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EXHIBIT 10.44
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ASSET PURCHASE AGREEMENT
by and between
OUTLET STORES, INC.,
a Delaware corporation,
and
XXXXXX XXXXX, INC.,
a New York corporation
Dated as of October 28, 1996
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 28, 1996 (this
"Agreement"), by and between OUTLET STORES, INC. ("Buyer"), a Delaware
corporation and wholly owned subsidiary of Xxxxxx Xxxxx Jeanswear Company
("Parent") a Delaware corporation, and XXXXXX XXXXX, INC., a New York
corporation ("Seller").
WHEREAS, Buyer desires to acquire Seller's Outlet Store Assets
(as defined herein) and Inventory (as defined herein) and assume certain
liabilities in exchange for the consideration set forth herein, and Seller
desires that the Outlet Store Assets and the Inventory be so sold and certain
liabilities be so assumed; and
WHEREAS, on the Closing Date (as defined herein) Outlet
Holdings Inc. ("Holdings"), a Delaware corporation and wholly owned subsidiary
of Parent, and Seller shall enter into a license agreement substantially in the
form of Exhibit A hereto (the "License Agreement"), pursuant to which Holdings
shall be granted a license to use the trademarks XXXXXX XXXXX and CK/XXXXXX
XXXXX for and in connection with the operation of the Business (as defined
herein).
NOW, THEREFORE, in consideration of the promises and the
mutual representations, warranties and agreements hereinafter set forth, the
parties hereto, intending legally to be bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
In addition to the other definitions contained herein, the
following definitions shall apply for purposes of this Agreement:
1.1 "Accounts Receivable" shall mean the accounts receivable
relating to the Business.
1.2 "Affiliate" of a specified person means a
Person (as defined herein) that, directly or indirectly,
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through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person.
1.3 "Assets" shall have the meaning set forth in Section
2.1(a).
1.4 "Assumed Liabilities" shall have the meaning set forth
in Section 2.3(a).
1.5 "Assumption Agreement" shall have the meaning set forth in
Section 2.3(c).
1.6 "Business" means Seller's and its Affiliates' existing
business of selling at off price (not full price or regularly priced) retail
discounted men's and women's clothing, apparel and related items in Outlet
Stores (except for such business as conducted and related to the Designer Label
Store (as defined herein)).
1.7 "Buyer" shall have the meaning set forth in the preamble
hereto.
1.8 "Buyer Indemnified Party" shall have the meaning set forth
in Section 8.1.
1.9 "Claims" shall have the meaning set forth in Section 8.1.
1.10 "Closing" shall have the meaning set forth in Section
4.1.
1.11 "Closing Date" shall have the meaning set forth in
Section 4.1.
1.12 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.13 "Contracts" shall mean all supply agreements and purchase
orders with suppliers, commitments, and other agreements entered into by Seller
and its Affiliates related to the Business except for Leases (as defined herein)
and those contracts which relate to the Designer Label Store.
1.14 "December 1995 Financial Statements" shall have the
meaning set forth in Section 5.4(a).
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1.15 "December 1995 Net Assets Statement" shall have the
meaning set forth in Section 5.4(a).
1.16 "December 1995 Statement of Cash Flows" shall have the
meaning set forth in Section 5.4(a).
1.17 "December 1995 Statement of Operations" shall have the
meaning set forth in Section 5.4(a).
1.18 "Designer Label Store" shall mean the designer label
outlet store located at 00 Xxxxx Xxx, Xxxxxxxx, XX.
1.19 "Dispute Notice" shall have the meaning set forth in
Section 3.3.
1.20 "Employee Pension Benefit Plan" shall have the meaning
set forth in Section 3(1) of ERISA.
1.21 "Employees" shall have the meaning set forth in Section
5.13(a).
1.22 "Environmental Claim" shall mean any claim, action, cause
of action, investigation or written notice by any Person alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resource damages,
property damages, personal injury or penalties) arising out of, based on or
resulting from (a) the presence of any Material of Environmental Concern (as
defined herein) on or prior to the Closing Date at any location where Seller is
conducting the Business, whether or not owned, leased or operated by Seller or
(b) circumstances existing on or prior to the Closing Date forming the basis of
any violation, or alleged violation, of any Environmental Law (as defined
herein).
1.23 "Environmental Law" shall mean all current federal, state
and local statutes, laws, ordinances, rules, regulations, decrees, judgments,
orders, and common law standards or decisions relating to pollution or
protection of human health, safety or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata, or natural resources including, without limitation, laws and regulations
relating to emissions, discharges, releases
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or threatened releases of hazardous materials, or otherwise relating to the
manufacture, processing, distribution, record-keeping, reporting, notification,
disclosure, use, treatment, storage, disposal, transport or handling of
hazardous materials, as enacted and currently in effect as of the Closing Date.
Without limiting the generality of the foregoing, Environmental Law includes,
but is not limited to, the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S. C. Sections 9601 et seq.; the Solid
Waste Disposal Act, 42 U.S.C. Sections 6901 et seq.; the Emergency
Planning and Community Right-To-Know Act of 1986, 42 U.S.C. Sections 11001
et seq.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251 et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801
et seq.; and the Clean Air Act, 42 U.S.C. Sections 7401 et seq.; in each
case as enacted and currently in effect as of the Closing Date.
1.24 "Equipment and Furnishings" shall have the meaning set
forth in Section 2.1(b).
1.25 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder.
1.26 "Excluded Assets" shall have the meaning set forth in
Section 2.2.
1.27 "Final Inventory Value" shall have the meaning set forth
in Section 3.3.
1.28 "Final Statement of Inventory" shall have the meaning set
forth in Section 3.3.
1.29 "Firm" shall have the meaning set forth in Section 3.4.
1.30 "Guarantee" shall mean the Guarantee entered into between
Parent and Seller dated as of the date hereof.
1.31 "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended.
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1.32 "Improvements" shall mean the buildings, improvements and
structures on the premises demised under the Leases.
1.33 "Intellectual Property" shall mean all registered and
unregistered trademarks, service marks, trade names, brands, private labels,
designs, patents, registered and unregistered copyrights, trade secrets,
know-how (other than prototype decor and fixtures identified with the trademark
"Xxxxxx Xxxxx" or any other trademarks of Seller), and computer software and
databases used in connection with the Business.
1.34 "Inventory" shall mean all the clothing, apparel,
fragrances and other products, supplies and other related goods held for sale in
connection with the Business at Seller's existing outlet stores (other than the
Designer Label Store), and all such items held in Seller's warehouse in North
Bergen, N.J. or in transit, owned by Seller or its Affiliates.
1.35 "Inventory Payment" shall mean $3,483,646.00.
1.36 "Inventory Warranty Claims" shall mean claims for the
return, repair or replacement of Inventory.
1.37 "IRS" shall mean the Internal Revenue Service.
1.38 "June 1996 Financial Statements" shall have the meaning
set forth in Section 5.4(b).
1.39 "June 1996 Net Assets Statement shall have the meaning
set forth in Section 5.4(b).
1.40 "June 1996 Statement of Cash Flows" shall have the
meaning set forth in Section 5.4(b).
1.41 "June 1996 Statement of Operations" shall have the
meaning set forth in Section 5.4(b).
1.42 "Leased Property" and "Leased Properties" shall mean all
of Seller's right, title and interest, as tenant, under the Leases in and to the
premises generally
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described in Schedule 1.42 and the Improvements on such premises.
1.43 "Leases" shall have the meaning set forth in Section
5.10(a).
1.44 "License Agreement" shall have the meaning set forth in
the preamble.
1.45 "Liens" shall have the meaning set forth in Section
2.1(a) hereof.
1.46 "Losses" shall have the meaning set forth in Section 8.1.
1.47 "Manchester Deposit" shall have the meaning set forth in
Section 2.1(b)(xi).
1.48 "Material Adverse Effect" shall have the meaning set
forth in Section 5.1.
1.49 "Material of Environmental Concern" shall mean any
substance presently listed, defined, designated or classified as hazardous,
toxic, radioactive, dangerous or otherwise regulated by any Environmental Law,
whether by type or by quantity, including without limitation any material
containing such substance as a component, and, including, without limitation,
pollutants, contaminants, wastes, toxic substances, asbestos, petroleum and
petroleum products.
1.50 "Notice" shall have the meaning set forth in Section
8.3(d).
1.51 "Operating Expenses" shall have the meaning set forth in
Section 4.4(a).
1.52 "Outlet Store Assets" shall have the meaning set forth in
Section 2.1(b) hereof.
1.53 "Outlet Store Assets Payments" shall have the meaning set
forth in Section 2.4.
1.54 "Outlet Stores" shall mean those stores currently
operated by Seller located on the Leased Properties and the contemplated store
located in Clinton, CT.
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1.55 "Parent" shall have the meaning set forth in the preamble
hereto.
1.56 "Permitted Encumbrances" shall mean, collectively, (i)
all statutory or other liens for taxes or assessments which are not yet due;
(ii) all mechanics', materialmen's, carriers', workers' and repairers' liens,
and other similar liens imposed by law, incurred in the ordinary course of
business, which allege unpaid amounts that are less than 30 days delinquent; and
(iii) all other liens which do not materially detract from or materially
interfere with the present use, occupancy or operation of the asset subject
thereto or affected thereby.
1.57 "Person" shall mean any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
estate, unincorporated organization, governmental or regulatory body or other
entity.
1.58 "Preliminary Statement of Inventory" shall have the
meaning set forth in Section 3.1.
1.59 "Price Waterhouse" shall have the meaning ascribed to
such term in Section 3.2.
1.60 "Product Liability Claims" shall mean claims that
personal injury, property damage or economic loss (whether such claim is based
on a tort theory or other theory), has been caused by, or has otherwise arisen
out of or is incidental to, any defect in the design of materials or workmanship
of a Product or has been caused by, or has otherwise arisen out of or is
incidental to, any other act or omission relating to such a Product, including,
without limitation, failure to warn of hazards associated with a Product or
failure to modify, correct or improve a Product.
1.61 "Products" shall have the meaning ascribed to such term
in the License Agreement.
1.62 "Purchase Orders" shall mean those purchase orders and
other contracts and commitments of Seller and its Affiliates entered into in the
ordinary course of business for the purchase of Products.
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1.63 "Register Cash" shall have the meaning set forth in
Section 2.1(b)(x).
1.64 "Related Agreements" shall have the mean- ing set forth
in Section 4.2.
1.65 "Retail Inventory Method" shall have the meaning set
forth in Section 3.1.
1.66 "Retained Liabilities" shall have the meaning set forth
in Section 2.3(b).
1.67 "Seller" shall have the meaning set forth in the preamble
hereto.
1.68 "Seller Indemnified Party" shall have the meaning set
forth in Section 8.2.
1.69 "Seller Plans" shall have the meaning set forth in
Section 5.12(a).
1.70 "Seller's Knowledge" shall mean the actual knowledge of
Xx. Xxxxxx Xxxxx, Xx. Xxxxx X. Xxxxxxxx, Xx. Xxxxxxx X. Xxxxxx, Xx. Xxxxxxx
Xxxxx-Xxxxxxx, Xx. Xxxxxx X. XxXxxxx, and Xx. Xxxxxxxxx Xxxxx.
1.71 "Seller Individual Account Plan" shall have the meaning
ascribed to such term in Section 9.2.
1.72 "Successor Individual Account Plan" shall have the
meaning ascribed to such term in Section 9.2.
1.73 "Tax Return" shall mean any return, report, information
return or other document (including any related or supporting information) with
respect to Taxes (as defined herein).
1.74 "Taxes" shall mean all taxes, charges, fees, levies,
penalties or other assessments imposed by any federal, state, local, or foreign
taxing authority, including, but not limited to, income, excise, property,
sales, transfer, franchise, payroll, withholding, social security or other
taxes, including any interest, penalties or additions attributable thereto.
1.75 "Territory" shall mean the United States, Mexico and
Canada.
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1.76 "Transfer Date" shall have the meaning ascribed to such
term in Section 9.2.
1.77 "Transferring Employee" shall have the meaning ascribed
to such term in Section 9.1(b).
1.78 "Transitional Services Agreement" shall have the meaning
ascribed to such term in Section 4.2.
1.79 "WARN Act" shall mean the Worker Adjustment and
Retraining Notification Act (and any applicable similar state law).
1.80 "Work" shall have the meaning ascribed to
such term in Section 7.12.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Outlet Store Assets.
(a) On the terms and subject to the
conditions set forth in this Agreement, at the Closing Seller shall sell,
assign, transfer, convey and deliver to Buyer, and Buyer shall purchase and
accept from Seller, all of the Outlet Store Assets and the Inventory
(collectively, the "Assets"), free and clear of all claims, mortgages, deeds of
trust, pledges, security interests, liens, charges, easements, restrictions,
tenancies, options, assignments, judgments, possibilities of reversion, or any
other conflicting ownership or security interest in favor of any third party or
other encumbrances except for Permitted Encumbrances (collectively, "Liens").
(b) The "Outlet Store Assets" shall consist of the
following assets and properties of Seller:
(i) the Leases;
(ii) all tangible personal property
and other equipment, machinery, furniture, furnishings, appliances, and
other tangible personal property of every description and kind owned by
Seller that are located at the Leased Property as well as
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that to be located at the contemplated store located at Clinton, CT
(collectively, the "Equipment and Furnishings");
(iii) all books and records (except
for records necessary for Seller's tax, financial and accounting
purposes, copies of which have been provided or made available to
Buyer) owned and needed in connection with the Business;
(iv) all know-how, packaging supplies,
sales records and histories, customer and supplier lists,
inventory records and other trade secrets now owned and used in
connection with the operation of the Business and marketing plans,
market research data and all other records and materials owned and used
primarily in connection with the Business (except for Intellectual
Property which is granted pursuant to the License Agreement) and all
rights in computer software owned or licensed by Seller and used
exclusively in connection with the Business;
(v) all governmental licenses and
permits relating to the Business that may be lawfully transferred;
(vi) all of Seller's claims, causes
of action, choses in action, rights to recovery (including, without
limitation, rights to insurance proceeds or other recoveries for
damaged Inventory acquired by Buyer (except to the extent any such
insurance proceeds or other recoveries relate to damaged Inventory,
rights to casualty insurance proceeds with respect to the Leased
Property or proceeds resulting from a taking of all or any portion of
the Leased Property), rights of set-off and indemnification and rights
of recoupment relating to the Assets;
(vii) all warranty and other claims
of Seller (express or implied) against third parties
relating to the Outlet Store Assets;
(viii) all right, title and interest
of Seller in and to the Contracts and the Purchase
Orders;
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(ix) all right, title and interest of Seller
in and to any other contracts relating to the Business and any other
assets necessary to conduct the Business consistent with past practice
which is not otherwise utilized by Seller in its other businesses or
operations;
(x) cash in the aggregate amount of $18,300
in the form of cash in the registers and xxxxx cash as set forth in
Schedule 2.1(b)(x) ("Register Cash"); and
(xi) the security deposit in the amount of
$13,333 for the Outlet Store located in Manchester, VT (the "Manchester
Deposit").
2.2 Excluded Assets. Notwithstanding the provisions of
Section 2.1, Seller is not selling and Buyer is not purchasing or
assuming obligations with respect to the following assets (the "Excluded
Assets"):
(a) the stock books, stock ledgers, minute books,
resolutions and corporate seal of Seller or any of its Affiliates;
(b) cash, cash equivalents, securities, insurance
policies and rights under or arising from such policies (other than as set forth
in Section 2.1(b)(vi), (x) or (xi));
(c) any trademarks, copyrights, service marks, logos,
trade names, corporate names or other Intellectual Property (except the
intellectual property being transferred to Buyer pursuant to Section 2.1(b)(iv)
above) or any registrations or applications for registration for any of the
foregoing;
(d) all assets of Seller's businesses other than the
Business and all assets located at the Designer Label Store;
(e) the assets set forth on Schedule 2.2(e) hereto;
(f) all Accounts Receivable that relate to sales
prior to the Closing Date; and
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(g) all security deposits related to the Leased
Property (except for the Manchester Deposit).
2.3 Assumption of Certain Liabilities.
(a) Buyer agrees to assume only the following
liabilities and obligations relating to the Business, whether known or unknown,
fixed or contingent:
(i) all obligations to give notice or
other liabilities arising under the WARN Act arising out of any
termination of Transferring Employees by Buyer or failure by Buyer to
offer employment to any Employee in accordance with Section 9.1(b);
(ii) liabilities and obligations of
Seller under any group health, vacation, severance, salary continuation
or termination pay plans or agreements of Seller for the benefit of
Employees, and, with respect to severance, any plan, practice or
policy, including, but not limited to, liability under Section 4980B of
the Code or Sections 601-607 of ERISA on account of such Employees (as
defined below), in each case resulting from the termination of
employment of the Employees with the Seller and its Affiliates on the
Closing Date or with the Buyer and its Affiliates, after the Closing
Date;
(iii) liabilities and obligations of Seller
under (A) Purchase Orders existing on the Closing Date that are
described on Schedule 5.6(b) and (B) the Contracts (or the applicable
portions thereof that relate to the Business) that are listed or
described on Schedule 5.6(a) and all other contracts entered into in
the ordinary course of business, and (C) the Leases which are assigned
to Buyer;
(iv) all liabilities of the Business
incurred by Buyer or its Affiliates after the Closing Date, other than
Retained Liabilities;
(v) all liabilities of the Seller for
Product Liability Claims relating to occurrences after the Closing
Date; and
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(vi) Environmental Claims relating
to occurrences after the Closing Date (provided that the Seller shall
be liable for indemnification to the Buyer in accordance with Article
VIII for any breach of the representations and warranties set forth in
section 5.16).
The liabilities described in the foregoing
clauses (i)-(vi) (other than the Retained Liabilities) are collectively
hereinafter referred to as the "Assumed Liabilities".
(b) Except as and to the extent otherwise
expressly provided in this Agreement, Buyer does not, and shall not, assume or
be deemed to assume, nor shall Buyer discharge, be responsible for or liable
with respect to any other liabilities or obligations of Seller or any other
Person, whether arising prior to, on, or after the Closing Date (collectively,
the "Retained Liabilities"). Notwithstanding anything to the contrary set forth
herein, Retained Liabilities shall include, without limitation, (i) all of
Seller's liability for accounts payable and accrued expenses, (ii) any
liability, duty or other obligation contained in or arising out of any
agreement, contract, license agreement, lease or sublease relating to the
Business that is not a Contract or Lease that is listed or described on Schedule
5.6(a) or Schedule 5.10(a) or otherwise assumed in Section 2.3(a)(iv), (iii) all
obligations of Seller to any banks, or to any other affiliate with respect to
money borrowed, (iv) except as described in Section 2.3(a)(ii), any liability or
obligation for accrued and unpaid wages, salaries, bonus or incentive
compensation or any other remuneration to any Employee with respect to service
prior to the Closing, (v) any and all costs directly attributable to or arising
directly from any actions, suits, proceedings, investigations, demands,
assessments, or audits which are pending or threatened as of the Closing,
arising under, out of, or in connection with the Business or any of the Assets,
including the matters set forth on Schedule 5.8, (vi) except as described in
Section 2.3(a)(ii), any liability with respect to health, welfare and other
benefit plans of Seller relating to the Employees, including but not limited to
liabilities arising under the Seller Plans set forth on Schedule 5.12(a),
arising on account of services performed prior to the Closing, including but not
limited to liability under Section 4980B of the Code or Sections
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601-607 of ERISA, (vii) any and all liabilities and obligations, direct or
indirect, fixed or contingent, for Taxes (a) of Seller or any member of any
affiliated group (within the meaning of Section 1504(a) of the Code) or any
combined or consolidated group for state or other tax purposes of which Seller
is or has been a member, whenever incurred, or (b) attributable to or incurred
in connection with the Assets or the Business prior to or on the Closing Date,
except as provided in Section 7.2(b), and (viii) all obligations of Seller under
this Agreement.
(c) On the terms and subject to the
conditions set forth in this Agreement, Buyer shall execute and deliver to
Seller on the Closing Date one or more assumption agreement or agreements
(collectively, the "Assumption Agreements") in form and substance reasonably
satisfactory to Buyer and Seller and their respective counsel, pursuant to which
Buyer shall assume and agree to pay, perform and discharge when due, and to
indemnify them against and hold Seller and its Affiliates harmless from, all
obligations and liabilities of Seller to be paid or performed by Buyer under the
Leases.
2.4 Purchase Price for the Outlet Store Assets. Subject to the
terms and conditions of this Agreement, at the Closing Buyer shall pay or cause
to be paid to Seller by wire transfer of immediately available funds to an
account designated by Seller an amount equal to $285,165, which amount
represents (A) $253,532 (Seller's depreciated cost of the fixed assets listed on
Schedule 2.4) plus (B) $250,000 plus (C) the Manchester Deposit, plus (D) the
Register Cash less (E) the $250,000 payment previously made to Seller (the
payment referred to in this Section 2.4 is herein referred to as the "Outlet
Store Assets Payment") in return for the Outlet Store Assets.
2.5 Purchase Price for the Inventory. Subject to the terms and
conditions of this Agreement, at the Closing, Buyer shall pay or cause to be
paid to Seller by wire transfer of immediately available funds to an account
designated by Seller, an amount equal to the Inventory Payment in return for the
transfer to Buyer of all Seller's Inventory on the Closing Date.
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ARTICLE III
DETERMINATION OF PURCHASE PRICE;
PURCHASE PRICE ADJUSTMENTS
3.1 Preliminary Statement of Inventory Valuation. Attached as
Exhibit B is a preliminary statement of Inventory of the Business (the
"Preliminary Statement of Inventory") setting forth as of October 19, 1996, the
value of the Inventory on such date and specifying a value for the Inventory as
determined in accordance with the retail inventory valuation method under GAAP
(as defined herein) on a basis consistent with past practices at the lower of
cost or market (the "Retail Inventory Method"). Such procedure is consistent in
all material respects with the procedure used to calculate inventory value in
the June 1996 Net Assets Statement, giving due consideration to the use of
estimates on an interim basis. The Preliminary Statement of Inventory
categorizes the Inventory of the Business by cost, product category and store.
3.2 Physical Inventory. On or about the Closing Date, at
Buyer's expense, a physical count of the Inventory being transferred to Buyer
hereunder as of the Closing Date shall be taken by Seller and observed by
Coopers & Xxxxxxx L.L.P., Buyer's independent certified public accountants and
Price Waterhouse L.L.P. ("Price Waterhouse"), Seller's independent certified
public accountants. Buyer will provide Seller with the cooperation of its
employees in connection with such physical count.
3.3 Final Statement of Inventory. Within 60 days after the
Closing Date, a final audited Inventory statement (the "Final Statement of
Inventory") shall be prepared by Seller, audited by Price Waterhouse, and
delivered to Buyer and Buyer shall make the payment to Seller specified in
Section 3.5 of this Agreement, unless it objects as specified in Section 3.4 of
this Agreement. The expenses of Price Waterhouse in the preparation of the Final
Statement of Inventory shall be borne by Buyer. Buyer will cooperate fully and
will cause its employees, including the Transferring Employees, to cooperate
fully in assisting Price Waterhouse and Seller in preparing the Final Statement
of Inventory. The Final Statement of Inventory shall incorporate the results of
the physical
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inventory specified in Section 3.2 and shall include the amount of Inventory in
transit as of the Closing Date and a value for the Inventory being transferred
on the Closing Date (with appropriate detail for each category of Inventory,
i.e., clothing and supplies being transferred to Buyer on the Closing Date) in
accordance with the Retail Inventory Method (the "Final Inventory Value"). The
Final Statement of Inventory shall categorize the Inventory of the Business by
cost, product category and store. Buyer shall have access to work papers,
records, and related materials used in preparing the Final Statement of
Inventory. Seller's auditors shall receive a customary indemnity upon release of
such documents. Buyer shall have 30 days from the date the Final Statement of
Inventory is delivered to object to all or any part of such statement by
delivery of a written notice (the "Dispute Notice") to Seller specifying in
reasonable detail its objections. In the event Buyer objects to all or any part
of the Final Statement of Inventory, all such objections shall be resolved in
accordance with Section 3.4 hereof.
3.4 Resolution of Objections. The parties shall use their best
efforts to promptly resolve any objections or disputes as to the Final Inventory
Value specified in the Dispute Notice. If the parties cannot agree as to all or
any part of such valuations within 30 days after the delivery by Buyer of the
Dispute Notice, they shall submit the dispute to a third national accounting
firm agreed to by the parties (the "Firm"), for resolution. If the parties
cannot agree on a firm, the parties' then current independent certified public
accountants shall jointly select such Firm. The fees of the Firm shall be paid
equally by Buyer on the one hand and Seller on the other hand. Buyer and Seller
shall cooperate fully with such Firm. The Firm shall be instructed to reach its
conclusion regarding Final Inventory Value in accordance with the Inventory
valuation procedures set forth in Section 3.1 upon the written submissions of
the parties and, if requested by the Firm, oral presentations of the parties, by
no later than 45 days from the date the dispute is submitted to the Firm for
resolution. The Firm's resolution of the dispute shall be conclusive and binding
upon the parties hereto.
3.5 Purchase Price Adjustment. On the date the Final Inventory
Value has been determined in accor-
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dance with Section 3.3 or 3.4, as the case may be, Buyer or Seller shall
make the following payments:
(a) if the Final Inventory Value as of
the Closing Date as set forth in the Final Statement of Inventory (or as finally
determined by the Firm pursuant to Section 3.4 hereof) exceeds the Inventory
Payment, Buyer shall deliver, by check made to the order of Seller, an amount
equal to the difference, or
(b) if the Inventory Payment exceeds the
Final Inventory Value, as set forth in the Final Statement of Inventory (or as
determined by the Firm pursuant to Section 3.4 hereof), Seller shall deliver to
Buyer, by check made to the order of Buyer, an amount equal to the difference.
Buyer and Seller agree to treat any payment made pursuant to
this Section 3.5 as an adjustment to the purchase price in all of their
respective Tax Returns and not to take any position in any tax or information
return, tax proceeding, tax audit or otherwise inconsistent with such treatment.
ARTICLE IV
THE CLOSING
4.1 The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Xxxx,
Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx at 10:00 a.m., local time, on the date
hereof (the "Closing Date").
4.2 Related Agreements. At the Closing, (i) Buyer shall
execute the Assumption Agreement, (ii) Seller and Holdings shall enter into the
License Agreement, (iii) Seller and Buyer shall enter into a Transition Services
Agreement (the "Transition Services Agreement") and (iv) Seller and Parent shall
enter into an amendment (the "Amendment") to the License Agreement, dated August
4, 1994 between Parent and Buyer (such Assumption Agreement, License Agreement,
Transition Services Agreement and Amendment to be collectively referred to as
the "Related Agreements").
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4.3 Deliveries at the Closing.
(a) At the Closing, Seller shall deliver
or cause to be delivered to Buyer:
(i) such general and specific bills
of sale, endorsements, assignments, deeds and other good and sufficient
instruments of transfer and conveyance, in form and substance
reasonably satisfactory to Buyer and Seller and their respective
counsel, as shall be effective to vest in Buyer all of the right, title
and interest of Seller in and to the Assets, including, without
limitation such bills of sale and assignments as shall be necessary to
vest in Buyer good title, free and clear of Liens, to the Assets and
the Leases;
(ii) duly executed instruments of
assignment and assumption for each Lease transferring to Buyer valid
leasehold interest to each Leased Property, free and clear of all
Liens, except Permitted Encumbrances;
(iii) originals or certified copies
of all Leases;
(iv) estoppel certificates executed
by the landlord, for each of the Leases (except for the estoppel
certificate for the Lease for the Outlet Store located in Manchester,
Vermont which will be delivered by the Landlord upon delivery of the
guarantee by Designer Holdings, Inc., a Delaware corporation, of
Buyer's obligations thereunder) substantially in the form attached
hereto as Exhibit C or in such other form as shall be set forth in the
applicable Lease and shall be reasonably satisfactory to Buyer (the
"Estoppel Certificate");
(v) Subject to Section 7.1 of this
Agreement, the written consent from the landlord for each Lease for
each Leased Property to the assignment of such Lease to Buyer whose
such consent is required under the terms of each Lease;
(vi) the written consent from all
parties other than Seller to each Contract being
assigned to Buyer pursuant to this Agreement;
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(vii) a certification in form and
substance reasonably satisfactory to Seller and Buyer, verified as true
and signed and sworn to under penalties of perjury by a duly authorized
officer of Seller, certifying Seller's taxpayer identification numbers
and that Seller is not a "foreign person" as that term is defined for
purposes of the Foreign Investment in Real Property Tax Act, Code
Section 1445, as amended, and the regulations promulgated thereunder;
provided, however, that if Seller shall fail to deliver such
certificate, the Closing shall nevertheless occur and Buyer shall
withhold from payments otherwise to be made to Seller such amounts as
are required to be withheld under applicable laws;
(viii) a certificate signed by a
vice president or president of Seller that states that (A) all the
representations and warranties of Seller set forth in Article V are
true and correct in all material respects and (B) Seller has performed
or complied in all material respects with the agreements contained in
this Agreement required to be performed and complied with by it prior
to the date hereof; and
(ix) all other documents, opinions,
instruments and writings reasonably required by
Buyer.
(b) At the Closing, Buyer shall deliver
to Seller or the appropriate Person:
(i) the Outlet Store Assets Payment;
(ii) the Inventory Payment;
(iii) the payments to be made on the
Closing Date as specified in each of the Related
Agreements;
(iv) a certificate signed by a vice
president or president of Buyer that states that (A) all the
representations and warranties of Buyer in Article VI are true and
correct in all material respects and (B) Buyer has performed or
complied in all material respects with the agreements contained
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in this Agreement required to be performed and complied with by it
prior to the date hereof; and
(v) all other documents, opinions
and writings expressly required to be delivered by
Buyer to Seller pursuant to this Agreement.
4.4 Apportionments.
(a) Expenses for power and utilities
charges, prepaid expenses, sewer and water rents and taxes, real estate taxes
and assessments and "minimum", "fixed" or "base" rent due and payable under the
Leases (including, so called "escalation rent", "additional rent", or "operating
expenses" collectively, "Operating Expenses") and similar prepaid items for the
Leases shall be prorated between Seller and Buyer as of the Closing Date and the
net amount thereof shall be promptly paid to Buyer or Seller or credited to
Buyer, as the case may be, as soon as practicable following the Closing Date
but, in any event, not later than 10 business days following the Closing Date,
on the basis of the fiscal or calendar year for which assessed and based on a
three hundred sixty (360) day year and a thirty (30) day month.
(b) Real estate taxes and assessments
shall be prorated on the basis of the fiscal year for which the same are
assessed. If the Closing Date shall occur either before an assessment is made or
a tax rate is fixed for the tax period in which the Closing occurs, the
proration shall be made on the basis of the tax rate for the preceding year
applied to the latest assessed valuation. After the real estate taxes and
assessments are finally fixed, Buyer and Seller shall make a recalculation and
proration of the same, and Buyer or Seller, as the case may be, shall make an
appropriate payment to the other based on such recalculation. If Buyer shall
receive any refund issued to Buyer, as tenant, with respect to taxes for the
period prior to the Closing, the amount of such refund received by Buyer shall
be apportioned as of the Closing and the amount allocable to the period prior to
the Closing shall be paid by Buyer to Seller within 10 days after such refund is
received. The obligations of Seller under this paragraph shall survive the
Closing.
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(c) Expenses for utilities, unfixed water
rates and charges and sewer rents and taxes shall be apportioned on the basis of
actual current readings or, if such readings have not been made, on the basis of
the most recent bills that are available. If any apportionment is not based on
an actual current reading, then, upon the taking of a subsequent actual reading,
such apportionment shall be readjusted and Seller or Buyer, as the case may be,
shall promptly deliver to the other the amount determined to be due upon such
readjustment.
(d) "Percentage rent" for the calendar,
fiscal or lease year in which the Closing occurs, as the case may be, shall be
apportioned based upon Seller's and Buyer's share of store revenues constituting
the basis of percentage rent under the applicable Lease (as calculated pursuant
to the terms of such Lease). Buyer's share of such store revenues shall be
accompanied by a certificate from Buyer's Chief Financial Officer to the effect
that Buyer's share of such store revenues and the method of calculation of
Buyer's share of such store revenues is true and accurate. If any "percentage
rent" payable after the Closing Date is due with respect to the period in which
the Closing Date occurs and is payable by Seller by reason of the foregoing
allocation, then the appropriate sum shall be promptly paid by Seller to Buyer.
The obligations of Seller under this subparagraph shall survive the Closing.
(e) If Operating Expenses have not been
billed or have not been determined in accordance with the provisions of the
respective Leases, the apportionment of such Operating Expenses shall be made at
the Closing Date by applying the assessed Operating Expenses for each of the
respective Leases for the preceding year, but, promptly after the determination
of Operating Expenses for the current year, the apportionment thereof shall be
recalculated and the Seller or Buyer, as the case may be, shall promptly make an
appropriate payment to the other based on such recalculation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
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5.1 Corporate Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has corporate power to own all of its
properties and assets and to carry on its business as it is now being conducted,
and is duly qualified to do business and is in good standing in all
jurisdictions where its ownership, operation or leasing of property or assets or
the conduct of its business requires it to be so qualified, except in such
jurisdictions, if any, where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a material adverse effect on
the business, operations or condition (financial or otherwise) (a "Material
Adverse Effect") on the Business. Seller has all necessary government
authorizations to own, lease and operate all of its properties and assets and to
carry on its business as now being conducted, except any such authorizations the
failure to obtain which would not have or would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect.
5.2 Due Authorization. The execution, delivery and performance
of this Agreement and the Related Agreements have been duly authorized by all
necessary corporate action on the part of Seller and this Agreement and the
Related Agreements have been duly executed by a duly authorized officer of
Seller. This Agreement and the Related Agreements constitute valid and binding
agreements of Seller enforceable against Seller in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and subject to general
principles of equity (regardless of whether enforcement is sought in equity or
law).
5.3 Consents and Approvals; No Violation. Except as set forth
on Schedule 5.3 and subject to the expiration or earlier termination of all
waiting periods under the HSR Act, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
(i) violate or conflict with any provision of Seller's Articles of Incorporation
or Bylaws or other similar charter documents of any of its Affiliates involved
in the Business, (ii) violate or conflict with or result in a default (or give
rise to any right of termination, cancellation or
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acceleration) under any of the terms, conditions or provisions of, any note,
bond, mortgage, indenture, license, lease, agreement or other instrument or
obligation to which Seller or any of its Affiliates involved in the Business is
a party or by which Seller or any of its Affiliates involved in the Business may
be bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents either have been
obtained by Seller or any of its Affiliates involved in the Business or the
obtaining of which has been waived by Buyer, (iii) result in the creation or
imposition of any material lien, charge or encumbrance by a third party on the
Outlet Store Assets and the Inventory and Seller or any of its Affiliates
involved in the Business or (iv) violate any order, writ, injunction, decree,
arbitration award, statute, rule or regulation applicable to Seller or any of
the Assets, excluding from the foregoing clauses (ii), (iii) and (iv) such
defaults and violations which, individually or in the aggregate, would not have
a Material Adverse Effect.
5.4 Financial Statements. (a) Set forth on Schedule 5.4(a) are
true and complete copies of (i) the statement of net assets to be sold for the
Business for the fiscal year ended December 30, 1995 (the "December 1995 Net
Assets Statement"); (ii) the statement of operations for the Business for the
fiscal year ended December 30, 1995 (the "December 1995 Statement of
Operations"; and (iii) the statement of cash flows to (from) Seller for the
fiscal year ended December 30, 1995 (the "December 1995 Statement of Cash
Flows" and, together with the December 1995 Net Assets Statement and the
December 1995 Statement of Operations, the "December 1995 Financial
Statements"). Seller agrees to have the December 1995 Financial Statements
audited by Price Waterhouse delivered as soon as practicable following the
Closing, but, in any case, not later than 10 business days following the
Closing. The December 1995 Financial Statements were prepared by Seller (i) to
present certain information relative to the Business and are not intended to be
a complete presentation of the Outlet Stores' assets and liabilities and
revenues and expenses and (ii) were derived from Seller's historical financial
statements for such periods and include allocation and estimates based upon
assumptions Seller believes are reasonable (it being understood that these
allocations and estimates are not necessarily indicative of the costs and
expenses that
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would have resulted if the Business had been operated as a separate entity).
Subject to the foregoing, the December 1995 Net Assets Statement fairly
presents, in all material respects, the net assets to be sold of the Business as
of December 30, 1995 and the related results of operations and cash flows to
(from) Seller for the fiscal year then ended; and each of the December 1995
Financial Statements (including the related notes) has been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied.
(b) Set forth on Schedule 5.4(b) are true
and complete copies of (i) the unaudited statement of net assets to be sold for
the Business for the six months ended June 29, 1996 (the "June 1996 Net Assets
Statement"), (ii) the unaudited statement of operations for the Business for the
six months ended June 29, 1996 (the "June 1996 Statement of Operations"); and
(iii) the unaudited statement of cash flows to (from) Seller for the six months
ended June 29, 1996 (the "June 1996 Statement of Cash Flows" and, together with
the June 1996 Net Assets Statement and the June 1996 Statement of Operations,
the "June 1996 Financial Statements"). The June 1996 Financial Statements were
prepared by Seller (i) to present certain information relative to the Business
and are not intended to be a complete presentation of the Outlet Stores' assets
and liabilities and revenues and expenses and (ii) were derived from Seller's
historical financial statements for such periods and include allocation and
estimates based upon assumptions Seller believes are reasonable (it being
understood that these allocations and estimates are not necessarily indicative
of the costs and expenses that would have resulted if the Business had been
operated as a separate entity). Subject to the foregoing, the June 1996 Net
Assets Statement fairly presents the net assets to be sold of the Business as of
June 29, 1996, and the related results of operations and cash flows to (from)
Seller for the six months then ended; and each of the June 1996 Financial
Statements has been prepared in accordance with GAAP consistently applied.
5.5 Absence of Changes. Except as set forth in Schedule 5.5
hereto, since the date of the December 1995 Financial Statements, the Business
has been conducted in the ordinary course and there has not been, with respect
to any store:
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(a) any Material Adverse Effect or any event which is
reasonably likely to result in a Material Adverse Effect;
(b) any change by Seller in the accounting methods,
principles or practices relating to the Business, other than changes required by
GAAP;
(c) any acquisition of, or commitment to acquire, any
Assets, or any entry or commitment to enter into any Contracts, or any
undertaking or commitment to incur or undertake any Assumed Liabilities other
than in the ordinary course of business.
For purposes of this Section 5.5, a Material Adverse Effect shall not be deemed
to include any effect upon the business, prospects, results of operations,
properties, assets, liabilities or condition (financial or otherwise) of the
Business taken as a whole arising out of or resulting from the execution of this
Agreement or the consummation of the transactions contemplated hereby.
5.6 Contracts.
(a) Schedule 5.6(a) lists or describes all Contracts to
which either Seller or any of its Affiliates is a party relating to the Business
(including all contracts and commitments of the contemplated store to be located
in Clinton, CT) other than any Contract entered into in the ordinary course of
business which provides for payments of less than $10,000 and all of which
provide for payments of less than $100,000. True, complete and correct copies of
the written Contracts and a description of all others set forth on Schedule
5.6(a) have been delivered to Buyer. All the Contracts are valid and in full
force and effect, and there does not exist any default or event of default by
Seller or, to Seller's Knowledge, by any other party under any Contract, or any
event that, with notice or lapse of time or both, would constitute a default or
an event of default by Seller or, to Seller's Knowledge, any other party under
any Contract, which in either such case would have a Material Adverse Effect on
any of the Outlet Stores. Seller has not received notice that any party to any
Contract intends to cancel or terminate such Contract. Except as set forth on
Schedule 5.6(a), no consent of any other party to any Contract is required in
connection with the
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execution, delivery and performance of this Agreement and the Related
Agreements.
(b) Schedule 5.6(b) sets forth a list dated as of
September 20, 1996 of all Purchase Orders as of such date. Within five days
prior to the Closing, Seller shall deliver to Buyer an updated list of all
Purchase Orders as of five business days prior to such date of delivery.
5.7 Absence of Undisclosed Liabilities. Seller has no
liabilities or obligations of any kind whatsoever, whether or not accrued and
whether or not contingent or absolute, determined or determinable, that are
Assumed Liabilities, other than (a) liabilities and obligations which are
disclosed or accrued in the December 1995 Financial Statements and the June 1996
Financial Statements or the notes thereto or the Schedules to this Agreement,
(b) liabilities and obligations incurred on behalf of the Business in connection
with this Agreement and the transactions contemplated hereby, (c) liabilities
and obligations incurred in the ordinary course of business after the date of
the December 1995 Financial Statements and the June 1996 Financial Statements
and (d) liabilities that would not have a Material Adverse Effect on any of the
Outlet Stores.
5.8 Litigation. Except as disclosed in Schedule 5.8, or the
June 1996 Financial Statements, there are no claims, actions, suits, proceedings
or investigations pending or, to the best knowledge of Seller, threatened
against the Seller, the Business or the Assets before any government which,
individually or in the aggregate, have a reasonable likelihood of resulting in a
Material Adverse Effect. Seller is not subject to any outstanding order, writ,
injunction or decree which has had or could be reasonably expected to have a
Material Adverse Effect.
5.9 Taxes. There are no liens for taxes on the Assets other
than liens which are Permitted Encumbrances.
5.10 Leases and Leased Property.
(a) Schedule 5.10(a) sets forth a true and complete list
of all leases, subleases, licenses and other occupancy agreements (including all
amendments,
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modifications and supplements or other agreements relating thereto) pursuant to
which Seller has the right to use or occupy the Leased Properties (collectively,
the "Leases"). True, complete and correct copies of the Leases (as amended,
modified or supplemented to the date hereof) have been made available to Buyer.
Seller, or one of its subsidiaries, as the case may be, holds its leasehold
interest in each of the Leased Properties substantially in accordance with the
provisions of the applicable Lease and free of all Liens on such leasehold
interest, except for Permitted Encumbrances. Except as set forth on Schedule
5.10(a), (i) each of the Leases is valid, binding and in full force and effect,
all rent and other sums and charges payable by Seller thereunder are current
within applicable grace periods and no notice of default or termination under
any Leases has been given or received by Seller which describes a default which
has not been cured, and to the best knowledge of Seller, no events have occurred
or circumstances exist which would, with the giving of notice or the passage of
time or both, constitute a material default; (ii) none of Seller nor any of its
Affiliates involved in the Business has an ownership, financial or other
interest in the landlord under any Leases; (iii) to Seller's Knowledge, there
are no brokerage commissions due by Seller with respect to any of the Leases;
(iv) Seller has not received any notice of any existing, pending or contemplated
condemnation, eminent domain, environmental or similar proceeding with respect
to the Leases or the Leased Properties; and (v) Seller has not received notice
of any violation from any building, health, fire or similar governmental agency,
nor has it received notice of any violation of any recorded restrictions,
affecting the Leases or the Leased Properties. The Leased Properties constitute
all interests in real property necessary to operate the Business substantially
in the manner that it has been operated by Seller prior to the Closing.
(b) Except as set forth in Schedule 5.10(b), none of the
Leased Properties is subject to any lease, sublease, license or other agreement
in which Seller grants to any other person any right to the use, occupancy or
enjoyment of the Leased Property or any part thereof.
(c) Except as disclosed in Schedule 5.10(c), Seller has
received no written notice of any
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violation of any applicable zoning and other land use ordinances, any building
codes or other applicable laws, statutes, rules, regulations and ordinances. To
Sellers' knowledge, all Improvements, including but not limited to the roofs and
structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water, storm water, paving and
parking equipment, systems and facilities included therein (other than items and
categories of items which Seller is not required to maintain or repair under the
applicable Lease), in the aggregate, are in substantially good condition and
repair in all material respects, except for normal wear and tear, and are
adequate for the purposes for which they are being put in the ordinary course of
the Business. All water, gas, electrical, steam, telecommunication, sanitary and
storm sewage lines and systems and other similar systems and utilities, if any,
serving the Leased Properties are installed and operating and are reasonably
sufficient to enable each of the Leased Properties to continue to be used and
operated in the manner currently being used and operated, and any so-called
hookup fees or other associated charges payable by Seller have been fully paid.
(d) Seller has, and provided Seller receives consent when
required under any Lease after the Closing Date, will convey to Buyer a valid
leasehold interest in and to all of the Leased Properties, subject to no Lien
except for Permitted Encumbrances.
(e) Except for the consents set forth on Schedule 5.10(e), the
assignment to Buyer of each of the Leases pursuant to the terms of this
Agreement does not require the consent of any party thereto.
(f) If Buyer receives an Estoppel Certificate covering any
matter that is a subject of a representation or warranty made by Seller, then
Seller's representation and warranties covered by such Estoppel Certificate
shall expire and terminate to the extent that they are confirmed by such
Estoppel Certificate.
5.11 Inventory. All Inventory included in the Assets is, and
will be as of the Closing Date, of substantially similar quality and saleability
as that maintained in the Outlet Stores in accordance with past
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practice and will be subject to no Lien at the Closing Date.
5.12 Employee Benefit Plans; ERISA.
(a) Schedule 5.12(a) contains a true and complete list of each
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by Seller or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together with
Seller would be deemed a "single employer" within the meaning of section
4001(b)(1) of ERISA, for the benefit of any employee or former employee of
Seller involved in the Business, whether formal or informal and whether legally
binding or not (the "Seller Plans").
(b) With respect to each of the Seller Plans, Seller has
heretofore delivered to Buyer true and complete copies of each of the following
documents:
(i) a copy of the Seller Plan (including all amendments
thereto); and
(ii) the most recent determination letter received from the
IRS with respect to each Seller Plan that is intended to be qualified under
section 401 of the Code.
(c) No liability under Title IV of ERISA that would have a
Material Adverse Effect has been incurred by Seller or any ERISA Affiliate since
the effective date of ERISA that has not been satisfied in full.
(d) Each of the Seller Plans has been operated and
administered in all respects in accordance with applicable laws, including but
not limited to ERISA and the Code, except where the failure to be so
administered and operated would not have a Material Adverse Effect.
(e) Except as set forth on Schedule 5.12(e), each of the
Seller Plans that is intended to be "quali-
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fied" within the meaning of section 401(a) of the Code has been determined by
the IRS to be qualified under Section 401(a) of the Code and Seller is not aware
of any event that has occurred since the date of such determination that would
adversely affect such qualification.
5.13 Labor Relations and Employment. Except as set forth in
Schedule 5.13(a): (a) Seller and its Affiliates are in material compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practices concerning employees of Seller and/or the Affiliates relating to
the Business ("Employees") and have been in such compliance during the past five
years; (b) Seller and/or its Affiliates have not entered into or become a party
to any collective bargaining agreement or similar agreement with any labor
organization, or agreed to any work rules or practices with any labor
organization or employee association applicable to the Employees; (c) there is
no unfair labor practice complaint pending or, to Seller's Knowledge, threatened
before the National Labor Relations Board regarding any Employee; (d) there is
no labor strike, dispute, slowdown, stoppage or lockout actually pending, or to
the knowledge of Seller, threatened against or affecting Seller and/or its
Affiliates with regard to the Business and during the past five years there has
not been any such action; (e) no union claims to represent any of the Employees;
(f) to Seller's Knowledge, there are no current union organizing activities
among the Employees and no representation question exists respecting any of the
Employees; (g) no grievance or any arbitration proceeding arising out of or
under a collective bargaining agreement is pending or, to Seller's Knowledge,
threatened with regard to any Employee and no claim therefor exists; (h) Seller
and/or its Affiliates have not received notice of the intent of any federal,
state, local or foreign agency responsible for the enforcement of labor or
employment laws to conduct an investigation with respect to or relating to the
Business and no such investigation is in progress; (i) no pending or, to
Seller's Knowledge, threatened lawsuits, administrative proceedings or
investigations between Seller and/or its Affiliates, on the one hand, and
current or former directors or officers of Seller and/or its Affiliates, or
Employees, on the other hand, including without limitation, any claims for
wrongful termination, breach
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of express or implied contract of employment or for violation of equal
employment opportunity laws; (j) there are no employment contracts or written
severance or termination agreements with any Employee; (k) without giving effect
to the transactions contemplated hereby, since the enactment of the WARN Act,
Seller and/or its Affiliates have not effectuated (A) a "plant closing" (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of
Seller and/or its Affiliates relating to the Business, or (B) a "mass lay-off"
(as defined in the WARN Act) affecting any site of employment or facility of
Seller and/or its Affiliates relating to the Business without complying with the
WARN Act; and (l) Seller and/or its Affiliates have not been affected by any
transaction or engaged in layoffs or employment terminations of current or
former employees of Seller and/or its Affiliates relating to the Business
sufficient in number to trigger application of any similar foreign, state or
local law without complying with any such law. Except as disclosed in Schedule
5.13(a), no current or former Employee has suffered an "employment loss" (as
defined in the WARN Act) since 6 months prior to the Closing Date.
5.14 Brokers and Finders. No financial adviser, broker, agent
or finder has been retained by Seller in connection with this Agreement or any
transaction contemplated hereby and no such financial adviser, broker, agent or
finder is entitled to any fee or other compensation from Seller on account of
this Agreement or any transaction contemplated hereby.
5.15 Insurance. Schedule 5.15 contains an accurate and
complete description of all policies of liability, fire, workers' compensation
and other forms of insurance owned or held by Seller and covering the Business
or any of the Seller Plans. All such policies are valid and enforceable and in
full force and effect, are underwritten by unaffiliated financially sound and
reputable insurers, are sufficient for all applicable requirements of law and
provide insurance, including, without limitation, fire, general liability and
product liability insurance, in such amounts and against such risks as is
customary for companies engaged in similar businesses to protect the Assets.
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5.16 Environmental. Schedule 5.16 contains an accurate and
complete description of all environmental reports known to Seller that affect
any of the Assets, and Seller has delivered a complete copy of each such report
to Buyer. Except as set forth in Schedule 5.16 or in the reports listed therein,
Seller has no knowledge of the presence or release of any toxic substance or
hazardous material or of any other environmental condition or contamination in
or from the Assets.
5.17 Disclosure. No representation or warranty by Seller in
this Agreement contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary to make the statements
herein or therein not misleading, it being understood that as used in this
Section "material" means material to the Business taken as a whole.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
6.1 Corporate Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has corporate power to own all of its properties and assets and to
carry on its business as it is now being conducted, and is duly qualified to do
business and is in good standing in all jurisdictions where its ownership,
operation or leasing of property or assets or the conduct of its business
requires it to be so qualified, except in such jurisdictions, if any, where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect. Buyer has all necessary government
authorizations to own, lease and operate all of its properties and assets and to
carry on its business as now being conducted, except any such authorizations the
failure to obtain which would not have or would not be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect. True and
complete copies of the Articles of Incorporation and Bylaws of Buyer as
currently in effect have been provided to Seller.
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6.2 Due Authorization. The execution, delivery and performance
of this Agreement have been duly authorized by all necessary corporate action on
the part of Buyer and this Agreement has been duly executed, by a duly
authorized officer of Buyer. This Agreement constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and subject to general
principles of equity (regardless of whether enforcement is sought in equity or
law).
6.3 Consents and Approvals, No Violation. Except as set forth
in Schedule 6.3 hereto, subject to the expiration or earlier termination of all
waiting periods under the HSR Act, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will not,
(i) violate or conflict with any provision of Buyer's Articles of Incorporation
or By-laws, (ii) violate or conflict with or result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of, any note, bond, mortgage, indenture,
license, lease, agreement or other instrument or obligation to which Buyer is a
party or by which Buyer or any of its respective properties or assets may be
bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents either have been
obtained by the Buyer or the obtaining of which has been waived by Seller, (iii)
result in the creation or imposition of any material lien, charge or encumbrance
by a third party on the assets of Buyer or (iv) violate any order, writ,
injunction, decree, arbitration award, statute, rule or regulation applicable to
Buyer, any of its Subsidiaries or any of their respective properties or assets,
excluding from the foregoing clauses (ii), (iii) and (iv) such defaults and
violations which, individually or in the aggregate, would not have a Material
Adverse Effect.
6.4 Brokers and Finders. No financial adviser, broker, agent
or finder has been retained by Buyer in connection with this Agreement or any
transaction contemplated hereby and no such financial adviser, broker, agent or
finder is entitled to any fee or other compensa-
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tion from Buyer on account of this Agreement or any transaction contemplated
hereby.
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Consents. Buyer and Seller shall use their respective
reasonable best efforts to obtain all consents and approvals required in
connection with, and waivers of any violations, breaches and defaults that may
be caused by, the consummation of the transactions contemplated by this
Agreement.
7.2 Tax Matters.
(a) Allocation of Purchase Price. Seller and Buyer hereby
agree upon the allocation of the purchase price being paid by Buyer under this
Agreement in accordance with the allocation set forth on Schedule 7.2(a). Such
allocation shall be utilized by Buyer and Seller in all of their respective Tax
Returns and Seller and Buyer shall not take a position in any Tax or information
return, Tax proceeding, Tax audit or otherwise inconsistent with an agreed upon
allocation pursuant to this Section 7.2(a). Each of Buyer and Seller shall
timely file a Form 8594 in accordance with the requirements of Section 1060 of
the Code and this Section 7.2(a).
(b) Sales and Transfer Taxes and Fees. All sales, use,
transfer, stamp, recording and registration Taxes and fees incurred in
connection with the consummation of the transactions contemplated by this
Agreement whether imposed on Seller or Buyer, including, without limitation, all
Taxes and fees incurred in connection with the transfer of the Leases and the
Leased Properties demised thereby or otherwise, shall be paid equally by Buyer
and Seller, and each of Buyer and Seller shall, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such Taxes and
fees. Seller and Buyer agree to cooperate with each other in connection with the
preparation and timely filing of all necessary forms and clearances required by
any taxing authority.
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(c) Withholding. Seller shall withhold (and pay over to
the relevant taxing authority) all income, employment and other taxes required
to be withheld from wages and other remuneration paid (or considered paid) prior
to the Closing Date, and shall make available to Buyer copies of payroll records
for the calendar year which includes the Closing Date (which shall show the
remuneration paid (or considered paid) by Seller to each employee and the taxes
withheld for such year).
(d) Employment Taxes.
(i) Seller and Buyer will, to the extent permitted by
law, (A) treat Buyer as a "successor employer" and Seller as a "predecessor,"
within the meaning of sections 3121(a)(1) and 3306(b)(1) of the Code, with
respect to Transferring Employees who are employed by Buyer for purposes of
Taxes imposed under the United States Federal Unemployment Tax Act ("FUTA") or
the United States Federal Insurance Contributions Act ("FICA") and (B) cooperate
with each other to avoid, to the extent possible, the filing of more than one
IRS Form W-2 with respect to each such Transferring Employee for the calendar
year within which the Closing Date occurs.
(ii) At the request of the Buyer with respect to any
particular applicable Tax law relating to employment, unemployment insurance,
social security, disability, workers' compensation, payroll, health care or
other similar Tax other than Taxes imposed under FICA and FUTA, Seller and Buyer
will, to the extent permitted by law, (A) treat Buyer as a successor employer
and Seller as a predecessor employer, within the meaning of the relevant
provisions of such Tax law, with respect to Transferring Employees who are
employed by Buyer and (B) cooperate with each other to avoid, to the extent
possible, the filing of more than one individual information reporting form
pursuant to each such Tax law with respect to each such Transferring Employee
for the calendar year within which the Closing Date occurs.
7.3 Public Announcements. Except as provided below, Buyer and
Seller shall not, and they shall use their best efforts to cause their
respective Affiliates not to, issue any press release or otherwise make any
public statement or respond to any press inquiry with respect to this Agreement
or the transactions contemplat-
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ed hereby without the prior approval of the other party, which approval shall
not be unreasonably withheld, except as may be required by law. Buyer and Seller
shall consult with each other regarding announcements and press releases
regarding the transactions to be made upon execution of this Agreement and upon
Closing.
7.4 Expenses. Whether or not the transactions contemplated
hereby are consummated, Buyer and Seller shall each bear their own costs and
expenses incurred in connection with this Agreement and the Related Agreements
and the transactions contemplated hereby and thereby including, without
limitation, fees of legal counsel, accountants, and other consultants or
representatives. The fees and expenses of the Firm shall be paid equally by
Buyer and Seller.
7.5 Access to Records and Leased Properties. From and after
the Closing, Seller shall provide Buyer and its agents and representatives with
reasonable access during regular business hours to the extent necessary for
Buyer to operate the Business and to prepare financial statements, to all tax,
financial, accounting and other records relating to the Business which were
retained by Seller
7.6 Accounts Payable. From and after the Closing, Seller
agrees that it shall pay its accounts payable and accrued expenses relating to
the Business which constitute Retained Liabilities, in accordance with past
practice.
7.7 Contracts. At the Closing, Seller is assigning and Buyer
is assuming the Contracts or the relevant portions thereof set forth on Schedule
5.6(a); provided that, to the extent any such Contracts relate to Seller's or
its Affiliates' businesses other than the Business, Seller is only assigning the
interests in such Contracts as they relate to the Business. Seller shall,
following the Closing Date, use commercially reasonable efforts to cause the
portions of the distribution agreements which constitute Contracts being
assigned to Buyer hereunder to be executed as separate agreements by the parties
thereto and assigned to Buyer.
7.8 Buyer's Mail and Other Documents. Following the Closing,
Seller agrees to deliver to Buyer all
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mail and other documents received by Seller which relate to the Business and
which, from its review, should be delivered to Buyer.
7.9 Seller's Mail and Other Documents. Buyer agrees to deliver
to Seller all mail and other documents received by Buyer and which from its
review, should be delivered to Seller.
7.10 Returns. From and after the Closing, Buyer agrees that it
will accept returns from customers of the Business in accordance with the
Business's return policy existing immediately prior to the Closing Date whether
or not the merchandise being returned was sold prior to or after the Closing
Date.
7.11 Accounts Receivable. Seller shall retain all of the
Accounts Receivable existing on the Closing Date and shall collect such
receivables in accordance with its credit and collection policies. Buyer agrees
that it shall, if requested by Seller, assist Seller in connection with the
collection of such Accounts Receivable and that it shall take no action that
would interfere with Seller's ability to collect such Accounts Receivable.
7.12 Post Closing Leasehold Improvements. If in connection
with the action described in item 1 of Schedule 5.8 hereof, Seller shall be
compelled or shall in its sole discretion agree to cause the construction of
certain improvements or alterations (the "Work") at the Leased Property located
in Manchester, Vermont, then Seller, its contractors and agent shall be allowed
by Buyer to enter upon the leased premises at reasonable times for the purposes
of performing the Work and for related purposes. Seller shall request the
consent of Buyer no less than five business days prior to the date the Work
shall commence, which consent shall not be unreasonably withheld. Buyer shall
cooperate with Seller, at Seller's sole cost and expense, in connection with
Seller's performance of the Work, which cooperation shall include, without
limitation, entering into agreements reasonably required in connection with the
performance of the Work. Seller hereby agrees that, unless compelled to do so by
court order or equivalent legal process, Seller shall not (i) perform any such
Work unless Seller shall have first submitted plans and specifications detailing
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such Work to Buyer and shall have obtained Buyer's approval thereof, which
approval shall not be unreasonably withheld or delayed or (ii) take any action
in connection with such Work in violation of the applicable Lease. Seller shall
cause all such Work to be performed (i) in a good and workmanlike manner, (ii)
as expeditiously as is reasonably practicable, (iii) in a manner so as to
minimize the disturbance to Buyer's conduct of business and (iv) in accordance
with all applicable laws, and shall obtain all consents to such Work, if any,
required under the applicable Lease. Prior to commencement of the Work, Seller
shall present to Buyer evidence of such required consents, governmental licenses
and permits as Buyer shall reasonably request. Seller hereby agrees to indemnify
and hold harmless Buyer against any Losses arising directly or indirectly as a
result of such Work or the improvements or alterations constructed.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller. Subject to the terms and
conditions of this Article VIII, Seller agrees to indemnify and hold harmless
each of Buyer, its respective officers, directors, shareholders and Affiliates
and the successors and assigns of each of them (the party or parties being
indemnified collectively referred to herein as the "Buyer Indemnified Party")
from and against each and every demand, claim, loss, liability, damage, cost and
expense (including, without limitation, interest, penalties, and reasonable
attorneys' fees and disbursements) (collectively, "Losses") imposed upon or
incurred by the Buyer Indemnified Party, directly or indirectly resulting from
or arising out of (i) any breach of any representation or warranty of Seller
contained herein or in any of the Related Agreements and any actual or
threatened action or proceeding in connection therewith, (ii) any failure to
comply with any agreement of Seller contained herein or in any of the Related
Agreements and any actual or threatened action or proceeding in connection
therewith, any claim or demand for commission or other compensation arising out
of the transactions contemplated by this Agreement by any broker, finder or
agent or agent claiming to be entitled thereto, (iii) any failure by Seller to
comply with any "bulk sales" law under the
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Uniform Commercial Code, the tax laws of any jurisdiction or any similar
applicable laws applicable to the transactions contemplated by this Agreement,
or (iv) the Retained Liabilities. Each matter for which Seller has agreed to
provide indemnification pursuant to this Section 8.1 hereof is hereinafter
referred to individually as a "Claim" and collectively as the "Claims."
8.2 Indemnification by Buyer. Subject to the terms and
conditions of this Article VIII, Buyer agrees to indemnify and hold harmless
each of Seller, its shareholders, officers, directors and Affiliates and its
successors and assigns (the party or parties being indemnified collectively
referred to herein as the "Seller Indemnified Party") from and against all
Losses imposed upon or incurred by the Seller Indemnified Party, directly or
indirectly resulting from or arising out of (i) any breach of any representation
or warranty of Buyer contained herein and any actual or threatened action or
proceeding in connection therewith (ii) any failure to comply with any agreement
of Buyer contained herein and any actual or threatened action or proceeding in
connection therewith, (iii) any claim or demand for commission or other
compensation arising out of the transactions contemplated by this Agreement by
any broker, finder or agent claiming to be entitled thereto, or (iv) any Assumed
Liability. Each matter for which Buyer has agreed to provide indemnification
pursuant to this Section 8.2 hereof is hereinafter referred to individually as a
"Claim" and collectively as the "Claims."
8.3 Conditions of Indemnification. The obligations and
liabilities of any party to indemnify any other party under Sections 8.1 and 8.2
hereof with respect to Claims shall be subject to the following terms and
conditions:
(a) The party to be indemnified (the "Indemnified
Party") shall give the other party or parties (the "Indemnifying Party") prompt
notice of any such Claim; provided, however that the failure to notify the
Indemnifying Party promptly shall not relieve such Indemnifying Party of its
obligations under this Article VIII except to the extent that the failure to so
notify adversely prejudices the Indemnifying Party's ability to defend such
Claim.
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(b) The Indemnifying Party shall be entitled to contest
and defend any Claim, subject to the provisions of Section 8.3(c) hereof, by all
appropriate legal proceedings, at the Indemnifying Party's own cost and expense;
provided, that the Indemnifying Party so notifies the Indemnified Party within
30 days after receipt of notice of the Claim (or sooner, if the nature of the
asserted liability so requires it). If the Indemnifying Party assumes the
defense of a Claim, the Indemnified Party shall have the right to participate in
all proceedings and to be represented by attorneys of the Indemnified Party's
own choosing at the Indemnified Party's own cost and expense. If the
Indemnifying Party fails to take reasonable steps necessary to defend such Claim
within 30 calendar days after receiving notice from the Indemnified Party that
the Indemnified Party believes the Indemnifying Party has failed to take such
steps, the Indemnified Party may assume its own defense, and the Indemnifying
Party shall be liable for any reasonable expenses therefor. Notwithstanding
anything contained herein to the contrary, the Indemnified Party shall have the
right to employ separate counsel at the Indemnifying Party's expense and to
control its own defense of such action or proceeding if the named parties to any
such litigation include the Indemnified Party and the Indemnifying Party and, in
the opinion of counsel to the Indemnified Party addressed to the Indemnifying
Party that representation of both parties would be inappropriate due to actual
or potential conflicts between the parties. In addition, if the Indemnifying
Party assumes the defense of a Claim, (i) no compromise or settlement thereof
may be effected by the Indemnifying Party without the Indemnified Party's
consent (which shall not be unreasonably withheld) unless (A) there is no
finding or admission of any violation of law by the Indemnified Party and no
effect on any other claims that may be made against the Indemnified Party and
(B) the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party and (ii) the Indemnified Party shall have no liability with
respect to any compromise or settlement thereof effected without its consent.
(c) In the event that the Indemnifying Party does not
elect to assume the defense of a Claim in accordance with the provisions of
subparagraph (b) above, the Indemnified Party shall keep the Indemnifying Party
fully informed of the facts of the Claim and the progress
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of the defense thereof and the Indemnifying Party shall be bound by any
determination made or any settlement or compromise effected with respect thereto
by the Indemnified Party. Notwithstanding any other provision of this Section
8.3, if an Indemnified Party determines in good faith that there is a reasonable
probability that an action which is the basis of a Claim may adversely affect it
or its affiliates other than as a result of monetary damages, such Indemnified
Party may, by notice to the Indemnifying Party, assume the exclusive right to
defend, compromise or settle such action, but the Indemnifying Party shall not
be bound by any determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
(d) The notice referred to in Section 8.3(a) hereof shall
set forth the details of the Claim (including the amount, estimated if
necessary, of the asserted damages) and the specific provisions of this
Agreement relating thereto (the "Notice") and with respect to any Claim pursuant
to Section 8.1(i) (other than Seller's representations and warranties specified
in the following proviso) or 8.2(i), respectively, shall have been given by the
Indemnified Party no later than eighteen months from the Closing Date; provided,
that, with regard to Claims arising out of a breach of the Sellers'
representations and warranties set forth in Section 5.2, 5.9 and 5.14 the notice
shall have been given prior to the applicable statute of limitation for such
Claim and with regard to Claims arising out of a breach of the Sellers'
representations and warranties set forth in Section 5.16 the notice shall have
been given prior to the earlier of (i) the fifth anniversary of the date hereof
or (ii) the applicable statute of limitation for such claim. Notwithstanding the
foregoing, no Notice shall be required with respect to any claims pursuant to
Sections 8.1(iv) and 8.2(iv) and the indemnifications provided thereunder shall
survive the Closing Date in perpetuity.
8.4 No Set-Off. No Indemnified Party under this Agreement
shall have any right of set off or recoupment with respect to the amount of any
Claim against any sums of money or other property payable or deliverable by the
Indemnified Party or any Affiliate to the Indemnifying Party or any Affiliate
pursuant to this Agreement or
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any other agreement, instrument or undertaking to which they are a party to with
another party to this Agreement.
8.5 Limitations on Indemnification. Notwithstanding anything
to the contrary set forth in this Agreement, the indemnification provided for in
Sections 8.1 and 8.2 shall be subject to the following limitations:
(a) No liability shall be enforced against the Seller to
the extent of any insurance proceeds received by Buyer Indemnified Party with
respect to such Losses. If any Buyer Indemnified Party receives any such
insurance proceeds after the Seller shall have made any payment to any Buyer
Indemnified Party with respect to such Losses, any Buyer Indemnified Party shall
promptly return such payment to the Seller to the extent of such insurance
proceeds received.
(b) No indemnification payment for any Losses shall be
made by Seller or Buyer, as the case may be, pursuant to Section 8.1 or 8.2
(except for Section 8.2(iv) hereof which shall not be subject to this
limitation) hereof, respectively, except to the extent that the aggregate
amounts which would otherwise be payable pursuant to either such Section
relating to such Losses exceed $50,000 (the "Minimum Amount"), and such Minimum
Amount shall be deducted from the aggregate amount payable under Section 8.1 or
8.2, as the case may be, with respect to damages payable pursuant to such
Sections of this Agreement.
(c) Each of the Sellers and the Buyers shall not be
obligated to pay any amount for indemnification under Sections 8.1(i) and
8.2(i), respectively, in excess of $1,000,000.
(d) This Article VIII shall be the sole and exclusive
basis of any remedy each party may have against the other party for a breach of
or violation of a representation, warranty, covenant or agreement under this
Agreement or any agreement contemplated hereby and each party hereby waives any
claim (other than under this Article VIII) it may have against the other party
with respect to a breach of any such representation, warranty, covenant or
agreement unless such breach or violation is
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a result of fraud or intentional or wilful misrepresentation or gross negligence
by a party hereto.
ARTICLE IX
EMPLOYEES AND EMPLOYEE PLANS
9.1 Offer of Employment.
(a) Prior to Closing, Seller shall provide a complete
and accurate list of the names, job titles, functions and wage or salary rates
for all Employees.
(b) Buyer shall offer to hire, effective as of the Closing
Date, all of the Employees in a comparable position at levels of total
compensation (which shall include salary, bonus and benefits) that are
substantially similar in the aggregate to the total compensation including, but
not limited to, severance benefits paid and offered to such employees on the
date hereof, including any such Employees who are on approved leave of absence.
The Employees who accept such offers of employment by the Closing Date pursuant
to this Section 9.1(b) shall become Employees of Buyer as of the Closing Date
or, if on leave, as of the date of resumption of employment, and are referred to
as the "Transferring Employees." Except for the Employees offered employment
pursuant to the first and second sentences of this Section 9.1(b), Buyer shall
have no obligations, liabilities or entitlements to make offers to or otherwise
hire any employees of Seller. Seller will have sole responsibility for any
obligations or liabilities to all of Seller's employees who are not Employees at
all locations under WARN, and Buyer will have sole responsibility for any
obligations and liabilities to the Employees under WARN to the extent that WARN
thresholds are exceeded as a result of actions taken or not taken by Buyer on or
after the Closing Date, including but not limited to the failure by Buyer to
offer employment to the Employees as described in this Section 9.1(b).
(c) Except as otherwise provided in this Article IX,
following the Closing Date the employment of the Transferring Employees shall be
upon such terms and conditions as Buyer, in its sole discretion, shall deter-
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mine. From and after the date of this Agreement, upon Buyer's request, Seller
shall provide Buyer reasonable access to and copies of all data (including
computer data) regarding the dates of hire, hours, compensation and job
description of the Transferring Employees and such other employment records
covering employees of the Business as Buyer may reasonably request.
(d) Transferring Employees shall receive credit for all
periods of employment with Seller prior to the Closing Date under each Buyer's
employee benefit plan for purposes of vacation accruals and eligibility, vesting
and entitlements to early retirement benefits and severance practices and
policies to the extent such periods were recognized for such purposes under the
Seller Plans prior to the Closing Date. In addition, with respect to any welfare
benefit plan established or maintained by Buyer or its Affiliates for the
benefit of the Employees Buyer shall, or shall cause the relevant Affiliates to,
waive any insurability requirement or pre-existing condition exclusions (other
than any insurability requirement or pre-existing condition that was not waived
by the corresponding Seller Plan) and provide that any covered expenses incurred
under a Seller Plan on or before the Closing Date in respect of the current plan
year by any employee (or any covered dependent of such employee) shall be taken
into account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions under Buyer's comparable type of plan after the
Closing Date in respect of such current plan year.
(e) All offers of employment by Buyer pursuant to this
Section 9.1 shall be expressly conditioned upon the consummation the
transactions contemplated by this Asset Purchase Agreement.
9.2 Individual Account Plan.
(a) As soon as practicable after the Closing Date, Buyer
shall establish or designate an individual account plan for the benefit of
Transferring Employees (the "Successor Individual Account Plan"), shall take all
necessary action, if any, to qualify such plan under the applicable provisions
of the Code and shall make any and all filings and submissions to the
appropriate governmental agencies required to be made by
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it in connection with the transfer of assets described below. As soon as
practicable following the establishment or designation of the Successor
Individual Account Plan, Seller shall cause the trustee of the Xxxxxx Xxxxx Inc.
Retirement Savings Plan and Trust (the "Seller Individual Account Plan") to
transfer (such date of transfer being referred to herein as the "Transfer Date")
in the form of cash, securities and/or other property the full account balances
of the Transferring Employees under the Seller Individual Account Plan as of the
Closing Date (which account balances will have been credited with appropriate
earnings attributable to the period from the Closing Date to the Transfer Date
and reduced by any benefit or withdrawal payments to or in respect of
Transferring Employees occurring during the period from the Closing Date to
Transfer Date), together with any notes held by the Seller Individual Account
Plan in connection with participant loans to any Transferring Employee, to the
appropriate trustee as designated by Buyer under the trust agreement forming a
part of the Successor Individual Account Plan.
(b) In consideration for the transfer of assets described
herein, Buyer shall, (i) effective as of the Transfer Date, cause the Successor
Individual Account Plan to assume all of the obligations of the Seller
Individual Account Plan and any of its Affiliates in respect of the account
balances accumulated by Transferring Employees under the Seller Individual
Account Plan on or prior to the Transfer Date and (ii) indemnify Seller and its
Affiliates and each officer, employee and director of the Seller and its
Affiliates and each fiduciary of the Seller Individual Account Plan from any and
all losses, claims, damages and liabilities incurred or suffered by them arising
out of, in respect of, or in connection with, the qualified status of the
Successor Individual Account Plan. Neither Buyer nor any of its Affiliates shall
assume any other obligations or liabilities arising under or attributable to the
Seller Individual Account Plan.
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Further Assurances. At any time or from time to time
after the Closing, either party shall, at the request of the other party,
execute and deliver any further instruments and documents and take such further
action as each party may reasonably request, in order to consummate and make
effective the transactions contemplated by this Agreement.
10.2 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified or supplemented only by written
agreement of each of the parties hereto, or their respective successors or
assigns.
10.3 Waiver of Compliance; Consents. Except as otherwise
provided in this Agreement, any failure of either of the parties to comply with
any obligation, covenant, agreement or condition herein may be waived by the
party entitled to the benefits thereof only by a written instrument signed by
the party granting such waiver, but any such waiver or failure to insist upon
strict compliance with any such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure of such obligation, covenant, agreement or condition. Whenever
this Agreement requires or permits consent by or on behalf of either party
hereto, such consent shall be given in writing and signed by the party granting
such consent.
10.4 Investigations. All representations and warranties of the
parties hereto contained in this Agreement shall survive the Closing Date
regardless of any investigation made by the parties hereto, provided that
indemnification with respect thereto shall be limited as provided in Sections
8.3 and 8.5. This Section 10.4 shall have no effect upon any other obligation of
the parties hereto, whether to be performed before or after the Closing Date.
10.5 Notices. All notices and other communications required or
permitted hereunder shall be given in writing and shall be deemed given on the
day delivered if
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delivered by hand or sent by telecopy, and on the next business day if sent by
reputable overnight air courier or on the third business day if mailed by
registered or certified mail (return receipt requested), postage pre-paid,
addressed as follows:
(a) if to Buyer, to:
c/o Designer Holdings Ltd.
0000 Xxxxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopier: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000
(b) if to either Seller, to:
Xxxxxx Xxxxx, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxxx Xxxxx, Esq.
Telecopier: (000) 000-0000
10.6 Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective succes-
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sors and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other party, provided, however,
that such written consent shall not be required with respect to the assignment
of the rights provided to Buyer in Section 2.1(a), nor is this Agreement
intended to confer upon any other person except the parties hereto any rights or
remedies hereunder provided, further, that no such assignment shall be valid
unless such successor assignee agrees to be bound by, and such assignor shall
remain liable for, all such assignor's obligations hereunder.
10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the provisions thereof relating to conflicts of law.
10.8 Specific Performance. The parties hereto agree that if
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any remedy at law or equity.
10.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
10.11 Entire Agreement. This Agreement, including the exhibits
hereto and the documents, schedules, certificates and instruments referred to
herein, and the Confidentiality Agreement, dated July 19, 1995, by and among
Parent and Seller (the "Confidentiality Agreement") embody the entire agreement
and understanding of the parties hereto in respect of the subject matter hereof.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth
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or referred to herein or therein. This Agreement supersedes all prior agreements
and understandings between the parties, other than the Confidentiality
Agreement, with respect to such subject matter.
10.12 No Third Party Beneficiaries. This Agreement is not
intended to, and does not, create any rights or benefits of any party other than
the parties hereto.
10.13 Parent Guarantee. Parent hereby unconditionally
guarantees all of Buyer's obligations under this Agreement in accordance with
the Guarantee set forth on Exhibit D hereto.
10.14 Clinton, CT Store. For the avoidance of any ambiguity,
the Outlet Store Assets to be sold by Seller and the Assumed Liabilities to be
assumed by Buyer shall include those relating to the contemplated store to be
located in Clinton, CT (as more fully described in Schedule 5.6(a)).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
OUTLET STORES, INC.
By:_____________________________
Name:
Title:
XXXXXX XXXXX, INC.
By:_____________________________
Name:
Title:
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Outlet Store Assets.............................. 9
2.2 Excluded Assets....................................................... 11
2.3 Assumption of Certain Liabilities..................................... 12
2.4 Purchase Price for the Outlet Store Assets............................ 14
2.5 Purchase Price for the Inventory...................................... 14
ARTICLE III
DETERMINATION OF PURCHASE PRICE;
PURCHASE PRICE ADJUSTMENTS
3.1 Preliminary Statement of Inventory Valuation.......................... 15
3.2 Physical Inventory.................................................... 15
3.3 Final Statement of Inventory.......................................... 15
3.4 Resolution of Objections.............................................. 16
3.5 Purchase Price Adjustment............................................. 17
ARTICLE IV
THE CLOSING
4.1 The Closing........................................................... 17
4.2 Related Agreements.................................................... 17
4.3 Deliveries at the Closing............................................. 18
4.4 Apportionments........................................................ 20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Corporate Organization................................................ 22
5.2 Due Authorization..................................................... 22
5.3 Consents and Approvals; No Violation.................................. 22
5.4 Financial Statements.................................................. 23
5.5 Absence of Changes.................................................... 25
5.6 Contracts......................................................... 25
5.7 Absence of Undisclosed Liabilities.................................... 26
5.8 Litigation............................................................ 26
5.9 Taxes................................................................. 27
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Page
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5.10 Leases and Leased Property........................................... 27
5.11 Inventory............................................................ 29
5.12 Employee Benefit Plans; ERISA........................................ 29
5.13 Labor Relations and Employment....................................... 30
5.14 Brokers and Finders.................................................. 31
5.15 Insurance............................................................ 31
5.16 Environmental........................................................ 32
5.17 Disclosure........................................................... 32
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6.1 Corporate Organization................................................ 32
6.2 Due Authorization..................................................... 33
6.3 Consents and Approvals, No Violation.................................. 33
6.4 Brokers and Finders................................................... 34
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Consents.............................................................. 34
7.2 Tax Matters........................................................... 34
7.3 Public Announcements.................................................. 36
7.4 Expenses.............................................................. 36
7.5 Access to Records and Leased Properties............................... 36
7.6 Accounts Payable...................................................... 36
7.7 Contracts............................................................. 36
7.8 Buyer's Mail and Other Documents...................................... 37
7.9 Seller's Mail and Other Documents..................................... 37
7.10 Returns............................................................... 37
7.11 Accounts Receivable................................................... 37
7.12 Post Closing Leasehold Improvements................................... 37
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Seller............................................. 38
8.2 Indemnification by Buyer.............................................. 39
8.3 Conditions of Indemnification......................................... 39
8.4 No Set-Off............................................................ 42
8.5 Limitations on Indemnification........................................ 42
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Page
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ARTICLE IX
EMPLOYEES AND EMPLOYEE PLANS
9.1 Offer of Employment................................................... 43
9.2 Individual Account Plan............................................... 45
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Further Assurances................................................... 46
10.2 Amendment and Modification........................................... 46
10.3 Waiver of Compliance; Consents....................................... 46
10.4 Investigations....................................................... 46
10.5 Notices.............................................................. 47
10.6 Assignment........................................................... 48
10.7 Governing Law........................................................ 48
10.8 Specific Performance................................................. 48
10.9 Counterparts......................................................... 48
10.10 Interpretation....................................................... 48
10.11 Entire Agreement..................................................... 49
10.12 No Third Party Beneficiaries......................................... 49
10.13 Parent Guarantee..................................................... 49
10.14 Clinton, CT Store ................................................... 49
Exhibits
Exhibit A -- License Agreement
Exhibit B -- Preliminary Statement of Inventory
Exhibit C -- Form of Estoppel Certificate executed by
the landlord
Exhibit D -- Parent Guarantee
Schedules
Schedule 1.42 Leased Properties
Schedule 2.1(b)(x) Register Cash
Schedule 2.2(e) Excluded Assets
Schedule 2.4 Fixed Assets
Schedule 5.3 Consents and Approvals
Schedule 5.4(a) December 1995 Financial Statements
Schedule 5.4(b) June 1996 Financial Statements
Schedule 5.5 Material Changes
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Schedule 5.6(a) Contracts
Schedule 5.6(b) Purchase Orders as of October
12, 1996
Schedule 5.8 Litigation
Schedule 5.10(a) Leases
Schedule 5.10(b) Subleases
Schedule 5.10(c) Compliance with Zoning
Schedule 5.10(e) Consents to Assignment of Lease
Schedule 5.12(a) Employee Benefit Plans
Schedule 5.12(e) Non-qualified ERISA Plans
Schedule 5.13(a) Labor Relations and Employment
Schedule 5.15 Insurance
Schedule 5.16 Environment
Schedule 6.3 Buyer's Consents and Approvals
Schedule 7.2(a) Allocation of Purchase Price
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