Zale Corporation Zale Delaware, Inc. TXDC, L.P. Irving, Texas 75038 November 9, 2007
Exhibit
2.2(b)
Xxxx
Corporation
Xxxx
Delaware, Inc.
TXDC,
L.P.
000
Xxxx
Xxxxxx Xxxx Xxxx
November
9, 2007
Finlay
Fine Jewelry Corporation
Finlay
Enterprises, Inc.
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
Reference
is made to that certain Asset Purchase Agreement made and entered into as of
September 27, 2007 (the “Purchase
Agreement”),
by
and among Xxxx Corporation, Xxxx Delaware, Inc., TXDC, L.P., Finlay Fine Jewelry
Corporation, and for limited purposes only, Finlay Enterprises, Inc. Capitalized
terms used herein but not otherwise defined shall have the meaning set forth
in
the Purchase Agreement. This letter agreement amends and clarifies the Purchase
Agreement as set forth below.
1. Effective
Time.
The
definition of Effective Time set forth in the Purchase Agreement shall be
amended and restated in its entirety as follows:
“Effective
Time”
shall
mean the close of business on November 8, 2007.
2. Inventory
True-Up.
Section
2.3 of the Purchase Agreement shall be amended and restated in its entirety
as
follows:
Section
2.3 Inventory
True-Up.
(a) Beginning
eighteen days prior to the scheduled Closing Date, representatives of Purchaser
and Sellers, supervised or observed, if requested by either Purchaser or Sellers
(and at the requesting party’s sole expense), by Xxxxxx LLP, shall conduct a
physical count of the Inventory at the Real Property and the Distribution Center
such physical count to be brought forward and adjusted (utilizing perpetual
inventory records) through the Effective Time, using methodology consistent
with
past practices and GAAP principles (“Inventory
Count”).
Without by implication limiting the generality of the other provisions of this
Agreement, it is acknowledged and agreed that all expenses incurred by, and
all
sales made by, the Business after the Effective Time shall be for the account
and benefit of Purchaser. The value of the Inventory (the “Closing
Inventory Value”)
shall
be determined based on Sellers’ cost for such Inventory as reflected on Sellers’
books and records (including freight in and freight out, excluding reserves).
In
connection with the determination of the Closing Inventory Value, Purchaser
and
its independent accountants, if requested by Purchaser, will have reasonable
access to all requisite accounting and other records of Sellers and to the
Real
Property and the Distribution Center, if necessary. Sellers will provide
Purchaser with an initial calculation of Closing Inventory Value on or prior
to
November 15, 2007. The parties will use their respective reasonable best
efforts to agree upon the Closing Inventory Value based on the Inventory Count
no later than ten Business Days following the Closing Date, or five Business
Days after delivery of the Sellers’ calculation, whichever is later. If the
parties cannot agree upon the Closing Inventory Value based upon the Inventory
Count within the time period specified above, the parties shall submit such
matter to the Independent Accountant for review and resolution, with the fees
and expenses thereof to be shared equally by the parties; and any determination
by such third party shall be final and binding upon the parties.
(b) If
the
Closing Inventory Value (as finally determined) exceeds $189,000,000 (the
“Excess
Amount),
Finlay
shall cause Purchaser to pay by wire transfer to an account designated in
writing by Sellers in immediately available U.S. funds (i) such Excess Amount,
not to exceed $26,000,000, no later than fifteen Business Days following the
Closing Date, and (ii) if such Excess Amount is greater than $26,000,000, the
balance of the Excess Amount on February 4, 2008. If not paid when due, interest
shall accrue on the amount due at a rate equal to the lesser of (a) 12% per
annum or (b) the maximum rate permitted by law.
(c) If
the
Closing Inventory Value (as finally determined) is less than $189,000,000,
Sellers shall pay by wire transfer to an account designated in writing by
Purchaser in immediately available U.S. funds an amount equal to the shortfall
no later than fifteen Business Days following the Closing Date. If not paid
when
due, interest shall accrue on the amount due at a rate equal to the lesser
of
(a) 12% per annum or (b) the maximum rate permitted by law.
3. Consigned
Merchandise
(a) Within
five Business Days following the Closing Date, Sellers shall deliver to
Purchaser a true, correct and complete list of all consigned merchandise of
the
Business as of the Effective Time, together with the name of the consignor,
the
cost of the merchandise and any other material terms of the consignment
relationship (to the extent other than pursuant to Sellers’ customary
consignment terms) (“Consigned
Merchandise List”).
For
the avoidance of doubt, the consigned merchandise shall include, and the
Consigned Merchandise List shall include sub-lists for, all so-called “memo”
consigned merchandise, “sample room” consigned merchandise, and direct-to-store
consigned merchandise.
(b) To
the
extent that any consigned merchandise of the Business is lost, stolen or damaged
prior to the Effective Time, including merchandise that is not on the Consigned
Merchandise List but is asserted by a consignor to be on consignment as of
the
Effective Time, Parent and the Sellers shall jointly and severally indemnify
and
hold harmless the Purchaser for any Losses directly or indirectly resulting
from
such loss, theft or damage or allegedly missing consigned merchandise; provided,
however, that any such loss, theft or damage occurring after the Effective
Time
shall be the responsibility of Purchaser.
(c) Without
by implication limiting the generality of Section 1.3 of the Purchase Agreement
or the other provisions thereof, following the Closing, Purchaser shall use
commercially reasonable efforts to provide Sellers with written confirmation
from the consignors of consigned merchandise that Sellers no longer shall be
responsible to such consignors for such merchandise or for payment therefore,
subject to Section 3(b) above.
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4. Cash
Collection
(a) Pursuant
to the Transitional Services Agreement, Opco shall process all cash, checks
and
credit card payments (including with respect to Opco’s proprietary credit cards)
received by the Business (collectively, “Receipts”).
Opco
acknowledges that it has no right, title or interest in any Receipts, such
Receipts shall be held by Opco in trust for Purchaser, and such Receipts shall
not be subject to any setoff, offset, charge or deduction of any kind except
for
amounts paid to customers for customer returns, telecheck fees, merchant and
other fees charged by credit card processors, chargebacks by credit card
processors, funding xxxxx cash for the Business, and similar items incurred
by
the Business after the Effective Time. Each Tuesday and Friday during the period
that Opco provides the foregoing services (other than December 25th
and
January 1st),
Opco
shall pay by wire transfer to an account designated in writing by Purchaser
in
immediately available U.S. funds all Receipts not theretofore transferred.
In
connection with each transfer, Opco promptly shall provide Purchaser with
sufficient documentation to confirm accuracy of the amount of the transfer
and
any deductions made in accordance with clauses (i) or (ii) above. Subject to
the
terms of the Confidentiality Agreement, Opco shall provide Purchaser and its
Representatives reasonable access during normal business hours to the books,
records, personnel, work papers, systems and accounts reasonably necessary
to
verify the documentation provided to Purchaser by Opco.
(b) If
any
dispute arises in connection with Section 4(a), Purchaser shall provide written
notice thereof to Opco and the parties shall attempt in good faith to resolve
such dispute. If the parties cannot resolve such dispute within five Business
Days from the date on which Purchaser shall have delivered such written notice,
the parties shall submit such matter to the Independent Accountant for review
and resolution, with the fees and expenses thereof to be shared equally by
the
parties; and any determination by such party shall be final and binding upon
the
parties.
5. Meadowood
Following
the Closing, Opco shall pay the landlord of the Meadowood Mall store (Store
No.
2265) $242,000 in accordance with the terms of the lease for such store. Opco
shall provide written notice to Purchaser no later than two days after such
payment to confirm the amount and date of payment. This payment shall be treated
for tax purposes as a reduction of the Purchase Price but shall not otherwise
reduce any amounts due to Sellers pursuant to the Purchase Agreement.
6. Big
Ticket Recourse Program
Without
by implication limiting or expanding the generality of Section 1.3 of the
Purchase Agreement, Assumed Liabilities shall include (i) the amount of any
recourse obligation due to Citibank USA, N.A. that arises from the purchase
of
merchandise subsequent to the Effective Time using a Xxxxxx, Banks and Xxxxxx
proprietary credit card issued by Citibank (“BBB
Credit Card”)
and
(ii) the amount of any recourse obligation due to Citibank that arises from
the
purchase of merchandise prior to the Effective Time using a BBB Credit Card
where such BBB Credit Card (or a different card for the same account) is used
to
purchase merchandise with recourse subsequent to the Effective Time, provided
that Opco, acting pursuant to the Transitional Services Agreement, follows
its
customary procedures in approving purchases following the Effective Time. With
respect to such purchases, Opco shall provide, pursuant to the Transitional
Services Agreement, such reports as Purchaser reasonably shall request. In
addition, upon request by Opco, Purchaser promptly shall reimburse Sellers
for
the net amount of any restricted cash required to be deposited with Citibank
with respect to any recourse obligations which are Assumed Liabilities as
discussed above, subject to reimbursement when such restrictions lapse. For
the
sake of clarity, any recourse obligation relating to the period prior to the
Effective Time shall remain the liability of sellers, and shall not be an
Assumed Liability, other than under the limited circumstances set forth
above.
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7. Bonus
Prorations
The
November bonus pursuant to the monthly manager bonus plan shall be prorated
between Purchaser and Sellers based upon sales occurring before and after the
Effective Time during the month of November. The bonus for the period from
August 1, 2007 through January 31, 2008 that will be due and owing after the
Effective Time to Transferred Employees under the semi-annual bonus plan shall
be prorated between Purchaser and Sellers based upon “controllable
contributions” compared to plan occurring before and after the Effective Time
during the relevant measurement periods. The retention bonuses payable to
employees at the Roosevelt Field store (Store No. 2264) after the Effective
Time
shall be allocated between Sellers and Purchaser based upon the percentage
of
sales between April 1, 2007 from November 8, 2007 (for which Zale is
responsible) and between November 8, 2007 until the store closing date (for
which Purchaser is responsible) to total sales during the period from April
1,
2007 until the store closing date. The parties shall make such payments after
the Closing as may be necessary to allocate the bonuses as provided above at
the
time such bonuses are due and payable.
8. Prepaid
Expenses
(a) Without
by implication limiting Section 5.11 of the Purchase Agreement, with respect
to
any amounts paid by Sellers prior to the Effective Time that are subject to
pro
ration, Sellers shall provide Purchaser with a reconciliation thereof as soon
as
practicable following the closing of their books for the month of November
2007
and Purchaser shall pay any amount due within five Business Days
thereafter.
(b) If
any
dispute arises in connection with Section 8(a), Purchaser shall provide written
notice thereof to Opco and the parties shall attempt in good faith to resolve
such dispute. If the parties cannot resolve such dispute within five Business
Days from the date on which Purchaser shall have delivered such written notice,
the parties shall submit such matter to the Independent Accountant for review
and resolution, with the fees and expenses thereof to be shared equally by
the
parties; and any determination by such party shall be final and binding upon
the
parties.
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9. Insurance
Premiums
To
the
extent that Opco collects insurance premiums or similar payments from
Transferring Employees for periods subsequent to the Effective Time, Opco shall
credit those amounts against amounts due from Purchaser for such subsequent
periods.
10. Woodlands
At
its
expense, Opco shall complete the current renovations of the Woodlands Mall
store
(Store No. 2242) and shall be entitled to receive, when due, with respect
thereto the build-out allowance of $200,000 from the landlord.
11. SPIFS
To
the
extent that Purchaser is required to fulfill the obligations of a defaulting
vendor with respect to sales incentives for sales associates of the Business
and
the applicable sales incentive program commenced prior to the Effective Time,
the cost of such fulfillment shall be prorated between Purchaser and Sellers
based upon sales occurring before and after the Effective Time.
12. Sales
Tax
To
the
extent that Purchaser pays sales tax with respect to the Business for sales
occurring prior to the Effective Time, Sellers promptly will reimburse Purchase
for such taxes.
13. King
of Prussia
Pursuant
to that certain Master Agreement dated October 26, 2007 by and among Simon
Property Group, LP ("Simon"),
Opco
and Purchaser, Simon has executed that certain Consent and Estoppel for the
Xxxxxx, Banks and Xxxxxx store located in the King of Prussia mall in
Pennsylvania (the "King
of Prussia Store").
Until
such time as Simon delivers a counterpart to the Consent and Estoppel from
the
other partner who has an ownership interest in the King of Prussia Store, Parent
and the Sellers shall jointly and severally indemnify and hold harmless the
Purchaser for any Losses (without regard to the deductible and the cap
provisions of Article X of the Purchase Agreement) directly or indirectly
resulting from the failure to receive such counterpart to the Consent and
Estoppel.
14. Miscellaneous
The
provisions of Article XI of the Purchase Agreement shall apply as if set forth
herein in their entirety.
*
* * *
*
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If
you
agree with the foregoing, please so indicate by signing below where
indicated.
| Sincerely yours, | ||||
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XXXX
CORPORATION
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By:
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/s/
Xxxxxx Xxxxxx
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Its:
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EVP,
CAO & CFO
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XXXX
DELAWARE, INC.
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By:
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/s/
Xxxxxx Xxxxxx
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Its:
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EVP,
CAO & CFO
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TXDC,
L.P.
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By:
Xxxx Delaware, Inc., its
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General
Partner
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By:
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/s/
Xxxxxx Xxxxxx
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Its:
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EVP,
CAO & CFO
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AGREED
TO:
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FINLAY
FINE JEWELRY
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CORPORATION
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By:
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/s/
Xxxxxx X. Xxxxxx
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Its:
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for
the limited purposes stated in the Purchase Agreement or herein:
FINLAY
ENTERPRISES, INC.
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By:
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/s/
Xxxxxx X. Xxxxxx
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Its:
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