leases and executory contracts,
including any software licenses with respect to Seller's computers and computer
systems, of Seller of any nature including service contracts and any other
executory contracts of any nature, located in the Closing Stores.
"Sales Taxes" shall mean all sales, excise or use taxes attributable to the
sale of the Inventory.
"SBA" shall mean Schottenstein ▇▇▇▇▇▇▇▇▇ Capital Group, LLC, a Delaware
limited liability company, and Alco.
"Seller" shall have the meaning set forth in the Preamble to this
Agreement.
"Seller Employees" shall have the meaning set forth in Section 12.3.
"Store Closing Sales" shall have the meaning set forth in Section 2.1.
"Taxes" shall mean all taxes, charges, fees, levies, interest, penalties,
additions to tax or other assessments, including, but not limited to, income,
excise, property, sales, use, value added and franchise taxes and custom duties,
imposed by any Government Body.
"Tax Returns" shall mean any return, report, information report or other
document (including any related or supporting information) filed or required to
be filed with any Government Body in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
"Transfer Taxes" shall mean all sales (including, without limitation, bulk
sales), use, transfer, recording, ad valorem and other similar Taxes and fees.
"Unassumed Liabilities" shall have the meaning set forth in Section 2.3.
"WARN" shall have the meaning set forth in Section 12.3.
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2.2 Rules of Construction. Any reference in this Agreement to a Section,
Article, Schedule or Exhibit shall be deemed to be a reference to the Sections,
Articles, Schedules and Exhibits included or attached to this Agreement. For
purposes of this Agreement (i) the terms "include" and "including" shall be
without limitation, regardless of whether or not specifically stated herein,
(ii) singular terms shall include the plural, and (iii) the terms "herein,"
"hereunder" and "hereof" shall mean under this Agreement.
3
STORE CLOSINGS; PURCHASE AND SALE
3.1 Store Closing Sales. Promptly after the Bankruptcy
Court enters the Approval Order, and subject to the terms of this Agreement,
through and including the close of business on Friday, February 28, 1997 (the
"Closing Period"), Buyer shall, with respect to the Best Stores listed on
Exhibit A to the Addendum (the "Closing Stores"), conduct Store Closing Sales
(as defined in the Addendum) as Seller's agent as more fully set forth in the
Addendum.
3.2 Purchase and Sale of Assets. Upon the terms and
subject to the conditions set forth in this Agreement, Seller shall sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from
Seller at the Closing, free and clear of any and all Encumbrances, all right,
title and interest of Seller in and to all of the following assets and
properties of Seller (the "Assets"), which Assets shall not include the Excluded
Assets:
(a) all tangible personal property owned by Seller, including, without
limitation, all furniture, fixtures, computers, equipment and supplies;
(b) those Option Leases assumed by Seller and assigned to Buyer or a third
party designated pursuant to Sections 5.2 and 5.3;
(c) the right to the proceeds from the sale of all inventory owned by
Seller, letter of credit inventory and on-order inventory, except for inventory
that is the subject of the Initial Order and the Initial Sales Agreement (the
"Inventory");
(d) all manufacturers and third-party warranties or guarantees in respect
of any item of property falling within the scope of the Assets and all
indemnification rights against third parties related to the Assets to the extent
legally transferable;
(e) all accounts receivable of the Seller;
(f) all cash and cash equivalents of Seller (other than cash received or to
be received under the Initial Sales Agreement and the Cash Consideration);
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(g) all rights and benefits of Seller in and to all prepayments, deposits
and refunds;
(h) the real property described on Schedule 2.2(h), ("Conveyed Real
Property"); and
(i) all other assets listed on Schedule 2.2(i).
3.3 Excluded Assets. Notwithstanding anything to the contrary contained in
Section 2.2, Seller is not selling, assigning, transferring or conveying to
Buyer the following (collectively the "Excluded Assets"):
(a) the Seller's owned real property (other than the Conveyed Real
Property);
(b) the Personalty Leases;
(c) those Option Leases not assumed by Seller and assigned to Buyer or a
third party designated by Buyer pursuant to Sections 5.2 and 5.3;
(d) causes of action under sections 509, 510, 542 through and including
550, 552 and 553 of the Bankruptcy Code and all defenses, counterclaims,
cross-claims and third party claims arising under applicable law;
(e) the capital stock, the corporate minute books, seal, stock record book
and stock transfer records, stock certificates, treasury stock, certificate of
incorporation and by-laws of Seller and any subsidiary of Seller;
(f) all right, title and interest in the patents, tradenames, service
marks, logos, all other names and marks owned or used by the Seller and all
other intellectual property of any nature owned or used by Seller, except as
otherwise provided in the Addendum.
(g) all files, financial information, contracts or other documentation and
books and records in whatever form (including, without limitation, computer
records, operating systems and data bases) of Seller wherever located; provided,
however, that documents shall be furnished to Buyer for its inspection and
copying (at Buyer's expense) upon written request by Buyer;
(h) all licenses (including any software licenses with respect to Seller's
computers and computer system), permits, and authorizations which have been
issued or are pending to Seller relating to the Seller, the Business or the
Assets and all other consents, grants and other rights that are used for the
lawful ownership and operation of the Business or the Assets;
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(i) all goodwill associated with the Seller, the Assets or the Business;
(j) the excluded assets listed on Schedule 2.2(j) attached hereto;
(k) all proceeds from the sale or other disposition of the Excluded Assets;
(l) all post-petition utility deposits; and
(m) all other assets of Seller of every kind and nature, wherever located,
that are not specifically listed in Section 2.2.
3.4 Liabilities. Except as expressly assumed by Buyer hereunder, all claims
against Seller and all liabilities and other obligations of any nature of Seller
attributable to, accrued or incurred in connection with the Assets or the
Business prior to the Closing, including, without limitation, claims or
liabilities or other obligations of any nature that may arise (i) under any
environmental law, rule or regulation or with respect to any environmental
condition existing at any Best Store as of the Closing, (ii) with respect to any
Seller employee benefit plans and Seller's Employees, including any liabilities
or obligations under WARN, (iii) with respect to Taxes (including, without
limitation, Sales Taxes and other Transfer Taxes other than any Transfer Taxes
in respect of the transactions contemplated hereby) attributable to, accrued or
incurred for all periods up to and including the Closing, and (iv) any trade
payables (including, without limitation, occupancy costs) shall remain with
Seller and shall not be transferred to Buyer (the "Unassumed Liabilities").
Seller shall indemnify Buyer and hold Buyer harmless in respect of all Unassumed
Liabilities, and Seller hereby acknowledges and agrees that any such
indemnification obligation, if allowed by the Bankruptcy Court, shall be treated
as an administrative claim, entitled to priority in Seller's Bankruptcy Case,
pursuant to sections 503(b)(1) and 507(a)(1) of the Bankruptcy Code. Such
administrative claim shall be paid promptly following allowance of the same by
the Bankruptcy Court without the need to wait until confirmation of a chapter 11
plan for Seller or any other event in the Bankruptcy Case at such time and if
authorized by the Bankruptcy Court. Any liabilities incurred by Buyer after the
Closing, including those related to the Assets and the Store Closing Sales,
shall be liabilities of Buyer.
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4
PURCHASE PRICE; ADJUSTMENT
4.1 Purchase Price. Subject to Section 3.3, as payment in full for Buyer's
right to conduct the Store Closing Sales and the Assets to be transferred to
Buyer pursuant to Section 2.2, Buyer agrees, subject to the terms, conditions
and limitations set forth in this Agreement, to deliver at the Closing, to and
for the account of Seller, Four Hundred Ten Million Dollars ($410,000,000) in
cash (the "Cash Consideration"), subject to adjustment as provided for in
Section 3.3, to be paid, by wire transfer of immediately available funds to an
account designated by Seller prior to Closing, at Closing in accordance with and
in the manner set forth in Section 4.3.
4.2 Inventory.
4.2.1 Inventory Count. Immediately following the entry of the Approval
Order, Seller and Buyer shall cause to be taken an "SKU" physical inventory (the
"Inventory Count") of all Inventory located in the Closing Stores and at
Seller's distribution centers in Ashland, Virginia and Richmond, Virginia and at
Seller's jewelry office in New York, New York. Each such Closing Store and
distribution center and the New York jewelry office shall be closed while the
Inventory Count for such Closing Store and distribution center and the New York
jewelry office is in progress. The Inventory Count shall be completed at all of
the Closing Stores and distribution centers and the New York jewelry office no
later than five (5) calendar days after the entry of the Approval Order, time
being of the essence. The Closing with respect to each Closing Store and the
payment of the Cash Consideration in respect of the Inventory located in such
Closing Store and distribution centers and the New York jewelry office shall
occur on the next Business Day following the completion of the Inventory Count
for each Closing Store and distribution centers and the New York jewelry office.
The Inventory Count shall be taken by RGIS and/or another independent inventory
service designated jointly by Seller and Buyer (the "Inventory Service"). The
cost of the Inventory Service shall be paid equally by Seller and Buyer. Once
the Inventory Count commences in any Closing Store and until the completion of
the Inventory Count in such Closing Store, neither Seller nor Buyer shall enter
such Closing Store without each having a representative present; provided,
however, that, until the completion of the Inventory Count, Buyer and Seller
shall each be entitled to enter any Closing Store at any time after providing
prior notice to the other party in the event of an emergency at such store. The
instructions to be delivered to the Inventory Service with respect to the
conduct of the Inventory Count shall be mutually agreed upon by Buyer and Seller
five days prior to Closing and delivered to the Inventory Service promptly
following such agreement. From and after the completion of the Inventory Count
in each Closing Store, Buyer shall conduct Store Closing Sales in such Closing
Store, as Seller's agent. Upon full payment of the Cash Consideration and the
Expenses of Sale (as defined in the Addendum), Buyer shall have the right to
retain, as its sole and exclusive property, free and clear of Encumbrances, all
proceeds with respect to such Store Closing Sales. Buyer shall receive the
benefit of all Store Closing Sales conducted in each Closing Store from and
after the completion of the Inventory Count with respect to such Closing Store,
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and Buyer shall be responsible for those expenses, for which Buyer is
responsible under the terms of this Agreement and the Addendum, that are
attributable to the Closing Stores from and after the entry of the Approval
Order. In order to facilitate the Inventory Count, immediately following the
execution of this Agreement by Seller and Buyer, Seller agrees to make its SKU
and pricing data files and related computer hardware and software available to
the Buyer and the Inventory Service. The Inventory Service shall be additionally
instructed by Buyer and Seller to prepare and deliver to Buyer and Seller,
immediately upon completion of the Inventory Count at each Closing Store, the
final certified report of Inventory Count for each Closing Store.
4.2.2 Book Value of the Inventory. Promptly (and in no event later than ten
(10) calendar days) following the day on which the Inventory Service shall have
delivered the final report of Inventory Count, taken in accordance with Section
3.2.1, to Seller and Buyer, Seller and Buyer shall jointly calculate and agree
on the book value of the Inventory at cost (the "Book Value of the Inventory"),
which Book Value of the Inventory shall be equal to (A) the cost of the
Inventory based on the Inventory Count, minus (B) valuation reserves (other than
relating to shrink) calculated in accordance with Seller's past practices, plus
(C) capitalized freight calculated in accordance with Seller's past practices.
In the event that Buyer and Seller mutually agree to use "gross rings" as
provided for in the Addendum, then the cost of the Inventory based on the
Inventory Count shall be supplemented for gross rings as calculated in
accordance with the last sentence of Section 13.13. Buyer and Seller shall rely
on Seller's existing books and records and computer system (in whatever form,
including but not limited to computer software or any other computer format) for
the purpose of determining the Book Value of the Inventory. If Seller and Buyer
shall disagree as to the application of Seller's historical practices in
determining the Book Value of the Inventory and are unable to reach an agreement
regarding the same on or prior to the expiration of the second (2nd) Business
Day following the delivery of the Inventory Count by the Inventory Service, the
disagreement shall be presented to a "Big Six" accounting firm, to be mutually
selected by Buyer and Seller, on the next day for a decision that shall be
rendered by such accounting firm within five (5) Business Days thereafter and
shall be final and binding upon each of the parties. The fees, costs and
expenses incurred in connection therewith shall be shared mutually by Buyer and
Seller.
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4.3 Adjustments to the Cash Consideration. Consideration
4.3.1 Initial Sales Agreement. Pursuant to a letter agreement, dated as of
October 10, 1996 between SBA and Seller (the "Initial Sales Agreement"), a copy
of which is attached hereto as Exhibit 3.3.1(1), which agreement was approved,
as modified, pursuant to an order (the "Initial Order") of the Bankruptcy Court
dated October 21, 1996 (and in which agreement Nassi was subsequently admitted
as a participant), SBA agreed to conduct store closing sales (the "Initial
Sales") in the eighty-one (81) stores listed on Exhibit A to the Initial Sales
Agreement (the "Initial Stores") and to pay to Seller the net proceeds set forth
in the Initial Sales Agreement, which net proceeds shall be agreed upon by Buyer
and Seller no later than five (5) days prior to Closing. The Cash Consideration
shall be (i) reduced by an amount equal to the net proceeds to be paid to Seller
pursuant to the Initial Sales Agreement prior to the increase in the Guaranteed
Amount (as defined in the Initial Sales Agreement) from 85.15% to 91.30% as a
result of competitive bidding at the hearing before the Bankruptcy Court with
respect to the motion for approval of the Initial Sales Agreement, (ii)
increased by the total amount of expenses incurred by Seller in connection with
the Initial Sales Agreement, each of which amounts in (i) and (ii) shall be
determined in accordance with Schedule 3.3.1(1) hereto, and (iii) further
adjusted in accordance with the provisions set forth below in this Section 3.3.
As contemplated by the Initial Sales Agreement, the Initial Sales shall be
conducted solely for the benefit of SBA.
4.3.2 Deviation from Projected Book Value of the Assets.
(a) Two (2) Business Days prior to Closing, Seller shall, acting
reasonably, prepare and deliver to Buyer a preliminary estimate of the projected
book value of the Assets (including, without limitation Inventory), as of the
close of business on the day immediately preceding the date on which the Closing
occurs and the estimated net Cash Consideration payable in accordance with this
Agreement and the Asset Adjustment Schedule attached hereon as Schedule 3.3.2
(the "Closing Statement"). The Closing Statement shall be prepared by Seller,
acting reasonably and in good faith. The parties acknowledge that the Inventory
is anticipated to be less than the inventory amount set forth on the Asset
Adjustment Schedule.
(b) At the conclusion of each day in which an Inventory Count shall have
been conducted at any one or more Closing Stores, Buyer and Seller shall agree
on the daily Closing amount to be paid in respect of the Closing attributable to
such Closing Stores. Such daily Closing amount shall be equal to the product of
(A) the estimated net Cash Consideration set forth in the Closing Statement
multiplied by (B) a fraction, the numerator of which shall be the number of
Closing Stores for which the final certified report of Inventory Count shall
have been delivered on such Inventory Count day, and the denominator of which
shall be the total number of Closing Stores. Buyer shall pay such daily Closing
amount to Seller on the next Business Day in accordance with Section 3.3.3 until
the total estimated net Cash Consideration set forth in the Closing Statement
shall have been paid subject to and in accordance with the terms of this Article
3.
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(c) As soon as possible following completion of the Inventory Count, Buyer
and Seller shall agree on the book value of the Assets other than Inventory.
Upon reaching a determination as to the amount of the Book Value of the
Inventory and the book value of the Assets other than Inventory, Buyer and
Seller shall prepare a final closing statement setting forth the definitive Cash
Consideration payable under this Agreement. If and to the extent that Buyer and
Seller determine that the Cash Consideration payable under such final closing
statement is less than or greater than the aggregate of the daily Closing
amounts paid by Buyer to Seller pursuant to Section 3.3.2(b) and 3.3.3, the
amount payable by Buyer hereunder shall be reduced or increased, as appropriate,
by the appropriate amount (the "Adjustment Amount") in accordance with the Asset
Adjustment Schedule, no later than twenty-four (24) hours, time being of the
essence, after Buyer and Seller reach a determination as to the Cash
Consideration payable under the final closing statement. If Seller and Buyer
disagree at any time as to the book value of the Assets other than Inventory,
and are unable to reach an agreement regarding the same on or prior to December
31, 1996, time being of the essence, Seller and Buyer shall present the
disagreement to a "Big Six" accounting firm, to be mutually selected by Buyer
and Seller, on the next Business Day for a decision that will be rendered by
such accounting firm within five (5) Business Days and which decision will be
final and binding upon each of the parties. The fees, costs and expenses
incurred by such accounting firm shall be shared mutually by Buyer and Seller.
Notwithstanding anything contained herein, Seller shall use its best efforts to
return to vendors pursuant to the terms of any applicable agreement with vendors
any damaged goods located in or shipped to the Best Stores or that were
transferred from the Initial Stores and excluded as Merchandise (as defined in
the Initial Sales Agreement); it being understood that such goods do not include
Merchandise rejected from the Initial Stores.
4.3.3 Escrow and Post-Closing Adjustments. At each daily Closing for any
one or more of the Closing Stores, Buyer shall (A) deposit an amount equal to
ten percent (10%) of the Cash Consideration to be paid at each daily Closing for
any one or more of the Closing Stores pursuant to Section 3.1, subject to
Section 3.3.2(b) and the pre-Closing adjustments set forth in this Section 3.3,
in an interest bearing escrow account (which shall be established pursuant to an
escrow agreement the terms of which shall be mutually and reasonably agreed upon
by Seller and Buyer prior to Closing (the "Cash Consideration Escrow
Agreement")), which escrow account shall be under the jurisdiction of the
Bankruptcy Court; and (B) pay the ninety (90%) percent balance of the Cash
Consideration to be paid at each daily Closing for any one or more of the
Closing Stores to Seller in accordance with Section 3.1, subject to Section
3.3.2(b) and the pre-Closing adjustments set forth in this Section 3.3. Upon
determination by Buyer and Seller of the Adjustment Amount that shall be made to
the Cash Consideration, pursuant to Section 3.3.2(c), in accordance with the
Cash Consideration Escrow Agreement, Seller and Buyer shall direct the escrow
agent to deliver to the party entitled to receive such Adjustment Amount the
portion of the escrowed funds equal to such Adjustment Amount (including accrued
interest thereon). To the extent that an Adjustment Amount (including interest
accrued thereon) exceeds the escrowed amount, the party required to pay such
excess under this Section 3.3 shall pay such excess to the other party within
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twenty-four (24) hours of such determination, without the necessity of any other
or further order of or approval by the Bankruptcy Court, and the Approval Order
shall so provide.
4.3.4 Failure to Transfer Assets. In the event that Seller is unable to
transfer and assign to Buyer any of the Assets described in Section 2.2 and such
Assets are listed on the Asset Adjustment Schedule, the Cash Consideration shall
be reduced at the Closing by the value of such Assets as reasonably determined
by Buyer and Seller in accordance with the Asset Adjustment Schedule, as such
assets are listed on the Asset Adjustment Schedule. The parties hereby
acknowledge that the Toledo property listed on Schedule 2.2(h) shall not be
transferred to Buyer at Closing and that an adjustment to the Cash Consideration
to reflect that such property shall not be transferred to Buyer shall be made at
Closing in accordance with the Asset Adjustment Schedule.
5
CLOSING
5.1 Place and Time. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Battle ▇▇▇▇▇▇ LLP,
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 9:00 a.m. (New York City time)
on November 21, 1996, except that if all of the conditions to Closing shall not
have been satisfied or waived in writing on or prior to such date, the Closing
shall take place on the first business day after satisfaction or waiver of all
such conditions to Closing, or on such other date and at such other time,
subject to the provisions of Section 13.12, or place as the parties may agree.
5.2 Deliveries by Seller. At the Closing, Seller shall deliver to Buyer (or
such other Person designated below) the following items. The documents listed in
items (b) through (f) below shall be in form and substance reasonably
satisfactory to Buyer and its counsel:
(a) Two Million Dollars ($2,000,000) to Buyer in cash as consideration for
the execution and delivery by Buyer of the Guaranty (the "Guaranty Fee");
(b) a quitclaim deed with respect to the Chula Vista real property;
(c) a certificate of the corporate secretary of Seller dated as of the
Closing setting forth (i) the names, signatures and positions of the officers of
Seller executing this Agreement, and (ii) a copy of the resolutions duly adopted
by the board of directors authorizing the execution, delivery and performance of
this Agreement and the transactions contemplated hereby;
(d) a certificate dated as of the Closing signed by the chief executive
officer of Seller certifying that Seller has performed and complied with in all
material respects all agreements contained in this Agreement that are required
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to be performed or complied with by Seller prior to or at Closing and that the
representations and warranties set forth in Article 7 are true and correct in
all material respects at and as of the Closing;
(e) a receipt from Seller acknowledging that it has received the Cash
Consideration payable at Closing pursuant to Section 3.1; and
(f) the Cash Consideration Escrow Agreement.
4.3 Deliveries by Buyer. At the Closing, Buyer shall deliver the following
items to Seller. The documents listed in items (d) through (g) below shall be in
form and substance reasonably satisfactory to Seller and its counsel:
(a) the Cash Consideration payable at Closing, subject to and in accordance
with Sections 3.2 and 3.3;
(b) the Guaranty, substantially in the form attached hereto as Exhibit
4.3(b), together with the letter of credit contemplated thereby and a receipt
from Buyer acknowledging receipt of the Guaranty Fee;
(c) the Indemnification Letter of Credit;
(d) copies of good standing certificates for each of Jubilee, ▇▇▇▇▇▇▇▇▇,
Alco and Nassi from the state in which each such entity is formed, organized or
incorporated, dated as of a recent date prior to the Closing.
(e) a certificate dated as of the Closing signed by Buyer certifying that
Buyer has performed or complied with in all material respects all agreements
contained in this Agreement that are required to be performed or complied with
by Buyer prior to or at Closing, and that the representations and warranties set
forth in Article 8 are true and correct in all material respects at and as of
the Closing;
(f) resale certificates, with respect to personal property that is being
acquired for resale; and
(g) the Cash Consideration Escrow Agreement.
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6
STORE CLOSING SALES AND OTHER SALES; OPTION LEASES; PERSONALTY LEASES
6.1 Store Closing Sales. As set forth in Section 10.7, the Approval Order
shall authorize Buyer to conduct the Store Closing Sales, as more fully set
forth in the Addendum. Buyer shall not operate any of the store premises after
the conclusion of the Store Closing Sales.
(a) Option Period; Closing Period. At any time and from time to time from
and after the Closing up to and including the Last Saturday (the "Option
Period"), Buyer shall have the right to occupy the premises covered by all of
Seller's real property leases (the "Option Leases") subject to and in accordance
with Sections 5.2 and 5.3. At any time and from time to time during the Closing
Period, Buyer shall have the right to occupy the premises owned by Seller,
subject to and in accordance with Article 6, and use any personalty that is the
subject of the Personalty Leases.
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6.2 Assignment of Option Leases.ignment of Option Leases
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6.2.1 Subject to Section 5.3.3, and only if and to the extent that such
assumption and assignment is permitted pursuant to the provisions of the
Bankruptcy Code, during the Option Period, Buyer shall have the right, which
right may be exercised at any time and from time to time in its sole and
absolute discretion, to request in writing that Seller, under section 365 of the
Bankruptcy Code, assume and assign to Buyer or a third party designated by Buyer
any or all of Seller's Option Leases at no additional cost or expense to Buyer
other than cure amounts, subject to the provisions set forth in Section 5.2.2
with respect to cure amounts; it being understood and agreed that the assumption
and assignment of any one or more Option Leases to Buyer shall not be subject to
higher and better offers, provided, however, that if such assumption and
assignment shall, for any reason, be subject to higher and better offers, then
Seller shall pay to Buyer all proceeds that Seller may receive with respect to
the assumption and assignment of such Option Leases, including any and all
proceeds received by Seller in respect of such higher and better offers. As soon
as practicable, but no later than three (3) Business Days following Seller's
receipt of a written request from Buyer, which written request shall include the
basis for satisfaction of the requirement of "adequate assurance" of future
performance as required by section 365 of the Bankruptcy Code, at any time and
from time to time within the Option Period, seeking the assumption and the
assignment of any Option Lease to Buyer or a third party designated by Buyer,
Seller shall use its best efforts to obtain the entry of a Final Order of the
Bankruptcy Court approving the assumption of the Option Leases identified in
writing by Buyer and the assignment of such Option Leases to Buyer or a third
party, as designated in such request. The term "best efforts" as used in this
Section 5.2.1 shall require Seller to act as reasonably requested by Buyer,
provided, however, that such term shall not require Seller to pay any funds or
any cure amounts or assume any claims (subject to the provisions set forth in
Section 5.2.2 with respect to cure amounts) but shall require Seller to pay
fees, costs and expenses in connection with the prosecution of any motion
seeking the entry of any such Final Order. Seller shall be required to use its
best efforts as set forth above only if Buyer provides or causes a third party
assignee, as appropriate, to provide reasonable evidence that Buyer or the
proposed assignee will be able to provide the relevant lessor with adequate
assurance of future performance, with respect to any Option Lease that Buyer
seeks to have assigned to it or to a third party assignee, as the case may be.
In the event that either (i) Buyer notifies Seller in writing that it waives its
right to require Seller to assume and assign to it or to a third party any
Option Lease, or (ii) the Option Period shall have expired without an assumption
of such Option Lease, then Seller shall have the right to assign such Option
Lease to a third party and to retain any proceeds generated by such lease
assignment. Upon assignment of any Option Lease to Buyer or a third party, such
Option Lease shall no longer be treated as an Excluded Asset for purposes of
this Agreement, but rather shall constitute an Asset of Seller transferred and
assigned to Buyer or such third party, as the case may be, pursuant to the
provisions of this Agreement, and Buyer or such third party, as applicable,
shall assume all obligations and liabilities in connection therewith. Except as
otherwise expressly provided in this Section 5.2.1, Buyer shall be entitled to
keep and retain, at no additional fee, cost or expense to Buyer of any nature
(except for the payment of any cure amounts in accordance with Section 5.2.2),
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as its sole and exclusive property, and free and clear of any and all
Encumbrances (other than those caused directly by Buyer), any and all proceeds
generated by or resulting from the assignment or subletting of any one or more
Option Leases to any one or more third parties.
6.2.2 Buyer shall pay any and all cure amounts required under section
365(b) of the Bankruptcy Code in respect of any of the Option Leases it elects
to require Seller to assume and assign to Buyer or any third party; provided,
however, that, Seller and Buyer shall share equally the cure costs for any and
all amounts, liabilities or any other obligations due and owing under the Option
Leases prior to September 24, 1996 (or otherwise allocable to the period prior
to September 24, 1996, including, without limitation, base rent, taxes and
percentage rent), other than for repair and maintenance obligations.
Notwithstanding anything contained in this Agreement, Seller covenants and
agrees to pay to the lessors under the Option Leases when due all amounts
payable under the Option Leases from and after September 24, 1996 (or otherwise
allocable to the period from and after September 24, 1996), including, without
limitation, base rent, taxes and percentage rent, subject to the percentage rent
allocation set forth in Section 5.3.4, provided, that Buyer shall have paid, on
behalf of Seller, to the lessors under the Option Leases those amounts payable
by Buyer pursuant to Section 5.3 within the time period set forth in such
Section 5.3 for such payment.
6.2.3 So long as Buyer shall use and occupy the premises subject to any
Option Lease to conduct Store Closing Sales, Buyer shall comply with all
provisions of such Option Lease, except for any provision thereof relating to
maintenance and repairs and except as set forth in the Approval Order.
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6.3 Payment of Rent and Other Expenses Relating to Option Leases
6.3.1 Subject to Section 5.3.3, from and after the Closing and up to and
including the earliest to occur of (i), (ii) and (iii) below in this Section
5.3.1, as consideration for Buyer's right to use and occupy the premises covered
by the Option Leases during the Option Period, Buyer shall (x) pay on behalf of
Seller directly to the lessors under each Option Lease set forth on Schedule
5.3.1, on the first day of each calendar month or as otherwise set forth on
Schedule 5.3.1, the amounts set forth on Schedule 5.3.1 for each Option Lease
set forth on Schedule 5.3.1, which amounts shall include rent, common area
maintenance and real estate taxes (it being understood and agreed that Buyer
shall not incur or be deemed to have incurred any liabilities or obligations of
any nature to such lessors by reason of Buyer having made such payments to the
lessors directly), and (y) pay on behalf of Seller directly to the Persons
designated by Seller (it being understood and agreed that Buyer shall not incur
or be deemed to have incurred any liabilities or obligations of any nature to
such Persons by reason of Buyer having made such payments to such Persons
directly) within three Business Days following the presentment of invoices by
Seller, all other amounts due and owing by Seller under each Option Lease that
are not set forth as Schedule 5.3.1 (with respect to amounts incurred by Seller
after the Closing), including, utilities and all other usual and customary
operating costs incurred from and after the Closing in connection with the
Option Leases and consistent with Seller's prior practices, provided that Buyer
shall have the right to challenge any invoices submitted (the items set forth in
clauses (x) and (y) are collectively, the "Leased Property Payments"). Promptly
following payment of the Leased Property Payments, Buyer shall provide Seller
with reasonable written evidence of Buyer's payment of the Leased Property
Payments. From and after October 10, 1996, Seller shall not have extended,
rejected or otherwise terminated (or have assumed and assigned to a third party)
and from and after the date hereof shall not extend, reject or otherwise
terminate (or assume and assign to a third party or reject, without Buyer's
prior written consent) any of the Option Leases until the earliest to occur of
(i) fourteen (14) days following the delivery by Buyer to Seller of written
notice indicating that Buyer waives its right to require Seller to assume and
assign to it or a third party any one or more of the Option Leases specified
therein, (ii) the entry of an order by the Bankruptcy Court approving the
assumption and assignment of any such Option Lease to Buyer or a third party
designated by Buyer, and (iii) the first Saturday following the six-month
anniversary of the Closing (the "Last Saturday"). Seller shall notify Buyer
within five (5) Business Days after the date hereof in respect of any options
that must be exercised or permitted to lapse within the next three (3) months.
If Buyer requests that Seller exercise any such option, then Seller shall
exercise such option only in the event that the lease in respect of such option
is assumed by Seller and assigned to Buyer or its designee. Nothing herein shall
vitiate Buyer's right to the prepaid rent as set forth in the Asset Adjustment
Schedule.
6.3.2 Upon the occurrence of any of the events specified in (i), (ii) and
(iii) of Section 5.3.1, (A) Buyer shall have no further obligation or liability
of any nature for the Lease Property Payments, any amounts payable to the lessor
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under the applicable Option Leases, or for any costs associated with the Best
Stores to which such Option Leases relate, and (B) Seller shall be solely
responsible for all amounts payable or other obligations or liabilities that may
be owed to the lessor under or in connection with such applicable Option Leases,
including, without limitation, any damages resulting from the rejection of such
Option Leases under section 365 of the Bankruptcy Code or otherwise (subject
only to the provisions of the Guaranty), and for all costs associated with the
Best Stores to which such Option Leases relate.
6.3.3 If Buyer fails to make any Leased Property Payments within three (3)
Business Days of the date such payment is due pursuant to Section 5.3.1 and
except if there shall be pending a challenge by Buyer with respect to any
invoice, then following the expiration of a five (5) day cure period after
receipt (notwithstanding the provisions of Section 13.15) by Buyer of notice of
such failure to make such payment, Seller shall be entitled to revoke Buyer's
right to use and occupy the premises covered by such Option Lease and to reject
such Option Lease or assume and assign such Option Lease to a third party with
Seller retaining any proceeds of such assumption and assignments. Except as
otherwise provided in Section 5.2.2 with respect to cure amounts, regardless of
whether Seller rejects or Buyer directs Seller to assume and assign any one or
more Option Leases at any time, the cost and expense of the rejection or
assumption and assignment at any time of any one or more Option Leases,
including the filing and prosecuting of any motions or other papers with respect
to the same, shall be borne and paid for solely by Seller.
6.3.4 Buyer's obligation to pay percentage rent payable, if any, with
respect to any Option Lease shall be calculated and limited as follows: The
percentage rent payable, if any, for any applicable period for which percentage
rent is calculated with respect to any Option Lease shall be multiplied by a
fraction, the numerator of which shall be the sales generated by Buyer during
the applicable period in respect of the Best Store to which such Option Lease
relates and the denominator of which shall be the total sales generated by Buyer
and Seller during the applicable period in respect of the Best Store to which
such Option Lease relates.
6.4 Extension Order. In order for the parties to accomplish the objectives
of this Article 5 and the parties' objectives in respect of the Guaranty, Seller
hereby agrees to use its "best efforts" to obtain the entry by the Bankruptcy
Court of an order (or, if such order cannot be obtained, additional orders),
providing, that the total time for Seller to determine whether to assume or
reject all of the Option Leases, as set forth in section 365(d)(4) of the
Bankruptcy Code, shall be extended for a period of at least six months from the
Closing (the "Extension Order"). If the Extension Order cannot be obtained,
despite the use by Seller of its best efforts, Buyer agrees that the Guaranty
shall not be affected by Seller's failure to obtain the Extension Order with
respect to any one or more Option Leases as to which at least a three (3) month
extension shall have been obtained; but if, with respect to those Option Leases
as to which Seller shall have been unable to obtain at least a three (3) month
extension, Buyer does not agree that the Guaranty will not be affected, then
Seller shall have the right to elect not to proceed with the transactions
contemplated by this Agreement. Seller's initial motion for the entry of the
Extension Order shall be scheduled and heard simultaneously with Seller's motion
for the entry of an order approving the transactions contemplated by this
Agreement.
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6.5 Prosecution, Defense and Settlement of Rejection Claims; Mediation.
Pursuant to Section 4.3(c), at Closing, Buyer shall deliver to Seller the
Guaranty with respect to the amount of claims, as fixed, determined and allowed
pursuant to a Final Order, resulting from the rejection pursuant to section 365
of the Bankruptcy Code of the Option Leases, as such claims are limited by
Section 502(b)(6) of the Bankruptcy Code or otherwise (the "Allowed Rejection
Claims"). The prosecution, defense and settlement of any and all rejection
claims filed with respect to the Option Leases shall be controlled solely by
Buyer, acting reasonably. Except as provided below, any such prosecution,
defense or settlement shall be performed by Seller at Seller's reasonable
expense. To enable Buyer to manage and control effectively the prosecution,
defense and settlement of such rejection claims, Seller shall regularly (and in
no event less frequently than weekly) keep Buyer apprised of the status of the
litigation of any such claims and any settlement discussions relating thereto.
In addition, Seller shall deliver to Buyer a monthly listing of the Allowed
Rejection Claims and, upon resolution of the last Allowed Rejection Claim, Buyer
and Seller shall agree on the aggregate amount of the Allowed Rejection Claims.
If Seller believes that Buyer is not acting reasonably with respect to Buyer's
request regarding the prosecution, defense or settlement of any rejection claim
relating to any Option Lease (including the expenditure of legal or other
professional fees in connection with such prosecution, defense or settlement),
then Seller must promptly after such request is given and in no event later than
two (2) Business Days thereafter, either proceed with such prosecution, defense
or settlement of such rejection claims in accordance with Buyer's request or
submit the issue of the reasonableness of the request regarding such
prosecution, defense or settlement (and the expenditure of such legal or other
professional fees) to binding mediation. A single mediator for such binding
mediation shall be selected by mutual agreement of Seller and Buyer from the
judicial panel for the Bankruptcy Court for the Eastern District of Virginia or,
in the absence of such a panel in the Bankruptcy Court for the Eastern District
of Virginia, the Bankruptcy Court for the Southern District of New York. If
Seller and Buyer are unable to agree on the selection of a mediator, the
bankruptcy judge assigned to the Bankruptcy Case shall select and appoint the
mediator. The decision of the mediator (whether selected by mutual agreement of
Seller and Buyer or appointed by the bankruptcy judge) shall be final and
binding. Any and all fees, costs and expenses (including, without limitation,
the fees and expenses of attorneys and other professionals) incurred in
connection with the prosecution, defense or settlement of any rejection claim
filed with respect to any Option Lease shall be paid for solely by Seller unless
Buyer shall have been determined to be the loser in any mediation relating to
the prosecution, defense or settlement of such rejection claim (or the
expenditure of legal or other professional fees in connection with such
prosecution, defense or settlement), in which case Buyer shall be responsible
for all such fees, costs and expenses retroactive to the period from and after
the commencement of the mediation. The loser in connection with the mediation of
a particular rejection claim shall be solely responsible for the fees, costs and
expenses of the mediator. If the mediator is able to effect a settlement between
Seller and Buyer or if the mediator fails to render a decision with respect to
the prosecution, defense or settlement of a particular rejection claim (or the
expenditure of legal or other professional fees in connection with such
prosecution, defense or settlement), the fees, costs and expenses of the
mediator shall be shared equally by Seller and Buyer.
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7
BUYER'S USE OF REAL PROPERTY OWNED SELLER
7.1 Owned Stores.
7.1.1 Use of Owned Stores. During the Closing Period, Buyer shall have the
right, in its sole and absolute discretion, which right may be exercised at any
time and from time to time, to use and occupy any one or more of the store
locations owned by Seller (the "Owned Stores"), which Owned Stores are set forth
on Schedule 6.1, at a cost to Buyer on an Owned Store-by-Owned Store basis of
Twenty-Six Thousand Dollars ($26,000) (the "Per Store Rent"). The Per Store Rent
shall be paid to Seller on a monthly basis (on the first day of each month) and
shall constitute all of the rent payable with respect to each occupied Owned
Store for such month, including rent, real estate taxes and common area
maintenance charges. Seller shall pay all rent, real estate taxes and common
area maintenance charges when due. Moreover, Seller shall maintain and pay for
all reasonable property (excluding contents) and secondary liability insurance
for each Owned Store and Seller shall pay for all repairs and maintenance for
the Owned Stores, except for ordinary day-to-day maintenance and repairs,
including cleaning, trash removal and snow removal, which shall be the
obligation of Buyer. Utility costs shall be an obligation of Buyer. The Per
Store Rent for each Owned Store shall only be required to be paid for so long as
such Owned Store is occupied by Buyer, it being understood that Buyer may at any
time and for any reason whatsoever cease its operations at any one or more Owned
Stores. If Buyer fails to pay the Per Store Rent and any other amounts payable
as set forth above with respect to any Owned Store, then following the
expiration of a five (5) day cure period after receipt (notwithstanding the
provisions of Section 13.15) by Buyer of notice of such failure to make such
payments, Seller shall be entitled to revoke Buyer's right to use and occupy
such Owned Store. Buyer shall be required to vacate in broom-clean condition
each Owned Store that it has occupied by no later than Friday, February 28,
1997.
7.1.2 Relief from Stay. If any mortgagee with respect to any of the Owned
Stores succeeds in obtaining relief from the automatic stay pursuant to an order
of the Bankruptcy Court or Seller agrees to convey title to the Owned Store
premises, which constitute such mortgagee's collateral, to mortgagee in
satisfaction of mortgagee's claim against Seller, Seller shall arrange for Buyer
to complete the Store Closing Sales at such Owned Stores. Seller shall give no
fewer than seventy (70) days prior written notice of any voluntary transfer of
an Owned Store to any mortgagee holding a mortgage on any Owned Store; provided,
however, that such notice need not be any longer than the remaining time period
for Buyer to complete the Store Closing Sales at such Owned Store.
7.2 Headquarters. Subject to the right of Circuit City to exercise its
option to occupy more space in the Headquarters, which right shall be superior
to any right of Buyer provided herein, Buyer shall have the right, in the
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exercise of its sole and absolute discretion, which right may be exercised at
any time and from time to time during the Closing Period, to use and occupy a
reasonable portion of Seller's headquarters building located in Richmond,
Virginia (the "Headquarters") at no cost to Buyer. Seller shall provide to Buyer
the central administrative services and payroll related thereto as listed on
Schedule 6.2 at a cost of One Hundred Fifty Thousand Dollars ($150,000) per
week. In addition, all computer services shall be provided to Buyer at no cost
until such time as Seller determines, acting reasonably, that it no longer shall
use the mainframe computer systems. After any reasonable determination by Seller
is made that it no longer shall use the mainframe computer systems, Buyer shall
pay Seller the actual cost of the computer leases and other computer related
costs (excluding payroll) not to exceed Two Hundred Thousand Dollars ($200,000)
per month. Notwithstanding anything contained herein, from and after the date
hereof until the Closing, Seller shall provide Buyer with a reasonable amount of
space in the Headquarters at no charge of any nature.
8
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
8.1 Organization, Power, Standing and Qualifications. Except as set forth
on Schedule 7.1, Seller is a corporation duly organized, validly existing under
the laws of the Commonwealth of Virginia. Except as set forth on Schedule 7.1,
Seller has all requisite corporate power and authority and all necessary
licenses and permits to carry on the Business, as it has been and is currently
being conducted, to own, lease and operate the properties and assets used in
connection therewith and to enter into and perform this Agreement and consummate
the transactions contemplated hereby. Except as set forth on Schedule 7.1,
Seller is duly qualified to do business as a foreign corporation under the laws
of all jurisdictions wherein the conduct of the Business or the ownership,
leasing or operation of its properties and assets requires such qualification,
except where the failure of Seller to obtain such qualification would not have
an adverse effect on its assets or businesses. None of the subsidiaries of
Seller hold any material assets or properties.
8.2 Due Authorization. The execution and delivery of this Agreement by
Seller, the performance by Seller of its obligations hereunder, and the
transactions contemplated hereby, have been duly and validly authorized by all
requisite corporate action on the part of Seller. Subject to Bankruptcy Court
approval, this Agreement will be a valid and binding obligation of Seller,
enforceable in accordance with its terms.
8.3 Non-Contravention. Except as set forth in Schedule 7.3 and except for
defaults of the type referred to in section 365(b)(2) of the Bankruptcy Code,
the execution and delivery of this Agreement by Seller does not, and the
consummation of the transactions contemplated hereby will not, (i) violate or
conflict with any of the provisions of the articles of incorporation or by-laws
of Seller, or (ii) result in a breach or violation by Seller, of any of the
terms, conditions, or provisions of any law, rule, ordinance or regulation or
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any order, injunction, judgment or decree of any court or Government Body except
for such breaches or violations, whether individually or in the aggregate, that
would not materially impair or delay Seller's ability to consummate the
transactions contemplated hereby. Except for approval of the Bankruptcy Court,
and except as set forth in Schedule 7.3, no governmental license, permit or
authorization, and no registration, declaration or filing with any regulatory
agency or Government Body is required in connection with the execution, delivery
or performance of this Agreement.
8.4 Real Property. Schedule 7.4 sets forth (i) a list of all real property
owned by another Person that as of the date of this Agreement is leased to
Seller pursuant to the Option Leases, and (ii) a list of the Option Leases.
Buyer has been provided with access to all of the Option Leases and all of
Seller's other records with respect to the real property leased pursuant to the
Option Leases prior to Closing.
8.5 Brokers and Finders Fees. Neither Seller nor any of its officers,
directors or employees, as the case may be, has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement for which Buyer
will be liable.
8.6 Full Disclosure. No representations or warranties in this Agreement and
no statement contained in this Agreement or any Exhibit or Schedule attached
hereto or required to be delivered in accordance herewith contains or will
contain any untrue statement of material fact, or omit to state any material
fact necessary, in light of the circumstances in which it was made, to make the
statements herein or therein not misleading.
Except for the representations and warranties contained in this Article 7,
neither Seller nor any other Person makes any other express or implied
representations or warranty with respect to the Assets or the Business on behalf
of Seller.
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9
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
9.1 Organization, Power, Standing and Qualifications. Jubilee is an Ohio
limited partnership, duly organized, validly existing and in good standing under
the laws of the State of Ohio. ▇▇▇▇▇▇▇▇▇ is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Alco is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware. Nassi is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of California. Each of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco and Nassi has all
requisite power and authority and all necessary licenses and permits to carry on
its business as it has been and is currently being conducted, to own, lease and
operate the properties and assets used in connection therewith and, subject to
the obtaining of any necessary licenses and permits, to enter into and perform
this Agreement and consummate the transactions contemplated hereby.
9.2 Due Authorization. The execution and delivery of this Agreement by each
of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco and Nassi, the performance by each of Jubilee,
▇▇▇▇▇▇▇▇▇, Alco and Nassi of its obligations hereunder, and the transactions
contemplated hereby, have been duly and validly authorized by each of Jubilee,
▇▇▇▇▇▇▇▇▇, Alco and Nassi.
9.3 Non-Contravention. The execution and delivery of this Agreement by each
of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco and Nassi does not, and the consummation of the
transactions contemplated hereby will not, (i) violate or conflict with any of
the provisions of the certificate of incorporation, bylaws, certificate of
formation or limited liability company agreement, as applicable, of any of
Jubilee, ▇▇▇▇▇▇▇▇▇, Alco or Nassi or (ii) result in a breach or violation by any
of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco or Nassi of any of the material terms, conditions or
provisions of any law, rule, ordinance or regulation or any order, injunction,
judgment or decree of any court or Government Body. Except for Bankruptcy Court
approval, no governmental license, permit or authorization, and no registration,
declaration or filing with any Government Body is required in connection with
the execution, delivery and performance by Buyer of this Agreement.
9.4 Brokers and Finders Fees. None of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco, Nassi or
any of their respective directors, officers, managers, members or employees has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders fees in connection with the transactions contemplated by
this Agreement for which Seller will be liable.
9.5 Full Disclosure. No representations or warranties in this Agreement and
no statement contained in this Agreement or any Schedule or Exhibit attached
hereto or required to be delivered in accordance herewith contains or will
contain any untrue statement of material fact, or omit to state any material
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fact necessary, in light of the circumstances in which it was made, to make the
statements herein or therein not misleading.
9.6 Assets Being Acquired. None of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco and Nassi will
individually hold $15 million or more of the Assets and none of such entities is
within the same person as that term is defined in 16 CFR ss. 801.1(a)(1).
9.7 Ownership of Seller and Buyer. Each of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco and
Nassi represents and warrants that (i) neither it nor any of its affiliates owns
any capital stock of Seller ("Best Stock") nor will it or any of its affiliates
become the owner of any Best Stock as long as Buyer has the right to acquire any
additional assets from Seller as contemplated hereunder; (ii) to the best of the
knowledge (with reasonable due diligence of each of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco and
Nassi) no person that owns Best Stock owns an equity interest in Buyer; and
(iii) each of Jubilee, ▇▇▇▇▇▇▇▇▇, Alco and Nassi shall use their respective best
efforts to ensure that no person that owns Best Stock will become the owner of
any equity interest in Buyer for so long as Buyer has the right to acquire
additional assets from Seller as contemplated hereunder. For this purpose,
ownership includes any indirect ownership taking into account the attribution
rules of sections 267(c) and 707(b) of the Internal Revenue Code.
Buyer acknowledges that neither Seller nor any other Person on behalf of
Seller has made any other express or implied representations or warranties with
respect to the Business or the Assets, except as expressly set forth herein.
10
TRANSACTIONS AND CONDUCT OF BUSINESS PENDING CLOSING
Seller covenants and agrees that, pending the Closing, and except as may
otherwise be approved in advance in writing by Buyer:
10.1 Thanksgiving Advertising. Prior to Closing, Buyer shall arrange for
advertising for the Thanksgiving holiday weekend and if the Closing shall not
occur, Buyer shall make available to Seller at Seller's option any such reserved
advertising space at the same rate that Buyer would have paid for such
advertising space. Buyer shall work with Seller to make sure that reasonably
adequate space is reserved.
10.2 Encumbrance of Assets; Avoidance of Liabilities. Except as set forth
on Schedule 9.2, and except for deposits required to be made by Seller pursuant
to an order of the Bankruptcy Court, Seller shall not mortgage, pledge or
subject to any Encumbrance any of the Assets.
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10.3 Maintenance of Insurance. Seller shall continue to maintain in full
force and effect, without a decrease in present limits and coverage, all
policies of insurance, binders and bonds on the Business and the Assets and
shall make no changes therein without the prior written consent of Buyer.
10.4 Maintenance of Financial Records. Seller shall keep true books,
records and accounts and will make materially full and correct entries therein
of all its business transactions with respect to the Business and the Assets.
10.5 Access. Seller shall afford the members, officers, employees,
accountants, counsel and other representatives of Buyer prompt, free and full
access, upon reasonable notice, to its properties and its books, records,
contracts, commitments and other documents relating to the Business and the
Assets, including, without limitation, cooperating with Buyer with respect to
the all working papers of Seller's accountants relating thereto (provided that
Buyer has signed confidentiality and other documents required by Seller's
accountants), the right to consult with the officers, employees, accountants,
counsel and other representatives of Seller for the purpose of making such
investigation of the Business and the Assets as Buyer shall desire to make. In
connection with this investigation, Seller shall furnish to Buyer, for its
inspection and for its copying at its own expense, copies of all such documents,
records and information to which Buyer shall be entitled to have access relating
to the Business and the Assets (which shall not include accountants' working
papers) as Buyer may from time to time reasonably request.
10.6 Certain Dispositions. Seller shall not, at any time, dispose of any of
its furniture, fixtures, computers or equipment other than in the ordinary
course of business consistent with past practices or pursuant to an order of the
Bankruptcy Court in respect of a motion or other proceeding filed by a third
party.
10.7 Notices. Prior to the hearing with respect to the motion for the entry
of the Approval Order, Seller shall have duly provided actual notice to all
known creditors and constructive notice to all other parties, in accordance with
Rule 6004(c) of the Federal Rules of Bankruptcy Procedure, and shall have
provided actual notice to each known holder of any Encumbrance (including any
Government Body with respect to Taxes, including Sales Taxes and Transfer Taxes)
against the Owned Real Property, the Option Leases, the Personalty Leases, the
Inventory, Seller's furniture, fixtures, computers and equipment, Seller's
accounts receivable, and any other of the Assets to be transferred to Buyer
pursuant to the provisions of this Agreement of Seller's motion seeking, inter
alia, approval of this Agreement and the transactions contemplated by this
Agreement, including, without limitation, the sale of the Assets to Buyer free
and clear of Encumbrances pursuant to section 363(f) of the Bankruptcy Code.
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11
CONDITIONS TO BUYER'S OBLIGATION
The obligations of Buyer to enter into and complete the Closing are subject
to the fulfillment or satisfaction, on or prior to the Closing, of each of the
following conditions (any of which may, in Buyer's sole and absolute discretion,
be waived in writing in whole or in part by Buyer).
11.1 Representations and Warranties True as of Closing. Seller's
representations and warranties contained in this Agreement, and the Schedules
and Exhibits hereto shall be true and correct in all material respects at and as
of the date hereof and shall be true and correct in all material respects at and
as of the Closing with the same effect as though such representations and
warranties were made on and as of the Closing with such exceptions as do not in
the aggregate have a material adverse effect on Seller's ability to consummate
the transactions contemplated by this Agreement.
11.2 Compliance with this Agreement. Seller shall have performed and
complied in all material respects with all agreements and covenants contained in
this Agreement that are required to be performed or complied with by it prior to
or at the Closing.
11.3 Payment. Seller shall have concurrently with the Closing delivered to
Buyer the Guaranty Fee.
11.4 Deliveries. Seller shall deliver to Buyer at or prior to the Closing,
the documents and other items listed in Section 4.2 of this Agreement.
11.5 No Stay. The consummation of this Agreement shall not be the subject
of any stay of any nature imposed by any court of competent jurisdiction (each
party agreeing to use its best efforts to have any such stay terminated or
lifted).
11.6 Consents and Approvals. All authorizations, consents or approvals of
any and all Government Bodies and other third parties required to be obtained by
Seller to consummate the transactions contemplated by this Agreement shall have
been obtained and shall be in full force and effect.
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11.7 Bankruptcy Court Orders.
(a) As of the Closing, the sale of the Assets from Seller to Buyer pursuant
to this Agreement shall have been approved by the Bankruptcy Court pursuant to
section 363 of the Bankruptcy Code and any motions filed and any orders
approving such sale shall have been in form and substance reasonably
satisfactory to Buyer and Seller and shall have contained, inter alia, the
provisions set forth below (the "Approval Order"). The Approval Order shall have
been entered and no stay of any nature imposed by any court of competent
jurisdiction with respect to the Approval Order shall be pending as of the
Closing. The Approval Order, which must be reasonably satisfactory in form and
substance to Buyer, shall authorize Seller to enter into and consummate this
Agreement and the transactions contemplated hereby, and further provide among
other things that: (i) the transfers of the Assets by the Seller to Buyer
pursuant to this Agreement (a) are or will be legal, valid and effective
transfers of the Assets; (b) vest or will vest Buyer with good title to the
Assets (including good and marketable title to the Option Leases) free and clear
of all Encumbrances; (c) constitutes the best offer or value received by Seller
for the Assets transferred hereby; (d) do not and will not subject Buyer to any
liability as a successor of Seller; (e) the Bankruptcy Court retains
jurisdiction to enforce the provisions of this Agreement in all respects, (f)
the provisions of the Approval Order are nonseverable and mutually dependent,
(g) the transactions contemplated by this Agreement are undertaken by the Buyer
in good faith, as that term is used in section 363(m) of the Bankruptcy Code,
(h) pursuant to section 363(n) of the Bankruptcy Code, the consideration paid
under this Agreement was not controlled by an agreement among potential bidders
at the hearing, and (i) Buyer is authorized to conduct the Store Closing Sales
as Seller's agent subject to the terms and conditions contained herein and in
the Approval Order. Seller shall simultaneously with the motion to obtain the
Approval Order seek and use its best efforts to obtain the entry of an order
providing, among other things, that the transfers and assignments to Buyer
contemplated by this Agreement (including, without limitation, the transfer and
assignment of any Option Leases or Owned Stores) shall, pursuant to section
1146(c) of the Bankruptcy Code, not be subject to the imposition or payment of
any transfer taxes of any nature.
(b) Buyer shall be entitled to, and is not waiving, the protection of
section 363(m) of the Bankruptcy Code, the mootness doctrine or any similar
statute or body of law if the Closing occurs in the absence of any one or more
Final Orders.
(c) Promptly following execution of this Agreement, Seller shall have
caused Buyer to be included on the Bankruptcy Court's service list, and Seller
shall have promptly delivered to Buyer copies of any papers filed with respect
to the Option Leases, the Personalty Leases and the Owned Stores (e.g. by Met
Life) and any motions, objections to any motions filed under, pursuant to or in
connection with this Agreement or the transactions contemplated thereby prior to
Closing.
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11.8 Advertising and In-Store Promotions. Seller shall only conduct coupon
advertising that shall be mutually agreed upon with Buyer but in no event shall
such advertising cover any period after November 16, 1996.
12
CONDITIONS TO SELLER'S OBLIGATION
The obligations of Seller to enter into and consummate the Closing are
subject to the fulfillment or satisfaction, prior to or at the Closing, of each
of the following conditions (any of which may be waived in writing in whole or
in part by Seller):
12.1 Representations and Warranties True as of Closing. Buyer's
representations and warranties contained in this Agreement and the Schedules and
Exhibits hereto shall be true in all material respects at and as of the Closing
with the same effect as though such representations and warranties were made on
and as of the Closing, with such exceptions as do not in the aggregate have a
material adverse effect on Buyer's ability to consummate the transactions
contemplated by this Agreement.
12.2 Compliance with Agreement. Buyer shall have performed and complied in
all material respects with all agreements contained in this Agreement that are
required to be performed or complied with by it prior to or at the Closing.
12.3 Payment. Buyer shall have concurrently with the Closing delivered the
Cash Consideration, subject to and in accordance with the terms of this
Agreement.
12.4 Deliveries. Buyer shall deliver to Seller at or prior to the Closing
the documents and the other items listed in Section 4.3 of this Agreement.
12.5 Consents and Approval. All authorizations, consents or approvals of
any and all Government Bodies and other third parties required to be obtained by
Buyer to consummate the transactions contemplated by this Agreement shall have
been obtained and shall be in full force and effect and any required waiting
period shall have elapsed.
12.6 Bankruptcy Court Orders. The Approval Order shall have been entered
and no stay of the Approval Order shall be in effect. The consummation of this
Agreement shall not be subject to any stay of any nature imposed by any court of
competent jurisdiction (each party agreeing to use its best efforts to have any
such stay terminated or lifted).
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13
CERTAIN TRANSACTIONS AND OBLIGATIONS SUBSEQUENT TO CLOSING
13.1 Further Assurance of Cooperation. From and after the date hereof and
for a period of nine months following the Closing, Seller shall, from time to
time, upon reasonable request of Buyer and without further cost or expense to
Buyer, acknowledge and deliver all such further acts, bills of sale,
assignments, transfers, conveyances, powers of attorney and assurances as Buyer
may reasonably request to more effectively consummate the transactions
contemplated hereby and to vest in Buyer good and valid title to the Assets, to
protect Buyer's right, title and interest in all the Assets, and otherwise may
be appropriate to carry out the transactions contemplated by this Agreement.
13.2 [Intentionally Deleted.]
13.3 Seller's Retention of Employee Liabilities. Seller and Buyer hereby
agree that Buyer is not a successor employer to Seller. Seller shall be
responsible for all liabilities, obligations and expenses relating to employees
or former employees of Seller (the "Seller Employees") with respect to their
employment by Seller, including, but not limited to, liabilities and obligations
(i) for compensation accrued at any time except as provided for in the Addendum,
(ii) arising under any employee benefit plan, program or arrangement sponsored,
maintained or contributed to by Seller, whether accrued before, on or after the
Closing, and/or (iii) incurred as a result of or otherwise attributable directly
or indirectly to the termination of employment of any Seller Employees by
Seller. Buyer shall not have any liabilities or obligations with respect to such
liabilities, obligations and expenses relating to the Seller Employees, and
Seller hereby indemnifies and holds Buyer harmless in respect of any such
claims, liabilities or obligations. Seller shall retain all liability and
responsibility under the Worker Adjustment and Retraining Notification Action of
1988 ("WARN") with respect to Seller Employees.
13.4 [Intentionally Deleted.]
13.5 Tax Matters. If, despite the use by Seller of its best efforts to
obtain the entry of the 1146(c) Order, Seller is unable to obtain the entry of
such 1146(c) Order, Buyer shall pay the Transfer Taxes relating to the transfers
and assignments to Buyer or any third party designated by Buyer (including the
transfer and assignment of any Option Lease), and Seller shall pay the Transfer
Taxes relating to the transfers and assignments to or any third party designated
by Seller (including the transfer and assignment of any Option Lease or any
Owned Store); provided, however, that Buyer and Seller shall have the right to
contest the imposition or amount of any purported Transfer Tax assessed or
imposed.
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13.6 Bankruptcy Court Orders. (a) Pursuant to Article 5, at any time and
from time to time during the Option Period, upon any request from Buyer to
assume and assign any Option Lease, Seller shall use its best efforts to obtain
the entry of an order of the Bankruptcy Court approving any such assumption and
assignment pursuant to section 365 of the Bankruptcy Code in forms of motions
and orders reasonably acceptable to Buyer and Seller ("365 Orders"). Such 365
Orders shall provide that the relevant Option Lease will be transferred to, or
remain in full force and effect for the benefit of Buyer or any third party
designated by Buyer notwithstanding any provision in such contracts or leases
(including those described in sections 365(b)(2) and (f) of the Bankruptcy Code)
that prohibits such assignment or transfer.
(a) No later than two (2) Business Days after the date hereof, Seller shall
file a motion with the Bankruptcy Court seeking (i) the entry of the Approval
Order, (ii) a determination by the Bankruptcy Court that the transfers and
assignments to Buyer contemplated by this Agreement (including without
limitation the transfer and assignment of any Option Leases during the Option
Period) shall, pursuant to section 1146(c) of the Bankruptcy Code, not be
subject to the imposition or payments of any transfer taxes of any nature (the
"1146(c) Order") and (iii) the entry of the Extension Order. Seller agrees to
make promptly any filings, to take all actions and to use its best efforts to
obtain any and all other approvals and orders necessary or appropriate for the
consummation of the transactions contemplated hereby.
(b) If the Approval Order, the 365 Orders, the 1146(c) Order, the Extension
Order (or orders) or any other orders of the Bankruptcy Court relating to this
Agreement shall be appealed by any party (or a petition for certiorari or motion
for rehearing or reargument shall be filed with respect thereto), Seller agrees
to use its best efforts to prosecute such appeal, petition or motion, or defend
against such appeal, petition or motion, and Buyer agrees to cooperate in such
efforts, and each of Buyer and Seller agrees to use its best efforts to obtain
an expedited resolution of any such appeal. It is understood and agreed that the
"best efforts" as used in this Section 12.6 shall require Seller to act as
reasonably requested by Buyer. In the event that Buyer and Seller disagree as to
the reasonableness of any request by Buyer with respect to the entry of any of
the orders described above pursuant to this Section 12.6, Seller must promptly
after such request is made and in no event later than two (2) Business Days
thereafter either follow Buyer's request or submit the matter to the Bankruptcy
Court for determination; it being understood and agreed if Seller shall fail to
submit the matter to the Bankruptcy Court for determination, then Buyer shall
have the right to submit the matter to the Bankruptcy Court for determination.
13.7 Guaranty. Buyer and Seller shall each honor their obligations under
the Guaranty.
13.8 Additional Deliveries. Seller shall promptly deliver to Buyer copies
of any papers filed with the Bankruptcy Court after the Closing with respect to
the Option Leases (including proofs of claim), the Owned Stores, the Extension
Order, and any objections to any motions filed under, pursuant to or in
connection with this Agreement or the transactions contemplated hereby.
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14
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; TERMINATION
14.1 Survival of Representations. The representations and warranties
contained in Articles 7 and 8 shall terminate on the nine-month anniversary of
the Closing.
14.2 Indemnification by Seller. Subject to the terms and conditions of this
Section 13.2 and if (but only if) the Closing is consummated, Seller hereby
agrees to indemnify, defend and hold harmless, Jubilee, ▇▇▇▇▇▇▇▇▇, Alco, Nassi
and any parent, subsidiary or director, officer, member, partner or employee of
Buyer (collectively, the "Buyer Group"), from and against all demands, claims,
actions or causes of action, assessments, payments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and attorneys' fees and expenses (collectively "Damages") asserted
against, resulting to, imposed upon or incurred by the Buyer Group or any member
thereof or against the Assets, by reason of or resulting from (i) the Unassumed
Liabilities (pursuant to Section 2.4), (ii) the failure by Seller to duly and
punctually perform any and all of its obligations under this Agreement or any
other agreement contemplated hereby after the expiration of any applicable
notice and cure periods, if any, and (iii) any breach by Seller of the
representations and warranties contained in Article 7. Seller hereby
acknowledges and agrees that any indemnification obligation under this Section
13.2 shall be treated as an administrative claim, entitled to priority in
Seller's Bankruptcy Case, pursuant to sections 503(b)(1) and 507(a)(1) of the
Bankruptcy Code. Such administrative claim shall be paid promptly following
allowance of the same by the Bankruptcy Court without the need to wait until
confirmation of a chapter 11 plan for Seller or any other event in the
Bankruptcy Case at such time and if authorized by the Bankruptcy Court.
14.3 Indemnification by Buyer.
14.3.1 Subject to the terms and conditions of this Section 13.3 and if (but
only if) the Closing is consummated, Buyer hereby agrees to indemnify, defend
and hold harmless Seller and any parent, subsidiary, director, officer or
employee of Seller from any Damages arising by reason of or resulting from (i)
the failure of Buyer to duly and punctually pay the liabilities of Seller
expressly assumed by Buyer hereunder or to perform any and all of its
obligations under this Agreement or any other agreement contemplated hereby
after the expiration of any applicable notice and cure periods, if any, (ii) any
and all Damages accruing from and after the Closing that result from Buyer's
operation of the Best Stores, including, without limitation, with respect to
Taxes, (iii) all liabilities and obligations with respect to the Business,
Buyer's ownership of the Assets, Store Closing Sales or other sales, from and
after the Closing, and (iv) any breach by Buyer of the representations and
warranties contained in Article 8. The indemnity provided under this Section
13.3.1 shall be secured pursuant to a Five Million Dollar ($5,000,000) standby
letter of credit (the "Indemnification Letter of Credit"), in form and substance
-32-
reasonably acceptable to Buyer and Seller, delivered at Closing by Buyer.
Notwithstanding any other provision of this Agreement, other than the delivery
of the Indemnification Letter of Credit and with respect to the Guaranty, Buyer
shall have no further obligation or liability under this Section 13.3 and
Seller's indemnification obligations shall be limited to Five Million Dollars
($5,000,000).
14.3.2 Prior to drawing down any amounts under the Indemnification Letter
of Credit, Seller shall (i) certify in writing to Buyer that Seller believes it
has a valid claim against Buyer under this Section 13.3, and (ii) afford Buyer
five (5) Business Days to pay such claim; provided, however, that Seller shall
not be subject to the obligations set forth in clauses (i) and (ii) from and
after the date Buyer is subject to a case under the Bankruptcy Code. If such
certification has been made to Buyer by Seller and Buyer has not otherwise paid
such claim, Seller may five (5) Business Days following the delivery of the
certification draw down on the Indemnification Letter of Credit only up to the
amount of its claim.
14.4 Conditions of Indemnification. The obligations and liabilities of
Seller under Section 13.2 hereof and the obligations and liabilities of Buyer
under Section 13.3 hereof with respect to claims relating to third parties shall
be subject to the following terms and conditions:
(a) A party seeking indemnification under this Agreement ("Indemnified
Party") will give the party required to provide such indemnification (the
"Indemnifying Party") notice of any such claim promptly, but in no event later
than five (5) Business Days after receiving notice hereof, and thereafter the
Indemnifying Party will undertake the defense thereof by representatives chosen
by it, provided, however, that failure to give such notification shall not
affect the indemnification provided for herein except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure; provided, further, however, that even if Seller as Indemnifying Party
undertakes the defense of a claim, Buyer may, at its own expense, participate in
the defense of such claim.
(b) If the Indemnifying Party, within a reasonable time after notice of any
such claim, fails to defend such claim, the Indemnified Party will have the
right to undertake the defense, compromise or settlement of such claim at the
expense and on behalf of and for the account and risk of the Indemnifying Party.
(c) Anything in this Section to the contrary notwithstanding, (i) if there
is a reasonable probability that a claim may materially and adversely affect an
Indemnified Party other than as a result of money damages or other money
payments, the Indemnified Party shall have the right, at its own cost and
expense, to defend, and with the consent of the Indemnifying Party, to
compromise or settle such claim, and (ii) the Indemnifying Party shall not,
without the written consent of the Indemnified Party, its successors and
assigns, settle or compromise any claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party, a release from all liability
in respect of such claim.
-33-
14.5 No Setoff. Neither Seller nor Buyer shall have any right of setoff or
offset against any payments due and owing to the other party hereunder.
14.6 [Intentionally Deleted].
14.7 Remedies Cumulative. Except as herein expressly provided, the remedies
provided herein shall be cumulative and shall not preclude assertion by any
party hereto of any other rights or the seeking of any other remedies against
any other party hereto.]
14.8 Expenses. Except as otherwise provided herein, each of the parties
hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.
14.9 Press Releases. No party hereto shall issue any press release with
respect to this Agreement or the transactions contemplated hereby, prior to
Closing, without the prior consent of the other parties hereto except as may be
required by the Bankruptcy Court, any applicable Federal or state securities
laws or the regulations or requirements of a stock exchange or
over-the-counter-market on which the shares of common stock of Seller are
listed, after consultation with the other parties hereto. Nothing in this
Section 13.8 shall prohibit Seller from notifying its employees of the existence
of this Agreement and the transactions contemplated hereby or discussing those
transactions with their employees or vendors.
14.10 Contents of Agreements. This Agreement (including the Exhibits and
Schedules hereto), the Guaranty and any other agreement referred to herein
(including, without limitation, the Initial Sales Agreement) set forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. This Agreement shall not be amended except by a written
instrument making specific reference hereto and duly executed by each of the
parties hereto. Any and all previous agreements and understanding between or
among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement. Notwithstanding the foregoing, and except as
otherwise expressly provided herein, the terms of the Initial Sales Agreement
remain and shall remain in full force and effect.
14.11 Assignment and Binding Effect. This Agreement may not be assigned by
any party hereto without the prior written consent of each other party hereto.
14.12 Waiver. No alteration, amendment or modification of any of the terms
or provisions of this Agreement shall be valid unless made pursuant to an
instrument in writing signed by both parties hereto, provided, that, the waiver
by either party of compliance with any provision hereof or of any breach or
default by the other party need only be signed by the party waiving such
provision, breach or default. Waiver by either party hereto of any such breach
or default by the other party shall not operate as a waiver of any other breach
or default waived.
-34-
14.13 Outside Dates. (a) The Approval Order shall be entered by no later
than Monday, November 25, 1996, time being strictly of the essence, and the
conditions set forth in Article 10 shall be satisfied by no later than Monday,
November 25, 1996, time being of the essence. If the Approval Order shall not be
entered on or prior to November 25, 1996, time being of the essence, if any stay
shall be pending with respect to such order as of the close of business on
November 29, 1996, time being of the essence, or if any condition set forth in
Article 10 shall not have been satisfied on or prior to November 25, 1996, time
being of the essence, (i) Buyer shall have the right to elect not to proceed
with the transactions contemplated herein upon the delivery of written notice to
Seller, (ii) Buyer shall be entitled to retain the Due Diligence Fee
notwithstanding its exercise of such right and (iii) if Buyer elects to exercise
such right, (a) Buyer shall have no obligation or liability of any nature to
Seller or its estate other than with respect to the Initial Sales Agreement, and
(b) Seller shall have no obligation or liability of any nature to Buyer other
than the obligation to pay Buyer the Due Diligence Fee pursuant to the Initial
Order.
(a) If all of the conditions set forth in Article 10 shall have been
satisfied as of Monday, November 25, 1996 and Seller is ready, willing and able
to consummate the transactions contemplated herein but Buyer is unable to
consummate the transactions contemplated herein then (i) Seller shall have the
right to elect not to proceed with the transactions contemplated herein upon the
delivery of written notice to Buyer, (ii) if Seller elects to exercise such
right, Seller shall have no obligation or liability of any nature to Buyer
except with respect to the Initial Sales Agreement and except for the obligation
to pay Buyer the Due Diligence Fee pursuant to the Initial Order, and (c) Seller
may commence an action against Buyer for money damages based on the extent, if
any, to which Seller has been damaged by Buyer's failure to close.
(b) If the Closing shall occur for any reason or under any circumstance
after Thursday, November 28, 1996, time being of the essence, then the Closing
shall be deemed to have occurred for purposes of this Agreement as of Thursday,
November 28, 1996; it being understood and agreed that under such circumstances
Buyer shall receive the benefit of all sales conducted in the Closing Stores
after Thursday, November 28, 1996, and Buyer shall be responsible for those
expenses, for which Buyer is responsible under the terms of this Agreement and
the Addendum, that are attributable to the Closing Stores after Thursday,
November 28, 1996. To account for the adjustment contemplated by this Section
13.12(c), Buyer and Seller shall jointly keep track of and tabulate the gross
rings (exclusive of Sales Taxes) on Seller's cash registers in each of the Best
Stores from and after November 29, 1996. For purposes of the Inventory and L/C
Difference calculation in the Asset Adjustment Schedule, physical inventory at
Closing will be the sum of (A) the cost of inventory per the Inventory Count
pursuant to and in accordance with Section 3.3, (B) inventory associated with
gross ring sales and (C) a shrink adjustment equal to the product of (i) gross
rings at the retail price (exclusive of sales taxes) and (ii) 1.2%.
-35-
14.14 Termination. Notwithstanding anything to the contrary contained
herein, this Agreement may be terminated before the Closing occurs only as
follows: (i) by written agreement of Buyer and Seller at any time, (ii) by Buyer
by notice to Seller at any time, pursuant to the provisions of Section 13.13(a),
(iii) by Seller by notice to Buyer at any time, pursuant to the provisions of
Section 13.13(b), and (iv) by Buyer by notice to Seller at any time upon
Seller's failure to comply with the conditions set forth in Section 10.8.
14.15 Notices. Any notice, request, demand, waiver, consent approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy or sent, postage prepaid, by
U.S. Post Office express mail, or by recognized overnight air courier service
and shall be deemed given when so delivered personally, or telecopied or if
mailed or sent by overnight courier service, on the scheduled delivery date, to
the parties at the following addresses:
If to Buyer:
▇▇▇▇▇▇▇▇▇ Financial Group, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
and
Jubilee Limited Partnership III
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
and
Alco Capital Group, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
and
The Nassi Group, LLC
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
-36-
with a copy to:
Battle ▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Primoff, Esq.
and a copy to:
Irell & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
If to Seller:
Best Products Co., Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other address or person as any party may have specified in a notice
duly given to the party as provided herein.
14.16 [Intentionally Deleted].
-37-
14.17 Severability. If any provision of this Agreement, or the application
thereof to any person or entity or any circumstance, is invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction in any case so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in a manner adverse to any party.
14.18 Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by and interpreted and enforced in accordance with the laws of the
State of New York as applied to contracts made and fully performed in such
state, without giving effect to the choice of law principles thereof. The
parties hereto irrevocably submit to the exclusive jurisdiction of the United
States Bankruptcy Court for the Eastern District of Virginia over any dispute
arising out of or relating to this Agreement or any of the transactions
contemplated hereby except where mediation is otherwise expressly referred to
herein. The Bankruptcy Court shall retain jurisdiction with respect to any
matter, issue, claim or controversy arising out of or resulting from this
Agreement or any of the transactions contemplated hereby or associated herewith,
including any matter, issue, claim or controversy relating to Buyer's right to
have received the Assets free and clear of any and all Encumbrances.
14.19 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and Buyer and their respective permitted successors and assigns and they
shall not be construed as conferring, and are not intended to confer, any rights
on any other persons (including, without limitation, any creditors of Seller).
14.20 Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
14.21 Schedules and Exhibits. All Schedules and Exhibits referred to herein
are intended to be and hereby are specifically made a part of this Agreement as
if set forth herein in their entirety. Within ten (10) days after the date of
execution of this Agreement, Seller shall provide Buyer with any Exhibits or
Schedules not attached hereto on the date of execution of this Agreement.
14.22 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and Seller and Buyer
may become parties hereto by executing a counterpart hereof. This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
-38-
14.23 Trial by Jury. Each party to this Agreement waives any right to trial
by jury in any action, matter or proceeding regarding this Agreement or any
provision hereof.
14.24 Preparation of this Agreement. Buyer and Seller hereby acknowledge
and agree that (i) Buyer and Seller jointly and equally participated in the
drafting of this Agreement and all other agreements contemplated hereby, (ii)
both Buyer and Seller have been adequately represented and advised by legal
counsel with respect to this Agreement and the transactions contemplated hereby,
and (iii) no presumption shall be made that any provision of this Agreement
shall be construed against either party by reason of such role in the drafting
of this Agreement and any other agreement contemplated hereby.
-39-
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement on the date first above written.
BEST PRODUCTS CO., INC.
By: _________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title:Chairman and CEO
JUBILEE LIMITED PARTNERSHIP III
By: _________________________________
Name:
Title:
▇▇▇▇▇▇▇▇▇ FINANCIAL GROUP, LLC
By: _____________________________
Name:
Title:
ALCO CAPITAL GROUP, INC.
By: _____________________________
Name:
Title:
THE NASSI GROUP, LLC
By: _____________________________
Name:
Title:
-40-
SCHEDULE 3.3.1
ADJUSTMENTS TO THE CASH CONSIDERATION
For purposes of this exhibit, Inventory Value, Merchandise, On Order
Merchandise, Merchant, and Sale shall be defined according to the Initial Sales
Agreement. Initial Stores shall refer to the eighty-one (81) stores listed in
Exhibit A to the Initial Sales Agreement.
I. The Cash Consideration of $410,000,000 shall be:
(a) Reduced by an amount equal to 85.15% times the aggregate Inventory
Value of the Merchandise in the Initial Stores, except for (a) On
Order Merchandise and (b) Merchandise from Merchant's distribution
centers located in Tacoma, Washington, Las Vegas, Nevada and Denver,
Colorado in each such case received at the Initial Stores after
October 31, 1996, as to which such percentage shall be the product of
85.15% times the complement of the then prevailing Sale discount at
the time of receipt of such Merchandise at the Initial Stores; and
(b) Increased by certain expenses incurred by Seller in connection with
the Initial Sales Agreement from October 20, 1996 through Closing,
which expenses shall only include (i) Leased Property Payments for the
Initial Stores subject to Option Leases, and (ii) $10,000 per store
plus utilities for the Initial Stores that are Owned Stores.
-41-
Schedule 3.3.2
ASSET ADJUSTMENT SCHEDULE
I. Projected September 30 Book Assets and L/C Inventory
----------------------------------------------------
(000's)
Cash $ 5,000
Inventory $479,888 A
L/C Inventory (before adjustment for import costs) $ 61,694 B
Other Current Assets $ 20,465
Equipment and Leasehold Improvements $ 77,259
Other Assets $ 9,515
II. Adjustment Percentages
Cash 100%
Inventory and L/C Inventory 70.3%
III. Inventory and L/C Inventory Difference Calculation*
Equals the difference between (I) the sum of A plus B and (II) physical
inventory pursuant to the initial agreement plus the physical inventory at
Closing (including layaway merchandise) plus in-transit domestic inventory
where Best has title and has or will be obligated to pay for merchandise
plus capitalized freight calculated in accordance with the Company's past
policies minus valuation reserves calculated in accordance with the
Company's past policies.
----------------------
* For purposes of this Agreement L/C Inventory will not be included on the
"Closing Statement" pursuant to 3.3.2. Upon receipt at the distribution center
(or stores if applicable), such merchandise will be added to the book value of
the Inventory in accordance with Company's prior practices, and will be taken
into account when calculating the final and total cash consideration as will be
the payments noted in the following sentence. Upon notice from Seller, Buyer
shall pay to Seller within one business day the amounts payable in accordance
with the adjustment percentages noted in the "Asset Adjustment Schedule."
-42-
IV. Equipment and Leasehold Improvements Adjustment
$25,000 per store reduction in price (excluding jewelry stores), where
equipment and fixtures cannot be conveyed.
If Best cannot convey substantially all unencumbered movable furniture,
fixtures, and equipment in the headquarters and distribution centers, then
Best shall retain all movable unencumbered furniture, fixtures, and
equipment in headquarters and distribution centers and reduce the Purchase
Price by one million dollars. Buyer will be responsible for any removal
costs associated with fixtures conveyed.
V. Other Assets
If assets held for resale are not delivered, Purchase Price will be reduced
by 90% of the book value for the Chula Vista property, and $1,000,000 for
the Toledo property.
VI. Other Current Assets
The Purchase Price will be adjusted by the differences to book values
listed below multiplied by the percentages associated with such
differences:
Adjustment
($000's) Book Value* Percentage
Trade A/R 1,003 50%
Amex A/R 24 90%
Coupons 40 100%
Bankcard - ▇▇▇▇▇▇▇ ▇▇ ▇▇▇%
▇▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇ ▇▇ 100%
Other A/R 440 50%
Freight Claims 351 50%
Prepaid Supplies 629 25%
Prepaid VEBA expenses 426 100%
Prepaid Rent Real Estate 1,941 100%
Prepaid Rent Equipment 152 100%
Site Fuel 105 100%
Security Deposits+ 128 25%
Recovery Claim 355 25%
* Book values will be calculated in accordance with Best's historical
practices.
+ Excludes post-petition utility deposits.
-43-
Schedule 6.2
Central Administrative Services
15 Daily sales information, including:
* gross sales, net sales and discount by category
* sales tax reporting
* sales by store, by department and by week only for comparable periods
last year
16 Daily cash reconciliation, including:
* cash management and reconciliation prepared by Agent on a daily basis
* credit card processing and management (if applicable)
* daily deposit information to reconcile weekly
17 Weekly payroll processing and management, including detailed
accounting of hours and benefits and presently performed payroll
functions.
18 Physical inventory taking and management, including management and
tracking of inventory transfers and receipts.
19 Management of POS to manage the sales process, including
downloading of discounts (by SKU and/or by department)
throughout the term of the Sale.
20 Access and analysis of current SKU, price and cost files, including
all information on which ▇▇▇▇ and Maintained Markup reports are based.
-44-
EXHIBIT A
STORE CLOSING ADDENDUM
As of October 29, 1996
Upon execution by BEST PRODUCTS CO., INC. (the
"Merchant"), a debtor in possession in a case under Chapter 11 of title 11 of
the United States Code (the "Bankruptcy Code") pending in the United States
Bankruptcy Court for the Eastern District of Virginia (the "Bankruptcy Court"),
this addendum (the "Addendum") is an integral, and non-severable part of the
Asset Agreement, as defined below, between Merchant and Jubilee Limited
Partnership III, ▇▇▇▇▇▇▇▇▇ Financial Group, LLC, ALCO Capital Group, Inc., and
The Nassi Group, LLC (hereinafter collectively referred to as the "Agent") for
Agent to act as Merchant's sole and exclusive agent pursuant to the terms of
this Agreement for the limited purpose of selling all of the Merchandise in
Merchant's stores listed on Exhibit A attached hereto (collectively, the
"Stores" and individually, a "Store") by means of a store closing or similar
sale (the "Sale"). Simultaneously with the execution and delivery of this
Addendum, the parties hereto are executing and delivering an Asset Purchase
Agreement dated as of October 29, 1996 (the "Asset Agreement"). In consideration
of the mutual promises and covenants contained herein and in the Asset Agreement
and other good and valuable consideration, the adequacy and sufficiency of which
is hereby acknowledged, Merchant and Agent hereby agree as follows:
1. Sale and Agency. The Agent agrees to serve as Merchant's
exclusive agent for the limited purpose of conducting the Sale of the
Merchandise (as defined in Section 4(a) hereof) in accordance with the terms of
this Addendum.
2 Bankruptcy Court Approval. Merchant's and Agent's obligations
hereunder are subject to approval of the Bankruptcy Court of this Addendum and
the Asset Agreement and shall be of no force and effect in the event that such
documents are not so approved and on a unitary and non-severable basis. As soon
as practicable after Merchant's execution of this Addendum and the Asset
Agreement, Merchant shall apply to the Bankruptcy Court for an order approving
this Addendum and the Asset Agreement in their entirety and as a unitary
non-severable whole (the "Approval Order"). With respect to the provisions of
this Addendum, the Approval Order shall provide, in a form reasonably acceptable
to counsel for the Agent and Merchant, that: (a) this Addendum is in the best
interests of Merchant, Merchant's estate, creditors and other parties in
interest; (b) this Addendum (and each of the transactions contemplated hereby)
is approved in its entirety; (c) Merchant and Agent shall be authorized to take
any and all actions as may be necessary or desirable to implement this Addendum
and each of the transactions contemplated hereby; (d) Agent shall be entitled to
sell all Merchandise hereunder free and clear of all liens, claims or
encumbrances thereon; (e) Agent shall have the right to use the Stores for the
purpose of conducting the Sale; (f) Agent, as agent for Merchant, is authorized
to conduct the Sale as a store closing or similar type sale (the "Store Closing
Sale"); (g) Agent shall be granted a limited license and right to use until the
End Date the trade names, logos and customer lists relating to and used in
connection with the operation of the Stores, solely for the purpose of
advertising the Sales in accordance with the terms of the Addendum; (h) Agent
shall have the right to use all Store-level assets and such other assets and
services of Merchant designated in this Addendum, solely for the purposes and to
the extent and for the duration set forth in this Addendum; (i) Agent is
authorized to post signs, advertise and otherwise promote the Sale only as a
"Store Closing Sale" or "Bankruptcy Court Authorized Store Closing Sale" or
"Going Out of Business Sale" without further consent of any person other than
Merchant, in a manner consistent with the Sale guidelines attached as Exhibit B
hereto (the "Guidelines"); provided, however, that no signs shall be posted in
or about any Store which shall be in violation of the lease for such Store,
except as may be modified by the Approval Order, including the Guidelines; (j)
each and every federal, state or local agency, department or governmental
authority with regulatory authority over the Sale (collectively, the
"Governmental Authority") and all newspapers and other advertising media in
which the Sale is advertised shall be directed to accept the Approval Order as
binding to allow Merchant and Agent to consummate the transactions provided for
in this Addendum, including, without limitation, the conducting and advertising
of the Sale as a "Store Closing Sale" or "Bankruptcy Court Authorized Store
Closing Sale", and no further approval, license or permit of any Governmental
Authority shall be required; (k) the Bankruptcy Court shall retain jurisdiction
over the parties to enforce this Addendum; (l) Agent shall not be liable for any
claims against the Merchant other than as expressly provided for in this
Addendum and the Asset Agreement, and Agent shall have no successorship
liabilities whatsoever; (m) sales of Merchandise shall be protected by section
363(m) of the Bankruptcy Code in the event that the Approval Order is reversed
or modified on appeal; and (n) Agent's claims hereunder shall be entitled to
priority under section 507(a)(1) of the Bankruptcy Code.
3 The Inventory Count; Fixtures List. Merchant and Agent shall cause
to be taken an "SKU" inventory of all Merchandise in accordance with the terms,
conditions and procedures set forth more fully in the Asset Agreement. On the
day immediately prior to the Inventory Date, representatives of Merchant will
take a physical count and prepare a list of all Fixtures located in the Stores,
which list will be verified, signed and approved by an authorized representative
of Agent within two (2) days of the Inventory Date.
4 Merchandise/On Order Merchandise.
1 The term "Merchandise" shall include (i) all
merchandise and goods owned by Merchant and located at the Stores on the Start
Date, at Merchant's distribution centers in Ashland, Virginia and Richmond,
Virginia, and at Merchant's office space in New York, New York, and (ii) all On
Order Merchandise (as hereinafter defined); provided, however, that
"Merchandise" shall not include (A) goods which belong to sublessees, licensees
or concessionaires of Merchant or which have been placed in the Stores on
consignment or bailment; and (B) furniture, fixtures, equipment and improvements
to realty located in the Stores (the "Fixtures").
2 "On Order Merchandise" shall mean first quality in
season goods (A) to be received at the Stores in the ordinary course from
Merchant's vendors on or before November 30, 1996, (B) which are consistent as
to type and quality as Merchandise presently located in the Stores, (C) which
are ticketed at Merchant's expense upon delivery to the Merchant's distribution
centers or the Stores in a manner consistent with Merchant's historic practices
and policies; provided, however, that consistent with such historic practices
and policies all or a portion of such Merchandise may not physically display the
price of such merchandise, (D) having an aggregate cost not in excess of
$75,000,000, and (E) all of which is generally described in Exhibit C attached
hereto.
3 Agent shall not bring any additional merchandise
into any Store with the exception of Merchandise transferred from (i) another
Store, (ii) one of Merchant's distribution centers, or (iii) Merchant's New York
jewelry office.
4 Merchant shall retain all responsibility for any goods
not included as "Merchandise" hereunder. Any layaway, repair or special order
goods not constituting Merchandise, together with all contracts relating
thereto, shall remain Merchant's liability and responsibility, but Agent shall
cooperate with Merchant in administering such matters. Except as expressly
provided in this Section 4(d), Agent shall have no cost, expense or
responsibility in connection with any goods not included in Merchandise.
5 INTENTIONALLY DELETED.
6 Duration of the Sale; Vacating the Premises.
1 Unless otherwise provided for in the Asset
Agreement the Sale shall start on the first day after the completion of the
Inventory Count (with respect to each Store, the date that the Sale commences
shall be referred to as the "Start Date"), and shall end no later than the close
of business at each Store on February 28, 1997, unless extended by agreement of
the parties (the "End Date"). Agent may terminate the Sale prior to the End Date
at any Store in its discretion on fourteen (14) days' prior written notice to
Merchant.
2 Except as otherwise provided for in the Asset
Agreement, at the conclusion of the Sale, Agent (i) agrees to leave the Stores
in "broom clean" condition and to leave the Stores in the same condition as on
the Start Date, ordinary wear and tear excepted, (ii) shall vacate the Stores on
or before the End Date, and (iii) shall surrender and deliver each of the Store
premises and keys thereto to Merchant, or as otherwise directed by Merchant, as
the Sale therein is completed.
7 Gross Rings. In the event that Merchant and Agent agree under the
terms of the Asset Agreement that the Sale may commence in any particular Store
prior to the completion of the Inventory Count at such Store, then for the
period from the Start Date for such Store, until the Inventory Count is taken in
such Store, Agent and Merchant shall jointly keep a strict count of gross
register receipts less applicable sales tax ("Gross Rings") and cash reports of
sales within such Store. The register receipts shall show for each item sold the
selling price and the Storewide or other discount granted by Agent in connection
with such sales. All such records and reports shall be made available to Agent
and Merchant during regular business hours upon reasonable notice.
8 Proceeds
1 INTENTIONALLY DELETED
2 INTENTIONALLY DELETED
3 The term "Proceeds" shall mean the proceeds
received from the sale of the Merchandise (which amount shall not include
sales taxes) and the proceeds of Merchant's insurance, if any, for loss or
damage to the Merchandise, or robbery of cash to the extent of insurance
coverage of Merchant.
4 On the Start Date, Agent shall reimburse
Merchant as of the start of business on the Start Date for all cash
remaining in the Stores used for the purpose of refunds, exchanges, and cash
registers.
5 After full payment of the cash consideration (the
"Cash Consideration") to be paid by Agent and received by Merchant under the
Asset Agreement, and the full payment of all Expenses of Sale, Agent shall
retain all Proceeds of the Sale. All Merchandise remaining at the conclusion of
the Sale shall become the property of the Agent, free and clear of all liens,
claims, and encumbrances of any kind or nature.
6 All amounts required to be paid by Agent or Merchant
under any provision of this Addendum, shall be made by wire transfer of
immediately available funds which shall be wired by Agent or Merchant, as
applicable, no later than 2:00 p.m. (Eastern Time) on the date that such payment
is due; providing, however, that all of the information necessary to complete
the wire transfer has been received by Agent or Merchant, as applicable, by 9:00
a.m. (Eastern Time) on the date that such payment is due. In the event that the
date on which any such payment is due is not a business day then such payment
shall be made by wire transfer on the next business day.
7 Agent shall provide a complete accounting to
Merchant within thirty (30) days of the End Date of (i) all Proceeds from the
Sale, (ii) all Sales Taxes collected during the Sale, and (iii) any other
accountings required hereunder.
9 Conduct of the Sale. Agent shall conduct the Sale in the manner in
which Agent in its discretion reasonably deems fit, including, but not limited
to, advertising, pricing of Merchandise, number and type of personnel, Store
hours, Store maintenance and security, all in accordance with the applicable
Store lease as may be modified by the Approval Order. Agent shall conduct the
Sale in a commercially reasonable manner in accordance with the terms of this
Addendum and the Approval Order. Unless otherwise agreed by Merchant, Agent
shall only advertise the Sale as a "Store Closing Sale" or "Bankruptcy Court
Authorized Store Closing Sale" or "Going Out of Business Sale" with reference to
the specific Store location, subject to the terms of the Approval Order.
Merchant will have the right to approve, within two (2) business days of
notification to Merchant, all advertising prior to any commitment being made
therefor by Agent; provided, however, that Merchant's approval shall not be
unreasonably withheld and any failure by Merchant to respond to any advertising
so submitted (other than any direct mailing to Merchant's customers) within two
(2) business days shall be deemed approved. All advertising shall be sent to
▇▇▇▇▇▇ ▇. ▇▇▇▇ and W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. via facsimile number (▇▇▇) ▇▇▇-▇▇▇▇.
Agent recognizes that Merchant's name has an established reputation for quality
in the community and shall conduct the Sale in a manner consistent with
Merchant's reputation.
10 Employees.
1 Agent may use Merchant's employees to the extent
Agent deems feasible, and Agent may select and schedule the number and type of
Merchant's employees required for the Sale. Notwithstanding the foregoing,
Merchant's employees shall at all times remain employees of Merchant and shall
not be considered or deemed to be employees of Agent; provided, however, that
Agent shall be responsible for supervising all such employees used by Agent
during the Sale and shall be responsible for the conduct or actions of such
employees during the Sale. Agent's selection and scheduling of Merchant's
employees shall at all times comply with all applicable laws and regulations.
Agent shall provide Merchant with seven (7) days' prior written notice as to the
number and type of employees, if any to be terminated prior to the End Date in
each Store. Following the date of this Addendum, Merchant shall not transfer or
dismiss any store-level employees (except "for cause") without Agent's consent,
which consent will not be unreasonably withheld; provided, however, that
Merchant may provide notices to its employees under WARN (as defined below).
2 On and after the Start Date, Agent agrees to pay
Merchant within twenty four (24) hours after receipt of invoices therefor an
amount equal to the sum of (i) the gross wage payroll paid to Merchant's
employees used in the Stores by the Agent during the Sale plus (ii) an amount
equal to twenty-one percent (21%) of such gross wage payroll to pay for (x) the
related payroll taxes (including FICA and Unemployment), (y) worker's
compensation and health care insurance benefits, and (z) holiday pay for Store
employees in respect of the Thanksgiving and Christmas holidays (the amounts set
forth in (x), (y) and (z), collectively, the "Benefits"). Agent shall not be
responsible for the payment of Benefits in excess of 21% of the gross wage
payroll (the "Fringe Benefit Cap"), and any amounts in excess of the Fringe
Benefit Cap shall be paid by Merchant without reimbursement by Agent and shall
not be an Expense of Sale (as defined in Section 11 hereof).
3 Except for Agent's obligations to reimburse
Merchant for wages and Benefits (subject to the Fringe Benefits Cap) of
employees used in the Stores by the Agent during the Sale as provided for above,
Merchant and Agent acknowledge and agree that (i) nothing herein nor any of
Agent's actions taken in respect hereto shall be deemed to constitute an
assumption by Agent of any of Merchant's obligations relating to any of
Merchant's employees including, without limitation, pension, withdrawal,
severance pay, vacation leave or pay, sick leave or pay, maternity leave or pay,
Worker Adjustment Retraining Act ("WARN") claims (if any) and other termination
type claims and obligations; and (ii) Merchant hereby indemnifies Agent in
respect to any claims asserted by any of Merchant's employees against Agent,
except as to claims arising out of the negligence of Agent or wrongful acts or
omissions of Agent or its representatives, and Merchant is solely and
specifically responsible for all of Merchant's obligations under any collective
bargaining agreements and any purported oral service contracts.
4 Agent shall indemnify and hold harmless Merchant
for claims of Merchant's employees in the Stores arising with respect to the
period of the Sale and arising solely out of the negligence or wrongful acts or
omissions of Agent or its representatives. During the Sale, Agent shall maintain
a safe working environment consistent with Merchant's policies and procedures
applicable to the Stores which are furnished by Merchant to Agent prior to the
Start Date.
5 In Agent's sole discretion, Proceeds may be used
to pay, as an Expense of Sale, retention bonuses ("Retention Bonuses")
(which bonuses shall be inclusive of payroll taxes but as to which no benefits
shall be payable) to Store employees who do not voluntarily leave employment and
are not terminated "for cause." Such Retention Bonuses shall be payable within
thirty (30) days after the End Date, and shall be processed through Merchant's
payroll system. Prior to the Start Date, Agent shall deliver to Merchant a
description of Agent's proposed Retention Bonus program for the Sale. Following
the Start Date Agent shall not, without Merchant's consent, make any change to
such program which would adversely effect the interests of Store employees
thereunder.
11 Agent's Expenses of Sale; Bank and Charge Accounts.
1 Agent shall collect all Proceeds and shall pay all
Expenses of Sale. "Expenses of Sale" shall be (i) the actual gross wage
payroll paid to Merchant's employees used in the Stores by the Agent during the
Sale, plus the cost of the Benefits for such employees, subject to the Fringe
Benefit Cap, plus Retention Bonuses paid to such employees by Agent; (ii)
advertising expense (at Merchant's contract rates, if available), including
costs attributable to direct mail and other media; (iii) signage for the Sale;
(iv) security in the Stores including, without limitation, courier and guard
services; (v) bank service charges, bank card fees and chargebacks; (vi)
telephone charges for the Stores; (vii) Agent's expenses for supervisors at the
Stores and at Merchant's central office facilities, including costs of travel;
(viii) 50% of the fees and costs of the Inventory Service to conduct the
Inventory Count; (ix) a pro-rata portion of Merchant's casualty insurance
premiums attributable to the Merchandise; (x) costs of general liability
insurance required to be obtained under Section 24(b) below; (xi) costs of
transfers of Merchandise during the Sale Term, other than transfers of On Order
Merchandise to the Stores; (xii) Store trash removal; (xiii) personal property
taxes for Merchandise located at the Stores pro rated for the period of time
that the Agent is operating at such Stores, but in no event in excess of
$125,000; (xiv) all housekeeping and cleaning expenses related to the Stores,
which housekeeping and cleaning services shall be performed by Agent (including
cleanliness and frequency) in a manner consistent with Merchant's present
practices; (xv) all travel expenses payable to Merchant's employees relating to
travel by such employees at the direction of the Agent, which shall include,
without limitation, the cost of transferring Merchant's employees between
Stores; (xvi) all costs and expenses of providing such additional Store-level
services which the Agent in its reasonable discretion considers appropriate; and
(xvii) any other expenses directly attributable to the Sale, including
additional Supplies, and any other expenses expressly required to be paid by
Agent pursuant to this Addendum. To the extent that any Expenses of Sale are
advanced by Merchant, Agent shall reimburse Merchant the total amount of same
promptly following receipt of invoices therefor.
2 All cash Proceeds shall be deposited by Agent in
agency accounts established by Agent (the "Agency Accounts"). Agent shall
exercise sole signatory authority and control with respect to the Agency
Accounts. Merchant shall promptly upon Agent's request execute and deliver all
necessary documents to open and maintain the Agency Accounts.
3 Agent shall establish merchant identification
numbers under Agent's name and shall process all credit card Proceeds under such
numbers for Agent's account, and Merchant shall cooperate with Agent in such
regard. Notwithstanding the foregoing, for a period not to exceed the first
seven (7) days of the term of the Sale (or, with Merchant's consent (which
consent will not be unreasonably withheld) a longer period), Agent shall have
the right (but not the obligation) to use Merchant's credit card facilities
(including Merchant's credit card terminals and processor(s), credit card
processor coding, merchant identification number(s) and existing bank accounts)
for credit card Proceeds. In the event that Agent elects so to use Merchant's
credit card facilities, Merchant shall process credit card transactions on
behalf of Agent and for Agent's account, applying customary practices and
procedures. Without limiting the foregoing, Merchant shall cooperate with Agent
to down-load data from all credit card terminals each day during the Sale Term
and to effect settlement with Merchant's credit card processor(s), and shall
take such other actions reasonably necessary to process credit card transactions
under Merchant's merchant identification number(s). Merchant shall deposit all
credit card Proceeds actually received from Merchant's credit card processor(s)
into a designated account and shall transfer such Proceeds to Agent daily (on
the date received by Merchant if received prior to 12:00 noon, or otherwise
within one business day) by wire transfer of immediately available funds.
Merchant shall not be responsible for and Agent shall pay as an Expense of Sale
hereunder, all credit card fees, charges, and chargebacks related to the Sale,
whether received prior to or after the End Date.
12 Sales Taxes.
1 During the Sale, Agent shall collect all
sales, excise and gross receipts taxes (but not income taxes)
(collectively, the "Sales Taxes") payable to any taxing authority having
jurisdiction, which taxes shall be added to the sales price and be paid by the
customer at the time Merchandise is purchased. Agent shall pay to Merchant by
wire transfer the amount of the Sales Taxes collected four (4) days prior to the
due date and Merchant agrees to deposit such taxes in Merchant's own name, such
funds to be used solely for payment of Sales Taxes when due. Merchant shall file
all necessary tax returns, reports and forms for Sales Taxes. Merchant will be
given access to the computation of gross receipts for verification of all Sales
Tax collections, and Agent warrants the accuracy of all information Agent
provides to Merchant relating to Sales Taxes.
2 Provided Agent complies with its obligations
under Section 12(a) hereof to collect and remit the Sales Taxes to Merchant,
Merchant shall indemnify and hold Agent harmless from and against any and all
costs (including, but not limited to, reasonable attorneys' fees), assessments,
fines or penalties which Agent actually sustains or incurs as a direct or
indirect result or consequence of the failure by Merchant to pay the Sales Taxes
to the proper taxing authorities and/or the failure by Merchant to promptly file
with taxing authorities any and all returns, reports and other documents
required by applicable law to be filed or delivered to such taxing authorities.
The Agent shall indemnify and hold Merchant and its officers, directors and
other "responsible persons" (as such term or similar term is defined under the
law of the applicable taxing jurisdiction) harmless from and against any and all
costs including, but not limited to, reasonable attorney's fees, assessments,
fines or penalties which Merchant and its officers, directors and other
"responsible persons" (as such term or similar term is defined under the law of
the applicable taxing jurisdiction) actually sustain or incur as a direct or
indirect result or consequence of the failure by the Agent to fulfill its
obligations under Section 12(a) hereof.
13 Use of Supplies, Trade Names, Logos, Customer Lists and Central
Office Services.
Merchant covenants and warrants that it has
not and will not remove any supplies, including, but not limited to, bags,
boxes, twine, paper and similar sales materials ("Supplies"), from the Stores in
contemplation of this Agreement other than by use of Supplies in the ordinary
course of business prior to the Sale; provided, however, that Merchant does not
warrant that the existing Supplies in the Stores as of the Start Date are
adequate for the purposes of the Sale. In addition, Agent shall be granted a
limited license and right to use until the End Date the trade names, logos and
customer lists solely relating to and used in connection with the operation of
the Stores and solely for purpose of advertising the Sales in accordance with
the terms of this Agreement. Merchant shall have the right to approve all direct
mailing advertising proposed to be used by Agent prior to Agent's distribution
thereof, which approval shall not be unreasonably withheld.
14 Terms of Sales to Customers. All sales to customers shall be for
cash or upon bank credit cards (excluding private label cards). All sales shall
be advertised as "FINAL," and all sales receipts shall be marked "FINAL." Any
consumer complaints or other matters relating to periods or sales prior to the
Start Date (e.g., gift certificates, layaways, credits, returns) shall be
referred to a designated representative of Merchant.
15 Return of Merchandise. During the Sale, Agent shall not accept
returns of merchandise sold by Merchant from the Stores prior to the Start Date.
16 Merchant's Expenses. During the Sale, Merchant shall be
responsible for payment of the following items, none of which shall be deemed an
Expense of Sale: (i) any Benefits in excess of the Fringe Benefit Cap; (ii) all
other employee benefits, including but not limited to union dues, termination
pay, pension benefits, severance pay, vacation pay, sick leave or pay, maternity
leave or pay, and WARN claims (if any); (iii) major maintenance and structural
repair; and (iv) any other expenses not directly attributable to the Sale and
any other expenses expressly required to be paid by Merchant pursuant to this
Addendum. To the extent that any expenses of Merchant under this Addendum are
advanced by Agent, Merchant shall reimburse Agent for the total amount of same
promptly following receipt of invoices therefor.
17 Reporting; Right of Access. Agent shall furnish Merchant with
weekly reports including, without limitation, reports that comply with the
Merchant's current reporting to its central office, reflecting the progress of
the Sale which shall specify the Proceeds received to date, and shall furnish
Merchant with such other information regarding the Sale as Merchant reasonably
requests. During the course of the Sale, Merchant shall have the right to have
representatives continually act as observers of the Sale in the Stores so long
as they do not interfere with the conduct of the Sale.
18 INTENTIONALLY DELETED.
19 Letter of Credit. In order to secure all of Agent's obligations
under this Agreement, and in addition to Agent's indemnification obligations
under this Addendum, the Agent shall furnish to Merchant, on the Start Date, an
irrevocable standby Letter of Credit in the original face of ten million dollars
($10,000,000) (the "Letter of Credit") for the benefit of Merchant and its
officers, directors and other "responsible persons" (as such term or similar
term is defined under the law of the applicable taxing jurisdiction), issued by
▇▇▇▇▇ Fargo Bank, N.A. and National City Bank, Columbus Ohio or other similar
national bank reasonably acceptable to Merchant. On the sixtieth (60th) day
after the End Date, the Letter of Credit shall automatically be reduced to an
amount equal to seven million dollars ($7,000,000), which Letter of Credit shall
have an expiry date of six months after the End Date (the "Reduced Letter Of
Credit").
20 Merchant's Warranties and Representations and Covenants.
Merchant hereby warrants and represents as follows:
1 Except as affected by the provisions of the Bankruptcy
Code or as otherwise determined by the Bankruptcy Court or provided for in the
Approval Order, as of the date of entry of the Approval Order (i) this Addendum
and all other documents executed by Merchant in accordance with this Addendum
are the valid and binding obligations of Merchant enforceable in accordance with
their terms; (ii) Merchant has taken all necessary corporate action required to
authorize the execution, performance and delivery of this Addendum and related
documents; (iii) no court order or decree of any federal, state or local
government authority, or other action known to Merchant, is in effect which will
or may prevent or impair consummation of the transactions contemplated by this
Addendum; and (iv) the consent of any person or entity (other than the
Bankruptcy Court), including any landlord, is not required with respect to the
transaction contemplated herein.
2 Merchant owns and will own at the Start Date and
during the Sale good title to all of the Merchandise, free and clear of all
liens, claims and encumbrances of any nature except for presently existing
liens, claims and encumbrances which, in accordance with the Approval Order
shall attach only to the Cash Consideration.
3 Since September 1, 1996, Merchant has not conducted
any promotions or advertised sales at the Stores, except promotions and sales
in the ordinary course of business, copies of which promotions and advertised
sales have been provided by Merchant to Agent and which are listed by
publication and date in Exhibit D attached hereto.
4 No actions or proceedings have been instituted against
Merchant or, to the best of Merchant's knowledge (limiting such knowledge to
▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.), have been threatened, preventing
or which may prevent the consummation of the transactions contemplated by this
Agreement.
5 INTENTIONALLY DELETED
6 INTENTIONALLY DELETED
7 Since September 1, 1996, Merchant has maintained its
pricing files in the ordinary course of business, and prices charged to the
public for goods (whether in-Store, by advertisement or otherwise) are the same
in all material respects as set forth in such pricing files for the periods
indicated therein, except for the promotions and sales described in Section
20(c). All such pricing files and records are true and accurate in all material
respects as to the actual cost to Merchant for purchasing the goods referred to
therein and as to the selling price to the public for such goods as of the dates
and for the periods indicated therein.
8 INTENTIONALLY DELETED
9 Merchant shall ticket or ▇▇▇▇ all items of inventory
received at the Stores prior to the Start Date (including, without
limitation, all On Order Merchandise), in a manner consistent with similar
Merchandise located at the Stores and in accordance with Merchant's historic
practices and policies relative to pricing and marking inventory; provided,
however, that consistent with such historic practices and policies, all or a
portion of such Merchandise may not physically display the price of such
merchandise.
10 Since September 1, 1996, all point of sale activity
at the Stores has occurred and will occur up to the Start Date in the ordinary
course of business and consistent with promotions described in Sections 20(c)
and 20(k).
11 Merchant covenants, from the date of this Addendum to
the Start Date, (i) to continue selling inventory during such period at
customary prices (and subject to clause (ii) below), (ii) to not promote or
advertise any sales relating to the Stores or in-Store promotions (including POS
promotions) to the public other than as set forth in Section 10.8 of the Asset
Agreement), (iii) not to return voluntarily inventory that shall constitute
Merchandise located at the Stores to vendors (other than defective or damaged
merchandise returned to vendors consistent with Merchant's historic practices
and policies), and (iv) not to transfer supplies or inventory that shall
constitute Merchandise between or among Stores, and the Merchant's distribution
centers, except as expressly permitted herein.
12 To the best of Merchant's knowledge (limiting such
knowledge to ▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.), all Merchandise is
in compliance with all applicable federal, state or local product safety laws,
rules and standards. To the extent presently existing and available, Merchant
shall provide Agent with its historic policies and practices regarding product
recalls prior to the taking of the inventory at the Stores.
13 Throughout the Sale Term, the Agent shall have the
right to the unencumbered use and occupancy of, and peaceful and quiet
possession of, each of the Stores, the assets currently located at the Stores,
and the services provided at the Stores, subject to the terms of Store leases
and other agreements, all of which are made reasonably available by Merchant to
Agent prior to the Start Date, except to the extent the same are modified by the
Approval Order. Merchant shall throughout the Sale Term maintain in good working
order, condition and repair, at its sole expense (except to the extent resulting
from Agent's negligence, wrongful acts or omissions, in which event Agent shall
bear such expense as an Expense of Sale), all cash registers, heating systems,
air conditioning systems, elevators, escalators, Store alarm systems, and all
other mechanical devices used in the ordinary course of operation of the Stores.
14 Merchant has paid and will continue to pay
throughout the Sale Term, all undisputed post-petition obligations in
respect of self-insured or Merchant funded employee benefit programs for
employees, including health and medical benefits and insurance and all proper
claims made or to be made in accordance with such programs.
15 Merchant has not and shall not throughout the
Sale Term take any actions the result of which is to increase salaries or
other amounts payable by Agent to employees used in the Stores, other than
increases to minimum wage as required by applicable law.
16 Except as disclosed on Exhibit E attached hereto (i)
Merchant is not a party to any collective bargaining agreements with its
employees, (ii) to the best of Merchant's knowledge (limiting such knowledge to
▇▇▇▇▇▇ ▇. ▇▇▇▇ and W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.), no labor unions represent
Merchant's employees at the Stores, and (iii) to the best of Merchant's
knowledge (limiting such knowledge to ▇▇▇▇▇▇ ▇. ▇▇▇▇ and W. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇.), there are currently no strikes, work stoppages or other labor disturbances
affecting the Stores, Merchant's central office facilities or distribution
centers.
17 As of the date of this Addendum, to the best of
Merchant's knowledge (limiting such knowledge to ▇▇▇▇▇▇ ▇. ▇▇▇▇ and W. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇.), Merchant is current in the payment of all undisputed
post-petition utility, tax, insurance and advertising liabilities. Merchant
agrees that in the event that Agent receives notice that any such undisputed
post-petition liability is overdue and, as a direct result of such nonpayment,
Agent is unable to advertise the Sale with any newspapers, magazines, radio or
television stations or other media providers which target or serve the market
areas of the Stores or is unable to obtain Merchant's contract rate with any
such provider, Merchant shall immediately pay such post-petition, undisputed
applicable balances in full.
21 Agent's Warranties, Representations and Covenants.
Agent hereby warrants and represents as follows:
1 INTENTIONALLY DELETED.
2 (i) This Addendum and all other documents
executed by Agent in accordance with this Addendum are the valid and binding
obligations of Agent enforceable in accordance with their terms; (ii) Agent has
taken all necessary action required to authorize the execution, performance and
delivery of this Addendum and related documents; (iii) no court order or decree
of any federal, state or local government authority, or other action known to
Agent, is in effect which will or may prevent or impair consummation of the
transactions contemplated by this Amendment; and (iv) the consent of any person
or entity is not required with respect to the transaction contemplated herein.
3 There is no outstanding order, judgment,
injunction award or decree of any court, governmental or regulatory body or
arbitration tribunal by which the Agent is bound which would materially
interfere with this transaction, and there shall be no action, suit, claim,
legal, administrative or arbitral proceedings or investigation (whether or not
the defense thereof or liabilities in respect thereof are covered by insurance)
against the Agent which would, if determined adversely to the Agent, be likely
to have a material adverse effect upon the transactions contemplated hereby, nor
to the best of Agent's knowledge, are there any facts which are likely to give
rise to any such action, suit, claim or legal, administrative or arbitral
proceeding or investigation.
4 INTENTIONALLY DELETED
5 No actions or proceedings have been
instituted against Agent or, to the best of Agent's knowledge, have been
threatened, preventing or which may prevent the consummation of the transactions
contemplated by this Addendum.
6 In conducting the Sale contemplated by the
Addendum, Agent shall comply with all applicable federal, state and local laws,
ordinances, rules and regulations with respect to such Sale, except for such
laws, ordinances, rules and regulations which have been superseded by the
Approval Order.
7 As of September 30, 1996, Agent had
tangible net worth in excess of one million dollars ($1,000,000).
22 Conditions Precedent. As an express condition
precedent to all of Merchant's and Agent's obligations hereunder:
1 Merchant shall have obtained the Approval
Order by November 25, 1996 approving this Addendum and the Asset Agreement, and
the Approval Order shall not have been stayed nor shall an application for a
stay of the Approval Order be pending;
2 Merchant shall have received the Cash
Consideration to be paid by Agent at Closing under the Asset Agreement and
the Letter of Credit provided in Section 19 hereof; and
3 All the representations and warranties
of Merchant and Agent made hereunder are and shall continue to be true and
correct in all material respects, and neither Merchant nor Agent shall have
breached any of its respective covenants or agreements hereunder.
23 INTENTIONALLY DELETED
24 Insurance.
1 Merchant at its expense shall continue
until the End Date, in such amounts as Merchant currently has in effect, all
of Merchant's liability insurance policies, including but not limited to,
comprehensive public liability policies covering injuries to persons and
property in or in connection with Merchant's operation of the Stores and, from
and after the Start Date, shall cause Agent to be named as additional insured,
as its interests may appear, with respect to all such policies. On or before the
Start Date, Merchant shall deliver to Agent certificates evidencing such
insurance policies, setting forth the duration thereof and the naming of Agent
as an additional insured, as its interests may appear, in accordance with the
provisions hereof, all in form reasonably satisfactory to Agent. Merchant shall
be responsible for the payment of all deductibles, retentions or self-insured
amounts under such policies except in the event liability arises by reason of
the wrongful acts or omissions or negligence of Agent or Agent's employees,
agents or independent contractors, in which event such amounts shall be the
responsibility of the Agent.
2 Agent shall purchase on behalf of
Merchant, as an Expense of Sale hereunder, liability insurance coverage, which
shall continue in effect until the End Date, with limits in the amount of one
million dollars ($1,000,000) per occurrence, two million dollars ($2,000,000)
general aggregate per location, with excess umbrella coverage with limits of
fifteen million dollars ($15,000,000), which shall include, but not be limited
to, comprehensive public liability policies covering injuries to persons and
property in or in connection with the operation of the Stores from and after the
Start Date and until the End Date. Agent shall be named as an additional
insured, as its interests may appear, with respect all such policies. On or
before the Start Date, Agent shall deliver to Merchant certificates evidencing
such insurance policies, setting forth the duration thereof, all in form
reasonably satisfactory to Merchant. Agent shall be responsible for the payment
of all deductibles, retentions or self-insured amounts under such policies
except in the event liability arises by reason of the wrongful acts or omission
or negligence of Merchant or Merchant's employees, agents (other than Agent or
Agent's employees, agents or independent contractors) or independent
contractors, in which event such amounts shall be paid by Merchant.
3 At Agent's expense as an Expense of Sale
hereunder, Merchant shall continue its current property insurance on the
Merchandise in a total amount at least equal to the cost value thereof, with the
existing or, in Agent's discretion (and at Agent's expense) more favorable
deductibles. From and after the Start Date, said coverage will contain a loss
payable clause in Agent's favor. In the event of a loss to the Merchandise
occurring on or after the Start Date, the proceeds of such insurance
attributable to the Merchandise shall be paid to Agent and such proceeds shall
be included as part of the Proceeds. On or before the Start Date, Merchant shall
deliver to Agent certificates evidencing such insurance policies, setting forth
the duration thereof and the naming of Agent as a loss payee in accordance with
the provisions hereof, all in form reasonably acceptable to Agent. Agent shall
be responsible for the payment of all deductibles or self-insured amounts under
such policies except in the event liability arises by reason of the wrongful
acts, omissions or negligence of Merchant or Merchant's employees, agents and
independent contractors (other than Merchant's employees, agents and independent
contractors under the direct supervision of Agent), in which event such amounts
shall be paid by Merchant.
4 Merchant shall at all times during the
Sale maintain in full force and effect Worker's Compensation Insurance in
compliance with all statutory requirements.
5 A list of all of Merchant's insurance
policies currently in effect setting forth the name of the insurer, the type of
policy, the limits of coverage, deductibles and self-insurance amounts is set
forth on Exhibit F hereto.
25 Agent's Right of Access and Usage of Equipment.
Merchant agrees to grant and provide Agent peaceful and quiet possession of
the Stores during the Sale subject to the terms of the Store leases, except as
modified by the Approval Order, and to take no action relating to the Stores
which would disturb such possession, including any action to modify or terminate
any existing ADT or similar security system or cash register maintenance
agreements or remove any of the furniture, fixtures or equipment from the
Stores. Merchant agrees to maintain in operation at the expense of Merchant
(except as provided for above) for the benefit of Agent (i) the point of sale
equipment in the Stores during the period of the Sale and (ii) the management
information systems during the period of the Sale and for a period of ten (10)
days after the End Date. Agent shall have reasonable access to such systems for
the purposes of preparing any reports, monitoring the progress of the Sale,
rendering the accountings required hereunder, and for such other information
reasonably required to conduct the Sale.
26 Indemnification.
1 In addition to the other
indemnification obligations of the parties provided for in this Addendum,
Merchant agrees to indemnify and defend and hold harmless Agent from any and all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees, costs and expenses, asserted against,
resulting to or imposed upon Agent, directly or indirectly, by reason of or
resulting from the following by Merchant: (i) any material breaches or failure
to comply with any of the agreements, covenants, representations or warranties
contained in this Addendum, (ii) any negligent or wrongful acts or omissions of
Merchant or its employees, agents or independent contractors (other than
Merchant's employees, agents or independent contractors under Agent's direct
supervision), or (iii) any failure to pay any and all obligations under this
Addendum.
2 In addition to the other indemnification
obligations of the parties provided for in this Addendum, Agent agrees to
indemnify and defend and hold harmless Merchant from any and all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties and
reasonable attorneys' fees, costs and expenses, asserted against, resulting to
or imposed upon Merchant, directly or indirectly, by reason of or resulting from
the following by Agent: (i) any material breaches or failure to comply with any
of the agreements, covenants, representations or warranties contained in this
Addendum, (ii) any negligent or wrongful acts or omissions of Agent or its
employees, agents or independent contractors, or (iii) any failure to pay any
and all obligations under this Addendum, including without limitation, the
reimbursement of Expenses of Sale.
27 Events of Default. The following shall be "Events of
Default" hereunder:
1 Merchant or Agent shall fail to perform
any material obligation hereunder or under the Asset Agreement if such failure
remains uncured for five (5) days after written notice thereof; or
2 any representation or warranty made by
the Merchant or Agent hereunder proves untrue when made; or
3 the Sale is terminated at a Store for
reasons other than a default, breach or other action by the Agent that is not
authorized hereunder. Any party's entitlement to damages or equitable relief on
account of an Event of Default shall be determined by the Bankruptcy Court.
28 INTENTIONALLY DELETED
29 INTENTIONALLY DELETED
30 Amendments. This addendum may not be modified
except in a writing executed by each of the parties.
31 Successors and Assigns. This Addendum shall not
inure to the benefit of, nor shall it be assignable to, any person or entity
other than Merchant and Agent. All of the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be enforceable by the
successors in interest of the respective parties hereto.
32 INTENTIONALLY DELETED
33 INTENTIONALLY DELETED
34 Section Headings. The headings of the sections of
this Addendum are inserted for convenience only and shall not be considered
for the purpose of determining the meaning or legal effect of any of the
provisions of this Agreement.
35 Definitions. Unless otherwise defined herein, all
defined terms shall have the meaning ascribed to same in the Asset Agreement.
Exhibits to Store Closing Addendum
Exhibit A - Available in hard copy upon request.
Exhibit B - Follows this page.
Exhibit C - Available in hard copy upon request.
Exhibit D - Available in hard copy upon request.
Exhibit E - Available in hard copy upon request.
Exhibit F - Available in hard copy upon request.
EXHIBIT B
GUIDELINES FOR CONDUCT OF STORE CLOSING SALES
BEST PRODUCTS CO., INC.
1. The sale shall be conducted so that the subject Store remains open during
that Store's normal hours of operation provided for in the lease for that
Store, and the existing terms of Merchant's leases for the Stores shall
control (i) the operation of the Stores during the Store Closing Sales and
(ii) the conduct of the Store Closing Sales, except as otherwise expressly
provided for in the Approval Order (including these Guidelines).
2. The Sale shall be conducted in accordance with applicable state and local
"Blue Laws".
3. The Agent shall not use flashing lights or any type of amplified sound on
the leased premises or on any common areas to advertise the Sales or
solicit customers for the Sale at that Store.
4. A Sale shall end no later than February 28, 1997, except as otherwise
provided for in the Addendum. The Agent shall give notice to the affected
landlord, as soon as practicable, as to the anticipated end date for the
Sale. Best shall give notice to any affected landlord of its consent to any
extension of the February 28, 1997 end date and the landlord may take such
appropriate action in the Bankruptcy Court that it my deem appropriate
without prejudice to the opposition of Merchant or Agent.
5. At the conclusion of a Sale, the Agent shall vacate the Stores in
broom-clean condition, and shall leave the Stores in the same condition as
on the commencement of the Sales, ordinary wear and tear excepted.
6. After the commencement of the Store Closing Sales, Agent shall not augment
or otherwise bring any new merchandise into the Stores, other than
merchandise presently owned by Merchant or On-Order Merchandise from
Merchant's existing vendors.
7. With respect to the advertising of the Store Closing Sales, Merchant and/or
Agent shall be permitted to promote and advertise the Sale as a "Going Out
of Business," "Store Closing" and "Bankruptcy Court Authorized Store
Closing Sale", including, without limitation, by means of electronic and
print media advertising and in-Store and exterior signage (i.e., banners,
A-frame, display and hanging signs); provided that all such signage shall
be professionally lettered, and all banners and hanging signs shall be hung
in a professional manner.
8. With respect to any Store located in a mall, store front signs must be on a
pedestal or hung inside the Store at least one (1) foot from the window and
there may be no more than one sign for every eight feet of window. Nothing
contained herein shall be construed to create or impose upon the Agent any
additional restrictions not contained in the applicable lease agreement.
9. Conspicuous signs shall be posted at the Stores to the effect that all
sales are "final."
10. The Agent shall not make any alterations to the storefront or exterior
walls of any of the Stores (including the removal of Store signs).
11. The Agent shall not make any alterations to interior or exterior Store
lighting.
12. INTENTIONALLY DELETED
13. Merchant and/or Agent shall not, without further authorization of the
Bankruptcy Court, conduct an auction for the sale of Fixtures in the
Stores. Merchant, however, reserves its right to request, upon notice to
creditors, authorization by the Bankruptcy Court to auction any Fixtures
remaining unsold at the end of the Store Closing Sales.
14. Except as modified by these guidelines, or any order of the Bankruptcy
Court in which the Merchant's chapter 11 case is pending, all provisions of
any lease with respect to the affected premises shall remain in full force
and effect.
15. Removal by the Agent of inventory or equipment must be before or after
regular business hours of the Store, so as not to disrupt the operations of
other tenants or disturb customers, and in a manner reasonably satisfactory
to Store's landlord.
The Agent shall not remove from any Store any property so affixed to the
real estate that an interest therein arises under real estate law (i.e.,
"fixtures" within the meaning of the Uniform Commercial Code).
17. All defined terms shall have the meaning ascribed to same in the Approval
Order and the Addendum.
EXHIBIT 4.3(c)
GUARANTY
GUARANTY, made as of the __ day of November 1996, by
JUBILEE LIMITED PARTNERSHIP III, an Ohio limited partnership ("Jubilee"), THE
NASSI GROUP, LLC, a California limited liability company ("Nassi"), ▇▇▇▇▇▇▇▇▇
FINANCIAL GROUP, LLC, a Delaware limited liability company ("▇▇▇▇▇▇▇▇▇"), and
ALCO CAPITAL GROUP, INC., a Delaware corporation ("Alco"; each of Jubilee,
Nassi, ▇▇▇▇▇▇▇▇▇ and Alco, individually a "Guarantor" and, collectively, the
"Guarantors"), in favor of BEST PRODUCTS CO., INC., a Virginia corporation
("Best"). Capitalized terms not otherwise defined herein shall have the meaning
ascribed to such terms in the Asset Purchase Agreement (defined below).
WHEREAS, Best commenced a case under chapter 11 of title
11 of the United States Code, 11 U.S.C. Sections 101 et seq. (the "Bankruptcy
Code"), in the United States Bankruptcy Court for the Eastern District of
Virginia (the "Bankruptcy Court") on September 24, 1996, which case is stylized
as Case No. 96-35267-T;
WHEREAS, Best and the Guarantors entered into a certain
Agreement, dated as of October 29, 1996 (the "Asset Purchase Agreement"),
which provides, among other things, (i) for Best to sell and Buyer to purchase
certain of the assets of Best in accordance with, inter alia, sections 105, 363,
365 and 1146(c) of the Bankruptcy Code, and (ii) that, subject to the terms and
provisions of this Guaranty, the cost and expense of damages resulting from the
rejection of any one or more Option Leases at any time shall be borne solely by
Best and its chapter 11 estate and shall be a claim against Best and its chapter
11 estate to be satisfied pursuant to a plan of reorganization for Best
confirmed by the Bankruptcy Court in the Bankruptcy Case;
WHEREAS, as contemplated by the Asset Purchase
Agreement, the Guarantors are required to deliver to Best a guaranty of certain
amounts with respect to the allowed amount of the claims resulting from the
rejection pursuant to section 365 of the Bankruptcy Code of the Option Leases,
as such claims are limited by section 502(b)(6) of the Bankruptcy Code or
otherwise;
WHEREAS, Best has simultaneously herewith paid to the
Guarantors, as consideration for the issuance by the Guarantors of this
Guaranty, a fee in the amount of Two Million Dollars ($2,000,000) (the "Guaranty
Fee"); and
WHEREAS, simultaneously herewith the Guarantors shall
cause to be delivered to Best the Letter of Credit described in Section 3
hereof.
NOW, THEREFORE, in consideration of the mutual promises
and covenants herein contained, it is hereby agreed as follows:
Section 1. Guaranty. (a) The Guarantors hereby,
jointly and severally, irrevocably and unconditionally guarantee to Best, on the
terms and subject to the conditions set forth herein, to pay the "Guaranteed
Amount" on demand therefor. The Guaranteed Amount shall mean that amount which
is equal to (x) the amount, if any, by which (i) the aggregate of all Allowed
Rejection Claims (as defined in Section 1A below), up to an amount equal to
Sixty-Five Million Dollars ($65,000,000) (subject to adjustment as set forth in
Section 2 below) (the "Ceiling"), exceeds (ii) Forty Million Dollars
($40,000,000) (subject to adjustment as set forth in Section 2 hereof) (the
"Floor") multiplied by (y) the sum of the Initial Dividend Rate and the Final
Dividend Rate (as each are defined in Section 1A below). For example, if the
aggregate of all Allowed Rejection Claims were determined to be $45,000,000,
then: if the Initial Dividend Rate were 20% and if the Final Dividend Rate were
10%, then the Guaranteed Amount would be $1,500,000 (i.e. $45,000,000 minus
$40,000,000 multiplied by 30% equals $1,500,000). In no event and under no
circumstance shall the Guarantors be required to pay to Best under this Guaranty
or otherwise any amounts to be paid by Best on account of any Allowed Rejection
Claims in excess of the Ceiling.
Section 1A. Definitions. The
following terms as used herein shall have the following meanings: (i) "Allowed
Rejection Claims" shall mean the aggregate amount of all timely filed claims
(each, a "Rejection Claim") against Best in the Bankruptcy Case resulting or
arising from the rejection pursuant to section 365 of the Bankruptcy Code of
Option Leases (as such claims are limited by section 502(b)(6) of the Bankruptcy
Code or otherwise), which amounts shall have been fixed, determined and allowed
pursuant to final orders of the Bankruptcy Court with respect to such Rejection
Claims; provided, however, that for purposes of this Guaranty, no Allowed
Rejection Claim shall include any environmental claims or any liabilities,
obligations, fees, costs or expenses relating to such environmental claims in
any way; (ii) "final order" shall mean, with respect to any Allowed Rejection
Claim, an order of the Bankruptcy Court or a court of competent jurisdiction
that may hear appeals from the Bankruptcy Court, which order is no longer
subject to review, reversal, modification or attack by rehearing, appeal,
review, writ of certiorari or otherwise; (iii) "Initial Dividend Rate" shall
mean the aggregate amount of initial distributions in cash to be made to all
holders of allowed general unsecured claims under the Plan of Reorganization (as
defined below), expressed as percentage of all allowed general unsecured claims
in the aggregate, which Initial Dividend Rate shall be jointly agreed upon by
Best and the Guarantors based on an accounting of allowed general unsecured
claims under the Plan of Reorganization and the initial distributions in cash
made in respect thereof; and (iv) "Final Dividend Rate" shall mean the amount of
all distributions, subsequent to the initial distributions, to be made to all
holders of allowed general unsecured claims under the Plan of Reorganization,
expressed as percentage of all allowed general unsecured claims in the
aggregate, which Final Dividend Rate shall be jointly agreed upon by Best and
the Guarantors based on a final accounting of all allowed general unsecured
claims under the Plan of Reorganization and the distributions made in cash in
respect thereof.
(b) Subject to and in accordance with the
terms of this Guaranty, demand for payment may be made upon the Guarantors
hereunder on either or both of the following dates: (A) any date (the "Initial
Demand Date") after (i) distributions to allowed general unsecured creditors
shall have commenced under a plan of reorganization for Best, which plan has
been confirmed by the Bankruptcy Court (as so confirmed, the "Plan of
Reorganization"), and as to which "substantial consummation" (as defined under
section 1101 of the Bankruptcy Code) has occurred; and (ii) there has been a
determination by means of an accounting performed by, or at the mutual request
of, the Guarantors and Best, that (x) the aggregate amount of Allowed Rejection
Claims, as limited by the Ceiling, exceeds (y) the Floor; and (B) the date (the
"Final Demand Date") which is ten days after the date on which a Final Dividend
Rate is determined based upon a final accounting with respect to all timely
filed unsecured claims under the Plan of Reorganization. In no event and under
no circumstance shall any payments be made hereunder by the Guarantors in excess
of the Guaranteed Amount.
(c) It is hereby agreed that if it shall
be determined by means of the accounting described in clause (b)(A)(ii) above
that (x) the Allowed Rejection Claims are less than (y) the Floor, Best shall
pay to Guarantors upon written demand therefor (I) on the Initial Demand Date
that amount which is equal to (i) (e) the Floor minus (f) the aggregate amount
of the Allowed Rejection Claims multiplied by (ii) 50%, multiplied by (iii) the
Initial Dividend Rate; and (II) on the Final Demand Date, that amount which is
equal to (i) (e) the Floor minus (f) the aggregate amount of the Allowed
Rejection Claims multiplied by (ii) 50%, multiplied by (iii) the Final Dividend
Rate.
Section 2. Adjustments. If any Option Lease shall be
assumed by Best and assigned to any Guarantor or any "affiliate" of any
Guarantor, subject to and in accordance with Sections 5.2 and 5.3 of the Asset
Purchase Agreement, then each of the Floor, the Ceiling and the Guaranty Fee
shall be adjusted downward in accordance with the mechanism set forth in Exhibit
A annexed hereto; provided, however, that if a Guarantor requests that any
Option Lease be assigned to it for the purpose of subletting the premises
covered by such Option Lease to a third party (other than an affiliate of any
Guarantor) on an arms-length basis, there shall be no such adjustment. The term
"affiliate", with respect to any Guarantor, means a person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with any Guarantor. If pursuant to Sections 5.2 and 5.3
of the Asset Purchase Agreement, Buyer shall request that any Option Lease be
assumed by Best and assigned to any Guarantor or any affiliate of any Guarantor
and such Option Lease shall ultimately be assigned to a third party by reason of
competitive bidding with respect to the assignment of such Option Lease, then
each of the Floor, Ceiling and Guaranty Fee shall be adjusted downward in
accordance with the mechanism set forth on Exhibit A hereto as though such
Option Lease shall have been assigned to any Guarantor or any affiliate of any
Guarantor. If the Bankruptcy Court does not enter an Extension Order providing
(or additional orders which in their aggregate provide) that the time for Best
to determine whether to assume or reject any Option Lease, as set forth in
section 365(d)(4) of the Bankruptcy Code, shall be extended for a total period
of at least three (3) months from the date of the closing of the Asset Purchase
Agreement for such Option Lease, despite Best's best efforts to obtain the entry
of such Extension Order (or orders), then each of the Floor, the Ceiling and the
Guaranty Fee shall be adjusted in accordance with the mechanism set forth in
Exhibit A for each such Option Lease for which such aggregate three (3) month
extension period has not been obtained; provided, however, that the Guarantors
may elect, by sending written notice of such election to Best's counsel, for the
Floor, Ceiling and Guaranty Fee not to be adjusted in accordance with the
mechanism set forth in Exhibit A with respect to any one or more of such Option
Leases for which the Bankruptcy Court does not enter such Extension Order or
orders. Any amounts to be paid by each of the Guarantors and Best to the other
on account of the adjustments that may be made to the Guaranty Fee pursuant to
the provisions of this Agreement shall be paid by Guarantors and Best as soon as
practicable following the substantial consummation of the Plan of
Reorganization.
Section 3. Letter of Credit. (a) To secure the
Guaranteed Amount, the Guarantors shall deliver or cause to be delivered to Best
a standby letter of credit in the initial face amount of Ten Million Dollars
($10,000,000) substantially in the form annexed hereto as Exhibit B (such letter
of credit, together with any replacements therefor, the "Letter of Credit").
(b) The Letter of Credit shall
provide that it shall expire on the earliest to occur of (i) the drawing by Best
of all amounts available thereunder, (ii) the termination of this Guaranty
pursuant to Sections 1(b)(A)(ii) and/or 1(c) hereof, which termination shall be
certified to the issuer of the Letter of Credit by Best (Best hereby agreeing to
cause such certification to be delivered to such issuer to the extent Best
reasonably determines that the Guaranty terminates pursuant to either of such
sections) and (iii) the date which is one year from the date of its issuance
(the "Expiration Date"). If not later than thirty (30) days prior to the initial
or any subsequent Expiration Date, Best shall not have received (A) notice from
the issuer thereof that the Letter of Credit has been renewed or (B) evidence
that the existing Letter of Credit shall be replaced by a Letter of Credit (in
the same amount as the amount currently available to be drawn under the existing
Letter of Credit) from National City Bank of Columbus, ▇▇▇▇▇ Fargo, Chase
Manhattan Bank or another issuer reasonably satisfactory to Best, then Best
shall be permitted to immediately draw the full amount available to be drawn
under the Letter of Credit; provided, however, that Best shall deposit such
amount in an escrow account (the "Escrow Account") established pursuant to an
escrow agreement (the "Escrow Agreement") the terms of which shall be reasonably
agreed upon by the Guarantors and Best (such terms to include, without
limitation, the provision for the remitting to Guarantors of any escrowed
amounts determined under this Guaranty to exceed the Guaranteed Amount) pending
(x) the entry by the Bankruptcy Court of final orders with respect to all timely
filed allowed Rejection Claims, and (y) if and only if the amount of the Allowed
Rejection Claims exceeds the Floor, the establishment of the Final Dividend
Rate.
(c) Subject to the terms and
conditions of this Guaranty including, without limitation, Section 1(b) hereof,
Best may draw upon the Letter of Credit for the Guaranteed Amount (or such
lesser amount as shall be available for draw thereunder) after a written demand
for payment has been made upon Guarantors in accordance with the terms of
Section 1(b) above and such payment has not be made within five (5) business
days of the receipt of demand therefor.
(d) The Letter of Credit shall also
provide that (i) in no event may Best draw thereunder an amount in excess of the
Guaranteed Amount and (ii) upon a conclusive but reasonable determination by
Best and the Guarantors in accordance with Section 1(b)(A)(ii) hereof that the
Guaranteed Amount shall in all events be less than $10,000,000, the Letter of
Credit shall be reduced such that the face amount thereof shall not be greater
than the Guaranteed Amount as so determined by Best and the Guarantors, less any
draws made thereunder, upon receipt by the issuer thereof of a certificate from
Guarantors and Best (a "Reduction Certificate") (Best hereby agreeing to execute
and deliver such Reduction Certificate together with the Guarantors in
accordance with this clause, to the extent Best reasonably determines that the
Letter of Credit should be so reduced) certifying the new Guaranteed Amount.
Section 4. Representations and Warranties. Each
Guarantor, jointly and severally, makes the following representations and
warranties to Best, each and all of which shall survive the execution and
delivery of this Guaranty, that as of the date hereof:
(a) Each Guarantor (i) is a
corporation, limited partnership or limited liability company, as the case may
be, duly and validly existing and in good standing under the laws of the state
of its organization or formation, as the case may be; (ii) has the requisite
corporate or partnership power, as the case may be, and authority and the legal
right to execute, and perform its obligations under, this Guaranty; (iii) is in
compliance with its articles or certificate of incorporation, limited
partnership or formation, as the case may be, and by-laws, limited partnership
agreement or operating agreement, as the case may be; and (iv) is in compliance
with all applicable provisions of law where the failure to comply would have a
materially adverse effect on such Guarantor's ability to pay the Guaranteed
Amount in accordance with the terms hereof.
(b) The execution, delivery and
performance of this Guaranty and all instruments and documents to be delivered
by each Guarantor hereunder are within such Guarantor's corporate or partnership
powers, as the case may be, have been duly authorized by all necessary or proper
corporate or partnership action, as the case may be, including the consent of
stockholders, limited partners or members, as the case may be, where required,
are not in contravention of any provision of such Guarantor's articles or
certificate of incorporation, limited partnership or formation, as the case may
be, or by-laws, limited partnership agreement or operating agreement, as the
case may be, will not violate any law or regulation where such violation would
have a materially adverse effect on such Guarantor's ability to pay the
Guaranteed Amount in accordance with the terms hereof, or any order or decree of
any court or governmental instrumentality, will not conflict in any material
respect with, or constitute a default in any material respect under, any
material indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Guarantor is a party or by which any Guarantor or such
of its property is bound, and the same do not require the consent or approval of
any governmental body, agency, authority or any other person except those
already obtained. This Guaranty has been duly executed and delivered on behalf
of such Guarantor, and constitutes a legal, valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the rights of creditors generally or by the application
of general equity principles.
Section 5. Waiver. The Guarantors hereby
absolutely, unconditionally and irrevocably waive, to the fullest extent
permitted by law, (a) promptness, diligence, notice of acceptance and any other
notice with respect to this Guaranty, (b) presentment, demand of payment,
protest, notice of dishonor or nonpayment and any other notice with respect to
the Guaranteed Amount, (c) any other action, event or precondition to the
enforcement of this Guaranty or the performance by the Guarantors of the
obligations hereunder and (d) the benefits of all provisions of law which are in
conflict with the terms of this Guaranty.
Section 6. Guaranty Absolute. (a) The Guarantors
guarantee that, to the fullest extent permitted by law, the Guaranteed Amount
will be paid or performed strictly in accordance with its terms, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of Best with respect thereto. Any
claim, controversy or other action with respect to this Guaranty or the Letter
of Credit shall be submitted to the Bankruptcy Court in accordance with Section
13 hereof, which shall retain jurisdiction with respect thereto and the 363
Order shall so provide.
(b) This Guaranty is one of payment and
performance, not collection and a separate action or actions may be brought and
prosecuted against the Guarantors to enforce this Guaranty.
(c) The liability of the Guarantors under
this Guaranty shall be absolute and unconditional irrespective of:
(i) any exercise or failure to
exercise any rights against the Guarantors including the failure to
enforce this Guaranty, the Asset Purchase Agreement or the Letter of
Credit, or the waiver or consent by Best with respect any provision
hereof or thereof;
(ii) any settlement or compromise of
any obligation of any Guarantor to Best, any security therefor or
any liability (including any of those hereunder) incurred directly
or indirectly in respect thereof or hereof, and any subordination of
the payment of all or any part thereof to the payment of any
obligation (whether due or not) of any Guarantor to creditors of any
Guarantor;
(iii) any change, restructuring or
termination of the existence of any Guarantor;
(iv) the validity, enforceability
or any future amendment of, or change in, this Guaranty, the Asset
Purchase Agreement or the Letter of Credit or any other agreement,
instrument or document to which Best or any Guarantor is or may
become party in connection therewith or herewith; or
(v) any other action or
circumstance which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor.
(d) This Guaranty shall continue to be
effective or be reinstated, as the case may be, if claim is ever made upon Best
for repayment or recovery of any amount or amounts received by Best in payment
or on account of the Guaranteed Amount and Best repays all or part of said
amount by reason of any judgment, decree or order of any court or administrative
body having jurisdiction over the Best, or any settlement or compromise of any
such claim effected by Best with any such claimant, then and in such event the
Guarantors agree that any such judgment, decree, order, settlement or compromise
shall be binding upon the Guarantors, notwithstanding any revocation hereof or
the cancellation of any instrument evidencing any Guaranteed Amount, and the
Guarantor shall be and remain liable to Best hereunder for the amount so repaid
or recovered to the same extent as if such amount had never originally been
received by Best.
Section 7. Continuing Guaranty. This Guaranty is a
continuing one and shall (a) remain in full force and effect until the earlier
to occur of (i) indefeasible payment and satisfaction in full of the Guaranteed
Amount by Best or the Guarantors, as the case may be, and (ii) the determination
by Best or the Guarantors in accordance with Section 1(b)(A)(ii) and/or 1(c)
above that the aggregate amount of all Allowed Rejection Claims is less than the
Floor, which determination shall be evidenced by a certificate executed by Best
and each of the Guarantors certifying thereto, (b) be binding upon the
Guarantors, their respective successors and assigns, and (c) inure to the
benefit of, and be enforceable by, Best and its successors and assigns. All
obligations to which this Guaranty applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon.
Section 8. Terms. (a) The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation".
(b) All references herein to Sections and
subsections shall be deemed to be references to Sections and subsections of this
Guaranty unless the context shall otherwise require.
Section 9. Amendments and Modification. No
provision hereof shall be modified, altered or limited except by written
instrument expressly referring to this Guaranty and to such provision,
and executed by the party to be charged.
Section 10. Rights and Remedies Not Waived. No act,
omission or delay by Best shall constitute a waiver of its rights and remedies
hereunder or otherwise. No single or partial waiver by Best of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 11. Admissibility of Guaranty. The
Guarantors agree that any copy of this Guaranty signed by the Guarantors and
transmitted by telecopier for delivery to Best shall be admissible in evidence
as the original itself in any judicial or administrative proceeding, whether or
not the original is in existence.
Section 12. Notices. Any notice, request, demand,
waiver, consent approval, or other communication which is required or permitted
to be given to any party hereunder shall be in writing and shall be deemed given
only if delivered to the party personally or sent to the party by telecopy (with
hard copy to follow promptly by mail) or sent, postage prepaid, by U.S. Post
Office express mail, or by recognized overnight air courier service and shall be
deemed given when so delivered personally, or telecopied or if mailed or sent by
overnight courier service, on the scheduled delivery date, to the parties at the
following addresses:
If to Guarantors:
Jubilee Limited Partnership III
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Legal Department
▇▇▇▇▇▇▇▇▇ Financial Group, LLC
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Alco Group, Inc.
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Mr. ▇▇▇▇ ▇▇▇▇▇
The Nassi Group, LLC
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Battle ▇▇▇▇▇▇ LLP
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Primoff, Esq.
and a copy to:
Irell & ▇▇▇▇▇▇▇ LLP
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
and a copy to:
Stroock & Stroock & ▇▇▇▇▇
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to Best:
Best Products Co., Inc.
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or to such other address or person as any party may have specified in a notice
duly given to the party as provided herein.
Section 13. Assignments. This Guaranty shall not be
assigned or otherwise transferred without the prior written consent of all the
parties hereto.
Section 14. Counterparts. This Guaranty may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original and all of which shall together constitute one and the same agreement.
Section 15. Jurisdiction; Trial by Jury; Entire
Agreement, etc. (a) The Bankruptcy Court shall be the court to which Best and
each Guarantor shall submit all claims or controversies in connection with this
Guaranty and the Letter of Credit for adjudication. It shall be a condition to
the effectiveness of this Guaranty that the Approval Order (as defined in the
Asset Purchase Agreement) shall provide that the Bankruptcy Court shall retain
jurisdiction with respect to this Guaranty, as contemplated by this Section 15.
(b) Except as prohibited by
law, each party hereto waives any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of, under or in
connection with this Guaranty.
(c) This Guaranty constitutes
the entire contract among the parties hereto relative to the subject matter
hereof. Any previous agreement among the parties hereto with respect to the
subject matter hereof is superseded by this Guaranty. Except as expressly
provided herein, nothing in this Guaranty, expressed or implied, is intended to
confer upon any party, other than the parties hereto, any rights, remedies,
obligations or liabilities under or by reason of this Guaranty. All parties
hereto acknowledge they have been represented by counsel in the preparation of
this Guaranty and that this Guaranty has been jointly drafted by the parties
hereto, and there shall be no presumption that this Guaranty is to be construed
against any party or parties based upon a presumption that such party drafted
same.
Section 16. GOVERNING LAW. THIS GUARANTY AND THE
GUARANTEED AMOUNT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE,
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 17. Captions; Separability. (a) The
captions of the Sections and subsections of this Guaranty have been inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Guaranty.
(b) If any term of this Guaranty shall be
held to be invalid, illegal or unenforceable, the validity of all other terms
hereof shall in no way be affected thereby.
Section 18. Acknowledgment of Receipt. The
Guarantors acknowledge receipt of a copy of this Guaranty.
IN WITNESS WHEREOF, the Guarantors have duly executed
and delivered or caused this Guaranty to be duly executed and delivered in the
State of New York as of the date first above set forth.
JUBILEE LIMITED PARTNERSHIP III
By: __________________________
Name:
Title:
By: __________________________
THE NASSI GROUP, LLC
By: ___________________________
Name:
Title:
▇▇▇▇▇▇▇▇▇ FINANCIAL GROUP, LLC
By: ___________________________
Name:
Title:
ALCO CAPITAL GROUP, INC.
By: ___________________________
Name:
Title:
Accepted and Acknowledged by:
BEST PRODUCTS CO., INC.
By: _____________________________
Name:
Title: