<PAGE>
EXHIBIT 2.1
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
IPARTY RETAIL STORE CORP.,
AS PURCHASER,
AND
THE BIG PARTY CORPORATION,
AS SELLER
Dated as of August 2, 2000
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated as of August 2, 2000, by and among
iParty Retail Store Corp., a corporation organized and existing under the laws
of the State of Delaware ("iParty" or "Purchaser"), and The Big Party
Corporation, debtor and debtor-in-possession under Chapter 11 Case No. 00-2852
(GMS), in the United States Bankruptcy Court for the District of Delaware ("Big
Party" or "Seller"). In consideration of the mutual covenants, agreements and
warranties herein contained, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Specific Definitions. Unless otherwise defined herein, terms used
herein shall have the meanings set forth below:
"Accounts" shall have the meaning ascribed thereto in Section 2.1 (g)
hereof.
"Acquired Assets" shall have the meaning ascribed thereto in Section 2.1
hereof.
"Acquired Locations" means the retail locations of Seller identified on
Schedule A hereto and the Headquarters.
"Adjustment Amount" means 2,000,000 multiplied by a fraction, the
numerator of which is the Contribution of an Acquired Location for calendar
1999, and the denominator of which is $10,110,000.
"Affiliate Obligations" means Seller's debt and other obligations and
liabilities to affiliates and stockholders of Seller, and includes all interest,
fees, costs and similar amounts payable by Seller in respect thereof.
"Agency Agreement" means that Agency Agreement dated as of even date
herewith between Big Party and the joint venture of Hilco Trading Co., Inc. and
The Ozer Group, LLC, as in effect on the date hereof.
"Aggregate Purchase Consideration" shall have the meaning ascribed thereto
in Section 3.1 hereof.
"Agreement" means this Asset Purchase Agreement, including all Exhibits
and Schedules hereto, as it may be amended from time to time in accordance with
its terms.
<PAGE>
"American Greeting" means American Greeting Card Company, party to an
agreement with Big Party.
"American Greeting Card Agreement" means the agreement between Big Party
and American Greeting.
"Ancillary Documents" shall have the meaning ascribed thereto in Section
11.8 hereof.
"Assignment and Assumption" shall mean an Assignment and Assumption of
Leases, Contracts and other Assumed Obligations, as provided for in Section 10.2
hereof, executed and delivered by Purchaser and Sellers in accordance with
Sections 10.2 and 10.3 hereof.
"Assumed Contracts" shall mean those Contracts and, if applicable, the
American Greeting Card Contract, assigned by Seller and assumed by Purchaser
pursuant to Section 2.2 hereof.
"Assumed Leases" shall have the meaning ascribed thereto in Section 2.2(a)
hereof.
"Assumed Obligations" shall have the meaning ascribed thereto in Section
2.4 hereof.
"Backstop Agreement" shall mean the Backstop Agreement between the Seller
and Hilco Trading Co., Inc. and The Ozer Group LLC.
"Bank Payment" shall have the meaning ascribed thereto in Section 3.2.
"Bankruptcy Code" means Title 11, United States Code, sections 101-1330,
as same shall be amended from time-to-time.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware, having jurisdiction over Big Party and its assets in the
Chapter 11 Case.
"Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure as
shall be promulgated by the Supreme Court of the United States, as same shall be
applicable in the Chapter 11 Cases.
"Bill of Sale" shall have the meaning ascribed thereto in Section 10.2
hereof.
"Business" means the business of Seller involving the retail sale and
distribution of party goods and related items in stores operated by Seller,
together with such office operations operated by Seller as of the date hereof,
but specifically not including the business of Seller (i) from the Excluded
Locations and (ii) at Seller's warehouse and distribution facility in Quincy,
Massachusetts.
2
<PAGE>
"Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which the banks in New York City are authorized or obligated by law or
executive order to close.
"Cash Amount" shall have the meaning ascribed thereto in Section 3.1
hereto.
"Chapter 11 Case" means the pending case commenced by Big Party on June
23, 2000 under Chapter 11 of the Bankruptcy Code, pending in the Bankruptcy
Court under docket no. 00-2852 (GMS).
"Claim" means any claim, lawsuit, demand, suit, inquiry made, hearing,
investigation, notice of violation, litigation, proceeding, arbitration, or
other dispute, whether civil, criminal, administrative or otherwise.
"Closing" means the consummation of the transactions contemplated herein
in accordance with Article X hereof.
"Closing Date" means the date on which the Closing shall occur, as more
extensively discussed in Section 10.1 hereof.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Competitive Business" shall have the meaning ascribed thereto in Section
6.2(a) hereof.
"Confidential Information" shall have the meaning ascribed thereto in
Section 6.2(a) hereof.
"Contaminant" means any substance regulated under any Environmental Law as
a pollutant, hazardous substances, hazardous or toxic wastes, hazardous
materials, or toxic substances under any Environmental Law.
"Contracts" shall have the meaning ascribed thereto in Section 2.2(b)
hereof.
"Contract Rejection Option" shall have the meaning ascribed thereto in
Section 2.2(b)(ii) hereof.
"Contribution" means the revenues of an Acquired Location for the relevant
calendar year, as reported on the books and records of Seller, less cost of
goods sold, store payroll, store occupancy costs and store non-payroll expenses
for such Acquired Locations, as reported on the books and records of Seller or
Purchaser, as applicable.
3
<PAGE>
"Cure Amount" shall have the meaning ascribed thereto in Section 2.4(a)
hereof.
"Disclosure Schedule" means the disclosure schedules hereto, if any.
"Earnout" shall have the meaning ascribed thereto in Section 3.6 hereof.
"Employees" shall have the meaning ascribed thereto in Section 7.2 hereof.
"Environmental Costs and Liabilities" means all Losses from any Claim, by
any Person, whether based on contract, tort, or arising under or pursuant to any
Environmental Law or a Release of a Contaminant into the environment, including
any Remedial Action, any Lien in favor of any authority pursuant to any
Environmental Law or any Order or agreement with any authority.
"Environmental Law" means any Regulation which is related to or otherwise
imposes liability or standards of conduct concerning discharges, releases or
threatened releases of Contaminants into ambient air, water or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of
Contaminants.
"Escrow Agent" shall have the meaning set forth in Section 3.2 hereof.
"Estimated Cash Amount" shall have the meaning ascribed thereto in Section
3.2 hereof.
"Estimated Inventory Amount" shall have the meaning ascribed thereto in
Section 3.2 hereof.
"Estimated Purchase Consideration" shall have the meaning ascribed thereto
in Section 3.2 hereof.
"Excluded Assets" shall have the meaning ascribed thereto in Section 2.3
hereof.
"Excluded Locations" shall mean these Seller retail locations which are
not included within "Acquired Locations," including, without limitation, those
locations that are represented by one or more Rejected Leases.
"Fixtures and Equipment" shall have the meaning ascribed thereto in
Section 2.1(d) hereof.
"General Balance" shall have the meaning ascribed thereto in Section 3.2
hereof.
4
<PAGE>
"Guarantee" means any guarantee or other contingent liability (other than
any endorsement for collection or deposit in the ordinary course of business),
direct or indirect, with respect to any Indebtedness or obligations of another
Person, through a Contract or otherwise.
"Headquarters" means Seller's corporate headquarters located at 1457 VFW
Parkway, West Roxbury, Massachusetts 02132.
"Hired Employees" shall have the meaning ascribed thereto in Section 7.2
hereof.
"Indebtedness" with respect to any Person means any obligation of such
Person for borrowed money, and in any event shall include (i) any obligation
incurred for all or any part of the purchase price of property or other assets
or for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course of business,
(ii) the face amount of all letters of credit issued for the account of such
Person, (iii) obligations (whether or not such Person has assumed or become
liable for the payment of such obligation) secured by Liens, (iv) capitalized
lease obligations, (v) all Guarantees of such Person, (vi) all accrued interest,
fees and charges in respect of any Indebtedness, and (vii) all prepayment
premiums and penalties, and any other fees, expenses, indemnities and other
amounts payable as a result of the prepayment and/or discharge of any
Indebtedness.
"In Transit Inventory" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Inventory" shall have the meaning ascribed thereto in Section 2.1(a)
hereto.
"Inventory Amount" shall have the meaning ascribed thereto in Section 3.1
hereto.
"Inventory Balance" shall have the meaning ascribed thereto in Section 3.2
hereof.
"Inventory Valuation" shall have the meaning ascribed thereto in Section
3.2 hereof.
"Lease Deposits" means any security deposits held or required under any
Assumed Leases.
"Lien" means any security interest, lien, charge, mortgage, deed,
assignment, pledge, hypothecation, encumbrance, easement, restriction or
interest of another Person of any kind or nature.
"Losses" mean all liabilities of every kind, losses, costs, claims,
judgments, awards, damages (including punitive, consequential and treble
damages), penalties or expenses (including, without limitation, reasonable
attorneys' fees and expenses and costs of investigation and litigation), and
also including any expenditures or expenses incurred to cover, remedy or rectify
any such Losses.
5
<PAGE>
"Order" means any decree, order, injunction, rule, judgment, consent of
or by any court or governmental authority.
"Ordinary Course of Business" means from and after the date of the
parties' execution and delivery hereof, the Debtor shall continue to operate the
Business in the same manner as conducted on the date of this Agreement, and (i)
without any liquidation, close out, going-out-of-business or other deep discount
sales at any of the Acquired Locations, (ii) as operating retail stores in a
manner consistent with preserving the goodwill of the Business at the Acquired
Locations as a going concern for the benefit of Purchaser, with Purchaser
acknowledging that Seller has been limited in purchasing and stocking new
inventory due to the Chapter 11 Case and restrictions on financing, and (iii)
otherwise in the ordinary course with respect to markdown and promotional
activities in the Business consistent with past practices in effect prior to
filing of the Chapter 11 Case.
"Permits" shall have the meaning ascribed thereto in Section 2.1(e)
hereof.
"Permitted Designee" shall have the meaning ascribed thereto in Section
11.9 hereof, but shall include, without limitation, iParty Retail Store Corp., a
Delaware corporation.
"Person" means any corporation, partnership, joint venture, limited
liability company, organization, entity, authority or natural person.
"Proprietary Information" shall have the meaning ascribed thereto in
Section 2.1(c) hereof.
"Purchase Orders" means those contracts of Seller to purchase merchandise
that, if owned by Seller on the date of the Closing would constitute Inventory,
are included in Assumed Contracts under this Agreement.
"Purchase Price" shall have the meaning ascribed thereto in Section 3.1
hereof.
"Purchaser" means iParty Retail Store Corp. or any Permitted Designee
thereof as permitted under this Agreement.
"Recovery Claims" shall have the meaning ascribed thereto in Section
2.1(h) hereof.
"Regulation" means any law, statute, regulation, ruling, rule or Order
of, administered or enforced by or on behalf of any governmental authority.
"Rejected Leases" shall have the meaning ascribed thereto in Section
2.3(d) hereof.
6
<PAGE>
"Release" means any release, spill, emission, leaking, pumping, disposal,
discharge, dispersal or migration into the indoor or outdoor environment or into
or out of any property or assets (including the Acquired Assets) owned or leased
by Sellers as at the Closing Date, including the movement of Contaminants
through or in the air, soil, surface water, groundwater or property.
"Remedial Action" means all actions required under any applicable
Environmental Law to (1) clean up, remove, treat or in any other way address
Contaminants in the environment; (2) prevent the Release or threat of Release or
minimize the further Release of Contaminants so they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment; or (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Retail Value" shall have the meaning ascribed to such term in the Agency
Agreement.
"Sale Order" means that certain order(s) to be entered by the Bankruptcy
Court in the Chapter 11 Case, as described in Section 8.7 of this Agreement,
inter alia, approving the transactions contemplated by this Agreement.
"Seller" shall have the meaning ascribed thereto in the Preamble of this
Agreement.
"Settlement Date" shall have the meaning ascribed thereto in Section 3.2.
"Solicitation" and the "Terms and Conditions" contained therein means the
Solicitation for Bids on Debtor's Retail Business Operations and Related
Non-Cash Assets and Terms and Condition of Auction entered by the Bankruptcy
Court in the Chapter 11 Case.
"Store Cash Amount" shall have the meaning ascribed thereto in Section
2.1(j) hereof.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including, without limitation, income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, capital, license,
payroll, unemployment, environmental, customs duties, capital stock, disability,
stamp, leasing, lease, user, transfer, fuel, excess profits, occupational and
interest equalization, windfall profits, severance and employees' income
withholding and Social Security taxes imposed by the United States or any other
country or by any state, municipality, subdivision or instrumentality of the
United States or of any other country or by any other tax authority, and
unemployment insurance contributions, including all applicable penalties and
interest, and such term shall include any interest, penalties or additions to
tax attributable to such Taxes.
"Tax Return" means any report, return or other information required to be
supplied to a taxing authority in connection with Taxes.
7
<PAGE>
A "third party" means any Person other than Sellers, Purchaser or any of
their respective affiliates.
"Ticket Value" shall mean the ticket or SKU value of Inventory as marked
for sale in the Acquired Locations.
"Unassumed Liabilities" shall have the meaning ascribed thereto in Section
2.5 hereof.
"Warehouse" means Seller's warehouse located on Washington Street, Quincy,
Massachusetts.
1.2 Other Terms. Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning through this
Agreement.
1.3 Other Definitional Provisions.
(a) The words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) References herein to a specific Section, Subsection, Exhibit or
Schedule shall refer, respectively, to Sections, Subsections, Exhibit or
Schedules of this Agreement, unless the express context otherwise requires.
(d) Wherever the word "include," or "includes," or "including" is
used in this Agreement, it shall be deemed to be followed by the words "without
limitation."
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES
2.1 Acquired Assets. Subject to the terms and conditions set forth in this
Agreement, at the Closing, Seller shall sell, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase, acquire and take assignment and
delivery of, the following assets owned by Seller on the Closing Date (wherever
located) which relate to, and are necessary for, the continued operation of the
Business, and all of Seller's right, title and interest therein and thereto on
the Closing Date, free and clear of all liens, claims and encumbrances of
whatever kind or nature, but not including those assets specifically excluded in
Section 2.3 hereof (all of the assets to be sold, assigned, transferred and
delivered to Purchaser hereunder shall be deemed included in the term "Acquired
Assets" as used herein):
8
<PAGE>
(a) The following inventories: (i) inventories of finished goods
located at the Acquired Locations not including In Transit Inventory (which is
covered in subsection (iii)), (ii) merchandise located at the Warehouse that
constitutes Halloween repack for the Acquired Locations, and (iii) merchandise
which either has been delivered to an Acquired Location [or the Warehouse]
within the ten (10) days prior to the date hereof or is in transit to an
Acquired Location or the Warehouse on the date hereof, in either case which has
been paid for in full by Seller as identified on Schedule B hereto ("In Transit
Inventory"); provided, however, that merchandise described in subsection (iii)
shall only be included as "In Transit Inventory" if it is new party goods
merchandise that was ordered and paid for by Seller within thirty (30) days
prior to the date hereof (as more fully described in purchase orders provided by
Seller and approved by Purchaser at or prior to the Closing), is every day
merchandise generally saleable in the ordinary course within thirty (30) days of
placement in a retail store and is of the type and quality sold by Seller in the
Acquired Locations, in all cases contained in unopened shipping boxes
accompanied by packing slips identifying the contents of such shipping boxes
(collectively, "Inventory");
(b) All right, title and interest in and to any and all intellectual
property or other general intangibles owned and utilized by Seller, including,
without limitation, all proprietary and licensed software and all contract
rights relating thereto, all trademarks and trade names and all goodwill
associated therewith, all copyrights, all telephone numbers of Seller, including
all Headquarters and store telephone numbers at the Acquired Locations and any
"800" or other toll free telephone numbers, all domain rights and internet
website(s), and the name and mark "Big Party" and the goodwill associated
therewith, including without limitation the registered trademarks and
applications therefor set forth in Schedule 2.1(b) hereto;
(c) All proprietary information ("Proprietary Information") in the
possession, custody and/or control of Seller, including, but not limited to, any
and all customer, supplier, and/or mailing lists, as well as all other
proprietary information in the possession, custody and/or control of Seller
affiliates associated with the Business. All Proprietary Information shall be
delivered to Purchaser in its present form;
(d) All (1) machinery, equipment, tools, owned vehicles, furniture,
fixtures, furnishings, leasehold improvements, goods, and other tangible
personal property owned by Seller which are used in the day-to-day operation or
maintenance of the Business at (i) the Acquired Locations, and (ii) Seller's
Headquarters, including in each case, but not limited to, any owned computer
hardware and software and any store-related furniture, fixtures and/or equipment
which are used in the day-to-day operation or maintenance of the Business
(collectively, the "Fixtures and Equipment"), and (2) material and supplies
(including packaging materials) located at the Acquired Locations and the
Headquarters;
(e) All licenses, permits, approvals, certificates of occupancy,
authorizations, operating permits, registrations, plans and the like applicable
in any way to the Business at the
9
<PAGE>
Acquired Locations and Headquarters to the extent the same are transferable by
Seller to Purchaser ("Permits");
(f) Any and all rights of return, offsets, counterclaims (other than
claims described in Section 2.3(j) below), deductions and unpaid allowances with
respect to those vendors (a) from which the Inventory was acquired and (b) under
Seller Purchase Orders which are included in Assumed Contracts;
(g) Except as described in Section 2.1(h) below, all accounts and
accounts receivable, net of any and all returns, credits for damaged and/or
defective items, disputed amounts, and co-op or other advertising allowances of
Seller (collectively, "Accounts");
(h) All sums owing to Seller by any affiliate or shareholder of
Seller and all Claims arising under Section 547 of the Bankruptcy Code
(collectively, "Recovery Claims");
(i) All prepaid assets and the Lease Deposits relating to the
Acquired Locations and Headquarters that exist as of the date hereof or are
created for the benefit of Seller after the date hereof;
(j) All cash in each cash register located in each Acquired Location
("Store Cash Amount"); provided, however, that the Purchase Price shall be
increased by an amount equal to the Store Cash Amount, provided, further, Seller
and Purchaser agree that they shall each use their respective good faith best
efforts to reconcile and determine the amount of cash on hand in each of the
referenced Acquired Locations as of the Closing Date within the time periods
stated in Section 3.5 hereof;
(k) To the extent relating to the Business at the Acquired Locations
or the Headquarters, all books, records, manuals, information, computer files
and similar materials, except for those records identified in Section 2.3(c)
hereof; and
(l) Any insurance recoveries relating to the Acquired Assets and any
and all other assets that are necessary for the continued conduct of the
Business at the Acquired Locations and the Headquarters.
2.2 Assignment of Leases, Licenses, Contracts, Purchase Orders and Certain
Claims. Subject to the terms and conditions set forth in this Agreement,
including, but not limited to this Section 2.2, Seller will assume and assign
and transfer to Purchaser, effective as of the Closing Date, all of Seller's
right, title and interest in and to, and Purchaser will take assignment of, the
following rights and interests that are exclusively used in connection with, or
relate exclusively to, the Business, with such assignment and transfer to be
free and clear of any and all liens, claims and encumbrances of whatever kind or
nature (and the right, title and interest of Seller under all of the following
shall be deemed included in the term "Acquired Assets" as used herein):
10
<PAGE>
(a) All leases for the real property locations which constitute the
Acquired Locations and the Headquarters, except for those leases which are not
acquired by Purchaser as provided for in this Agreement or which are a Rejected
Lease (the "Assumed Leases"), provided, however, that Purchaser shall have the
right to terminate this Agreement in the event the Bankruptcy Court does not
authorize Seller's assumption and assignment to Purchaser under the Sale Order
of at least 30 leases at Acquired Locations and of the lease for the
Headquarters.
(b) Any and all executory contracts, unexpired leases, and other
contractual rights of Seller, concerning and/or necessary to the continued
day-to-day operations or maintenance of the Acquired Locations, the Headquarters
or the Business acquired by Purchaser, except for (A) those executory contracts,
unexpired leases and other contractual rights identified as Excluded Assets in
Section 2.3 hereof, (B) the American Greeting Card Agreement, which is provided
for in subsection (c) below), or (C) which constitute automobile leases; or (D)
software licenses; as each of same shall be designated by the Purchaser in the
manner and at such times as are provided for herein (collectively, the
"Contracts"); provided however,
(i) at or prior to the Closing, Seller (A) shall provide
Purchaser with a schedule identifying the Contracts, which schedule shall be
made part hereof, as Schedule 2.2(b)(i), at the Closing and (B) shall not reject
the Contracts pending the exercise or non-exercise by Purchaser of the Contract
Rejection Option;
(ii) the Purchaser shall have the right through and including
the date that is sixty (60) days after the Closing to determine not to acquire
any Contract by way of assumption and assignment by the Seller (the "Contract
Rejection Option");
(iii) with respect to those Contracts that constitute personal
property leasing contracts, pending Purchaser's exercise or non-exercise of the
Contract Rejection Option Purchaser shall be granted a license to use any and
all such agreements and property, which shall be at Purchaser's cost and expense
in an amount equal to the per diem occupancy charges under such Contracts;
provided however, that to the extent that Purchaser designates any Contract as a
Contract which Purchaser has elected not to acquire by way of assumption and
assignment by Seller, Purchaser's obligations under this Section 2.2(b)(iii),
with respect to the Contracts so designated, shall terminate ten (10) days after
delivery of written notice of such designation to Seller; and
(iv) the Seller's (A) curing any pre-assumption/assignment
defaults under any Assumed Leases and Assumed Contracts which are assumed by
Seller and assigned to Purchaser hereunder, and (B) restoring any deficiencies
in Lease Deposits under the Assumed Leases shall each be conditions to
Purchaser's agreement to assume any such Contracts or Leases as herein provided;
and
(c) At Purchaser's option, to be exercised at or prior to Closing,
the American Greeting Card Agreement (but without the right to exercise the
Contract Rejection Option);
11
<PAGE>
provided however, that if on or prior to Closing Seller provides to Purchaser a
written agreement from American Greeting that a specified amount of credit for
the purchase of party goods inventory (the "American Greeting Credit"), which
American Greeting Credit is now available to Seller under the American Greeting
Card Agreement, (i) is transferable to Purchaser, and (ii) can be utilized by
Purchaser without time restriction for the purchase of party goods items from
American Greeting and any of its subsidiaries, then at Closing Seller will
assign and transfer to Purchaser, and Purchaser will take assignment of, the
American Greeting Card Agreement (without the right to exercise the Contract
Rejection Option).
2.3 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, the following assets of Seller, as well as any other assets not
defined as Acquired Assets, shall be retained by Seller and are not being sold
or assigned to Purchaser hereunder (all of the following are referred to
collectively as the "Excluded Assets":
(a) Any capital stock held by Seller or any other affiliates of
Seller;
(b) Subject to Section 2.1(j) hereof, cash and cash equivalents;
provided that Purchaser and Seller agree that in the event either of them
receive any cash or cash equivalents that properly constitute the property of
the other in accordance with the terms of this Agreement, such cash or cash
equivalents as shall be the property of the other party to this Agreement shall
be held by its recipient in trust for the other, and further shall be accounted
for and paid over to the other party promptly after its receipt;
(c) Any and all corporate records, including all of Seller's
corporate seal(s), charter, by-laws, minute books and other corporate governance
documents;
(d) Any Contracts and/or Purchase Orders that do not constitute
Assumed Contracts pursuant to Section 2.2(b) hereof, including, without
limitation, (i) leases for the Excluded Locations, (ii) leases for one or more
Acquired Locations but which are not assigned by Seller and assumed by Purchaser
due to failure to obtain approval in the Sale Order ("Rejected Leases"), (iii)
contracts relating to the Excluded Locations or any Acquired Locations
identified in subsection (ii) hereof and (iv) any other Contracts or Purchase
Orders not purchased and assumed by Purchaser under any provision of this
Agreement, including, without limitation, under Sections 2.2(b), 2.2(c), 3.3(b)
and 8.6;
(e) Any inventory (other than Halloween repack at the Warehouse and
designated for the Acquired Locations), fixtures, equipment or other assets
located at any of the Excluded Locations or as otherwise provided for in the
Agency Agreement;
(f) Any refunds or claims for refunds of income or corporate taxes;
(g) Any life insurance policies and proceeds thereof owned by
Seller;
12
<PAGE>
(h) Any governmental rebates or refunds due or which may become due
to Seller pursuant to any federal or state sales, customs or excise tax laws;
(i) All Claims and causes of action (A) arising under Sections 544,
548, 549, 550 and 553 of the Bankruptcy Code (the "Avoidance Actions") and (B)
arising under or related to any of the Excluded Assets;
(j) Such other items mutually agreed upon by Seller and Purchaser;
and
(k) Such items not otherwise provided for in this Agreement
designated by Purchaser as Excluded Assets prior to or within sixty (60) days
after Closing, provided that there shall be no adjustment to the Purchase Price
with respect to any such exclusion.
2.4 Assumed Obligations. At the Closing, except as provided in Section 2.3
and/or in Section 2.5 hereof, Purchaser shall assume, and agree to pay, perform,
fulfill and discharge the following additional obligations of the Seller:
(a) Those obligations which are required to be performed after the
Closing Date under the Assumed Contracts from and after the date of the Closing;
provided, however, Seller shall pay any amounts due to any and all non-Seller
parties to any Assumed Contracts and Assumed Leases in respect of any cure
amount as established by the Sale Order ("Cure Amount") under Section 365(b) of
the Bankruptcy Code or otherwise, which Cure Amount, together with all
deficiencies in Lease Deposits under the Assumed Leases, shall be itemized by
Seller prior to Closing as Schedule 2.4(a) hereto, subject to the limitations
contained in Section 2.2(b)(iv) hereof, and shall restore any deficiencies in
Lease Deposits under the Assumed Leases;
(b) Those obligations relating to accrued but unused vacation and
sick leave of Hired Employees of Seller (or any of them) hired by Purchaser at
Closing; provided, however, following the Closing, subject to Section 7.2
hereof, Purchaser may establish such policies and procedures in respect of Hired
Employees vacation and other employee-related policies post-Closing as Purchaser
shall deem appropriate, in its discretion; and
(c) Gift certificates issued by Seller in the ordinary course prior
to the Closing, which have not yet been redeemed and which, pursuant to
applicable law, are required to be honored by issuer.
The amounts set forth in this Section 2.4(a) - (c) are collectively
defined herein as the "Assumed Obligations."
2.5 No Other Liabilities Assumed. Seller acknowledges and agrees that
pursuant to the terms and provisions of this Agreement and under any executory
contracts, unexpired leases, and other contractual rights of Seller, Purchaser
will not assume any obligation of Seller, other than the Assumed Obligations. In
furtherance and not in limitation of the foregoing, neither
13
<PAGE>
Purchaser nor any of its affiliates shall assume, and shall not be deemed to
have assumed, other than as specifically set forth in Article II hereof, any
debt, claim, obligation or other liability of Seller or any of its affiliates
whatsoever, including, but not limited to, (i) any Environmental Costs and
Liabilities for any act, omission, condition or event caused by or attributable
to Seller to the extent occurring or existing prior to the Closing Date,
including without limitation all Environmental Costs and Liabilities relating in
any manner to Seller's direct or indirect handling, transportation or disposal
of any Contaminants, (ii) any of Seller's liabilities in respect of Taxes,
except as expressly provided in Section 11.11(b) hereof, (iii) any investment
banking, financial advisory, brokers or finders fees arising by reason of
Seller's dealings with brokers or other third parties, or other liability of
Seller for costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement, (iv) any Indebtedness, (v) any obligations or
liabilities for Seller's Employees, including severance, termination pay,
pension, profit sharing or any other employee benefit plans, compensation or
retiree medical and other benefits and obligations, except to the extent
otherwise provided in Sections 2.4(b) and 7.2 hereof, or any obligation, claim
or amount under the Workers Adjustment and Retraining Notification Act ("WARN
Act"), (vi) any obligation or liability arising as a result of or whose
existence is a breach of Seller's representations, warranties, agreements or
covenants contained in this Agreement or otherwise, (vii) any Excluded Assets,
(viii) any Affiliate Obligations, (ix) any liability subject to compromise,
except to the extent same constitutes an Assumed Obligation, and (x) rebates,
allowances, deductions and/or price discrepancies relating in any manner to
products sold in pursuit of the Business prior to the Closing Date
(collectively, "Unassumed Liabilities"). Disclosure of any obligation or
liability on any schedule to this Agreement shall not create an Assumed
Obligation or other liability of Purchaser, except where such disclosed
obligation has been expressly assumed by Purchaser as an Assumed Obligation in
accordance with the provisions of Article II hereof.
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 Purchase Price. Subject to the terms and conditions of this Agreement,
the aggregate consideration to be paid by Purchaser (the "Purchase Price") in
respect of, inter alia, the Acquired Assets, the Assumed Leases and Assumed
Contracts, among others, at such times and in such manner as shall be set forth
herein, shall be comprised of the items set forth in subsections (a) - (b)
below, subject to adjustment as provided in this Agreement:
(a) Purchaser shall pay Seller (or its designee), upon such schedule
and such terms as are set forth in Section 3.2 hereof, a sum equal to the
aggregate of the following:
(i) One Million Five Hundred Thousand Dollars ($1,500,000);
(ii) Twenty five percent (25%) of the Retail Value of all
Inventory other than In Transit Inventory, to be counted and calculated in
accordance with the inventory
14
<PAGE>
taking, instructions, pricing and related provisions of Section 5 of the Agency
Agreement (with all references therein to the Agent being deemed to refer for
purposes hereof to Purchaser), provided however, that at Purchaser's option, to
be exercised or waived by Purchaser in its sole discretion, the aggregate Ticket
Value of such Inventory shall not be less than $7,000,000 and shall not be
greater than $9,000,000;
(iii) Seller's cost of all In Transit Inventory as evidenced
by the applicable purchase orders and invoices therefor;
(iv) The Store Cash Amount; and
(v) Fifty Percent (50%) of the American Greeting Credit; and
(b) Purchaser's assumption of the Assumed Liabilities.
The aggregate of the items listed in subsections (i), (iv) and (v) shall
be referred to as the "Cash Amount," the aggregate of the items listed in
subsections (ii) and (iii) shall be referred to as the "Inventory Amount," and
the aggregate of the Cash Amount and the Inventory Amount shall be referred to
collectively as the "Aggregate Purchase Consideration".
3.2 Payment of Purchase Price; Escrow.
(a) Provided that (i) the Agency Agreement shall have closed and the Agent
thereunder shall have made the initial payment due thereunder, (ii) there is no
event of default by Seller hereunder and (iii) no condition which would prevent
or excuse Purchaser from closing hereunder is then in effect, if the Closing
does not occur on or before August 11, 2000 through no fault of Seller, unless
otherwise agreed to by the parties, on August 11, 2000 Purchaser will authorize
the Deposit Escrow Agent to release and pay the Deposit directly to Seller's
lender and shall provide Seller with such additional sums, payable directly to
Seller's lender, as may be required, not to exceed $500,000, to pay off Seller's
lender in full (such released Deposit and such additional payment are together
herein called the "Bank Payment"). If Purchaser does not release the Deposit or
make such additional payment, Purchaser agrees to pay at Closing, as an
additional adjustment to the Purchase Price, the amount of Seller's accrued
interest on the balance owed its lender for the period from August 11, 2000 to
the date of Closing. In the event Purchaser makes the Bank Payment, but this
Agreement does not subsequently close, Seller will repay the amount of the Bank
Payment at the time of and out of the first payments to the Seller under the
Backstop Agreement, and hereby grants Purchaser a security interest in any such
payments coming due under the Backstop Agreement to secure this obligation, and
will execute and file UCC financing statements evidencing such security interest
at the time of payment of the Bank Payment.
(b) Prior to Closing, Purchaser and/or Seller shall make a good faith
estimate of the Cash Amount (the "Estimated Cash Amount") and the Inventory
Amount (the "Estimated
15
<PAGE>
Inventory Amount"), in each case taking into account the adjustments provided
for in this Agreement (collectively, the "Estimated Purchase Consideration") and
shall notify the other party, in writing, of such estimate. At Closing,
Purchaser shall pay by wire transfer of immediately available funds to Purchaser
an amount equal to the sum of (A) one hundred percent (100%) of the Estimated
Cash Amount less the General Balance and (B) seventy five percent (75%) of the
Estimated Inventory Amount, less the Deposit or, if applicable, the Bank
Payment. Also at Closing, (a) the amount of One Hundred Thousand Dollars
($100,000) from the Estimated Cash Amount (the "General Balance") shall be held
for payment to Purchaser of any adjustments to the Purchase Price provided for
in this Agreement other than those adjustments relating to the Inventory
Valuation, and the remainder, if any, shall be paid to Seller on January 31,
2001 (unless the Seller shall have closed its pending Case in the Bankruptcy
Court prior thereto in which event such date will be December 31, 2000 (such
applicable date is herein called the "Settlement Date"); provided, however that,
if final bills (for any items, charges or payments which are subject to
adjustment out of the General Balance) have not been received from the lessors
under the Assumed Leases and Assumed Contracts by the Settlement Date, the
parties shall make a good faith estimate of any additional amounts payable by
Seller and such amount shall be deducted from the final payment due Seller and
shall be paid to Purchaser on the Settlement Date), and (b) the remaining
portion of the Estimated Inventory Amount (the "Inventory Balance") shall be
held for payment to Purchaser of any adjustments to the Purchase Price provided
for in this Agreement relating to the Inventory Valuation, and the remainder, if
any, shall be paid to Seller within three (3) business days after completion of
valuation of the Retail Value of Inventory (the "Inventory Valuation"), as
provided for in Section 3.1(a)(ii) hereof.
(c) At Closing, Purchaser shall either (i) deposit with Traub,
Bonacquist & Fox L.L.P. ("Escrow Agent") the General Balance and the Inventory
Balance, each to be held pending completion and acceptance of all adjustments
provided for herein (with respect to the General Balance), and the Inventory
Valuation (with respect to the Inventory Balance), or (ii) post letters of
credit in form and substance reasonably satisfactory to Seller in such amount to
secure payment of the Inventory Balance and the General Balance. Any funds
deposited with the Escrow Agent hereunder shall be reference to as the "Escrow."
(d) From time to time following Closing, Purchaser may notify the
Escrow Agent (with a copy to Seller) that, pursuant to the adjustment and
proration provisions of this Agreement, all or a portion of the General Balance
is payable to Purchaser. Purchaser may provide such notice to Escrow Agent with
respect to an item to be paid by Purchaser directly, which is partially
attributable to Purchaser and partially attributable to Seller. Within ten (10)
days of receipt of such notice, if Escrow Agent has received no objection from
Seller, it shall distribute to Purchaser from the Escrow the amount specified in
such notice. On the Settlement Date, any Escrow remaining and attributable to
the General Balance shall be paid to Seller. If letters of credit are provided,
on the Settlement Date Purchaser shall pay the General Balance due, after
adjustment (in which event the letters of credit will be released back to
Purchaser), or,
16
<PAGE>
if Purchaser fails to make such payment on such date, Seller may draw under the
letters of credit for the General Balance due, after adjustment, to it.
(e) Upon notice from Purchaser (with a copy to Seller) of completion
of the Inventory Valuation, if funds are deposited in escrow, if it has
received no objection from Seller, the Escrow Agent shall distribute to
Purchaser the amount of the Escrow equal to any portion of the Inventory Balance
as the Inventory Valuation indicates is payable to Purchaser, and the remaining
Escrow funds, if any, to Seller. If letters of credit are provided, Purchaser
shall pay the Inventory Balance due, after adjustment, within three business
days following the completion and acceptance of the Inventory Valuation (in
which event the letters of credit will be released back to Purchaser), or, if
Purchaser fails to make such payment within such time period, Seller may draw
under the letters of credit for the Inventory Balance due, after adjustment, to
it.
(f) For purposes of this Agreement, adjustments to the General
Balance may include amounts that are payable as Cure Amounts or are required to
restore any deficiencies in Lease Deposits under Assumed Leases (and thus in
either case the responsibility of Seller), but which are paid by Purchaser after
Closing.
(g) Any disputes between Purchaser and Seller regarding calculation
of adjustments under this Agreement and payments to be made from the General
Balance or the Inventory Balance, shall be resolved by the mechanism provided
for in Section 3.5 hereof.
(h) If after payment and application of all portions of the Purchase
Price under this Section 3.2, including by application of any or all of the
Escrow, the aggregate amounts paid by Purchaser to Seller hereunder is less than
the Aggregate Purchase Consideration, as adjusted hereunder, on the Settlement
Date Purchaser shall pay any such shortfall to Seller by wire transfer of
immediately available funds.
3.3 Adjustments to Aggregate Purchase Consideration. The Aggregate
Purchase Consideration is subject to adjustment as follows:
(a) Seller shall be responsible for fifty percent (50%) of the cost
of conducting the Inventory Valuation, which amount shall be deducted from the
Aggregate Purchase Consideration;
(b) Within fifteen (15) business days of the Closing, Purchaser
shall in good faith determine the cost of repair or replacement of any real or
personal property located at the Acquired Locations or subject to an Assumed
Contract, required to restore such real or personal property to a condition
consistent with operation of the Acquired Locations as retail facilities, and
the Aggregate Purchase Consideration shall be reduced by the amount so
determined in excess of $25,000 per Acquired Location, provided however, that
the Aggregate Purchase Consideration shall not be reduced by more than $75,000
for all Acquired Locations and provided further that if the cost of such repair
or replacement with respect to an individual
17
<PAGE>
Acquired Location exceeds $100,000, Purchaser may elect not to assume the Lease
with respect to such Acquired Location and any such Lease shall cease to be
included in the term "Assumed Leases" and shall be treated as a "Rejected Lease"
for all purposes of this Agreement;
(c) An amount equal to the Adjustment Amount for each of the
Rejected Leases shall be deducted from the Aggregate Purchase Consideration;
(d) Adjustments required pursuant to Section 8.6 shall be made; and
(e) An amount equal to accrued vacation and sick leave time payable
with respect to Hired Employees as of the Closing Date, assumed by Purchaser
pursuant to Section 2.4(b) hereof, shall be deducted from the Aggregate Purchase
Consideration.
3.4 Prorations. Except as otherwise provided in this Agreement with
respect to items allocable exclusively to Seller or Purchaser, to the extent
that any of the items listed below in this Section 3.4 are paid by Seller prior
to the Closing or are payable by Purchaser or the Seller after the Closing Date,
such items shall be apportioned as of the Closing Date such that Seller shall be
liable for (and shall reimburse Purchaser, including without limitation by
offset to the General Balance held in escrow to the extent that Purchaser shall
pay) that portion of such of the foregoing relating or attributable to periods
prior to the Closing Date and Purchaser shall be liable for (and shall reimburse
Seller to the extent Seller shall have paid) that portion of the foregoing
relating or attributable to, periods on or after the Closing Date. Should any
amounts to be prorated not have been finally determined on the Closing Date, a
mutually satisfactory estimate of such amounts made on the basis of Seller's
records shall be used as a basis for settlement at Closing, and the amount
finally determined will be prorated as of the Closing Date and appropriate
settlement made as soon as practicable after such final determination, with
final settlement to be made no later than The Settlement Date. If as a result of
any such settlement in accordance with the preceding sentence Purchaser is owed
an amount from Seller, Purchaser shall have the right in its sole discretion to
be reimbursed for such amount out of the Escrow Amount. Such prorated items
shall include: (a) personal property, real estate, retail sales, occupancy and
water Taxes, if any, on or with respect to the Business, the Acquired Assets
and/or the Assumed Obligations notwithstanding the date of the assessment of
such Taxes; (b) insurance premiums of any policies acquired by Purchaser at
Closing; and (c) any and all other expenses customarily subject to proration in
connection with the sale and purchase of assets and not otherwise provided for
herein. Seller and Purchaser agree to furnish each other with such documents and
other records as each party reasonably requests in order to confirm all
adjustment and proration calculations made pursuant to this Section 3.4. The
proration and adjustment process provided in this Section 3.4 shall also include
an adjustment of cash received by Purchaser or Seller (as the case may be) to
which the other is entitled pursuant to the provisions of Sections 2.1 and 2.3
above, but shall not include an adjustment for security and other deposits
heretofore paid by Seller to third parties.
18
<PAGE>
3.5 Procedure for Purchase Price Calculation and Payment. Purchaser and/or
Seller shall prepare a written schedule as soon as practicable after the Closing
setting forth the calculation of the Aggregate Purchase Consideration as
provided for in Section 3.1(a) and 3.3. Seller and Purchaser hereby agree to use
their diligent, good faith efforts to effectuate and finalize the calculation of
the Aggregate Purchase Consideration and other adjustments contemplated by this
Article III within 60 days following the Closing Date, to the extent information
is available as of such date, and in no event later than the Settlement Date. In
the event that the calculation of the Purchase Price and all such other
adjustments have not been finalized and effectuated within 15 days after the
expiration of the relevant calculation period, either party may submit the
matter to the Bankruptcy Court for resolution.
3.6 Earnout.
(a) With respect to calendar years 2001, 2002 and 2003, Purchaser
shall pay an "Earnout" to Seller, calculated as follows:
(i) With respect to the actual results of operations for
calendar year 2001, Purchaser shall pay Seller twenty percent (20%) of the
Contribution of the Acquired Locations in excess of Ten Million Dollars
($10,000,000), as such amount may be adjusted as provided below (the "Floor
Amount"), up to a maximum of $250,000 (the "2001 Earnout Amount");
(ii) With respect to the actual results of operations for
calendar year 2002, Purchaser shall pay Seller twenty percent (20%) of the
Contribution of the Acquired Locations in excess of the Floor Amount up to a
maximum of $250,000 plus the positive difference, if any, between $250,000 and
the 2001 Earnout Amount (the "2002 Earnout Amount"); and
(iii) With respect to the actual results of operations for
calendar year 2003, Purchaser shall pay Seller twenty percent (20%) of the
Contribution of the Acquired Locations in excess of the Floor Amount up to a
maximum of $250,000 plus the positive difference, if any, between $500,000 and
the aggregate of the 2001 and 2002 Earnout Amounts (the "2003 Earnout Amount").
(b) "Contribution" (as referenced in section 3.6(a)) shall be
calculated in a manner consistent with the method by which Big Party computed
the calendar 1999 store contribution, which totaled approximately $10 million
for the Acquired Locations, a copy of which is attached hereto as Exhibit
3.6(b).
(c) All Earnout payments will be made within ninety (90) days of the
end of the relevant calendar year and will be accompanied by a report evidencing
the basis for the calculation of the relevant Earnout Amount. If the aggregate
of the three Earnout payments is less than Two Hundred Fifty Thousand Dollars
($250,000) (the "Shortfall"), then ninety (90)
19
<PAGE>
days after the end of calendar year 2003 Purchaser shall pay Seller the
Shortfall, in addition to any 2003 Earnout Amount otherwise payable.
(d) If during any of the relevant calendar years the retail
operations at an Acquired Location are discontinued (a "Discontinued Location"),
the Floor Amount shall be reduced by an amount equal to the product of (A) the
quotient of (i) Contribution of the Discontinued Location for the calendar year
1999, divided by (ii) total Contribution of all Acquired Locations for calendar
year 1999, times (B) the then applicable Floor Amount. This adjustment
calculation shall be made with respect to any Rejected Leases.
(e) Any dispute between Seller and Purchaser regarding the
calculation of any Earnout Amount that has not be resolved between the parties
within sixty (60) days shall be resolved in accordance with the dispute
resolution procedures contained in Section 3.5.
3.7 Deposit. Purchaser has previously deposited with Escrow Agent the
amount of $100,000 (the "Initial Deposit"). Promptly after entry of the Sale
Order, Purchaser shall deposit with the Deposit Escrow Agent such amount as,
when added to the Initial Deposit, equals ten percent (10%) of the Estimated
Purchase Consideration and, as so supplemented, the Initial Deposit shall be
referred to as the "Deposit." The Deposit shall be held and disbursed by the
Deposit Escrow Agent in accordance with paragraph 10 of the Terms and Conditions
of the Solicitation. Seller's sole and exclusive remedy and recourse against
Purchaser for any breach or default by Purchaser hereunder is limited to
retention of the Deposit then paid hereunder.
3.8 Further Assurances. From time to time after the Closing and without
further consideration, (a) Seller, upon the request of Purchaser and at Seller's
expense, shall execute and deliver such documents and instruments of conveyance
and transfer as Purchaser may reasonably request in order to consummate more
effectively the purchase and sale of the Acquired Assets as contemplated hereby
and to vest in Purchaser title to the Acquired Assets transferred hereunder,
provided that (i) Seller shall not be required to execute or deliver any
document or instrument pursuant to this Section 3.8 which includes any
provision(s) which impose obligations upon the Seller which are greater than
those imposed upon Seller under the other provisions of this Agreement or the
documents executed pursuant hereto and (ii) in no event shall Seller be required
to incur any material cost or expense in the performance of its obligations
under this Section 3.8 (it being understood that Purchaser shall in any event be
entitled to require Seller to take such action as Seller would otherwise be
required to take pursuant to this Section 3.8 but for the cost thereof by
providing to Seller the amount Seller reasonably anticipates incurring in excess
of immaterial costs and expenses of taking such action), and (b) Purchaser, upon
the request of Seller and at Purchaser's expense, shall execute and deliver such
documents and instruments of assumption as Seller may reasonably request in
order to confirm Purchaser's liability for the obligations under the Assumed
Obligations or otherwise more fully consummate the transactions contemplated by
this Agreement; provided that (i) Purchaser shall not be required to execute or
deliver any document or instrument pursuant to this Section 3.8 which includes
any provision(s) which impose obligations upon the Purchaser which are greater
than those imposed upon
20
<PAGE>
Purchaser under the other provisions of this Agreement or the documents executed
pursuant hereto, and (ii) in no event shall Purchaser be required to incur any
material cost or expense in the performance of its obligations under this
Section 3.8 (it being understood that notwithstanding the foregoing, Seller
shall in any event be entitled to require Purchaser to take such action as
Purchaser would otherwise be required to take pursuant to this Section 3.8 but
for the cost thereof by providing to Purchaser the amounts Purchaser reasonably
anticipates incurring in excess of immaterial costs and expenses in taking the
action).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as of the date of this
Agreement and the Closing Date, as follows:
4.1 Due Incorporation; Good Standing. Seller is a corporation duly
incorporated under the laws of the states or provinces of its incorporation, and
is in good standing thereunder as of the date hereof and as of the Closing.
4.2 Consents. To the best of Seller's knowledge, formed after reasonable
inquiry, except for consents, approvals or authorizations of, or filings with
the Bankruptcy Court, no notice to, filing with, authorization of, exemption by,
or consent of any governmental authority is required in order for Seller to
consummate the transactions contemplated hereby.
4.3 Title to and Condition of Properties. At and as of the Closing Date,
Seller will have good and marketable title to, or a valid leasehold or license
interest in, and will have, subject to the entry of the Sale Order for which no
stay has been obtained, the right to sell, convey, transfer, assign and deliver
to Purchaser, free and clear of all liens, interests and encumbrances of
whatever kind or nature, the Acquired Assets, including, but not limited to, the
Assumed Leases and the Assumed Contracts. At and as of the Closing Date, the
Bill of Sale and the Assignment and Assumption will be effective to vest in
Purchaser good and valid record and marketable title to the Acquired Assets,
including, but not limited to, the Assumed Leases, the Assumed Contracts and all
of the Inventory on hand at each of the Acquired Locations. As of the Closing
Date, Seller will have good and marketable title to, and will have the right to
sell, convey, transfer, assign and deliver to Purchaser its interest in the
Proprietary information.
4.4 Contracts. To the best of Seller's knowledge, formed after reasonable
inquiry, incorporated into Schedule 2.2(b)(i) hereof is a true and complete list
of all material Contracts (i.e., contracts under which Seller would be required
to pay $10,000 or more annually to another party) as of the date hereof to which
a Seller is party and which relates exclusively to the Business, or to which any
of the Acquired Assets or Assumed Obligations are subject.
21
<PAGE>
4.5 Brokers. Seller has incurred no liability to any broker, finder or
agent with respect to the payment of any commission regarding the consummation
of the transactions contemplated hereby.
4.6 Additional Representations and Warranties of Seller. (a) Seller has
maintained its pricing files relating to the Business in the Ordinary Course of
Business, and prices charged to the public for goods (whether in-Stores, by
advertisement or otherwise) are the same in all material respects as set forth
in such pricing files for the periods indicated therein. All pricing files and
records requested by Purchaser relative to the Inventory have been and will
continue to be made available to Purchaser. All such pricing files and records
requested by Purchaser and agreed to be supplied by Seller are and shall
continue to be true and accurate in all material respects as to the actual cost
to Seller for purchasing the goods referred to therein and as to the selling
price to the public for such goods as of the dates and for the periods indicated
therein.
(b) Seller has not since June 23, 2000, and shall not have up to the
Closing Date, (i) marked up or raised the price of any items of Inventory
(except for price/cost adjustments or chain wide price adjustments in the
Ordinary Course of Business), or removed or altered any tickets or any indicia
of clearance or reduced price merchandise or (ii) conducted any non-ordinary
course promotional activity. Prior to the Closing Date, Seller shall have
implemented all normal course permanent and hard markdowns in the Ordinary
Course of Business.
(c) Seller shall ticket or mark all items of Inventory received at
the Acquired Locations and any warehouse or distribution center after the date
hereof but prior to the Closing Date in a manner consistent with similar
inventory located thereat and in accordance with Seller's historic practices and
policies relative to pricing and marking of inventory.
(d) All point of sale activity in the Business has occurred and will
occur up to the Closing Date in the Ordinary Course of Business.
(e) To the best of Seller's knowledge, all Merchandise Inventory and
all merchandise that is the subject of Seller's Purchase Orders is in compliance
in all material respects with all applicable U.S. federal, state, or local
product safety laws, rules and standards, and customs regulations where
applicable, and has or will be manufactured and produced in conformity with all
applicable U.S. federal, state, or local child labor and other similar laws,
rules and standards.
(f) Seller has paid and will continue to pay subject to any
applicable Orders of the Bankruptcy Court, through the Closing Date, (i) all
self-insured or self-funded employee benefit programs for Employees of the
Business, including health and medical benefits and insurance and all proper
claims made in accordance with such programs, (ii) all casualty, liability,
workers' compensation and other insurance premiums, and (iii) all applicable
employment Taxes.
22
<PAGE>
(g) Seller shall not have intentionally taken, and shall not
intentionally take through and including the Closing Date, any actions to
increase the cost of operating the Business, including, without limitation,
increasing salaries or other amounts payable to Employees, except to the extent
such action is in the Ordinary Course of Business.
(h) Seller has and shall continue through and including the Closing
Date to operate the Business in the Ordinary Course of Business.
(i) Seller is not a party to any collective bargaining agreement
covering any of the Employees of the Business and no labor union represents any
such Employees.
(j) To the best of Seller's knowledge, formed after a reasonable
inquiry, the amounts reflected on Schedule 2.4(a) reflect the aggregate amount
of Cure Amounts and any deficiencies in Lease Deposits under the Assumed Leases
that Seller would be obligated to pay for its pre-assumption arrears under the
Contracts.
(k) All representations and warranties of Seller relating to the
Inventory made in Section 11 of the Agency Agreement are hereby incorporated by
reference herein.
4.7 Inventory. As of the date of the execution and delivery hereof and as
at the Closing, Seller's books and records fairly and accurately reflect and
represent (i) the retail price of the Inventory, and (ii) the sales of
Inventory.
4.8 Employees. The information regarding the employees currently employed
at the Acquired Locations and the Headquarters, including compensation, bonus,
benefit, length of service and other terms of employment for such employees,
provided by Seller to Purchaser prior to the date hereof is true and complete as
of the date hereof.
4.9 Registered Trademarks. Schedule 2.1(b) contains a true, correct and
complete listing of all registrations and pending applications for trademarks
owed and used by Seller in operation of the Business.
4.10 Duration. Unless otherwise specifically provided herein, Seller's
representations and warranties in this Article IV shall expire on that date that
is six (6) months after the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 Purchaser represents and warrants to Seller as follows:
23
<PAGE>
(a) Organization, Standing and Power. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of its organization. Purchaser has all requisite corporate power and
authority to own, lease and operate its properties, and to carry on its business
as now being conducted. Purchaser has received the approval of Purchaser's Board
of Directors to execute, deliver and perform this Agreement and all writings
relating hereto, and Purchaser's execution and delivery of this Agreement has,
been duly authorized by all requisite corporate action. This Agreement has been
validly executed by Purchaser and constitutes the valid and binding obligation
of Purchaser enforceable in accordance with its terms, subject to the
satisfaction of the conditions contained in Articles VI and VIII hereof.
(b) No Conflicts or Violations. The execution and delivery of this
Agreement, the consummation of the transactions herein contemplated, and the
performance of, fulfillment of and compliance with the terms and conditions
hereof by Purchaser do not and will not: (i) conflict with or result in a breach
of the Certificate of Incorporation or by-laws of Purchaser; (ii) violate any
statute, law, rule or regulation, or any order, writ, injunction or decree of
any court or governmental authority; or (iii) violate or conflict with or
constitute a default under any agreement, instrument or writing of any nature to
which Purchaser is a party or by which Purchaser or its assets or properties may
be bound.
(c) Consents. No notice to, filing with, authorization of, exemption
by, or consent of any authority is required in order for Purchaser to consummate
the transactions contemplated hereby.
(d) Brokers. Purchaser has incurred no liability to any broker,
finder or agent with respect to the payment of any commission regarding the
consummation of the transactions contemplated hereby.
5.2 "AS IS" Purchase. Purchaser hereby acknowledges and agrees that,
except as otherwise expressly provided in Sections 3.3(b) and 8.6 and in Article
IV herein, (i) Seller makes no representations or warranties whatsoever, express
or implied, with respect to any matter relating to the Acquired Assets, and (ii)
Purchaser accepts the Acquired Assets "AS IS," "WHERE IS," and "WITH ALL
FAULTS."
5.3 Unless otherwise specifically provided herein, Purchaser's
representations and warranties in this Article 5 shall expire on that date that
is six (6) months after the Closing Date.
ARTICLE VI
COVENANTS OF SELLER AND/OR PURCHASER
24
<PAGE>
6.1 Consents and Approvals. Subject to the provisions of Section 3.8 above
and subsection (b) below, Seller and Purchaser shall each use their commercially
reasonable best efforts (i) to obtain all consents and approvals, as reasonably
requested by Purchaser and Seller, to more effectively consummate the purchase
and sale of the Acquired Assets and the assumption and assignment of the Assumed
Contracts, Assumed Leases, and Assumed Obligations, as applicable, together with
any other necessary consents and approvals to consummate the transactions
contemplated hereby, (ii) to make, as reasonably requested by Purchaser and
Seller, all filings, applications, statements and reports to all authorities
which are required to be made prior to the Closing Date by or on behalf of
Purchaser and/or Seller or any of their respective affiliates pursuant to any
applicable Regulation in connection with this Agreement and the transactions
contemplated hereby, and (iii) to obtain, as reasonably requested by Purchaser
and Seller, all required consents and approvals (if any) to assign and transfer
the Permits to Purchaser at Closing and, to the extent that one or more of the
Permits are not transferable, to obtain replacements therefor; provided that
Seller shall not be required to make any filing in connection with the transfer
of a Permit or take any other action required by this sentence unless Purchaser
advances any and all fees and other charges imposed by any applicable authority
or other Person in connection with such filing, transfer or other requested
action. Subject to the provisions of Section 3.8 and this Section 6.1(a), in the
event that certain Permits are not transferable or replacements therefor are not
obtainable on or before the Closing, but such Permits are transferable or
replacements therefor are obtainable after the Closing, Purchaser and Seller
shall continue to use such reasonable efforts in cooperation with the other
after the Closing as may be required to obtain all required consents and
approvals to transfer, or obtain replacements for, such Permits after Closing
and shall do all things reasonably necessary to give Purchaser the benefits
which would be obtained under such Permits.
6.2 Confidentiality and Use of "Big Party" Name.
(a) Seller acknowledges that it has a special knowledge of the
Business and the proprietary and confidential information included in the
Acquired Assets, and that Purchaser is making a considerable investment in the
Acquired Assets from which investment Seller has benefited. In consideration of
this Agreement and such investment and benefit, and as an inducement to
Purchaser to enter into this Agreement and consummate the transactions
contemplated herein, Seller agrees that, for a period of three (3) years after
the Closing Date, it will not, directly or indirectly in one or a series of
transactions, disclose in violation of this Agreement to any person (other than
any of Seller's officers, directors, employees, advisors or affiliates), or use
or otherwise exploit for their own benefit or for the benefit of anyone other
than Purchaser, Confidential Information (as defined below) and Seller shall use
its reasonable efforts to direct all persons or entities to whom any
Confidential Information has been disclosed without violation hereunder to
observe the terms and conditions set forth herein as though each such person or
entity was bound hereby; provided however, Seller shall be deemed to have used
such reasonable efforts, as required by this Section 6.2, by the issuance by
Seller of a memorandum, substantially in the form annexed hereto as Exhibit 6.2,
to each of the Seller's officers, directors and employees. "Confidential
Information" means any trade secret, confidential study, data,
25
<PAGE>
calculations, software storage media or other compilation of information,
patent, patent application, copyright, trademark, trade name, service mark,
service name, know-how, trade secrets, customer lists, details of client or
consultant contracts, pricing policies, sales techniques, confidential
information relating to suppliers, marketing plans or strategies, products and
formulae, product development techniques or plans, business acquisition plans or
any portion or phrase of any scientific or technical information, ideas,
discoveries, designs, computer programs (including source or object codes),
processes, procedures, research or technical data, improvements or other
proprietary or intellectual property of Seller specifically relating to the
Business, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof. The term "Confidential Information" does not include, and
there shall be no obligation hereunder with respect to, information that is or
becomes generally available to the public other than as a result of a disclosure
by Seller in breach of this Paragraph. Seller shall have no obligation hereunder
to keep confidential any Confidential Information if and to the extent
disclosure of any therefor is specifically required by law; provided, however,
that in the event disclosure is required by applicable law, Seller shall provide
Purchaser with prompt notice of such requirement, prior to making any
disclosure, so that Purchaser may seek an appropriate protective order, and
shall cooperate with Purchaser, at Purchaser's expense, in connection therewith.
Notwithstanding anything to the contrary in this Agreement, Seller shall not be
deemed to be in default under this Section 6.2 or any other provision of this
Agreement by reason of any information which Seller may reasonably deem
appropriate to disclose in the continuing administration of the Chapter 11
Cases.
(b) For a period of two (2) years following the Closing Date, Seller
agrees that it will not, without the express prior written approval of Purchaser
(i) directly or indirectly recruit, solicit or otherwise induce or influence any
Hired Employee, sales agent, joint venturer, lessor, supplier, agent,
representative or any other person that has or had during the one (1) year
period immediately preceding the Closing Date a business relationship with
Seller relating to the Business, to discontinue, reduce or adversely modify such
employment, agency or business relationship with Purchaser as it relates solely
to the Business, or (ii) only to the extent competitive with the Business as
conducted on the Closing Date, employ or seek to employ or cause any Competitive
Business to employ or seek to employ any person or agent who is employed or
retained by Purchaser. Notwithstanding the foregoing, nothing herein shall
prevent an officer of Seller from providing a letter of recommendation to an
employee with respect to a future employment opportunity.
(c) For a period of three (3) years following the Closing Date,
Seller agrees that it will not without the express prior written approval of
Purchaser, directly or indirectly, recruit, solicit or otherwise induce or
influence any customer of Purchaser to discontinue, reduce or modify such
business relationship with Purchaser to the extent such business relationship
pertains to the Business.
26
<PAGE>
(d) Seller agrees that the violation or threatened violation of any
of the provisions of this Section 6.2 by it shall cause immediate and
irreparable harm to Purchaser and that the damage to Purchaser will be difficult
or impossible to calculate with precision. Therefore, in the event that Seller
violates this Section 6.2, an injunction restraining Seller from such violation
may be entered (upon proper proof) against the Seller, in addition to any other
relief available to Purchaser.
(e) If, at the time of enforcement of any provision of this Section
6.2, a court shall hold that the duration, scope or other restrictions stated
herein are unreasonable under circumstances then existing, the parties agree
that the maximum duration, scope or other restrictions reasonable under such
circumstances shall be substituted for the stated duration, scope or other
restrictions and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and other restrictions
permitted by law.
(f) This Section 6.2 applies only to the Seller and not to any other
person, including, without limitation, any current officer, director,
shareholder or employee of Seller.
(g) Immediately following Closing, Seller shall change its corporate
name to a name that does not include the words "Big Party," and shall
discontinue use of the name "Big Party" in connection with all of its ongoing
operations and activities.
6.3 Referral of Business Opportunities. From and after the Closing Date,
Seller shall use reasonable efforts to refer to Purchaser all incoming business
inquiries, customer orders and other matters related to the Business, the
Acquired Assets and the Assumed Obligations including, without limitation, all
customer orders received by Seller via computer or other automated inventory
control systems. To the extent customer orders are delivered to third party
electronic data interchange providers, such providers will be instructed to
transmit such orders to Purchaser or Purchaser's providers. Electronic delivery,
if used, shall be by such method as shall be mutually agreed.
6.4 Seller's Employees. Seller will provide reasonable assistance to
facilitate Purchaser's hire of such of Seller's Employees as shall be designated
by Purchaser at or prior to the Closing, consistent with Section 7.2 hereof.
6.5 Purchaser's Access To Seller's Records. From and after Seller's
execution and delivery of this Agreement, Seller shall continue to provide
Purchaser (or its designated representatives) full and complete access, upon
reasonable advance notice to Seller, to Seller's employees, books and records,
corporate offices and other facilities for the purpose of conducting such
additional due diligence as Purchaser deems appropriate or necessary, in its
discretion, in order to facilitate Purchaser's efforts to consummate the
transaction provided for herein. Seller hereby covenants and agrees to
reasonably cooperate with Purchaser in this regard. Following Closing and
through December 31, 2000, Seller will provide to Purchaser and its accountants
access to its books and records for the years 1997 through 2000 as related to
the Business for
27
<PAGE>
review and audit purposes, such review and audit to be conducted at Purchaser's
expense, and Seller shall cooperate and use its reasonable efforts to have its
accountants to cooperate therewith (at Purchaser's expense) and make their work
papers available for this purpose.
6.6 Seller's Remaining Current on Obligations. Through the Closing Date,
subject to the terms of the any applicable Order of the Bankruptcy Court, Seller
shall remain current under all Leases and Contracts deemed a part of the
Business, or shall take such other actions as are necessary to prevent such
Leases and Contracts from being terminated prior to Purchaser's taking action
under the Contract Rejection Option, so as to ensure that Purchaser may acquire
such assets (or otherwise use same under Section 2.2(b) hereof) at Closing free
and clear of any and all pre-Closing claims.
6.7 COBRA and WARN Act Obligations. Through and after the Closing Date,
Seller shall comply with its COBRA and WARN ACT obligations, if any.
6.8 Payment of Cure Amounts. Seller shall timely, in the manner provided
for in the Sale Order, (a) pay the Cure Amounts due under the Assumed Contracts,
including, without limitation, any amounts assessed by any landlord under any
Assumed Lease following Closing with respect to Seller's occupancy and rental of
the Acquired Locations prior to Closing and (b) restore any deficiencies in
Lease Deposits under Assumed Leases.
6.9 Termination of Hired Employees. Contemporaneously with the Closing,
Seller shall terminate all Employees whom Purchaser has designated as Hired
Employees. Except for the obligations with respect to the Hired Employees
expressly assumed by Purchaser under Section 2.4(b), Seller shall be solely
liable for all termination payments and obligations to such Hired Employees,
including, without limitation, any severance and other costs and expenses
incurred or to be incurred in connection with such termination.
6.10 Reporting Obligations. Following Closing, Seller shall provide to
Purchaser all information regarding sales at the Acquired Locations and other
matters relevant to Purchaser's fulfillment of its obligations under the Assumed
Leases.
6.11 Payment of Fees for Inventory Valuation. Seller and Purchaser shall
each bear fifty percent (50%) of the fees and other costs and expenses for the
Inventory Valuation relating to the Acquired Assets. Any payments made by
Purchaser on Seller's behalf shall be an adjustment to the Purchase Price, as
provided for in Section 3.3(a) hereof.
6.12 Duration of Covenants. The covenants set forth in Sections 6.3 and
6.4 shall lapse at, and be of no further force and/or effect on that date which
is six (6) months after the Closing Date. The covenant set forth in Section 6.6
shall lapse at, and be of not further force and/or effect following the Closing
Date. All other covenants in this Article 6, not specifically limited herein,
shall survive, without limitation, the Closing Date.
28
<PAGE>
ARTICLE VII
COVENANTS OF PURCHASER
7.1 Assumed Obligations. Subsequent to the Closing, Purchaser agrees to
assume and perform the Assumed Obligations.
7.2 Employees. Information regarding the employees with respect to the
Business ("Employees") has been provided by Seller to Purchaser. Upon the
occurrence of the Closing, Purchaser shall offer to those Employees it selects
continued at will employment by Purchaser in accordance with the standard
personnel policies of Purchaser in connection with the business operations
related to the Acquired Assets. Employees who accept offers of employment made
by Purchaser pursuant to this Section 7.2 shall be referred to hereinafter as
the "Hired Employees." In addition to its obligations under Section 6.9 hereof,
Seller shall assist Purchaser in effecting the change of employment of the Hired
Employees as of the Closing in an orderly fashion. Nothing herein expressed or
implied shall confer upon any Employee of Seller, any Hired Employee, any other
employee or any legal representative thereof any additional rights or remedies,
including any additional right to employment or continued employment for any
specified period, of any nature or kind whatsoever, under or by reason of this
Agreement. Seller shall be solely responsible for compliance with its WARN Act
or COBRA obligations, as and to the extent applicable.
7.3 Waiver of Claims. Following Closing, Purchaser shall take all actions
it deems appropriate and sufficient to waive and release with prejudice the
Recovery Claims.
7.4 Reasonable Access to Records and Certain Personnel. Following
consummation of the Closing, so long as such access does not unreasonably
interfere with Purchaser's business operations, Purchaser shall permit Seller's
employees, agents, counsel and other professionals employed in the Chapter 11
Case, or otherwise retained by Seller, reasonable access to the financial and
other books and records relating to the Acquired Assets or the Business (whether
in documentary or data form) for the purposes of facilitating the continuing
administration of the Chapter 11 Case, preparing Tax Returns or responding to
Tax related inquiries, and other such administrative activities, which access
shall include the right of such professionals to copy, at the Seller's expense,
such documents and records as it may request in furtherance of the purposes
described above, subject in all respects to the provisions of Section 6.2
hereof. Purchaser may, in its discretion, move any or all of the books and
records relating to the Acquired Assets and/or the Business to a location of its
designation; provided, however, if Purchaser moves any such documents or records
from their present location, Seller has the right to require Purchaser to copy
and deliver to Seller or its professionals such documents and records as they
may request, but only to the extent Seller or any such professional (i)
furnishes Purchaser with reasonably detailed written descriptions of the
materials to be so copied and (ii) Seller advances to Purchaser the costs and
expenses thereof. The parties acknowledge that Seller shall have the right to
retain any
29
<PAGE>
documents and records provided to it by Purchaser, subject in all respects to
the provisions of Section 6.2 hereof. Following the Closing, Purchaser shall
provide Seller and such of Seller's professionals as Seller shall have from
time-to-time designated, with reasonable access to former management of the
Business during regular business hours to assist Seller as set forth in this
Section 7.4, provided again that such access does not unreasonably interfere
with Purchaser's business operations. Purchaser shall not dispose of any such
documents and records except as shall be consistent with applicable law;
provided, further, Purchaser shall provide Seller with reasonable advance
written notice prior to the disposal of any such documents or records, together
with the opportunity for Seller to preserve such documents or records at
Seller's cost.
Except for the covenant set forth in Section 7.2 above (to the extent that
it is fully performed by Purchaser concurrently with or prior to the Closing),
all of Purchaser's covenants set forth in this Agreement shall survive the
Closing.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are, at the option of
Purchaser, subject to satisfaction of the following conditions precedent on or
before the Closing Date.
8.1 Representations and Warranties True as of Both Present Date and
Closing Date. Each of the representations and warranties of Seller contained
herein shall be true and correct in all material respects on and as of the date
of this Agreement, (except for such changes as are contemplated by the terms of
this Agreement and except for representations and warranties which specifically
relate to an earlier date) on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date. Seller shall also have
complied in all material respects with all of its covenants and obligations
hereunder which are to be completed or complied with at or prior to Closing.
8.2 Bankruptcy Condition. The Sale Order shall (i) have been entered by
the Bankruptcy Court, and (ii) not have been appealed or be subject to any
pending appeal as of the Closing Date, and no stay with respect thereto
(including any stay under Bankruptcy Rule 6004(g)) shall be in effect as of the
Closing Date.
8.3 No Material Adverse Change. The Purchaser being satisfied that there
has been no material adverse change in any of the Acquired Assets, the Acquired
Locations, the Assumed Contracts or the Business between the date hereof and
Closing and no event shall have occurred which has materially impaired or might
materially impair the ability of Purchaser to carry on the Business at the
Acquired Locations and Headquarters after the Closing substantially as such
Business was conducted as of the date hereof.
30
<PAGE>
8.4 Audit. Purchaser's accountants, in consultation with Seller's
accountants, shall have confirmed in writing their ability to perform and
complete an audit of the Business and Acquired Assets to be acquired by
Purchaser hereunder, for the periods 1997 through 2000, in accordance with
applicable Regulations of the Securities and Exchange Commission within 70 days
after the Closing Date.
8.5 Ordinary Course Operations. From and after the date of the parties'
execution and delivery hereof, Seller shall have continued to operate the
Business in the Ordinary Course of Business.
8.6 Delivery of Acquired Assets. At Closing, Seller shall deliver
possession of all Acquired Assets to Purchaser, in good operating order and
condition and in all events in compliance with the provisions of the Leases,
reasonable wear and tear excepted. If Seller is unable to made delivery of any
portion of the Acquired Assets as required hereunder, including without
limitation as a result of fire or casualty, taking or other events, actions,
court orders or other circumstances, Purchaser may, in its sole discretion,
elect to accept delivery of the remaining Acquired Assets and an equitable
adjustment to the Purchase Price shall be made; without limitation, if Seller is
unable to deliver to Purchaser any Acquired Location, the Headquarters or any
Assumed Contracts at Closing, Purchaser shall be entitled to a Purchase Price
adjustment equal to the Adjustment Amount for each Acquired Location and
$250,000 for the Headquarters, and Purchaser shall not be required to purchase
or assume Inventory, Contracts and Fixtures and Equipment relating to such
locations. In no event shall Seller assign less than thirty (30) Acquired
Locations to Purchaser.
8.7 Bankruptcy Court Approval. Entry of one or more orders of the
Bankruptcy Court (each a "Sale Order"), inter alia, approving the sale,
assignment, transfer and conveyance of the Acquired Assets to Purchaser,
pursuant to the terms of this Agreement. The Sale Order must be in form and
content reasonably satisfactory to the Purchaser and at a minimum contain the
following: (i) a finding that the Acquired Assets shall be sold to Purchaser
free and clear of all liens, claims and encumbrances of whatever kind or nature
pursuant to section 363(f) of the Bankruptcy Code, (ii) provision that the
Purchaser is a good faith purchaser entitled to the protection of section 363(m)
of the Bankruptcy Code, (iii) authorization for Seller's assumption and
assignment to Purchaser of each of the Assumed Leases and Assumed Contracts,
(iv) the exemption of the transactions contemplated herein from certain taxes
under section 1146(c) of the Bankruptcy Code, and (v) subject to Section 3.5
hereof as concerns the Accounting Firm, the retention of jurisdiction by the
Bankruptcy Court to resolve any and all disputes that may arise under this
Agreement as between Seller and Purchaser, and further to hear and determine any
and all disputes between Seller and/or Purchaser, as the case may be, and any
non-Seller party to, among other things, any Assumed Contract or Assumed Lease,
as applicable, concerning, inter alia, Seller's assumption and assignment
thereof to Purchaser under this Agreement.
8.8 Lease/Contract Assumption and Assignment. The Sale Order shall also
approve and authorize the assumption and assignment of the Assumed Leases over
which the Bankruptcy
31
<PAGE>
Court has jurisdiction. The Sale Order shall also provide that, and if and to
the extent necessary the Assumed Leases and Assumed Contracts shall be deemed
modified to provide that, (i) all the Assumed Leases are in full force and
effect, (ii) the assumption and assignment shall be free and clear of any claims
of defaults, (iii) Seller shall be responsible for curing any and all defaults
which may exist at the time of assignment and restoring any deficiencies in
Lease Deposits under the Assumed Leases, (iv) the Assumed Leases shall be
transferred free and clear of all liens, claims and encumbrances, (v) the
Purchaser may conduct business at any Acquired Location(s) under the "iParty"
and/or "iParty.com" tradenames, (vi) all references in the Assumed Leases to
"Big Party" or "Tenant" or "Lessee" shall thereafter mean and refer to
Purchaser, (vii) Purchaser may change its signs and perform alternations and
remodeling to the extent permitted in the applicable lease or as may be
consistent with Purchaser's method of conduct of business under its tradenames,
and (viii) the assumption and assignment contemplated hereunder are otherwise
permitted.
8.9 Sale Order Deadline. Except as otherwise provided in Section 10.1
hereof, the Sale Order shall be entered on or before August 8, 2000.
8.10 Closing Deadline. The Closing shall have occurred on or prior to
August 18, 2000, time being of the essence.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are, at the option of
Seller, subject to the satisfaction of the following conditions precedent on or
before the Closing Date:
9.1 Representations and Warranties True as of Both Present Date and
Closing Date. The representations and warranties of Purchaser contained herein
shall be true and correct in all material respects on and as of the date of this
Agreement, and shall also be true in all material respects (except for such
changes as are contemplated by the terms of this Agreement, and except for
representations and warranties which specifically relate to an earlier date) on
and as of the Closing Date with the same force and effect as though made by
Purchaser on and as of the Closing Date. Purchaser shall also have complied with
all of its covenants and obligations hereunder which are to be completed or
complied with at or prior to Closing.
9.2 Bankruptcy Condition. The Sale Order (i) shall have been entered by
the Bankruptcy Court, and (ii) shall not have been appealed or be subject to any
pending appeal as of the Closing Date, and no stay with respect thereto
(including any stay under Bankruptcy Rule 6004(g)) shall be in effect as of the
Closing Date.
ARTICLE X
32
<PAGE>
CLOSING
10.1 Closing. Unless otherwise mutually agreed by Purchaser and Seller,
the Closing shall take place no later than August 18, 2000 on a date mutually
agreed upon by the parties, provided that the parties shall use their
commercially reasonable efforts to effect the Closing on August 11, 2000.
10.2 Deliveries by Seller. At the Closing, Seller will deliver, in
addition to the other documents contemplated by this Agreement, the following to
Purchaser: (a) a Bill of Sale ("Bill of Sale") in form and content mutually
satisfactory to Purchaser and Seller; (b) an Assignment and Assumption
("Assignment and Assumption") in form and content mutually satisfactory to
Purchaser and Seller; (c) a Trademark Assignment in form and content mutually
satisfactory to Purchaser and Seller; (d) with respect to each vehicle
comprising part of the Acquired Assets, an original Certificate of Title (or, if
unavailable, a mutually satisfactory substitution therefor), with the assignment
portion completed and signed by Seller; and (e) such other and additional
documents of transfer that may be reasonably requested by Purchaser (and/or any
Permitted Designee thereof).
10.3 Deliveries by Purchaser. At the Closing, Purchaser will deliver the
following: (a) the Purchase Price payable pursuant to and in accordance with
Section 3.1 and Section 3.2; and (b) duly-executed originals of the Assignment
and Assumption.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses. Subject to (i) Sections 3.3(a) hereof (with respect to the
sharing of the cost of the Inventory Valuation) and (ii) Section 3.5 hereof
(with respect to the sharing of the cost of the Accounting Firm), each party
hereto shall bear its own expenses with respect to the transactions contemplated
hereby. Notwithstanding the foregoing, in the event of any action or proceeding
to interpret or enforce this Agreement, the prevailing party in such action or
proceeding (i.e., the party who, in light of the issues contested or determined
in the action or proceeding, was more successful) shall be entitled to have and
recover from the non-prevailing party such costs and expenses (including,
without limitation, all court costs and reasonable attorneys' fees) as the
prevailing party may incur in the pursuit or defense thereof.
11.2 Amendment. This Agreement may be amended, modified or supplemented
but only in a writing signed by all of the parties hereto.
11.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (i) when received if given in person, (ii) on the date of
transmission if sent by telecopy or other wire transmission
33
<PAGE>
(provided that a copy of such transmission is simultaneously deposited in the
manner provided in clause (iv) below), (iii) one Business Day after being
delivered to a nationally known commercial courier service providing next day
delivery service (such as Fed Ex), or (iv) three Business Days after being
deposited in the U.S. mail, certified or registered mail, postage prepaid:
(A) If to Seller, addressed as follows:
The Big Party Corporation
1457 VFW Parkway
West Roxbury, MA 02132
Attn: Robert Trabucco, CEO
Tel: (617) 323-0822
Fax: (617) 323-5073
With copies to:
Traub, Bonacquist & Fox L.L.P.
655 Third Avenue
New York, NY 10017
Attn: Paul Traub, Esq.
Tel: (212) 476-4770
Fax: (212) 476-4787
(B) If to Purchaser, addressed as follows:
iParty Retail Store Corp.
130 West 30th Street
New York, NY 10001
Attn: Sal Perisano, CEO
Tel: (212) 609-4300
Fax: (212) 609-4333
With copies to:
Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, MA 02114
Attn: Donald H. Siegel, P.C.
Tel: (617) 973-6100
Fax: (617) 367-2315
34
<PAGE>
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.4 Effect of Investigations. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties and
covenants of, and indemnities by, Seller made or undertaken pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Purchaser.
11.5 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
11.6 Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 Headings. The headings preceding the text of Articles and Sections of
this Agreement and the Schedules thereto are for convenience only and shall not
be deemed part of this Agreement.
11.8 Applicable Law and Jurisdiction. SUBJECT TO ANY PROVISION IN THIS
AGREEMENT AND ANY ANCILLARY DOCUMENT, TO THE CONTRARY, THIS AGREEMENT (AND ALL
DOCUMENTS, INSTRUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED PURSUANT TO THE
TERMS AND PROVISIONS HEREOF (COLLECTIVELY, "ANCILLARY DOCUMENTS") SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
WHOLLY WITHIN SUCH JURISDICTION. PURCHASER AND SELLER FURTHER AGREE THAT SUBJECT
TO SECTION 3.5 HEREOF THE BANKRUPTCY COURT SHALL HAVE JURISDICTION OVER ALL
DISPUTES AND OTHER MATTERS RELATING TO (i) THE INTERPRETATION AND ENFORCEMENT OF
THIS AGREEMENT OR ANY ANCILLARY DOCUMENT; AND/OR (ii) THE ACQUIRED ASSETS AND/OR
ASSUMED OBLIGATIONS AND PURCHASER EXPRESSLY CONSENTS TO AND AGREES NOT TO
CONTEST SUCH JURISDICTION.
11.9 Binding Nature; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither
35
<PAGE>
this Agreement nor any of the rights, interest or obligations hereunder shall be
assigned by any of the parties hereto without prior written consent of the other
parties; except, that (i) iParty may assign any of its rights hereunder to any
affiliates or wholly-owned subsidiaries (a "Permitted Designee") (and upon such
designation as a Permitted Designee hereunder, such Permitted Designee shall
become obligated to perform any and all obligations arising hereunder in respect
of that portion of the Acquired Assets and Assumed Obligations allocable
thereto; provided, however, that iParty shall remain obligated to perform the
obligations of "Purchaser" hereunder, in the event any Permitted Designee
thereof fails to perform any obligation arising under this Agreement required of
it as a "Purchaser" hereunder, and (ii) Purchaser may grant a security interest
in its rights and interests hereunder to its third-party lender(s). Nothing
contained herein, express or implied, is intended to confer on any Person other
than the parties hereto or their successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
11.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective affiliates and no provision
of this Agreement shall be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right.
11.11 Tax Matters.
(a) Purchaser shall make available to Seller, and Seller shall make
available to Purchaser, (i) such records as any such party may require for the
preparation of any Tax Returns required to be filed by Seller or Purchaser, as
the case may be, and (ii) such records as Seller or Purchaser may require for
the defense of any audit, examination, administrative appeal, or litigation of
any Tax Return in which Seller or Purchaser was included.
(b) Purchaser shall be responsible for the timely payment of all
sales, use, transfer (including, without limitation, documentary transfer, stamp
and like taxes) and similar taxes payable in connection with the consummation of
the transactions contemplated by this Agreement; provided, however, the Sale
Order shall contain a provision that the Seller's sale, transfer, assignment and
conveyance of the Acquired Assets to Purchaser hereunder shall be entitled to
the protections afforded under section 1146(c) of the Bankruptcy Code.
(c) Notwithstanding anything herein to the contrary, as soon as
practicable following the Closing but in any event within thirty (30) days after
Closing, Purchaser and Seller shall for United States income tax purposes agree
to an allocation of the Purchase Price (and other capitalized costs) among the
Acquired Assets, subject to the provisions of Section 1060 of the Code.
11.12 Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to this Agreement to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Any reference to any federal, state, local,
36
<PAGE>
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Nothing in the Disclosure Schedule will be deemed adequate to disclose an
exception to a representation or warranty made herein unless the substance and
applicability of such exception is reasonably apparent from the disclosure
contained in the Disclosure Schedule. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other items itself). The parties hereto intend that
each representation, warranty, and covenant contained herein shall have
independent significance. If any party hereto has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which such
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
11.13 Entire Understanding. This Agreement, together with the Agency
Agreement and the Ancillary Documents set forth the entire agreement and
understanding of the parties hereto in respect to the transactions contemplated
hereby, and this Agreement, the Agency Agreement and such Ancillary Documents
hereto supersede all prior agreements, arrangements and understandings relating
to the subject matter hereof. There have been no representations or statements,
oral or written, that have been relied on by any party hereto, except those
expressly set forth in this Agreement, in the Agency Agreement or in any
Ancillary Document hereto.
11.14 Broker Commission Indemnity. Purchaser and Seller agree that if any
claims for commissions, fees, or other compensation, including, without
limitation, brokerage fees, finders fees, or commissions are ever asserted
against Purchaser or the Seller in connection with the transaction, all such
claims shall be handled and paid by the party whose actions form the basis of
such claim and such party shall indemnify, defend (with counsel reasonably
satisfactory to the party(ies) entitled to indemnification), protect and save
and hold the other harmless from and against any and all such claims or demands
asserted by any person, firm or corporation in connection with the transaction
contemplated hereby.
[SIGNATURES APPEAR ON NEXT PAGE]
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
PURCHASER:
iPARTY RETAIL STORE CORP.
By: /s/ Sal Perisano
--------------------------------
Name: Sal Perisano
Its: Chief Executive Officer
SELLER:
THE BIG PARTY CORPORATION
Debtor and Debtor-in-Possession
By: /s/ Robert Trabucco
-------------------------
Name: Robert Trabucco
Title: Chief Executive Officer
38
<PAGE>
SCHEDULE A
LIST OF ACQUIRED LOCATIONS
Wallingford 39
Enfield 14
Southington 10
Manchester 16
W. Hartford 11
St. Pete 25
Clearwater 27
Sarasota 28
Bellingham 18
Walpole 46
Burlington 13
N. Dartmouth 30
Chelmsford 34
Shrewsbury 06
Quincy 05
Avon 22
S. Weymouth 21
W. Roxbury 01
Auburn 41
Pembroke 36
S. Attleboro 15
Raynham 26
Medford 17
E. Longmeadow 09
Saugus 02
Natick 04
S. Portland 19
Nashua DW 47
Nashua 43
Portsmouth 44
Cranston 12
E. Providence 35
N. Providence 40
